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Season Eckstrom

Marketing to the Bottom of the Pyramid: India

Season Eckstrom

BUSA 460 Professor Simpson October 29, 2007

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growing markets will allow this company to reach new levels of growth and profitability. The markets we currently operate in have proved to be extremely profitable. Although many businesses wrongfully see no promise in marketing to the BOP. Not only is this endeavor an enormous business opportunity for us. the ultimate goals for all businesses. and increased innovation. improved efficiency. Though we have previously held the majority of the market share through the continual introduction of new and improved products.Season Eckstrom Marketing to the Bottom of the Pyramid: India As one of the leading multinational corporations today. There are many businesses that do not truly understand the concept of the bottom of the pyramid. the BOP segment is one that holds great potential for expansion and profits. Entering the BOP market in India will allow this company to experience immense growth. this will be a very advantages opportunity for Indian people as well. virtually untapped market of approximately 4 billion people located at the bottom of the pyramid. Specifically. Entering new. however. expansions into entirely new markets will be the key to increasing the profitability and market share of this company. it is vital that our company seek out new opportunities for expansion and growth in order to keep our market position and remain ahead of the competition. Though this market is mistakenly overlooked by many companies.2 trillion in purchasing power parity (Katz 2007). This group of approximately 4 billion people makes up nearly three-fourths of the world’s population and has a combined purchasing power of about $14 trillion (Cateora 2007). our company would see great benefits from tapping into this vast emerging market. entering the BOP market in India will open up a huge customer base of nearly 925million people with $1. or BOP. while taking a socially responsible role of helping alleviate poverty in this less-developed country. This opportunity resides in a huge. This is definitely not a market that any company 2 . these markets are entering the maturing stages of their life cycles and profits are no longer increasing.

the combined income of these individuals makes for a very profitable opportunity. India. Though it is true that the majority of people in the BOP live on less than two dollars a day (Prahalad 2002). will leave us with the majority of the market share in the present and the future and place our company in excellent position for long-term success in India. ‘western’ markets have become saturated and many international marketers are beginning to see the need in turning to markets in developing countries. with “the capacity to be one of the more prosperous nations in Asia” (Cateora 2007).Season Eckstrom looking to increase market share and revenues should consider ignoring. Taking advantage of this market now. 3 . large in both size and population. Though companies are rightfully turning to developing countries. As Richard Fletcher (2005) addresses. which will build loyal relationships and bring success to all parties involved. Companies like this one. before competitors begin to realize the enormous opportunity India presents. India. is an emerging market that has great potential to be major part of the worldwide economy in the near future. presents the opportunity to be one of the most profitable BOP markets in the world. securing a place in the Indian market will create the stability necessary to meet the needs and demands of the millions of new Indian consumers of the future. it would benefit this company to venture into these available markets while they are emerging into the developed world so that we can build sustainable relationships with these consumers. 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. With the population continually growing to “a population that will exceed China by 2050” (Cateora 2007). with a BOP population of nearly 925 million. Our goal here is to set our company apart in the minds of the BOP market by providing them with the products and services they desire at prices they can afford. With many companies deciding not to enter these markets at this time.

Since prices are already substantially higher than those offered to middle and upper class consumers. instead of the majority. Prahalad (2002). therefore. Although these consumers are individually poor.Season Eckstrom Fletcher (2005) also points out that these marketers are mistakenly targeting the minority. this assumption is one that causes companies to forfeit an incredibly profitable share in the poor markets of the world. the wealthy and middle class consumers. collectively they are extremely rich and are willing to pay for quality products at affordable prices. 4 . including India. the BOP market in India accounts for 95 percent of the countries population and 84.8% of the total $1. 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. yet this will attract new customers and “increase both sales and customer loyalty” (Prahalad 2002). offering lower prices is not something that will drastically decrease our margins. Being that India is continually growing and truly beginning to become a part of the global economy. but failed to look at the market in India that is almost four times larger.42-trillion national household market.2 trillion in purchasing power needs to become a part of our company. which is now approximately 250 million people (Cateora 2007). This is not to say that we will be required to offer products at prices that will produce no profit. the 95 percent of the population that holds $1. the BOP market. Many businesses wrongly assume that only those individuals with medium to large incomes serve as profitably consumers. Other MNC’s have chosen to market to the middle class of India. focusing their efforts on those markets. In fact. However. BOP consumers. According to Katz (2007).

The opportunity of innovation is present in the BOP market of India as well. Since maintaining low costs is essential to marketing to the BOP markets.” by providing the “opportunity for global firms to discover what is likely to be the ‘next practice’. BOP’s offer low-cost ways to introduce and examine ideas. ‘the bottom of the economic pyramid is a sandbox for innovation. 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.” Once these strategies are incorporated into the BOP markets and have proven to be successful. technologies. India provides us with a huge pool of cheap labor. One major advantage that we cold definitely capitalize on when doing business in India is outsourcing. and products that are currently to risky to bring to the developed markets.” BOP markets will provide us with the opportunity to test new ideas and products on a huge. Prahalad (2002) argues this “can push companies to discover creative ways to configure their products. Though our innovations may not initially meet quality standards of our developed markets. 5 . BOP markets provide the opportunity to reduce costs and increase efficiency. With a labor force of nearly 507 million people (The World Factbook 2007). we can use these strategies in our current markets to increase our overall productivity as a company. Outsourcing and reducing costs are not the only way to increase efficiency for our company. diverse customer base that can give us insight into whether our new ideas have potential to bring in revenue.Season Eckstrom Beyond the vast potential for growth. As Prahalad (2004) states. ultimately increases local consumers’ purchasing power” (Prahalad 2002). ultimately reducing our costs and increasing efficiency. as “outsourcing jobs to BOP markets can enhance growth. finances. and supply chains to enhance productivity.

McGraw Hill. 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. References Cateora. income. We have to opportunity to legitimize our social consciousness to our consumers. With approximately three-fourths of the worlds population living in poverty. and affordable products and services to people who would otherwise not have the opportunity. In fact. 6 . As a multinational corporation with vast monetary power. and make it known that we care about more than mere profits. There are several multinational corporations who have lost the opportunity to earn high profit margins.Season Eckstrom Entering India’s BOP market will not only bring monetary benefit to our company. but will allow us to fulfill our social responsibility. we have a responsibility to give back to a world that has provided us with so much. and encourage innovation by greatly underestimating the potential in BOP markets. investing in BOP’s is our chance to help alleviate poverty through providing jobs. “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). which can only lead to growth and profits. We have the resources to help India’s BOP market strive and begin to bring the population out of poverty. Our company has the chance to capitalize in India’s BOP market. Phillip (2007) International Marketing. Remaining in our current. gain efficiency. maturing markets will not provide this company with the expansion necessary to continue to turn over an exponential profit.

Richard (2005) International Marketing at the Bottom of the Pyramid. McGraw-Hill. Katz.K. Vol. Prahalad.K. (2004) Why Selling to the Poor Makes for Good Business.2 Trillion. Phillip (2007) Marketing to the Bottom of the Pyramid.Season Eckstrom Cateora. International Marketing. Pp 651-651. Fortune.gov 7 . Emmons. C. Rob (2007) Indian BOP Market Stands at $1. C. Profitably.cia. Harvard Business Review The World Factbook (2007) www. (2002) Serving the World’s Poor. Economic Times of India. Garry (2007) The Plight of the Global Poor: Is it any Business of Business? Fletcher. Issue 9 Prahalad. 150.