Strategies to Overcome Challenges in Marketing to the Bottom of the Pyramid Essay Example

While rural areas are often viewed as underserved markets, it is important to consider that 25 percent of the BOP resides in metropolitan and other city areas.

Mumbai, with a population exceeding 11.9 million people, has a considerable portion of its residents (26.5 percent) who live below the monthly household income threshold of less than Rs. 5000 ($125). This offers marketers a chance to cater to the needs of this economically disadvantaged group without causing additional financial burden in spite of the high cost of living in Mumbai. By concentrating on serving the bottom-of-the-pyramid (BOP), their quality of life can be enhanced and future savings can be attained.

An instance of this is when a local money lender imposes interest rates that reach 20 percent per day. This implies that a vegetable vendor who borrows Rs. 100 in the morning will have to repay Rs. 120 by evening. Consequently, even if they make sales of Rs. 200, their profit will only be Rs. 80.

Additionally, the local illegal practice includes payment of a premium to gangsters by BOP in order to have a shop in a specific area. Providing credit to the BOP will definitively contribute to their economic improvement. Grameen Bank has revolutionized traditional banking methods by eliminating the requirement for collateral and establishing a banking system centered around trust, responsibility, involvement, and innovation. Grameen Bank offers credit to the most impoverished individuals in rural Bangladesh, without any need for collateral.

Founded by Professor Muhammad Yunus, Grameen Bank offers financial resources to impoverished individuals under appropriate and reasonable terms and conditions. As of May 2007, the bank has 7.1 million borrowers, with 97 percent of them being women.

With 2431 branches, Grameen Bank provides services in 78,659 villages, covering over 94 percent of all villages in Bangladesh. This exemplifies the crucial role banks play in the profitable development of the Bottom of the Pyramid (BOP). In this article, we will explore the transformation of the economic pyramid and the advantages that marketers can gain from targeting the BOP. We will also examine the potential challenges and strategies for overcoming them. The distribution of wealth and income generation worldwide can be visualized as an economic pyramid.

The uppermost section of the pyramid consists of the elite members of society who possess an average purchasing power parity exceeding 20,000 USD. Their substantial income enables them to engage in higher levels of consumption, leading to improved financial and life circumstances. This segment can also be referred to as Globals4. It is estimated that there are around 75 to 100 million individuals in Tier 1 markets.

Below them are the Tier 2 and tier 3 markets characterized as the strivers, whose PPP in USD falls between 1,500 and 20,000. These markets have a population range of 1.5 to 1.75 million. The Tier 4 markets are a cause for concern as they consist of the deprived, who struggle to sustain themselves and their families with limited income. Some of them even rely on compromised meals. These individuals are commonly referred to as poor people and make up the Bottom of the Pyramid.

More than 6 billion people, approximately two-thirds of the global population, are not benefiting from globalization. These individuals, mostly impoverished, are experiencing a market economy for the first time. India has made significant economic advancements over the past two

decades, leading to increased purchasing power among its residents. Between 1985 and now, the average household disposable income in India nearly doubled. Consequently, there has been a notable increase in household consumption and the emergence of a new middle class.

A report by McKinsey & Company in May 2007 stated that if India continues on its current high growth trajectory, its market will undergo a significant transformation. The report predicts that Indian income levels will almost triple, and by 2025, India will become the world's fifth largest consumer market from being the 12th. This growth will lead to a substantial change in India's income pyramid. Over 291 million people are expected to move out of extreme poverty and adopt a more sustainable lifestyle, while the middle class is projected to grow over tenfold - from 50 million individuals presently to 583 million.

Hindustan Lever Limited, a subsidiary of Unilever PLC, expects a similar shift from the Bottom of the Pyramid (BOP) to the middle class. This demonstrates the untapped potential of the BOP market. By using better marketing strategies that target the BOP, companies can increase their profitability while also improving the quality of life for those in need. Additionally, multinational corporations (MNCs) are starting to prioritize BOP markets, showing their global growth.

