The BOP- Explained

 BOP the acronym for “ Bottom of the

Pyramid” was introduced by C.K.
Prahald in his book “ The fortune at
the bottom of the pyramid”.

 In his book he has quoted “If we

stop thinking of the poor as victims
or as a burden and start recognizing
them as resilient and creative
entrepreneurs and value-conscious
consumers, a whole new world of
opportunity will open up”.

 He suggests that 4 billion people

living in less than 2$ a day are in the
bottom of the pyramid. So this group
can be the engine for the next round
of global trade and prosperity.

 Serving the bottom of the pyramid

customers requires large firms work
The BOP- Framework
12 Principles of Innovation
for BOP
• Focus on the price performance.

• Hybrid solutions blending old and new technology.

• Scalable and transportable operations across cultures.

• Reduced resource intensity. Eco-friendly products.

• Radical product redesign from the beginning.

• Build logistical and manufacturing infrastructure.

• Deskilling of Service work.

• Educate semiliterate in product usage.

• Product must work in the hostile environment.

• Adaptable user interface to heterogeneous consumer base .

• Distribution methods to be designed to reach the markets.

• Focus on broad architectures enabling quick and easy features.

 Price performance-
Challenges
Given below is the table comparing the purchase cost of some
of the regular items used in rural and urban areas.

Item Dharavi(A) Warden road(B) Ratio(A/B)

Cost of Credit 600- 12-18% 75
Municipal water 1000%
56 R.S 1.5 R.S 37
Phone Call(per 2.5 R.S 1.25 R.S 2
minute)
Diarrhea 1000 R.S 100 R.S 10
medication
Rice per Kg 14 R.S 12 R.S 1.2

• Cost of servicing of the BOP market continues to be

high as delivery model
of the companies are predominantly costly.
• The product/service pie is dominated by necessities and
hence BOP
customers are exploited with higher premium.
• The BOP could be characterized as a section of the
community that is living
in a world of price slavery
 Price performance-
Recommendations
• Prahalad has highlighted the need for creating a price
performance envelope
with quantum jumps as price is an important part of the basis
for growth.

• Basic services like Telephony, banking, transportation

infrastructure need
to be planned and developed in BOP concentric markets.

• Since the markets are maturing and the penetration in the

affluent areas
are relatively high, it would be a wise decision to
concentrate in the rural
areas where BOP customers are concentrated.

• Margins will get shaved in this process as the companies

would take a
“ Customer acquisition approach” rather than just making
a naïve
presence. This brings competition in the untapped rural
 Price performance-
Recommendations
• Another significant area of improvement could be introducing the
“ value packs”
alternatively known as paisa packs. These are the revelation in
the FMCG market
that plays a vital role in turn-over contribution. E.g. Unilever’s 3
Roses tea has 1
Rs. Sachets are the growth drivers in the rural and sub-urban
segments.

• “Value packs” converts the nascent desire to an effective

demand by providing
them value in small units that could cater to instant needs.
Some Examples are given below for prospective value
• segments
•This model
Micro can be
financing introduced
products with in all the
lower basic services
interest. like
This could
Banking
create products,
lot of entrepreneurs as in Bangladesh by Gramin
• telephony
bank. and other
Chota Recharge essential
coupons commodities.
for pre-paid cards and ITC calling
card of BSNL
Scalable and transportable
operations

• The hindrance of place is the major road block in reaching the

BOP.
• Most of them are in remote villages which is difficult to cover as
the distribution
becomes unviable for the distributors. Hence most of these
markets are either
disconnected or underserviced.
• Even the markets that get serviced are affected by premium
pricing as viability will
be compromised otherwise.

• The hindrance of place can be removed by creating satellite

markets through which
scalable distribution can be achieved. This is done by MNC
companies like Unilever,
Nestle etc. These companies identify and nurture the distribution
network that are
meeting the distribution norms profitably by scalable operation.
They cover the
 Hybrid- Challenges
• Scalable, price-performance-enhancing solutions need advanced and
emerging technologies creatively blended with existing and rapidly
evolving infrastructures.
• Technologies should be used to fulfill customer needs and at
affordable price.
• In case of Jaipur foot they are able to identify foot behavior of Indian
people that very much differ from western people by using a
traditional methods ( Bare foot Walking, Walking on uneven grounds
etc) and new Technologies.
• Hybrid systemsField of Quality : Size
that can be local, economic and sustainable.
Specializatio Outcomes
Jaipur n
Prosthetics As Good as US 16,000/year
Foot

Aravind Eye care As Good as UK 2,50,000/

Eye Year
Hospital
Escorts Cardiac Care As Good as US 7,000/Year
Scalable and transportable
operations
Gao Chalo- an example for using NGOs for
reaching the horizon
• As an alternative for creating satellite markets, Tata tea has
come up with a new
and innovative value delivery system named as “ Gao Chalo”.
• This system used the NGOs in the rural areas that were working
for rural
empowerment and elimination of poverty.
• The NGOs identified unemployed youth who can distribute the
stock in the
nearby villages in less costlier modes of transportation.
• This not only empowers the unemployed youth but also creates
the presence of
product in places that were unviable for the conventional
system.
Infrastructure- Challenges
• Just as critical as product innovations. The logistics system
for accessing potential consumers, selling to them, and
servicing products cannot be assumed.
• Should not be disruptive to consumers’ lives and improve
their quality of life profitably.
• Careful consideration of process innovations to achieve the
requirements.
• Companies like Amul has used a path breaking logistics
process that match with day to day rural India lives.
 Infrastructure- Example
Milk Collection Centers: Twice a Day Ritual in Rural
India
 Eco Friendly Products

