Marketing

to
Base of Pyramid
Customers

Srikanth V
 Unit – I

Understanding Poverty and the Base of the Pyramid

Identifying Pyramid related Marketing Challenges,
Going deeper with target customers
Defining and Scoping your Marketing Challenge.
Maslow’s Theory
 The Need Theory of Maslow is common knowledge to all in this
room.

 Enlist some needs of different people…..are all the same for all…??
 No!!..for some a need, but for the other a luxury…right???
 What can we infer from this ?
 An economic divide???
Economics in Marketing
 Does Economics have a role to play in Marketing?
 “HOW??”
 Basis an understanding of the economic situation of the Country, State,
Region, the organization would –
◦ Plan on the Product – Its Features, Its Benefits, Its Pricing
◦ Plan on the Marketing Strategy – Segmentation, Target audience, Promotions etc.,

 And this apart, in our previous slide we discussed of how a need could be
a luxury for the other and shows that economics need to be
considered…right??
 Apply these thoughts to the entire population across the globe….
 Is the entire population across countries and economies being serviced by
the companies with their Products and Services?
 Are everyone having access to these Products and Services?
 Are everyone able to afford these Products and Services?
Wealth Distribution
 Is the distribution of wealth equal?
 So then, how is it to look at?

 Again a Pyramid!!!!
 But guess, that’s how lot of organisation structures look
too…..
A New Term - BOP???
 We now have to deal with a new term –
BOP
 What is it?
 What does it stand for?
 This term in Economics refers to the
poorest two-thirds of the economic
human pyramid living in abject Poverty
Poverty – Let’s Just give it a thought
It is the state of one who lacks a usual or socially
acceptable amount of money or material possessions.
Poverty is said to exist when people lack the means to
satisfy their basic needs.
In this context, the identification of poor people first
requires a determination of what constitutes basic
needs…

Statistics indicate that close to two-thirds of the world’s

population, around 4-5 billion people live in Poverty.
Without buying power (income)
No Transaction capacity such as Credit
No Infrastructure to support business
No Distribution Systems to make the goods available
No Institutional frameworks for fair trade
Poverty – An Opportunity ?
 Is this segment a real opportunity?
 Has it ever been considered?
 Does it make business sense to focus on
this segment?
 Are business houses planning to tap this
potential ? If yes, how?
 What could be the challenges?
 Should the business strategy be different?
Poverty – An Opportunity for MNC?
Poverty has 3 premises to be looked at as an
opportunity.
1. The world’s poor constitute massive growth
opportunities and profit potential given their
size.
2. MNCs should play a leading role in
unlocking the economic potential of such
difficult-to-access markets,
3. Bringing the poor into the global economy
will simultaneously generate fortunes for
MNCs while solving the problem of global
poverty.
Base Of Pyramid
 The BOP is defined as those people who earn
less than $ 2 per day and are excluded from the
modernity of our globalised civilized societies
including consumption and choice as well as
access to organized financial services.
 Alleviating global poverty was identified as a top
priority in the United Nations Millennium
Development Goals.
 The concept of addressing the needs of the poor
through business was introduced in 2006 by Prof.
CK Prahalad. He popularised the idea of this
demographic as a profitable consumer base.
Base Of Pyramid………..contd.
 The BOP refers to a market-based model of
economic development that promises to
simultaneously alleviate widespread poverty while
providing growth and profits for MNCs.
 They are value demanding consumers, resilient
and creative entrepreneurs, producers, business
partners and innovators.
 As they are largely excluded from formal markets,
there is a strong demand for innovative products,
services and technologies that provide access to
basic needs.
 These markets grow fast, but have an
underutilized productive sector.
Approach to BOP
Engaging people at the BOP as
Producers
Consumers and
Entrepreneurs
is key to improving their livelihood and
driving economic growth for both
communities and the Private sector.
Approach to BOP…………contd.
 Prahalad proposes that businesses, governments, and donor agencies
stop thinking of the poor as victims and instead start seeing them as
resilient and creative entrepreneurs as well as value-demanding
consumers.
 He proposes that there are tremendous benefits to MNCs who
choose to serve these markets in ways responsive to their needs.
After all, the poor of today are the middle class of tomorrow. There
are also poverty reducing benefits if multi-nationals work with civil
society organizations and local governments to create new local
business models.
 His view on solving the problem of poverty as a Co-
Creation solution towards economic development and social
transformation, of which the parties involved are:
◦ Private enterprises
◦ Development and aid agencies
◦ Bottom of the Pyramid consumers
◦ Bottom of the Pyramid entrepreneurs
◦ Civil society organizations and local government
BOP - MNCs

The BOP approach says that MNCs have to –

 Produce appropriate Products
 Distribute high volumes
 Affordable Products operating on razor-thin margins

The above is possible as they have -

 The Incentive (growth opportunities)
 The Financial resources
 The Capabilities (low-cost mass production, marketing
expertise, international experience)
Examples of BOP Business
 Microcredit
 Market Specific Products – Shampoo from
HUL
 Innovation – Mobile Banking
 Social Venture Funds
 Community partnerships for Waste-
management, Home cleaning, Insect
Treatment etc
 Market Potential of BOP
The business potential of the BOP is estimated
at $ 5 Trillion
 $ 2.3 trillion in food and nutrition
 $ 317 billion in energy
 $ 32 billion in water
 $ 508 billion in housing
 $ 206 billion in info & commn technology
 $ 193 billion in education
 $ 243 billion in health
 $ 405 billion in clothing and personal care
 $ 298 billion in transport
Assignment
 Explore the BOP in the Indian context
 Enlist the Govt initiatives – Central and
State
 Enlist 5 Business houses in each segment
focussing on addressing the BOP
customers with an insight into their
Mission and Vision
Challenges
Crucial Challenges are :
Governance
Effective Governance Mechanisms are needed to
Regulate
Monitor
and oversee the development of markets and effective competition

Sustainability
The viability of the business as they address this segment is
a area for constant monitoring
The returns could be meagre or even negative in certain
cases, but the business model needs to factor these aspects
and balance the negative cash flows against the positive
cash inflows from the bigger market segments
A longer stay in the market place in this segment would
help on gaining trust and thereby start enhanced sales and
revenue
Recap
Poverty
 It is the Scarcity or lack of certain amount
of material possessions or money.
 Absolute / Extreme Poverty refers to a
condition of lack of even basic needs such
as Food, Shelter and Clothing.
Bottom Of Pyramid
Pictorial Depiction

The BOP is the largest, but poorest socio-economic group

On a global scale, close to 4 billion people comprise this group and earn less
than $2 per day
It is estimated that close to 60% of this segment live in China and India
Defining the BOP
Debate on BOP Approach
 Approach to BOP
Engaging people at the BOP as producers, consumers and entrepreneurs is key to
improving their livelihood and driving economic growth for both communities and
the private sector.

The problem of poverty can be solved as a Co-Creation solution towards

economic development and social transformation, of which the parties involved
are:
Private enterprises
Development and aid agencies
Bottom of the Pyramid consumers
Bottom of the Pyramid entrepreneurs
Civil society organizations and local government
 Market Potential of BOP
The business potential of the BOP is estimated
at $ 5 Trillion
 $ 2.3 trillion in food and nutrition
 $ 317 billion in energy
 $ 32 billion in water
 $ 508 billion in housing
 $ 206 billion in info & commn technology
 $ 193 billion in education
 $ 243 billion in health
 $ 405 billion in clothing and personal care
 $ 298 billion in transport
Business Issues in BOP Markets
As a BOP Initiative is started, the following 4 issues are important and need to be
consciously addressed before hand itself:

A. The Definition of the BOP segment is not very precise.

I. Some mention that the BOP is that segment where income levels are less than $3000 per
annum on a PPP (Purchasing Power Parity - Purchasing power parity is a measurement of prices
in different countries that uses the prices of specific goods to compare the absolute purchasing
power of the countries' currencies) basis,
II. Another indicates that the BOP is those people who live on less than $2 per day.
These varying estimates suggest that the BOP lies within an income range of $2 to $6 per day. As it
mentions a count of 4 billion people needs that the accepted definition of BOP needs to be
arrived at with more precision as well as acceptance.

B. If Firms intend to engage with BOP, they need to be clear on

I. How will the BOP venture be viewed and
II. How will the BOP venture be evaluated within the firm?
There is a thin line between CSR(Corporate Social Responsibility) and BOP Initiatives
CSR does not have a profit motivation. So Firms would need to first ask the questions –
i. Is the venture going to be a for profit activity or will it be taken up as CSR activity?
ii. What are the motivations for undertaking this activity?
iii. Is the primary aim market expansion or is it part of strategic intent which aims to stretch the
organization’s capabilities.
Business Issues in BOP Markets
C. Ethical issues are important in BOP.
I. Does the firm have an ethical checklist which will guide activities in the BOP?
II. Are ethical compliance standards build into the business and operational
processes?

