CASE 33 Marketing to the Bottom of the Pyramid

Professor C. K. Prahalads seminal publication, The Fortune at

the Bottom of the Pyramid, suggests an enormous market at the
bottom of the pyramid (BOP)a group of some 4 billion people who subsist on less than $2 a day. By some estimates, these
aspirational poor, who make up three-fourths of the worlds
population, represent $14 trillion in purchasing power, more than
Germany, the United Kingdom, Italy, France, and Japan put together. Demographically, it is young and growing at 6 percent a
year or more.
Traditionally, the poor have not been considered an important
market segment. The poor cant 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 segmentsthese are some of the assumptions that
have, until recently, caused most multinational firms to pay little or
no attention to those at the bottom of the pyramid. Typical market
analysis is limited to urban areas, thereby ignoring rural villages
where, in markets like India, the majority of the population lives.
However, as major markets become more competitive and in some
cases saturatedwith the resulting ever-thinning profit margins
marketing to the bottom of the pyramid may have real potential
and be worthy of exploration.
One researcher suggested that American and European businesses should go back and look at their own roots. Sears, Roebuck was created to serve the lower-income, sparsely settled rural
market. Singer sewing machines fashioned a scheme to make consumption possible by allowing customers to pay $5 a month instead
of $100 at once. The worlds largest company today, Walmart, was
created to serve the lower-income market. Here are a few examples
of multinational company efforts to overcome the challenges in
marketing to the BOP.
Designing products for the BOP is not about making cheap
stuff but about making technologically advanced products affordable. For example, one company was inspired to invent the
Freeplay, a windup self-powergenerating 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.

BOP MARKETING REQUIRES

ADVANCED TECHNOLOGY
The BOP market has a need for advanced technology, but to
be usable, infrastructure support must often accompany the
technology. For example, ITC, a $2.6 billion a year Indian conglomerate, decided to create a network of PC kiosks in villages.
For years, ITC conducted its business with farmers through a
maze of intermediaries, from brokers to traders. The company
wanted farmers to be able to connect directly to information
sources to check ITCs offer price for produce, as well as prices
in the closest village market, in the state capital, and on the
Chicago commodities exchange. With direct access to information, farmers got the best price for their product, hordes of

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intermediaries were bypassed, and ITC gained a direct contact

with the farmers, thus improving the efficiency of ITCs soybean acquisition. To achieve this goal, it had to do much more
than just distribute PCs. It had to provide equipment for managing power outages, solar panels for extra electricity, and a
satellite-based telephone hookup, and it had to train farmers
to use the PCs. Without these steps, the PCs would never have
worked. The complex solution serves ITC very well. Now more
than 10,000 villages and more than 1 million farmers are covered by its system. ITC is able to pay more to farmers and at the
same time cut its costs because it has dramatically reduced the
inefficiencies in logistics.
The vast market for cell phones among those at the BOP is
not for phones costing $200 or even $100 but for phones costing less than $50. Such a phone cannot simply be a cut-down
version of an existing handset. It must be very reliable and have
lots of battery capacity, as it will be used by people who do not
have reliable access to electricity. Motorola went thorough four
redesigns to develop a low-cost cell phone with battery life as
long as 500 hours for villagers without regular electricity and an
extra-loud volume for use in noisy markets. Motorolas low-cost
phone, a no-frills cell phone priced at $40, has a standby time
of two weeks and conforms to local languages and customs. The
cell-phone manufacturer says it expects to sell 6 million cell
phones in six months in markets including China, India, and
Turkey.

BOP MARKETING REQUIRES

CREATIVE FINANCING
There is also demand for personal computers but again, at very
low prices. To meet the needs of this market, Advanced Micro
Devices markets a $185 Personal Internet communicatora basic
computer for developing countriesand a Taiwan Company offers
a similar device costing just $100.
For most products, demand is contingent on the customer
having sufficient purchasing power. Companies have to devise
creative ways to assist those at the BOP to finance larger purchases. For example, Cemex, the worlds third-largest cement
company, recognized an opportunity for profit by enabling
lower-income Mexicans to build their own homes. The companys Patrimonio Hoy Programme, a combination builders
club and financing plan that targets homeowners who make
less than $5 a day, markets building kits using its premiumgrade cement. It recruited 510 promoters to persuade new
customers to commit to building additions to their homes. The
customers paid Cemex $11.50 a week and received building
materials every 10 weeks until the room was finished (about
70 weekscustomers 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.

