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Marketing at Bottom of Pyramid

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Marketing at Bottom of Pyramid, myths, risks, issues

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Marketing at Bottom of Pyramid

  1. 1. P Bottom of Pyramid Potential at Bottom of Pyramid Sec A Group-4 Gajendra Yadav(UM15019) Gautami Pati(UM15020) Harish Vellatery(UM15021) Himanshu Chugh(UM15022) Jaydeep Sahoo(UM15023) Kanupriya Pandey(UM15024)
  2. 2. Table of Contents I. Summary................................................................................................................ 2 II. Introduction........................................................................................................... 2 III. Why companies should target BoP? ..................................................................... 2 IV. Why BoP initiatives are lacking among MNC?.................................................... 3 V. Risk aversion ......................................................................................................... 3 VI. Myths ..................................................................................................................... 3 VII. Issues at BoP ......................................................................................................... 4 VIII. MNC Attitude........................................................................................................ 4 IX. Initiatives taken by Organizations........................................................................ 5 X. Idea ........................................................................................................................ 7 XI. Strategies................................................................................................................ 8 XII. Conclusion............................................................................................................. 9 XIII. References.............................................................................................................10
  3. 3. BOTTOM OF PYRAMID - DECEMBER 2015 2 Summary The Bottom of the Pyramid (BOP) has emerged as one of the dominant ideas in business. Cognizant of the overwhelming attention BOP has attracted and its potential impact on the billions of the poor and on managerial practices. An attempt is made to provide a perspective on the BOP concept. BoP is targeted by many companies such as Godrej ,Hindustan Unilever Limited, Selco, Aravind Eye Care, Narayan Hrudayalya etc. with many disruptive business models to touch the pain points. Here in this we have tried to analyze the myths about BoP such as poor section of society is not so profitable etc. and then what is the MNC attitude towards it. Later on with the primary research and understanding we are proposing an idea of designing footwear from waste plastic, which will depict the measure issues and some of the solutions for the same such as environment friendliness, sustainability, cost effectiveness, health and hygiene. Introduction The bottom of the pyramid is the largest, but poorest socio- economic group constituting more than 2.5 billion people that live on less than $2.50 a day. A BoP business is a business that takes into account possible customers at the BoP as individuals and as a community in its strategic decision-making, and then allows them to take part in the firm’s operations thus letting them add value to the final product directly and indirectly. Why companies should target BoP? The BoP has been a challenging market for companies that seek to make profit. While the vast majorities of companies have seen these challenges as impossible barriers, others have pursued strategies of experimentation in developing unique products and services for some of the world‘s most needy consumers. Although the buying power of the individual BoP consumer is low, the future potential of the market appears very attractive and as a result MNCs have been busy exploring this untapped potential by implementing innovative marketing strategies. At present, BoP consumers spend the majority of their income on food, beverage, tobacco, transportation and housing. However, by 2025, the spending on food, beverage and tobacco is estimated to decline as the poor‘s disposable income increases. Meanwhile the spending on transportation, healthcare, personal products and services, recreation and education are likely to increase gradually. The size of the BOP market is expected to expand at a faster rate than that of the top of the pyramid. The changing spending pattern has required a change in marketing strategies to be able to unlock the full potential of the BoP market. It is also a neglected market, which gives great growth opportunities, compared to the developed and saturated marked. Therefore the potential and the opportunities of the BOP market are enormous for the private sector (as well as the public sector). The BoP marketing strategies need to focus not only on lowering
  4. 4. BOTTOM OF PYRAMID - DECEMBER 2015 3 price points for existing products and services, but also on creating and offering customized products to address the unmet needs of BoP consumers. Why BoP initiatives are lacking among MNC? Large company executives are pressured to identify lines of business with relevant bottom-line impact; their career development and financial rewards depend on making the numbers. The business concept and market intelligence supporting a BoP venture are often developed by ad-hoc teams, which develop empathy for their target audiences. But when that data flows to the rest of the organization, or there is a change in leadership, the project comes to be assessed differently. The path from research to pilot, and from pilot to full execution, may run into these “discontinuity spots” several times –and it only takes one of them to kill even the most brilliant idea. Traditionally, the poor in Latin America have been largely viewed as people needing assistance from the government, civil society organizations, and corporate foundations in order to survive. In short, they tended to be seen as passive objects of charity, rather than active economic subjects. Sadly, this attitude is not only still prevalent among private-sector actors but also among members of the BoP communities themselves. Risk aversion Earlier research on disruptive innovation has established that organizations with significant investments in their status quo tend to resist change and risk taking. That basic pattern seems to hold true at large companies experimenting with BoP ventures. A multinational’s marketing development head said, “This company has no appetite for risk. If the president has to choose between earning an additional 10 % or doubling our business with a 50 % failure risk, he will consistently lean towards the first choice.” Similarly, a MNC’s sales and strategic planning department’s project leader reported that her company retraced its steps on its BoP project because the segment was riddled with uncertainty. Myths 1. Poor can't afford and use the products and services that are sold in developed market. One of the myths with BOP is that poor in the developing countries cannot afford the same products and services as those in the developed countries but Good Knight FastCard introduced in the market is proving quite benficial and is estimated to have a market of over Rs. 700 crore in the coming five years.
