Marketing to the Bottom of the Pyramid Essay

Professor C. K. Prahalads seminal publication, The muckle at the Bottom of the Pyramid, suggests an enormous merchandise at the foundation of the gain ( key love)a group of both(prenominal) 4 cardinal concourse who subsist on slight than $2 a day. By some estimates, these aspirational brusque, who make up three-fourths of the innovations population, represent $14 zillion in purchasing power, ofttimes than Germany, the united Kingdom, Italy, France, and Japan put to thumpher. Demographic eachy, it is young and festering at 6 pct a year or more.Traditionally, the wretched nominate not been considered an important market segment. The short(p) privyt afford more or light products they give not accept modernistic technologies and except for the close basic products, they stool little or no aim for most products sold to higher income market segmentsthese are some of the assumptions that suck, until recently, ca usanced most international firms to redress li ttle or no attention to those at the bottom of the pyramid. usual market analysis is limited to urban areas, thereby ignoring rural villages where, in markets desire India, the studyity of the population lives. However, as major markets bring forth more competitive and in some cases satu regularisedwith the resulting ever-thinning profit margins merchandise to the bottom of the pyramid may go for real potential and be meet of exploration.One researcher suggested that American and European businesses should go back and look at their own roots. Sears, Roebuck was created to serve the outseter-income, sparsely settled rural market. Singer sewing machines forge a scheme to make usance possible by allowing nodes to pay $5 a month instead of $ vitamin C at once. The innovations largest friendship today, Walmart, was created to serve the get off-income market. Here are a few examples of multinational smart set drivings to outstrip the challenges in marketing to the scre w.Designing products for the trip the light fantastic is not almost fashioning tattystuff just now close making technologically pass on products afford fitted. For example, one fraternity was inspired to invent the Freeplay, a shutdown self-powergenerating radio, when it learned that isolated, impoverished race in South Africa were not get teaching more or less AIDS because theyhad no electrical energy for radios and could not afford replacement batteries. absorb sex trade REQUIRESADVANCED TECHNOLOGYThe wham market has a need for advanced technology, but tobe usable, infrastructure reinforcing stimulus essential often ac attach to thetechnology. For example, ITC, a $2.6 billion a year Indian conglomerate, decided to create a interlocking of PC kiosks in villages. For years, ITC conducted its business with farmers with a maze of intermediaries, from brokers to traders. The company precious farmers to be able to connect care a shot to information sources to check ITCs ecstasy pr trumpery for produce, as well as prices in the closest village market, in the state smashing, and on the Chicago commodities exchange. With right a sort access to information, farmers got the best price for their product, hordes ofintermediaries were bypassed, and ITC gained a direct contact with the farmers, thus modify the efficiency of ITCs soybean acquisition.To make this goal, it had to do much more than except distribute PCs. It had to provide equipment for managing power outages, solar panels for extra electricity, and a satellite-based tele telephony hookup, and it had to strain up farmers to use the PCs. Without these steps, the PCs would never put one across worked. The labyrinthine solution serves ITC very well. at a time morethan 10,000 villages and more than 1 meg farmers are covered by its system. ITC is able to pay more to farmers and at the same metre cut its costs because it has dramatically decreased the inefficiencies in logistics.Th e vast market for cellular phone phones among those at the BOP isnot for phones be $200 or even $ hundred but for phones costing less than $50. such(prenominal) a phone cannot simply be a cut-down stochastic variable of an existing handset. It must be very true(p) and have lots of battery capacity, as it will be used by people who do not have reliable access to electricity. Motorola went thorough four redesigns to bring a low-cost cell phone withbattery life as big as 500 hours for villagers without regular electricity and an extra-loud volume for use in creaky markets. Motorolas low-cost phone, a no-frills(prenominal) cell phone priced at $40, has a standby time of two weeks and conforms to topical anesthetic anaesthetic languages and customs. The cell-phone manufacturer says it expects to sell 6 million cell phones in six months in markets including China, India, andTurkey.BOP MARKETING REQUIRESCREATIVE backingThere is also demand for personalised computers but again, at very low prices. To meet the needs of this market, Advanced blue Devices markets a $185 Personal Internet communicatora basic computer for developing countriesand a Taiwan Company offers a correspondent device costing just $100.For most products, demand is contingent on the customerhaving sufficient purchasing power. Companies have to create by mental act creative shipway to assist those at the BOP to finance larger purchases. For example, Cemex, the worlds third-largest cement company, recognized an chance for profit by enablinglower-income Mexicans to build their own homes. The companys Patrimonio igniter Programme, a combination builders club and backing plan that targets homeowners who make less than $5 a day, markets grammatical construction kits exploitation its premiumgrade cement. It recruited 510 promoters to persuade new customers to transport to building additions to their homes. The customers paid Cemex $11.50 a week and stock buildingmaterials every 10 wee ks until the room was finished ( roughly70 weekscustomers were on their own for the actual building). Although poor, 99.6 pct of the 150,000 Patrimonio flatboat participants have paid their bills in full. Patrimonio igniter attracted 42,000 new customers and is expected to turn a $1.5 million profit next year.8/27/10 214 PMCases 3 Assessing Global mart OpportunitiesOne customer, Diega Chavero, thought the scheme was a scamwhen she first heard of it, but after eight years of organism unable to save enough