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Cases 3 Assessing Global Market Opportunities

One customer, Diega Chavero, thought the scheme was a scam
when she first heard of it, but after eight years of being unable to
save enough to expand the one-room home where her family of six
lived, she was willing to try anything. Four years later, she has five
bedrooms. Now I have a palace.
Another deterrent to the development of small enterprises at
the BOP is available sources of adequate financing for microdistributors and budding entrepreneurs. For years, those at the bottom
of the pyramid needing loans in India had to depend on local moneylenders, at interest rates up to 500 percent a year. ICICI Bank,
the second-largest banking institution in India, saw these people as
a potential market and critical to its future. To convert them into
customers in a cost-effective way, ICICI turned to village self-help
groups.
ICICI Bank met with microfinance-aid groups working with
the poor and decided to give them capital to start making small
loans to the poorat rates that run from 10 percent to 30 percent.
This sounds usurious, but it is lower than the 10 percent daily rate
that some Indian loan sharks charge. Each group was composed
of 20 women who were taught about saving, borrowing, investing,
and so on. Each woman contributes to a joint savings account with
the other members, and based on the self-help groups track record of savings, the bank then lends money to the group, which in
turn lends money to its individual members. ICICI has developed
10,000 of these groups reaching 200,000 women. ICICIs money
has helped 1 million households get loans that average $120 to
$140. The banks executive directory says the venture has been
very profitable. ICICI is working with local communities and
NGOs to enlarge its reach.

BOP MARKETING REQUIRES

EFFECTIVE DISTRIBUTION
When Unilever saw that dozens of agencies were lending microcredit loans funds to poor women all over India, it thought that
these would-be microentrepreneurs needed businesses to run. Unilever realized it could not sell to the bottom of the pyramid unless it found low-cost ways to distribute its product, so it created a
network of hundreds of thousands of Shakti Amma (empowered
mothers) who sell Levers products in their villages through an
Indian version of Tupperware parties. Start-up loans enabled the
women to buy stocks of goods to sell to local villagers. In one
case, a woman who received a small loan was able to repay her
start-up loan and has not needed to take another one. She now sells
regularly to about 50 homes and even serves as a miniwholesaler,
stocking tiny shops in outlying villages a short bus ride from her
own. She sells about 10,000 rupees ($230) of goods each month,
keeps about $26 profit, and ploughs the rest back into new stock.
While the $26 a month she earns is less than the average $40
monthly income in the area, she now has income, whereas before
she had nothing.
Today about 1,300 poor women are selling Unilevers products in 50,000 villages in 12 states in India and account for about
15 percent of the companys rural sales in those states. Overall, rural markets account for about 30 percent of the companys
revenue.
In another example, Nguyen Van Hon operates a floating sundries distributorship along the Ke Sat River in Vietnams Mekong
Deltaa maze of rivers and canals dotted with villages. His boat
is filled with boxes containing small bars of Lifebuoy soap and

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single-use sachets of Sunsilk shampoo and Omo laundry detergent, which he sells to riverside shopkeepers for as little as
2.5 cents each. At his first stop he makes deliveries to a half dozen
small shops. He sells hundred of thousands of soap and shampoo
packets a month, enough to earn about $125five times his previous monthly salary as a junior Communist party official. Its
a hard life, but its getting better. Now, he has enough to pay
his daughters schools fees and soon . . . will have saved enough
to buy a bigger boat, so I can sell to more villages. Because of
aggressive efforts to reach remote parts of the country through
an extensive network of more than 100,000 independent sales
representatives such as Hon, the Vietnam subsidiary of Unilever realized a 23 percent increase in sales last year to more than
$300 million.

BOP MARKETING REQUIRES

AFFORDABLE PACKAGING
As one observer noted, the poor cannot be Walmartized. Consumers in rich nations use money to stockpile convenience. We go
to Sams Club, Costco, Kmart, and so on, to get bargain prices and
the convenience of buying shampoos and paper towels by the case.
Selling to the poor requires just the opposite approach. They do
not have the cash to stockpile convenience, and they do not mind
frequent trips to the village store. Products have to be made available locally and in affordable units; fully 60 percent of the value of
all shampoo sold in India is in single-serve packets.
Nestl is targeting China with a blitz of 29 new ice cream
brands, many selling for as little as 12 cents with take-home
and multipack products ranging from 72 cents to $2.30. It also
features products specially designed for local tastes and preferences of Chinese consumers, such as Nestl Snow Moji, a rice
pastry filled with vanilla ice cream that resembles dim sum, and
other ice cream flavors like red bean and green tea. The ice cream
products are distributed through a group of small independent
saleswomen, which the company aims to expand to 4,000 women
by next year. The project is expected to account for as much as
24 percent of the companys total rural sales within the next few
years.

