I think that maybe wily old Bill may have quite liked that line! Only that my revelation has to do with the bottom of the economic pyramid. I’ll give you a moment to settle matters with your thoughts, just in case you happen to have a relentlessly imaginative mind.

Being an Indian, one never really has to discover the Bottom of the Pyramid. It’s out there on the streets staring right at you, ever since you can remember. It’s unlikely that you just happened to stumble upon it one mid-summer’s night. But B-school has this mystic yet nagging ability to make you re-discover things you thought you were mighty aware of all your life. And so I once again found myself on a new journey, discovering the Bottom of the Pyramid all over again.

C.K.Prahalad’s thoughts on the fortune at the bottom of the pyramid reveal many interesting observations. The corner stone of the idea put forward by C.K.Prahalad is the assumption that individuals at the bottom of the economic pyramid are entrepreneurial in nature. He spoke about the need to co-create solutions for problems at the bottom of the pyramid; a process which he believed would transform the poor into active, informed and involved consumers.  Co-creation, according to him, was the tool that could help build self-esteem and entrepreneurial drive at the BOP. Many critics of the idea of a fortune at the bottom of the pyramid dispute this key assumption by arguing that most people in this world simply prefer to have a job rather than start their own businesses. Why would individuals at the BOP be any different they say? Prof. Aneel Karnani, an erstwhile colleague of Prahalad’s at the University of Michigan, has been one of the most vocal critics of the BOP theory. Having had the opportunity to attend a guest lecture (over Skype) by Prof. Karnani, I must admit that he puts across his arguments quite convincingly. However, at the end of the course, I conveniently take my stand right in the middle. Certainly, not everyone will possess an entrepreneurial drive. But then again, necessity is the mother of all invention and necessity may spark the entrepreneurial drive that Prahalad refers to.

In his book The Fortune at the Bottom of the Pyramid, Prahalad says,” I do not want the poor of the world to become a constituency. I want poverty to be a problem that should be solved.”  He identified 12 principles that he felt constituted the building blocks of a philosophy of innovation for BOP markets ( a quick reference to the 12 principles: http://www.design4billions.com/pages/tipstricks.html). I will focus on the first of the 12 principles, viz. focus on the price performance of products and services, for the remainder of this article. Price-performance is not entirely a foreign concept. After all, all we’re really talking about is our beloved funda of ‘Paisa Vasool’. Prahalad talks about the importance of the price-performance envelope while designing products for the bottom of the pyramid. Low disposable incomes of BOP consumers make price reduction the overarching goal of all firms catering to the BOP market. However, simply reducing the price of products is not a sustainable business model for the BOP market since the key metric that determines value to BOP customers is actually the price-performance relationship. The key insight here is that the BOP consumer, though poor, is often unwilling to compromise on quality.

One method to sell products at a lower price is to reduce the product quantity. Shampoo sachets, a marketing tactic gifted to the world by Cavin Kare back in 1983, did just this. Sachets made it possible for people with low disposable incomes to purchase shampoos. Smaller packs seem to be the strategy being adopted by more and more FMCG companies to increase their penetration of their respective markets. The launch of Good Day biscuit-packs priced at Rs.5 and 23g Kurkure packets, also priced at Rs.5, is a deliberate strategy on the part of Brittania and PepsiCo, respectively, to increase their penetration of the rural and BOP markets. Clearly, the million dollar question is whether they will succeed!

Let me digress a little in order to bring in some more structure to this discussion and my analysis. Some of the biggest success stories in BOP marketing until now have been products and services that cater to what could be called basic human needs, such as good health: HUL’s Lifebuoy Soap initiative, Iodized salt initiative or even Aravind Eye Care are examples of this. (Please note that I’m referring only to BOP initiatives where the BOP individual is a consumer of products as opposed to being a supplier or manufacturer of products, which also falls under the gamut of the BOP marketing theory. For example: the Amul dairy revolution or ITC’s eChoupal) A pertinent question that follows would be: what about marketing of products that are not necessarily ‘essential’ products such as these. What about ice-creams, juices or what could broadly be classified as ‘indulgence’ products? Once again, I will narrow the scope of this discussion and keep it to just food products and not other indulgence products like, say cosmetics.

Marketing of such indulgence products have not really been successful so far. Amul did come out with Rs.5 ice-creams targeted at the BOP segment. They positioned ice-creams as a substitute for milk and thereby, an alternative source of nutrients for kids. While I haven’t been able to successfully google any facts to determine if this initiative is a success, Mr. Karnani’s article (http://www.un.org/esa/coordination/Mirage.BOP.CMR.pdf) suggests that HUL was forced to exit the ice cream segment for the BOP market since they weren’t able to turn around a profit at their low price points. Might be justification of the hypothesis that price alone cannot be a driving factor for marketing to the BOP. Assuming that the ice-creams were of good quality and that HUL was in fact able to reduce costs significantly, what could be a reason for lack of appeal of these ice creams? I’m tempted to think that it’s because ice cream as a category does not offer an attractive price-performance relationship since consumers at BOP always account for volume or size while evaluating the performance of food products at BOP. Why do I say so? There is only one food product which could potentially be classified as an indulgence product that has successfully penetrated the BOP market and that is biscuits. And the single reason for this is that biscuit manufacturers such as Parle-G have since long offered large biscuit packets at a low price point! Size does matter! BOP consumers will rarely indulge in a product that offers only a moment’s satisfaction. The indulgence needs to be an experience that lasts for a while. Large biscuit packets can probably be saved for later and need not be consumed at one go. Taking this argument forward, large bottle juices sold a low price point may be the strategy to penetrate the BOP market for juices.

Will PepsiCo and Britannia’s small-pack strategy help penetrate the BOP market? I’m not so sure. As always, I guess we’ll just have to wait and see how it unfolds. But if size does matter, they may be forced to rethink their strategy!