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Bottom of the Pyramid (BOP)

The concept draws attention to the 4-5 billion poor in the world who are unserved or underserved by the large organised private sector, including multinational firms. In other words these are low income markets.

Bottom of the Pyramid (BOP)

Purchasing power: Tier 1 - > $20,000 Tier 2 - > $1500 - $20000 Tier 3 - $1500 Tier 4 - < $1500 (Source:Economic Pyramid C.K Prahalad & Stuart Hart 2002) Tier

1 Tier 2-3

Population; (1) 75-100 million (2 & 3) 1500-1750

(4 & 5) 4000 million million

Tier 4

Tier 5

Bottom of the Pyramid

Opportunities to serve: 1. Clear consensus that this constitutes a significant market. 2. This 4 billion people who constitute a BOP are not a monolith. 3. Can serve any segment of the BOP. 4. The poverty stricken among the BOP need Govt. assistance. 5. Opportunity requires new business models.
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Bottom of the Pyramid

Global Potential: Four billion poor can be the engine of the next round of global trade and prosperity. Serving the Bottom of the Pyramid consumers will demand innovations in products, services and technology. It requires large firms to work collaboratively with local governments. Market development will also create millions of new entrepreneurs at the grass root level.
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Bottom of the Pyramid

For The Success:
Pvt. Sector

Local govt.

Economic dev. & social transformation

Dev.Aid Agencies

BOP Customers

Bottom of the Pyramid

Current attitude of MNC to BOP: 1. Our cost structure cannot serve the BOP 2. Poor cannot afford our products. 3. Poor does not need advanced technology solutions. 4. BOP is a distraction. 5. Best people cannot work in BOP markets.

Lessons from BOP market experiments

1.
2.

3.

Key task is to create awareness, have access, induce affordability and ensure availability. Evolve an eco system that comprises large firms, small firms, micro-entrepreneurs ( Unilevers Project shakthi), public system. All have to collaborate. Gaining specialised knowledge, gaining trust, reducing capital and revenue expenses and becoming locally relevant.
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Lesson from BOP market experiments

4. The new concept of scale case of amul (originates milk from 10000 villages covering more than 2.2 million farmers, through village level collection centers) Decentralised origination, centralised processing, and marketing is the key. 5. Advanced technology is critical for ensuring the quality of the product or service delivered.

Lesson from BOP market experiments

6. Sustain the availability of natural resources when the BOP grows is a challenge. 7. Managers should change their mind sets when they approach the BOP markets ( e.g., AIRTEL changed from average revenue per user as a measure of market attractiveness to contribution per minute of cell phone time. 8. Look into the life style changes that are taking place in the BOP markets.
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Nature of the BOP market

1.

BOP market has money: Purchasing power increase. India has emerged as the worlds top ten countries in industrial production (source: United nations industrial development organisations Year book of industrial statistics 2010). Poor cannot be compared to the rich for purchases. But considering their sheer numbers, there is immense potential. Poverty penalty has to be eliminated. e.g., low interest % loans to this segment.
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Nature of the BOP market

2. There is access to the BOP markets: The perception is that rural markets are inaccessible and rural people are denied not only the products and services but also the information. But HLLs project Sakthi is a case of creating opportunities for Penetration into rural markets.

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Nature of the BOP market

3. BOP markets are Brand Conscious: An aspiration to a new and different quality of life is a dream for everyone, including the BOP. They expect great quality for the price they pay.

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Nature of the BOP market

4. The BOP market is connected: The spread of wireless devices. The Indian market is growing at 1.5 mission handsets per month. BOP customers engage actively in dialogue with other firms. Cadburys worm issue spread into all rural markets.

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Nature of the BOP market

5. BOP consumers accept advanced technology: ITC e-choupal as a village meeting place allowed farmers to check prices of soyabean futures at Chicago board of trade. They had discussions on how much to sell and to whom. Fishermen in Kerala sell the catch to highest bidders using the cell phones.

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Products and Services for BOP

1.
2. 3. 4. 5.

Focus on price performance of products and services. Performance enhancing solutions needed Products creatively blended to existing rapidly evolving infrastructures. Scalable and transportable solutions. Reduced resource intensity (conserve)

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Products and Services for BOP

6. Marginal changes in products will not be enough. 7. Building a logistics infrastructure that is sensitive to the prevailing conditions. 8.The design of the products and services must take into account the skill levels, poor infrastructure and difficulty of access. 9.Educating the customers on product skills.