D. Firms will find it difficult to implement successful BOP initiatives on their

own.
I. Does the firm have a plan for establishing linkages with multiple institutions
within the Commercial, Government and Non-Governmental Sectors for
implementing BOP initiatives?
Marketing Issues in BOP Markets
There are some very important Marketing Issues that need to
be addressed by Firms undertaking BOP Initiatives
1. Consumer Analysis
2. Company Skills & Resource Analysis
3. Competition Analysis
4. Collaborator Analysis
5. Segments & Targeting
6. Positioning
7. Products
8. Price
9. Distribution
10. Promotion
11. Loyalty
Consumer Analysis
A research activity in 2010 found that the BOP
Consumers desired products which help enhance
and maintain self respect and dignity
So the questions that need to be asked with the
BOP consumers are –
1) What are the key consumer goals?
2) Which Product categories are appropriate for the BOP?
3) How much can consumers pay?
Understanding the needs , wants and current
behaviour of BOP consumers is a challenge as
these consumers may have unique needs and
motivations
Company Skills and Resource
Analysis

BOP Market activities are significantly different

from conventional marketing activities

It is important for firms

To carry out a thorough analysis of the requirements
Ensure availability of Technological knowledge
Re-plan on utilizing the Financial Strength
Engage Resources with knowledge
Competition Analysis
BOP Consumers
Have Limited Options
Purchase fewer categories
Substitute one category for another depending on
the availability of the monies on hand

Hence, Competition Analysis in the BOP segment

must cover not only competition at Product or
Brand level, but also at the Category level
Collaborator Analysis
On the Urban area BOP Segment Settlers, it is possible
to draw out the BOP Consumers from their place of
residence and attract them to modern stores
situated nearby
On the Rural front with the areas being widespread, it
would be difficult to draw the consumers and hence
the channel must deliver the product or service at a
place which is very close to the consumer’s residence
or at the consumer’s residence itself
Hence Creative Approaches are to be developed
towards the implementation of the channels of
distribution for BOP Segment
Segments and Targeting
The BOP Segments exist
In the Rural Environment
In the Urban Environment

Are their habits the same?

 No, they are not one amorphous group
 So they are to be segmented using standard criteria

Which of these two are to be focussed on?

Opinion says…the Urban BOP Consumer
They have better access
More exposure to technology
Well informed
Segmentation easy
Positioning
Objective for Positioning
To build an aura of exclusivity around
The Purchase of the Product
The Use of the Product

So while Positioning for a BOP Consumer

It is to communicate the idea of Inclusion
Incite the thought to think that they can also aspire for
middle class like status
Purchase and use high quality brands
Products
Products for the BOP Consumers
 Should not be those that have been phased out from
developed countries
 Should be of high quality
 Should meet the consumer needs
 Should contribute to sustainability
 Should consider the purchasing constraints – Package
size is often a critical issue

Hence it calls for the application of modern

technology for creating suitable products and
services for the BOP segment
Pricing
Several studies point out that the poor pay more for
the same products which are available at lower prices
to consumers in other segments
This is also termed as Poverty Penalty
While lower prices are certainly necessary to address
affordability in the BOP segment, merely reducing
pack size or serving size to offer lower prices is not
the way to succeed
It is necessary to find ways and means to help BOP
consumers to increase their incomes, and create
processes for offering credit and instalment payment
plans
Distribution
Characteristics of the BOP Markets
Bulk of the BOP Consumers live in Villages and Rural
towns
Minimal infrastructure like Roads, Transport and
Communication
Distribution Infrastructure not in place
The shops the villages are
Very small
Stock only few items such as Food Grains, Cooking Oil,
Few Consumer Goods
Creating a distribution system that delivers products
to these rural consumers is a costly and difficult
undertaking
Promotion
Key Challenges
High levels of functional illiteracy
The consumers process brand related information by
relating pictographic symbols
They may make a purchase decision on the basis of a single
attribute because they have difficulties with abstractions;
Trade-off happens between economic value and convenience
for emotional goals.
Shopping Habits
Avoidance strategy such as buying at the same store
Buying in Smaller Shops
Buying only known brands
Buying small amounts
Establishing relationships with store personnel
Seeking help in the store
Buying one item at a time to avoid loss of control over cash
Loyalty
Brand loyalty can be expected to be high in BOP and
subsistence markets
Why?
 Poor consumers have little margin for error
 Try to reduce risk by purchasing well-known brands
 View local brands as risky
 Unit – II
Consumption and Marketing Practices in BOP contexts
Truth as a consumer, Truth as a customer
A Brand Pyramid
BOP Approach

 An Approach to help the Poor

 An Approach that involves partnering with the
poor to Innovate
 Achieve sustainable win-win scenarios with the
poor playing a active role
 Ensure companies providing the Products and
Services are Profitable
Business Modelling
Key Aspects are:
Minor adaptation of Business models from
Affluent markets will not work for the BOP
Consumer Markets
Deep insight into the BOP Consumer markets
beginning with the very basic requirements are
to be incorporated
Shift from Creating needs in existing markets
to Creating Markets out of Unmet Needs
Marketing Mix
Identifying the four P‘s as the controllable
parameters likely to influence the consumer
buying process and decisions could be the first
steps to further development of a BOP marketing
strategy
4Ps
Product
Questions that need to be asked when defining the
product are –
 What type and range of product should we provide?
 What does the consumer want from the product (in terms
of features, size, color and use)?
 What should be the name of the product?
 How should it be branded?
 How is it differentiated from the competitors?
 Finally ask ―Does each product we offer provide relevant
and desired benefits for today‘s consumer needs?
Price
Price is the only one of the four P's that brings in money
There are many factors to consider –
 Incentives
 Discounts
 Channel Pricing
 With price, the goal should be to attract buyers by creating the
positive perception of worth
 People don't always buy the lowest price items, but they do expect
value for their investment
 When setting the price for the product or service following questions
are relevant -
 what is the value of the product or service to the consumer?
 Is the consumer price sensitive?
 What kind of discount should be offered?
 Are there established prices for products or services in this area?
 How will your price compare with your competitors?
Promotion
Promotion is concerned with how a company communicates with its potential
consumers and its present consumers
Promotion includes personal and impersonal promotion, and it is the marketing
manager‘s job to blend these methods of communication
 Advertising, public relations, sales and direct marketing have always focused
on messages and mediums
 More recently, companies use strategies such as social media, guerilla
marketing and so on, which encourages marketing managers to use
unconventional methods of promotion by relying on time, energy and
imagination instead of big budgets
 With promotion, the name of the game is testing – test the message, test the
delivery mechanism, test the response

Therefore questions that need to be asked in regards to promotion

are such as:
 How do we best communicate with our target market consumers and
persuade them to buy our offer?
 Where and when can we get across our marketing messages to our target
market (the press, TV, radio or billboards)?
 When is the best time to promote?
 How do our competitors promote? And how/what should our response be
Place
Place is concerned with all the decisions involved in
getting the right product to the target market place
◦ A product isn‘t much worth to a consumer if it isn‘t available when
and where it is wanted
◦ A product reaches consumers through a channel of distribution.
◦ A channel of distribution is any series of companies or individuals
that participate in the flow of products from producer to final
consumer
To determine the place for ones product, follow question
are excellent to ask:
 What channels of distribution and what levels of service are
appropriate?
 Where do consumers look for our product or service?
 How can we access the right distribution channels?
 Is a sales force necessary?
 What do our competitors do, and how can we learn from and/or
differentiate?
The A’s
There is said to be a connection in consumers buying preferences between the four P‘s of
marketing and the marketing challenges the BOP market faces . The marketing challenges
are as followed:
 Acceptability – the extent to which consumers and others in the value chain are willing to
consume, distribute or sell a product or service. In BOP markets, there is often a need to
offer products and services that are adapted to the unique needs of both consumers and
distributors
 Affordability – the degree to which a company‘s goods or services are affordable to BOP
consumers. Many low-income consumers in developing countries survive on daily wages,
meaning that cash-flow can be a problem. Companies need to be able to deliver offerings
at an appropriate price which enables consumption by even the poorest consumers
 Awareness – the degree to which consumers are aware of a product or service. With many
BOP consumers largely unreachable to conventional advertising media, building
awareness can be a significant challenge for companies. To overcome these constraints
companies must explore alternative communication channels
 Availability – the extent to which consumers are able to acquire and use a product or service.
 Distribution channels in BOP markets can be fragmented or non-existent and the task of
simply getting products to people can be a major hurdle to overcome
 Companies need to explore alternative methods of delivering their products and services
to even the most isolated BOP communities
Marketing Framework for BOP
The relationship between the four Ps of marketing (product,
price, place and promotion) and the four marketing challenges
(awareness, availability, accessibility and affordability) provides
the following marketing framework:
Acceptability
Functionality of the Product is a key parameter
 Product that has worked well in traditional markets may
not be acceptable to BOP consumers
 If the product functionality is not in line with their unmet
needs, MNCs should focus on developing customized
products
 Their need could be met via a creative blend of advanced
technology and deep local insight
Acceptability……………...contd…..
 The challenge in serving BOP markets is to gain acceptability for the product

