Module 2: Social Marketing at the Base of the Pyramid
The Base of the Economic Pyramid (BoP) is composed of roughly three to four billion people who comprise the world’s poorest, earning less than US$2.50 a day.(1),(2) Although every independent member of the BoP has less than US$3,000 in local purchasing power annually,(3) they collectively account for more than 50 % of purchasing power in developing countries by their sheer volume, which arguably forms a considerable consumer market.(4) Experts estimate the value of this market to range from US$0.3 trillion(5) to US$13 trillion,(6) with moderate estimates hovering around US$5 trillion.(7) Despite some objections to the contrary,(8) many of these estimates point towards the BoP market as one that has been unexploited by multinational companies, which could be developed into a hugely profitable enterprise to accelerate development efforts. These ideas have created awareness among company executives and have stimulated interesting discussion; however, efforts by multinationals have primarily yielded disappointing results, a trend that continues to this day.(9)
(Mis)approaches To The Problem: The Basic Needs Approach
The scholar Erik Simanis has argued that one of the main reasons why these efforts have failed is because of an inability to properly market products to the BoP. He characterizes past efforts as having strictly addressed material needs of populations, while losing sight of humanitarian aspects.(10) This approach, which he calls the Basic Needs strategy, oversimplifies development and hence economic growth. The result is both mediocre development results and meager profit margins.
According to Simanis et al., the Basic Needs strategy is flawed in a number of ways. First of all, it is reliant upon traditional market strategies that only work when applied to a market. By “market,” these companies mean a formalized network in which buyers and sellers exchange money in return for goods or services. Nevertheless, this sort of established structure in large part does not exist for the BoP; there are few to no effective product markets and there is a proliferation of informal trades and exchanges. Since there are no product markets, there are no reference points to determine whether a product has demand.(11)
Moreover, traditional avenues for consumer feedback—such as online campaigns, mailing lists, or mass media—do not exist or are poorly applied in developing countries.(12) The results are sobering. Companies with brilliant track records of marketing to the developed world have failed to launch high-impact projects, such as Nike’s disappointing introduction of the US$15 World Shoe.(13) Even more striking is the example of Procter & Gamble—one of the world’s best marketing and management firms—which, despite the identification of a “market need” of clean water, has been unable to successfully market their PUR water purification technology to the BoP. Indeed, not a single corporation has created a viable clean water business at the BoP, though there have been many attempts. According to Simanis et al., part of the reason is that there is no “market” for clean water—instead it is so ingrained in daily life that a stand-alone value is incalculable.(14)
Others have questioned whether the current BoP marketing strategy is a thinly-veiled guise to “sell to the poor,” and the perceived paternalistic exploitation of the concept has increasingly alienated nonprofit and public sectors as well as the poor themselves, which has hindered business partnerships and progress.(15) As A.K. Jaiswal suggests, if the social goal of BoP marketing is truly to reduce poverty by increasing income, the BoP ought to be perceived as producers rather than consumers. Products sold to the poor should empower the poor to create a better living. For example, Kickstart pumps enable rural farmers to irrigate their fields and vastly increase their farm yields. Beyond that, the BoP ought to move from general consumption to selective consumption, aimed towards products that can create profits or improve well-being.(16) One problem with consumption in the developing world is that counterfeit products are prevalent, which are difficult for the BoP to distinguish, especially since many are illiterate and have little consumer awareness. These products can be dangerous and deadly, and more regulation and education can be done to minimize this problem.(17)
Beyond Basic Needs: The New Commons Approach
Rather than trying to formulate a business model in the boardrooms of a developed country using economic and business models optimized for the North American or European experience, there is another way to launch businesses using an approach that has the potential to solve more poverty. This approach engages the community as a business partner to help co-create a product, which is then embedded within existing socio-cultural institutions. Simanis calls this approach the New Commons.(18)
The first step of the New Commons approach is to conduct a pre-field analysis to select the correct site, team, partners, and community. The site ought to have long-term strategic interest to ensure a constant flow of resources. The team should involve corporate team members who are passionate, experienced, and ideally local, in addition to community members; all members are trained in core BoP techniques to build a common set of skills and ethic. The local partner involved can provide social capital, trust, and community knowledge, and is ideally socially ingrained within the community. Throughout the whole process, significant funds should also be invested in R&D, as BoP opportunities almost invariably require the development of new capabilities based on the local setting.(19)
The in-field work begins by building deep dialogue with the community. This involves the project team entering a community without any preconceived notions on which products to pursue or how to market the product. Corporate team members ought to be introduced to the community and start homestays, in which the corporate member lives with a community member for at least a week, an activity meant to build trust and rapport with the community. More community members are selected to join the project team using participatory rural appraisal techniques (PRA), which allows the selection of diverse villagers from different levels of wealth and status. To build teamwork and communication, the entire project team participates in daylong participatory workshops, which have the goals of building a shared business language, exploring joint capabilities, and identifying community needs. Finally, the project team splits into smaller groups, brainstorms and assesses ideas until all the groups converge on a single business concept that is feasible in a reasonable timeframe, but is also imaginative enough to bring novelty to the community.(20)
