Serving the bottom of the pyramid4 min read . Updated: 07 Apr 2011, 09:23 PM IST
Serving the bottom of the pyramid
Serving the bottom of the pyramid
Business is brisk for Dheeraj Singh, a small kirana shop owner in Delhi’s Govindpuri area. He stocks a host of brands offered by the Indian fast-moving consumer goods (FMCG) companies in categories such as hair oil, shampoo, biscuit, fairness cream and tea, among many others. But he offers most of these products in their smallest pack sizes costing between Rs1 and Rs10.
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This just works fine for Savitri, a regular customer at the store employed as domestic staff in a flat nearby. She is pleased to point out that the smaller and cheaper packs are affordable and she often buys tea, cream biscuits and talcum powder from the shop.
The store clearly caters to people living in the slums close by populated by daily wage labourers and people in sundry other low-paying, unskilled jobs. Marketeers think of this set of consumers as the “gold mine at the bottom of the pyramid (BoP)", indicating consumption potential at the very low end.
There is no debate that BoP, both in urban and rural markets, is an emerging consumer segment attracting companies. However, the sachet/small pack revolution to reach out to this consumer is passe. To further influence consumption in this segment, a host of food and beverage companies are using the health and nutrition plank, reserved for the affluent customer up until now, to push their products.
Usually, food products are sold on the health, indulgence or convenience platform. However, to sell to the BoP consumer on the nutrition plank converges the companies’ social responsibility (alleviating micronutrient deficiency, for instance) and business objectives.
A big pilot study in remote India is currently under way to test-market a fortified water brand and a healthy snack at very low price points. The project has been initiated by a soft drinks manufacturer. In 2009, another beverage maker had roped in a non-governmental organization to introduce a fortified low-priced powder drink with added micronutrients. The programme was launched in Orissa. The same company is also said to be developing a nutritional beverage option to address iron deficiency and iron deficiency anaemia among BoP customers.
Maggi critics may find it difficult to digest, but the world’s largest food company, Nestle, that markets this brand of noodles, had also launched a product targeting micronutrient deficiency. Masala-ae-Magic was introduced at Rs2 with a fortified taste enhancer containing iron, iodine and vitamin for the low-income families.
Of course, how the BoP consumer responds to these products and promises remains to be seen. The belief is that, if the idea and communication hits the right chord, product volumes will be significant even if the margins are low. In any case, in most product categories we have very low per capita consumption in both volume and value terms.
An iodine salt brand did exceptionally well as the communication and benefits of iodine supplement in diet went down very well with consumers. Marketing experts insist that if consumers see value in the product, especially, for their children, they are more inclined to buy. Of course, for food and beverages, taste is paramount.
A tea brand with added vitamins had to struggle as did a mixed juice with carrots even though the latter was not targeted at the BoP consumer.
The challenge, however, is defining the BoP. The definition remains fluid depending on who you talk to. An advertising agency that claims it handles projects for a host of companies that target the BoP consumer claims the segment is 350 million strong. Instead of waiting for this set to move up, companies are creating products for them.
If this sounds like a big number, take a look at how a Booz & Co. analyses this socio-economic category of consumers. Booz estimates BoP numbers at 950 million. Its annual income cut off for BoP, however, is Rs2 lakh a year. It says that unlike the middle class segment, which is rather urban and well served, the BoP markets are largely rural and poorly served.
Rural marketing agency MART, however, defines consumers at BoP as a daily wage earner who does not make more than Rs50 a day. Pradeep Kashyap, founder of MART, argues that companies use the term BoP rather loosely.
In his view, selling to the BoP is a very powerful thought but something that hasn’t really taken off since you can’t really sell to somebody who earns Rs50 a day. It’s kind of an acronym for people at the lower end.
Even so, companies are pulling all stops to optimize their business in the BoP segment. Products are being tweaked to ensure volumes and the same brands are being offered, well mostly, but more intelligently. However, single-minded focus on affordability for the BoP market segment is no longer an option. Products are tailored to suit their habits and needs.
But for the benefit of this market segment, Kashyap’s recipe is “inclusive marketing". For that companies must stop looking at the low-income and the poor segment as merely consumers but focus on enhancing their incomes by improving their skills.
That’s a thought both for the consumers and companies.
Shuchi Bansal is marketing and media editor with Mint. Comment at firstname.lastname@example.org