Selling To The World's Poor

global life:styles
business practices 1
2002
selling to the worlds poor

the new mass market?
: introduction 1
: introduction
Corporations have traditionally focused their efforts in emerging
markets on middle- and upper-income consumers. This strategy
ignores billions of potential customers.
When the population of the world is segmented by income, the
largest groups are at the bottom of the income scale.1 Often called
the bottom-of-the-pyramid (BOP) market, these potential consumers
represent about two-thirds of the worlds population, or about 4
billion people.
Some companies are now targeting this market and developing
strategies to enable the worlds poorest people to become
consumers of goods and services including consumer products,
energy, medicine, and even inexpensive vehicles.
: bottom-of-the-pyramid (BOP) market defined

Management and BOP market experts C.K. Prahalad and Stuart Hart
break the worlds consumers into four tiers, revealing the scale of the
BOP market.
annual per capita
income*
tiers
More than $20,000
$1,500 to $20,000
2&3
population in
millions
75-100
1,500-1,750
: bottom-of-the-pyramid
(BOP) market defined 1
: BOP markets will grow 2

population growth 2
economic stabilization and
poverty reduction 2
media influence 3
: BOP markets require

innovative approaches 3
product design 3
volume not margins 3
close connection to the
customer 4
marketing 4
distribution 4
decentralized production 4
new approaches to
measure market potential 5
access, not ownership 5
: companies are making

BOP markets work 5
: barriers to BOP markets

remain 7
Less than $1,500
4,000
* Based on purchasing power parity in US$.

Source: Adapted from C.K. Prahalad and Stuart L. Hart, The Fortune at the Bottom of
the Pyramid, Strategy and Competition, First Quarter 2002, www.strategybusiness.com
According to their estimates, Tier 1 includes the worlds 75-100

million most affluent people. They are middle- and upper-class
: business implications 7
: references 8
2
consumers from developed countries and the rich elite of the
developing world.
Four billion people are
joining the pre-markets of the
world, and they are yearning
for a way of life they see on TV
and the Internet. They can see
how the rest of the world lives,
and they are eager to become
consumers.
C.K. Prahalad, professor,
University of Michigan
Business School and expert
on marketing to bottom-ofthe-pyramid consumers
Source: Dana James, B2-B4
Spells Profits, Marketing News,
November 5, 2001
The scale of BOP markets is

staggering. Venky
Venkatesh, a sales manager
for Hindustan Lever,
oversees a region in India
comprised of 150,000
villages and some 200
million people. That is more
people than in Russia and
Ukraine combined.
Altogether, rural India makes
up about 12% of the worlds
population.
Source: Rekha Balu, Strategic
Innovation: Hindustan Lever
Ltd., Fast Company, June 2001
Youre going to have to price

your product, package it, and
market it in totally different
ways than for your Fortune
500 product.
Allen Hammond, World
Resources Institute, on
selling to BOP markets
November 5, 2001
Social ) Technologies
Tier 2 consists of poor consumers in the developed world, and Tier 3

is the rising middle class of developing nations, who have
traditionally been the targets of emerging-market strategies. These
two tiers include about 1.51.75 billion people.
Tier 4 is the bottom of the pyramid. It includes the 4 billion people
whose per capita income is less than $1,500 per year. Over a quarter
of the BOP market has a per capita income of less than $1 per day.2
Many BOP consumers live in rural settings, making them hard to
reach. Still, in aggregate, Prahalad and Hart estimate Tier 4 to be a
multi-trillion-dollar market.3
The four-tiered pyramid can be loosely applied to the Worlds
classification system used in the Lifestyles project. BOP markets
would correspond to the lower-income segments in World 2 and all of
World 3.
: BOP markets will grow

BOP markets will increase in both size and importance due to three
main drivers:
population growth
economic stabilization and poverty reduction
media influence
population growth
In the coming decades, the size of BOP markets will grow. Population
growth rates in Worlds 2 and 3 are much higher than in World 1.
Between 2000 and 2030, almost all the worlds population growth
will occur in the less developed nations of Africa, Asia, and Latin
America.4
The World Bank projects that the population at the bottom of the
pyramid could grow to 6 billion over the next four decades.5
economic stabilization and poverty reduction

