BOP MARKET

The phrase “bottom of the pyramid” was used by U.S. president Franklin D.

Roosevelt in his April 7, 1932 radio address, The Forgotten Man.

Bottom of Pyramid is the largest, but poorest socio-economic group. In “The Fortune

at the Bottom of the Pyramid “ Late C.K. Prahlad talks about the potential and

importance of the BOP market and discusses new business model to tap this BOP

market by providing goods and services to the poorest people.

According to Bill Gates, it "offers an intriguing blueprint for how to fight poverty

with profitability."

What exactly is BOP market and why it is important?

BOP market is about people who are below poverty line and is usually considered to

be a burden for the development of any country. However, the perceptions of the

organizations are changing towards these segments that have been ignored for so long.

At present, for any firm who is looking for a growth and sustainability cannot afford

to ignore this segment which possesses huge potential and growth opportunities. The

BOP market is so huge that any firm who would be able to tap this market would hold

the major share of the market thus having a competitive advantage over their

competitors.

The Market Size

India is the 2nd

largest population in the world and is a developing nation. Considering

this fact India has the largest population which is below poverty line and is an

untapped market in the world. Over all BOP market size is 4 Billion; which is a huge

market.

IMPORTANCE OF BOP MARKET

One cannot ignore the importance of BOP market. The market has substantial strength

to increase the wealth turnover of any organisation who are ready to provide them

quality products at an affordable price. One of the smartest methods adopted by the

retailers and manufacturing firms like Godrej is to provide their products in

instalments. This has substantially increased their market share since BOP market is

huge and is untapped by the competitors which is totally opposite to metro and urban

areas where the competition is stiff and firms are finding it hard to maintain their

margin.

Where in urban market the customers expect the quality products and competitors are

well in number, the firms are forced to provide products at lower rates thus sacrificing

their margin. On the contrary, in rural market and the BOP market not many firms

have dared to enter due to various factors like demand for cheaper products, less

buying capability and fear of losing brand image.

However, the data says the BOP market has huge potential to spend provided the

firms find innovative ways to offer them value than price. low income people spend

larger portion of their income on food, while high income people spend larger portion

on education, medicine and health care.

POTENTIAL OF BOP MARKET

The GDP of the developing nation is at rise and that does not

limit to just urban population. The prospects of gaining

consumers in BOP market depends upon marketer‟s potential to

understand the market, the consumers and their ability to serve them effectively. The

spread of wireless devices among the poor is proof of a market at the BOP. The Indian

market is growing at about 1.5 million handsets per month. Telecommunications

providers have made it easier for BOP consumers to purchase handsets and service

through prepaid cards.

Some of the finest examples of MNC understanding the potential of BOP market and

shifting its focus towards this segment are GODREJ and HUL.

GODREJ’s CHOTUKOOL

A recently launched Rs 3,250, Small Refrigerator (ChotuKool) is not

just cheap but has been tagged as super economical. It is a portable top

opening unit weighs only 7.8 kg and uses high end insulation to stay

cool for hours without power and consumes half the energy used by regular

refrigerators. It is a perfect example of understanding the BOP market and customer

needs thus providing product that not only offers value for money but also has high

performance. It has been launched in March 2010 and is aimed to capture the

untapped BOP market.

How did they manage?

Chotukool is 35% cheaper than any

other regular refrigerator. The number of

parts used in Chotukool is 20 instead of

200. The c ompany involved the

villagers from the first step of design to

selling of the product. The product has

gone in for several alterations after every little detail, including pricing and color (red

and blue were the clear winners) was discussed with a select group of villagers.

UNILEVER’s PUREIT

Unilever comes out with the water purifier which is a

need for every BOP customer as the quality of water is

the y live on is the most polluted and cannot afford to

purchase high prices water purifier. Pureit comes at a one-time cost

of just Rs.1800! The GermKill Battery Kit typically lasts for about

1500 litres. The repla cement of the GermKill Battery Kit is priced at

Rs. 300. This means consumers will typically get five litres of water

that is „as safe as boiled water‟ for just one rupee (20 paise/per litre

only). Therefore, Pureit provides water that is `as safe as boiled‟

water at an extremely affordable price, without the hassles of boiling that too with no

use of electricity.

Micro-finance institutions SKS Microfinance and Basix are enabling the purchase of

such devices in rural India, where 700 million people make less than $2 per day.

Often these institutions enable women to become entrepreneurs. In the long run this

will improve nutrition, literacy, create smaller families and contain population growth

in addition to improving the lots of rural consumers.

Telecommunication industry has also

shifted their focus to these BOP markets

which is one of the major market shares

for telecom companies like Nokia, LG and service providers

like Uninor, Tata Docomo etc. by providing low cost basic handsets starting at Rs.

1000/ and service providers providing call rates as cheap as 1paise per second or 20p

aise per minute.

FMCG manufacturers realises the

needs of the customers and have

started coming up with smaller packs

to cater the needs of the customers.

P&G introduced Tide Re. 1/- sachet

which help the daily wage earners to buy as per their need rather

investing Rs. 40/- in a single purchase. Similarly, Cinthol‟s Rs.5/- pack

and Sunfeast biscuit for Rs. 5/-

With all these measures firms have been able to tap the untapped BOP

markets which was once considered to be a burden and not worthy enough to invest

in. By penetrating into these market firms have been able to increase their market

share and been able to have a competitive advantage over their competitors.