E-commerce remains a major opportunity for brands in recession-hit Brazil, writes James Conrad, chief executive of TNS Brazil.
Brazil is a country in the middle of a harsh recession, largely driven by a consumer credit and spending-driven consumption boom that collapsed without the foreign investment or export infrastructure to bail it out. Its economy faces a long and difficult road to recovery as inflation and unemployment soar, so retailers looking to appeal to consumers need to be very savvy about it.
Despite the financial crisis, many brands in Brazil have continued to invest and innovate, increasing spending on advertising in particular. The recession has meant that brands have a hard message to deliver in the face of significant cuts but it seems to be paying off for those that have been able to successfully appeal to consumers.
A good example of defying the financial decline is the automotive sector. Despite a decline of around 20% in the sector, brands such as Toyota and Honda have continued to grow with the help of savvy marketing investment.
There is a risk in putting more money behind marketing when cuts are being made across all industries. Brands need to make sure that they are adapting their campaigns according to the fragmented market they are operating in. The most popular approach has been to focus on promotions, price reductions and generally delivering volume.
However, this is a short-term strategy that can ultimately erode long-term equity. The risk is that with price reductions comes an expectation that makes it very difficult to hike prices back up when the financial strain eases. Many brands are being left with little choice if they want to survive the worst of the recession.
Strong customer loyalty
On a positive note for brands that are more established in Brazil, strong customer loyalty appears to remain.
Status is of particular importance within local communities, meaning that people are either waiting for a promotion on particular items or simply buying them less frequently if necessary. This bucks the recession trend seen in markets such as the UK and US, where consumers resort to buying ‘own brands’ that represent better value but potentially less quality.
“With the likes of Amazon investing in expansion in the region, e-commerce is set to become an area of considerable growth”
Although there is loyalty in Brazil, brands must be aware that a large proportion of the population has a low income. Crudely split up, Brazilian society is divided into three tiers so brands need to be able to adapt their approach to meet the divergent needs of customers at all levels.
One area that is not very well developed in Brazil but has huge potential is e-commerce. The main barrier currently is a lack of trust in online payments among customers. However, with the likes of Amazon investing in expansion in the region, this is set to become an area of considerable growth.
Despite this lack of trust in e-commerce, Brazilians are open to online interaction with brands, meaning that businesses need to do more to engage consumers online. Increasingly, part of the investment being made in marketing strategies should be directed at digital campaigns.
One example of strong online interaction with customers is Fiat’s launch of the first-ever crowdsourced car. In the campaign, Fiat built its own ‘social network’ forum to create a space for dialog between the designers of the car and Fiat drivers. The members of the community were invested in the final results of the campaign – a real car called the Fiat Mio.
This is the best way to engage with potential customers, giving them a hand in creating the product. The project drew 10,000 suggestions and although designed and implemented in Brazil, it reached over 17,000 people in 160 countries.
Ultimately there are opportunities for brands to grow market share in Brazil but it is a very competitive market, targeting consumers with little disposable income. The focus needs to be on promoting product quality as well as providing value for money.
Clearly the main opportunity is the expansion of e-commerce, with the brands that produce engaging online content giving themselves the chance to target a wide range of new potential customers.
Whether online or through other channels, successful marketing strategies are crucial to the survival of many brands in this harsh economic backdrop.