BOP: Fortune at the bottom of the pyramid..

Here's a question.. Do the millions of people living on just a few dollars a day around the world represent a market with considerable spending power? University of Michigan's b-school professor C.K.Prahalad believes they do. Sure, you cannot sell them an iPod, but they represent such a huge market that even the slimmest of margins can translate into huge profits!

Such a huge, untapped customer base is registering a blip on the screens of major multinationals only now. From selling $4 lenses in India, to 3-cent prepaid phone connections in Philippines, Prahalad's BOP philosophy is fast gaining ground. I have personally seen how this operates in India. Hindustan Lever (a subsidiary of Unilever) found that rural markets were not responsive enough to its expensive shampoos. The solution: sell shampoos in 1-rupee sachets (or something equally cheap) that are eminently affordable. Now, every tea stall in the most remote corners of India stock shampoos and toothpaste in small packets that are within the reach of the daily wages of the poorest people. (And oh, posters showing beautiful half naked women using shampoos can't hurt their popularity either, can't they :-) )

The moral of course, is that everyone is a consumer as long as the products are available in affordable denominations. This reminds me of the anecdote of the two shoe salesmen who were sent to a remote village to do a market study before opening a shop. The first salesman returned with an anguished report of how the business would not be successful since no one wore shoes in the village. The second salesman came back beaming and reported that the entire village was an untapped market since no one owned shoes!