 There is a necessity to offer products and services that are adapted to the
unique needs of both consumers and distributors

 The product must be altered so that it meets the needs of the poor and the
requirement of the environment they are in

 The BOP market is ready to adopt new technologies that can improve their
opportunities and the MNCs shouldn‘t hesitate to sell and market a bit more
advanced technologies at the BOP, even before selling and marketing them to
the developing markets

 The Marketing Efforts for the BOP Consumers should be towards making the
consumer accept the product

 Also, it is proof enough that inputs from the consumer is essential towards
adapting the product to the particular market
Affordability

 Given the low disposable income of BOP

consumers, Pricing is key to higher product
penetration

 People in rural areas are not only price

sensitive, but also quality conscious
Affordability……………contd…….
There are only three ways to reduce prices:
◦ Reduce Profits
◦ Reduce Costs without reducing quality,
◦ Reduce Costs by reducing quality
 To reduce profit, means that the company‘s must lower their
margin, which is most unlikely.
 The framework for analyzing Quality has 8 dimensions –
◦ Performance
◦ Features
◦ Reliability
◦ Conformance
◦ Durability
◦ Serviceability
◦ Aesthetics
◦ Perceived Quality
Affordability……………contd…….
The consumer takes into account all these dimensions and
reaches a subjective judgment of the overall quality of the
product, and is willing to pay a higher price for a product with
higher quality – this is the Price-Quality Trade-off
Holding technology and company capabilities constant, it costs
more to produce higher quality products – this is the Cost-
Quality Trade-off

To profitably serve the poor, the company needs to make the

cost-quality trade-off in a manner consistent with the price-
quality trade-off made by the target consumer
 The only example of product reduction is in the product category of
electronics, where the technology of production has improved so much that
the margin has been able to stay at the same level, while the prices of the
product have been reduced. There are no other product categories that have
been able to make the same prosperity
Affordability………….contd……..
Contrary to Prahalad‘s BOP approach, it is often necessary to
reduce quality in order to reduce costs
The challenge is to do this in such a way that the cost-quality
trade-off is acceptable to poor consumers
 The poor do like inexpensive, low-quality products, it‘s not because they
cannot appreciate or do not want good quality, it is simply because they
cannot afford the same quality products as the rich; so, they have a different
price-quality trade-off
 Insisting on not lowering quality hurts the poor by depriving them of a
product they could afford and like to buy
 As earlier mentioned BOP consumers have low disposable incomes and
receive their income on a daily rather than weekly or monthly basis therefore
MNCs have to ensure that products or services offered are affordable and
match the consumer‘s cash-flows
Awareness
The Rural BOP Consumers are different from the
Urban BOP Consumers, how?
 The access to information, exposure to upcoming
technologies differ among the two groups
 So, culturally it has now become a complex group
 Additionally, low literacy rates, joined with limited reach
of the electronic media, are likely to act as a barrier to
promotional efforts
 Therefore regionalization of the product promotion is
necessary
Awareness……………contd…..…
 In the Promotion, the consumer must be exposed to the product in a way that they
◦ Understand what the product is about
◦ Understand what kind of need the product will cover
 As different cultures have different learning and understanding abilities, the product must be
presented according to the receiver
 MNCs need to be very careful in choosing the vehicle to use for communication and focus on
unconventional marketing as it help save costs
◦ Audio visuals are a very popular way to convey the message
◦ Traditional media forms such as folk dance and puppetry can also be used for high-impact
product campaigns
◦ Word-of-mouth is also a good form of advertising. In rural areas, there are some select opinion
leaders who hold regular meetings with the community, these meetings are a common platform
for all to discuss everyday issues, which could also be a good place to present and promote the
product
 With many BOP consumers largely inaccessible to conventional advertising media, building
awareness is a challenge for companies wishing to serve low-income consumers in the developing
world
 Co-creation is a technique where the companies can tie up with the local vendors in the
unorganized market to sell or promote their product and offerings to BOP consumers
 The local vendor has a wider access to the market and has a deeper understanding of consumers‘
needs. Hence, a promotional strategy by a local vendor/seller is expected to be more successful than
a direct effort of the company
Awareness…….……….contd……..
 With regard to Promotion and Marketing to the BOP,
companies need to
◦ Take a long-term view about this market
◦ Focus on developing a sustainable and fitted business
model
◦ Communication to be the Key to Innovation and
Awareness

 The Methods of Communication need to be blended

well to ensure that the message is understandable by
the target audience in that particular market,
irrespective of it being the affluent or the BOP
Availability

 One of the biggest challenges of serving BOP markets is

to ensure availability of products and services
 Unlike in the developed world, distribution channels in
these markets can be fragmented or non-existent and the
simple fact of getting products to people can be a major
difficulty to overcome
 A strong distribution system is critical to any effective
BOP market strategy
 Reaching the poor is not easy, especially given the poor
road infrastructure in the rural areas, this causes the
distribution costs to increase, which sometimes makes
them even higher than in the urban markets
 This also puts pressure on the companies in protecting
their margins in the BOP market
Availability……………contd…...
 A MNC cannot alone create the commercial infrastructure at the BOP
 Viable partnerships with local people and community agents who have the social capital to
bring people together and build incentives should be emphasized
 The involvement of local population in the distribution not only improves product distribution,
but also encourages entrepreneurial aspirations, thereby creating more employment
opportunities
 The distribution system will have to adapt itself to satisfying demands for increased services at
the consumer‘s convenience and be open to rapid consolidation across the supply chain
 Involvement of MNCs in for example retailing would lead to efficiency in supply chain that will
help reduce costs in production and result in better prices, which benefits both the supplier
and the end consumer
 Distribution patterns for products and services must account for where the poor people live
and work. BOP consumers often work long or odd hours, and either walk or take public
transportation; therefore it is very important that the MNCs provide an easy access to
products
 It‘s all about getting the right product to the target markets place, and therefore the difficulties
are worth it, in the long run
 Once the distribution channel is established it can be re-used by other product categories
within the company
 When comparing availability with the element place, it is important to choose the channel of
distribution wisely. It can in both markets differentiate your product from the competitor, and
at the same time save the company costs
 The latter is more important in the BOP market, because it is essential that the costs are as
low as possible, since the price of the product has to be low as well
Aspiration
 Another important aspect to reckon is the people,
or the aspirations of the people in the BOP
 The poor have aspiration about getting out of
poverty, and the only way they can achieve this is to
get a job and start earning money, or get better
earning job that can take them above $2 a day
 This aspiration is also in the best interest of the
MNCs, because if the consumers have more money
between their hands, they spend more money
 The poor people needs will also change from basic
needs to some other items
Aspiration……………..contd…….
The BOP proposition focuses on the poor primarily as
consumers, but the poor, like most people, are of course both
consumers and producers
 The poor need –
◦ An employment
◦ A decent employment
◦ An employment that offers
 A Good Income
 Security
 Flexibility
 Protection
 A Voice in the Community
 Aspiration for the Future
 Employment is not just about Income. It improves
◦ Wellbeing
◦ Individual Skill
◦ Physical Abilities
◦ Self-respect
5 A’s
BOP – Profits or Social Benefits
The BOP Proposition is -
“Doing Well by Doing Good”

But, it is said to be
 A “Mirage”
 Logic is “riddled with fallacies”

Corporations stating success at the BOP –

 Strain their credulity

Mr. Karnani says that the BOP activities are

Either Profitable but not Socially beneficial

or
Socially virtuous but not Profitable
BOP Approach – a Success?
 Unfortunately, there are very few examples of
Profitable businesses marketing socially useful goods
 There are more number of examples of businesses
that profit from exploiting the poor
 The Poor are vulnerable owing to –
◦ Lack education
◦ Lack of information
◦ Economic, Cultural and Social Deprivations
 An example is –
◦ The large fraction of spending on Alcohol and Tobacco
by the poor
BOP Approach – a Success?
The fallacy of the consumer based BOP approach
It does not differentiate between Priority and Non-priority areas

An example is the success of the whitening cream

“Fair & Lovely”

Success of the product can be construed as an affordable product

formulated for providing a choice and empowerment for the poor
woman

Alternately, it is not a positive social goal as it is sustaining sexist and

racist prejudices in the society.

