The Indian BoP market experience: fact or fantasy?

Minutes after I came across this piece written in LiveMint, associated with the Wall Street Journal, claiming there really wasn't a profitable market at the Bottom of the Pyramid, and certainly not one worth the effort it would take to effectively serve them,

New Delhi: Indian companies seeking their pot of gold from the lower-end or bottom of the pyramid (BOP) consumers are in for a bit of shock: The market may be much smaller in reality. While earlier, this market was supposed to be formed of 400 million people, now market research firms Technopak Advisors and Evalueserve are saying that it is not more than 160 million.

I came across this article not only presenting the success stories demonstrated by some of India's largest brandnames,

Four of India's largest companies Tuesday showcased here how they have benefited by tapping India's huge rural market.

The four - ICICI Bank, Hindustan Unilever Ltd, Hero Honda Motors and Infosys Technologies - are among the largest in their own areas of business.

'It's a myth that profit margins get squeezed if you market to the bottom of the pyramid,' said K.V. Kamath, managing director and chief executive officer of ICICI Bank, India's largest private lender, Tuesday in his keynote address at the Ninth Annual Marketing Summit organised by the Confederation of Indian Industry (CII).

but going on to add a rather well known advertising industry executive's take on Technopack Advisors, mentioned in the article first referenced above, as being the lone dissenting voice in the Indian marketplace.

There is certainly life in the bottom of the pyramid,' argued Piyush Pandey, executive chairman and national creative director of Ogilvy and Mather India.

He was referring to the only contrarion view put forth by Arvind K. Singhal, chairman of Technopak, a global management consultancy major, who said 'there is no opportunity at the bottom of the pyramid'. But his was a lone voice.

With both articles datelined August 19th 2008, it makes one wonder whether a) that lone dissenting voice might truly have something to say based on accurate reporting OR whether b) it was a case of the 'warring' press releases?

Tempted though I am to root for the underdog, in this specific situation, I neither support the claim that there is no market at the BoP - certainly there is, where ever there are human beings there is a bazaar, however small it may be - nor do I contend that its "not worth the investment". The BoP market is one where corporates need to look at more than the immediate ROI when evaluating their decision to invest. This is one demographic across the world and a significant one, more than two thirds of the global population in fact, where short term profits and costs cannot remain the only criteria by which to evaluate the value of choosing to serve the underserved.

Comments

[Neelakantan]

If you go into it with your regular bag of tricks, obviously that is right. But if you reconfigure your portfolio, think differently, there surely is. This is a mindset issue.

I am sure we heard the same about about cellphones until the ultra low cellphone charges, ultra cheap cellphones came in. And there are many such examples...

[niti bhan]

neelakantan,

As usual you have read my mind exactly, see what I found on exactly what you have just said in the next post, quoting CK Prahalad on cellphones and BoP market. That it is the asymmetry of information that is the essence of poverty, viz., knowing prices of goats and onions etc and that is why such things are rapidly becoming essential items of the BoP consumer's "shopping list"

not to mention the fact, that cellphones aside, even if the so called BoP market in India has been demoted from 400 million people to *only* 160 million people, that is still half the population of the United States

[Neelakantan]

I like that comparison. BTW for the US, the entire India is BoP :) and going by that mindset, we would never figure as a population that can buy anything.

[niti bhan]

true true, especially not corus, jaguar et al ;p