Selling to the Bottom of the Pyramid?

Selling to the Bottom of the Pyramid?
By Babar Bhatti

Bottom of the Pyramid is a term that we often hear with reference to emerging markets where there are a large number of people with limited buying power. Overall, the sale could be very high even if the per item price is low. LIRNEAsia.net has done extensive work on this. It is good to see that BoP concept is also catching on with the global thought leaders. I read articles in Wired magazine and then saw a blog post from Seth Godin about it – you can make money and make a positive difference. Who can argue with this? It’s not easy though.

The best way to help developing countries? Sell them good stuff – cheap, says the Wired article. I would say that developing countries should learn how make cheap/good stuff because they know what will work for their environment. That’s what Tata did with Nano.
Providing access to modern technologies by creating super cheap products may be the best way to improve economic well-being.

It provides several examples and notes that nimble and cost-effective startups are more likely to come up with innovative solutions for products and services for BoP. The article also includes reference to a Harvard Business Review article by Vijay Govindarjan, Chris Trimble and Jeffrey Immelt. A key point in this paper is:
People in emerging markets are “more than happy with high-tech solutions that deliver decent performance at an ultralow cost – a 50% solution at a 15% price.

How do you create acceptable products which are really cheap? Seth Godin, the mastermind marketer, has some ideas. The lessons and advice here is valuable for everyone, not just for marketers. Seth says:
The cell phone, for example, has revolutionized the life of billions in the developing world. If you have a cell phone, you can determine the best price for the wheat you want to sell. You can find out if the part for your tractor has come in without spending two days to walk to town to find out. And you can be alerted to weather… etc. Productivity booms. There’s no way the cell phone could have taken off as quickly or efficiently as a form of aid, but once someone started engaging with this market, the volume was so huge it just scaled. And the market now competes to be ever more efficient.
It’s not as easy as it looks

And here’s the kicker: If you’re a tenth-generation subsistence farmer, your point of view is different from someone working in an R&D lab in Palo Alto. The Moral Economy of the Peasant makes this argument quite clearly. Imagine standing in water up to your chin. The only thing you’re prepared to focus on is whether or not the water is going to rise four more inches. Your penchant for risk is close to zero. One mistake and the game is over.

As a result, it’s extremely difficult to sell innovation to this consumer. A promise from a marketer is meaningless, because the marketer isn’t part of the town, the marketer will move away, the marketer is, of course, a liar.

Let me add one more easily overlooked point: Western-style consumers have been taught from birth the power of the package. We see the new nano or the new Porsche or the new convertible note on a venture deal and we can easily do the math: [new thing] + [me] = [happier]. We’ve been taught that an object can make our lives better, that a purchase can make us happier, that the color of the Tiffany’s box or the ringing of a phone might/will bring us joy.

That’s just not true for someone who hasn’t bought a new kind consumer good in a year or two or three or maybe ever. As a result, stores in the developing world tend to be stocked with the classic, the tried and true, because people buy refills of previous purchases, not the new.
No subsistence farmer walks to a store or stall saying, “I wonder what’s new today? I wonder if there’s a new way for me to solve my problems?” Every day, people in the West say that very thing as they engage in shopping as a hobby.

You can’t simply put something new in front of a person in this market and expect them to buy it, no matter how great, no matter how well packaged, no matter how well sold.

So you see the paradox. A new product and approach and innovation could dramatically improve the life and income of a billion people, but those people have been conditioned to ignore the very tools that are a reflex of marketers that might sell it to them. Fear of loss is greater than fear of gain. Advertising is inefficient and ineffective. And the worldview of the shopper is that they’re not a shopper. They’re in search of refills.
The answer, it turns out, is in connecting and leading Tribes. It lies in engaging directly and experientially with individuals, not getting distribution in front of markets. Figure out how to use direct selling in just one village, and then do it in ten, and then in a hundred. The broad, mass market approach of a Western marketer is foolish because there is no mass market in places where villages are the market.

This raises the bar for customer service and exceptional longevity, value and design. It means that the only way to successfully engage this market is with relentless focus on the conversations that tribe leaders and early adopters choose to have with their peers. All the tools of the Western mass market are useless here.
Just because it is going to take longer than it should doesn’t mean we should walk away. There are big opportunities here, for all of us. It’s going to take some time, but it’s worth it.