Expand Marketing to Credit Risk Consumers

For much of retailing, a resurgence is being led by the luxury segment. Still, it’s important for you to remember potential customers toward the bottom of the pyramid.
     This is what a number of wireless carriers are doing. Larger ones like Verizon Wireless and smaller carriers like Cricket are increasing their marketing to people who don’t require a solid credit rating in order to use the service. The traditional business model for these carriers has been to sell a subscription. As part of the two-year contract, the purchaser gets a phone at a great price. Now the growth will be coming with prepaid plans in which there’s no commitment, the companies are predicting. A USA Today article reports that experts say this market will increase about 7.5% each year for the next four years.
     The trend for long-term contract customers is in the opposite direction. The numbers dipped for the first calendar quarter of 2012 compared to the last calendar quarter of 2011. This is the first quarter-to-quarter decline in the history of the wireless industry.
     The USA Today article views the move to prepaid as expanding the market to people who fear commitment. Doing this makes sense to me from a shopper psychology angle, but I’d dig deeper to determine why there is this fear of commitment. My guess is that it has to do with the continuing shocks to personal finances coming from the Great Recession. Many consumers have good reason not to be as sure about their credit worthiness as a few years ago, and those granting the credit ratings share in the doubts.
     The connections between retailers of wireless services and the lower levels of the economic pyramid have been around for a decade. In 2002, global consulting firm Booz Allen Hamilton published "The Fortune at the Bottom of the Pyramid." The paper argued that because there are so many poor people in the world, they are a lucrative market for retailers, even if each person spends only a very little. An example of the viability of this view was the success of “cell phone ladies” in Third World countries who received small, no-collateral loans from Grameen Bank to run businesses on the model of selling brief use of the phone to villagers.
     What are ways you might expand your target markets toward the bottom of the pyramid, to those who are credit risk consumers?

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