The next step of in-field work involves the co-creation of the organizational foundation and the development of an initial product or service. The co-creation process establishes a shared organization identity. Training via small group, hands-on exercises rather than lectures are conducted to ensure that all team members maintain a shared knowledge about products and technologies, as well as business concepts and contexts. Furthermore, these exercises allow sources of expertise to be identified, which fosters a sense of mutual interdependence. Initial field experiments involving the broader community are performed to help create market demand.(21)
The business prototype can finally be adapted to a complete business model, ready to be scaled up. Systems and skills to manage ongoing local operations are developed, such as accounting as customer feedback. Community members shadow corporate members to help them transition into active involvement and co-direction of the company. To ensure that there is a genuine demand for a product, the project team continues to work with the broader community to develop the prototype. This process encourages a sense of membership within the community and contributing to product demand. As the product is being developed, the supply chain should be as local as possible, involving local materials and services.(22)
As the product or service continues to develop, the whole team must be aware of emerging issues. Corporate and community team members ought to continue working together on the field to generate creative solutions—one example is to conduct joint sales calls. At this point, flexibility is imperative because the business model and revenue sources are uncertain; consequently, fixed asset investment and permanent organizational structure decisions should be avoided. Any performance targets at this time should only be in place to generate a baseline income, and should overall be concentrated on emphasizing learning.(23)
The final step involves scaling the project. For a corporation to invest the resources and time required to implement the New Commons approach, the value that needs to be generated requires the project to be replicated and embedded in hundreds or thousands of other communities. Scaling the project follows an “open pollination model,” in which the original business supplies ambassadors and the seed business concept to new communities, while simultaneously encouraging adaptations to local needs. Formal organizational links are formed to accelerate development and exchanges between the parent business and new project team. Following this, small-scale business pilots are launched in the new sites, which embed the initial business model within the village community. Throughout the process, the parent business maintains liaisons with the new community to transfer lessons and business skills, flattening the learning curve. Once new communities have adopted the product, they can in turn launch projects in other cities, scaling the project exponentially.(24)
The Advantages of the New Commons Approach
The New Commons approach addresses many of the hot-button issues in BoP social marketing today. It focuses on targeting aggregated communities rather than individuals. It develops products by rooting product development in local communities rather than imposing a product from the top-down.(25) It ensures that the products address the specific needs of the BoP and that the potential for improving the well-being of customers is maximized.(26) Furthermore, this approach recognizes that communities themselves can be drivers of change.(27) A study conducted by the Acumen Fund found that extensive training, as is seen in the New Commons approach, is correlated with meeting at least 75% of sales targets.(28)
The approach has also been proven successful. The Solae Company followed the New Commons approach to establish a project in an Indian slum in Hyderabad. The project team settled on the idea to create a “Culinary Park Network,” which included converting slum rooftops into green spaces and sites that sold affordable, high-protein food products. The business was also designed to educate villagers about balanced diets, teaching them how to prepare nutritious meals at home. Community “expos” helped to widely market the project. The project proved economically and socially successful and quickly spread to two dozens of small villages within five miles of the initial site.(29)
Another successful organization that follows the logic and practices of the New Commons approach is the Grameen Bank, an Indian organization that provides small monetary loans to the rural poor. Despite some criticisms of the microlending system, the Grameen bank is generally held to be a developmental and commercial success.
Case Study: Ecotact and its Ikotoilets—Marketing Fashionable Sanitation
Often, marketing to the BoP requires creative thinking that addresses unique local problems, in ways that are often overlooked by multinational companies. In Sub-Saharan Africa, 80 % of recorded illnesses are waterborne, due in large part to how two in three individuals lack access to basic sanitation.(30) Despite many attempts from the developed world to remedy the problem, most have failed. In 2009, the Kenyan company Ecotactintroduced a public toilet, fee-for-use system called Ikotoilet that has revolutionized the way that sanitation is perceived, paving the way for great strides in improving general sanitation.
In the absence of Ikotoilets, poor Kenyans often resort to open defecation or “The Flying Toilet,” which involves defecating in a plastic bag and throwing it away.(31) The problem is hence doubly-pronged: not only is there a lack of access to toilets, but individuals are also frequently engaging in unsanitary practices.
