3. Question 1
What are the key differences in marketing to
‘Bottom of the pyramid’ (low Income) customers?
4. Bottom of the Pyramid (BOP)
• The BOP approach to earning profit has gained substantial
interest in marketing literature in recent years (Pitta et al, 2008)
• It has awoken managers to the possibility of a double bottom line
where corporations have the opportunity to merge social goals,
namely alleviating poverty, with profit (Prahalad and Hammond,
2002)
• However, there are fundamental differences between the top and
the bottom of the pyramid
• Companies targeting this sector will have to understand how the
BOP segment differs from other segments and customise the
marketing approach
• For marketers to successfully target this segment, they will have
to use new techniques and ignore what they would normally
accept as truths and accepted knowledge in marketing
5. Key Differences
• Purchasing Power
• Distribution Channels
• Product Modification
• Marketing Channels
• Consumer Behaviour and Characteristics
6. Purchasing Power
• BOP consumers are heavily constrained by a lack of income
(Subrahmanyan and Gomez-Arias, 2008)
• They suffer from low and volatile disposable incomes which
limits their purchasing power severely
• BOP consumers live mainly at a subsistence level which means
that after they satisfy the basic human needs of fuel, food and
clothing they have spent 80% of their income (Pitta et al, 2008)
• Due to this distinct lack of purchasing power, affordability must
be at the centre of the thought process in serving the BOP
• BOP Consumers are very price sensitive due to their meagre
incomes and therefore the appropriate pricing of a product is of
paramount importance for the marketer
7. Purchasing Power
• Believers of marketing to the BOP acknowledge that individually
low income consumers have little purchasing power but feel that
together they represent massive purchasing power (Pitta et al,
2008)
• The pertinent question for marketers to the BOP remains how to
harness this group purchasing power and at what price?
• Karnani (2007) acknowledges that due to BOP consumers lack of
purchasing power, there has to be a price-quality trade off
• Marketers must decide to what level this trade-off takes place to
produce a desirable product and still remain profitable
8. Distribution Channels
• The critical barrier to doing business in BOP regions is
distribution access, not a lack of buying power (Prahalad and
Hammond, 2002)
• Therefore, marketers need to revisit their distribution channels to
approach the market effectively
• Vachani and Smith (2008) outline the main factors behind the
lack of market access to BOP consumers;
• Poor Road, Communications and Electricity Infrastructure
• Escalating fuel costs adding to the cost of transportation
• Lack of adequate information to make informed buying decisions
and illiteracy
9. Distribution Channels
• BOP consumers have several behavioural traits and preferences
which affect the choice of distribution channels;
• Prefer small neighbourhood stores
• Prefer to shop close to home
• In essence, BOP consumers seem to prefer to shop in stores that
are close in terms of geography and emotionally
• The collectivist nature which exists in many BOP markets means
that consumers are inclined to shop within their immediate area
where they have built a relationship with shopkeepers
• Local stores often provide microfinance which can be vital for
BOP consumers
10. Consumer Characteristics and
Behaviour
• Mothers, whom are mostly homemakers, make the majority of
the purchasing and family spending decisions for the household
fulfilling their role as wife, mother and household manager (Pitta
et al, 2008)
• BOP consumers tend to spend a higher percentage of their
income on consumer goods (50 to 75 percent) compared to
wealthier segments (around 35 percent) (D’Andrea et al, 2004)
• Shop Daily and spend small amounts
• Reluctant to buy products in places located far from their home
• Social values – Collectivist nature, Importance of community
interaction, Try to cultivate social capital
• Limited and Unstable Income
11. Product Modification
• Subrahmanyan and Gomez-Arias (2008) acknowledge that
marketers face the challenge of designing relevant and practical
products for BOP consumers
• This may mean the redesigning of existing products or
completely new products which will ultimately depend on buyer
preferences in the specific market
• Since Affordability is one of the key elements in targeting BOP
consumers, product modification may help in lowering the price
and making the product more available (Pitta et al, 2008)
• D’Andrea et al (2004) believe that BOP consumers prefer
products in smaller sizes due to space and income constraints
• Ultimately buyer preferences in any given BOP market may
differ, giving rise for the need to modify products
12. Promotion Channels
• Effective marketing channels differ from market to market. Some
of the factors which characterise BOP markets include;
• Lower literacy rates
• More local forms of promotion – Street performances, Local
forms of theatre etc
• Lack of access to conventional media channels
• The presence of these barriers must be examined in order to
design an appropriate promotions strategy
13. Q2. Are low income customers
a profitable target for Unilever
in Brazil?
