The world's poorest people constitute about two-thirds of its total population. In economic terms, they represent people at the bottom of the pyramid, society's lowest economic bloc—a massive four billion people. However, this huge number portrays a massive consumer market that can often go under the radar.
But for the business leader with a keen eye, this market can be exploited to benefit all its stakeholders. And in this article, we discuss the huge potential of the BOP and how it can be tapped for public and private gain.
What is it?
A BOP approach seeks to exploit the huge market opportunities at the BOP. It targets those at the lowest socio-economic strata and creates value for them. It does this by leveraging the right economies of scale to yield utility and pricing products that suit those at the BOP.
So instead of being regarded as an economic liability, people at the BOP can be seen for their huge economic prospects.
The ultimate goal of a BOP strategy (as deployed by multinationals) is to alleviate the economic conditions of people at the BOP. And in so doing, these business prospects will also create profit and growth opportunities for the businesses and Multinational corporations (MNCs) that engage them.
When do we use it?
The bottom of the pyramid presents businesses with huge potential in certain areas. So, a strategy around it can be used to:
Reach large consumer audiences
The BOP market is a fertile ground for the most accessible and affordable products. Hence, the businesses that target them know best to redesign their products to appeal to consumers on a large scale.
Create socially responsible businesses
Social responsibility is crucial to the growth of every business. And with a BOP strategy, you can create community-centered business initiatives that positively impact the local consumer.
Achieve product diversification
People in the BOP often need products that are tailored to meet their needs or pocket depth. So you can target this market with a product that appeals to them, and you'll have struck gold.
Create entrepreneurial solutions to business problems
Do you struggle to find the best way to market your products? Or are your ideas so big that you find it hard to bring them to life? Cut them to size and bring them to the BOP market—as your starting point.
What business questions is it helping us to answer?
Building your business strategy around the BOP is one effective way to answer the following business questions.
How do I contribute to community development?
People at the BOP require the most help to power through their everyday lives and meet their basic needs. So the businesses that target them must commit to their welfare and survival and not be fixated on profits.
How can I balance profit with people?
A BOP model can help you reach those on the lower rungs of the socio-economic ladder with the value that caters to them. And it can help businesses stay on the margins of social responsibility while still making reasonable profits.
How can I reach people at the bottom of the pyramid
People at the BOP are the most disadvantaged in terms of economic power. And it'll take concerted effort to create a low-priced product that meets them at the point of their needs. A BOP strategy can help you pull the right levers and create just the right product for the BOP.
How can I make my brand more visible?
The BOP market is packed with people looking for a product that meets their everyday needs. What better place to sell your products and market your brand than a place with such keen eyes and open minds?
How do we use it?
Below are a few steps to unlocking huge business prospects using a BOP model/strategy.
Step 1: Identify the BOP
Identifying the BOP will help you create the right products that meet their everyday needs. Because for people in the BOP, it is the basic things that matter most.
Step 2: Target the BOP
Your next move will be to create the right product for people at the BOP. And in doing so, you must factor in certain conditions for the product to be well-accepted in the market. They are as follows.
Accessibility
The consumers in the BOP market are not the most sophisticated or technically aware. And so, a product launched into such markets must always be easy (and ready to use).
Availability
The typical BOP market has a massive coverage area. And for any product to filter across such a market, it has to be released en masse. Only then can it be found on shelves at all times for the teeming consumers that need it for their everyday applications.
Affordability
People in the BOP will not always have sufficient purchasing power. So it is natural that the products found there will spot the lowest prices. When the products are cheap or affordable, they can be bought and used as intended. So the products have to be rolled out in bulk to lower the unit cost of production and provide a profit margin.
Step 3: Carry out effective BOP marketing
This has to do with identifying the right distribution and marketing channels through which you can reach the BOP market. You'll need to engage informal distributors at the grassroots to cover sufficient ground.
Practical Example
India is home to some of the world's poorest people. So it is not inconceivable that some of its younger citizens will not be exposed to computer literacy. However, this is a huge opportunity that big IT companies can exploit.
Imagine if you could build several small affordable tablets with preinstalled learning modules, fast wifi connection, and other crucial features. It'd be a hit in the market and fetch you huge rewards.
Advantages
It creates room for high-volume production
The bottom of the pyramid has the biggest space and can take up the most people. So businesses that target the BOP can ramp up production (at lower unit costs) to service the increased demand for their products.
It creates endless opportunities across the value chain
The sheer size of the BOP market presents huge opportunities for the businesses that target it. These businesses can optimize their value chain activities for cost leadership, product differentiation, and other competitive advantages.
It helps businesses create sustainable advantages
The BOP market has low entry barriers and is open to more competition. So the businesses that target it must find ways to build sustainable advantages. This way, they can gain the trust and confidence of the market and capture a significant share of it.
Disadvantages
It raises issues of ethics and standard practice
Some businesses take advantage of the huge BOP market to create substandard products. They often do this to compensate for their low prices.
It is not always profitable in the short term
Questions exist about whether there is a real fortune at the bottom of the pyramid, and the answers are farfetched. So businesses must increase volume to counter low prices. The revenue rises, but the same may not be said for profit and how quickly it arrives.
It creates organizational gaps
The value chain in BOP businesses has far too many links and levers to pull. And this can pose problems for strategy implementation, effective communication, and other organizational activities.
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