Marketing to the Bottom of the Pyramid: India

Part – II

Companies like this one, who have experienced immense success and fortune in the

markets of the developed world, quickly need to realize that the potential for continual growth in

these markets are decreasing. As Richard Fletcher (2005) addresses, ‘western’ markets have

become saturated and many international marketers are beginning to see the need in turning to

markets in developing countries. Though companies are rightfully turning to developing

countries, Fletcher (2005) also points out that these marketers are mistakenly targeting the

minority, the wealthy and middle class consumers, instead of the majority, BOP consumers.

Many businesses wrongly assume that only those individuals with medium to large incomes

serve as profitably consumers, therefore, focusing their efforts on those markets. However, this

assumption is one that causes companies to forfeit an incredibly profitable share in the poor

markets of the world, including India. Other MNC’s have chosen to market to the middle class

of India, which is now approximately 250 million people (Cateora 2007), but failed to look at the

market in India that is almost four times larger, the BOP market. According to Katz (2007), the

BOP market in India accounts for 95 percent of the countries population and 84.8% of the total

$1.42-trillion national household market. Being that India is continually growing and truly

beginning to become a part of the global economy, the 95 percent of the population that holds

$1.2 trillion in purchasing power needs to become a part of our company.

Although these consumers are individually poor, collectively they are extremely rich and

are willing to pay for quality products at affordable prices. This is not to say that we will be

required to offer products at prices that will produce no profit. In fact, Prahalad (2002), states

that “consumers at the bottom of the pyramid pay much higher prices for most things than

middle-class consumers do,” which provides multinational corporations such as ours the chance
to capture a huge percentage of the market share by offering high quality at prices that are

cheaper than the prices currently offered. Since prices are already substantially higher than those

offered to middle and upper class consumers, offering lower prices is not something that will

drastically decrease our margins, yet this will attract new customers and “increase both sales and

customer loyalty” (Prahalad 2002).

Beyond the vast potential for growth, BOP markets provide the opportunity to reduce

costs and increase efficiency. One major advantage that we cold definitely capitalize on when

doing business in India is outsourcing. With a labor force of nearly 507 million people (The

World Factbook 2007), India provides us with a huge pool of cheap labor, ultimately reducing

our costs and increasing efficiency, as “outsourcing jobs to BOP markets can enhance growth,

ultimately increases local consumers’ purchasing power” (Prahalad 2002). Not only do we

benefit from outsourcing, but the Indian people will have the opportunity to increase their

income and work themselves up toward a middle class life.

Outsourcing and reducing costs are not the only way to increase efficiency for our

company. Since maintaining low costs is essential to marketing to the BOP markets, Prahalad

(2002) argues this “can push companies to discover creative ways to configure their products,

finances, and supply chains to enhance productivity.” Once these strategies are incorporated into

the BOP markets and have proven to be successful, we can use these strategies in our current

markets to increase our overall productivity as a company.

The opportunity of innovation is present in the BOP market of India as well. As Prahalad

(2004) states, ‘the bottom of the economic pyramid is a sandbox for innovation,” by providing

the “opportunity for global firms to discover what is likely to be the ‘next practice’.” BOP

markets will provide us with the opportunity to test new ideas and products on a huge, diverse
customer base that can give us insight into whether our new ideas have potential to bring in

revenue. Though our innovations may not initially meet quality standards of our developed

markets, BOP’s offer low-cost ways to introduce and examine ideas, technologies, and products

that are currently to risky to bring to the developed markets.

Entering India’s BOP market will not only bring monetary benefit to our company, but

will allow us to fulfill our social responsibility. As a multinational corporation with vast

monetary power, we have a responsibility to give back to a world that has provided us with so

much. With approximately three-fourths of the worlds population living in poverty, investing in

BOP’s is our chance to help alleviate poverty through providing jobs, income, and affordable

products and services to people who would otherwise not have the opportunity. We have to

opportunity to legitimize our social consciousness to our consumers, and make it known that we

care about more than mere profits. In fact, “the way for multinationals to invigorate their

legitimacy is to bring their resources and capabilities to bear on reducing poverty in developing

countries” (Emmons 2007). We have the resources to help India’s BOP market strive and begin

to bring the population out of poverty.

There are several multinational corporations who have lost the opportunity to earn high

profit margins, gain efficiency, and encourage innovation by greatly underestimating the

potential in BOP markets. Our company has the chance to capitalize in India’s BOP market,

which can only lead to growth and profits. Remaining in our current, maturing markets will not

provide this company with the expansion necessary to continue to turn over an exponential

profit. Staking our claim in the emerging market of India will allow for future, long-term growth

and development for both our organization and the BOP market of India.