14. Assessing the target market in Brazil...
Population: 170million- 48million live in the Northeast
Income Per Capita: $6,600 (Southeast)
$2,250 (Northeast)
• 40% of population are illiterate
• 53% of Northeast falls into social classes E+ or E-
• Only 28% in Recife own a washing machine
15. Possible problems with introducing a
profitable low income detergent…
• Lack of disposable income in Northeast
• Risk to existing products
• Challenge of sustaining Omo’s price and market
share
16. Reasons why a low income detergent
could be profitable.....
• Brazilians would love to buy Omo but tight budgets means
they can only afford cheaper local brands
• Clothes are washed more frequently in the Northeast- 5
times a week
• Success of Nirma in India
17. Overall issues when deciding to introduce a
low income detergent that could...
Affect possible profitability...
• Lack of knowledge on low income consumers
• Level of existing competition
• No experience of a marketing strategy that would work
for this segment
Affect Unilever...
• Reputation damage
• Stock market repercussions
• P&G introducing low income detergent and gaining
market share if it is successful
18. Prahalad and Hammond acknowledge
the untapped potential of the poor
• 65% of the world’s population earns less than
$2,000 each per year- that’s 4 billion people
• Assumption-poorer people have little to spend so
what they do spend goes basics like food and
shelter
• Individual buying power may be low but the
aggregate buying power of the poor is high
(C.K Prahalad and Allen Hammond 2002)
19. Yes low income customers would be a
profitable target for Unilever
• Rewards for introducing a low income detergent: growth,
profits, and contributions to mankind
New Challenge:
Low Cost + Good Quality + Sustainability + Profitability
How is this achieved?
Decentralisation
• Production
• Marketing
• Distribution
(C.K Prahalad and Allen Hammond 2002)
20. Cost, Profits and Margins
Cost Structure
• Low price point
• Traditional pursuit of high margins not an option
Profits are driven by
• Volume
• Capital efficiency
Margins
• Margins low but unit sales high
• Focus on innovation and economic profit, opportunities
lost if focus is gross margins
(C.K Prahalad and Allen Hammond 2002)
21. Corporate Strategic Strategy to bring together....
Best of Technology
Best of Technology
Global Resource Base to
Global Resource Base to
Address Local Market
Address Local Market
Conditions
Conditions
Cheap and low quality products are NOT the goal and will not equal profits!
(C.K Prahalad and Allen Hammond 2002)
22. In order to make a profit Unilever need
to improve channels of success by....
• Creating Buying Power
• Shape Aspirations
• Improve Access
• Tailor Local Solutions
23. In contrast Karnani believes…
• Buying power of low income customers in over estimated
• Prices are set too high for these people
Only three ways to reduce prices…
• Reduce profits
• Reduce costs without compromising quality
• Reduce costs by reducing quality
(Karnani, A. 2007)
24. In Conclusion….
A cautious approach should be taken by Unilever
but there is potential for low income customers to
be a profitable target
Critical elements to ensure success
• Assessing local market conditions
• Access to detergent
• Getting the Marketing Strategy right
• Pricing
Overall the price-quality trade off in a way that the
low income customers view to be acceptable is the
key
25. Q.3. Would a low income
product cannibalize sales from
Unilever’s other detergent
brands?
27. Cannibalisation
Definitions: “the process by which a new product gains sales by diverting them from
an existing product”
Or
“the extent to which one product’s customers are at the expense of other products
offered by the same firm.”
