Session Title:
Innovative Solutions

Date of talk or publication:
2005

Speaker Name / Title:
Melchior Dikkers & Paulo Cesar Motta

Organization:
IAG Business School, PUC-Rio, Catholic University of Rio de Janeiro

Description:
In 2004, Kodak Brazil began targeting the low-income classes that account for 60% of Brazil's population and 38% of its consumption. Brazil's low-income classes have an average daily income of $8.7 on a purchasing power parity basis and most possess televisions, radios, and refrigerators and want to buy mobile phones and washing machines. But Kodak research had revealed that only 35% of Brazilian households owned a camera. Why had Kodak largely ignored the low-income segment of the market until 2004? First, many Brazilian marketing professionals within the company did not understand the low-income classes, the business opportunity they offer, and the importance of formulating a distinct marketing strategy to tap that opportunity. Second, Kodak Brazil had little autonomy with respect to doing things differently; all advertising campaigns, for example, were produced in the United States and translated. Kodak Brazil would have had a difficult time convincing headquarters that it needed a different a strategy to market to the low-income classes. Third, Brazil's general manager had little incentive to target the low-income classes; financial results were good despite focusing exclusively on the upper and middle classes. Moreover, Kodak headquarters did not measure whether Kodak Brazil was taking advantage of all opportunities.

However, several years of declining profits, film sales, market share, and brand loyalty spurred Kodak to appoint a new general manager, and the adverse context created by these poor results and the threat of digital photography finally forced Kodak to seriously consider any alternative that could extend the life cycle for conventional photography. Two other factors prompted Kodak to belatedly target the low-income classes: a general manager who believed in the opportunity and had the leadership skills to exploit it; and various indications that Kodak could do more business with the low-income classes.

Kodak's strategy was to create an organizational culture that values doing business with the low-income classes, selling low-end cameras at no profit and making photography more accessible to the low-income classes. Kodak targets the low-income market with cameras that are easy to use and sells them in kits that include film and batteries, enabling consumers to use them without incurring additional expense. Because even the cheapest Kodak camera represents a large expense for the low-income classes, Kodak Express stores permit consumers to pay in installments. Kodak's first truly local advertising campaign was created to appeal to the low-income classes. In addition, Kodak began to sell cameras through Casas Bahia, a store frequented by poor consumers, only at the end of 2003, shortly after the new general manager took over. Kodak's objective in targeting the low-income classes was to take advantage of an ignored opportunity, but also offset the drop in film demand due to the upper and middle classes switching to digital technology. In 2004, Kodak's conventional camera sales increased by 60% and film sales declined significantly less than the market (Kodak -6%, market -20%).