Description
This document describes various marketing strategies targeting bottom of pyramid.
Marketing Strategies targeting the Bottom of the Pyramid
Introduction The bottom of the (economic) pyramid consists of the 4 billion people living on less than $2 per day. For more than 50 years, the World Bank, donor nations, various aid agencies, national governments, and, lately, civil society organizations have all done their best, but they were unable to eradicate poverty.
Bottom of Pyramid: A Market The base of the economic pyramid (BOP) in India representing the masses is an over $1.2-trillion market, making up the biggest chunk of the global 5 trillion $ BOP market excluding China, says a study by IFC and World Resources Institute (WRI). The term ‘bottom of the pyramid’ was coined by management guru CK Prahalad to describe the poor and the underserved section of the market. The BOP market in India, about $1.205 trillion, in purchasing power parity terms, makes up 84.8% of the total $1.42-trillion national household market.
The BOP population of 924.1 million people — 78% of them in rural areas— makes up
about 95% of the country’s population. The IFC-WRI study that used data from national household surveys in 110 countries, the BOP was defined as all those with incomes below $3,000 in local purchasing power. China was not part of the study. Of the global BOP market, Asia makes up the biggest chunk with a $3.47 trillion market, followed by Latin America ($509 billion), Eastern Europe ($458 billion) and Africa ($429-billion). Sector-wise, food is the biggest BOP market ($2.8-trillion), followed by energy ($433 billion), housing ($332-billion), transportation ($179 billion), health ($158-billion), ICT ($51-billion) and water ($20 billion). Compared to the BOP, the mid-market segmentthose with incomes between $3,000 and $20,000- represent a $12.5 trillion market globally. (Economic Times, 2007)
Bottom of the Pyramid: A Marketing Perspective The Traditional Approach: To experienced marketing managers in the world’s largest multinational companies, it is perfectly obvious who their target market audiences are: The developed world and upper and middle class residents of the developing world. The rationale is simple: these are the customers who demand and can afford costly products and services, who appreciate advances in technology and who provide intellectual excitement to managers trying to capture their business. The world’s poor? They are better served by governments and non-profit organizations. Selling to them just isn’t worth the effort. The Modern Approach: A member of the BOP is increasingly seen as a consumer or a potential buyer. Strategies are formulated in order to make the product available to the consumer, through innovation in the marketing mix. As the BOP market is very vast and huge, it can be utilized in manner that is profitable for a company. Some of the basic strategies used by the company are: 1) Product Innovation: Companies have to modify their product attributes pertaining to the needs and requirements of the BOP consumer. HUL has been one of the pioneer companies to formulate marketing strategies in order to cater to the BOP consumers. One of the effective strategies had been designing and changing the manufacturing process of the Lifebuoy brand of soaps from hard soap production to milled soap production, a change that made the soap longer lasting and produced more lather such that it can be used effectively with cold and hard water. (Prahalad 2005) Another example that can be treated as product innovation is building refrigerators with batteries to counter attack the problem of electricity supply in such areas.