In the last five years some of the attractiveness of emerging markets
was soured by Asian and Latin American financial crises.6 Still, during
the next decade, activities in BOP markets may become more viable
as many developing countries continue to stabilize, open their doors
to trade and foreign investment, and improve health and education.7
gl: business practices 1 | selling to the worlds poor
3
A new consensus is forming about how to combine aid to the poorest
with successful economic policy. There is an unprecedented degree
of agreement about what is required to overcome global poverty,
said Horst Khler, the managing director of the International
Monetary Fund, in 2002.8
As part of the effort to fight poverty, microcredit has increased in
Worlds 2 and 3. These small loans enable BOP consumers to afford
higher ticket items, such as a solar power system. Shell Solar
considers partnerships with NGOs that make microcredit loans a
prerequisite to entering a BOP market. Without microcredit it would
be impossible to expect someone earning $1,500 per year to pay for
a $500 solar system. There has to be a capacity to pay. You can get
to a lot of paddy farmers who can give a down payment of 20% and
pay the rest over five years, notes Shell Solars business manager
for India, Sri Lanka, and the Philippines.9
I see the life overseas. I see

on television. Its not like in
South Africa. The houses are
nice. Its difficult to get nice
houses, but they will come.
Mvuselelo Jompolo, South
African 13-year-old
Source: Rachel L. Swarns,
Children Saw What We Had Not
Seen, That We Must Fight, New
York Times, January 1, 2000, 44
media influence
Exposure to television and other media sources is also helping to
drive consumer aspirations. In rural India, one third of rural
consumers watch TV, seeing everything from Ally McBeal to Indian
soap operas.10 This exposure is resulting in consumer demands for
better products and services that make their lives easier.11
: BOP markets require innovative approaches

Corporations going after the BOP market are using unique strategies
at all levels, from product design to production, marketing, and
packaging. For example:
product design
Products are being designed to fit the lifestyles and available
resources of BOP consumers. This often means packaging products
for single use, enabling a lower purchase price. Hindustan Lever, the
Indian subsidiary of Unilever, pioneered this tactic with its soap
products in India, where 40% of rural workers are paid on a daily
basis and make small daily purchases.12 It has since exported the
single-use design concept to BOP markets in Asia, Latin America, and
Africa. Other companies have followed Levers lead. Coke recently
debuted a 6.8-ounce bottle of cola that sells for about 12 cents in
India.13 One company redesigned its refrigeration system, which
used to account for 40-50% of the cost of its ice cream, and can now
profitably sell ice cream in India for 2 cents per cone.14
Like many Unilever products

aimed at BOP markets,
Sunsilk shampoo comes in a
variety of sizes, including
single-use packets.
Source: www.unilever.com.ph
volume not margins

BOP markets will not deliver the high margins of more developed
markets. Instead, profits are driven by volume and efficiency.15 This
4
may mean measuring success in new ways. For example, Hindustan
Lever looks at total hair washes as its market for shampoos. It does
not necessarily strive to capture a certain percentage of the shampoo
market, but instead seeks to increase consumption so that the
desired percentage of total hair washes are done with a Unilever
product.16
Only village people buy
duplicates. I want the real
thing.
Maryamma, a poor Indian
woman, on buying a knock-off
brand versus Levers Wheel
detergent
close connection to the customer

As in any market, it is essential to listen to the consumer. To this end,
Hindustan Lever requires that each management trainee begin his or
her career by spending six to eight weeks in a rural village, sleeping,
eating, and living side by side with villagers in an attempt to learn
what this vast market is all about.17
marketing
Radio and TV ads are important, but lower media penetration and
high illiteracy in BOP markets mean that alternative marketing
approaches are essential. Tactics include word-of-mouth and product
demonstrations at village fairs and festivals. Hindustan Lever has
successfully used skits in village street theaters to raise awareness of
soap products. Over six months, 50 teams of local actors, magicians,
and musicians gave performances at 2,005 village marketplaces,
connecting residents to the Lever brand. Scripts were adapted to
local dialects, education levels, and religions. Awareness and sales
of Lever products increased after the six-month campaign.18
distribution
Everybody 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 share, you have to
participate in all segments.
Keki Dadiseth, Unilever
Direct-sales techniques are often used to compensate for a lack of

formal distribution channels and to reach the large, often rural,
populations of BOP markets. For example, half of Indians living in
small villages do not have access to motorable roads, meaning
products have to be brought in by animal drawn cart or bicycle.19
Some companies have seen success using direct sales. Avon has
sold its products to small villages in the Amazon since the mid1990s. As one Avon executive put it, The poor like to smell good,
too.20
decentralized production
Hindustan Lever has built an extensive production and distribution
network to reach consumers throughout India. It ships products from
100 factories to 7,500 distributors and 3 million retailers. Lever
claims that the high fixed costs associated with such a system are
offset by the higher volume enabled by reaching more consumers.21
new approaches to measure market potential

