Here's an interesting business question: if roughly two-thirds of the world's population makes USD 1,500 or less per year,

why try to sell them expensive, bulky goods and services originally designed for consumers who easily make twenty times as much in North America, Western Europe or Japan?

To the rescue come innovative micro-selling methods, aimed at new consumers in developing mega-economies like China, India, The Philippines, Mexico and Brazil. It's all about serving up your products, services and loans in affordable portions, sachets or sizes, so that consumers get to know and like your brand. Meanwhile, you the manufacturer or service provider can still make a good profit from sheer overall volume (smaller sizes, but more buyers). Our sister-publication Springwise New Business Ideas has already been paying quite a bit of attention to these interesting initiatives: now it's up to TRENDWATCHING.COM to coin the overarching trend: SACHET MARKETING. Consider the following examples highlighting the SACHET MARKETING trend: In Brazil, fast moving consumer goods giant Unilever sells Ala, a brand detergent created specifically to meet the needs of low-income consumers who want an affordable yet effective product for laundry that is often washed by hand in river water. In India, Unilever successfully markets Sunsil and Lux shampoo sachets sold in units of 2-4 dollar cents; Clinic All Clear antidandruff shampoo sachets at 2.5 rupees each; and 16 cent Rexona deodorant sticks. In Tanzania, Key soap is sold in small units for a few dollar cents. Filipino telcoSmart has turned its customers into salespeople: the Smart Buddy System allows cell phone customers to resell their unused credits, which not only eases the strain on cash flow, but earns them money as well! For each 1,000 pesos sold, the 'merchant' receives a 150 pesos commission. For more info, check out the Springwise item on the Smart Buddy system.

Mexican Banco Azteca, which launched in December 2002, is gearing a 'less is more' approach towards 16 million Mexican households who make too little (from USD 250-1300 a month) to attract the interest from established financial institutions. These Mexican consumers, even those without a bank account or solid proof of income, can now apply for a savings account, wire transfers, mortgages, or small one-year loans (sometimes purely based on their personal possessions). The force behind Banco Azteca is Grupo Elektra, Mexico's largest appliance retailer. Their 800+ appliance stores double as bank branches, and quite often bank clients are loyal Grupo Elektra customers as well, giving them a partial credit history. For more info, check out the Springwise item on Banco Azteca. GrameenPhone, Bangladesh's leading cell phone operator, is offering a special low-priced package to so-called 'phone ladies' in small villages, where fixed telephone lines are nonexistent. The phone ladies share their cell phones with other villagers at a few taka a call. For more info, check out the Springwise item on GrameenPhone. In a surprising twist, microfinance, which has blossomed in emerging economies in Asia, Africa and Latin America, is now also catching on in mature economies. The practice, which involves lenders granting small business loans to entrepreneurs with low incomes or poor credit histories, is now tax deductible in the US and the UK. In the UK alone, more than 20 microfinance banks (like WEETU for women and Prime for entrepreneurs over the age of 50) qualify for the tax program. Another 40 are on the way, waiting to be accredited. Participating UK businesses usually have fewer than five employees, and require unsecured loans of between EUR 1,500 and 15,000. (Source: WSJ.) Whirlpool is cashing in on its line of inexpensive yet stylish washing machines in Brazil, India and China. Both price and looks have received a SACHET MARKETING makeover: machines cost USD 150 - 200 (about half of the US average) and are customized to local tastes. For example, in Brazil, customers wanted to see the machine operate, so Whirlpool made a transparent acrylic lid, that also happens to be cheaper than glass. Machines also have a smaller capacity, because lower income Brazilians do laundry more frequently. In China, where washers are considered status symbols and are often placed in living rooms due to lack of space, extra attention was paid to sleek looks. Wash cycles were named on a by-country basis (in India, the delicate cycle is called the 'sari' cycle). And like microfinance, Whirlpool is already exploring the possibility of bringing these 'people's washers' to Europe and North America. (Source: WSJ.) OPPORTUNITIES Thinking small in large volumes -- the essence of SACHET MARKETING -- yet never losing brand focus, could open up entirely new markets for many of the worlds B2C and B2B