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Products and Services for BOP

10. Products must work in hostile environments. 11. Heterogeneity in consumer base is a big challenge. Constant research is a must. 12. Focus on brand architecture (quick and easy to incorporate the features)

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MARKET ANALYSIS
1. Analysing market potential. 2. Analysing customers. 3. Analysing competitors.

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MARKET ANALYSIS Analysing Market Potential:

Market Potential is the total sales volume that all the organisations selling the product during a stated period of time in a specific market could achieve under ideal conditions. Sales potential is a portion of the market potential that a specific company could expect to achieve under ideal conditions.

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MARKET ANALYSIS
A Sales forecast is an estimate of the probable sales of one companys brand during a stated period in a specific market, assuming a defined marketing plan is used. A sales forecast is made based on the basis of a specific marketing plan for the product.

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MARKET ANALYSIS
Methods of Sales forecasting: a) Market factor analysis based on the behavior of certain market factors. e.g., a producer of automobile tyres wants to know about the market potential for replacement tyres will have to consider the factor of number and age of automobiles on the road.

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MARKET ANALYSIS
b) Survey of buyers intentions: Asking the current and potential customers how much of a particular product they would buy. A large sample is needed to get accurate results.

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MARKET ANALYSIS
C) Test Marketing: A firm markets a new product in a limited geographic area, measuring sales and from this sample, projects the products sales over a larger area.

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MARKET ANALYSIS
d) Past Sales and trend analysis: The demand is actually a percentage increase over the applied to the volume achieved last year. This is okay in unchanging environments. Trend analysis examines past data to calculate the rate of change in sales volume and used it to forecast future sales.

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MARKET ANALYSIS
e) Sales force composite : Collecting from the sales people estimates of sales for their territories during the future period of interest. The total of all these estimates is the companys sales forecast.

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MARKET ANALYSIS
f) Executive Judgment: Obtaining opinions from one or more of the senior marketing executives. a modified version of this is the Delphi technique where the expert individuals are asked to give their forecasts more than one time without the knowledge of the others, and these individual forecasts are averaged.

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MARKET ANALYSIS
2. Analysing customers: Consumer Demographics: Age, Gender, family life cycle, education, income & ethnicity. Family life cycle Bachelor, Young married, young married with children, parents with dependent children, divorced and alone, middle aged married, middle aged with dependent children, older married couples with no children living with them, older single.
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MARKET ANALYSIS
Consumer Decision Making: 1. Need recognition 2. Identification of alternatives. 3. Evaluation of alternatives 4. Decisions 5. Post purchase Behaviour.

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MARKET ANALYSIS
Analysing competitors Strategies

Group A Narrow line Low mfg cost High service High price

Group B Full line

Group C
Moderate

Group D Broad line Medium mfg cost Low service Low price
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line Low mfg Medium cost mfg cost Good Medium service service Medium Medium price price

MARKET ANALYSIS
Analysing competitors Strategies

Competitor Objectives: What the competitor is seeking What drives each competitor Running for growth? profits ? Market share?
A company should monitor the competitors share of market, share of mind and share of heart.

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MARKET ANALYSIS
Analysing competitors Strategies

Selecting Competitors: 1. Strong versus Weak 2. Close versus distant 3. Good versus bad

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Marketing Strategies
Assessment of Strengths and Weaknesses: Areas of S&W: Marketing Co. reputation, Market share, Customer satisfaction, customer retention, product quality, service quality, Pricing effectiveness, distribution effectiveness, promotion effectiveness, sales force effectiveness, innovation effectiveness, geographical coverage.

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Marketing Strategies
Finance - Cost or availability of capital, cash flow, financial stability. Manufacturing Facilities, Economies of scale, Capacity, able and dedicated work force, ability to produce on time, technical and manufacturing skill. Organisation Visionary& capable leadership, dedicated employees, entrepreneurial orientation, flexible or responsive.
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Marketing Strategies
Strategy Formulation (Michael Porter): Overall cost leadership. Differentiation Focus.

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BOP GLOBAL OPPORTUNITIES

Sources of Opportunity: 1. Many BOP markets are large and attractive as stand alone entities. 2. Many local innovations can be leveraged across other BOP markets, creating a global opportunity for local innovations. 3. Some innovations from the BOP markets will find applications in developed markets. 4. Lessons from the BOP markets can influence the management practices of global firms.
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