2) Packaging: Due to the lack of space associated with the BOP consumers, what becomes necessary is to offer the product in various sizes and shapes. CavinKare revolutionalized the market with its sachet shampoos. Sachets were first introduced by the company in 1976 for its South-India based brand ‘Velvet’. (Ranganathan, 2003). In 1999, CavinKare came up with another pricing innovation: it launched a 4-ml sachet of Chik shampoo priced at 50 paisa. The launch was a great success: Chik’s market share jumped from 5.61 percent in 1999 to over 23 percent in 2003. It became the largest selling brand in rural markets. Companies will have to increasingly package their products in a manner that will occupy less space in the BOP consumer’s home. This is because; a typical BOP consumer’s bathroom has only one platform like a window sill which is used to store all the toiletries. So ideally, a consumer will not purchase a product even though it is small, if it occupies a large space on the platform. 3) Celebrity Endorsement: It is a general perception that celebrities have a high amount of influence on such consumers. It is a known phenomenon on how Rajnikant is worshipped down south and how Amitabh Bachchan has a temple built of himself by an admirer in Kolkatta. This phenomenon is obviously taken advantage of by marketers, however, what needs to be emphasized is that, the celebrities can be used to impart right information and educate these consumers about the benefits of using the products, effectively. Simple products like toothpowder, oil and chywanprash are endorsed by Suniel Shetty, Govinda and Amitabh Bachchan respectively. 4) Distribution: Cholayil Ltd., a purveyor of the herbal soap “Medimix,” campaigned in mobile vans to promote its brand. The van campaign visited interior villages where there were no distributors. The van was halted at specific points in order to demonstrate and distribute free samples. Alternatively, promoting one’s brand in large congregation points like village markets and fairs has a far wider reach, and is more cost effective. (Khicha 2007) Another simple strategy that can be adopted by marketers is to distribute free samples to the consumers. This strategy however, needs a follow up strategy,
because either your product has to be of very high quality such that the consumer gets hooked to your product, or every time the company wishes to increase sales or induces consumers to purchase the product they will either need to give a discounting scheme or club the products together. Chik when it was introduced in the market was promoted by giving free samples to consumers at fairs. 5) Innovative Communication strategies: Information about the product needs to be communicated keeping in mind the technology available and the literacy levels of the BOP consumers. National Television is highly instrumental for advertising in rural areas because of its penetration in the remotest areas. Companies also reportedly use posters on walls, theaters and mobile kiosks. HUL partnered with Ogilvy & Mather to formulate innovative communication strategies in order to communicate the need for creating awareness for cleanliness in terms of washing hands and the importance of K15 in salt as compared to regular salt or iodized salt that was not encapsulated. For the former, the company initiated the project of Swasthya Chetna, which had 127 two-person teams equipped with audiovisual equipment, flip charts, interactive games etc. to reach an estimated 40 million people in the first year alone. The latter was the need that prompted the company to launch ‘Shakti’, an idea that used local village women, to not only educate the rural BOP consumers, but also acted as distributors of various HUL products. The company found an innovative way to educate the consumers and gain access to a new distribution system. (Prahalad 2005). CavinKare used the strategy of live demonstrations of using the shampoo when it first launched the sachets to communicate to the consumers how using a shampoo was more effective then using a soap. Consumers till then were using soap to wash their hair. The above strategies however have only concentrated on the BOP member as a potential consumer. Another perspective can be to enable the customer to rise to a new level in the pyramid. In other words, a marketing model that empowers the customer. Marketers are increasingly realizing the fact that in order to tap the complete potential of the consumers at the bottom of the pyramid, what is important is to empower them.
The key issue is to empower the consumers with more disposable income, because at their current disposable income, there can only be a need or a want. What is essential is to convert that need into consumption. It is basic understanding, that if the consumers at the BOP are empowered their purchasing power increases, thereby increasing their capacity to consume, thus, converting their want into consumption. An approach presented by Karnani (2007), states that if the objective is to increase the income levels of the BOP consumers, then they should be perceived as producers rather than consumers. We need to facilitate production by the poor, and also support them in selective consumption. Selective consumption means choosing to enable or restrict consumption, based on the characteristics of the goods to be consumed and the effect they will have on the wellbeing of consumers. To understand the dynamics of promoting and curtailing consumption by the poor, it is useful to view it from the perspective of which target markets a company chooses to include and exclude. When marketers make such choices, they can have significant effects for the individuals involved (Sirgy and Lee, 1996; Smith and Quelch, 1993). Examples of successful models that have developed strategies in order to enable the consumers to establish themselves by viewing them as producers are: Amul was started in 1946, under the direction and guidance of Sardar Vallabhai Patel to form a dairy cooperative in order to directly undertake sale and processing of milk collected from member dairy farmers of the district. Amul is primarily a partnership between milk farmers and professional managers. Amul strategy has not only empowered the milk farmers in the state of Gujarat, but also created a global brand which serves high quality milk and milk products. Amul daily collects 7.4 million liters of milk from about 2.7 million farmers and converts it into value-added milk products1. Amul relies on employees who are dedicated to the cause of milk producers. Amul’s wage costs are less than 1 percent of total sales volume, while its private sector competitors have a wage cost of about 6 percent of sales (Business India, 2003).
