Selling to The Bottom of the Pyramid
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Have you heard of the bottom of the pyramid concept? It’s an idea that says even the most impoverished markets can actually be profitable for businesses. How, you ask? Well, the secret lies in customizing products and packaging specifically for these markets.
In the book The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, the late Professor C. K. Prahlad introduced the concept I want to talk about. It’s all about finding ways to help people in low-income markets by creating products and services that cater to their needs. Some examples of this include micro-credit products and selling things like shampoos in small packages called sachets.
I’m currently in India, and I’ve been seeing some interesting examples of this concept being put into action here. Let me share a few observations with you:
Mobile phones
One thing that stands out is how affordable it is to own a SIM card. I got mine for just 20 cents, and it came with talk-time and free incoming calls. It’s no surprise that there are over 900 million mobile phone users in India.
According to an article I read in the Times of India, there are 70 mobile phone subscriptions for every 100 people in the country. What’s even more fascinating is that 96% of these subscriptions are prepaid, and 53% of households in India own a mobile phone. On top of that, the cost per minute of using a mobile phone is the lowest it can possibly be, at just 1 cent.
Did you know that mobile phones have opened up a whole new world for entrepreneurs? They can set up shops and sell SIM cards at great discounts, attracting tons of people like in the cool picture above!
But that’s not the only place you can find SIM cards. Businesses in all sorts of industries sell them too. I read in the Times of India that a whole bunch of people in India use text messages all the time. Crazy, right?
This means there’s a big market for products and marketing strategies that use SMS. One really cool idea I came across was a service that sends you an SMS to let you know if there’s a cheaper alternative to the prescription drug you need.
And let’s not forget about cars!
Let’s talk about some cool stuff, starting with cars. You know what’s really cool? The Tata Nano. It’s the cheapest car you can find in the market, and it only costs around $3,616. Pretty amazing, right? Now, here’s the thing – because cars are more affordable now, more people are buying them. But that has led to some problems, like more traffic on the roads. But guess what? This also creates an opportunity for people who sell auto accessories and work at repair shops. They can help make sure your car is in top shape!
Now, let’s move on to another cool topic – innovative consumer products.
Have you heard about Godrej’s refrigerator called ChotuKool? It’s really special because it was designed with the help of women who live in rural areas. And you know what? It won a bunch of awards too! How cool is that? It just goes to show that when you involve different perspectives, you can come up with some really awesome stuff!
Next up, we have social innovation.
We all know how important clean drinking water and good health are, right? Well, there’s this organization called HealthPoint that’s doing some really incredible work. They provide safe drinking water to people in villages for just $1.50 per month. That’s super affordable! Not only that, but they also offer low-cost diagnostic tests and ehealth consultations. It’s amazing how they’re making such a big difference in people’s lives!
And lastly, let’s talk about food.
When I left India more than 15 years ago, big fast food chains like KFC and McDonald’s were expensive and not affordable for the average person. But things seem to have changed now.
Looking at the prices today, it seems like these fast food giants are not only competing in terms of price, but they are also adapting their products to better suit the local market they are serving. Take McDonald’s McAloo Tikki Burger, for example, which is a vegetarian option made with potatoes.
So, what can small businesses and entrepreneurs learn from these examples?
First, we should think about how we can take advantage of local market opportunities. Let’s look at the Virgin Mobile brand of Sprint in the US as an example. They offer a cellphone plan with unlimited data and text, but with limited minutes, for only $35. This kind of plan is perfect for students.
If you’re thinking about selling your products abroad, it’s important to consider the different market opportunities available, both in affluent areas and in lower-income communities.
It’s also a good idea to keep an eye on the strategies used by big companies, as they can have a big impact on small businesses. Take, for example, the decline of local bookstores due to competition. I really miss those independent bookstores!
Recently, I read an article in The Economist called The bottom of the pyramid: Businesses are Learning to Serve the Growing Number of Hard-up Americans. It talked about how businesses are finding ways to cater to lower-income customers. It even gave some examples of products that are targeted towards this market segment right here in the United States.
Have you noticed anything similar to the concept of the bottom of the pyramid? I’m curious to hear your thoughts!