And, a poor woman buying Fair & Lovely is diverting expenditures

from more essential products such as Nutrition and Health Care

So a profitable BOP Business that fails to alleviate poverty are just

normal profit seeking businesses under a flimsy disguise.
BOP Approach – a Success?
 The BOP Business Opportunity is often confused with “Social
Business”
 Mr.Yunus, the Founder of Grameen Bank worked on the theory
that the problem of Poverty can be cleared by running a “not-
for-loss” businesses/initiatives, in the sense – “not-for-profit”
 The “not-for-profit” initiatives are not sustainable in the long
run as they depend on donations, whereas the “not-for-loss”
businesses are viable as they cover their operating costs. But
the one flaw in the “not-for-loss” mode of operation is that the
Opportunity Cost of Capital is not covered
 The objective of Private firms is not just accounting profits, but
rather “economic profits”, defined as accounting profits minus
the opportunity cost of capital
 Economic Profitability is necessary to make the project viable
and scalable. Should it generate returns lesser than the cost of
the capital , it would remain under-funded and operate on a
small scale only dependent on donations
BOP Approach – a Success?
 Clear demarcation needs to be made among
the businesses –
◦ Those that create share-holders wealth
◦ Those that cover their operational expenses but
do not create share-holders wealth
◦ Charities that require donations to survive

The first are clear Private business houses aimed at

increasing share-holders wealth
The second are Social businesses that try to maintain
the wealth
The Third are designed to voluntarily re-distribute
wealth
BOP Approach – a Success?
 The unmet needs of the poor are presented as
offering a huge untapped business opportunity
◦ An example to elucidate the statement is as under –
 Statistics indicate that close to 50% of the worlds
population on an average need to wear spectacles, however
in india the penetration stands at 7%
 Hence it is concluded that there is a huge business
opportunity to market eyeglasses to the Indian BOP.
 The current market size is small, but the future
opportunities are big
 Atleast a billion people live in abject poverty with many
unmet needs constituting a business opportunity
BOP Approach – a Success?
 The flaw in the logic is that an Unmet need does not necessarily translate into
a market
 The market exists only when the buyers are willing and able to pay a price
higher than the total costs, including opportunity cost of capital
 The perceived consumer value must exceed the price
 The consumer must be willing to the pay the price
 They must be able to pay the price
 So, for a firm it makes sense in selling at this price only if its revenues exceed
its total costs
 The size of the market and price of a product are determined by the
intersection of the demand and supply curves
 It the two curves do not intersect, there will be no market, even if there is an
unmet need
 As an example – there is a need for solar energy in homes, however, the price
they are willing to pay for solar energy is too low compared to the cost of
manufacturing solar panels and energy storage devices – A clear case of Unmet
need, but no market
BOP Approach – a Success?
 Assessing the size of the unmet need is easy, but that
is not the same as estimate of the potential market
opportunity
 For example., assessing the size of the unmet need
for eyeglasses in quite easy, given that data on
number of people with refractive problems, number
of eyeglasses being sold is available
 However, estimating the potential size of the market
is far more difficult given the fact that we are unable
to answer the question on how many poor people
would be able to afford the cost of atleast $4 per
pair of glasses
BOP Approach – a Success?

 Reason why BOP markets are small –

◦ Many poor people are not well informed
◦ Not well educated to appreciate the value of
the product or service being offered

Another example to highlight the above –

People were asked about switching to purified
water, but about 60% responded that they
would not switch even if it was given free.
BOP Approach – a Success?
 Confusing the unmet need and market size leads to disappointing
performance
 The size of the BOP market can grow bigger, if the supply or demand curve
shift outwards
 The demand curve can shift out if the income of the BOP increases, or if the
poor assign a higher perceived value to the product due to getting better
educated about its benefits
 Educating the poor about the benefits of the product is expensive and
increases the costs of the firm taking on this task
 The supply curve can shift out if the technological innovation significantly
reduces costs
 If the market size is too small compared to the unmet need , market-based
solutions are not a feasible way to alleviate poverty. Pilanthropic responses –
traditional charity organizations or social businesses will work better
 Private companies need to
◦ Implement market based solutions to alleviate poverty by marketing socially useful goods
to the BOP and expand the market
◦ Key issue to be addressed is designing the product in such a way as to make the price
truly affordable for the poor
Affordability Trap
 It is argued that since the poor account for the majority of the
world’s population, their aggregate buying power is in fact large
even though their individual income is very low
 Also, the poor do buy “luxury” items and they do value brands
if access is given
 They pay “high” prices because of distribution inefficiencies
 As a result of the above, there is a potential to provide them
with low cost products by efficiently organizing the supply
chain. This view makes the MNCs target the BOP market with
their existing products, or adaptations of the existing products
without sacrificing quality. This often results in marketing
products that are in fact much too expensive and not
affordable by the poor
 Important lessons –
◦ Firms should not overestimate the Purchasing power of the poor
◦ Firms should adjust the cost-quality trade-off much more
significantly to conform to the lower purchasing power of the poor
Overestimation of Purchasing Power
 A common mistake is that firms and researchers convert
income of the poor using PPP exchange rates, but convert
product prices using financial exchange rates. This
mistakenly makes products seem affordable by the poor.
Since financial exchange rates are about 3-5 times higher
than the PPP exchange rates for most developing
countries, this has a big impact on the apparent
affordability of products
 Another cause of overestimation of the purchasing power
is that firms do not fully appreciate the consumption
patterns of the poor
 Basic necessities account for a large fraction of their
meagre income, not leaving much room for other
expenditures
Cost Quality Trade Off
 In order to make the products affordable by the poor, firms
need to achieve large price and cost reductions
 A significant improvement in technology could reduce costs
drastically…eg. In telecommunications
 However, there have not been much technological
advancements in most categories-hence it is often necessary to
reduce quality in order to reduce costs, but it is to be done in
such a manner that the cost-quality trade-off is acceptable to
poor consumers
 Selling low quality products to the poor might seem unethical.
However, selling products at the appropriate cost-quality trade-
off is not only ethical, it is socially virtuous
 The appropriate reference point for quality is not the standard
prevailing in affluent markets, but rather the status quo in BOP
markets, which usually is unfulfilled basic needs. A low-quality
product is better than no product at all
The Distribution Trap
 Many multinational companies launching BOP initiatives are forced to
create distribution networks from scratch in order to reach the poor
rural consumers. It creates difficulties that are often underestimated.

 The strategic trend among large companies in developed companies

has been –
◦ To de-integrate their activities
◦ Unbundle the value chain
◦ Outsource what they can
◦ Focus on their core business

MNCs are often ill-equipped to forward integrate into distribution, especially

in the familiar environment of the BOP in emerging economies
While alliances with non-profit organizations maybe instrumental to ignite
operations, they cannot be relied on to scale up the business as being
social businesses, attracting enough capital to grow the business to a large
scale is a problem
Multi Objectives Trap
 Trying to combine socially useful products with firm
profitability is a major challenge
 BOP initiatives often make this problem even harder
by adding other social and environmental objectives
 Multiple objectives-
 Profitability
 Generating employment
 Environmental sustainability
 Public Health
Are all in conflict given the limited resources eventually
leading to trade-offs
The danger is that attempting to address all objectives
simultaneously leads to the project’s commercial
failure
Features of BOP Consumer

Low Income

Low Literacy Low Purchasing

Levels Power

Consumption
(Periodic &
Frequent)
Discoveries
 Dependence on Social Networks
Dependent on Relatives & Friends……why?
Need to overcome the gap
Low Purchasing Power & Consumption owing to Basic
requirements and Emergency needs
How does the Social Network help in the above
Access to Bridge Loans

 Purchase from Open Market Shops

In spite of existence of Govt Fair Price shop
Urge to cope with deficiencies of –
Purchasing Abilities
Access
Skills
Outcomes of Discoveries
 These trigger choices towards Selection of –
Shops
Products

 Additional Parameters
Credit Facility
Social Network Influence
Shortage of Time
Convenience
Scope for Negotiation and Bargaining
Parameters for Shop Selection
 Subsidy
 Credit Facility
 Proximity
 Convenience
 Scope of Bargaining
 Time Utility
Parameters for Product Selection
 Price
 Availability in Proximity & Fair Price Shop
 Retailer’s choice
 Credit Link
 Intra-household behavioural interactions
 Missing information
 Donations
Other Outcomes
 Selection of specific shops leads to
constrained choice of products
 Peculiar features of the BOP markets leads to
peculiar consumption patterns by the BOP
consumers

 Managers to understand the triggers for –

◦ Shop Selection
◦ Product Selection
◦ Peculiar Consumption pattern
◦ Purchase Pattern
A Snapshot
Selection of Purchase Products Selected
Point Loose unbranded products based
FPS on quantity requirement
Local Retail Cheaper Brands
Local Markets Branded Pouches
Second-hand Durables Multiple brand preferences within
Market the family
Second-hand Durables

Parameters of Shop
Selection
Provisions of BPL Card
Credit Facility
Shortage of Time
Convenience
Scope for Bargaining
Parameters of Product
Features of BOP Consumers Selection
Low Income Low Literacy Strict Budget Constraint
Low Purchasing Power Availability in FPS/Retail
Periodic Purchase Retailers Influence
Dependence on Social Network High Price Sensitivity
Retailers for Credit Purchase Low Brand Recall
Inclination for more VFM Brand Aspirations for Personal
Care Products

Consumption Pattern
Major share in consumption of Food(Basic Need)
Consumption of Cheaper Veggies
Meal Rotation(e.g. eating overnight’s leftovers)
Postponement or Reduction in Consumption
Degrading the Food Value(Diluting Milk)
Replacing the use of one Products by another(Toilet soap instead of Shampoo)
Tailoring usage of Particular Service(Missed call)
Brand Pyramid

The “BRAND PYRAMID” is an useful tool

to help identify where the customers are
in their journey towards Loyalty
Brand

What is a BRAND?
 BRAND – Is a set of –
Expectations
Memories
Stories
Relationships
Taken together account for the Consumer’s
decision to choose one product or service over
another
The Brand Pyramid
The Brand Pyramid has 5 key stages that customers go through
with a brand, starting with basic awareness to complete loyalty
Presence
This is the first level.
Customers are –
Just aware about the brand

Might have tried the Products/Services earlier

Little/No Attachment to the Brand

Relevance

The Second Level in the Pyramid.