1
For more information on the organization, visit www.amul.com
Amul is partnered with Gujarat Co-operative Milk Marketing Federation (GCMMF) which not only markets Amul products through a wide distribution network, but also provides available products at competitive prices. Amul is a classic example of how a company can successfully tap the potential of the BOP market. Shri Mahila Griha Udyog Lijjat Papad is an organization involved in the manufacturing of various food products primarily papad2 and consumer products like detergents and cake. This initiative by women, mostly from the lower strata of society, began in Mumbai in 1959. It gradually expanded to 69 branches in different states all across India. Membership has grown from seven founding women to more than 42,000 women. Following the concept of collective ownership, the organization is run by member sisters. Today, membership is open to any woman who has faith in its basic philosophy. For its papad production, the organization has a completely decentralized model. Each morning, at each branch, kneaded dough is distributed among the women. The women take the dough to their homes, and make papads by rolling and then drying them, and return the dried papads after one or two days. The organization’s total sales exceed Rs.470 crores with exports of more than Rs.24 crores. The organization has enabled women to earn economic independence, and raise their families’ living standards, all through engagement with dignified labor3. LIC has also tapped the BOP market, by innovating its products to specifically appeal to the needs of the rural consumer. Banking and insurance markets form symbiotic relationships when it comes to tapping rural markets, with banking being an excellent distribution channel for marketing insurance products. Citing the example of LIC tapping the extensive branch network of nationalized banks in deep, miles-from-anywhere locations, the model has allowed for unprecedented penetration by LIC into rural India. The critical success factor in succeeding in India's
2
Papad is an Indian food product made of flour and spice. It can be roasted or fried. It is used as an accompaniment to a meal or as a snack or appetizer. 3 For more information on the organization, visit www.lijjat.com
rural markets is the element of trust that a company has to gain from the rural consumer. (Brand Dossier, 2008) Around 35 per cent of Reader's Digest's 600,000 customers were located in rural and semi-urban areas, with a large chunk of them being school teachers. They used the post office as their primary delivery and direct marketing mechanism; the rate of undelivered copies being less than one per cent. (Brand Dossier, 2008) HUL’s Shakti campaign (discussed earlier in the paper) is also one of the strategies, used to empower the consumer, in this case, the women BOP consumers. The initiative of e-Choupal by ITC is a success story of technology meets opportunity. The e-Choupals, information centers linked to the internet, represent an approach to seamlessly connect subsistence farmers with large firms, current agricultural research and global markets. The network of these, each operated by a farmer in each community is called the sanchalak, allow for a virtual integration of the supply chain and significant efficiencies in the traditional system. The farmers benefit by realizing better prices for their crops, better yield through better practices and a sense of dignity and confidence in being connected with the rest of the world. (Prahalad 2005)
The SBE Model The paradigm shift comes in re-positioning a company to be a Social Business Enterprise (SBE). An SBE does not do pure charity per se. It will make profit because the poor will be converted into consumers through a new marketing model. The paradigm shift permeates through the entire organization: First, an SBE stretches disposable income by providing goods and services at lower prices. Here, the marketing product and pricing managers, channel and distribution managers will play a primary role. Second, it expands disposable income by providing goods and services not currently available for the bottom of the pyramid. Here, innovation should come through field researchers and R&D. Field researchers should discover Customer Insights from the poor – for unfulfilled needs and unmet desires. They should report directly to R&D so that nothing is missed out. Third, an SBE increases disposable income by growing the economic activity of the underserved society. For example, the mobile phone industry in Bangladesh—largely driven by Grameen Phone—created a total value added of $812 million in 2005 and contributed directly and indirectly to more than 250,000 income opportunities. To succeed, the new marketing innovation model should replace traditional business models. All marketing mix variables may have to be redesigned. Referring to Core Elements of Marketing, Marketing Strategy is made up of Segmentation, Targeting and Positioning. An SBE's approach to segmentation is simple. It is mainly based on the social economic status of the market. However, what is creative about its segmentation is that an SBE views the bottom of the pyramid as a new emerging segment that is worthwhile to pursue. Communities are effective in spreading word-ofmouth, a powerful marketing tool, and to uphold the business system. The SBE's positioning should highlight how it is doing business by serving the poor. Differentiation, Marketing Mix and Selling form Marketing Tactic. In an SBE, its marketing mix must be creative. Products must be designed to be affordable. Remember that the poor needs affordable products, not necessarily cheaper ones. The tactic for packaging is product unbundling – produce small sachets to be sold at affordable prices.