Compared to developed markets, labor costs in these markets are significantly lower, leading multinational corporations (MNCs) to utilize foreign citizens in foreign countries for manufacturing their products and taking advantage of reduced manufacturing costs. In India, the service sector, particularly Business Process Outsourcing (BPO) companies, plays a vital role in creating job opportunities for young individuals and improving both their families' and the country's economic

status.

This impressive growth has resulted in many countries inviting MNCs to contribute to their nation's development. To determine which products and services to offer, it is crucial to understand the needs of the Bottom of the Pyramid (BOP) market. The BOP market differs from upper-class society as their requirements vary from those of the global market.

Offering a product or service that enhances earning or saving potential can help people have more money to spend. In the field of Banking, Finance ; Insurance, Life Grameen Bank has revolutionized traditional banking practices by removing the necessity for collateral. Instead, they have established a banking system based on trust, accountability, participation, and creativity. This system provides credit to the poorest individuals in rural Bangladesh. Credit is a cost-effective tool in fighting poverty and acts as a catalyst for the overall development of socio-economic conditions for the underserved. These individuals have been excluded from traditional banking due to their poverty, making them seem unbankable. Professor Yunus believed that if financial resources can be made accessible to these individuals with appropriate and reasonable terms and conditions, their collective efforts can lead to substantial development wonders.

Life and Health Insurance products are crucial for reducing the financial burdens faced by disadvantaged individuals in times of death or illness, especially those in the informal sector, such as those classified as part of the BOP category. These individuals often lack any form of protection for themselves and their families. For instance, if a construction worker were to have a fatal accident, their dependents would be left without any income source. Consequently, their children may be forced to abandon education and start working at an

early age. The promotion of insurance products can effectively address these circumstances. Furthermore, Agricultural Insurance Products can help farmers mitigate losses resulting from natural disasters.

Household ; Healthcare products: Health is wealth Just as in the high society, there are essential needs for everyone in the modern world. HLL offers specific products that are affordable for the Bottom of the Pyramid (BOP). The BOP faces limited access to healthcare and loses a significant number of working days due to illness. In India, Direct to Consumer (DTC) advertising of pharmaceutical products is restricted. By providing generic low-cost drugs to the BOP through doctors in rural areas, pharmaceutical companies can greatly reduce the healthcare expenses of the poor, thus improving their health. These are the primary and fundamental necessities of the impoverished individuals.

Apart from these, any product that the elite society uses can also be used by the BOP. Therefore, promoting new products to the BOP is not an issue. However, ensuring a higher ROI is essential. To accomplish this, it is crucial to comprehend the needs of the BOP and market the product accordingly for a better return on investment. The challenge of entering the BOP market resembles using a weapon to dig into a diamond mine since it involves reaching a geographically diverse market with various distribution solutions.

Urban concentrations pose a unique challenge compared to reaching dispersed rural communities. The cost of reaching consumers differs greatly between countries globally. Both companies and social welfare organizations are actively exploring different business models to effectively distribute goods and services. HLL in India has emerged as a pioneer among multinational corporations in tapping into markets at the bottom of

the pyramid (BOP).

Despite facing numerous challenges in the BOP market, accessibility to the BOP markets remained a significant hurdle. To address this, they initiated a project called Shakti which aimed to improve the lives of rural Indians by providing income-generating opportunities. These initiatives were successful and sustainable when aligned with the company's core business and mutually beneficial for both the intended population and the company. The distribution and sale of products were managed by the Shakti ammas.

Such a sales system will address the distribution challenges across the country. The Shakti ammas residing in rural areas receive consistent training and comprehensive product knowledge. They play a significant role in the distribution network, ensuring products reach from mini towns to remote villages. HLL also conducts various programs for the personal growth of these Shakti ammas, including lucrative financial development initiatives. Emulating HLL's approach serves as a commendable model.

These enterprising women generate a monthly income ranging from Rs. 3,000 to 7,000 (U.S. $60-$150), allowing them and their families to enhance their consumption abilities. Additionally, they are actively involved in educating and reaching out to rural BOP consumers within their communities. It is important to mention that this method is not new.

