1. Welcome to class of Bottom of the Pyramid Dr
Welcome to class of Bottom of the Pyramid Dr. Satyendra Singh Professor, Marketing and International Business University of Winnipeg Canada

2. Opportunity for growth
7 b people
2b can afford good products
5b Bottom of Pyramid (BOP)
We need to cater BOP and develop market oriented products accordingly
Emerging markets
Developing countries
Moral responsibility to cater BOP!
Because they’re denied resources and opportunities 2

3. Bottom of the Pyramid
BOP: 5 trillion worth of purchasing power 3

4. Marketing Strategies for EMs…
Need 2 strategies
Urban  Global strategy is applicable
Consumers prefer global brands to local brand
Global brand equates to quality and prestige
Communicates sophistication and modernity
Admire HIG lifestyle and the products that symbolize that
Large cities have advanced distribution channels
HIG customers are less price sensitive
Serves as social distinction
Firms do not need to be based in developed countries
Concept of 3rd world countries multinationals
E.g. Nando’s fast food from Africa
 Now in +30 countries 4

5. Marketing Strategies for EMs
Bottom of the pyramid strategy
LIG  radically different
Low price/value focused segment  Tata Nano
Less features, toothbrush with no angles (i.e new design is needed)
No need to focus western markets in the beginning
Satisfy needs of the mass markets
Mahindra and Mahindra tractors, India
Ranbaxy pharmaceuticals, India
Orascom telecom, Egypt
Embraer aerospace, Brazil
These firms have learned to make a profit at prices unheard of the developed countries  due to mass marketing at low $ 5

6. Successful firms from emerging markets
Acer
Bharti Airtel
Hailer
Lenovo LG QQ
Samsung
TATA
 move from OEM (1-5% margin) to leadership position (+40% margin)
Successful industries:
Telecommunications
Fast-moving consumer goods
Pharmaceuticals 6

7. Barriers in BOP markets…
Distribution costs ↑ 7

8. Barriers in BOP markets…8

9.  Low margin and high volume difficult to achieve
Barriers in BOP markets
Scattered villages  service cost is high for durables
Difficult to penetrate (+5%) remote villages
Small scale growers are decentralized
Uncertain cash flow  BOP cannot pay upfront/poor
Local knowledge and local trust
Mismatched priorities clean water vs cell phone
Difficult to predict demand China/child education
Local knowledge and Trust  microfinance
 Low margin and high volume difficult to achieve 9

10. How to ↓ distribution costs
Get local input (raw material…)
Organize the suppliers in groups
Coca-Cola in Uganda and Kenya for its juice organizes small farmers, gives them training
Wal-mart in India to make cold storage
Use technology for delivery, if possible
Use existing network of distribution post office and Western Union 10

11. How to ↑ cash flow
It is ok to borrow (credit) to pay  western culture
University fee, car loan, house mortgages…
↓ upfront payment
Use sachet retail strategy
Even 50-kg fertilizer bag is sold in 5kg, eg.
Pay-per-use  Cell phone pay-as-go, irrigation pumps in India, clean drinking water in Philippines
Installment payment in India to buy gold 11

12. Sachet distribution in BOP markets12

13. Standardization and Specialization:
Successful low-Cost providers to BOP
Economy of scale, very basic 13

14. Innovation: Reverse engineering
TATA Nano: $3,000 14

15. 15

16. 16

17. Bundling: tooth brush, paste, soap17

18. Not Free in BOP Yet But Will Be Soon18

19. Need to optimize value addition
Commodity Goods Service Experience
1₡-2₡ ₡-25₡ 75₡-$1.5 $2-$2.50
The BOP segment may not be brand conscious yet. 19

20. Is the BOP market suitable for you?20
Source: Simanis (2012), HBR, June

21. Strategy implementation in EMs
Leadership more involved
Socioeconomic
Low formal education and high unemployment
Culture
Highly embedded and hierarchical, risk avoidance
Organizational structure
More centralized and formalized is appropriate
Small team, and group reward, collective society
Intraorganizational relations
Social and relational identities
Rank, status, self esteem, well being, relations
Top managers available physically for guidance
Learning 21

22. Five myths about EM! Tech. from mature markets will succeed in EM
EM are technology backwaters
I.e. Use outdated technologies; may not be true in case of cell phones
EM consumers won’t pay premium for brands
Brands affect preferences
EM cannot afford technology purchases
May not true in case of BRIC countries
Tech. from mature markets will succeed in EM
Develop new product with relevant feature
Nokia phone in India  flashlight, individual call tracking for shared use of phones, multiple address book
EM consumers focus on products, not services 22

23. Where are Emerging Markets? Emerging Markets Trading Blocks
Asia
Association of SouthEast Asian Nations (ASEAN)
Asia Pacific Economic Cooperation (APEC)
Africa
Economic Council of West African States (ECOWAS)
Common Market for Eastern and Southern Africa (COMESA)
South America
Mercosur (Mercosul) 23

24. ASEAN: Asso. Southeast Asian Nations
Free Trade
10 countries
Brunei, Cambodia, Indonesia, Lao, Malaysia, Mayamar, Philippines, Singapore, Thailand, and Vietnam
HO: Jakarta
ASEAN scholarship
ASEAN Univ.Network 24

25. APEC: Asia Pacific Economic Cooperation
Eco. Growth & prosperity
Trade/invst Liberalization
Business Facilitation
Economic/tech cooperation
Important
40% of world’s pop
50% of world’s GDP
40% of world’s trade
21 countries
Australia, Brunei, Canada, Indonesia, Japan, Korea, Malaysia, NZ, Phil, Singapore, Thai, US, Taipei, HK, china, Mexico, PNG, Chile, Peru, USSR, Vietnam
HO: Singapore 25

26. ECOWAS: Economic Council West African States
Economic integration
Mutual defense, court of justice
Ecowas rail, common currency 2015
Gambia, Ghana, Guinea, Nigeria, Sierra L
15 countries
Benin, Burkina Faso, Cape Verde
Cote d’lvoire, Gambia, Ghana, Guinea-
Bissau, Liberia, Mali, Nigeria, Senegal,
Sierra Leone, Togo
Niger – suspended 2009– election problem
Guinea – suspended 2008 – coup attempt
Liberia wants to join Ecowas
HO: Abuja, Nigeria 26

27. COMESA: Common Mkt for Eastern Southern Africa
Regional economic integration
Trade and investment
19 countries
Burundi, Comoros, Congo, Djibouti,
Egypt, Eretria, Ethiopia, Kenya,
Libya, Madagascar, Malawi, Mauritius
Rwanda, Seychelles, Sudan, Swaziland
Uganda, Zambia, Zimbabwe
HO: Lusaka, Zambia
Branding: Buy African, Build Africa
COMESA statistics 27

28. MERCOSUR Free trade and people movement Full member Associate member
Argentina, Brazil, Paraguay, Uruguay
Venezuela (Paraguay to ratify)
Associate member
Bolivia, Chile, Columbia, Ecuador
Peru
Observer members
Mexico
New Zealand
HO: Montevideo, Uruguay 28