Bottom of pyramid approach in rural marketing sector
- 1. MADAN MOHAN MALAVIYA UNIVERSITY OF TECHNOLOGY, GORAKHPUR(U.P) INDIA SEMINAR REPORT PRESENTATION ON BOTTOM OF PYRAMID APPROACH IN RURAL MARKETING PROJECT GUIDE:- Dr. Vinay Kumar Yadav (ASST. PROFESSOR) CMS MMMUT SUBMITED BY:- Vishal Gupta MBA II Year (2017063158) 2017-19
- 2. What is bottom of pyramid • In economics, the bottom of pyramid is the largest, but poorest socio-economic group • It is also often referred to as the “Base of the Pyramid” or just the “BoP” • Current usage refers to the “ billions people living on less than $2 per day “ -As defined by Professors C.K Prahalad Stuart L. Hart (in 1998)
- 3. The World Economic Pyramid PURCHASING POWER PARITY POPULATION IN MILLIONS IN DOLLAR TIER 1 >$20,000 75-100 TIER 2 and 3 $1,500-20,000 1,500-1,750 TIER 4 <$1,500 4,000
- 4. Why does this market opportunity remain invisible • The poor are not our target consumers because MNCs, with their current cost structures, cannot compete for that market. • The poor cannot afford and have no use for the products and services that are sold in the developed markets. Product is our focus, not functionality. We worry about detergents not cleanliness. • Only the developed markets appreciate and will pay for new technology. The poor can use the last generation of technology. We focus on product and process innovations and not business innovations. • The bottom of the pyramid is not important to the long-term viability of our business. We can focus on Tiers 1-2 and leave Tier 3 and 4 to governments and non-profits. We do not see the bottom of the pyramid forcing us to innovate around sustainable development.
- 5. Rural Marketing Rural Marketing is a function which manages all those activities involved is assessing, stimulating and converting the purchasing power into a effective demand for specific products and services and moving them to the people in rural area to create satisfaction and a standard of living to them and there by achieves the goals of the organization.
- 6. Reasons For The Interest There are quite a few reasons for the growing interest in rural markets are : • The large number of consumers • Market size and potential • Increase income and purchasing power • Competition in urban market • Consumer Behaviour changes
- 7. Commercial Challenge • Cash poor consumer • Geographic, economic and cultural distance • Limited product awareness • Working with longer time frames
- 8. BoP From MNCs’ Perspective • Income is to low, the poor can’t buy MNCs’ products. • Good sold in developing markets are so cheap that MNCs’ can’t make reasonable profit. • The poor don’t waste money on luxury product they only fulfil basic needs. • Poor don’t have the required skills for the use of advanced technology.
- 9. Hindustan Liver Limited Case • An illustration of the successful execution of this strategy comes from Hindustan Liver Limited, a subsidiary of Unilever widely considered the best managed company in India. Like most MNCs for over 50 year it catered to the need of the elite of India the top of pyramid. • A local firm Nirma challenged HLL in its detergent business by creating a new business system- a new product formulation new manufacturing process, distribution packaging and pricing. HLL like most MNCs initially dismissed Nirma as a low end producer. • As Nirma grew rapidly, HLL realized both its new opportunity as well as its vulnerability. Nirma was attacking , in its detergent business, from the bottom of the pyramid.
- 10. • As Nirma grew rapidly, HLL realized both its new opportunity as well as its vulnerability. Nirma was attacking , in its detergent business, from the bottom of the pyramid. • HLL responded will its own offering for this market- drastically altering the traditional HLL business model. • HLL create a new product formulation which dramatically reduced the ratio oil to water in the detergent thereby reducing significantly the pollution associated with washing cloth in river and other public water system. • The decentralized the production, marketing and distribution of the product to take advantage of the abundant labor pool in rural India and quickly penetrate the thousand of small outlets where people at the bottom of pyramid shop
- 11. Conclusion • Bottom of pyramid can not be ignored because it is an huge opportunity. • Proper product and services should be designed to provide the maximum satisfaction to BoP. • BoP may offer opportunities to create value for companies and the poor • BoP is continuously evolving and is now a good opportunity for future rural marketing activities
- 12. THANK YOU