Is it exploitation for a company to profit from selling soaps, shampoo, personal computer and ice cream, and so on, to people with little disposable income?
As markets in developed countries reach saturation point, international marketers have been increasingly shifting focus to markets in the third world countries. Such moves have been targeted to a class of people consisting of the wealthy elite and the expanding middle class in such countries.
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It is rare cases where the marketing efforts have been endeared towards the masses in these developing countries, which represent 65 percent of the world’s population. The reason as to why international have not embarked on a strong marketing campaign to these “aspirational poor” at the Bottom of the Pyramid (BOP)-as they are usually called- is that the group is very delicate.
In deed, a different strategy is needed to tap the potential offered by this category of people. The conventional ‘western’ marketing mix offered by international marketers does not work with the BOP, and as such, these potential markets require an extremely tailored approach.
Buyers at the BOP behave differently not only form their counterparts in the first world country markets but also from the upper and bourgeoisie customers in their community. This paper is a case study of the strategies and guidelines that international marketers should keep in mind while targeting the BOP. The paper’s position is that marketing to the BOP is a strategy that should be endorsed by companies.
Wealth distribution in the world can is taken to exist in the form of an economic pyramid. At the top of the pyramid are the wealthy that have many chances for generating incomes while at the bottom of the pyramid are those who live on less than $2 daily.
This last group consists of more than four billion of the world’s population. These people have been living under the mercies of the World Bank, and more recently, civil society organizations. This is the group of people who are the focus of this case study.
It is important to note form the onset that the fact that this case study provides guidelines on how to approach marketing at the BOP does not imply that a number of successful advances have not been done in the past. In deed, as the paper progresses, a number of examples will be cited of how some companies have succeeded in the endeavor.
Educative campaigns and effective products assist these companies to eradicate such diseases. Others are organizations aiding the handicapped and small-scale farmers bond with the rest of the globe. Banks have not lagged behind as they conforming to the fiscal needs of the poor while power companies reach out to meet energy needs of the masses. Further, construction companies have been doing everything in their capacity to house the poor in dignified but affordable ways.
In addition, the availability of many stores all over, assist in understanding and serving the needs of the poor people. All these innovative approaches have been geared towards creating gateways for the poor by offering them alternatives and fostering a sense of worth.
Preparing the ground: Key concepts that marketers targeting the BOP should put in mind
International marketers who have not embarked on significant marketing efforts targeting the BOP might wonder how the exercise is possible. There are a number of things that such organizations need to understand from the onset. To begin with, although there are instances of multinational companies (MNCs) who have undermined the efforts of the BOP to build dignified livelihoods, the greatest harm such firms have done is to ignore the poor in entirety.
The poor represents a potential market for goods and services. Active engagement of private firms at the BOP is a crucial component in creating inclusive capitalism. This is because competition for this market encourages awareness of the poor as consumers. It creates alternatives for them are they are not required to rely on the goods and services available in their villages.
The bazillion dollar question that needs to be considered is why international marketers have not realized the potential in BOP markets and tapped. The answer lies with them. It is all in the mind. Everyone is a captive of his or her socialization. The lenses through which we view the world are manipulated by own beliefs, experiences, and existing management practices.
Each of the dominant groups who have been on the forefront in fighting the good fight of eradicating poverty is inured by its own overriding logic. For instance, some countries like India, poor as it is, have been treating the private sector with much suspicion due to a perceived exploitative nature. Some charitable organizations also hold that the private sector is inconsiderate and uncaring and that organizations cannot be entrusted with the trouble of eradicating poverty among the masses.
All these stakeholders have unanimously presumed that market-based solutions cannot lead to poverty eradication and economic development. For international marketers to succeed in marketing at the BOP, they have to break these implicit ideologies.
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The nature of the BPO market
Before providing a blueprint for guidelines on marketing at the BOP, it is important to consider the nature of the BOP market. This is because the BOP market has unique features that must be considered while engaging in marketing endeavors. One of the most defining characteristics of the BOP markets is that there is money at the BOP.
The overriding presumption among many international marketers is that the poor have no buying capacity, hence, do not represent a viable market. This is a gross misconception. This can be illustrated with the case of China, one of the developing countries. It has a population of 1.2 billion and an average GDP of $1000. Its current economy is estimated at $1.2 trillion.
If the GDP-based figure were to be converted into its dollar buying capability equivalent, China would be already a $5.0 trillion economy, hence making it the second largest economy after the U.S. If the estimates extend to a sample of eight other developing countries including Mexico, Indonesia, India, Turkey, Brazil, Thailand, Russia and South Africa, the GDP would stand at $12.5 trillion.
This GDP is greater than that of the so-called world’s super powers consisting of Japan, France, Germany, and the United Kingdom, all combined. By all standards, the developing nations are not a market to ignore.