BOP markets are often overlooked because market potential is
usually measured by per capita income. But while a young couple in
a BOP market might not be able to afford a refrigerator, an extended
family might pitch in together to buy one. Collective purchases,
whether at the family or village level, can enable BOP consumers to
buy larger-ticket items, such as appliances, consumer electronics,
computers, telecommunications service, or transportation.
In addition, because they often live in rural areas, many BOP
consumers produce their own food. This means their food is largely
free and that they may have more disposable income than an urban
resident, who might spend 50% of income on food.22
access, not ownership

Shared access to consumer goods is a common model in BOP
markets, due to the low income levels of consumers.23 Consumers in
India can rent computer time at Internet cafes for about 10 cents an
hour, for instance.24 In rural Bangladesh, shared phones from
GrameenPhone Ltd. are each used by about 100 people and generate
about $90 in profits per month. This is two to three times the revenue
generated by individually owned phones in urban Bangladesh.25
The grand outcome is that all

these companies are going to
get rich selling to the poor.
Pradeep Kashyap, president
of Marketing & Research
Team, a rural strategy
consultancy
Source: Manjeet Kripalani, Rural
India, Have a Coke,
BusinessWeek, May 27, 2002
: companies are making BOP markets work

To fully leverage emerging-market opportunities, more corporations
now are targeting the BOP segmentusing two main strategies:
offering products and services to fit BOP spending power and

lifestyle
employing BOP consumers as part of the enterprise
Companies doing business in BOP markets offer a wide variety of

products and services. In all cases, they strive to keep offerings
simple and affordable.
Unilever has become the classic example of BOP success. Unilever
has been investing in BOP markets since the late 1980s, when its
subsidiary Hindustan Lever began selling single-use packets of
Sunsilk shampoo that cost 24 cents. Today, mini-packages account
for half of the companys $2.4 billion in sales in India.26
Rexona mini deodorant sticks

are available in BOP markets.
In the Philippines they cost 17
pesos or about $0.34.
Source: www.unilever.com.ph
Unilever now offers small and single-use products in markets around

the world, including:
Rexona brand deodorant sticks popular in India, the Philippines,

Bolivia, and Peru, which sell for as little as 16 cents each
nickel-sized Vaseline packages

Close-Up brand toothpaste tubes that hold enough paste for 20
brushings
3-inch-square packets of margarine that do not require
refrigeration, sold in Nigeria27
BOP employees
Ushaben Patel milks her cow

twice a day in the Indian
village of Navali. She takes
the milk to the village
cooperative to be tested and
measured. At this point she
becomes part of the supply
chain of Anand Milk Union
Ltd., better known as Amul.
Unilever executives see the companys future success as directly tied

to brand-building in BOP markets. By 2010, they anticipate 50% of
sales will come from the developing world, up from 32% in 2001.28
Amul employs some 2 million

villagers throughout India.
With their low-cost sources of
raw milk, Amuls cheese, ice
cream, and chocolates have
recently been stealing market
share from Nestl and
Unilever. Sales are growing by
25% annually and Amul
already exports to the United
States, the Middle East, and
Africa.
Other examples of BOP products and services include:
Source: Manjeet Kripalani and

