When CK Prahalad, professor, corporate strategy at the Stephen M Ross School of Business in the University of Michigan, spoke of "the fortune at the bottom of the pyramid" in 2004, following it up later with a book by the same title, he made a lasting case for selling to a section of the society that is not just overlooked but written off by most businesses on account of its limited purchasing power.
Today it is precisely this section of consumers that is deemed the future by firms across sectors. Whether it is fast moving consumer goods (FMCG) companies charging in with value pack sizes and aggressive distribution strategies or quick service restaurant chains that are constantly cutting the menu prices to widen their pool of customers, everyone has a plan.
A recent study focused on the bottom of the pyramid titled "The Motion of Aspiration, India" by Quantum 360, a consumer research firm, however, says treating the whole bottom of the pyramid as one homogeneous market is a mistake. According to the study, India's consumption pyramid is in line with Pareto's principle: 72 per cent of the total households in India (880 million) form the base of the consumption pyramid. That is to say, they fit in with the broad definition of the bottom of the pyramid: households earning less than $3,000 or Rs 2 lakh in the Indian context, annually. But clubbing this entire 72 per cent together is unlikely to yield the desired results. The bulk of this aspirant class sits in urban centres, well within the loop of established distribution networks. Capture this audience first and then move further down, urges the study.
Companies have till now mainly looked at ways to target this aspirant lot by compressing pack sizes and making them available at a price affordable to their pockets. The driving point has been price. While the importance of an astute pricing strategy for this section cannot be denied, it would be wrong to build your strategy on pricing alone, or assuming that a certain category of products is naturally elitist and offering a more diluted version for those falling in the lower socio-economic classes. Tirthankar Dash, chief operating officer, Quantum Consumer Solutions, gives the example of Cadbury Mondelez's premium cookie brand, Oreo, which is supposedly working very well within the aspirant class that looks at the brand as an indulgence. Imagine then, what a wasted opportunity it would be for the company to continue targeting the brand at organised, modern trade outlets and blocking out the aspirant class. This is the insight on which the report builds itself.
According to Dash, the aspirant consumer is leapfrogging trends continually. She is uptrading, yes, but probably not in a linear fashion. She is open to newer experiences and categories. Waiting for her to desire and demand a product category would be a colossal waste of opportunity. Companies must use the opportunity to introduce her to categories that would further her self interest. Consider this example: one of the attributes of this aspirant class is grooming and self-projection. Demands for personal care and allied products is therefore very high within this section. But very few brands are doing it aggressively at this point.
Is anyone listening?
Today it is precisely this section of consumers that is deemed the future by firms across sectors. Whether it is fast moving consumer goods (FMCG) companies charging in with value pack sizes and aggressive distribution strategies or quick service restaurant chains that are constantly cutting the menu prices to widen their pool of customers, everyone has a plan.
A recent study focused on the bottom of the pyramid titled "The Motion of Aspiration, India" by Quantum 360, a consumer research firm, however, says treating the whole bottom of the pyramid as one homogeneous market is a mistake. According to the study, India's consumption pyramid is in line with Pareto's principle: 72 per cent of the total households in India (880 million) form the base of the consumption pyramid. That is to say, they fit in with the broad definition of the bottom of the pyramid: households earning less than $3,000 or Rs 2 lakh in the Indian context, annually. But clubbing this entire 72 per cent together is unlikely to yield the desired results. The bulk of this aspirant class sits in urban centres, well within the loop of established distribution networks. Capture this audience first and then move further down, urges the study.
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Many FMCG companies are looking at rural markets with a similar view in mind. Even expansion plans for retail or food and beverage/hospitality industry, dominated by the presence of Tier-II and Tier-III cities and towns, represents a similar reading of the future. The study points at some of the flaws in the way companies' execute their bottom-of-the-pyramid strategies.
Companies have till now mainly looked at ways to target this aspirant lot by compressing pack sizes and making them available at a price affordable to their pockets. The driving point has been price. While the importance of an astute pricing strategy for this section cannot be denied, it would be wrong to build your strategy on pricing alone, or assuming that a certain category of products is naturally elitist and offering a more diluted version for those falling in the lower socio-economic classes. Tirthankar Dash, chief operating officer, Quantum Consumer Solutions, gives the example of Cadbury Mondelez's premium cookie brand, Oreo, which is supposedly working very well within the aspirant class that looks at the brand as an indulgence. Imagine then, what a wasted opportunity it would be for the company to continue targeting the brand at organised, modern trade outlets and blocking out the aspirant class. This is the insight on which the report builds itself.
According to Dash, the aspirant consumer is leapfrogging trends continually. She is uptrading, yes, but probably not in a linear fashion. She is open to newer experiences and categories. Waiting for her to desire and demand a product category would be a colossal waste of opportunity. Companies must use the opportunity to introduce her to categories that would further her self interest. Consider this example: one of the attributes of this aspirant class is grooming and self-projection. Demands for personal care and allied products is therefore very high within this section. But very few brands are doing it aggressively at this point.
Is anyone listening?