  5. 5. BOTTOM OF PYRAMID - DECEMBER 2015 4 2. Poor can't use the same technology that is being used in developed countries It is always believed that poor will not be able to embrace and adapt to the latest technologies available in the industry but Selco, a for - profit social enterprise have utilised solar energy and have installed solar systems in more than 125,000 homes. 3. Talented Manager scarcity at BoP People have a perception that they wont be able to hire talent who is ready to take charge of the business at BoP but Kedar Lele as a part of HUL dispeled all these beliefs when he started Project Shakti to financially empower rural women and create livelihood opportunities for them. 4. BoP is not viable for the long term There is a misbelief that it is not a sustainable model as it is not viable in the long term but Aravind Eyecare provides cheap or nearly free eye - care services to nearly 32 million patients in India. 5. Managers are not excited by the business challenges that have humanitarian dimension. One of the other beliefs that managers have is that a business that has humanitarian dimension is not exciting enough to be taken up but Narayan Hrudyalaya is a hospital chain that provides low cost cardiac care to the poors. Issues at BoP  Duplicate Product:-Major local player copy big brands  Low income so people are buying small quantity:-People are from low income strata  Shopkeeper bias:-While selling products shopkeeper sells product as on their own interest.  Competitor Distribution conflicts:-Conflicts between intercompany distributors.  Tough competition and little differentiation:-Companies have very little to differentiate.  Low profit margins  Low returns on equity  Low brand loyalty  Ineffective asset utilization. MNC Attitude  Poor are not our customers because with our current cost structure, we can't compete profitability with that market.
  6. 6. BOTTOM OF PYRAMID - DECEMBER 2015 5  Poor can't afford and use the products and services that are sold in developed market.  Only developed market appreciate and use new technology. Poor can use previous generation of technology  BoP is not viable for the long term. It can be left to govt. and non-profits.  Managers are not excited by the business challenges that have humanitarian dimension.  Intellectual excitement is in developed markets. Its hard to find talented managers who want to work at the BoP. Initiatives taken by Organizations Godrej:GoodKnight Fast Card  With rising instances of dengue and malaria across India, Godrej's Good Knight Fast Card is an ultra-smart and highly relevant solution.  It is hugely popular in the rural areas across India as an effective, innovative and affordable mosquito repellent  It is India's first paper based mosquito repellent which is accessible and affordable by all, available at a price of Rs. 1/-. Arvind Eyecare  Aravind Eye Hospitals is a hospital chain in India, founded by Dr. Govindappa Venkataswamy .It has grown into a network of eye hospitals and has had a major impact in eradicating cataract related blindness in India.
  7. 7. BOTTOM OF PYRAMID - DECEMBER 2015 6  As of 2012, Aravind has treated nearly 32 million patients and performed 4 million surgeries, the majority of them being cheap or free making it the world’s largest and most productive eye-care service group.  The model of Aravind Eye Care hospitals has been applauded and has become a subject for numerous case studies across the world. Narayan Hrudalaya  The business model of Narayana Hrudyalaya became a Global Healthcare and Harvard Business School case study  The company won the "Good Company" award for its quality, affordability and scale  In 2015, It is the winner of Healthcare Leadership Awards by Stars of the Industry Group in 2 categories: Outstanding Achievement Awards Healthcare - Social Cause, Healthcare & Social Care Support Award and CEO of the Year Project Shakti by HUL -  Around 50% of HUL's revenues came from the rural markets in India  Empower underprivileged rural women by providing income-generating opportunities, health and hygiene education.  Shakti's ambit already covers about 15 million rural population  There are over 45,000 Shakti entrepreneurs covering over 135,000 villages across 15 states
  8. 8. BOTTOM OF PYRAMID - DECEMBER 2015 7 Selco:  The Solar Electric Light Company, India or SELCO India is a for-profit social enterprise based in Bangalore  It has played an instrumental role in improving living standards of poor households in rural India especially in the state of Karnataka through solar energy based interventions and low smoke cook stoves.  In recognition of the services towards reduction of the gap in access to energy, SELCO India has been awarded the prestigious Ashden Awards (also known as the Green Oscars) twice, in years 2005 and 2007. Idea “Everyone deserves a good pair of shoes”. 780 million people live on less than $2.5 a day. Many don’t have access to one of life’s most basic necessities: - a good pair of shoes. “The idea is to create a business model for a start-up to produce footwear from waste.” The issues that are taken care of:- Cost Effectiveness - Will be sold at minimum prices to be affordable by the BoP after trials. Environment Friendliness:- Since made from the waste and recycled plastic, will help in taking a step towards cleaning the environment. Health and hygiene factor:- The overall health and hygiene of the people will be improved with this initiative. Sustainability:- It is also a long term business model with the potential to sustain.