Avon, a major cosmetics company in Brazil, has hired more than 800,000 "Avon ladies" as distributors to effectively reach even the most isolated areas of Amazonia. Moreover, their adoption of multi-level marketing (MLM) incentivizes customers to suggest products to others and can aid in personal income growth. However, additional examination and establishment are needed to gauge the feasibility of implementing MLM in the BOP market. It is already evident that numerous individuals in BOP markets engage in MLM

presentations for companies such as Amway and Modicare and have achieved financial success.

Despite some individuals experiencing losses in their investments for various reasons, the MLM Business plans continue to face the challenge of keeping people focused. It is important to consider optimal utilization of the transport system. An ongoing obstacle in the current distribution system is the rising fuel prices.

The escalation of fuel costs is an enduring issue that cannot be undone. The surge in oil prices results in higher transportation expenses, resulting in the withdrawal of goods from the BOP. This ongoing problem can only be tackled by maximizing the efficiency of the existing system. In India, petrol prices have doubled over the past decade, emphasizing the pressing need for optimal utilization of transportation infrastructure. Granting farmers access to transportation for transferring their crops from rural areas would undoubtedly yield a mutually advantageous result.

A vehicle that transports Fast Moving Consumer Goods (FMCG) products from a metropolitan area to a Bottom of the Pyramid (BOP) market often returns empty. This presents an opportunity to utilize the same vehicle for transporting agricultural products from the village to the metros. Additionally, the Government of India has constructed the golden quadrilateral, which links the metros in India and reduces vehicle maintenance costs. Similarly, there are numerous projects in progress in underdeveloped and developing countries to improve road construction.

Channel Management is crucial in this technological era. Achieving country-wide connectivity is no longer a challenging task. This connectivity improves inventory management and helps prevent products from remaining unsold after their expiry dates. Payments can be deposited into a centralized account at any bank branch. This not only facilitates timely payment

collection, but also aids in understanding market needs.

By utilizing technology effectively, individuals in corporate offices can gain insights into the needs of specific markets and identify reasons for underperforming sales of certain products or services. One tool that can be instrumental in achieving efficient channel management is SAP, a system that has transformed distribution globally. This technology not only facilitates distribution, but also enables analysis of sales trends in various micro markets.

Education on distribution techniques is required for all individuals involved in the system. They should undergo regular training on the development and usage of the distribution system. The focus of the distribution system should not solely be on delivering goods, but also on understanding market sales patterns. Utilizing computers would greatly assist in monitoring sales for improved forecasting.

Pricing is crucial in the BOP market as it requires understanding the market and determining appropriate prices considering consumer acceptance and affordability. Conducting a pricing survey may be beneficial for this purpose.

It is not advisable to have different prices for the same product. This can result in a situation where a particular product is bought in bulk from the BOP market and sold at the supermarket. As a result, the sales of the established market suffer, leading to dissatisfaction among the established distributors at the metro markets. Instead of this approach, it is better to have a uniform price and find ways to bypass certain distribution channels, reduce costs, and pass on the benefits to the BOP consumer. HLL follows this strategy in the laundry sector by promoting WheelTM for the BOP, Rin-advanced for the middle of the pyramid, and Surf-excel for the Top of the pyramid.

Similarly, in the Personal Wash and Hair Care sector, Lifebouy TM soap and Clinic plus shampoo are positioned for the BOP.

HLL's strategy includes converting non-users of a specific product into users as well as enticing existing users to aspire to become brand loyal. In the healthcare industry, generic drugs have notably decreased healthcare costs in developed countries. In India, due to lenient patent laws, drug prices are significantly lower than international standards. However, distribution costs for an average medicine still account for over 35% of the retail price. A three-layered distribution process is currently in place, but bypassing one layer could result in savings of 10-20%. Some pharmaceutical companies in India have already started experimenting with this concept. As for packaging, offering smaller sachets instead of larger packs will make products more accessible to the Bottom of Pyramid (BOP) population.