Promotion should take the form of word-of-mouth. Informal community leaders can be approached to be our promoters or influencers. Selling ideally, must be promoted through social entrepreneurship. Jobs are created and income generated when the SBE makes the members of the target market its sales force. Besides, since it is an untapped market, they know best the purchase and usage behavior of their own people. The time has come that we co-learn with the people at the bottom of the pyramid. (Kartajaya 2007)
The Base of the Pyramid Protocol Initiative The Base of the Pyramid (BOP) Protocol Initiative is an action research program launched in 2003 to develop and refine a corporate innovation process geared for the unique challenge to sustain the serving of the Base of the Pyramid markets. The initial framework for the BOP Protocol process was developed in 2004 through an intensive four-day design workshop at the Johnson Foundation's Wingspread Conference Center. The Centre for Sustainable Global Enterprise has partnered with two corporations to implement the BOP Protocol. The first project was launched in 2005 by SC Johnson in Kenya, and the second was launched in 2006 in India by the Solae Company, a subsidiary of DuPont. In January 2006 Dupont's subsidiary, The Solae Company, partnered with Cornell University to implement the BOP Protocol in India. Solae's initiative was launched in two locations: the Hyderabad slum cluster of Rasul Pura and in Parvathagiri Mandal, a rural village county approximately 3 hours outside of Hyderabad. The seven-person Solae team began by conducting home stays in each area and participating in a range of work-related activities, including harvesting rice, operating a village pay-phone, and manning a small kiosk selling "cool drinks" in the 115 degree heat. The final business concepts co-developed in both locations address the issue of malnutrition and food security through the sale of fresh, prepared foods using locallysourced ingredients and a cooking "outreach team" skilled in culinary arts and nutrition. (CSGE, 2005)
Conclusion The Bottom of the Pyramid is a new term coined by Prahalad. However, the concept has been prevalent in the market since decades. Companies have been targeting consumers actual and potential through various strategies. However, the streamlining and focus on BOP consumers is a recent action. Although, the BOP consumer market looks very prospective, there are various underlining issues the companies need to address. It is very important for companies to plan their marketing strategies with a holistic approach. For long term sustainability of the market, it is very important, to increase the purchasing power of the consumers at the BOP level, thereby moving them to the next level of the pyramid. Although multi-national companies have developed strategies, there is an inherent need to develop strategies pertaining to the overall development of the Bottom of the Pyramid market.
References: Brand Dossier (2008). “Rural marketing: the bottom-of-the-pyramid game.” Retrieved October 6, 2008 from http://www.domain-b.com/brand_dossier/marketing/20080509_rural_marketing.html Business India (2003). “Can MNCs Build Brands?” June 22. Centre for Sustainable Global Enterprise (2005). “The Base of the Pyramid Protocol Initiative.” Retrieved October 6, 2008 from http://www.johnson.cornell.edu/sge/research/bop_protocol.html Economic Times (2007). “Bottom of the Pyramid Market stands at $1.2 trillion,” April 27. Jaiswal, A (2008). “Fortune at the Bottom of the Pyramid: An Alternative Perspective.” Research Paper, Indian Institute of Ahmedabad, India, July. Karnani, Aneel (2007). “Fortune at the Bottom of the Pyramid: A Mirage – How the Private Sector Can Help Alleviate Poverty.” Working Paper, Stephen M. Ross School of Business, University of Michigan, April. Kartajaya, H (2007). “A New Marketing Innovation Model to Serve the Poor of ASEAN .” Retrieved October 6, 2008 from http://hermawan.typepad.com/blog/2007/08/a-new-marketing.html Khicha, P (2007). “Building Brands in Rural India.” Retrieved October 7, 2008 from http://www.brandchannel.com/features_effect.asp?pf_id=389 Prahalad, C K (2005). The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits. New Delhi: Pearson Education/Wharton School Publishing.
