NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, January 2, 2015

BANGALORE, India—A. Ragini earns around $130 a month as a nanny in this city of nearly 10 million, just about the average wage in India. After paying for food and shelter, she has little cash to spare.

Ms. Ragini recently noticed the price of her favorite soap, Unilever PLC’s Hamam, had gone up to 24 rupees, or about 39 cents, from 16 rupees. It also had new packaging, and some variations offered different ingredients.

Even though it stretches her budget, Ms. Ragini, 49, has continued to buy the soap. “I’m so used to it, I don’t want to change it now,” she says.

Marketers are counting on many more reactions like hers throughout the developing world. For decades, consumer-goods companies expanded in emerging economies through rock-bottom prices and small, affordable pack sizes. At Unilever, the world’s second-largest consumer-goods maker by revenue after Procter & Gamble Co. , that meant one-use sachets of Sunsilk shampoo and 3½-ounce bars of Lifebuoy soap.

But now, with the global economy sluggish and emerging-market sales growth waning for the first time in years, companies are employing a developed-world strategy with their poorest customers: Pack more features into basic products and raise their prices.