Nairobi May 2010 Pikay Richardson, PhD, Manchester Business School University of Manchester Strategic Marketing Models For Reaching The Base of The Pyramid

Copyright © 2008 The World Bank – International Finance Corporation Coverage 1. How do you make customers? 2. The BOP Market and what it offers 3. Succeeding in the BOP Market 4. Building an effective Marketing Plan 5. The Fortune at the Base of the Pyramid 6. Finale

Copyright © 2008 The World Bank – International Finance Corporation The Purpose of the Firm The ultimate purpose of any business is to create and retain profitable customers – the Marketing Process

Copyright © 2008 The World Bank – International Finance Corporation Making Customers: The Marketing Process Marketing Mix – the combination of different elements (4Ps) used to achieved marketing objectives (of serving the needs of customers profitably).

Copyright © 2008 The World Bank – International Finance Corporation The Marketing Mix: The 4Ps 1. Product 2. Price 3. Place 4. Promotion

Copyright © 2008 The World Bank – International Finance Corporation Product A PRODUCT is a bundle of need-satisfying physical, service or symbolic attributes offered to the market for attention, use of consumption.

Copyright © 2008 The World Bank – International Finance Corporation The Firm and Its Products The role of marketing is to make sure that the company offers the right products, that they are currently positioned for the chosen target segments, and supported by the best marketing mix.

Copyright © 2008 The World Bank – International Finance Corporation Product Plan/Strategy Product line Product mix Packaging Labelling Branding Product research, improvements and innovation

Copyright © 2008 The World Bank – International Finance Corporation Price: the Exchange Value of a product from perspective of both seller and buyer. Price influences consumers perception of the product (VFM). Pricing

Copyright © 2008 The World Bank – International Finance Corporation Pricing Policy To enable the firm earn a fair return To meet or stay ahead of the competition To maintain or increase the firms share of the market To ensure stability of the prices of its products.

Copyright © 2008 The World Bank – International Finance Corporation Channels of Distribution: Direct: Provider/Producer-Consumer One Level: Producer-Retailer-Consumer Two levels: Producer-Wholesaler- Retailer-Consumer Place (Distribution)

Copyright © 2008 The World Bank – International Finance Corporation Communication Mix all those methods of communication an organisation uses to reach its various audiences. Promotion

Copyright © 2008 The World Bank – International Finance Corporation Advertising Promotion Personal selling Public relations Other publicity Communication Mix

Copyright © 2008 The World Bank – International Finance Corporation What Does BOP Market Present? Huge base of consumers – 4bn Largest and fastest growing segment of world population Substantial gross PP But large informal economy poses unique challenges Hence global capabilities and subsidiary strategy models inappropriate, rather, Requires strategic partners, and, Dealing with certain Macro issues

Copyright © 2008 The World Bank – International Finance Corporation BOP Market Entry Challenges Limited individual purchasing power High volume business based on small individual transactions Peculiarities of human and social capital of low-income communities Poor infrastructure Inadequate connectivity Corrupt intermediaries and officials

Copyright © 2008 The World Bank – International Finance Corporation New and Relevant Models Required It should be noted that BOP Markets require: advanced technology creative financing affordable packaging local partnerships, with relevant experience attention to societal performance

Copyright © 2008 The World Bank – International Finance Corporation Lessons from Success Stories Look for organisations in your target BOP market that are already serving the poor Build relationships with a number of organisations as early as possible Understand the strategic objectives, culture and organisational structure of these BOP models Indentify important bottlenecks once relationships are built Start thinking about replicating appropriate existing competencies to support the building of markets Ensure that the business model supports, and increase in the real income of people Monitor the development of partners strategic objectives

Copyright © 2008 The World Bank – International Finance Corporation Succeeding in the BOP Market: The Marketing Mix Product - technology-based - simple, but good quality - packaging (sachets, mini-key soap) - branding (Nokia phone)

Copyright © 2008 The World Bank – International Finance Corporation Marketing Mix in the BOP Market Price – economies of scale – Low-cost – affordable

