Bottom of the Pyramid Case Study
Bottom of the Pyramid Case Study
1. As a junior member of your company’s committee to explore new markets, you have received a memo from the chairperson telling you to be prepared at the next meeting to discuss key questions that need to be addressed if the company decides to look further into the possibility of marketing to the BOP segment. The ultimate goal of this meeting will be to establish a set of general guidelines to use in developing a market strategy for any one of the company’s products to be marketed to the “aspirational poor”. These guidelines needs not be company or product specific at this time. In fact, think of the final guideline as a checklist- a series of questions that a company could use as a start in evaluating the potential of a specific BOP market segment for one of its products.
Right now on this planet there are 2,582 people living for less than $2 a day and it is this group that makes up the bottom of the economic pyramid (BOP). With this group constituting such a large and diverse part of the market, many organizations have been seeking to make their presence larger in this area of the market with their products and services. This move is incredibly organizationally strategic as the BOP market has a need for advanced technology. However in order for this market initiative to be successful these products must be accompanied by the correct infrastructure support. Even more to this point, for most products, demand is contingent on the customer having sufficient purchasing power.
With this in mind, designing a business model to serve the market BOP has to start with a basic insight rather than tinkering or tailoring a minor detail of the current business model. Firms and companies must understand that the creation of markets out of unmet needs is paramount. Along with this, companies need to ensure that their products are profitable, actually serve the poor and are good for them as well. The BOP is a hard market to crack. Not only do firms have to account for the 4 P’s of marketing but also, they now must accommodate the four challenges of BOP marketing.
These challenges, awareness, availability, accessibility and affordability are the obstacles that stand in the way of a product being successful or not. If appropriately traversed, the company can expect to see huge profits. However this can only be done through a very thorough understanding of this unique market and the appropriate application of practical and pragmatic marketing strategies.
The BOP is not for every company. This market is often thought of as dominated by governments, aid agencies, non-profits, etc. Many companies and firms choose to leave this market segment to the aforementioned groups as they deem it as an unnecessary investment. One of the main reasons for this is the fact that the general population is constrained by their income. If the cost of producing a reasonably quality product is high, then the average consumer in this market would not be able to afford it. Not only this, but increasing consumption very well may not be sustainable in these BOP areas. With this in mind, there are many questions a company should ask in relation to the BOP target market. Some guidelines or questions that would be wise to ask in relation to the BOP are: When looking across different product categories the BOP consume, is it only basic needs? In what product categories are the products the most successful? What type and range of product should we provide?
What does the consumer want from the product?
What should be the name of the product?
How is it differentiated from the competitors
How do we best communicate with our target market consumers and persuade them to buy?
2. Marketing to the BOP raises a number of issues revolving around the social responsibility of marketing efforts. Write a position paper either pro or con on one of the following:
a. Is it exploitation for a company to profit from selling soaps, shampoo, personal computers, and ice cream, and so on, to people with little disposable income?
b. Can making loans to customers whose income is less than $100 monthly at interest rates of 20 percent to purchase TVs, cell phones, and other consumer durables be justified?
c. One authority argues that squeezing profits from people with little disposable income-and often not enough to eat- is not capitalist exploitation but rather that it stimulates economic growth.
In this day of age, it pays dividends to have a highly active and involved market. If you take a step back, and look at the characteristics of the developed nations of the world and compare them to those of the third world or developing countries, many differences can be noted. However, one reoccurring trend is that of the absence of a strong, diverse, international and active marketplace in many of the poorer countries. The places of business found in these areas tend to operate on a local system with transactions taking place between natives and sometimes even forgoing currency to barter. Slowly, many large companies and firms are taking note of these markets. These BOP (bottom of the pyramid) markets are ripe with opportunity for those willing to take the risk. Many people see this as capitalist exploitation, but in reality, it stimulates economic growth.
The extension of a company or firm into a BOP market means investing large amounts of time and capital into the project. These firms want to turn a profit and through cautious investing, will try and insure that. With investments come points of contact, the construction of a physical, tangible storefront, a service scape. With the installation of these comes the need of staffing, people to operate the stores, sell the product and carry the company message. Just like in India with Unilever. Several locals were given an opportunity to leave the life they were living behind for any opportunity at better existence. Now 1,300 women are selling Unilever products in 50,000 villages in 12 states in India, totaling to about 15% of the company’s rural sales in those states.
Many individuals tend to harbor xenophobic traits or a fear of change. In reality when if they could take a more logical approach, the benefits of foreign investment would far outweigh their fears. More and more people are realizing this and slowly are opening up to the idea. The Vietnamese are an example. At this moment, Vietnam has more than 100,000 independent sales representatives working for Unilever to push their products into the remote BOP markets. Such a large force of human capital could never have been employed if it wasn’t for the targeting of these markets. An argument may be brought up that their purchasing power is not strong enough or maybe that they are being exploited. However, in reality, foreign investment allows for growth and progress that these areas would never of been a part of it wasn’t for these large companies and firms help.