Pete Engardio, 13: Small Is
Profitable, BusinessWeek,
August 26, 2002
Were not doing this out of

charity. But if you can
contribute to a social cause
while being profitable, then
why not?
Pratik Pota, marketing

manager for Hindustan Levers
new-ventures team

New York Life Insurance Co., with local partner Max India, reports
a booming business in selling policies in villages of 5,000 people
and less. A typical term policy has a payout of around $200 and
an annual premium of $2.29
Britannia, the Indian subsidiary of Frances Groupe Danone, sells
energy biscuits for 2 cents and 6 cents apiece. European candy
makers Perfetti and Agrilimon sell hard candy at village shops for
a tenth of a cent each.30
Shell Solar, in conjunction with South Africas national power
company, provides affordable solar power to poor, isolated
communities. Shell Solar also operates in Sri Lanka, India, and
the Philippines, and is looking to expand into China and
Indonesia.31
Bristol-Myers Squibb, in reaction to international pressure,
slashed the prices of its AIDS drugs in Africa from $20 per day to
less than $1. This was not only a good PR move, but will also get
the companys products and brand to millions of consumers who
previously could not afford these advanced drugs.32
Honda, with its local Indian partner Hero, now sells almost half of
its motorbikes in rural areas. Though they may be too expensive
for most young men, the $900 bikes have become a popular gift
from parents of the bride to their new son-in-law.33
Arvind Mills, the worlds fifth largest denim manufacturer,
bypassed the problems of low income and poor distribution in
India with its Ruf & Tuf ready-to-make kit of jeans components
(denim, zipper, rivets, and a patch). The kit was priced at $6,
compared to $40 to $60 for jeans in urban stores. Ruf & Tuf jeans
are distributed through thousands of local tailors and are now
the largest selling brand of jeans in India.34
Scojo Vision sells non-prescription eyeglasses in El Salvador,
India, Haiti, and Guatemala for as little as $2 per pair. The
glasses come in three strengths and are sold by local
entrepreneurs who buy a kit of eye charts, brochures, and a stock
of glasses with a $75 loan from Scojo.35
Amuls cost-effective sourcing of raw milk from over 2 million

village dairy farmers in India lets it produce reasonably priced
packaged foods. Amuls latest offering, a pizza, costs about 40
cents, about a fourth of the competitors price.36
: barriers to BOP markets remain

Barriers will continue to make selling to BOP markets a challenge in
upcoming decades. Some common challenges include:
Its where there will be

growth in the next 10 to 20
years.
Diane Osgood,
environmental economist and
consultant who works with
companies developing
sustainable businesses in
poor countries
corruption
illiteracy
inadequate infrastructure
currency fluctuations
product counterfeiting
bureaucratic red tape37

November 5, 2001
Many companies seek to overcome barriers to BOP market entry by

forming partnerships with local government, NGOs, or local
businesses, gaining both access to local communities and insight
into consumer desires, behavior, and resource levels.38
In addition, new attention to governance, democracy, corruption, and
basic education in these markets should help to reduce these
barriers in the next decade and beyond.
: business implications
Much of the focus in BOP markets currently seems to be on rural

