Marketing to Bottom of the Pyramid

Some facts..
Four billion people around the globe with less than $5 a day in disposable income They are not only potential consumers to be tapped; they're also potential producers as well a co-creation solution companies in BOP markets can't just operate to make profits, they also must create social value in the areas where they operate
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Emerging Markets: characteristics and opportunities

Markets and culture are demanding
Adapting to local culture and rugged environment and designing solutions with strict price performance targets. Eg; a motorised cart, a mobile phone that points the way to Mecca Developing or acquiring strong local brands and tailoring global brands to local markets.

Markets are fragmented

Emerging Markets: characteristics and opportunities

Population is young and growing Market for education, games, apparel, fast foods, cafes, beauty products, and so on.

Limited income and space Weak infrastructure

Reduce pack size

Markets for water purification systems, generators, inverters, and so on
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Challenges
cultural distance between corporate decision makers and the poor. serious lack of infrastructure in poor markets that can make operating at the base of the pyramid difficult, and potentially costly Absence of a framework to guide decision making. difficult to find ways to bring BOP initiatives to scale and sustainability within the time frames dictated by traditional corporate targets
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Arguments against BOP marketing

Selling to the poor & serving the poor are two different things BOP marketing encourages overspending by those who can least afford it Companies have the power to create needs rather than respond to needs

Counterarguments by Prahalad
Poor are very value conscious If people have no sewerage or drinking water should we also deny them TVs and cell phones?

A more balanced approach!!!

There a two things that are required from the companies involved Commitment to educate customers Sell only what is of value

 On the basis of urban orientation, which is influenced by

Connectivity
Close to the urban centres Connected by public transport remote

Rural markets can be segmented

Social links
High when incomes are high, have relatives in the cities for more than one generation, children go to metros for education. Medium when incomes are high, agriculture dependant, first generation to attain financial status, relatives are first generation migrants, children may be studying in metros but are not detached from agriculture

BOP MARKETS IN PAKISTAN

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Facts
64% of Pakistani population is in the rurals Rural stratification: Strata 1: villages with more than 3k population (65% of rural population in about 9000 villages) Strata 2: villages with less than 3k population (35% of rural population in the rest) Average rural household size is 7, with approximately 3 rooms/house Average monthly rural household income: 73 A rural household mainly uses wood as cooking medium, get water via hand pump, though many have electricity in their homes.
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Profile of this customer

SEC D & E, LSM 1-4 Ranging between daily wage earners to small shopkeepers Large family sizes Residing in urban-rurals to the rurals A reluctant purchaser Owns an average of 3-4 durables; sewing machine, iron, TV, mobile phone, washing machine
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Characteristics of BOP Consumers

Their wants are different and are relevant to their environment They are value conscious and brand-conscious. They are connected. Rapid spread of good and bad news. They accept advanced technology readily. They have a strong sense of keeping up with the tradition and culture. Have a wait & see approach rather than the try & buy norm.
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Reasons behind this growth

Cotton prices almost doubled in 2010 as demand for the fiber outpaced production.
Sales at Unilevers Pakistan unit rose 15%, to Rs. 24.8 bn rupees ($284.3 mn) in the first half of 2011. Colgate-Palmolive Pakistans sales grew 29 percent in the six months through June, to Rs. 7.6 bn.

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What are the farmers in Pakistan buying?

Tractors Cars, motorcycles Mobile phones Personal grooming items Packaged foods and beverages Several other consumer products

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Maslows Hierarchy

Personal care, Hygiene and Beauty products; clothing; negative goods; household durables; entertainment
Transportation, health, basic education and vocational training

Food, energy, housing, water, sanitation

Source: An Integrated Approach to understanding consumer behavior at BOP, Journal of Consumer Marketing, 2008

What does this indicate?

There is a lot of untapped potential Products that were considered suitable only for the urbans are now in demand in the rurals. Rural markets are an opportunity for companies to withstand demand fluctuations in the urbans.

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Distribution
Trickle down phenomenon Rural van operations

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Competition in rural markets

There are Counterfeits
Biscuits; Super instead of Sooper Cooking Oils; Rafan instead of Rafhan Fast Food; FFC instead of KFC Confectionery;

Less expensive branded substitutes

Ashrafi Brand Ata

Less expensive unbranded substitutes

Cigarettes, cooking oil, tea, detergents, drugs,biscuits, etc.
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Media habits: rural population

Limited number has media exposure at home, some watch TV outside community viewing. Outdoor (posters/ hoardings/ wall paintings) emerges is the 2nd biggest medium that most rural population is exposed to.

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Pointers for BOP Marketers

Backward pricing, target pricing
Reducing costs of development, manufacturing, and distribution

Well designed solution

SKU: contextually relevant, appropriate & affordable Communication campaigns

Solving the distribution problem The 5Ds of BOP Marketing

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Reasons to focus on the BOP segment

Urban markets are slowing down Rural/semi-urban buyers disenchantment with the low end/second hand substitutes Improving purchasing power in the BOP segment.

