bottom of the pyramid

1. MBA (SEMESTER IV)
FINANCE
Term paper assignment of
MANAGING FOR SUSTAINABILITY
Submitted by: Rahul Gupta Submitted to:
Roll no: 200012135141 Dr. Ajai Prakash
DEPARTMENT OF BUSINESS ADMINISTRATION
UNIVERSITY OF LUCKNOW

3. INTRODUCTION
• "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.
• 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 (MNC’s).

4. CONCEPT
• Unlike traditional aid-based models of economic development, BOP
approaches recast poverty as an economic opportunity for MNCs. The
basic argument has three premises:
i. The world’s poor constitute massive growth opportunities and profit
potential for MNC’s.
ii. MNCs should play a leading role in unlocking the economic potential of
such difficult-to-access markets.
iii. Bringing the poor into the global economy will simultaneously generate
fortunes for MNCs while solving the problem of global poverty.
• UNICEF conducted a study that the world’s 20% population enjoys
more than 70% of world income. This 20% population is known as the
affluent population. In contrast, the rest 80% is known as the Bottom of
the Pyramid market.

5. The diagram below depicts a typical pyramid containing different
groups according to their purchasing power parity.
• Considering India's case, the BOP market
has over 924 million with a purchasing
power parity of rupees 6,550 thousand
crores. There are 114 million households in
India at the bottom of the Pyramid.
• The number is 76 per cent of the rural
population and 60 per cent of India's total
population. So, suppose a marketer in India
is not marketing to BOP. In that case, it is
only selling to 60 per cent of the
population.
• This number becomes vital when the
bottom of the pyramid population is
spending about 310.5 thousand crore
rupees on housing or equal to 48 per cent
of India's national housing market.

6. CHARACTERISTICS OF THE BOTTOM
OF THE PYRAMID MARKET
• Unmet Needs: The people in this market segment are also varied
because some of their needs are similar to the other market segment,
yet some needs are unique to them. There is a higher chance that
people in the BOP are willing to pay for it, but they may not have access
to the same.
• Subsistence Livelihood: It is defined as the minimum resources one
needs for their basic survival needs. The people in the BOP are
dependent on informal sectors and as is highly volatile are living hand-
to-mouth.
• Poverty Penalty: It can be explained as the poor segment's excessive
price against the price paid by the rich for the same goods and services.

7. CONSUMERS AT BOP
Consumers at the “bottom
of the pyramid” (BOP) are
not just targets of social
action aimed at poverty
reduction, improved
consumption aspiration and
capability, and enhanced
well being. These “next four
billion” consumers also
represent an unprecedented
opportunity for economic
growth and innovation.

8. • Price Sensitive: Needless to say, the market segment at the bottom
will not have a large disposable income and is highly price-sensitive to
the products and services available. An example of this case is dalda
ghee's preference over cow's milk ghee due to the price difference.
• Value-Conscious: The consumer will also pay more to the product if it
is providing more value to the consumer. For example, Vim soap's sale
with a plastic coating increased as the consumers perceived this soap
will last more than other soaps. In short, the consumers want to drive
maximum utility from a product.
• Brand-Conscious: It is a common misconception that this market
segment is not brand conscious. The consumer does, in fact, pay a lot
of value to the brand.
Hence, in conclusion, the consumer in this market is price-sensitive,
brand conscious and tries to obtain maximum utility from a product.

9. BOTTOM OF THE PYRAMID
STRATEGY
Strategizing for the Bottom of the Pyramid Market is essential to bottom
of pyramid marketing. After analyzing the market behavior and
consumer characteristics, it is imperative to move towards successful
marketing strategies.
• Reaching out to the BOP
• Creation of New Products and Services
• Creation of a New Business Model
• New Distribution Channels
• Partnering with Other Organizational Structures
• Investing in Best Technologies

10. CHALLENGES & OPPORTUNITIES IN
BOP
CHALLENGES
•Distribution access, not a lack of
buying power.
•Educating consumers through
product and process.
•Adopting Local need-based
components in Product and services.
•New business models are needed.
OPPORTUNITIES
•New IT & Communications
infrastructures (esp wireless)-
inexpensive way to establish
marketing and distribution channels
in these communities.
•BoP markets are very large and
attractive. Local innovations can be
leveraged across other BoP markets.
•Innovations from the BoP markets
will find applications in developed
Markets.
•Lessons from the BoP markets can
influence the management practices
of global firms

11. CONCLUSION
The 80 per cent of the population is known as the Bottom of the
Pyramid market. The name suggests it is at the bottom of the Pyramid
and only constituents to about 30 per cent of the spending.
Bottom of the pyramid market would be any market where an individual
income lies below $1500. It consists of more than four billion people in
the world.
The market is characterized by the fact that people want maximum
utility and highly price-sensitive.
Bottom of the pyramid marketing involves meeting the unique needs of
their constituent population.