There is no point in introducing a new product if the main effect is to pull
customers away from an existing product.
Therefore we must analyse Unilever’s existing products and estimate whether
or not the introduction of a new low-income product will affect them.
30. Omo
Would the introduction of a low income product reduce Omo’s sales?
• Omo is positioned in a different segment, and is communicated as a
much more luxury brand
• Omo’s target market is the more wealthy, and also an occasional
purchase from poorer people
• The wealthy people do not want to be seen buying a low-income
brand and therefore won’t migrate to the new low-income product
• In market research performed by Unilever, the most important
attribute of detergent was the perceived power of it.
– Omo is nearly 30% ahead of its nearest rival in this aspect.
• Omo has - 100% brand knowledge, 95% market penetration, and
70% top-of-mind awareness.
• It is also the cash cow of Unilever’s detergents portfolio in Brazil
Overall, we think the introduction would not have an effect on the sales
and profit margins of Omo.
31. Minerva
Would the introduction of a low income product reduce Minerva’s sales?
Overall, we think the profit margins lost on Minerva, due to people buying a
new low-income product, will not be significant and that Unilever can make substantial
profits from both products.
32. Campeiro
Would the introduction of a low income product reduce Campeiro’s sales?
Overall, given the poor people of the North-east are not priced out of range
and that the marketing mix is suited to them, we think the new low-income product
could steal a lot of Campeiro’s profits and make it difficult for Unilever to sustain
profitability for both.
33. Unilever’s Decision?
With these arguments in place, the important question
is...what will the cannibalisation rate be?
i.e. will Unilever gain or lose profits with the introduction of a
low-income product?
We think that with the introduction of a new low-income
product, Unilever will be able to;
• raise their market share in the detergent industry,
• grow their profit margins even further, and
• therefore continue being the market leader.
But to find a more accurate estimation of this, Unilever
would have to propose a marketing mix strategy that would
suit both the company and the consumers!
34. Q4. Propose a marketing mix for
launching a Unilever detergent for the
low-income market.
35. Northeast Market
• 48 million people living in the Northeast of Brazil.
• 40% of population are illiterate.
• Northeast have a distinct culture and history, mixed Africans
and European origins.
• In the Northeast only 28% of households own a washing
machine.
• 73% of women think that bleach is necessary to remove fat
stains.
• NE scrub clothes using bars of laundry soap. Then add
bleach and add only a small amount of detergent powder at
the end to smell nice.
• Clothes are washed more frequently in the NE.
• NE view washing clothes as one of the more pleasurable
activities of their week.
36. Attributes Wanted in a Detergent
• Low income consumers of NE evaluate detergents on 6
attributes along with price
– Perceived power of detergent (ability to clean & whiten
clothes with a small amount of detergent), which is often
judged by amount of foam produced.
– Smell of detergent.
– Ability of remove stains without the need for laundry soap
and bleach.
– Ease of which powder dissolves in the water and leaves no
residue on the fabric.
– Packaging: must be able to recognise brand and open
easy.
– Impact on colours least important.
37. Brand Strategy
• Develop a new formula priced half-way between Minerva
and Campeiro.
• Designed specifically for the Northeast culture of hand
washing.
39. Product
• New formula, for hand washing. Using detergent instead of
laundry soap.
• Combining attributes of laundry soap and detergent but at a
lower price than Minerva.
• Containing important attributes for low-income people.
– Ability to clean and whiten clothes using a small amount of
detergent.
– Pleasant smell with softening powder and gentleness to fabric
and hands
– Good stain remover without the need for laundry soap or
bleach.
40. Product
• Does not contain specific enzymes and builders which
improve whitening power of detergent when used in
washing machine – this will keep prices down.
• Focus on making best hand wash detergent as that is how
majority of NE wash their clothes.
• Detergent designed for hand washing is also cheaper to
produce.
41. Price
• Pricing is key for success of new brand. Priced too high
the product would be out of reach for the target market.