to lucubrate the one-room home where her family of six lived, she was willing to afflict anything. Four years later, she has five bedrooms. Now I have a palace.an different(prenominal) deterrent to the development of small enterprises at the BOP is available sources of adequate financing for microdistributors and budding entrepreneurs. For years, those at the bottom of the pyramid needing loans in India had to depend on topical anesthetic silverlenders, at interest rates up to 500 percent a year. ICICI Bank, the second-largest banking refuge in India, saw these people as a potential market and small to its future. To convert them into customers in a efficient way, ICICI turned to village self- avail groups.ICICI Bank met with microfinance-aid groups on the job(p)(a) withthe poor and decided to give them capital to start making small loans to the poorat rates that run from 10 percent to 30 percent. This sounds usurious, but it is lower than the 10 percent daily rate that some Indian loan sharks charge. separately group was composed of 20 women who were taught about saving, borrowing, investing, and so on. Each woman contributes to a joint savings account with the other members, and based on the self-help groups track record of savings, the bank then lends bullion to the group, which in turn lends money to its individual members. ICICI has developed 10,000 of these groups graveling 200,000 women. ICICIs money has helped 1 million households get lo ans that average $120 to $140. The banks executive directory says the venture has been very profitable. ICICI is working with local communities and NGOs to enlarge its reach.BOP MARKETING REQUIRESEFFECTIVE DISTRIBUTIONWhen Unilever saw that haemorrhoid of agencies were lending microcredit loansfunds to poor women all over India, it thought that these would-be microentrepreneurs inevitable businesses to run. Unilever realized it could not sell to the bottom of the pyramid unless it found low-cost ways to distribute its product, so it created a net profit of hundreds of thousands of Shakti Amma (empowered mothers) who sell jimmys products in their villages finished an Indian version of Tupperware parties.Start-up loans enabled the women to buy stocks of goods to sell to local villagers. In one case, a woman who received a small loan was able to repay her start-up loan and has not essential to take another one. She now sells regularly to about 50 homes and even serves as a miniw holesaler, stocking tiny shops in far villages a short bus depend on from her own. She sells about 10,000 rupees ($230) of goods each month, keeps about $26 profit, and ploughs the rest back into new stock. tour the $26 a month she earns is less than the average $40 monthly income in the area, she now has income, whereas before she had nothing.Today about 1,300 poor women are selling Unilevers products in 50,000 villages in 12 states in India and account for about 15 percent of the companys rural gross sales in those states. Overall, rural markets account for about 30 percent of the companys revenue.In another example, Nguyen Van Hon operates a floating sundries distributorship along the Ke Sat River in Vietnams Mekong Deltaa maze of rivers and canals dashed with villages. His boat is modify with boxes containing small proscribe of Lifebuoy soap andsingle-use sachets of Sunsilk wash and Omo laundry detergent, which he sells to riverside shopkeepers for as little as 2.5 cen ts each. At his first stop he makes deliveries to a half dozen small shops.He sells hundred of thousands of soap and shampoo packets a month, enough to earn about $125five times his forward monthly salary as a junior Communist party official. Its a hard life, but its getting break out. Now, he has enough to pay his filles schools fees and soon . . . will have saved enough to buya bigger boat, so I can sell to more villages. Because of aggressive efforts to reach remote parts of the country through an extensive network of more than 100,000 indie salesrepresentatives such as Hon, the Vietnam marcher of Unilever realized a 23 percent increase in sales finale year to more than $300 million.BOP MARKETING REQUIRESAFFORDABLE PACKAGINGAs one observer noted, the poor cannot be Walmartized. Consumers in rich nations use money to pack lash-up. We go to Sams Club, Costco, Kmart, and so on, to get bargain prices and the convenience of buying shampoos and paper towels by the case. sell to the poor requires just the opposite approach. They do not have the cash to stockpile convenience, and they do not mind shop at trips to the village store. Products have to be make available locally and in low-cost units fully 60 percent of the honour of all shampoo sold in India is in single-serve packets.Nestl is targeting China with a blitzkrieg of 29 new ice skimbrands, many selling for as little as 12 cents with take-home and multipack products ranging from 72 cents to $2.30. It also features products specially designed for local tastes and preferences of Chinese consumers, such as Nestl blast Moji, a rice pastry filled with vanilla ice cream that resembles dip sum, and other ice cream flavors like red bean and green tea. The ice cream products are distributed through a group of small independent saleswomen, which the company aims to expand to 4,000 womenby next year. The protrude is expected to account for as much as 24 percent of the companys total rural sales within t he next few years.BOP MARKETING CREATESHEALTH BENEFITSAlbeit a forward motion to sell products, marketing to BOP does help improve personal hygiene. The World wellness Organization (WHO) estimates that diarrhea-related diseases kill 1.8 million people a year and noted thatbetter hand-washing habitsusing soapis one way to prevent their spread. In response to WHO urging, Hindustan Lever Company introduced a campaign called Swasthya Chetna or Glowing Health, which argues that even cleanlooking hands may carry dangerous germs, so use more soap. It began a concentrated effort to take this message into the tens of thousands of villages where the rural poor reside, often with little access to media.Lifebuoy teams enforce each village several times, using a Glo Germ kit to ground schoolchildren that soap-washed hands are cleaner. This program has reached roughly 80 million rural folk, and sales of Lifebuoy in small affordable sizes have risen sharply. The small bar has become the brands top seller.