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 / Spring 2004 / Issue 34(originally published by Booz & Company)


6 Truths about Emerging-Market Consumers

  • Myth #2: Low-income and subsistence-level consumers’ needs are simple.
  • Truth: These consumers buy premium-priced branded products and are sophisticated shoppers.

It’s natural to surmise that low-income consumers would buy only the lowest-cost products and prefer no-frills stores or traditional street markets. But, although their shopping needs and tastes can be described as basic, they’re not simplistic. Our research showed that a typical shopping basket for this income tier is filled with a variety of household staples, including basic foodstuffs (rice and pasta), perishables (vegetables and fruits), a few packaged food and beverage items, and cleaning and personal care products.

And emerging consumers are willing to pay more for the leading and intermediate brands. Their desire to buy brands is prevalent not only in the staples category, but also in secondary “aspirational” products (shampoos, cold cuts, beer, dishwasher detergent) and what are considered luxury goods in Latin America (condensed milk, canned tuna, cookies, furniture polish, makeup).

The impulse to buy brands is not a lemminglike response to advertising campaigns, nor are emerging consumers carefree about their choices. Participants in our focus groups expressed a strong desire to buy branded products of all kinds, although affordability was always a concern.

As a whole, emerging consumers aspire to buy brands (especially leading brands) regardless of price, because they embody the quality and status that inspire confidence in the products and in themselves. They would rather pay more for quality than risk a product failure. This caution makes sense since the financial loss from an underperforming product is greater for people with limited incomes.

Consumers in our study expressed skepticism about the quality of “value branded” products with lower price points; as some remarked, “Lo barato sale caro” or “What is cheap ends up being expensive.” But acceptance of lower-priced value brands is growing in some countries. In Brazil and Argentina, we found emerging consumers were most open to trying value brands, especially branded cleaning products. Economic necessity and endorsements from family and friends strongly influence a person’s decision to buy a value brand.

Our study suggests that emerging consumers are more loyal in their purchases of branded products in general than they are to specific brand names. They are inclined to try new products and are especially responsive to good promotions. But in many product categories, they are comfortable making substitutions only among a small set of brands. Generally, they are not big experimenters with new products and unfamiliar brands.

The strongest brand loyalty among emerging consumers is reserved for staples, such as rice and cooking oil. Brand loyalty is also high for secondary categories like soft drinks, or products where emotions come into play. For example, choosing the baby food with the highest nutritional value and safety standards is a reflection of a family caregiver’s concern about her responsibilities; good choices contribute to self-esteem. This is consistent with marketing research that shows that consumers’ “level of involvement” with a category strongly correlates with their willingness to stretch their budget to buy what they perceive as the better product.

  • Myth #3: Emerging consumers are overwhelmingly attracted to the lowest shelf prices.
  • Truth: Emerging consumers are sensible shoppers who take into account many factors other than price in calculating their shopping costs.

Emerging consumers show price sensitivity in a variety of ways. They meticulously track price benchmarks, show considerable self-restraint as shoppers, and are reluctant to use credit to pay for consumables. When economic conditions deteriorate, emerging consumers often react quickly by scaling back spending on higher-priced goods.

But price sensitivity goes beyond responses to the shelf prices of individual products. Emerging consumers mentally add in all the costs associated with a shopping excursion. This “total cost of purchasing,” of which the shelf price of individual products is one component, also includes the costs of transportation (paying for a bus) and child care, the burden of carrying heavy packages, and time (getting to and from the store, or to a lesser degree, standing in line).

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  1. James A. Gingrich, “Five Rules for Winning Emerging-Market Consumers,” s+b, Second Quarter 1999; Click here.
  2. Alonso Martinez, Ivan De Souza, and Francis Liu, “Multinationals vs. Multilatinas: Latin America’s Great Race,” s+b, Fall 2003; Click here.
  3. C.K. Prahalad and Stuart L. Hart, “The Fortune at the Bottom of the Pyramid,” s+b, First Quarter 2002; Click here.
  4. David Luhnow and Chad Terhune, “A Low-Budget Cola Shakes Up Markets South of the Border,” Wall Street Journal, October 27, 2003
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