• A lot of health hazards are possible in effluents of the industrial

waste being dumped in the arid lands of the villages.
• India especially being utilized as the backyard of the western
countries like UK for
dumping the waste that can’t be recycled.
• Effluents from the industries that are properly regulated by the
environment
board can jeopardize the harmony of the inhabitants including its
workers.

ll the industries that are prone for environmental pollution such as Chemical,
extile, dying, tanning industries need to be strictly assessed for pollution contro
norms compliance before issuing license.
he local body need to take an active role in enforcing this. In case of coke bottlin
plant in Kerala, the local body has shut down the plant by conducting a agitation
rivate companies need to develop indigenous technology for conservation of the
environmental resources. Pepsi has taken a stand that it would implement measu
o save power, water and energy by setting measurable objectives.
 Identifying Functionality
• Product development must start from a deep understanding of
the functionality, not just the form; marginal changes to the
product does not appeal to the customer.
• Innovation should be a completely different set of value which is
perceived by the prospect in the market. It is delivered to them in
such a way to create practical value as well.

• There are so many examples for that in the real market

scenario:

• 1) Jaipur foot is advanced in functionality, for 1/200th of the

cost, can be custom-fitted by semi-skilled paramedics in one visit,
and last for 4-5 years.
• 2) ITC too has excelled in functional competence by running the
e-choupal program that gives the farmers an edge to understand
the market scenario with the help of the inputs from the
company. The formers can log into the net and read about the
latest trends in the market with the help of a sanchalk.
• 3) United Insurance introduced accident coverage policies that
costs less than 1 re. a day for the family members of the insurer.
By paying 249 R.s the insurer and two dependents get the
Identifying Functionality

• Functional competence can be achieved by the companies that

are already present in the BOP market by integration of operation
and developing in-house solutions for the product development.
 Process Innovation
• Just as critical as product innovations are, the logistics
system for accessing the potential customers, selling to
them and servicing the product cannot be compromised.

• Supply chain model of the companies are getting redefined

to fit the changes in the need of the customers in the urban
market. The same importance need to be given for the BOP
markets.

• A product not available in the shelf when a customer

enquires it is a potential loss of sales. So the companies
have to make sure they estimate the sales properly and fix
up delivery schedules in concordance with the off take.

• Over supply also will turn the customer away as slower off
take means product will be in the shelf for a long time
before it’s getting purchased.

• Efficient fleet management and meeting the delivery

window will soon be the important thing for capitalizing the
sale in any market.
 Project Shakthi- an example of process
innovation

• Project Shakthi is a distribution program run by Unilever in India

by hiring women
from the backward communities as “Shakthi ammas” to cater to
the untapped
market. They cover the markets in the nearby locality often door
to door and sell
 De-skilling of the work
• Companies when developing products must take in to account
the complexities in the customer segment in terms of skill level
to use the product or service, difficulty in accessing the product
etc.

• For example using the VAS in the mobile/ or accessing the

internet needs technological skills and literacy.

• Introducing a product for the BOP segment needs to be

thoroughly assessed for complications in usage.

• Products customized for simple usage will go great miles

especially technology based products.

• Services that require more understanding and effort will fail

eventually to entice the common man.
 A model campaign- Marg Darshan- Campaign
for MVAS

• Their rustic life does not allow them to break the barrier and look for
more value out of the cell phone.

• It’s not only a staunch indifference to services beyond basic voice

calls, they also lack skills to use services like SMS, and other VAS
offers.

• Operators need to identify CATALYST for each village, by running

this MargDharshan Campaign.

• MArgDharshan, through its Facilitators educate the use of VAS to

learn Farming Trends and techniques.

• Domain of Farming tips to be created with the help of Agricultural

Ministry.

• Operator can sensitize enrollments for this campaign by highlighting

the fact that being MargDharshak is an opportunity to serve the
farmers in the village.
Marg Dharshan

•Media Campaign, flashing the Toll Free number.

• On registration Margdharshak will be trained and

licensed for free lancing.

•Any farmers subscribing for the Mobile Farming

service will be through a conventional channel
partners.

•Margdharshak will get a fixed + subscription based

pay
• highest performer will be felicitated.
 Broad Architecture-
•
Challenges
BOP markets allow (and force) us to challenge existing
paradigms and conventional wisdom.
• Gaining scale, speed, extremely high quality, and
unbelievably low costs.
• BOP markets accept the most advanced technology
easily.
• Enabling people to buy by accessing markets creatively and
designing affordable products for them breaks the long-
held assumption that BOP markets are not viable.
• BOP markets break our traditional ways of thinking and
acting – their biggest allure and challenge alike.
• Unless we are willing to discard our biases, this opportunity
will remain invisible and “unattractive”