More than 10 years ago, we learned from C.K. Prahalad that a fortune lies on the bottom on the pyramid: the world’s emerging middle class includes almost two billion people with an annual spending power of $6.9 trillion, offering a whole new market for multinational companies. However, the concept of making high-end products accessible to lower-income consumers is even more relevant today, as companies reinvent products to appeal to the struggling middle class in developed countries.
The euro crisis has hit European consumers hard, and Jan Zijderveld of Unilever has already voiced concerns about poverty returning to Europe. As a result, the company is already adapting by cutting their packaging size (and prices). This business model has been a proven success in Asia, where small laundry detergents are being sold for only two to three cents. Unilever has also launched a discount brand to appeal to Greek consumers. While this may prove a successful short-term strategy, Unilever does risk tarnishing its image as a premium brand, and it may be difficult to increase prices to their typical level when the crisis does pass.
Levi’s Jeans has adopted an alternate strategy to maintain its premium image in India. Rather than reducing the price, in 2009, they partnered with local banks to offer a payment plan in which customers could pay for jeans in three monthly installments at 0% interest. The program has seen terrific industry and consumer response, and has generated a lot of PR and buzz.
As the global economy continues to limp along, more and more firms will be forced to deal with the consumer’s shrinking budget. No matter which strategy your brand adopts, it’s essential to maintain flexibility and constantly monitor local conditions to identify the right solutions.