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Issues in Market Research

Research Expenditure Potential in the Asia Pacific Region

Japan has the highest research volume (in US$ terms) followed by Australia. Next in line are countries such as India, Hong Kong, South Korea, Singapore, Thailand and Malaysia and China. Then come Taiwan, The Philippines, Indonesia, Pakistan, Bangladesh and Vietnam.

Some Truths about Asia Pacific Regions

Collectivistic societies Image of managers Temporal orientation Different symbolism Differences in verbal and non-verbal communication styles

Effect On Research
The Japanese look for information from the actual buyers rather than the potential buyers In countries such as India, Pakistan, Bangladesh, national income estimates do not reflect underreported or unreported income. Traditional values often prompt people in many countries to give socially desirable responses rather than true responses.

Research Problems In Pakistan

Lack of understanding of importance of marketing Absence of research culture Poor state of research industry Lack of adequate infrastructure, social and educational development lack of databases Primary data is also difficult and expensive to collect Culture-specific connotations

Complains from Research Users

Delays in completion of the projects Unsatisfactory analytical base Only 35 per cent corporate firms are satisfied with the services they get from local MR Service providers

What can be done?

Increased interaction btw the researcher and the research user Revival and role of MRSP Sampling should be done carefully Working with larger sample sizes. Scrutinizing sources of secondary data. Piloting, adapting and rolling-out Training interviewers

NPD AND RESEARCH

Factors determining New Product Success in markets

Ability to satisfy needs and buying motives of customers How well does it correspond with consumption patterns of customers Does it have a distinctive edge over existing products in the market How well does it match with the cultural, social, ethical, religious and environmental considerations

Stages of a New product/brand launch

PRE launch stage Idea generation & screening for winning ideas Concept development the proposition Concepts screening (for more than 1 concept) Product development & testing Fine-tuning the concept and the product proposition. Advertising testing Estimating Concept and Product potential Optimizing the marketing mix

Product/brand launch
Launch the product Set action standards to gauge performance

Stages of a New brand launch

Post launch Post launch evaluation and monitoring Evaluating launch performance Vs action standards set Continuous in market performance measurement and evaluation Evaluating and Fine-tuning the Marketing mix

Research solutions for different stages of a product launch

qualitative and quantitative qualitative and quantitative

PRE

POST

Research solutions for different stages of a product launch

qualitative and quantitative qualitative and quantitative

PRE

POST

Ad testing Concept & Use BASES testing

Qualitative Focus groups Home visits In-depth interviews

Quantitative Concept tests Product tests Single monadic Paired Blind tests Ad tests

Early Brand evaluation Usage and attitude study Brand equity studies Satisfaction / Loyalty studies Ad pre and post air testing Marketing mix testing 4 Ps Continuous tracking tools Consumer Panel Retail Audit Communication and Equity tracking

Committing a Research Budget

Nothing comes for free Brand needs to commit a budget Money invested in research can save a lot of undesirable expense incurred later on diagnostic research to understand what went wrong !!!

Consumer Behavior

The ASIAN CONSUMER

Challenges.. Rural to urban migration
Fickle minded customers Diverse choices

Think globally but sell locally

No more hand me downs

Penetration of traditional and modern media

BTL campaigns

Pakistan presents
.a great market opportunity for marketers
Nearly 55% of the population is below 20 years of age Fastest growing market in terms of mobile usage
From 4 m users in 2004 to 90 m users in 2009

Greater connectivity
One of the fastest growing markets in the world

By Jul 2009 cellular subscribers in Pakistan had crossed 90 million compared to only 4 million in 2004!

Source: Pakistan Telecommunications Authority

Changing lifestyles

Budding fashion industry thats gained recognition in international markets More women entering the workforce, getting education and empowerment Growing restaurant and coffee shop culture eating out with friends and family

Pop music concerts and underground gigs to nurture young talent

Understanding the Change in Buying Process

The Funnel Approach The Consumer Decision Process
Initial consideration

Awareness Familiarity

Post-purchase

Active evaluation

Consideration Purchase Loyalty

closure

The Pakistani Consumer.

spending more money on wants Decision making is no longer with one individual
Pester power:
Marketing to Marketing through Marketing to and through children

Is Marketing to children ethical?

Regulations/laws to protect consumers

Competition Act 2010
the law prohibits situations which tend to lessen, distort or eliminate competition such as actions constituting an abuse of market dominance, competition restricting agreements and deceptive market practices. Although essentially an enabling law, it briefly sets out procedures relating to review of mergers and acquisitions, enquiries, imposition of penalties, grant of leniency and other essential aspects of law enforcement.