Ranganathan, C K (2003). “The Making of Chik,” Praxis, Business Line Publication, July, 22-27. Sirgy, M J and Lee, Dong-Jin (1996). “ Setting Socially Responsible Marketing Objectives: A Quality-Of-Life Approach,” European Journal of Marketing, 30(5), 20-34.
doc_113431376.doc
This document describes various marketing strategies targeting bottom of pyramid.
Marketing Strategies targeting the Bottom of the Pyramid
Introduction The bottom of the (economic) pyramid consists of the 4 billion people living on less than $2 per day. For more than 50 years, the World Bank, donor nations, various aid agencies, national governments, and, lately, civil society organizations have all done their best, but they were unable to eradicate poverty.
Bottom of Pyramid: A Market The base of the economic pyramid (BOP) in India representing the masses is an over $1.2-trillion market, making up the biggest chunk of the global 5 trillion $ BOP market excluding China, says a study by IFC and World Resources Institute (WRI). The term ‘bottom of the pyramid’ was coined by management guru CK Prahalad to describe the poor and the underserved section of the market. The BOP market in India, about $1.205 trillion, in purchasing power parity terms, makes up 84.8% of the total $1.42-trillion national household market.
The BOP population of 924.1 million people — 78% of them in rural areas— makes up
about 95% of the country’s population. The IFC-WRI study that used data from national household surveys in 110 countries, the BOP was defined as all those with incomes below $3,000 in local purchasing power. China was not part of the study. Of the global BOP market, Asia makes up the biggest chunk with a $3.47 trillion market, followed by Latin America ($509 billion), Eastern Europe ($458 billion) and Africa ($429-billion). Sector-wise, food is the biggest BOP market ($2.8-trillion), followed by energy ($433 billion), housing ($332-billion), transportation ($179 billion), health ($158-billion), ICT ($51-billion) and water ($20 billion). Compared to the BOP, the mid-market segmentthose with incomes between $3,000 and $20,000- represent a $12.5 trillion market globally. (Economic Times, 2007)
Bottom of the Pyramid: A Marketing Perspective The Traditional Approach: To experienced marketing managers in the world’s largest multinational companies, it is perfectly obvious who their target market audiences are: The developed world and upper and middle class residents of the developing world. The rationale is simple: these are the customers who demand and can afford costly products and services, who appreciate advances in technology and who provide intellectual excitement to managers trying to capture their business. The world’s poor? They are better served by governments and non-profit organizations. Selling to them just isn’t worth the effort. The Modern Approach: A member of the BOP is increasingly seen as a consumer or a potential buyer. Strategies are formulated in order to make the product available to the consumer, through innovation in the marketing mix. As the BOP market is very vast and huge, it can be utilized in manner that is profitable for a company. Some of the basic strategies used by the company are: 1) Product Innovation: Companies have to modify their product attributes pertaining to the needs and requirements of the BOP consumer. HUL has been one of the pioneer companies to formulate marketing strategies in order to cater to the BOP consumers. One of the effective strategies had been designing and changing the manufacturing process of the Lifebuoy brand of soaps from hard soap production to milled soap production, a change that made the soap longer lasting and produced more lather such that it can be used effectively with cold and hard water. (Prahalad 2005) Another example that can be treated as product innovation is building refrigerators with batteries to counter attack the problem of electricity supply in such areas.
