Base of the Pyramid or BoP became a much-used word after strategy guru CK Prahalad wrote his famous treatise Fortune at the Bottom of the Pyramid, in 2004; a work which Bill Gates called ‘fighting poverty with profitability’.
This topic has spawned many a debate and several global conferences have been held on this theme over the last decade. With global recession and slowing down of the economy in developed countries, Fortune 500 companies took the lead in pursuing this El Dorado, with varying degrees of success.
In our own country, biggies like HUL, P&G, ITC, DCM, Murugappa group and others stepped up to enthusiastically reach out and fulfil the needs of the marginalised in rural and urban areas.
Unsuccessful initiatives
And while this catering to the ‘bottom of the pyramid' (so to speak) opened up a potential new market, the results were not as rosy as the firms’ anticipated.
The efforts required were substantial, and many got the math (size of the potential) and method (strategy) wrong.
One of the recurring themes in such failures was that corporations looked at their Base of the Pyramid more as a CSR activity than as a commercial business (‘Base’ was a coinage popularised by Prof Kash Rangan of Harvard, a don in ‘social entrepreneurship’, who felt that ‘bottom’ was somewhat condescending).
The second charge was that the corporations became exploitative of the gullible and helpless weaker sections.
What went wrong
Let’s tackle the second charge first. Whether it was ‘Chik’ shampoo in a sachet or a Glucon-D or ITC tea in smaller pack, it simply assumed that the poorer populations required the same product as the urban, educated and middle-class clientele; with the only difference that the former needed them in smaller, more affordable packs.
The reality, however, is far from this.
The rural and urban poor customers are not only economically weaker, but may also be less aware of some of the latest products in the market. Steeped as they are in local and traditional practices, merely morphing your product primarily designed for a urban educated middle-class won’t do.
Their day-to-day realities are different. Most companies fail to address this either out of sheer ignorance or, more damagingly, complete apathy and arrogance. They perhaps feel they are doing the rural poor a favour by enabling them to enjoy the same product or service as an urban rich.
Reality check needed
There has hardly been any attempt to understand the life of rural and poor customers, their constraints and realities. You rarely come across products or value propositions that have been put together from ground up, keeping only the rural or poorer sections in mind.
Immersive research is emerging as a way to unearth insights about the lives and needs of target customers, and conventional market research, as we know it, is increasingly being seen as preconceived, misleading and irrelevant.
Very few companies have shown patience and wisdom in understanding and applying this to the Base of the Pyramid Markets. Some products like Godrej's Chotukool (a portable, compact and customisable fridge) are exceptions, of course.
Unfair treatment
Equally important is the issue of targeting the rural/poor markets as extended CSR activity. Prof Porter of Harvard Business School exhorted companies to align their philanthropy with business contexts and needs, but opportunities thrown up by the base of the pyramid market are too big to be treated like this.
This market is viable and deserves respect. The rural and urban poor do not look for subsidies and handouts. They want to be taken seriously and treated with dignity. One can build a sustainable, profitable business by focusing just on the base of the pyramid, except that it needs a de novo mindset. This is important and critical to make the creation and distribution of products and services more efficient, fair, market-driven and effective.
With growth in traditional developed economies stagnating, the corporations that get this right will be the winners of this century.