The Customer –
Starts to think if the Brand meets their Wants
and Needs
Start to Compare the Cost of the Products
against the Value they provide
Questions asked are-
 Does this brand fit my needs?
 Is it in the Right Price Bracket for me?
 Is it Worth it?
Performance

 Customers begin to compare the Brand

with Others, checking if it delivers on its
potential
 Start to associate the Brand with a Specific
Identity
 Begin to Recognize it
 Begin to Associate with it
Advantage

 Customer acceptance of a distinct

advantage to using the Brand in comparison
to Others
 Begin to associate the Brand –
◦ With their Emotions
◦ With their Sense of Self
Bonding
The Final Stage of the Pyramid
Customers have at this stage –
 Established a bond with the Brand
 Accepted the Cost
 Clear on the Advantage
 Satisfied with the Performance of the Brand
 Emotional attachment with the Brand

In this stage, hence, the Brand has become an integral part of their
self-image representing who they are

This feeling also supports them towards excluding other brands in

favour of this Brand. He becomes Brand Loyal.

Also, they become Vocal Advocates of the Brand among their

Family, Social and Professional Circles
Applying the Tool
Brand Managers need to apply the Pyramid
concept while developing their Marketing
Strategy
The Strategy would be to lead their
customers through these stages
Part of the Strategy needs to reckon
Impractical to Focus on Just one stage at a
time
Crossover exists across the stages and
needs to be considered in the plan
Presence & Relevance
In this phase, Awareness of the Product is top
priority
Marketing Strategy to use 4Ps and Marketing Mix

The target segment comprises of different

Groups of Customers
Wants
Needs
Potential levels of Profitability

The Strategy needs to include either

Market Segmentation
STP Model
Presence & Relevance…..Contd….
As the Strategy unfolds, measurement is also
crucial to fine tune the same in order to
achieve better results

The measurement could use techniques such as

Conjoint Analysis
Kano Model Analysis

So, in the first two stages, the Customer –

No emotional attachment
Comparing Price
Comparing Value
Performance
Focus in this stage is about Product comparison

The Marketing Materials to –

Provide info to compare the product with other
competing products
Show Customers how much better the Brand is,
by highlighting benefits
Use USP Analysis modelling to help identify the
Brand’s Valuable Features
Advantage & Bonding
In these final stages the communication is to
focus on – further advantages of the Brand

Customers identify the Brand with emotions-

Fun
Excitement
Approval from Peers

The marketing strategy needs to enhance these

emotions and reinforce with Rewards and
Incentives to these “Vocal Advocates”
Brand Pyramid - Takeaways
A Brand Pyramid approach is useful-
 For defining the external face of your Brand
 Voice of your Brand

It should –
 Develop your UVP – Unique Value Proposition
 Develop your Brand Story
 Your Marketing Strategy
 Communication Plans
 Unit – III
Institution context of BOP markets, Marketing research in BOP
Markets- BOP Consumers – Producers - Entrepreneurs at the BOP
Institutional Context in the BOP
 Economic Development calls for –
 Creation of New Institutions to facilitate Entrepreneurial Efforts
 Invoke Structural Change through governance reform/privatisation

 BOP Context states –

 Entrepreneurial creativity can thrive in adverse institutional conditions found in the poorest
areas of the world
 The Institutional arrangements found in the BOP markets may provide advantages for certain
types of innovations and activities that may be unfamiliar and untested in more developed
markets but prove suitable for less developed ones
 National differences limit the scope of any particular innovation in reaching the full market
 A successful business venture could bring social benefits in low-income markets, but doubts
always exist with regard to the survival of the business
 So while the BOP Innovation may be successful in one institutional context, it may be
unsuccessful in another

So a comparative Management study needs to be undertaken for the BOP Markets

The study would provide insights into
 Institutional structures of a particular political economy
 Provide firms with advantages for engaging in specific types of activities
 And firms to leverage the institutional resources and capabilities to accomplish their internal
goals
Institutional Context in the BOP
 Institutional environment differs from country to
country
 It is different between the developed nations and the
developing nations
 Single policy will not work equally in countries as
different as Canada, Chad, China and Costa Rica
 Hence careful analysis of Institutional contexts needs
to be made -
◦ To evaluate the potential success of a specific business practice or
Product
◦ Evaluation with respect to a particular country –
 National differences may limit the scope of any particular innovation in
reaching the full market
Institutional Context in the BOP
 Institutional Logics provides pointers on –
 Common expectations of appropriate behaviour
 Routine behaviour patterns
 Interpret the meaning of others behaviour
 Distinguish between Formal Rules of Behaviour and actual operable
standards

 Institutional Systems are –

The Logic is derived out of –
• Historical Experience
• Local Knowledge
• Difficult to change through Design or Imitation

The Advantages of the system vary basis the –

• Historical Factors
• Cultural Factors
• Political Factors
Institutional Context
 Characteristics are –
 Informal Contracting –
 Would provide comparative advantages
 Political Instability –
 Political Stability is an important moderator

These contribute to distinctiveness in the

markets operated
Poor Vs Industrial economies –
Types of Resources and Capabilities differs
Institutional Context
 The Institutional model works best in a environment
that has a
 Moderate to High degree of Informality in their economic system
 Moderate degree of Political Stability
This is said as it is advantageous in supporting the governance
structure of the business

Also, the following structure of the Nations Provide advantages

for certain type of activities and disadvantages for others -
 Labour
 Financial
 Legal
 Governance Systems
Informality
 Types –
 Survival
 Growth

Survival Informality
States provide minimal support –
For Entrepreneurial activity
For Basic needs of Individuals/Families
Owing to the above points, individuals turn to
informal economy to avoid destitution
Here it is more of Survival and not about pursuing
growth in the market
Political Status
The political conflicts tend to –
 Weaken institutions
 Bankrupt companies
 Decrease entrepreneurship
 Lower FDI inflows
 Weaken the fit between the workers needs and firms strategies
 Likely chances of extortion and bribery

Informal Power Relationship -

◦ Warlords
◦ Gangs
◦ Military leaders(corrupt)

This explains the difference in type of economic relations in advanced

industrial societies and those that operate at the BOP
Snapshot of Political Condition in
BOP Countries
 Botswana – Rare episodes of Civil violence
 Columbia, Bosnia, Lebanon – Incidents of Civil violence
 DR Congo – Constant political unrest

The different degrees of informality and stability across societies show

the need for a fine grained analysis of institutional logics and
arrangements when exploring the effectiveness of a specific business
practice
Institutional Concept : Micro Finance
Microfinance is one of the largest and
persistent of the BOP Industry
The model –
 Lending small loans to the poor
 Available for people who have no access to formal
financial institutions
 Use Social Mechanisms – Group-based lending and
recovery
 Considered by the law makers as being a model to
reduce Poverty
 More of a Social governance and not formal
Institutional Concept : Micro Finance
 Cost of serving a customer –
◦ Cost towards evaluating credit worthiness
◦ Documentation
◦ Registration of loan
◦ Appraising the collateral
◦ Repayment collections
 Individuals form groups of Family members/Friends
 Lender make loans to the individuals of the entire
group, but the consequence of default by any member
is borne by all the members
 Riding on the social pressure built up among the
members, repayment rates stand at 98%
Marketing Research in the BOP

The Research Agenda for Marketing to the

BOP is developed into 4 areas –

Brands & Branding

Marketing Communication
Social Networks
Research Methods
Brands & Branding
Brands can be objects of desire even for poor consumers
 They view the brands purchases of middle class consumers as
aspirational brands
 The BOP consumers value brands that help enhance their self esteem
and dignity

Hence Research should aim to seek answers for –

 Which brands are consumers currently patronizing ?