Observing the street shop at the BOP market and the purchasing pattern of the people at the shop will reveal a contrasting perspective in comparison to the supermarkets in the elite area. The reason behind this distinction is that these individuals prefer smaller packaging based on their needs, as opposed to purchasing large quantities. The sachet phenomenon exemplifies a strategy to target the bottom of the pyramid customer segment, acknowledging that many people in India are unwilling to purchase an entire bottle of shampoo. However, this does not imply that they are unwilling to buy shampoo.

"9 Measured in tons, the Indian shampoo market is as large as the US market. Major participants in this market include MNCs such as HLL and Procter & Gamble (P&G). In addition, the packaging of products in the BOP market needs

to be designed to maximize sales in those regions. It is important to note that the poor have the same brand consciousness as the rich. For example, Pantene shampoo, which is a high-end shampoo from P&G, is also offered in single-use sachets priced at Rs. 3 each."

Furthermore, P&G has also introduced Rejoice shampoo at a price of Re. 1/-, along with Clinic Plus. This move by the private sector has led to the creation of a significant market in the base of the pyramid (BOP). In India, the usage of shampoo is remarkably widespread, with a penetration rate exceeding 90 percent.

Different products and markets require different promotional strategies. Each market has its own unique characteristics. HLL's Lifebuoy Swastya Chetna (LBSC) is an effective promotional strategy that focuses on rural health and hygiene. It was started in 2002 and specifically targets media dark villages in selected states of India. The main goal of LBSC is to raise awareness about the importance of handwashing with soap. A study conducted by the London School of Hygiene and Tropical Medicine showed that simply washing hands with soap and water can reduce the occurrence of diarrhoea by up to 47%.

However, lack of knowledge about fundamental hygiene practices results in high death rates in rural India. Lifebuoy recognized an opportunity to promote the concept of cleanliness and wellbeing in villages. LBSC is a multi-stage initiative that aims to modify behaviors among the rural community. It emphasizes that "being visibly clean is not necessarily clean," thus highlighting the significance of soap-based handwashing. The campaign focuses on children, who are catalysts for societal change, and mothers, who are responsible for maintaining health. The

campaign is divided into multiple phases.

During the first stage, a Health Development Facilitator (HDF) and an assistant establish communication and engage with students and community influencers, including village community representatives, medical practitioners, and school teachers. An array of methods are employed, including a visual narrative in the form of a flip chart, a "Glo-germ demonstration," and a quiz that offers enticing prizes to reinforce the message.

The "Glo-Germ demonstration" is a unique tool that highlights the importance of using soap to wash hands and eliminate germs by making them visible. This demonstration is initially done with students and then replicated with women and the rest of the community. The different stages of the demonstration reinforce the message and promote awareness and behavior change regarding hand hygiene. Over the past four years, this program has reached 27,800 villages and 80 million individuals. In 2006, LBSC specifically engaged with 10,000 villages in UP, MP, Jharkhand, and Bihar.

Communication has been revolutionized by Information and Communication Technology (ICT) in the late twentieth century. Television and radio are now accessible in almost every village, making them the primary means of communication. Additionally, the internet, mobile phones, and other technologies can also help marketers overcome challenges in reaching inaccessible markets.

Media Selection: BOP marketing focuses on reaching the masses and recognizes the importance of advertising. It emphasizes the need for low-cost advertisements in these markets and suggests continuing with nationwide television advertisements. Furthermore, it recommends exploring more affordable options for local advertisements.

MNC's invest large amounts of money in hiring brand ambassadors, and the influence of celebrity advertisements is particularly strong in rural areas due to the allure they have on consumers from the

BOP market. However, there is a limit to how much companies can spend on these increasingly expensive celebrities. In addition, it is important to determine the most effective mode of advertisement. By identifying the media programs that appeal to the BOP market, we can choose the optimal time slot for advertising in these programs.