2) Packaging: Due to the lack of space associated with the BOP consumers, what becomes necessary is to offer the product in various sizes and shapes. CavinKare revolutionalized the market with its sachet shampoos. Sachets were first introduced by the company in 1976 for its South-India based brand ‘Velvet’. (Ranganathan, 2003). In 1999, CavinKare came up with another pricing innovation: it launched a 4-ml sachet of Chik shampoo priced at 50 paisa. The launch was a great success: Chik’s market share jumped from 5.61 percent in 1999 to over 23 percent in 2003. It became the largest selling brand in rural markets. Companies will have to increasingly package their products in a manner that will occupy less space in the BOP consumer’s home. This is because; a typical BOP consumer’s bathroom has only one platform like a window sill which is used to store all the toiletries. So ideally, a consumer will not purchase a product even though it is small, if it occupies a large space on the platform. 3) Celebrity Endorsement: It is a general perception that celebrities have a high amount of influence on such consumers. It is a known phenomenon on how Rajnikant is worshipped down south and how Amitabh Bachchan has a temple built of himself by an admirer in Kolkatta. This phenomenon is obviously taken advantage of by marketers, however, what needs to be emphasized is that, the celebrities can be used to impart right information and educate these consumers about the benefits of using the products, effectively. Simple products like toothpowder, oil and chywanprash are endorsed by Suniel Shetty, Govinda and Amitabh Bachchan respectively. 4) Distribution: Cholayil Ltd., a purveyor of the herbal soap “Medimix,” campaigned in mobile vans to promote its brand. The van campaign visited interior villages where there were no distributors. The van was halted at specific points in order to demonstrate and distribute free samples. Alternatively, promoting one’s brand in large congregation points like village markets and fairs has a far wider reach, and is more cost effective. (Khicha 2007) Another simple strategy that can be adopted by marketers is to distribute free samples to the consumers. This strategy however, needs a follow up strategy,
because either your product has to be of very high quality such that the consumer gets hooked to your product, or every time the company wishes to increase sales or induces consumers to purchase the product they will either need to give a discounting scheme or club the products together. Chik when it was introduced in the market was promoted by giving free samples to consumers at fairs. 5) Innovative Communication strategies: Information about the product needs to be communicated keeping in mind the technology available and the literacy levels of the BOP consumers. National Television is highly instrumental for advertising in rural areas because of its penetration in the remotest areas. Companies also reportedly use posters on walls, theaters and mobile kiosks. HUL partnered with Ogilvy & Mather to formulate innovative communication strategies in order to communicate the need for creating awareness for cleanliness in terms of washing hands and the importance of K15 in salt as compared to regular salt or iodized salt that was not encapsulated. For the former, the company initiated the project of Swasthya Chetna, which had 127 two-person teams equipped with audiovisual equipment, flip charts, interactive games etc. to reach an estimated 40 million people in the first year alone. The latter was the need that prompted the company to launch ‘Shakti’, an idea that used local village women, to not only educate the rural BOP consumers, but also acted as distributors of various HUL products. The company found an innovative way to educate the consumers and gain access to a new distribution system. (Prahalad 2005). CavinKare used the strategy of live demonstrations of using the shampoo when it first launched the sachets to communicate to the consumers how using a shampoo was more effective then using a soap. Consumers till then were using soap to wash their hair. The above strategies however have only concentrated on the BOP member as a potential consumer. Another perspective can be to enable the customer to rise to a new level in the pyramid. In other words, a marketing model that empowers the customer. Marketers are increasingly realizing the fact that in order to tap the complete potential of the consumers at the bottom of the pyramid, what is important is to empower them.
