Please read the case and answer the following question in bullet points after the case:

Professor C. K. Prahalad's 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 world's 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 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"these 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

marginsmarketing 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 world's 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-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.

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 make 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 ITC's

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

intermediaries were bypassed, and ITC gained a direct contact with the farmers,

thus improving the efficiency of ITC's 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. Motorola's 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 world's third-largest

cement company, recognized an opportunity for profit by enabling lower-income

Mexicans to build their own homes. The company's Patrimonio Hoy Programme, a

combination builder's "club" and financing plan that targets

homeowners who make less than $5 a day, markets building kits using its

premium-grade 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 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. 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 secondlargest 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 group's 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. ICICI's money has helped 1 million households get loans that

average $120 to $140. The bank's 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 loan 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 Lever's 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 Unilever's products in 50,000 villages in 12 states in

India and account for about 15 percent of the company's rural sales in those

states. Overall, rural markets account for about 30 percent of the company's

revenue. In another example, Nguyen Van Hon operates a floating sundries

distributorship along the Ke Sat River in Vietnam's Mekong Deltaa maze of

rivers and canals dotted with villages. His boat is filled with boxes

containing small bars of Lifebuoy soap and singleuse 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. "It's a hard life, but its getting better."

Now, he "has enough to pay his daughter's 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 Sam's 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 soon. The project is expected to

account for as much as 24 percent of the company's 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 clean-looking 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 brand's top seller.

UPDATE

BOP marketing has undergone a reality check and a shot in the

arm recently. On the one hand, many companies have discovered that low-price,

low-margin, high-volume sales are difficult when infrastructure and product

knowledge are lacking. Scaling a marketing effort in villages is hard, and

high-touch sales are expensive. On the other hand, the sheer size of the

opportunity continues to be attractive. Millions of consumers are no longer

bound in hopelessness. If companies can localize and bundle base products,

offer an enabling service, and form peer groups to support usage, success is

possible. For example, multitudes in rural Ghana are threatened by malaria.

S.C. Johnson introduced a homemaker's club, providing gift baskets of

malaria-reducing products, such as mosquito abatement. Members take part in

coaching sessions that are fun and interactive, including dancing. Some

products come with refillable containers of home-cleaning products, for

example. Early indicators pace sales ahead of projections in Ghana.

1.As a junior member of your company's

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 (Bottom-of-the-Pyramid Markets) 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 company's

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.

Market segments of BOP:

What the customers demandof the product?

How is it different fromtheir rivals?

How to persuade thecustomers to but the product?

What country to enter?

What other similar productsare there in the market?