Reference no: EM132868479
What Do People Need and Demand at the Bottom of the Pyramid?
Confusing need with demand is a common problem among organizations serving the bottom of the pyramid. Many firms have wasted time and resources trying to market products that are designed for the poor but that consumers do not actually want. A research with microfinance customers in rural India showed that when given a choice between beneficial products, such as solar-powered lanterns and low-energy stoves, and aspirational products like mobile phones and gold coins, 85 percent of customers opted for the latter.
It is usually difficult to make the economics work for a product if demand must be generated, because marketing costs typically swamp efforts to keep prices extremely low. Companies should focus on areas where they can meet existing demand, with either lower-cost and better-quality products than the existing options, or simply with cheaper ones. Safaricom's hugely successful M-Pesa, for example, offered money transfers by mobile phone in Africa at 33 percent of the cost of Western Union-and at 20 percent of the cost of (and much greater security than) long-distance bus companies, the customary provider.
Source: Karamchandani, A., Kubzansky, M. & Lalwani, N. 2011. Is the bottom of the pyramid really for you? Harvard Business Review. 89(3): 107.
What is the implication of the example stated above?
Can the bottom of the pyramid prove to be a profitable, long-term market?