The Fortune At The Bottom Of

The Economic Pyramid

Concept- C.Prahlad
BOP CONCEPT
HOW IT WORKS
 BOP – A Global Opportunity
Prahalad has identified 4 distinct sources of opportunity
for firms to understand and cater to the BOP markets:

1)Some BOP markets are large and attractive as

stand-alone entities.
2)Many local innovations can be leveraged
across other BOP markets.
3)Some BOP innovations will find applications
in developed markets.
4)Lessons for the BOP markets can influence the
management practices of global firms.
 FACTS
ASSUMPTIONS
• The poor are not our customers.
• The poor do not have use for products
sold in developed countries
• Only developed countries appreciate
and pay for technological
innovations.
• The BOP market is not critical for the
long-term growth of MNCs.
• Intellectual excitement is in
developed countries; it is difficult to
recruit managers for BOP markets
IMPLICATIONS
• Our cost structure is a given ␣
cannot serve the BOP market .e.g.
the poor might need sanitation, but
can’’t afford detergents.
• BOP will not pay for tech
innovations; it can’’t be a source of
innovations.
• BOP market is at best an attractive
distraction
• We can’’t assign our best people to
work on market development in
BOP markets.
 CUSTOMERS TREND AT BOP

UNLOCKING THE LATENT PURCHASING POWER-

•Due to local monopolies, inadequate access, poor

distribution, and strong traditional intermediaries, the poor
pays 5 to 25 times what the rich pays in the same economy
•Rural markets are inaccessible to audio and television
signals, i.e. ““Media Dark”
•They are indeed brand-conscious and value- conscious by
necessity; they expect good quality at the prices they can
afford
•BOP Consumers Accept Advanced Technology Readily
Market Development
 Create the Capacity to Consume
Cash
Creating the capacity to consume is based on 3
principles:•
• Affordability (without sacrificing quality) •
• Access ( e.g. the poor may start their shopping after
7.00 pm)
•• Availability
Poor and with a low level of income, the BOP consumer has to be
accessed differently
May make unit packages (single-serves) that are small and much
more affordable.
(Indian shampoo market is as large as the US market)
 The Need for New Goods and
Services–
The involvement at the BOP can provide
opportunities for developing new goods and
services.

(e.g. access to good quality housing, clean

energy from solar and wind power, good
quality furniture)
 Dignity and Choice
•When the poor are converted into
consumers, they also acquire the dignity of
attention and choices previously reserved for
the middle-class and rich.
• Switching costs for single-serve goods are
negligible for the BOP consumers; hence
firms must continue to upgrade their
products to keep their customers.
 Trust is a Necessary

Firms must focus on building trust between

themselves and the consumers because poor
people take more time (customer cost) to
faith on product than richer.
 Products & Services For The BOP
12 PRINCIPLES OF INNOVATION FOR BOP MARKETS
1. Focus on price performance
2. Innovation requires hybrid solutions
3. Solutions must be scalable and transportable across countries, cultures and
languages
4. Innovations should be eco-friendly
5. Product development must start from a deep understanding of functionality
(as marginal changes to products developed for the first world will not do)
6. Process innovations are just as critical as product innovations
7. Work must be deskilled
8. Education of customers on product usage is a key
9. Products must work in hostile environments
10. The design of the interfaces must be carefully thought
11. Designing methods for accessing the poor at low cost is critical
12. As feature and function evolution in BOP markets can be very rapid, product
developers must focus on the ““platform”” so that new features can be easily
incorporated
SHARED EXPENDITURE
 FAILURE AT BOP
EXAMPLE-

SIMPUTER
CAUSE-

•Poor product design and development

•Poor market knowledge
•Poor market access
 SUCCESS AT BOP
EXAMPLE-

Hindustan Lever
CAUSE-

•Deep local understanding & innovation in formulation

and packaging
•Versatile distribution capabilities
•Corporate responsibility in the development of rural
India
 CONCLUSIONS
•BOP can be an important source of innovations for both
the global BOP markets and also for the developed worlds.
•Need to remember that one should not impose a first-world
business organisation to one addressing the BOP
opportunity
•Unique opportunities for creating products/services in BOP
•Should take note that the price/performance could be a
very challenging task for the R&D team.
•Disruptive innovations could capitalize on the BOP
markets for their initial growth
•Some have started to pay serious attention to BOP markets
and more will follow suit.
Opportunity at BOP will
improve the standards
of living of lower
income groups,
particularly those living
in rural areas, apart
from improving their