Marketing Issues in Pakistan

Week 2: Lecture 1

Marketing Issues in Pakistan Agenda  The µMarket at the Bottom of the Pyramid¶ ± The Power of the Dominant Logic The Nature of the BOP Market The Market Development Imperative ± ± .

Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± Demand in a Developing Country  Estimating market potential in less-developed countries is challenging. primarily arising from the co-existence of three distinct kind of markets: The Traditional/Rural Agriculture Sector The Modern/Urban High Income Sector Large Transitional Sector often represented as Low-income slums ± ± Each segment requires its own marketing program the greatest potential and challenge is to market to the third segment .

is that they tend to create opportunities for the poor by offering them choices and encouraging selfesteem´ Power Banks Marketing FMCG Construction Less than $2 a day . as you will come to appreciate.Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± Bottom-of-the-Pyramid Markets (BOPMs) wealthy ±³The strength of these innovative approaches.

Second. Old and tired solutions cannot create markets at the BOP. BOP markets must become an integral part of the work of the private sector. Successfully creating BOP markets involves change in the functioning of MNCs as much as it does change in the functioning of developing countries ± .Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± The Business DILEMMA: Don¶t Miss the Opportunity  First. they cannot merely be relegated to the realm of corporate social responsibility (CSR) initiatives. The new Business Model Third. as a market. provides a new growth opportunity for the private sector and a forum for innovations. there are numerous cases where large firms and multinational corporations (MNCs) is to ignore them altogether. ±   They must become part of the firms¶ core businesses. the BOP.

and serious questions about who their customers of the future will be. unexploited. ± . floundering business models.Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± Biggest ± Reason The BOP represents a vast. (app. these are important markets to crack. 4 billion market) For companies struggling with maturing markets. multitrilliondollar marketplace.

The poor present a market Poor as active consumers/entrepreneurs The poor are a problem Poor as µwards of the state¶ The poor do not appreciate new technology.Marketing Issues in Pakistan The Market at the Bottom of the Pyramid  The ± Power of the Dominant Logic Dominant logic relates to the main means a company uses to make a profit. imagination constraints Limitations on Capital Innovation to develop a new model . In essence. it is an interpretation of how a company has succeeded. Old technology solutions are acceptable Follow the µwestern model of business¶ Focus on Resource Constraints Efficiency in a known model Creative Bundling of Products and technology with a local flavor Selectively µleapfrog¶ and innovate Focus on creativity and entrepreneurship Limitation of information and access.

Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± HLL Example .

HLL dismissed Nirma as a low-end producer. At first.   . and continued to focus on upscale markets. offering a limited quantity. But to its astonishment. cutting costs by decentralized production. with powerful cleaning elements. and went for BTL and mobilization of local networks enabling it to achieve a price affordable at the very bottom of the market. Nirma began to eat up market share from the bottom-up. Nirma¶s business model was designed to cater the needs of BOP.Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± HLL Example   ³A New Business Design for Laundry Detergent´ an upstart company called Nirma entered the laundry detergent market for low-income Indians.

Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± ³shouldn¶t ice-cream be for EVERYONE? ´ .

highly mobile. salt-based heat shield. required very little energy. and involved hardly any pollutants Dented the market with acceptable price tiers     . It was cheaper to build.Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± ³shouldn¶t ice-cream be for EVERYONE ´  Challenge for HLL was to target the BOP market but how? Most (40%) of the cost of ice-cream comes from refrigeration (18C) and not milk and sugar So the company focused on rethinking the refrigeration platform and ²unexpectedly²developed a novel.

the poor represent a significant latent purchasing power that must be unlocked. by virtue of their numbers. the buying power these people cannot be compared with the purchasing power of individuals in the developed nations. the Indian economy is worth about $3. However.0 trillion in PPP terms. ± China is already a $5. Unlock the µPurchasing Penalty¶ ± ± .Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± The Nature of a BOP Market  Assumption 1: the poor have no purchasing power and therefore do not represent a viable market.0 trillion economy. making it the second largest economy behind the United States in PPP terms. Similarly.

Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± The Nature of a BOP Market  Assumption 2: distribution access to the BOP markets is very difficult and therefore represents a major impediment for the participation of large firms and MNCs. these cities will account for about 1. ± ± . Collectively. ± Urban areas are a magnet for Poor People There will be at least 23 cities with more than 10 million residents. Over 35 to 40 percent of these urban concentrations will be comprised of BOP consumers Create efficient methods of reaching these people.0 billion people.5 to 2.

On the contrary. They are also extremely value conscious by necessity.   . the poor are very brand-conscious. The main challenge is to offer brands that are affordable to these people or go for brand extensions.Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± The Nature of a BOP Market  Assumption 3: the poor are not brand-conscious. They expect quality at prices they can afford.

Brazil already has 80-90 million. ± ± . Growing at about 1. China = installed base of 750 million cell phones.5 million handsets per month. They are rapidly exploiting the benefits of information networks ± ± ± by the end of 20011. Pakistan has over 100 million subscribers India = 400 Pyramid million. BOP consumers are getting connected and networked.Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± The Nature of a BOP Market  Assumption 4: Contrary to the popular view. Both the current market size and the growth rates suggest that the BOP market is a critical factor in worldwide wireless growth.

Create the Capacity to Consume The Need for New Goods and Services Dignity and Choice Trust Is a Prerequisite 2. 3. . 4.Marketing Issues in Pakistan The Market at the Bottom of the Pyramid The Nature of a BOP Market   So how to tap the market? Go for the Market Development! 1.

. Distribution efficiency is critical. Cannot defer purchasing. a Bolivian financial services company. Proximity at Intensity Availability: BoP customers are out for necessity. has introduced smart automated teller machines (ATMs) that recognize fingerprints.Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± The Nature of a BOP Market: Market Development 1. Access: Time of the day. Create the Capacity to Consume ± ± ± ± Create the Three µAs¶ Affordability: the key is affordability without sacrificing quality or efficacy. and speak in three local languages. use color-coded touch screens. 2. Creation of New Products and Services ± PRODEM FFP.

better choice ± 4.Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± The Nature of a BOP Market: Market Development 3. Trust Is a Prerequisite ± ± There is a mistrust ± that runs deep Similarly MNCs often assume that the default rate among the poor is likely to be higher than that of their rich customers . Switching costs of single serving are lower. Dignity and Choice ± When BOP consumers buy these products they acquire the dignity of attention and choices from the private sector that were previously reserved for the middle-class and rich.

Marketing Issues in Pakistan The Market at the Bottom of the Pyramid ± Does  Are this always happen? people provided the same quality and benefits as the brand promises? most of the purchases are utilitarian?  Or  Is the real value of money or do people need things for basic necessities? two vid segments  .

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