To tackle both problems, the Ikotoilet model has adopted some innovative approaches. First of all, sanitation is considered a taboo topic in African culture, making it difficult to openly discuss solutions. The roadblock is similar to the early years of the HIV/AIDS pandemic, where silence prevented individuals and governments from taking the proper steps to prevent the transmission of the disease. Ikotoilets have brought discussion to the fore by featuring the toilets prominently in public places and in schools as a monument for display—sharply contrasting with the usual practice of hiding toilets away. Open discussion is a precursor to political action, and Ikotoilets are helping to stimulate discussion for increases in governmental sanitation budgets.(32)
Transforming the idea of toilets has been taken a step further. Ikotoilets feature non-toilet functions, and form a “toilet mall” that includes ATMs, shoe shine stations, and a convenience store that sells snacks. Each facility employs 10 young people, which helps engage community members in the project, stirring up community awareness and interest. Within a year of starting operations, Kenyans started regularly queuing in line during lunch breaks to buy snacks from the Ikotoilet.(33)
The final marketing strategy has been to make toilets—and by extension, sanitation—not only acceptable in society, but fashionable. Beauty pageant participants, as well as religious and political leaders have publicly endorsed the Ikotoilet, making the concept chic. Furthermore, although slums suffer from the greatest sanitation problem, Ikotoilets were ingeniously initially implemented in the capital of Nairobi to enhance its public image. Says David Kuria, the social entrepreneur behind Ikotoilet:
“The theory I hold is that everybody would want something called fashion, if only they can afford. There is the issue of really making the subject a bit sexy. "Have you seen those toilets in the city? That's what is coming here. You mean that is coming here?" But if it was the reversal, it would be impossible to sell. The Ikotoilet would be like it was designed for the poor man and I don't want to sell it that way. People need to be proud. When we do the first Ikotoilet in the slum, everybody will be saying like, "What is in Nairobi--we have it!"(34)
As of 2010, the Ikotoilet model has 40 urban and slum facilities in Kenya, and serves 30,000 customers every day. By 2011, the plan is to expand to 100 facilities including some in Tanzania, with the aim of serving 100,000 daily.(35) This grassroots social entrepreneurship initiative has the potential to create sustainable and profitable solutions to the sanitation problem of Africa.
(1) Shah, A. “Poverty Facts and Stats.” Global Issues: Social, Political, Economic and Environmental Issues That Affect Us All. 2010. Accessed June 29, 2010. <http://www.globalissues.org/article/26/poverty-facts-and-stats>
(2) Lefebvre, R.C. “Strategies for the Base of the Pyramid.” 2009. Strategies for the Base of the Pyramid. Accessed July 14, 2010. <http://socialmarketing.blogs.com/Publications/Strategies%20for%20the%20BOP-Lessons%20from%20social%20marketing.pdf>
(4) Krauel, H. and Montgomery, J. “Lessons from the Field: Sales at the Bottom of the Pyramid.” 2010. Acumen Fund. Accessed July 14, 2010. <http://www.acumenfund.org/uploads/assets/documents/Lessons%20from%20the%20Field%20-%20Sales%20at%20the%20Bottom%20of%20the%20Pyramid_6moi1Psr.pdf>
(5) Prahalad, C.K. The Fortune at the Bottom of the Pyramid. 2002. Philadelphia, PA: Longman Pub Group.
(6) Karnani, A. “The Mirage of Marketing at the Bottom of the Pyramid.” California Management Review. 49.4 (2007): 90-111. Accessed July 20, 2010. <http://wwwupdate.un.org/esa/coordination/Mirage.BOP.CMR.pdf>
(7) Lefebvre, R.C., 2009.
(8) Jaiswal, A.K. “The Fortune at the Bottom or the Middle of the Pyramid?” Innovations. 3.1 (2008): 85-100. Accessed July 16, 2010. <http://www.mitpressjournals.org/doi/pdf/10.1162/itgg.2008.3.1.85>
(9) Lefebvre, R.C. “A Social Marketing Manifesto.” 6 November 2007. On Marketing and Social Change. Accessed July 19, 2010. <http://socialmarketing.blogs.com/r_craiig_lefebvres_social/2007/11/the-new-social-.html>
(10) Simanis, E., Hart, S. and Duke, D. “The Base of the Pyramid Protocol: Beyond ‘Basic Needs’ Business Strategies.” Innovations. 3.1 (2008): 57-84. Accessed July 17, 2010. <http://www.mitpressjournals.org/doi/pdf/10.1162/itgg.2008.3.1.57>
(12) Krauel, H. and Montgomery, J., 2010.
(13) Simanis, E. et al., 2008.
(16) Jaiswal, A.K., 2008.
(18) Simanis, E. et al., 2008.
(25) Lefebvre, R.C., 2007.
(26) Jaiswal, A.K., 2008.
(27) Lefebvre, R.C., 2007.
(28) Krauel, H. and Montgomery, J., 2010.
(29) Simanis, E. et al., 2008.
(30) Kuria, D. and Ganter, J.C. (Interviewer). “David Kuria: Sanitation and Toilet Entrepreneur.” 19 March 2010. Circle of Blue WaterNews. Accessed July 19, 2010. <http://www.circleofblue.org/waternews/2010/world/david-kuria-sanitation-and-toilet-entrepreneur/>
(35) Kuria, D. and Ganter, J.C., 2010.