markets. But continued population growth and urbanization will
make serving the bottom-of-the-pyramid consumers in urban
areas attractive as well. By 2015 the 1,300 largest cities in the
world will account for 1.52 billion people, about half of whom
will be BOP consumers.39 And urban consumers will be easier to
reach than their rural counterparts.
Reaching BOP consumers now can get companies in on the
ground floor for future growth as wealth rises in successful World
2 and World 3 countries. Todays peasant kid may be the father of
tomorrows urban officeworker.
Companies are entering BOP markets for the promise of real
profits. But there will be ancillary benefits too: companies that
sell to the poor in ways that improve the poors lives can enhance
corporate reputations for social responsibility.
The need for widespread but small-scale distribution systems in
BOP markets creates a natural fit for large networks of individual
direct sellers. This need can also dovetail nicely with microcredit
initiatives.
As competition heats up in BOP markets, companies will need to
market diligently to ensure top-of-mind awareness for their
products. BOP consumers do not buy in weekly or monthly
product quantities as World 1 consumers do. Instead, they shop
every day after getting paid, giving them the daily opportunity to
switch brands.40
New marketing campaigns in BOP markets may need to focus on
customer education, as consumers are exposed to product and
service categories never before offered to them.
As the example of the jeans kits shows, BOP consumers may be
interested in kits, ingredients, or materials that they can make
into final form with their own cheap labor. In India, for instance,
concrete is widely advertised to consumers.
Market research in BOP markets will need to adapt to local
conditions. Observational research may be more useful than
conventional techniques because of illiteracy, lack of phones or
other technologies, widely distributed population, etc.41
Innovative and environmentally friendly packaging will be an
important component in successfully serving BOP markets. In
India, 30% of personal care products and other consumer
products such as shampoo, tea, and cold medicines are sold in
single-serve packages.42 As BOP markets expand, this strategy
could spell a disposal disaster. This implies that packaging
professionals should be in close coordination during product
design, and that environmental considerations should be
included in strategies for BOP markets.
: references
1
C.K. Prahalad and Allen Hammond, Serving the Worlds Poor, Profitably, Harvard
Business Review, September 2002, Vol. 80, Issue 9.
2
C.K. Prahalad and Stuart L. Hart, The Fortune at the Bottom of the Pyramid,
Strategy and Competition, First Quarter 2002, www.strategy-business.com.
3
4
Population Reference Bureau, Human Population: Fundamentals of Growth,
www.prb.org, viewed November 2002.
5
6
7
Dana James, B2-B4 Spells Profits, Marketing News, November 5, 2001.
8
Paul Blustein, The Right Aid Formula This Time Around? Washington Post, March
24, 2002.
9
Terry Slavin, The Poor Are Consumers Too, Manchester Guardian Weekly, April
11, 2001.
10
Rekha Balu, Strategic Innovation: Hindustan Lever Ltd., Fast Company, June
2001.
11
Manjeet Kripalani, Rural India, Have a Coke, BusinessWeek, May 27, 2002.
9
12
Khozem Merchant, Striving for Success: One Sachet at a Time, Financial Times,
December 11, 2000.
13
14
Ascribe Newswire, Serving the Poor Is Good Business, Says Strategy Guru,
October 22, 2001.
15
16
2001.
17
2001.
18
2001.
19
December 11, 2000.
20
Jack Epstein, Silicon Jack, Latin Trade, October 2002.
21
December 11, 2000.
22
2001.
23
Global News Wire, India: Every Indian Must Have Access to Credit, January 10,
2001.
24
Ascribe Newswire, Serving the Poor Is Good Business, Says Strategy Guru,
October 22, 2001.
25
26
Manjeet Kripalani and Pete Engardio, 13: Small Is Profitable, BusinessWeek,
August 26, 2002.
27
August 26, 2002.
28
2001.
29
30
31
11, 2001.
32
11, 2001.
33
34
35
August 26, 2002.
36
Global News Wire, India: The Amul Concept, September 27, 2001.
37
38
39
40
41
42

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global life:styles

selling to the worlds poor

: bottom-of-the-pyramid (BOP) market defined

More than $20,000

: BOP markets will grow 2

: BOP markets require

: companies are making

: barriers to BOP markets

Less than $1,500

* Based on purchasing power parity in US$.

According to their estimates, Tier 1 includes the worlds 75-100

The scale of BOP markets is

Youre going to have to price

Tier 2 consists of poor consumers in the developed world, and Tier 3

: BOP markets will grow

economic stabilization and poverty reduction

gl: business practices 1 | selling to the worlds poor

I see the life overseas. I see

: BOP markets require innovative approaches

Like many Unilever products

volume not margins

gl: business practices 1 | selling to the worlds poor

close connection to the customer

Direct-sales techniques are often used to compensate for a lack of

gl: business practices 1 | selling to the worlds poor

new approaches to measure market potential

access, not ownership

The grand outcome is that all

: companies are making BOP markets work

offering products and services to fit BOP spending power and

Companies doing business in BOP markets offer a wide variety of

Rexona mini deodorant sticks

Unilever now offers small and single-use products in markets around

Rexona brand deodorant sticks popular in India, the Philippines,

gl: business practices 1 | selling to the worlds poor

nickel-sized Vaseline packages

Ushaben Patel milks her cow

Unilever executives see the companys future success as directly tied

Amul employs some 2 million

Other examples of BOP products and services include:

Source: Manjeet Kripalani and

Were not doing this out of

Pratik Pota, marketing

Source: Rekha Balu, Strategic

gl: business practices 1 | selling to the worlds poor

Amuls cost-effective sourcing of raw milk from over 2 million

: barriers to BOP markets remain

Its where there will be

Source: Dana James, B2-B4

Many companies seek to overcome barriers to BOP market entry by

Much of the focus in BOP markets currently seems to be on rural

gl: business practices 1 | selling to the worlds poor

gl: business practices 1 | selling to the worlds poor

gl: business practices 1 | selling to the worlds poor

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