BARRIERS, RISKS AND 
SOLUTIONS FOR THE 
BOTTOM OF THE PYRAMID 
Prof. Sameer Mathur, 
Ph.D.
Sameer Mathur 
BuddingMarkets.com 
Indian Institute of Management, 
Lucknow 
Marketing Professor 2013 – 
Marketing Profess...
Agenda 
BOP Markets for MNCs 
Barriers to BOP Business Success 
Factors to Consider 
BOP Challenges and Risks
BOP Markets for MNCs 
• Some success in industries like telecommunications, 
FMCGs and pharmaceuticals. 
• Many other firm...
BOP Markets for MNCs 
• The BOP market is not useful for all companies, products and 
supply chains, irrespective of their...
Barriers to BOP Business 
Success 
Uncertain cash flow 
Gauging Demand 
Sales and Distribution challenges 
Disaggregated p...
Uncertain Cash Flow 
• Consumer cash flow is a major issue 
• BOP consumers are not only poor but 
also live in a state of...
Solutions 
• Reducing up-front payments by 
using credit. 
• Accepting payments in instalments. 
• Pay-per-use strategies ...
Gauging Demand 
• Common MNC mistake: No point in marketing products 
consumers don’t want (confusing need with demand)  ...
Solution 
• Focus on areas where an existing 
demand can be satisfied with low-cost 
and high-quality products. 
• Eg: Saf...
Sales and Distribution Challenges 
• Although numerous, BOP consumers 
are largely rural and highly scattered. 
• Difficul...
Solution 
• Building a dedicated channel to 
serve the market and teaming up 
with partners which have 
extensive reach in...
Disaggregated Providers 
• Small suppliers have rare access 
to high-quality inputs, they lack 
inputs, training and finan...
Underdeveloped Business 
Ecosystems 
• BOP lacks business ecosystems required for products 
and services. 
• Eg: A rural e...
Solution 
• Innovative companies may 
address holes in the eco-system 
by supplementing value chains 
end-to-end 
• Eg: Am...
Factors to Consider 
1. Must be able to manage numerous 
low-margin, low-value transactions 
• Companies depending on gene...
Factors to Consider 
3. Legacy and overhead costs 
• Companies must control such costs to ensure 
profitability and low pr...
BOP Challenges and Risks 
1. Image  Must demonstrate that commercial returns 
help to further community development susta...
BOP Challenges and Risks 
3. Cannibalization  New low-cost product may cut 
into sales of mid-range products – one soluti...
Summary – BOP Barriers 
Uncertain cash flow 
Gauging Demand 
Sales and Distribution challenges 
Disaggregated providers 
U...
Summary 
BOP Markets for MNCs 
Barriers to BOP Business Success 
Factors to Consider 
BOP Challenges and Risks
Recommended Reading
Over 1 Million views 
from more than 100 countries 
Prof. Sameer 
Mathur 
Top 1% most viewed 
Over 250 presentations on 
M...
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  • Bottom of the Pyramid - Barriers, Risks, Solutions

    1. 1. BARRIERS, RISKS AND SOLUTIONS FOR THE BOTTOM OF THE PYRAMID Prof. Sameer Mathur, Ph.D.
    2. 2. Sameer Mathur BuddingMarkets.com Indian Institute of Management, Lucknow Marketing Professor 2013 – Marketing Professor 2009 – 2013 Ph.D. and M.S. (Marketing) 2003 – 2009
    3. 3. Agenda BOP Markets for MNCs Barriers to BOP Business Success Factors to Consider BOP Challenges and Risks
    4. 4. BOP Markets for MNCs • Some success in industries like telecommunications, FMCGs and pharmaceuticals. • Many other firms face difficulties in reducing costs and prices to serve BOP consumers. • Eg: Procter & Gamble’s PUR water purification for BOP markets was not profitable enough and had to be moved under the company’s philanthropic arm.