manufacturers and service providers. If your customers are willing but cash strapped, think micro loans, think mini-sizes, think leasing, think bundling, think reselling! It will make you money, AND lay the foundation for brand awareness with future affluent customers. And as the microfinance and Whirlpool examples show, some of the thinking may eventually translate in innovative products for mature markets as well. Small IS 'Sundara'! >> Email this trend to a friend.
FRIDAY, JUNE 05, 2009

Why sachets are popular in Rural India?

Rural people consume most products such as shampoo, biscuits, tooth powder, etc in micro units. This is majorly linked to the fact that they earn in daily or weekly wages. The following discussion is to reason out why do they prefer daily/weekly wages in turn to explain the popularity of shampoo sachets (and not a shampoo bottle). If you visit any rural household or a surrounding retail stores please observe what kind of things they have. Tooth powder in sachet, Coconut oil in sachet, Fail & Lovely in sachet, only one soap bar (though they might be using multiple soaps in a month), small biscuit packet (Do you know the very popular Britannia Tiger?? it just contains 3 pieces instead of regular 10 pieces), the telephone usage with a 1 Re coin box, mobile phone usage in small top-ups (10/- or so), chotapepsi, etc. Basically consumption world is a miniature here. Basic reason for this micro-units of consumption is to use them for a day or for at most a week. Their consumption budget is just about a week or less. That is because their earnings fall under in similar periods. Typically in rural locations, the work contract period is about a week or less. In fact, it is day-contracts which rules here. Before proceeding further discussion on these consumption patterns, let me talk about an interesting topic and it is about you (Yes, I am talking about you, the reader). Assume, after a shopping exercise, you came out of a shop to return your home. As you are with some luggage, you wanted to return home with a auto-rickshaw. You found 3 autos standing on the road and you know it takes about 45/- to reach your home. When you asked each auto driver, you were told 3 prices, first guy 100/-, second guy 50/third guy 10/-. Then which one will you take to reach home? and why? Think for a while before reading further. Coming back to our original discussion, rural people plan weekly budgets unlike the Indian government which does 5-year budgets. As we have seen before that is because rural people earn in similar periods. And surprisingly, it is their choice to earn in daily but not monthly. Yes, you read it right, it is their preference. Why is that so? It is because, their logical capability to think is very limited. Just like birds, they can do additions up to 10, beyond which it is difficult for them to count. To understand things for a year period, you need to foresee a lot of things, and plan accordingly. This requires

arithmetic skill-set. So it is skill-set deficiency that makes an issue with them. Again, what exactly is the issue?? By the way, did you find out which auto you would prefer? I am damn sure that it is not the one which charges 100/-. Moreover, it is not the auto that charges 10/- either. Second guy who charges 50/-, which is a little more than the usual charge of 45/-, is the one you prefer. Why is that so? Why do you wish to pay higher, when there is a guy who would take you as cheap as 10/- (and in fact, you are willing to pay more than the usual charge)? The reason is simple. You know that it is not economically feasible for him to run at 10/-. Because you know if the usual charge is 45/-, then any auto must be making 10-15/- (or 25%-40% margin). This means actual cost is about 30/-. Then you would start doubting the guy who just charges 10/- instead of some price more than the actual cost of transportation, that is 30/-. You would believe that he would make money in another fashion perhaps by robbing you or so and not by direct charge. Thats what is known as fear of uncertainty. No one likes to take unknown risk. Rural Indians cant take decisions beyond a week or more is due to their incapability of logical thinking or arithmetic calculations. Beyond anyones capability falls under uncertainty. Rural people dont wish take those unknown risks. This is the reason for their earnings in short periods, and so, they spend on micro-units of consumable goods.