Strategic Marketing Models For Reaching The Base of The Pyramid

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

Coverage • How do you make customers? • The BOP Market and what it offers • Succeeding in the BOP Market • Building an effective Marketing Plan • The Fortune at the Base of the Pyramid • Finale

The Purpose of the Firm The ultimate purpose of any business is to create and retain profitable customers – the Marketing Process

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).

The Marketing Mix: The 4Ps • Product • Price • Place • Promotion

Product A PRODUCT is a bundle of need-satisfying physical, service or symbolic attributes offered to the market for attention, use of consumption.

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.

Product Plan/Strategy • Product line • Product mix • Packaging • Labelling • Branding • Product research, improvements and innovation

Pricing Price: the Exchange Value of a product from perspective of both seller and buyer. Price influences consumers perception of the product (VFM).

Pricing Policy • To enable the firm earn a fair return • To meet or stay ahead of the competition • To maintain or increase the firm’s share of the market • To ensure stability of the prices of its products.

Place (Distribution) Channels of Distribution: • Direct: Provider/Producer-Consumer • One Level: Producer-Retailer-Consumer • Two levels: Producer-Wholesaler-Retailer-Consumer

Promotion Communication Mix all those methods of communication an organisation uses to reach its various audiences.

Communication Mix • Advertising • Promotion • Personal selling • Public relations • Other publicity

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

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

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

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

Succeeding in the BOP Market: The Marketing Mix • Product - technology-based - simple, but good quality - packaging (sachets, mini-key soap) - branding (Nokia phone)

Marketing Mix in the BOP Market • Price • economies of scale • Low-cost • affordable

Marketing Mix in the BOP Market • Promotion - reach is more important than attention - information hungry; entertainment starved - face-to-face promotion

Marketing Mix in the BOP Market • Place (Distribution) • Affordable packaging (sachets, one-use) • Intermediary/partner channels

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

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?

Step 2 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 3 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 4 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 5 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 6 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?

Fortune at the BOP? • The world’s 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

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”,KekiDadise, Hindustan Lever

Can You Fault This? “I can’t 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

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

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

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

Finale Things work only if we make them work Things work only as well as we make them work

Strategic Marketing Models For Reaching The Base of The Pyramid