    5. 5. BOP Markets for MNCs • The BOP market is not useful for all companies, products and supply chains, irrespective of their motivation. • Many innovations come from organisations outside the mainstream in their industries. • Examples: – Microfinance by NGOs – Mobile money by Telecom providers – Micro mortgage companies in India by inexperienced entrepreneurs with little housing-sector knowledge
    6. 6. Barriers to BOP Business Success Uncertain cash flow Gauging Demand Sales and Distribution challenges Disaggregated providers Undeveloped business ecosystems
    7. 7. Uncertain Cash Flow • Consumer cash flow is a major issue • BOP consumers are not only poor but also live in a state of uncertainty • Immediate payments for many products is not feasible • Eg: Many small farmers in Kenya do not buy fertilizers as they cannot afford the 50kg bags it comes in.
    8. 8. Solutions • Reducing up-front payments by using credit. • Accepting payments in instalments. • Pay-per-use strategies Eg: Private primary education in Ghana, irrigation pumps in India, clean drinking water in the Philippines. • Re-packaging products in small amounts/sizes.
    9. 9. Gauging Demand • Common MNC mistake: No point in marketing products consumers don’t want (confusing need with demand)  Most consumers would buy a cell phone over a solar powered lantern or a low-energy stove. • If the demand has to be generated through marketing then this increases prices and costs which is not BOP viable.
    10. 10. Solution • Focus on areas where an existing demand can be satisfied with low-cost and high-quality products. • Eg: Safaricom’s M-Pesa  Offers money transfers by mobile phone in Africa at 33% of the cost of other organisations like Western Union.
    11. 11. Sales and Distribution Challenges • Although numerous, BOP consumers are largely rural and highly scattered. • Difficult to manage face to face and cash-based interactions. • Challenge is beyond initial sale – high cost of meeting repairs and warranty replacements in far off locations.
    12. 12. Solution • Building a dedicated channel to serve the market and teaming up with partners which have extensive reach in the market. • Eg: Hindustan Lever’s Pureit water filters are marketed through a partnership with microfinance institutions.
    13. 13. Disaggregated Providers • Small suppliers have rare access to high-quality inputs, they lack inputs, training and financial credit and have an unreliable output. • Solution : Company assistance through training, pre-determined contracts and provision of inputs.
    14. 14. Underdeveloped Business Ecosystems • BOP lacks business ecosystems required for products and services. • Eg: A rural entrepreneur who buys a cow may face difficulties in finding cheap and easily available vetinerary services.
    15. 15. Solution • Innovative companies may address holes in the eco-system by supplementing value chains end-to-end • Eg: Amul, that buys milk from 3 million farmers, also arranged for artificial insemination services for its small producers
    16. 16. Factors to Consider 1. Must be able to manage numerous low-margin, low-value transactions • Companies depending on generating high margins at each stage of the value chain will not succeed 2. Must be comfortable working with informal markets • Companies requiring proper trading paperwork and certification of suppliers may be uneasy in BOP markets
    17. 17. Factors to Consider 3. Legacy and overhead costs • Companies must control such costs to ensure profitability and low product costs 4. Requires a long-range mind-set • BOP markets require time, patient sources of capital and dedicated teams and leaders for healthy returns to be generated
    18. 18. BOP Challenges and Risks 1. Image  Must demonstrate that commercial returns help to further community development sustainably rather than come at the expense of the poor. 2. Brand  Low-end versions of a brand may reduce its attractiveness to customers – one solution is creating a distinct name for a BOP product.
    19. 19. BOP Challenges and Risks 3. Cannibalization  New low-cost product may cut into sales of mid-range products – one solution is selling through different channels. 4. Underestimating the competition  Numerous competitors in the informal economy – local competitors can be involved through employment, roles in the value chain or sourcing from them.
    20. 20. Summary – BOP Barriers Uncertain cash flow Gauging Demand Sales and Distribution challenges Disaggregated providers Undeveloped business ecosystems
    21. 21. Summary BOP Markets for MNCs Barriers to BOP Business Success Factors to Consider BOP Challenges and Risks
    22. 22. Recommended Reading
    23. 23. Over 1 Million views from more than 100 countries Prof. Sameer Mathur Top 1% most viewed Over 250 presentations on Marketing www.BuddingMarkets.com

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