 Are these local brands? Or are they global brands adapted for the local
markets
 Are these Global brands?
 Which brands does the consumer aspire to use ?
 What kind of relationship does the consumer share with their brands ?
Marketing Communication
BOP consumers may
 Have high level of functional illiteracy
 Face issues in the purchase process
 Develop unique coping strategies

Hence the MarCom needs to

 Extensively use Visual Information on –
 Products
 Packaging
 Branding communication

 The product needs to be –

 Easily recognizable
 Memorable Brand names with social connotations

Research to explore –
 Role of visuals
 Role of Brand Name towards Brand Choice and Brand Images
 Effectiveness of various message and Media strategy
 Preferred Media
Social Networks
Consumers rely heavily on Social Networks for
◦ Information
◦ Assistance in the purchase process

Research to the answers for

◦ Most influential type of Social Network –
Family/Friends/Neighbours/Co-workers etc

Role of Social Network –

o Introduction of New Products
o Promotion of Existing Products
o Choice of Purchase Outlets
Inclusive Marketing Research
Phases Involved –
Search
Understand
Co-Create
Commercial Pilot
Search - Segmentation

 The BOP Market is huge and not

homogeneous
 The segmentation is important as we answer –
 Rural Vs Urban
 Men Vs Women
 Stable Vs Unstable Income
 Living by the Day/ Living by the Week
 Target Group Segmentation would help in
 Documenting the Visits and talks
 Distinguish between various groups
Understand – Deep Dialogue
 Deep Dialogue is Vital
◦ It supports the first contact with the group
◦ Helps ‘get the ball rolling’ as the contacts are
bound to grow by way of the interviews being
conducted
◦ Helps collect a large amount of information in a
short period of time
◦ Ensures incorporation of existing knowledge
◦ Avoids re-invention of the wheel
Understand – Community Visits
 Community Visits helps meet -
◦ Potential Consumers
◦ Producers
◦ Entrepreneurs
◦ Investors
 By –
◦ Following
◦ Observing
◦ Working
We gain first-hand insight into their
Behaviour
Decision making processes

Key point to note during these deep-dives is –

Observe as against interpreting what you See-Hear-Feel
Co-Create
 Traditional approach in Marketing and Consumer Research is Top Down
 This leads to the BOP being excluded in the participating in development and Innovations
 This approach leads to loss of -
◦ Innovation Potential
◦ Resource Assets
◦ Mobilisation Power
Hence involving the Target Audience in the Market Research Team would help

Example –
As part of User testing a prototype of the product could be placed in the home of the
potential user
This helps in –
 Early stage validation of the product
 Explanation of the product/service to the end user
 Capture observations with regard to the pattern of usage by the user
 Capture feedback from the user

Basis this model of working –

 User problems could be identified at an early stage and corrected
 Trail and Error judgement happens and Innovation is supported to bring out a completely useful product
 Success is more pronounced
Commercial Pilot – Live Piloting
 Live Pilot to be undertaken in a
Shop/Stall/Community

 This gives a direct response to

◦ Product Proposition
◦ Product Use
◦ Price
◦ Promotion
◦ Helps identify – if a market exists or not

• The commercial pilot helps

 Reduce risks of the Entrepreneurs and Processors
 Helps gain an ethical perspective as, should the product
fail, it could harm the livelihoods of people in the BOP
Inclusive Marketing Research
Business Models Engaging BOP
Consumers & Producers
Assertions and conclusions about business models that work-
or-don’t work for operation in the BOP markets
1.Companies investing in inclusive business need the right business
model, as
 Takes Time
 Needs Innovation
 Returns are unclear
 Journey is ambiguous
 Target Markets are Fragmented
 Markets are underdeveloped

Companies in order to thrive and sustain need to

 Persevere
 Learn by doing i.e., experiential learning
 Take up unfamiliar roles and relationships
Business Models Engaging BOP
Consumers & Producers
2. Inclusive Business Models need to address the
following –
Right Distribution Network
Creation of Demand
Service Systems
Payment Systems
Government Acceptance
3. When sourcing from Farmers and Other
Producers, need to focus on
Product users having the Skills and Experience
All components of Production to be in place
Credit
Intermediaries
Business Models Engaging BOP
Consumers & Producers
4. The biggest challenge is about integrating all
the aspects into the business
5. The 4 Ps of Inclusive Business are –
 Perseverance – to continue until the model works
 Pilots – to test and learn how to make it work better
 Partnerships – Going beyond their own skill set
 Passion – To turn a bold vision into reality and keep
going until real returns set in
BOP As Producers
To Uplift the People at the BOP two
approaches exist –
The Handout Approach
The Handup Approach

Handout Approach – Varying Views

Capitalist View
Government View
Charities View
BOP As Producers – Handout
Approach
Capitalist View
It talks about MNCs lifting the poor out of poverty by providing
them goods that they can afford to buy, citing the potential to be high.
However, in spite of many years profit is still elusive

Government View
The Government considers its task is to provide the people in
the BOP with Education, Healthcare, Employment and other such
means for living. However they have not been successful and they have
always been treating the BOP as perpetual dependents on the state.

Charities View
Religious and Community based Charitable foundations were set
up to give Free Food, Clothing and Basic Necessities to the needy.
While the intentions are noble, that does not make the poor self-
sustained, but makes them more dependent
BOP As Producers – Handup
Approach
Social Entrepreneurs create Sustainable
solutions
Design Products and Services to solve their
real life problems
Consider the BOP comprising of several
segments with differing needs
The purpose of Social enterprise is to create
interventions that help people at the BOP
live a dignified life and alleviate inequality
and poverty in the society
Empowering the BOP
BOP can be positively impacted in two ways
–

1. Solving its problems through innovative

products and services

2. By empowering them through individual

livelihood opportunities by making them
Producers instead of Consumers
Scenario
BOP Family of 4 – Man, Wife & 2 Kids
Dalit Family – No Land – Works on lands of
bigger landlords for meagre wages – wife
works as a domestic help
The Problem –
Society marred with Casteism and hence no
community level interaction – No Farmland –
Sparring access to Education, Electricity etc
Elder child does not go to school as she tends
to her sibling
Solution 1 – Handout Approach
Family makes both ends meet by way of –
Government Subsidies
Ration Shops for goods

Issues –
Low Wages
Exploitation by Landlords
No education to children

No Change in Life….
Solution 2 – Handup Approach
A Social Enterprise supports by way of Microfinance model to purchase a farm
land along with 5-6 other farmers
They also help the group learn and indulge in Community Farming Techniques
This generates profits which is shared among all
The farmer earns an extra income through supply of farm waste to bio-fuel
companies and also sell their produce
Additional initiative possible is Poultry manageable from home for the woman
Also helps take care of the younger child, allowing the elder child to go to school

This indicates that intervention by a social enterprise

 Turned the BOP Family into Producers
 Turned them into Rural Entrepreneurs
 Changed their Socio Economic Status
 Helped impact in a similar way, life of 5 other families around
 Unit – IV

Trust and Tribes

Meaning of Trust, Factors of Trust
Key to develop Trust, Developing Trust, Trust Diagnosis
Marketing to the BOP – A
Framework
New innovations are a must for
Potential customer who are
Risk-averse
Extremely Price Sensitive

In such instances, we need to –

Understand the Potential customers
Develop Strategies that would increase the adoption of the
new innovations

The Marketing Framework needs to have incorporated the “Four

T’s(4 Ts) even before the marketing strategy

Few Core challenges of marketing to the BOP – Seth Godin says

Marketing – As per Godin
Marketing is –
The art of telling a story to a consumer that they want to hear
that lets them persuade themselves that they want to buy
something
The inferences from this definition are –
The art of Story telling –
Way of communication
Art means – knowing the type of language and style to
choose such that it resonates among the people aimed to be
reached
Persuade themselves –
The goal is to help the customer see the Value of the
Product/Service themselves
Marketing Goals for BOP
As we target the consumer in the BOP, we hope –
 Customer switches from an alternative product with similar
purpose to your product
 Customer adopts a new product for the first time
 Customers stops using a free products and starts using a paid
product

And all the above could happen when

 You are able to tell the story
 Help customers see the value of your product

Marketing Challenges – Components –

The Target Customer
Product / Service designed for the target customer
The First “T”
The consumers in the BOP balance –
Fear of Loss & Desire for Gain
Worldview is a key influencer of the Consumers
Behaviour
Hence it is critical for the marketer to think
about the worldview of the target consumer
Hence we ourselves need to be truthful to
ourselves before applying the concept to
others
That’s when we can understand the differences
and find the common aspect with the truths of
those that we intend to serve
Let’s Understand a Customer’s Worldview
The First “T”
Decisions of Buying are influenced by
Rational Factors
• Are the Features Perfect?
• Is the Price Right?
• Will it help at Work?
• Will I get to Work Faster?

Emotional Factors
 Aspiration
 Hope
 Desire
 Unarticulated belief
Other Emotional reasons are –
 Feel successful owning it
 Impressing others owing to me using it
 I am a good father/mother if I use it
 Friends think I am Cool/Smart/Worldly/Generous
 I feel more loved

Hence the consumers may make decisions for Emotional reasons. The Catalyst for
purchase need not be
 Something good for them
 Something which will help them
 Something healthier for them/their children
The First “T”
Just as there are powerful emotional reasons
to buy or try something new, there are
equally powerful emotional reasons to
NOT Buy or try a new product

Hence understanding the emotions of “Why

Not” are equally important as
understanding “Why”
The TRUTH as a Customer
There are different kinds of emotions that come into
play when we behave in certain ways –
1. Greed – If I make a decision now, I will be
rewarded.
2. Fear – If I don’t make a decision now, I am
toast(or I will be in trouble)
3. Altruism – If I make a decision now, I will help
others
4. Envy – If I don’t make a decision now, my
competition will win
5. Pride – If I make a decision now, I will look
smart
6. Shame – If I don’t make a decision now, I will
look smart
The TRUTH as a Customer
No Single emotion is likely to dominate the
purchasing decision completely
Also the decisions are probably influenced by
other factors as well
Given these, the marketer needs to think about
the “Truth” of the current customers to
understand what drove them to the purchase
It is equally important to be attentive to the
truths of the Pre-Customers and Non-
Customers
The Second “T”
The next “T” is “TRUST”
What are the values concerning Trust?
How do you Trust someone?
How much are you influenced by them?
Would your behaviour change if it pertains to trusting an organization?

