EMPORIO - Indian Institute of Management Ahmedabadstd · This month’s Emporio is a culmination of a night-out, a day- out, several coffee breaks and not-so-long-drawn efforts from

EMPORIO The Niche Newsletter

AUGUST,2010 ISSUE #3-10

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Contents:

The View from the Base of the Pyramid

Necessity, and the Marketer’s Invention

Public Policy, Poverty, and Products

Product Evolution in Reverse?

Not your Usual Base of Pyramid Story

From the Editors

This month’s Emporio is a culmination of a night-out, a day-

out, several coffee breaks and not-so-long-drawn efforts from

the freshly inducted faccha team and the now officially stale

tuccha team. Keeping alive the tradition of bringing

relevant yet different topics on board, this month’s issue is

all about “Marketing to the Bottom of the Pyramid”. We

received some great entries on this topic and as you flip

through the pages you will realise that in all the five articles

which form a part of this issue, the subject is the only

constant, with five different perspectives and versions of the

same. Also, encouraged by the overwhelming response to last

month’s contest, this month too we have six questions for

you, of which you have to answer five, with prizes for the

first two correct entries. We hope that you have as much fun

reading this issue as we had making it.

-On behalf of the Niche team,

Tiyasa &Abhijit

P.S.: We would also like to thank you guys for some amazing

entries to Dormination. May the best dorm win!

“Bottom of the pyramid is a

sandbox for innovation”

-C.K. Prahalad

CONTEST QUESTIONS INSIDE ARE JUMPING UP AND DOWN TO GET SOLVED BY YOU

HURRY!! HURRY!! DON‟T LET OTHERS POUNCE ON THEM

PRIZES WORTH Rs. 400 FOR EARLY BIRDS

customer while being aware of brands place

more value on „word-of-mouth‟ advertising than

any other form of advertising. While, they don‟t

mind paying a premium for a product, the

premium paid is usually for the additional value

created rather than for the brand.

The values of BoP customers differ from place

to place. These values are honed by their

upbringing and the cultural ethos that they are

exposed to. This makes selling to BoP customers

a highly localized business.

Techniques such as Nike‟s “World Shoe” and

Procter & Gamble‟s “PUR water purification

tablets” failed because they failed to take into

account the changes that these would require

from their customers in their everyday routine.

The people who inhabit the base of the pyramid

(BoP) have wants that differ completely from what

most businesses are used to when they design

products. Innovation is considered to be an expensive

market and is often considered as a way to serve a

niche segment, thereby creating an opportunity to

charge a premium and recover the cost of innovation.

To sell to the base of the pyramid, the innovative

brains of these businesses will have to think of value

creation of customers for sure. But also they should

look for affordability and therein lies the challenge.

The innovation appreciated by the people in the base

of the pyramid are myriad and sound mundane to

most people who are not forced to live in the

circumstances they do.

Something as simple as a mosquito net that is good

for five more washes or a stove that lasts for six more

months is of great value to them. A refrigerator which

runs on LPG is more valuable to people in the forests

of Africa, than a refrigerator that uses less power and

provides greater chilling. When the basic necessity of

electricity itself is not assured what would be the

value in purchasing a refrigerator, which might not be

in use most of the time. Contrary to popular belief,

BoP customers recognize value and are willing to pay

a higher cost for this value as long as the additional

cost is affordable.

For the BoP customer, any purchase other than those

satisfying the most basic needs is considered an

investment and will therefore have a lot of thought

behind it. Selling to the base of the pyramid is thus a

fine balancing act between making profits for a

company and the value created for the customer.

The

View from the

Base of the Pyramid

--by---

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AUGUST, 2010 ISSUE #3-10

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Some of the successful BoP strategies include Unilever „s (and Chik) sachets for shampoos and soaps, Tata‟s

trucks (one of the most popular vehicles in Africa), Nokia‟s designs, Telenor‟sGrameen Phone, and Coca-

Cola‟s manual distribution system in Africa (as low tech an innovation as you can get). All these successful

strategies include looking at the needs of the people at the base of the pyramid and adapting their product and

delivery accordingly. More and more customers are forming partnerships with local NGOs as these provide

the measure of trust required to induce the BoP customers to buy these products. For example, Danone has tied

up with GrameenBank, Microsoft has tied up with an NGO called Pratham.