Copyright © 2008 The World Bank – International Finance Corporation Promotion - reach is more important than attention - information hungry; entertainment starved - face-to-face promotion Marketing Mix in the BOP Market

Copyright © 2008 The World Bank – International Finance Corporation Place (Distribution) – Affordable packaging (sachets, one-use) – Intermediary/partner channels Marketing Mix in the BOP Market

Copyright © 2008 The World Bank – International Finance Corporation Building an Effective Marketing Plan (6 Steps) Developing a Marketing Plan gives you the opportunity to organise your thoughts and discover any trouble spots in your strategy

Copyright © 2008 The World Bank – International Finance Corporation Step 1 Describe your product/service in detail: - What are the most significant features? - Is the product/service in demand?; - What is the level of demand; Is it a growth market, etc?

Copyright © 2008 The World Bank – International Finance Corporation Identify your target market: - Who will the product/service appeal to most? - What information does your market research throw up – sales trends, geographical region, customer segments, etc, ? Step 2

Copyright © 2008 The World Bank – International Finance Corporation Size up the competition: - Who are your major competitors? - How does your product/service compare to them? - How strong a foothold do they have in the market? - How do they market their products/services - How do you create and sustainable competitive advantage? Step 3

Copyright © 2008 The World Bank – International Finance Corporation Detail your Marketing Strategy: - How will you advertise and market your product/service? - Which features of the product will you focus on? - Is Branding an option? - What price should you charge and why? Step 4

Copyright © 2008 The World Bank – International Finance Corporation Describe your operations: - What plans do you have for customer service – credit, sales terms, after-sales service, etc - Are your employees geared up for service – skills and motivation - Where is the best location for the business? - Is your management team competent – able to manage, read the signs, provide direction, etc? Step 5

Copyright © 2008 The World Bank – International Finance Corporation Prepare a financial statement based on projections of sales, operating costs and expenses: - Undertake cash-flow projections - Profit-and-loss reports and income statements for at least 3 years - Is the business viable? If no, why not? - What are the options open to you? Step 6

Copyright © 2008 The World Bank – International Finance Corporation Fortune at the BOP? The worlds biggest retailer, Wal-Mart, was created to serve the low-income market Designing products for the BOP is NOT about making cheap stuff, but about making technologically advanced products affordable It is worth the effort if the BOP market can be served efficiently, effectively and profitably; it is also about making a difference

Copyright © 2008 The World Bank – International Finance Corporation An Important Opinion everyone wants brands. And there are a lot more poor people in the world than rich people. To be a global business and to have a global market, you have to participate in all segments, Keki Dadise, Hindustan Lever

Copyright © 2008 The World Bank – International Finance Corporation Can You Fault This? I cant think of a more noble way to have an immediate impact on the lives and future of people who need light to help them find their way -Actor Tom Hanks, Freeplay Foundation Patron

Copyright © 2008 The World Bank – International Finance Corporation Encouragement If we stop thinking of the poor as victims or as a burden and start recognising them as a resilient and creative entrepreneurs and value-minded customer, a whole new world of opportunity will open up, C K Prahalad

Copyright © 2008 The World Bank – International Finance Corporation Exhortation Mt talent is trusting the poor and giving the poor good service. Many poor have a better character than the rich. I was poor once, Samuel Klein, Founder of Casas Bahia

Copyright © 2008 The World Bank – International Finance Corporation The End of the Matter There is considerable commercial market opportunity and the willingness to pay for off grid lighting products, globally and in SSA Recent technological advances such as LEDs promise technology-based solutions to the African marketplace The era of the incandescent bulb is fading, as energy efficiency and superior lighting technologies take hold The most expedient and sustainable way to bring affordable, reliable lighting to Africa is by supporting the industry to design and market an array of products tailored to the needs of the African consumer

Copyright © 2008 The World Bank – International Finance Corporation Finale Things work only if we make them work Things work only as well as we make them work