Questions to be answered
As a Customer As a Pre-Customer As a Non-Customer

Think of a Product /Service that has been Think of a Product/Service you have Think of a Product/Service you have had an
purchased recently been thinking of purchasing opportunity to buy, but did not buy

How did you find out about the

Do you trust the company Product/Service What happened

If there was one thing that the company could

Did a third party influence your decision have done differently that could have changed
If yes, how was the trust formed on making the purchase your decision, what could that have been

Did you find that forces apart from the

Are there some type of purchases that would company itself influenced your decision?
require a higher level of trust than others? How?
What do you think are differentiating factors
for you
Trust

The following video explains why building

Trust with Customers is always important
especially in the BOP
Trust in a World of Risks
The next video explains how our instinct
contributes in building trust. Through proof,
but there is something that works better
Trust = Proof
 Unit – V
Informal Economy- Alternative market initiatives at BOP- Ethical issues
Trials and Truth, The value of Trial, Trial planning, Talking to customers
Informal Economy
 An informal economy (informal sector or grey economy) is the
part of any economy that is neither taxed nor monitored by any form of
government
 The informal sector makes up a significant portion of the economies in
developing countries, it is sometimes stigmatized as troublesome and
unmanageable
 The informal sector provides critical economic opportunities for the
poor and has been expanding rapidly since the 1960s.
 Integrating the informal economy into the formal sector is an important
policy challenge.
 Unlike the formal economy, activities of the informal economy are not
included in a country's Gross National Product (GNP) or Gross Domestic
Product (GDP). The informal sector can be described as a grey market in
labour.
Informal Economy - Characteristics
The informal sector is largely characterized by several qualities:
 Skills gained outside of a formal education
 Easy Entry(meaning anyone who wishes to join the sector can find some sort of work which
will result in cash earnings)
 Lack of stable employer-employee relationships
 Small Scale of Operations

Workers who participate in the informal economy are typically classified as employed. The type of
work that makes up the informal economy is diverse in terms of
 Capital Invested
 Technology Used
 Income Generated

The spectrum ranges from self-employment or unpaid family labour to street vendors, shoe shiners,
and junk collectors.
On the higher end of the spectrum are upper-tier informal activities such as small-scale service or
manufacturing businesses, which have more limited entry. The upper-tier informal activities have
higher set-up costs, which might include complicated licensing regulations, and irregular hours of
operation.

However, most workers in the informal sector, even those are self-employed or wage workers, do
not have access to secure work, benefits, welfare protection, or representation. These features
differ from businesses and employees in the formal sector which have regular hours of operation,
a regular location and other structured benefits.
Informal Economy - Characteristics
The most prevalent types of work in the informal economy are
 Home-based workers - Home-based workers are more numerous
 Street Vendors-They are more visible.
 Combined, the two fields make up about 10–15% of the non-agricultural workforce in
developing countries and over 5% of the workforce in developed countries.

While participation in the informal sector can be stigmatized, many workers engage in informal
ventures by choice, for either economic or non-economic reasons.
Economic motivations include –
 Ability to evade taxes
 Freedom to circumvent regulations and licensing requirements
 Capacity to maintain certain government benefits

A study of informal workers in Costa Rica illustrated other economic reasons for staying in the
informal sector, as well as non-economic factors.
• First, they felt they would earn more money through their informal sector work than at a
job in the formal economy.
• Second, even if workers made less money, working in the informal sector offered them
more independence, the chance to select their own hours, the opportunity to work
outside and near friends, etc.

While jobs in the formal economy might bring more security and regularity, or even pay better, the
combination of monetary and psychological rewards from working in the informal sector
proves appealing for many workers
 Social and Political implications and issues
 According to development and transition theories, workers in the informal sector
typically
◦ Earn less income,
◦ Have Unstable income,
◦ Do not have access to basic protections and services.
◦ Women play a huge role. The working poor, particularly women, are concentrated in the informal
economy, and most low-income households rely on the sector to provide for them.
◦ Informal businesses can also lack the potential for growth, trapping employees in menial jobs indefinitely.
◦ Can allow a large proportion of the population to escape extreme poverty and earn an income that is
satisfactory for survival.
 Viewpoint of Governments
◦ The informal sector can create a vicious cycle.
◦ Being unable to collect taxes from the informal sector, the government may be hindered in financing
public services
◦ This in turn makes the sector more attractive.
Conversely, some governments view informality as a benefit, enabling excess labour to be absorbed, and
mitigating unemployment issues.
Government need to recognize that the informal economy can
◦ Produce significant goods and services,
◦ Create necessary jobs, and
◦ Contribute to imports and exports
 As the work in informal sector is not monitored or registered with the state, its
workers are not entitled to social security, nor can they form trade unions.
Social Implications and issues
Gender
◦ Major occupations in the informal sector
 Home-based workers (such as dependent subcontract workers, independent
own account producers, and unpaid workers in family businesses)
 Street Vendors
Women tend to make up the greatest portion of the informal sector, often
ending up in the most erratic and corrupt segments of the sector.
In India, women working in the informal sector often work as Ragpickers,
Domestic Workers, Coolies,Vendors, Beauticians, Construction labourers, and
Garment workers.

Poverty
The relationship between the informal sectors and poverty certainly is not
simple nor does a clear, causal relationship exist.
An inverse relationship between an increased informal sector and slower
economic growth has been observed though.
Average incomes are substantially lower in the informal economy and there is a
higher preponderance of impoverished employees working in the informal
sector.
In addition, workers in the informal economy are less likely to benefit from
employment benefits and social protection programs
Social Implications and issues…..contd….
Children and child labour
Children work in the informal economy in many parts of the world.
They often work as –
 Scavengers (collecting recyclables from the streets and dump sites),
 Day Labourers
 Cleaners
 Construction workers
 Vendors, in seasonal activities
 Domestic Workers
 In small workshops
And often work under hazardous and exploitative conditions.
Such children are very vulnerable to exploitation: often they are not allowed to
take breaks or are required to work long hours; many suffer from a lack of
access to education, which can contribute to social isolation and a lack of
future opportunity
During times of economic crisis many families experience unemployment and
job loss, thus compelling adolescents to supplement their parents’ income by
selling goods or services to contribute to the family economy.
At the core, youth must compromise their social activities with other youth,
and instead prioritize their participation in the informal economy, thus
manufacturing a labour class of adolescents who must take on an adult role
within the family.
Political implications and issues
Political power of agents
Workers in the informal economy lack a significant voice in government policy.
Not only is the political power of informal workers limited, but the existence of the informal economy
creates challenges for other politically influential actors.
For example, the informal workforce is not a part of any trade union, nor does there seem a push or
inclination to change that status. Yet the informal economy negatively affects membership and investment
in the trade unions. Labourers who might be formally employed and join a union for protection may
choose to branch out on their own instead. As a result, trade unions are inclined to oppose the informal
sector, highlighting the costs and disadvantages of the system.
The flexibility of production, low labour and production costs, and bureaucratic freedom of the informal
economy can be seen as consequential competition for formal producers, leading them to challenge and
object to that sector.
The nature of the informal economy is largely anti-regulation and free of standard taxes, which diminishes
the material and political power of government agents.
Whatever the significance of these concerns are, the informal sector can shift political power and
energies

Expansion and growth

The key drivers for the growth of the informal economy in the twenty-first century include:
• Limited absorption of labour, particularly in countries with high rates of population or urbanisation
• Excessive cost and regulatory barriers of entry into the formal economy, often motivated by
corruption
• Weak institutions, limiting education and training opportunities as well as infrastructure development
• Increasing demand for low-cost goods and services
• Migration motivated by economic hardship and poverty
• Difficulties faced by women in gaining formal employment
Political implications and issues

Policy suggestions

 Policy perspectives viewed the informal sector as disruptive to the national economy and a
hindrance to development.
 The justifications for such criticisms stem from the following thoughts –
◦ View the informal economy as a fraudulent activity that results in a loss of revenue from taxes
◦ Weakens unions,
◦ Creates unfair competition
◦ Leads to a loss of regulatory control on the government's part
◦ Reduces observance of health and safety standards
◦ Reduces the availability of employment benefits and rights.
These characteristics have led to many nations pursuing a policy of deterrence with strict regulation
and punitive procedures.
 The Department for Infrastructure and Economic Cooperation under SIDA explained three
perspectives on the role of government and policy in relation to the informal economy.
◦ Markets function efficiently on their own; government interference would only lead to
inefficiency and dysfunction.
◦ The informal economy functions outside of government control, largely because those who
participate wish to avoid regulation and taxation.
◦ The informal economy is enduring; suitable regulation and policies are required.

