14 Aug CASE 3-3 Marketing to the Bottom of the PyramidProfessor C. K. Prahalad’s semi

CASE 3-3 Marketing to the Bottom of the PyramidProfessor C. K. Prahalad’s seminal publication, The Fortune at theBottom of the Pyramid, suggests an enormous market at the “bottom of the pyramid” (BOP)—a group of some 4 billion peoplewho subsist on less than $2 a day. By some estimates, these “aspirational poor,” who make up three-fourths of the world’s population, represent $14 trillion in purchasing power, more thanGermany, the United Kingdom, Italy, France, and Japan put together. Demographically, it is young and growing at 6 percent ayear or more.Traditionally, the poor have not been considered an importantmarket segment. “The poor can’t afford most products”; “they willnot accept new technologies”; and “except for the most basic products, they have little or no use for most products sold to higherincome market segments”—these are some of the assumptions thathave, until recently, caused most multinational firms to pay little orno attention to those at the bottom of the pyramid. Typical marketanalysis is limited to urban areas, thereby ignoring rural villageswhere, in markets like India, the majority of the population lives.However, as major markets become more competitive and in somecases saturated—with the resulting ever-thinning profit margins—marketing to the bottom of the pyramid may have real potentialand be worthy of exploration.One researcher suggested that American and European businesses should go back and look at their own roots. Sears, Roebuckwas 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, Walmart, wascreated to serve the lower-income market. Here are a few examplesof multinational company efforts to overcome the challenges inmarketing to the BOP.Designing products for the BOP is not about making cheapstuff 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 learned thatisolated, impoverished people in South Africa were not gettinginformation about AIDS because they had no electricity for radiosand could not afford replacement batteries.BOP MARKETING REQUIRESADVANCED TECHNOLOGYThe BOP market has a need for advanced technology, but tobe usable, infrastructure support must often accompany thetechnology. 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 amaze of intermediaries, from brokers to traders. The companywanted farmers to be able to connect directly to informationsources to check ITC’s offer price for produce, as well as pricesin the closest village market, in the state capital, and on theChicago commodities exchange. With direct access to information, farmers got the best price for their product, hordes ofcat29974_case3_01-019.indd 10intermediaries were bypassed, and ITC gained a direct contactwith the farmers, thus improving the efficiency of ITC’s soybean acquisition. To achieve this goal, it had to do much morethan just distribute PCs. It had to provide equipment for managing power outages, solar panels for extra electricity, and asatellite-based telephone hookup, and it had to train farmersto use the PCs. Without these steps, the PCs would never haveworked. The complex solution serves ITC very well. Now morethan 10,000 villages and more than 1 million farmers are covered by its system. ITC is able to pay more to farmers and at thesame time cut its costs because it has dramatically reduced theinefficiencies in logistics.The vast market for cell phones among those at the BOP isnot for phones costing $200 or even $100 but for phones costing less than $50. Such a phone cannot simply be a cut-downversion of an existing handset. It must be very reliable and havelots of battery capacity, as it will be used by people who do nothave reliable access to electricity. Motorola went thorough fourredesigns to develop a low-cost cell phone with battery life aslong as 500 hours for villagers without regular electricity andan extra-loud volume for use in noisy markets. Motorola’s lowcost phone, a no-frills cell phone priced at $40, has a standbytime of two weeks and conforms to local languages and customs.The cell-phone manufacturer says it expects to sell 6 million cellphones in six months in markets including China, India, andTurkey.BOP MARKETING REQUIR

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