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

Nairobi May 2010

Pikay Richardson, PhD,Manchester Business School

University of Manchester

Strategic Marketing ModelsFor Reaching The Base of The Pyramid

Copyright © 2008 The World Bank – International Finance Corporation

Coverage

1. How do you make customers?

2. The BOP Market and what it offers

3. Succeeding in the BOP Market

4. Building an effective Marketing Plan

5. The Fortune at the Base of the Pyramid

6. 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

1.Product2.Price3.Place4.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


Price: the Exchange Value of a product from

perspective of both seller and buyer.

Price influences consumers perception of the product (VFM).

Pricing


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.


Channels of Distribution:

Direct: Provider/Producer-Consumer

One Level: Producer-Retailer-Consumer

Two levels: Producer-Wholesaler-Retailer-Consumer

Place (Distribution)


Communication Mix

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

Promotion


Advertising Promotion Personal selling Public relations Other publicity

Communication Mix


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 challengesHence 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


Promotion- reach is more important than attention

- information hungry; entertainment starved

- face-to-face promotion



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?


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 2


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 3


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 4


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 5


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?

Step 6


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”,

Keki Dadise, 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

Documents

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