 The challenge for policy interventions is that so many different types of informal work exist; a
solution would have to provide for a diverse range of circumstances.
 A possible strategy would be to provide better protections and benefits to informal sector players.
Marketing at BOP – Ethical Issues
 NOT marketing to the BOP raises ethical issues.
 There are two over-riding questions to keep in mind in this exploration of specific ethical concerns.
◦ Is the fundamental relationship between buyers and sellers cooperative or is it adversarial?
◦ And to what extent must global corporations adjust their tactics and strategies, perfected in
developed economies, to the special circumstances and conditions of developing countries?
 It would be unethical to deny products and services to people at the BOP just because the profit
margins in this segment would be much slimmer than margins of products and services targeted to
the middle class or to the top of the pyramid
 Ethical issues can arise at the BOP depending on the strategy employed in the marketing efforts.
 Any marketing effort must be aimed at serving the needs of the BOP segment in a way that is
beneficial to them
 The aspects to reckon while Marketing to the BOP are –
◦ Appropriate Products
◦ Fair Pricing
◦ Advertising and Promotion
 Honesty in Advertising
 Sales Promotion Tactics
 Marketing creates demand
◦ Distribution Concerns
◦ Branding
◦ Packaging
◦ Repatriation of the “Fortune”
Marketing at BOP – Ethical Issues

 The strategy of Hindustan Lever in India illustrates this principle.

◦ Hindustan Lever altered its products and distribution methods to meet the needs of its
target audience.
◦ Hindustan Lever decentralized production, marketing and distribution.
◦ While this took advantage of India’s abundant and inexpensive labour pool, it also provided
jobs. Products were packaged in smaller sizes, and prices were reduced.
◦ Lower profit margins were offset by higher volumes.
 Other examples include Bristol-Meyers Squibb selling AIDS medications in Africa for below
market prices; companies developing new food products to help combat malnutrition in
developing countries; and Shell Solar developing a way to bring affordable solar power to poor
areas
 These companies develop products and services for the BOP market that will deliver better
nutrition, better hygiene, availability to clean drinking water, availability to cheap energy, etc.
 However, development and distribution is not enough
 It is important for these companies to explain to the consumers how to get the most benefit
from the products that they are purchasing.
 Ethically these companies have a responsibility to this segment to ensure that they get the
most benefit from their extremely limited resources.
Marketing at BOP – Ethical Issues
 Ethical issues arise when the products or services offered are marketed in a way that
preys on people’s fears or prejudices.
 Fair and Lovely skin whitening cream is a prime example of this.
◦ It is targeted at females, and the advertising relays the message that lightening your
skin will improve your life.
◦ This may be an existing prejudice in some parts of the world; however, it is unethical
for any company to use this type of prejudice, at any level of the pyramid, to make a
profit.
 The question must be asked, will feeding this prejudice truly improve the lives of people
at the BOP?
 Other types of products would also raise ethical issues.
 An extreme example would be an Xbox. Even if the game were extremely cheap, it
would raise ethical issues to sell this type of product to this segment.
 How would this product improve the life of someone at the BOP? In fact, it could be
argued that quality of life would be lowered by the availability of this product
 People at the BOP do not need to spend money on this type of product
Marketing at BOP – Ethical Issues
 Local governments are involved with helping companies achieve low prices for the BOP
market.
 This help can come in the form of
◦ Favourable tariffs,
◦ Reduced tax rates
◦ Quicker Regulatory Approvals
 Therefore, local governments can have a huge effect on the types of products that are
offered to the BOP
 To summarize, selling to the BOP can be a very ethical business practice.
 Ethical issues arise when companies push products on this segment that do not improve
their lives, or prey on their fears and prejudices.
 Companies need to provide products that improve living conditions and ensure that the
target consumers fully understand how to get the most benefit from their very limited
resources.
 Finally, governments need to align their policies to ensure that favourable treatment is
given only to companies and products that will truly benefit the poorest of the poor.
Consumerism’s Impact at BOP
 Criticism of any major change is always a known fact. Some will criticize that the change
in and of itself is bad, while other will criticize that the change does not go far enough.
 In the case of BOP marketing, the criticism is that people are being offered products
that they don’t need.
 This forces them to divert the limited resources that they have from necessities to non-
necessities.
 The implication here is that since people at the BOP do not have enough resources for
the basics of life, any diversion of money is bad.
 Companies pursuing a BOP strategy may also be viewed as taking advantage of a poor,
uneducated population in the quest for greater profits.
 Companies pursuing a BOP strategy are looking for extra profits. Many times, profit is
equated with “consumerism.” This is especially true in the developed world where a
significant amount of profit is generated from products that could be considered as
non-necessities.
 But, Profits are necessary to keep the business going and to keep people employed. The
effects of the recent global recession are proof enough that lack of profits leads to lack
of employment.
Consumerism’s Impact at BOP
 The important thing to remember is that profit can be obtained without exploiting the
target market. The companies discussed here have provided a real and tangible benefit
to the markets they are trying to serve. If companies could not make profit, these
positive effects would not be possible.
 When marketing to the poorest of the poor, it is the responsibility of the companies to
ensure that their products and services fulfil a need for these people. Their limited
resources cannot be wasted on frivolous products.
 It is also important for companies to ensure that the people understand the proper use
of the product so they can get the most benefit for the money that they spend.
 If the products are able to achieve these high standards in a market, then it becomes a
moral obligation of the company to develop a similar approach for other BOP markets.
 Products and service that can improve living conditions for the BOP market should be
disseminated throughout the underdeveloped world.
 Profits will accrue to the companies that follow this strategy. These profits are
necessary for the dissemination of the benefits to continue, and for the development of
new products and services that can have the same effect.
The Third “T” - Tribes
Trust can be accrued through association with others that are trusted.

Trust can also be developed over time through Presence, Consistency and Proof.

Trust can be developed as a result of how “people of my tribe” behave.

“My Tribe” is equivalent to a critical group of which you are a member or want to be a member.

It usually consists of people like you or people you aspire to emulate

Tribes can be broad cultural groups or they can be small groups of friends

Tribe is an important concept for the marketer to be aware of while trying to develop trust with
the target customers and the community.

And in order to gain trust from the individual customer, you would need to be the
Organization/Product the tribe’s influencers have chosen to trust

The Group that matters in the Marketing Efforts – The Tribe

Tribes: People Like Me Do This

The Power of Concept of Tribes – Tribes: Stories to Bring

The concept of WWITMF – “Why and What would I Tell My Friends” is crucial - Video
The Final ‘’T” - TRAILS
The concept of running a TRAIL is important
because it allows to manage the risk before
investing large amounts of resources into
that initiatives that might fail.
Conducting TRAILs means designing an
intervention with the current or potential
customers who would help evaluate the
hypothesis using their worldview so that
better marketing initiatives can be taken
Trails
It is not just about talking to the target customers for a “Trail”

You talk with a hypothesis that you hope to evaluate through the
interactions with them. The hypothesis should shape the way to build
the prototype that would be used for the engagement

The Prototype could be the actual product that you want your customer
to provide feedback about or it could be the WWITMF messaging that
could help see how the targeted customer would react

While on Trails –
1. Do them Often, and never stop doing them
2. Actively participate in the trail – watch and learn how the product
works and how consumers interact with it

Reading a report on how the trail went will NOT give the kind of insight
and consumer understanding
 BOP Case Study Examples
 Project Shakti by Hindustan Unilever Limited
◦ Rural Marketing through villagers who were termed as “Shakti Amma” who promoted the
products among their neighbours and the promotion was more through Word of Mouth.
 LifeBouy Swasthya Chethana by Hindustan Unilever Limited
◦ Promotion of using Soap for washing and keeping ourselves clean. Targeting the members of
the BOP to start using Soap
 Annapurna Salt by Hindustan Unilever Limited
◦ Special research done by HUL addressed the loss of Iodine in salt due to varying temperature
conditions and transit time. Annapurna Salt was developed specifically to ensure Iodine was
available to the Rural BOP consumers in adequate quantities
 eChoupal by ITC
◦ Rural connect through ICT – Internet Connectivity for knowing Market Prices, Requirement
Trends, Weather Patterns etc., operated by a Sanchalak.
◦ Choupal Sagars – Rural Supermarkets
 Casas Bahia Model
◦ Brazilian Retailer selling Consumer Durables on Instalments to the BOP Consumers
 Aravind Eye Hospital
◦ Providing eyecare to Rural BOP Consumers. Providing spectacles free of cost and conducting
operations too at almost zero cost.
 ICICI Bank – Rural Banking
◦ Rural BOP Consumers are able to doing banking activities such as Saving money, opening
deposits, getting loans etc, in spite of the absence of a Bank branch. N-Logue Kiosks set up in
rural areas as part of this initiative
Thank You