Marketing to the Bop

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Perdita Das
MKT 650 International Marketing
Prof. James Nicholas
Date: 03/26/13
Case Study: Marketing to the Bottom of the Pyramid
Summary
The bottom of the pyramid (BOP) consists of over 4 billion people worldwide who survive on an income of $2 per day. These “aspirational poor” make up three-fourths of the world’s population, representing $14 trillion in purchasing power. This is more than Germany, the United Kingdom, Italy, France, and Japan put together. Demographically, the BOP is young and growing at 6% a year or more. Traditionally this particular group of people have been ignored by multinational corporations as it was assumed that “the poor can’t afford most products”; “they will not accept new technologies”; and “except for the most basic products, they have little or no use for most products sold to higher income market segments.” Typical market studies are limited to urban areas ignoring rural villages, which ignores a majority of the population that falls under the category of BOP. , as major markets become more competitive and in some cases saturated—with the resulting ever-thinning profit margins—marketing to the bottom of the pyramid may have real potential and be worthy of exploration. Problem

How can multinational companies market to the BOP without exploiting them? Alternatives
1. Devise a creative marketing plan that uses advanced technology, financing, effective distribution and affordable packaging 2. Only market certain products that are considered to be “necessary” and not “luxury” 3. Do not market to the BOP

Explanation of the Alternatives
Alternative 1. It is important to understand that marketing to the BOP does not mean cutting corners or devising cheap products. This population has little to no discretionary income and it should be set up in a way where these products are helping them provide sustenance for themselves and their families. For example, one company was inspired to invent the Freeplay, a windup self-power–generating radio, when it learned that isolated, impoverished people in South Africa were not getting information about AIDS because they had no electricity for radios and could not afford replacement batteries. Companies need to focus on making the lives of these “poor people” better so that they can even think about spending money. Marketing to the BOP requires advanced technology but the company needs to provide infrastructure support along with it. For example, ITC, a $2.6 billion a year Indian conglomerate, decided to create a network of PC kiosks in villages. The company wanted farmers to be able to connect directly to information sources to check ITC’s offer price for produce. With direct access to information, farmers got the best price for their product, hordes of intermediaries were bypassed, and ITC gained a direct contact with the farmers, thus improving the efficiency of ITC’s soybean acquisition. Companies also need come up with creative ways of financing because many of these BOP consumers does not have the adequate disposable income to be spending money on things that they need to. Cemex, the world’s third-largest cement company, recognized an opportunity for profit by enabling lower-income Mexicans to build their own homes. The customers paid Cemex $11.50 a week and received building materials every 10 weeks until the room was finished (about 70 weeks—customers were on their own for the actual building). Although poor, 99.6 percent of the 150,000 Patrimonio Hoy participants have paid their bills in full. Patrimonio Hoy attracted 42,000 new customers and is expected to turn a $1.5 million profit next year. Marketing to BOP also requires effective distribution strategies, mostly utilizing the population themselves because most of the time they will not have money to pay for shipping or in most areas not own cars to go to stores. For example, Unilever realized it could not sell to the bottom of the pyramid unless it found low-cost ways to distribute...
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