The key issue is to empower the consumers with more disposable income, because at their current disposable income, there can only be a need or a want. What is essential is to convert that need into consumption. It is basic understanding, that if the consumers at the BOP are empowered their purchasing power increases, thereby increasing their capacity to consume, thus, converting their want into consumption. An approach presented by Karnani (2007), states that if the objective is to increase the income levels of the BOP consumers, then they should be perceived as producers rather than consumers. We need to facilitate production by the poor, and also support them in selective consumption. Selective consumption means choosing to enable or restrict consumption, based on the characteristics of the goods to be consumed and the effect they will have on the wellbeing of consumers. To understand the dynamics of promoting and curtailing consumption by the poor, it is useful to view it from the perspective of which target markets a company chooses to include and exclude. When marketers make such choices, they can have significant effects for the individuals involved (Sirgy and Lee, 1996; Smith and Quelch, 1993). Examples of successful models that have developed strategies in order to enable the consumers to establish themselves by viewing them as producers are: Amul was started in 1946, under the direction and guidance of Sardar Vallabhai Patel to form a dairy cooperative in order to directly undertake sale and processing of milk collected from member dairy farmers of the district. Amul is primarily a partnership between milk farmers and professional managers. Amul strategy has not only empowered the milk farmers in the state of Gujarat, but also created a global brand which serves high quality milk and milk products. Amul daily collects 7.4 million liters of milk from about 2.7 million farmers and converts it into value-added milk products1. Amul relies on employees who are dedicated to the cause of milk producers. Amul’s wage costs are less than 1 percent of total sales volume, while its private sector competitors have a wage cost of about 6 percent of sales (Business India, 2003).
1
For more information on the organization, visit www.amul.com
Amul is partnered with Gujarat Co-operative Milk Marketing Federation (GCMMF) which not only markets Amul products through a wide distribution network, but also provides available products at competitive prices. Amul is a classic example of how a company can successfully tap the potential of the BOP market. Shri Mahila Griha Udyog Lijjat Papad is an organization involved in the manufacturing of various food products primarily papad2 and consumer products like detergents and cake. This initiative by women, mostly from the lower strata of society, began in Mumbai in 1959. It gradually expanded to 69 branches in different states all across India. Membership has grown from seven founding women to more than 42,000 women. Following the concept of collective ownership, the organization is run by member sisters. Today, membership is open to any woman who has faith in its basic philosophy. For its papad production, the organization has a completely decentralized model. Each morning, at each branch, kneaded dough is distributed among the women. The women take the dough to their homes, and make papads by rolling and then drying them, and return the dried papads after one or two days. The organization’s total sales exceed Rs.470 crores with exports of more than Rs.24 crores. The organization has enabled women to earn economic independence, and raise their families’ living standards, all through engagement with dignified labor3. LIC has also tapped the BOP market, by innovating its products to specifically appeal to the needs of the rural consumer. Banking and insurance markets form symbiotic relationships when it comes to tapping rural markets, with banking being an excellent distribution channel for marketing insurance products. Citing the example of LIC tapping the extensive branch network of nationalized banks in deep, miles-from-anywhere locations, the model has allowed for unprecedented penetration by LIC into rural India. The critical success factor in succeeding in India's
2
Papad is an Indian food product made of flour and spice. It can be roasted or fried. It is used as an accompaniment to a meal or as a snack or appetizer. 3 For more information on the organization, visit www.lijjat.com
rural markets is the element of trust that a company has to gain from the rural consumer. (Brand Dossier, 2008) Around 35 per cent of Reader's Digest's 600,000 customers were located in rural and semi-urban areas, with a large chunk of them being school teachers. They used the post office as their primary delivery and direct marketing mechanism; the rate of undelivered copies being less than one per cent. (Brand Dossier, 2008) HUL’s Shakti campaign (discussed earlier in the paper) is also one of the strategies, used to empower the consumer, in this case, the women BOP consumers. The initiative of e-Choupal by ITC is a success story of technology meets opportunity. The e-Choupals, information centers linked to the internet, represent an approach to seamlessly connect subsistence farmers with large firms, current agricultural research and global markets. The network of these, each operated by a farmer in each community is called the sanchalak, allow for a virtual integration of the supply chain and significant efficiencies in the traditional system. The farmers benefit by realizing better prices for their crops, better yield through better practices and a sense of dignity and confidence in being connected with the rest of the world. (Prahalad 2005)