Another characteristic of the BOP markets is accessibility. One again, the overriding misconception is that BOP markets are difficult to access, hence posing a major impediment to the participation of large firms and MNCs. This presumption does not take into account the expanding nature of the urban areas in the developing countries. For instance, it is expected that, by 2015, there will be more than 368 cities in the third world countries each with more than a million people.
Together, these cities will account for about two billion people with more than 40 percent of these urban concentrations being BOP consumers. The density of these settlements will offer intense distribution opportunities. In the case of rural consumers, the BOP is not restrained to one distribution solution. A number of innovations have proved successful in the past.
One such experiment is the Project Shakti at Hindustan Lever Ltd in India. The company created direct distribution network in inaccessible areas. This was done through the selection of entrepreneurial women from the villages and training them to become distributors. The project was a big success because the women understood the village needs and products that were in demand. International marketers interested in the BOP markets may have to borrow a leaf from such innovations.
Guidelines to be used when marketing to the BPO
After looking at some of the defining characteristics of the BOP markets and demystifying the existing myths about them, it is time now to provide the essential guidelines that international marketers should consider while targeting this vulnerable group. One of the essential requirements in targeting the BOP is that international marketers have to create the capacity to consume among the ‘aspirational poor’.
In order to convert the BOP into a consumer market, there is a need to access the cash-poor and those with a low level of income differently. The conventional approach in creating the capacity to consume among the BOP has been to provide products or services free of charge. This move has a philanthropic nature but hardly offers a lasting solution.
One of the means of creating the capacity to consume is through making unit packages that are small, hence affordable. This is because the poor have unpredictable income streams. In most cases, they subsist on daily wages and have to use the cash conservatively. In addition, they only buy when they have cash and when necessary.
As such, single-serve innovation is extremely handy in the BOP markets. Some MNCs like Unilever have realized the logic in this approach and are living to tell the story. Another way of creating the capacity to consume is via innovative purchase schemes. This strategy has been proved a success in countries like Brazil where Casa Bahia provides credit to consumers making them able to purchase high-quality appliances.
The strategy of creating the capacity to consume is founded on three principles. These include affordability, access, and availability. The logic in this scheme is to create the capacity to earn more in order to for BOP consumers to consume more.
Another factor that companies should consider while targeting the BOP is that this group of people need new goods and services. Companies that have realized this logic have lived to tell their success story. These include Amul, which is a daily cooperative in India. The company introduced good quality ice cream, which was very affordable.
The product is not only a source of enjoyment but also nutritious. The logic behind providing new products and services is to help the BOP develop economically, as well as promote good health. This helps boost their self-esteem as they acquire the dignity of attention and choices from firms that were initially a privilege of the middle calls and the rich.
As stated earlier in this paper, marketing at the BOP involves more than the conventional western marketing mix programs. It requires a change in the philosophy for developing products and services. In order to adopt a successful principle of marketing at the BOP, companies need to consider a number of principles.
The first principle is that marketing at the BOP requires focus on price performance of products and services. Serving BOP markets is more than just lower prices. It entails creating a new price-performance strategy. Another principle is that marketing at the BOP requires innovation. This innovation needs hybrid solutions.
This is because BOP consumer problems cannot be remedied with outdated technologies. In addition, given that BOP markets are large, the remedies that are created ought to be scalable and transportable across countries, cultures, and languages. Solutions must be tailor-made for ease adaptation in similar BOP markets.
Another principle that should guide companies targeting the BOP is that innovations ought to be centered on conserving resources. They should be geared towards eliminating, reducing, and recycling waste materials. If the ordinary BOP consumer were to use packaging as any other American or Japanese consumer, the world would soon have no room for resources used.
To add, deskilling is also critical in coming up with products and services for the BOP markets. This is because most of the BOP consumers are poor in skills. The design of products and services should, therefore, put into account the skill levels, poor infrastructure, and inaccessibility for services in remote locales.
Another essential principle that should guide companies wishing to target the BOP is that the BOP market opportunity cannot be justified by outdated technology solutions from the developed world. The market should be addressed by the most superior technologies ingeniously coupled with established and evolving infrastructure.
In addition, any innovations should be sustainable and ecologically friendly. To add on, innovation in BOP markets requires vital commitment in enlightening customers on the suitable use and the advantages of definite products and services.
In conclusion, the question of exploitation for a company profiting from selling soaps, shampoo, personal companies and ice cream to people with little disposable income does not arise. This paper is pro-BPO marketing. This presumption is based on the myth that the BOP is a basket of compelling needs but not a market.
Every market wishing to direct their efforts to the BOP must primarily do away with this notion. The marketing strategy should be grounded on the principles of design, demand, distribution, development and dignity. It should also be tailored towards creating a unique business model suitable to the local market that is both culturally sensitive and economically viable.
Marketing at the BOP should include developing ways of overcoming the infrastructure impediments faced by these consumers. Although this paper may not have exhausted all the considerations that companies must put into place, any marketing efforts at the BOP that fall short of the guidelines outlined in this case study are not only bound to fail, but also inclined to be costly to the companies undertaking them.