The term bottom of the pyramid refers to a marketing strategy that seems offensive on the surface until you realize that all goods and services are segmented, targeted, and positioned to benefit different members of the population. Although this article isn’t focusing on the income inequality gap globally, over 4 Billion people live at or below the poverty level. This is a serious socio-economic problem. Instead, this article will focus on marketing strategies to this market. Specifically, the objective is to provide a snapshot of the enormous potential for business opportunities within this consumer group. Amazingly, although this audience primarily represents the low-income demographic, they account for over 13 Trillion in purchasing power. Therefore, the market for goods and services to the BOP represents an enormously lucrative marketplace. With hard work, ingenuity, and creativity, the opportunities for profits here are tremendous. After all, who understands the consumer culture and the shared set of consumption needs of these demographics more than members of that group? Big business shouldn’t be the only investors profiting from this realization. There are programs like SBA that offer opportunities for business development. This organization assists economically disadvantaged groups or individuals and provides the funding and training needed to compete and reap economic benefits.
So, if the BOP is the target audience of your new marketing campaign, then it is imperative that you read on. You must carefully do your research and analyze your decisions. This ensures a good match for your business products and services. However, there are several factors relating to marketing strategies that must be identified before expending any unnecessary time or resources. These factors are market potential, sales potential, competition, and cost. Knowing market potential is very important because you need a solid understanding of who comprises your target audience. Meaning “The approximate number of potential customers in the segment, their income and the number of people in the segment who need the kind of product you offer” (Margraf, B. 2020). The total market potential is the number of buyers multiplied by average purchases multiplied by the cost per unit. The sales potential is the highest expected growth achievable within a measurable market strategy. Basically, use this metric to gauge if your ideas and efforts are going to be worthy prior to commencing any activities. An indication of a healthy competitive situation is if the other competitors’ sales are below market averages; this indicates room for profit-taking within the marketplace. However, sales near full market potential equal market saturation. This means a business would have to lower prices and use more resources before reaching profitability. So, in theory, this higher fixed cost presents an economic barrier to entry, which is undesirable for new businesses. Finally, the cost versus value analysis will determine if any segment’s value is worth the time and economic expenditures.
Savvy businesses are already profiting from their interactions with this market, and their actions are totally ethical. The prices set for goods and services in these communities are based on market potential which determines sales potential. Subsequently, companies use this information to determine fair market value for their offerings. Products and services offered closely match the target audience’s purchasing wants and needs. The pricing strategies of everyday items are affordable according to metrics based on the income of the surrounding geographic region.
Because of this fact, one of the logical pricing strategies will most likely be low margin low profits. However, a challenge of these marketing strategies is although low margins and low prices are a great way to sell products and services, it doesn’t equate to huge profits. Often these industries are very competitive because product offerings are not unique. Although your sales volume increases, there are fewer profits and it takes longer to acquire capital expenditures and boost sales.
Be aware that “This model has its flaws: It unavoidably necessitates an unreasonable target market’s penetration rate of up to 30% or more of all customers in a specific area”(Prahalad, 2002 ). This prerequisite is something that many start-up businesses will need to consider. For that reason alone, companies needing a minimum penetration of this magnitude to meet demands, face significant barriers to entry.