Fortune at the Bottom of the Pyramid by C K Prahlad and Stuart Hart - Essay Example

INTRODUCTION This paper is about my ideas and thoughts after reading the article “Fortune at the bottom of the Pyramid” by C K Prahlad and Stuart Hart. In this paper, I attempt to draw upon the ideas presented in the article and form some of my own and present a coherent and meaningful response to the same. The article in question is about how marketers can profit from devising new strategies to capture the market consisting of consumers at the lower end or what the article calls the “bottom of the pyramid”. BOTTOM OF PYRAMID According to the article, Bottom of the Pyramid means that segment of the market that is at the middle and lower rungs of the consumption ladder. Typically, the low income classes and the middle income classes need special marketing efforts to capitalize on their purchasing power and this is what the authors exhort the marketers to do. By targeting the middle and lower rungs, they can hope to cash in on the phenomenon of rising imbalance in wealth across the globe. The authors make the point that there are four tiers of the consuming classes. The tier 1 is the most affluent with annual incomes more than $20,000. The next two tiers 2 & 3 have annual incomes in the range of $1,500 to 20,000 and the last tier makes up of those who have incomes less than $1,500 annually. The article makes a strong case for devoting resources to target the tier 4 consumers. The point about social unrest due to the ability of the tier 4 consumers disturbing the lifestyles of the other tiers is discussed. Thus, it is in the interests of all sections to maintain the equitable balance in society to ensure that the tier 4 consumers are not neglected. This is the social point of view. However, as the article states there are compelling reasons from the profit point of view as well to create a market for tier 4 consumers. The wave of industrialization and globalization has created a category of consumers who are willing to try and experiment with new products but do not have the resources to buy premium products. Thus, there is a need to create and make products that are suitable for this class of consumers who would be willing to purchase the brands at an affordable price. IS THERE A FORTUNE? In this section, I address the question of whether there is indeed a fortune to be made from the bottom of the pyramid. From my learning’s from the international business and marketing courses, I do indeed believe that there exists a potential for making sizeable profits from the bottom of the pyramid. I illustrate this with examples from real world situations in the sections below. I strongly believe that if marketers find a way to reach out to this class of consumers, there is a pot of gold waiting for them. This can be done by a combination of adroit marketing strategy that comprises of providing brands in accessible and inexpensive formats to the consumers. It also depends on creating sales and distribution channels to carry these brands across to this class of consumers. The consumer revolution need not be confined to the upper segments alone. Developing on the ideas presented in the article, it can be concluded that niche marketing works not only at the upper segments but for the lower segments as well. I take examples of real world situations of targeted marketing to the lower segments. SACHET MARKETING AND MICRO CREDIT The stunning success of marketing sachets in quantities that are affordable and easily obtained has led to the marketers looking for ways to reach the consumers in this segment. The authors quote the success of the Nirma and the HLL (Hindustan Lever Limited) companies in marketing their brands in a sachet form that is affordable and inexpensive to purchase. By providing access to brands in ways that the not so well off consumer can purchase, these companies have found a very efficient and profitable way to do business. The other example is that of micro credit in Bangladesh. The Grameen Bank initiative provides credit to the less privileged by offering them loans at discounted rates and providing them access to capital that would otherwise be denied to them. The rate of success in this model has shown that any segment of the population, if provided the means to conduct their business and earn their livelihood can be successful given the right conditions. The two examples quoted above illustrate the fact that targeted marketing to the consumers at the lower ends of the wealth spectrum can be profitable and productive. These examples show that MNC’s and other companies entering the markets of the developing counties need to alter their strategies accordingly and cannot adopt a “one size fits all” approach towards marketing. Thus, there is a fortune to be made from the bottom of the pyramid provided that the companies are willing to go the distance in formulating effective strategies. A WORD OF CAUTION: THE SUBPRIME CRISIS Reading the article and elaborating on the positives presented in the article may leave us with some sort of euphoria about the successes of these initiatives. However, as the sub-prime crisis and the housing meltdown in the US shows, there is a flip side to the way in which the not so good credit borrowers be embraced into the system. The crisis was a result of reckless lending and questionable practices adopted by the banks and other lenders when supplying the “sub-prime” borrowers with credit. In their eagerness to tap the market of low income borrowers, the banks resorted to behavior that can be described as questionable in ordinary circumstances. And the borrowers, in their quest to have housing at affordable rates, threw caution to the winds. Thus, the word of caution here is about both the marketers and the consumers exercising prudence in their judgment and ensuring that they stay within the realm of conscientious action. CONCLUSION In this paper, I have summarized my ideas after reading the article and provided my view point on some of the issues raised by the authors of the article. It is my contention that there are profits to be made by targeting the sections hitherto neglected by the marketers. However, I qualify my assertion with the point that there are ethical norms to be followed as well. In conclusion, it would be in the interests of everyone concerned if marketers and consumers alike take responsibility and ensure that the benefits accrue to both all sides. Read More