Companies are starting to recognize that to do business successfully at the base of the pyramid there needs to

be a shared commitment from both the businesses and the customers. Intel, Wipro and HCL Systems together

run a community program called Community PC while Nestle has teamed up with NGOs to provide awareness

on nutrition and nutritionally fortified food products in Columbia, Peru and the Philippines.

By Srikanteaswaran T K

SOURCE: IFC,MARKET SIZE AND BUSINESS STRATEGY AT THE BASE OF PYRAMID

http://pdf.wri.org/n4b_executive_summary_graphics.pdf

http://pdf.wri.org/n4b_executive_summary_graphics.pdf

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Necessity and the

Marketer’s Inventions

Necessity is the mother of invention”.

Victor Hugo would have been proud to know that his quote is

valid even today and has ample examples to substantiate,

even in Marketing. A Google search of the now well-known

phrase “Bottom of the Pyramid” returns many articles written

by academicians like C.K. Prahlad and KasturiRangan, most

of them with linkages to developing nations.

A business opportunity in the hitherto business-ostracized

group of underserved is being discussed as companies around

the world cannot afford to overlook this “less than $5”

earning, “4 billion” strong group. Indian bread companies are

pioneers in serving this segment. Innovation, in creating,

communicating and delivering the value to the underserved

has been the hallmark of these companies, something which

even seasoned marketers from developed nations would find

difficult to emulate.

Create the value: The Genesis of any product is customer‟s

needs, and it is the same when dealing with the bottom of the

pyramid. The companies may choose to tweak an existing

product a bit, and come up with a new variant of the product,

or may choose to come up with a new product, which caters

to the specific needs, sans al frills, of the under deserved

An example of value creation for the BOP was that of “m-

Pesa” in Kenya, a mobile money transfer service by

Safaricom, a subsidiary of Vodafone. Kenya is a country

much like India with large number of immigrants residing in

the commercial pockets like Nairobi but have their families

residing in remote villages. These people don‟t have access to

bank accounts but have mobile phones, an example which

disproves digital divide! The target consumer here wanted a

facility that enabled him/her to transfer the money back

home. Safaricom latched on to the opportunity and provided

mobile money transfer services and today about 10% of

Kenyan GDP flows through m-Pesa. (Ernst and Young, 2010)

Communicate the Value

Even though some part of the group is accessible through the

traditional communication channels of Television and Radio,

the costs incurred to run a campaign appealing to the

underserved market to would wipe off the wafer-thin

margins. So the companies try to come up with innovative

ideas to communicate the benefits to the consumer. There

have been instances when the companies use the distribution

channels as communication channels and depend heavily on

the word of mouth communication.

A Few companies also involve in socially relevant causes

which enhance the image of the brands in the target segment.

A case in point is Fair and Lovely Scholarships. I used to

wonder why HUL did not name the scholarship after itself

and instead named it on one specific brand. The answer was

simple and it that HUL wants people to buy its products and

not shares in the company.

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The advantages are multi fold. The idea of helping the

girls per se appeals to the well to do and enhances the

image of the brand. A second utility would be that the

girls who receive the scholarship become a medium of

communication to attract their friends, relatives and

neighbours. Since the number of scholarships is in

hundreds, the company successfully establishes a link

to thousands of potential customers and the word

spreads.

HUL also conducts events such as Clinic Plus Mother-

Daughter day. On that day, it conducts competitions in

painting, cookery, handicrafts and other folk arts. These

events attract women of all age groups. The idea is to

persuade people to shift from other low cost shampoos

and other alternative products like soap, herbs etc. to

Clinic Plus.

As these events attract all the women in a locality, it is

a guaranteed way to reach out to the target. This event

saw the participation of a whopping 250 million

consumers.

Deliver the Value

This is probably the most difficult task for a

marketer especially in a developing country‟s

context. In India, the distribution in the rural

areas is a challenge. Companies have used

many innovative techniques in ensuring that the

product reaches the BOP consumer. In the

absence of retail stores, the point of sale is

generally the place where people congregate

like haats and melas. Other innovations like

Project Shakti are widely known.

