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Marketing to the Bottom of the Pyramid Position Paper

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Professor C. K. Prahalad’s seminal publication, “The Fortune at the Bottom of the Pyramid,”1suggests there is an enormous mar- ket at the “bottom of the pyramid” (BOP)—that group of some 4billion people who subsist on less than $2 a day. By some esti- mates, these “aspirational poor,” who make up three-fourths of the world’s population, represent $14 trillion in purchasing power, more than Germany, the United Kingdom, Italy, France, and Japan put together. Demographically, it’s young and growing at 6 percent a year or more. Traditionally, the poor are not considered an important market segment. “The poor can’t afford most products”; “they will not ac- cept new technologies”; and “except for the most basic products, they have little or no use for most products sold to higher income market segments”—these are some of the assumptions that have, until recently, caused most multinational firms to pay little or no attention to those at the bottom of the pyramid. Typical market analysis is limited to urban areas, thereby ignoring rural villages where, in markets like India, the majority of the population lives. However, as major markets become more competitive and in some cases saturated with resulting ever-thinning profit margins, mar- keting to the bottom of the pyramid is seen by some as having potential worthy of exploration. One researcher suggested that American and European busi- nesses have to go back and look at their own roots. Sears, Roebuck was created to serve the lower-income, sparsely settled rural market. Singer sewing machines fashioned a scheme to make consumption possible by allowing customers to pay $5 a month instead of $100 at once. The world’s largest company today, Wal- Mart, was created to serve the lower-income market. A few exam- ples of multinational company efforts to overcome the challenges in marketing to the BOP follow. Designing products for the BOP is not about making cheap stuff but about making technologically advanced products affordable. For example, one company was inspired to invent the Freeplay, a windup self-power-generating radio, when it was learned that isolated, impoverished people in South Africa weren’t getting in- formation about AIDS because they had no electricity for radios and couldn’t afford replacement batteries. If a product requires the support of an advanced infrastructure, then the product has to be redesigned or the marketing program has to include infrastructure support. For example, Hindustan Lever, a subsidiary of Unilever, markets an inexpensive, reusable heat shield that can keep ice cream cold for 24 hours—permitting the use of vending machines in areas without affordable electricity. And Electrolux Kelvinator, another Indian subsidiary of a Western company, sells refrigerators that can keep contents frozen through six-hour blackouts. Observers note that such innovations yield marketable products for middle-class consumers, too. For example, the Freeplay radio is now sold in wealthy nations as a standby radio for emergencies. A Chinese appliance maker has captured a third of the world mi- crowave oven market with designs originally intended for the tight spaces of Chinese kitchens. The BOP market has a need for advanced technology, but to be usable, infrastructure support must often accompany the technol- ogy. For example, ITC, a $2.6 billion a year Indian conglomerate, decided to create a network of PC kiosks in villages. For years, ITC conducted its business with farmers through a maze of inter- mediaries, from brokers to traders. The company wanted farmers to be able to connect directly to information sources to check ITC’s offer price for produce, as well as prices in the closest village mar- ket, in the state capital, and on the Chicago commodities ex- change. With direct access to information, farmers w

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