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Developing the Innovator’s Mindset
A company that builds affordable products creates awareness and provides access to the poor will experience phenomenal success.
According to Professor C.K. Prahalad, the BOP market has been viewed as a goldmine for reaping profits in business.
Rather than just focusing on corporate social responsibility (CSR), the BOP market should be the focus of core business:
- meeting unmet social needs and incorporating new consumer preferences to serve the BOP market,
- create opportunities that have substantial value for the market.
One example of this is the growth of microfinance.
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4 key elements to thrive in the low-income market
According to the late Professor, even the poor can be considered good customers by marketers who believe that BOP is an unsold market.
Although they have a low-income level, they are discerning consumers who value and are aware of more affluent brands. Low income creates obstacles according to this school of thought.
He proposed:
- creating buying power;
- shaping aspirations through product innovation and consumer education;
- improving access through better distribution and communication systems;
- tailoring local solutions.
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Example: Godrej Chotukool
An innovative product for the bottom of the pyramid (BOP) market was developed by Godrej (one of the largest manufacturers of home appliances in India).
The 'ChotuKool' (meaning 'small cooler') was developed by Godrej's R&D team in 2007.
Godrej's team decided to involve villagers in the market research process. In response to feedback received from rural women, the prototype underwent multiple iterations.
The ChotuKool offers a targeted value proposition that serves the BOP segment at a price of about US $65, less than half the price of an entry-level refrigerator.
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Fortune lies at the bottom
C.K. Prahalad argued that there is a ‘poverty penalty’ where the poorest people pay more for everything because they don’t have a choice: they are stuck with local monopolies and bad products and services.
Research recently highlighted by the World Resources Institute shows that the world’s four billion poorest people represent a US$5 trillion market opportunity.
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Issues at the bottom of the pyramid:
1) Pricing is vital
It is important to start with an affordable price, keeping in mind that the cost of the product less the profit equals the cost of the product. A new range of exciting options opens up as a result of this different way of thinking.
2) Innovation is essential
A fundamental rethink of the market is required to accelerate and improve this process.
3) Businesses need to substitute investment for collaboration
In order to increase collaboration, management time is needed - and it is a cheaper option than investing money.
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IDEAS CURATED BY
CURATOR'S NOTE
The Bottom of the Pyramid is a strategic concept coined by late professor C.K. Prahalad that emphasizes innovation at the grassroots levels of society.
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Weekly Concepts's ideas are part of this journey:
Learn more about strategy with this collection
Conducting market research
Analyzing data to make informed decisions
Developing a product roadmap
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