Priced too low could increase cannibalization of existing
Unilever brands.
• Pricing below Campeiro could be damaging. People may
not buy as perceived quality would be too low and not
give people the attributes they desire.
• Pricing half way between Minerva and Campeiro is the
best option.
42. How to cut costs?
• By producing a detergent product that is specifically
designed for hand washing will reduce price.
• Eliminating specific enzymes and builders that Unilever use
for their premium brands designed for detergents used in
washing machines will help reduce costs.
• Keep packaging simple and cheap will help keep costs
down.
• Use plastic packaging instead of cardboard.
• By reducing above-the-line advertising.
43. Packaging
• Selecting the right packaging for a low income
society is vital for the success of product
• Packaging should be bright in colour, distinctive,
simple and easy to recognise.
• Must be easy to open and keep detergent safe
from humidity.
• Package in medium size boxes, not too large so
as to be out of weekly budget range of the
poorest customers. But big enough to supply 2
weeks worth of detergent.
• Containers made out of plastic as it is cheaper
to produce. But still resemble the cardboard
44. Promotion
• Key message to be: Affordable quality
• Have a 50:50 split for above-the-line and below-
the-line advertising.
• Above-the-line advertising, all budget go to
television ad campaign. 70% have TV’s.
• Below-the-line campaign focusing on point of
purchase marketing, demonstrations, brand
ambassador for the detergent, sponsorship of
events (street events). Find innovative ways to
get product noticed.
• Product and brand have uniformity.
45. Place
• Distribution is key in the success of a product launch to
low income people.
• Product need to be placed in small local shops, as low
income shoppers don't shop in large supermarkets.
• Hire specialized distributors who would get exclusive
rights to sell all detergent in certain areas that otherwise
would be very hard to reach.
• Unilever seem to have overcome the distribution barrier
with their previous products and should continue with the
same distribution strategy as has proven successful
before.
46. Conclusion
• New product needs to be affordable but have quality.
• Promotion to be aimed at low income people but not offend
them. Half on TV, and half on sponsorship of street events
etc.
• Packaging – plastic as cheaper to produce but not lose the
box look.
• Place – continue with same distribution channels as well as
looking into high specialized distributors to reach harder to
get to places.
• Price – priced in-between Minerva and Campeiro
48. References
• Vachani, Sushil and Smith, N. Craig (2008) ‘Socially responsible Distribution:
Distribution strategies for reaching the bottom of the pyramid’, California
Management Review, Vol. 50, Issue 2, pp 52-84
• Karnani, Aneel (2007), ‘The mirage of marketing to the bottom of the
pyramid: How the private sector can help alleviate poverty’, California
Management Review, Vol.49, No. 4, pp 90-111
• Subrahmanyan, Saroja and Gomez-Arias, J Tomas (2008), ‘Integrated
Approach to understanding consumer behaviour at bottom of the pyramid’,
Journal of Consumer Marketing, Vol. 25, Issue 7, pp 402-412
• Pitta, Denis A, Guesalaga, Rodrigo and Marshall, Pablo (2008), ‘The quest for
the fortune at the bottom of the pyramid: potential and challenges’, Journal of
Consumer Marketing, Vol. 25, Issue 7, pp 393-401
• Prahalad, C.K. and Hammond, A (2002), ‘Serving the world’s poor
profitably’, Harvard Business Review, Vol. 80, No.9, pp 48-57
49. References
• Karnani, A. (2007), ‘The mirage of marketing to the bottom of the pyramid:
how the private sector can help alleviate poverty’, California Management
Review, Summer, Vol. 49, No. 4, pp 90-111
• D’Andrea, G., Stengel, E.A. and Goebel-Krstelj, A. (2004), ‘Six truths about
emerging-market economies ‘, Strategy and Business, Vol. 34, pp 2-12
• Prahalad, C.K., Hart, Stuart,L. (2002) ‘The fortune at the bottom of the
pyramid’ stratggy+business issue 26