  9. 9. BOTTOM OF PYRAMID - DECEMBER 2015 8 Strategies 1. Building an Ecosystem:  Creating Buying Power as to give access to credit as well as resources for income generation at BoP for constant profitability.  Improving Access to provide better information and distribution system.  Tailoring local solution to target the needs and pain points of the people and localized products are designed.  Shaping Aspirations to create trust and connectedness feelings. 2. Field Strategy: 4-A strategy: Awareness:-First, marketing managers working on BoP markets need to create an Awareness of the product and service, i.e., making sure that everyone understands what is available and how to use it. Access:-Next, companies should generate an Access as markets can be difficult to access and this should be overcome. Affordable:-Third, the supply should be Affordable for the local people’s wallet. Available:-Lastly, what is produced should be Available. Building a relationship is of utmost importance since markets sometimes do not exist, and the companies should see this strategy not as a market development but as a market creation. 5-D Strategy Development:-Development is selling any kind of product or service should have an immediate value for the BoP Consumers keeping in mind that money is scarce and BoP people need to make trade-offs everyday. Design:- Then comes Design whose underlying idea is that producing the same supply but lowering the price will definitely not be sufficient. Distribution:-Distribution is quite close to Accessibility and Availability and we find new distribution strategies such as “piggybacking”..
  10. 10. BOTTOM OF PYRAMID - DECEMBER 2015 9 Demand:-Demand is about human centered analysis, i.e., how does a company manage its advertisement and communication in order to resonate with the Bop consumer.. Dignity:- It is extremely interesting and can be found in the “design for all” approach in creating a dedicated supply. 3. Strategic Evaluation:-  Price Performance:-It can be improved at the BoP by better product development, manufacturing and distribution.  Sustainability:- With reduction in resource intensity, Using more of the renewable energy and working on recyclability ,sustainable models with potential to sustain for long term can be achieved.  Views of quality:- Focus on new delivery formats and creation of robust products for harsh conditions (heat, dust, etc )  Profitability:- Focussing on investment intensity, margins and volume. Conclusion Companies have recognized that innovations in emerging markets are a necessity now. The market development efforts in India's low-income groups have the potential to become sustainable business opportunities for companies provided they pursue the innovation agenda more aggressively. Companies must invest their energy to know the eco-system of these markets and delve deep into the nuances of the market before innovating products or processes. We believe companies should have the have the ability to work with the underserved and informal markets, ability to manage the cost of transactions that are likely to bring results in medium or long term, ability to collaborate and develop partnerships with stakeholders and create a win-win proposition for all. We would conclude by saying that companies need to innovate at three levels - product, process and people (organization) to make their offering most relevant to low income consumers.
  11. 11. BOTTOM OF PYRAMID - DECEMBER 2015 10 References 1. Pawan Kumar, Neha Dangi(International Journal of Management and Social Sciences Research:Aug. 2013)Rural Marketing in India: Challenges and Opportunities 2.Ms. Suchi K. Patel(Asia Pacific Journal of Marketing & Management Review, July 2013):the challenges and strategies of marketing in rural India 3. Anil Kalotra(International Journal of Advanced Research:Jan,2013),Rural Marketing Potential in India – An Analytical Study 4. Md. Abbas Ali1, Venkat Ram Raj Thumiki and Naseer Khan (International Journal of Business Research and Development:2012):Factors Influencing Purchase of FMCG by Rural Consumers in South India: An Empirical Study 5. Harvard Business Review (2012): Reality Check at the Bottom of the Pyramid 6. International Finance Corporation, World Bank Group (2012): The Next 4 Billion 7. Aneel Karnani (August 2009): The Bottom of the Pyramid Strategy for Reducing Poverty: A Failed Promise 8. Evalueserve(Oct 13,2008):Bottom of the Pyramid Marketing: Reaching out to 110 million Indians 9. Ks oils (2008): Indian consumer market a change from pyramid to sparkling diamond 10. Evalueserve(Sep.08,2006):Reaching Out to the Bottom of the Pyramid 11. C.K.Prahalad(July,2004)The Fortune at the Bottom of the Pyramid 12. Boston Analytics (December, 2012) India’s Rising Bottom of the Pyramid

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