BOP MARKETING CREATES

HEALTH BENEFITS
Albeit a promotion to sell products, marketing to BOP does help
improve personal hygiene. The World Health Organization (WHO)
estimates that diarrhea-related diseases kill 1.8 million people a
year and noted that better hand-washing habitsusing soapis
one way to prevent their spread. In response to WHO urging, Hindustan Lever Company introduced a campaign called Swasthya
Chetna or Glowing Health, which argues that even cleanlooking hands may carry dangerous germs, so use more soap. It
began a concentrated effort to take this message into the tens of
thousands of villages where the rural poor reside, often with little
access to media.
Lifebuoy teams visit each village several times, using a Glo
Germ kit to show schoolchildren that soap-washed hands are
cleaner. This program has reached around 80 million rural folk,
and sales of Lifebuoy in small affordable sizes have risen sharply.
The small bar has become the brands top seller.

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Part 6

Supplementary Material

QUESTIONS
1. As a junior member of your companys committee to explore
new markets, you have received a memo from the chairperson telling you to be prepared at the next meeting to discuss
key questions that need to be addressed if the company decides to look further into the possibility of marketing to the
BOP segment. The ultimate goal of this meeting will be to
establish a set of general guidelines to use in developing a
market strategy for any one of the companys products to be
marketed to the aspirational poor. These guidelines need
not be company or product specific at this time. In fact, think
of the final guideline as a checklista series of questions
that a company could use as a start in evaluating the potential
of a specific BOP market segment for one of its products.

2. Marketing to the BOP raises a number of issues revolving

around the social responsibility of marketing efforts. Write a
position paper either pro or con on one of the following:
a. Is it exploitation for a company to profit from selling
soaps, shampoo, personal computers, and ice cream, and
so on, to people with little disposable income?
b. Can making loans to customers whose income is less
than $100 monthly at interest rates of 20 percent to purchase TVs, cell phones, and other consumer durables be
justified?
c. One authority argues that squeezing profits from people
with little disposable incomeand often not enough to
eatis not capitalist exploitation but rather that it stimulates economic growth.

Sources: C. K. Prahalad, The Fortune at the Bottom of the Pyramid (Philadelphia: Wharton School Publishing, 2004); Stefan Stern, How Serving the Poorest Can Bring Rich
Rewards, Management Today, August 2004; Kay Johnson and Xa Nhon, Selling to the Poor: There Is a Surprisingly Lucrative Market in Targeting Low-Income Consumers,
Time, April 25, 2005; Cris Prystay, Indias Small Loans Yield Big Markets, Asian Wall Street Journal, May 25, 2005; C. K. Prahalad, Why Selling to the Poor Makes for Good
Business, Fortune, November 15, 2004; Alison Maitland, A New Frontier in Responsibility, Financial Times, November 29, 2004; Normandy Madden, Nestl Hits Mainland
with Cheap Ice Cream, Advertising Age, March 7, 2005; Ritesh Gupta, Rural Consumers Get Closer to Established World Brands, Ad Age Global, June 2002; Alison Overholt,
A New Path to Profit, Fast Company, January 1, 2005; Patrick Whitney, Designing for the Base of the Pyramid, Design Management Review, Fall 2004; C. K. Prahalad and
Stuart Hart, Fortune at the Bottom of the Pyramid, Strategy & Business 26 (2002); C. K. Prahalad and Aline Hammond, Serving the Worlds Poor, Profitably, Harvard Business Review, September 2002; The Invisible Market, Across the Board, September/October 2004; Anuradha Mittal and Lori Wallach, Selling Out the Poor, Foreign Policy,
September/October 2004; G. Pascal Zachary, Poor Idea, New Republic, March 7, 2005; Calling an End to Poverty, The Economist, July 9, 2005; Susanna Howard, P&G,
Unilever Court the Worlds Poor, The Wall Street Journal, June 1, 2005; Rajiv Banerjee and N. Shatrujeet, Shoot to the Heart, Economic Times, July 6, 2005; David Ignatius,
Pennies from the Poor Add Up to Fortune, Korea Herald, July 7, 2005; Rebecca Buckman, Cell Phone Game Rings in New Niche: Ultra Cheap, The Wall Street Journal,
August 18, 2005, p. B4; Its Good Business, but a Strategy that Saves Lives as Well, The Boston Globe, June 10, 2007; Global Executive: See the Poor as Entrepreneurs, Consumers, Star Tribune (Minneapolis, MN, July 30, 2007; The Right Package; It Started With Shampoo but Now Sachets Have Overtaken Shop Shelves, India Today, December
31, 2007; The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, South Asian Journal of Management, April 1, 2007; The Legacy that Got Left on
the ShelfUnilever and Emerging Markets, The Economist, February 2, 2008.

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