Casas Bahia - Marketing to the Poor

            
 
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Case Details:

Case Code : MKTG102
Case Length : 14 Pages
Period : 1997-2005
Pub Date : 2005
Teaching Note :Not Available
Organization : Casas Bahia
Retail ing
Countries : Brazil

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up."1

- C. K. Prahalad, Professor of Business Administration, University of Michigan.

"My talent is trusting the poor and giving the poor good service. Many poor have a better character than the rich. I was poor once."2

- Samuel Klein, Founder of Casas Bahia.

"We speak a language that our clients understand -- instalments. And we are sparing them a trip to the bank for a loan."3

- Michael Klein, Chief Financial Officer, Casas Bahia.

Introduction

Yolanda Moises (Moises), a middle-aged maidservant in a Sao Paulo suburb in Brazil had bought a stove, refrigerator, Video Cassette Recorder (VCR), stereo system, bed and a closet in just two years. All the appliances were purchased from the local Casas Bahia4 stores on loan. The interest on the loans did not cause Moises any worry since all the loan instalments fitted into her monthly budget. With a monthly salary of $190, she had never thought she could afford all these products as well as provide the basic necessities to her four children. Casas Bahia considered her creditworthy and worked out a personalized financial assistance plan for her so that all loan instalments were less than 50 per cent of her monthly salary.

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Somebody advised her to visit the Casas Bahia stores. She went to the nearest store. There, she was asked to fill up a simple loan application form and was told that she could buy the kitchen set. At last, she became a proud owner of a kitchen set, a luxury among the lower income groups of Brazil (Refer Exhibit I for a snap shot of Brazil).

A truck driver from Sao Paulo gave a surprise gift of a kitchen sink with cabinet and a washing machine to his wife. Casas Bahia not only gave him credit but also delivered the purchases at his doorstep so that he could see the surprise and happiness on his wife's face when she received the purchases. He said it was the biggest gift he ever gave to his wife and Casas Bahia made him a proud husband.

Most of the Brazil's low-income population had similar stories to narrate. When they entered Casas Bahia stores, they did not just buy a stove or a television set or a piece of furniture but a dream that they had never thought they could realize with their meagre salaries.

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1] "C.K. Prahalad thinks there can be a win-win relationship between business and the poor," The Economist, August 21, 2004.

2] Miriam Jordan, "Brazilian Retail Magnate Gets Rich By Courting Poor With Instalments," The Wall Street Journal, December 06, 2002.

3] Miriam Jordan, "Brazilian Retail Magnate Gets Rich By Courting Poor With Instalments," The Wall Street Journal, December 06, 2002.

4] Casas Bahia is the largest retail chain in Brazil which sells consumers electronics, home appliances and furniture. It is headquartered at Sao Paulo city's suburb of Sao Caetano do Sul in the state of Bahia.

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