Question & Answer: When selling to poor consumers, companies need to begin by doing something basic; They need to…

When selling to poor consumers, companies need to begin by doing something basic; They need to create the market By Erik Simanis. The World Street Journal, Monday October 26 2009 Around the world, four billion people live in poverty. And Western companies are struggling to turn them into customers. For the past decade, business visionaries have argued that these people, dubbed the Base of the Pyramid, make up an enormous, untapped market Some of the world’s biggest, savviest corporations have aimed to address their basic needs-by selling them everything from clean water to electricity But. time and again, the initiatives have quietly fizzled out. Why? Because these companies were looking it all wrong. Put most simply The Base of the Pyramid is not actually a market. True, those billions of low-income people have a lot in common But they don’t have two of the vital characteristics you need to have a consumer market They have been conditioned to think that the products being offered are something one would even buy. And they haven’t adapted their behaviours and budgets to fit the products into their lives. A consumer market is nothing less than a lifestyle built around a product. Think of an example close to home. In the 1970s, bottled water was a foreign idea to most Americans-it wasn’t part of American consumers’ lifestyle. It took decades for large numbers of consumers to accept the notion of buying something you could get free out of a faucet and turn bottled water into a big business. For many poor consumers, paying for dean water or sanitation products seems just as outlandish. What is the possible answer? Companies must create markets new lifestyles among poor consumers. They must make the idea of paying money for the products seem natural, and they must induce consumers to fit those goods into their long-held routines. That means working closely with local communities in developing products and businesses, to give consumers a stake in adopting the goods. What’s more companies must take a wide-ranging approach in their marketing, to give buyers as many reasons as possible to give the products a try. Inertia means inactivity, inaction, disinterest or laziness a) Base of pyramid refers to the largest but poorest socio-economic group. The billionaire and philanthropist. Bill Gates describes base of pyramid as an intriguing bluepnnt for how to fight poverty with profitability. This article describes the situation, the problem and the solution of base of pyramid consumers. You are required to identify the situation, problem and solution described by the article. b) As an entrepreneur, what can you do to help those at the bottom/base of the pyramid? What are the marketing strategies that you can adopt or adept?

Expert Answer

a. The situation that has been described in the article is the existence of a large number of potential consumers at the bottom of the pyramid (also known as the base of the pyramid). These potential consumers belong to low income groups. The problem at hand is how to make these large number of people in the base of the pyramid buy your products and services. The solution that has been described in the article is that companies should look at creating markets among the people belonging to the base of the pyramid. This can be easily done by building a lifestyle around the products and services that they are offering. When a lifestyle is build around the product the poor buyers will be induced to consume the goods and services being offered. Companies can build a lifestyle by addressing the basic needs of the consumers. The basic needs have been, till now, inherent and has not been expressed explicitly. The companies should work together with local communities while developing and marketing their goods and services to help the consumers at the base of the pyramid to adopt their behaviors in a way that will allow the goods and services being offered to fit into their lives.

b. As an entrepreneur, I would provide those goods and services that people at the base of the pyramid did not have access to. For instance new business models and strategies can be used to offer houses to people of low income groups in third world countries. Many people at the base of the pyramid in third world countries and developing countries do not own a house and live in shanties. I would implement a radical strategy and follow an approach that will see a paradigm shift by offering low cost houses that the people at the base can afford to buy. They can live in clean and hygienic conditions. I would enable them to adopt their behavior and budget to buy low cost houses to provide their families a better living condition. The marketing strategy would be based on premise that the housing option is offering them something that they never had access to – affordable housing. The focus would be on the 4P’s mainly the price and the product.

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