The Fortune Just Above the Bottom

(Source:The Economic Times epaper dated 6th march http://lite.epaper.timesofindia.com/getpage.aspx?pageid=13&pagesize=&edid=ETD&edlabel=ETD&mydateHid=06-03-2012&pubname=Economic+Times+-+Delhi&edname=Delhi&publabel=ET)

Addressing the needs of the poor calls for the patience of a saint and the pockets of a prince.A clutch of companies that has neither is targeting a more pragmatic opportunity: the chunk of consumers between the middle and the bottom of the pyramid,discover Kala Vijayraghavan & Rahul Sachitanand


Two years ago when Godrej & Boyce launched the affordable refrigerator ChotuKool,it was one of the finest examples of disruptive innovation at work.The idea of allowing a new set of consumers to access a product that has for long been perceived to be the prerogative of the more affluent was shaped at a workshop the company had with Clayton M Christensen,a Harvard professor who coined the phrase.Disruptive innovation is a process by which a product or service is targeted at the bottom of the market,after which it moves up the market and is eventually in a position to compete with established rivals.Godrej junked the traditional marketing model of a distributordealer chain and tied up with India Post,self-help groups and NGOs to sell the refrigerator.The idea discussed in the workshop with the Harvard professor was to involve rural folk in the process,right from designing to selling the product.With Godrej starting at the bottom of the pyramid (BoP),it seemed to be following the late CK Prahalads prescription to a T: of selling low-margin products in high volumes to consumers at the bottomPrahalad put the number of such consumers,who earn less than $4 a day,at 4 billion globally and,in the process,building a viable business.The results were,however,not quite what Godrej expected as it realised that affordability levels at the bottom were much lower than they projected.The next billion (commonly used to refer to BoP consumers globally ) is just marketing terminology, says G Sunderraman,vicepresident,corporate development,Godrej & Boyce,who reckons there is no fortune at the bottom of this proverbial pyramid.Sunderraman feels ChotuKool needs to be repositioned.How can you expect poor consumers with a minimum sustenance to be your pot of gold, he asks.The Godrej VP thinks it is unlikely that BoP consumers will use the refrigerator to store frozen peas or butter.Instead,the focus should be to create a product that can also help consumers generate income,he says.Thats why Godrej & Boyce is developing a version that can be used by chemists and primary healthcare centres to store vaccines.Already,small entrepreneurs in non-urban areas are using ChotuKool to sell items like chilled water.BoP is a great strategy,but its only for those who are willing to ride the long haul and wait patiently for the much-elusive profits to show.For those who dont have the confidenceand the deep pockets to keep pegging away at the bottom,the options are two-fold.One,forget about profits and move the business into the not-forprofit categoryjust as Procter & Gamble did worldwide by transferring a venture for a water-purification powder to its philanthropic arm.The other option,as many marketers in India will vouch for,is more pragmatic: move away from the bottom to the relatively more lucrative band of the pyramid just above it.Management consultancy PricewaterhouseCoopers has christened this the emerging middle (EM).