Bottom of the Pyramid - Essay Example

Bottom of the Pyramid It has been more than one semester since I transferred to this school, and my curiosity to learn more about my major s in International Business has been greater than ever. Last semester in International Marketing class, I read an interesting article called “The Fortune at the Bottom of the Pyramid” by C.K. Prahlad and Stuart L. Hart. After reading the article, I attempted to draw upon the ideas presented in the article and formed some of my own coherent responses to it. 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.” According to the article, the bottom of the pyramid means that segment of the market that is at the middle and lower steps 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 urge the marketers to do. By targeting the middle and lower incomes, they can hope to cash in on the phenomenon on the rising imbalance in wealth across the globe. What the article implies is that people who scrape together a living may well be the gold mine that marketers may want to look at. By scraping the bottom, the marketers may well find gold dust that has been neglected for so long. 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 and 3 have annual incomes in the range of $1,500 to $20,000, while 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 other tiers is discussed. Therefore, 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. In this essay, I would address the question of whether there is indeed a fortune to be made from the bottom of the pyramid as Prahlad and Hart try to convince me. From my learning 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 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 competent marketing strategy that comprises of providing brands in accessible and inexpensive formats to the consumers. What is needed is an attitude that goes beyond the normative rules of targeting only the rich. A change in attitudes towards the new class of consumers is called for. A new way of looking at the bottom of the consuming classes with an emphasis on creating genuine value and reaching out to the downtrodden would not only result in increased profits but also serve to bring these classes into the business paradigm. It also depends on creating sales and distribution channels to carry these brands across to his class of consumers. The consumer revolution need not be confined to the upper segment 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. 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 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 availability of sachets has revolutionized the hitherto unreachable and inaccessible segments of the populace for whom this has come as a godsend. The fact that HLL has made profits from the initiative shows that there is indeed a Fortune at the Bottom of the Pyramid. The other example in the article 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 scale can be profitable and productive. These examples show those multinational corporations and other companies entering the markets of the developing countries need to alter their strategies accordingly and cannot adopt “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. Reading the article and elaborating on the positives presented in the article may leave me with some sort of euphoria about the success of these initiatives. However, as the sub-prime crisis and the housing meltdown in the U.S. shows, there is a flip side to the way in which the not-so-good credit borrowers can 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. In the meantime, the borrowers, in their quest to have housing at affordable rates, threw caution to the winds. Thus, the word 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. The experience of the Sub Prime meltdown shows that condescending attitudes towards low income borrowers has to give way to a mature realization about the realities of lending to people who may not be in a position to repay the loans. What is needed is a kind of credit availability that is humane and not ruthless when it comes to lending for these classes. In this essay, 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 previously 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