The term ‘Bottom of the Pyramid’ was coined by C.K. Prahalad in 2005 in his work, The Fortune at the Bottom of the Pyramid . It refers to the concept of influencing the lives of poor population of the world through the managerial initiatives and business practices of multinational companies. This concept has gained wide range acceptability.
Need for bottom of the pyramid segment marketing
So far, the multinational companies have designed their offerings and marketing strategies for upper sections of the economic pyramid. They have simply disregarded the bottom of the pyramid consumers, taking them to be unreachable and not beneficial. It was in 2002 that C.K. Prahalad and Stuart Hart started reasoning that multinational companies must shift their focus towards bottom of the pyramid markets. They are unexplored with ample opportunities. Companies must adopt a preemptive approach towards meeting the needs and wants of the lowest strata of the economic hierarchy. To suit this market segment they need to design special offerings and strategies. These strategies should help them sell their products available at affordable prices. Serving bottom of the pyramid customers can prove to be a game changer for the companies as:
- It is profitable.
- It serves the corporate social responsibility requirements.
- Nearly 75 per cent of the world population falls into the bottom of the pyramid category.
By serving the bottom of the pyramid customers, multinational companies can curb poverty and also enhance the standard of the living for the poor (Jaiswal, 2007). This concept holds water in the Indian context as well. Bottom of the pyramid segment needs to be catered through extremely low-cost and high-quality business model. In India the bottom of the pyramid population comprise of both the rural as well the urban population. Companies must learn to amend their marketing approaches. This can be achieved by modifying their product design, pricing, packaging and distribution mixes to tap the low-cost customers. This low margin customer base result to large volume business(Karnani, 2009). Companies need to formulate marketing strategies like small unit packages, low margin per unit and high sales volume etc.
Bottom of the pyramid characteristics
Bottom of the pyramid market has unique characteristics. Consumers buy in small quantities due to low disposable income. They spend more on fundamental needs and personal care products. Culture plays a major role as this market is governed by rituals, festivals, harvest seasons etc. Consumers have very poor brand awareness and thus showcase different buying behavior. India has emerged as one of the largest consumer markets not only for middle class but also for the bottom of the pyramid segment. Many fast moving consumer goods companies like HUL, Cavin Care, ICT, Dabur, Tata, Godrej and Nirma have attempted suitable and successful marketing strategies. Companies are modifying their marketing mix to suit the expectancy and pockets of the bottom of the pyramid consumers. As per the four P’s (Jha, 2013):
Companies are striving to leverage technological advancement and innovation. They have come up with products which are capable of meeting the untapped demands of the bottom of the pyramid consumers with an affordable price. Coca-Cola came up with “Chota Coke” to make soft drink affordable. Micromax and Spice have captured the bottom of the pyramid market with low-priced but high featured mobile handsets.
By now we all know that the bottom of the pyramid is a price sensitive segment. It’s difficult to offer smaller packaging at lower prices due to the additional cost. Many fast moving consumer goods are being sold in smaller quantities at low prices to reach out to the consumers of this segment. However some companies went beyond it. Nirma, from being a local player emerged as a major detergent brand preferred by this segment. It adopted backward integration and produced its raw material as well. It also used simple and cheaper packaging material. Likewise, Chic shampoo sachets were available at 50p initially and now at Re. 1. This pioneered the sachet packaging fiasco. Hindustan Unilever Ltd. (HUL) followed the bill with its fast moving consumer goods like Surf, Fair n Lovely etc.
Urban bottom of the pyramid consumers have access to retail outlets. But in rural areas companies like HUL have come up with concepts like using self-help groups to distribute and market its products. ITC launched e-chaupal and attempted to capture the rural bottom of the pyramid segment.
The consumers of this segment are not native English speakers or they hardly know the language. Companies promote their products in regional dialects to make it easier for the local people. In southern Indian states, advertisements are made in regional languages with local movie stars as endorsers so that people can relate with them easily (Jha, 2013).
India is a big market for the bottom of the pyramid segment. Local and multinational companies cannot afford to ignore it. More and more companies are coming up with unique marketing ideas and product offerings to target the bottom of the pyramid consumers. This gave many companies opportunities to leverage through recessionary times with ease.
- Jaiswal, A. (2007). Fortune at the Bottom of the Pyramid: An Alternate Perspective, Working Paper, No. 2007- 07-13, Ahmedabad: IIM
- Jha, M. (2013). Opportunities, Challenges and Marketing Strategy for Serving Bottom of the Pyramid Market, Abhinav Journal of Research in Commerce and Management, 2(2), Pp. 117- 125
- Karnani, A. (2009). The Bottom of the Pyramid Strategy for Reducing Poverty: A failed Promise, DESA Working Paper, No. 80, New York: United Nations Department of Economic and Social Affairs.