In toto, selling a product to the underserved

consumer is a task that gives nightmares to a

marketer and therein lays immense opportunity.

By ShashankRajpurohit

Did you know?

About 1.4 billion people globally live at or

below the poverty line of US $1.25/day

The 4 billion people living on less than US

$3000/year represent a multi trillion euro

market

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Public Policy, Poverty, and

Products

What I am going to take a stab at in this article is to

explore the links which bind public policy, poverty and

products.

The bottom of the pyramid by definition, refers to the

lowest in the socio-economic demographic of society.

What puts people there? That selection can surely not be

self-imposed. Policy does put them there, to a large extent.

Public policy, which turns a section of people to be

disadvantaged, for whatever reason, can convert them to

occupy that stratum.

Policy can affect several aspects. It could affect or result in

the loss or lack of housing. This would, in a traditional

framework, result in two things. One is of course the

evident loss due to siphoning off of money into products

more basic. The second one is the loss due to displacement

and realignment of accessible markets. This is important,

since product penetration in different markets is not the

same.

One could of course argue that this is in keeping with

moving towards an ideal scenario, where demand ensures

that a product or a service which is demanded by someone

is available at a market which that person can access. This

obviously discounts the role which both price and time

play. It only addresses the problem of geography.

Policy goes further. It affects access to information. This,

in turn, affects what one believes one requires and whether

that is available at a price which one can afford. And of

course, policy affects business. It influences the macro-

environment significantly, thus making it an integral

element to acknowledge in any business model.

One can go on about the importance of trade restriction,

taxations, labour-laws and the like, but really, clarity and

constructiveness in policy, would do a great deal of good,

especially when it targets the quadrant of dependents,

which is where the people at the bottom of the pyramid

would be.

What am I trying to say here?

That to realize the so-called „fortune‟ at the bottom

of the pyramid, the thrust on ensuring policy is on

the side of the business model is crucial. One

cannot really look at it from the pure marketing

perspective, which focuses on getting the product,

placement, promotion and price right. It necessarily

involves getting the policy right too, or working

towards ensuring that policy-makers are goaded

into getting it to work in favour of the business

model. That‟s my 5P model. Note that this model

doesn‟t include poverty. It tries to reduce and

eliminate this P.

Any model which succeeds in this demographic

would play a useful cannibalistic role. My premise

here is that any model which succeeds at the bottom

of the pyramid would necessarily create a change in

the socio-economic indicator which would be a

positive change. This would in turn reduce the size

of this pyramid.

And I don‟t think anyone would really complain if

the size of the pyramid reduces.

By SaurabVivek Nair

Which alliance is being

talked about below?

An alliance was formed in 2006 by 30 global

and local partners managed by a major global

forum to Eradicate hunger through innovative

measures.

The pilot project of this alliance was started

in a region where 64% of the population is

below the poverty line and only 1% has

electricity.

One of the measures taken helped farmers

multiply their profits from 18.2 to 114 percent.

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There is the prevalent view that as products age and

move further in their product life cycle, they increase in

their capabilities. The product moves from offering just

one core benefit to multiple benefits, which make the

product not just unique, but makes it an experience also.

Additional products and services are added on to the

product to add different levels of customization and to

charge a premium. An augmented product is thus born.

The three levels of the product- the core product, the

actual product and the augmented product are shown in

the figure below:

These three levels of product are further characterized by

the type of benefits offered at each level to the consumer.

At the core product level, physical benefits are satisfied.

At the actual product level, logical benefits are satisfied.

At the augmented product level, emotional benefits are

also satisfied. Thus the augmented product targets the

premium customer more and more, thus leaving the

bottom of the pyramid unexploited.

This leads to the following questions: Is there a

stage where the added layers reach a saturation

level lead to volumes falling? When does this

search for niche markets with augmented products

become unviable?

In this age, when core products are forgotten and

people perceive the augmented product as the

original product, can you return focus to the core

product? If so, which segment would you be

catering to? Is this a good business proposition?

Let‟s try and answer them one at a time.

Right now, we see a sweeping change. There is

the push for premium products and services, but

also there is the drive for stripped down products.

Take for instance, the airline industry.

