Bottom Of The Pyramid Marketing Essay

Bottom Of The Pyramid Marketing Essay The Bottom of the Pyramid (BOP) is the largest and poorest socio-economic group in the society. There are more than four billion people who live their lives on less than $2 per day. Indias rural majority today accounts for more than US$100 billion in consumer spending, making them by far the biggest buyers in the country and contributing significantly to Indias gross domestic product. To tap the vast markets at the BOP, MNCs must specially design and develop quality products and services, or they must select some to alter and make available at lower cost. Serving BOP customers is a profitable opportunity for corporations. It is also a social imperative, given that two-thirds of the human population (about four billion people) are at the bottom of the economic pyramid. By addressing the BOP, MNCs can curtail poverty and improve the living conditions of the worlds poorest. HYPOTHESIS IS THERE SUFFICIENT OPPURTUNITY AT THE BOTTOM OF THE PYRAMID? 70% of the Indian population lives in rural areas. This segment, which is commonly referred to as the bottom of the pyramid, presents a huge opportunity for companies. To expand the market by tapping the countryside, more and more MNCs are foraying into Indias rural markets. Among those that have made some headway are Hindustan Lever, Coca-Cola, LG Electronics, Britannia, Standard Life, Philips, Colgate Palmolive, Amul and many foreign-invested telecom companies. The Opportunity In earlier times rural consumer had to go to a nearby town or city to buy a branded product. The growing power of the rural consumer is now forcing big companies to flock to rural markets. At the same time, they also throw up major challenges for marketers. Servicing rural markets involves ensuring availability of products through a sound distribution network, overcoming prevalent attitudes and habits of rural customers and creating brand awareness. Price-sensitivity is another key issue. Rural income levels are largely dependent on the vagaries of monsoon, and demand is not easy to predict. The Indian rural market currently contributes to 50% of the annual consumption of FMCG goods and is increasing year on year. As a result it is becoming an important market place for fast moving consumer goods as well as consumer durables. The Necessity The rural market is certainly tempting since it comprises 70 % of the countrys population, 41 per cent of its middle class, 58 per cent of its disposable income and a large consuming class. Today, real growth is taking place in the rural-urban markets, or in the 13,113 villages with a population of more than 5,000. In order to efficiently and cost-effectively target the rural markets, companies cover many independent retailers since in these areas, the retailer influences purchase decisions and stock a single brand in a product category. Most of the companies have started tinkering with pack sizes and creating new price points in order to reach out to rural consumers. Thus, sachets and miniature packs, as in the case of shampoo sachets priced at Re 1 and Rs 2 or toothpaste at Rs 10, have become the order of the day and help improve market penetration. Yet, driving consumption of goods in rural areas is not just about lowering prices and increasing volumes but also about product innovation and developing indigenous products to cater to their demands. For example, soap makers use advanced technology to coat one side of the soap bar with plastic to prevent it from wearing out quickly. Impact of globalisation The impact of globalisation is felt in rural India as much as in urban. It will have its impact on target groups like farmers, youth and women. Farmers, today keep in touch with the latest information and maximise both ends. They keep their cell phones constantly connected to global markets. Surely, price movements and products availability in the international market place seem to drive their local business strategies. On youth its impact is on knowledge and information and while on women it still depends on the socio-economic aspect. The marketers who understand the rural consumer and fine tune their strategy are sure to reap benefits in the coming years. In fact, the leadership in any product or service is linked to leadership in the rural India except for few lifestyle-based products, which depend on urban India mainly. Coca-Cola India In 2001, Coca-Cola India attempted to gain leadership in the Indian market and capitalize on the rural markets. In rural markets, soft drinks category was undeveloped. Coca-Cola India believed that the first brand to offer communication targeted to the smaller towns would own the rural market and went after that objective with a comprehensive strategy. The rural segments primary need was out-of-home thirst-quenching and the soft drink category was undifferentiated in the minds of rural consumers. Additionally, with an average Coke costing Rs. 10 and an average days wages around Rs. 100, Coke was perceived as a luxury that few could afford. In an effort to make the price point of Coke within reach of this high-potential market, Coca-Cola launched the Accessibility Campaign, introducing a new 200ml bottle, smaller than the traditional 300ml bottle found in urban markets, and concurrently cutting the price in half, to Rs. 5. This pricing strategy closed the gap between Coke and basic refreshments like lemonade and tea, making soft drinks truly accessible for the first time. At the same time, Coke invested in distribution infrastructure to effectively serve a disbursed population and increased the number of retail outlets in rural, increasing market penetration. Coca-Colas advertising and promotion strategy pulled the marketing plan together using local language and idiomatic expressions which even won them some campaign of the year award in the Advertising Market Coca-Cola doubled its spend on Government Channels, increased price compliance from 30 per cent to 50 per cent in rural markets and reduced overall costs by 40 per cent. Result: the rural market accounts for 80 per cent of new Coke drinkers and 30 per cent of its volumes. CONCLUSION The basic problem with brand marketing is its high cost. Local Markets do offer a cost-effective method of marketing. With the virtual Local Markets the cost saving is still better. Consider for example the case of marketing farm inputs like fertilisers, seeds and pesticides. In the brand marketing approach, the same information is provided by several marketers through different media and methods. In the virtual Markets, several people can join hands and provide best possible information in a most cost effective manner to the farmers. The rural market grab has already begun. Once the rural consumers get attached to these new forms of virtual Local Markets they are going to procure most of their requirements from the same source and sell their produce in the same Markets. This offers an interesting challenge for those companies that are selling in the rural market including the agri-input companies, farm equipment companies, FMCG and consumer durable manufacturers. The bottom of the value-chain pyramid indeed represents a huge gambit of opportunities. Here lies a fortune that is waiting to be explored