Marketing at the bottom of the pyramid

What is BoP and what are the 4 A's and 5 D's for marketing in the rural segment.

1. MARKETING AT THE BOTTOM OF THE PYRAMID SUBMITTED BY ADARSH SHARMA ANSHUL GARG DAVID YADAV GAURAV KUMAR MRUDULA SWAMY

2. WHAT IS BOTTOM OF PYRAMID Bottom of the pyramid (BOP), also called base of the pyramid, term in economics that refers to the poorest two-thirds of the economic human pyramid, a group of more than four billion people living in abject poverty. More broadly, BOP refers to a market-based model of economic development that promises to simultaneously alleviate widespread poverty while providing growth and profits for multinational corporations (MNCs). “Bottom of the Pyramid” ( BoP ) was first used by U.S. President Franklin D.Roosevelt in 1932. The phrase “Bottom of the Pyramid” is used in particular by people developing new models of doing business that deliberately target the poorest regions.

3. WORLD ECONOMIC PYRAMID

4. BOP FROM COMPANY’S PERSPECTIV Income is too low, the poor can’t buy MNCs’ products Goods sold in developing markets are so cheap that MNCs can’t make reasonable profit . The poor don’t waste money on luxury products, they only fulfill basic needs . The poor don’t have the required skills for the use of advanced technology .

5. PRINCIPLES OF INNOVATION OF BOP Price Performance Innovation : Hybrids Scale of Operations Sustainable Development : Eco-Friendly Identifying Functionality : Is the BOP different from Developed Markets? Process Innovation Deskilling Of Work Education Of Customers Designing for Hostile Infrastructure Interfaces Distribution : Accessing the Customer BOP markets essentially allow us to challenge the Conventional Wisdom in Delivery of Products and Services

6. MARKETING FOR BOP The first one, called the 4A’s, written by C.K Prahalad for the Journal of Product Innovation Managemen t . His focus is on the BoP as a source for breakthrough innovation . First of all, marketing managers working on BoP markets need to create an  Awareness  of the product and service. Basically, it comes down to making sure that everyone there understands that it is available and know how to use it. Second, companies should generate an  Access  to it. These markets can be difficult to access and this should be overcome. Third, the supply should be  Affordable  for the local people’s wallet. This is a real challenge in the sense that it means dividing product or service’s price. Fourth and last, what is produced should be  Available . Building a relationship is of tantamount importance since markets sometimes do not exist, and the companies should see this strategy not as a market development one, but as a market creation one, with implies a different customer relationship management.

7. MARKETING FOR BOP CONTD…. The second approach is called the 5D’s and was proposed by Niti Bhan . She proposes that the first thing that should be taken into account it  Development. It implies that selling any kind of product or service should have an immediate value for the Bop Consumers. Keeping in mind that money is scarce, BoP people need to make trade-off everyday, so if success is to be met, it is through a more or less immediate value creation.   Design .- The underlying idea being that producing the same supply but lowering the price will definitely not be sufficient. BoP customer are not as “trapped” in western style consumerism as we are, and this makes an huge challenge in terms of adapting and redesigning the supply Distribution -   Accessibility and Availability . D istribution strategies such as “piggybacking” or the one set up by Essilor in India. Demand -   It is about human centered analysis : how does a company manage its advertisement and communication in order to resonate with the Bop consumer ?  Dignity   -An extremely interesting and can be found in the “design for all” approach: in creating a dedicated supply, company should ensure that it does stigmatize the BoP consumer. Put differently, the product or service cannot be perceived as a “designed and produced for the poor”. BoP consumers are like any other ones on this point and do not want to have something that will highlight their current economical situation .

8. ADVANTAGES AND CHALLENGES Main Challenges Cash poor consumers Geographic, economic, and cultural distance Limited product awareness and understanding Weak physical and institutional infrastructure   Working with a longer time frame Main Advantages   Vast market size High growth rates A less competitive environment Opportunities for cost-saving Opportunities for innovation

9. EXAMPLES The most remarkable innovation of Tata Swach range of Water Purifiers from Tata Chemicals-A Tata Group Company satisfying the essential necessity of purified water for the BoP for as low as Rs.499 ($10). This innovation not only provided a source of potable drinking water but also provided a low cost solution to the already existing purifiers in the Indian market without the need of electricity, which is a scarce resource in India . Vortex  is a startup incubated at Indian Institute of Technology, Chennai which has been successful in making rural banking a reality with the low cost ATM. The startup has over 6 patents registered and operates at a low cost at the same time the machine is able to work at ambient temperatures of up to 50 degree Celsius unlike the traditional machines which are high on power consumption as well as needs air conditioning system to keep it cool. The company has also brought in Solar ATM and Biometric ATM now under its portfolio for catering to the rural needs . The earlier innovations have been a run away success like the sachets of Shampoo priced at Rs.1/Rs.2. The budget business hotel chain, Ginger Hotel from Indian Hotels, Project Shakti from Hindustan Unilever who has got the rural Self Help Groups (SHG) to act as its last mile connectivity in rural India and now has a commanding position in the Indian Rural market,