It has moved to more and more premium services

including seats which can be fully flattened and

special services for frequent flyers. On the other

hand, there was the development of low cost

airlines with no frills. Here the first class, the

business class and frequent flyer schemes are

examples of augmented products. They offer the

emotional benefits of comfort, good service and

exclusivity.

However, the low cost airlines offer the core

product with just the physical benefit of faster

transport.

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All other frills from service to food have been

stripped down to cater to the previously untapped

bottom ofthe pyramid. This new focus has

revolutionized the airline industry and low cost

airlines continue to thrive on the Indian

subcontinent.

This focus at the bottom of the pyramid is not

restricted to the airline industry. Take the case of

Yahoo! and Google. The basic product for

Yahoo! is its search engine. However the Yahoo!

portal is a very good example of an augmented

product portal which offers services from mail to

news.

Google on the other hand, rose to fame by the

success of its basic site featuring only its search

engine. It offered the core product, with no

distractions and appealed to the masses. Google

follows this strategy to this day, by offering each

service separately and never together and thus to

remain away from an image as a portal.

These aren‟t the only examples around.

Other examples of this reverse product evolution

include the no frills Ginger Hotels, the basic

Titan Sonata watches, the success of Chinese

products in the country and much more. In every

case, the product category was moving towards

augmentation and one player changed the game

by tapping the bottom of the pyramid.

The basic product and its logical functionalities

appeal to a large fraction of society and give an

extremely fertile market to drive large volumes.

Hence it‟s not surprising that many of these

industries are working reverse. It remains to see

how many more shall go this way...

By Ayshwarya R. Vikram

Identify the logo –This company introducedthe revolutionary first of its kind drug given once a day in fixed amounts for a disease that is not uncommon to the WIMWIans.

CP FOR FOODIES

Which food product brand had a logo which displayed a number, which was present there because of the following reasons 1) first digit of the number was the lucky number of the owner 2) the second digit of the number was the lucky number of the owners wife

“A non-profit organization that develops and

markets new technologies that are bought by

local entrepreneurs and used to establish new

small businesses” – www.KickStart.org

Heard of Project Shakti? E-Choupal? It‟s

Time to tell a new story. The story of

KickStart, the organization that helped

increase Kenya‟s GDP by 0.06%. KickStart

began in 1991 by launching products that used

manually powered technology. The idea was

to help low-income consumers quickly make

money. However, unlike the stalwarts of

Indian BoP marketing, KickStart chose not to

focus on self-help groups and NGOs but on

individuals. They priced their products low

enough for individual ownership. They looked

at environmentally sustainable products that

were easy to use and repair. And what they

worked with what we call „real options‟.

By investing in many real options with

numerous low cost products in the market and

incremental modifications, KickStart could

come up with that one special product that

made all the difference. KickStart got its

products wide distribution through mom-and-

pop shops and using live demonstrations,

radio ads and grassroots marketing. It would

modify its products based on feedback.

Given the high failure rate of new

innovations, KickStart‟s lean operations, low

cost model, outsourced manufacturing,

commission-based pay and organizational

flexibility has enabled it to capitalize on its

real options to make a real impact in the lives

of individuals. Their MoneyMaker pump has

empowered thousands of people to start own

micro-enterprise.

By Toshe Prasad

For those who Drink and

Drive

? Beer googles ?

Guess the beer brand which

tilted one of the letters in their

logo to make it look more

friendly

This beer brand uses the harp

named after their king as a

part of their logo

? Vrrooom ?

This car brand had a logo long

back inspired by the emblem

of the city of Hiroshima

Not Your Usual Base of the

Pyramid Story

http://www.kickstart.org/

Have you cracked all the questions that have been peppered over this

newsletter? If so hurry, and send in a mail to [email protected]

with all the answers. The first two readers to send in all the correct

answers win Rs. 200 each

A Big HELLO!! From the

NICHE team to all of you.

The Fachchas in the team Tiyasa Khanra

Abhijit Aswath Rushi B. Thakar Varsha Verma

Atreyi Aditya Garg

Edited by:

Abhijit Aswath

Tiyasa Khanra

TEAM NICHE

HEADLINESUB-HEAD

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EMPORIO - Indian Institute of Management Ahmedabadstd · This month’s Emporio is a culmination of a night-out, a day- out, several coffee breaks and not-so-long-drawn efforts from