Power Soaps is an example of a company that manufactures products and advertises exclusively in programs watched by the BOP. This demonstrates their strategy of selecting the best time slots to maximize brand exposure. There are cheaper options available for advertising in these markets, such as utilizing public and private transportation commonly used by the BOP. Advertisements can be placed both inside and outside of public transport vehicles. Additionally, companies can invest in advertising seat covers for bicycles or paint advertisements on trucks, earning some income through minimal rental fees. The diverse cultures within India present a unique challenge for marketers, as the country can be seen as a collection of 25 different countries.

One culture may find certain things suitable for them, while another may not. Therefore, it is important for products and services to be global, but the way they are marketed should be tailored to each local market. In India, for example, there are 13 recognized languages, and many more in use. To effectively reach the bottom of the pyramid (BOP) markets, advertising in the local language is necessary. Thus, understanding the local cultures is crucial in overcoming these challenges. Additionally, there are other important challenges involved in marketing to the bottom of the pyramid.

Political issues in India are centered around the challenge of governing a culturally diverse country with

both Central and State Governments functioning as coalition governments. This diversity often leads to differing opinions between political parties, making policy implementation difficult. A prominent example of this challenge was seen in the implementation of the Value Added Tax (VAT), which showcased the time it takes for State Governments to adopt policies suggested by the Central Government.

When Reliance Fresh began opening retail outlets in major cities, it encountered opposition from both the ruling government and opposition parties. Political parties exploit such issues for their own benefit, making it challenging for marketers to introduce new concepts or distribution systems. It would not be unexpected to face pressure from the government when implementing innovative selling methods. These challenges require careful handling.

Local Gangsters: The hidden thief

While supporting the less fortunate may improve the quality of life for individuals and the nation, the same cannot be said for gangsters. In the BOP, both legal and illegal local authorities hold sway. It is crucial to acknowledge the local dynamics at play. Gangsters in these regions forcefully extort money from shopkeepers as a fee for operating in a specific area. Introducing a new system could potentially provoke these individuals.

This is another sensitive issue that needs to be handled tactfully and carefully. The BOP markets, much like diamond mines, appear to be very profitable for companies. However, successfully reaching and marketing products and services to these markets is a massive undertaking. It involves the collective responsibility and cooperation of policymakers and corporations within society. By combining societal development with culturally adaptable marketing strategies, a higher Return on Investment can be achieved. Many of the common challenges faced in this regard have been

addressed.

Despite the existing challenges, additional challenges will be found during the implementation of the business plan. Applying common sense in these stages will lead to a successful solution. There should be no hesitation in marketing products and services to the bottom of the pyramid. If the global economy expands, the benefits will be shared with the BOP, even if only partially. India's income pyramid will undergo a significant transformation from a pyramid shape to a diamond shape as incomes increase.

Government and NGOs are taking several measures to reduce the gap between the rich and poor. Narrowing this gap will make the market more accessible and profitable. With proper planning and implementation, marketers will be able to access valuable opportunities as soon as possible.

References:

1. Adapted from UNCTAD Handbook of statistics 2006-2007
2. Urban Poverty and Transport: The Case of Mumbai, www. worldbank. org/transport/learning/presentations/Poverty%20;%20Trans/Cropper. df
3. http://www. grameen-info

org/bank/index.html

The text states that the publication titled "The Great Indian Middle Class: Results from the NCAER Market Information Survey of Households" was authored by S. K. Dwivedi, S. K. Shukla, and Asha Sharma, with assistance from Sunil Jain. The publication was published in 2004 and was conducted in association with Business Standard. The source of this information can be found at http://www.caer.org/Downloads/PublicationsCatalog.

pdf).

HLL Investor presentation, Road show –Presented

by SP Mustafa 8-10th August, 2007.
Consumer Markets in India – the next big thing? – KPMG report 10. http://www. hll. com/citizen_lever/lifebuoy_chetna.
com, August 2003.

asp 11. Lao Tzu 12.

and Hart, Stuart, 2002.

com +91-98402 39547 Maanasaa S. Kumar I year MBA, School of Management, D G Vaishnav College, Chennai – 600106, India. music_gr8@yahoo. co.

in +91-98416 67580