The SBE Model The paradigm shift comes in re-positioning a company to be a Social Business Enterprise (SBE). An SBE does not do pure charity per se. It will make profit because the poor will be converted into consumers through a new marketing model. The paradigm shift permeates through the entire organization: First, an SBE stretches disposable income by providing goods and services at lower prices. Here, the marketing product and pricing managers, channel and distribution managers will play a primary role. Second, it expands disposable income by providing goods and services not currently available for the bottom of the pyramid. Here, innovation should come through field researchers and R&D. Field researchers should discover Customer Insights from the poor – for unfulfilled needs and unmet desires. They should report directly to R&D so that nothing is missed out. Third, an SBE increases disposable income by growing the economic activity of the underserved society. For example, the mobile phone industry in Bangladesh—largely driven by Grameen Phone—created a total value added of $812 million in 2005 and contributed directly and indirectly to more than 250,000 income opportunities. To succeed, the new marketing innovation model should replace traditional business models. All marketing mix variables may have to be redesigned. Referring to Core Elements of Marketing, Marketing Strategy is made up of Segmentation, Targeting and Positioning. An SBE's approach to segmentation is simple. It is mainly based on the social economic status of the market. However, what is creative about its segmentation is that an SBE views the bottom of the pyramid as a new emerging segment that is worthwhile to pursue. Communities are effective in spreading word-ofmouth, a powerful marketing tool, and to uphold the business system. The SBE's positioning should highlight how it is doing business by serving the poor. Differentiation, Marketing Mix and Selling form Marketing Tactic. In an SBE, its marketing mix must be creative. Products must be designed to be affordable. Remember that the poor needs affordable products, not necessarily cheaper ones. The tactic for packaging is product unbundling – produce small sachets to be sold at affordable prices.
Promotion should take the form of word-of-mouth. Informal community leaders can be approached to be our promoters or influencers. Selling ideally, must be promoted through social entrepreneurship. Jobs are created and income generated when the SBE makes the members of the target market its sales force. Besides, since it is an untapped market, they know best the purchase and usage behavior of their own people. The time has come that we co-learn with the people at the bottom of the pyramid. (Kartajaya 2007)
The Base of the Pyramid Protocol Initiative The Base of the Pyramid (BOP) Protocol Initiative is an action research program launched in 2003 to develop and refine a corporate innovation process geared for the unique challenge to sustain the serving of the Base of the Pyramid markets. The initial framework for the BOP Protocol process was developed in 2004 through an intensive four-day design workshop at the Johnson Foundation's Wingspread Conference Center. The Centre for Sustainable Global Enterprise has partnered with two corporations to implement the BOP Protocol. The first project was launched in 2005 by SC Johnson in Kenya, and the second was launched in 2006 in India by the Solae Company, a subsidiary of DuPont. In January 2006 Dupont's subsidiary, The Solae Company, partnered with Cornell University to implement the BOP Protocol in India. Solae's initiative was launched in two locations: the Hyderabad slum cluster of Rasul Pura and in Parvathagiri Mandal, a rural village county approximately 3 hours outside of Hyderabad. The seven-person Solae team began by conducting home stays in each area and participating in a range of work-related activities, including harvesting rice, operating a village pay-phone, and manning a small kiosk selling "cool drinks" in the 115 degree heat. The final business concepts co-developed in both locations address the issue of malnutrition and food security through the sale of fresh, prepared foods using locallysourced ingredients and a cooking "outreach team" skilled in culinary arts and nutrition. (CSGE, 2005)
Conclusion The Bottom of the Pyramid is a new term coined by Prahalad. However, the concept has been prevalent in the market since decades. Companies have been targeting consumers actual and potential through various strategies. However, the streamlining and focus on BOP consumers is a recent action. Although, the BOP consumer market looks very prospective, there are various underlining issues the companies need to address. It is very important for companies to plan their marketing strategies with a holistic approach. For long term sustainability of the market, it is very important, to increase the purchasing power of the consumers at the BOP level, thereby moving them to the next level of the pyramid. Although multi-national companies have developed strategies, there is an inherent need to develop strategies pertaining to the overall development of the Bottom of the Pyramid market.
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