Bottom of the Pyramid – A Reality Check

Arundhati Bhattacharya, former SBI Chairman (a panellist at an NTLF session) had attended a board meeting recently. There was one chair in the room which was very different in look and feel from the others. Curiously enough, it remained vacant till the very end of the meeting. No, not even the session Chair occupied it. Later, she was told, that particular chair was assigned to the imaginary customer who is an integral part of every conversation. Do we know what she wants?

This may be a symbolic gesture but it has great meaning and resonates, even more, when we are seeking out the next billion.

The late CK Prahlad, one of the leading management thinkers of his time, continues to be frequently cited for his seminal work – The Fortune at the Bottom of the Pyramid. Although, over the last decade, strategists have remained divided about the “fortune” and how to get there. From a modern standpoint, scaling in the next billion markets is going to be very different in which the users are likely to be from low-medium income level groups.

Interestingly, more than two decades back, when MNCs first started trooping into Indian shores, they had miscalculated the market-size. Even today, though the Indian population is about 1.3 billion, the addressable market is only 300 million. The hyphenated urban-rural divide continues to underpin its social imbalance – 70% of India still resides in its 650000-odd villages. The market is far from uniform in character.

Banking – Differentiated Services

Addressing the inclusivity challenge was undertaken by the previous government as well, but it is only in the last four years that technology has provided the initial breakthroughs. When zero balance bank accounts got linked to Aadhar (which covers 98.3% of Indians), it was a big step forward with the telecom revolution in tow, proving to be the perfect enabler.

In the initial stages, 97% of the bank accounts had zero balance – indeed a matter of concern about serviceability – but today, the number has remarkably dwindled to a paltry 16% with deposits worth 20 billion INR in these accounts. However, merely having a bank account isn’t a great example of ticking the financial inclusion box. The account holders should also be able to avail banking services, like getting access to loans. With the aid of technology, credit history can be created today which has proved to be most beneficial in such use cases.

Today, the system can keep track of the cheques being used and when it senses that the previously issued cheques (through cheque book) are about to run out, it will automatically issue a fresh one to the account holder. Similarly, in case of PPF accounts, it sends an OTP over SMS to the depositor when she is eligible to withdraw money. However, India is a diversified country and not all customers may be comfortable with the online mode of transacting so banks have to offer differentiated services as well for those who aren’t tech savvy.

Bank of Rajasthan (now defunct) had a “camel branch.” Themed on, “Hamara Bank Raj Bank”, camels were used as mobile banks to disburse funds in the 90s. Given the ground reality, rural banking has always sought innovative ways of servicing the customer.

Today, there are distributed models and some of it is even happening offline. At some point, all this data will have to be uploaded so that models can be fine-tuned based on insights drawn to get the communication strategy right. The Jio phone – for a significant many – may be their first TV, internet, radio etc. all rolled in one. It’s akin to parched earth which soaks everything. This analogy is drawn to highlight the sheer volume of data consumption in this segment. The opportunities are massive and it’s not even been thoroughly scoped as yet. In rural India, any “sachet-type” of a marketing approach is likely to work. And, the device-connectivity duo has the potential to solve the last-mile conundrum.

For a long time now, people have been predicting that bank branches will be non- existent. Well, in reality, that has not happened – again, there’s an entire segment out there which prefers to bank the traditional way.

FMCG – Differentiated Services

Firstly, we aren’t China so let’s not even try and replicate Chinese business models in this segment. On a lighter vein, a cockroach repellant in India has to compete with a “slipper”. Swatting an insect may be the preferred (read cheaper) way than using a product which costs two hundred rupees. It implies that FMCG products have to be cheap with a strong distribution network, and have a sustainable value proposition as well for the rural sector. Growth in this segment can come only when very specific needs are met.

Though e-commerce is a high growth segment and yet, the kirana stores in the country thrive as well. There’s a great opportunity if these stores – a few million – can be integrated with online platforms. Deeper insights can then be drawn to do targeted marketing. Of course, a marketer may also choose to do print ads. The consumer spread is quite diverse and has to be taken into account.

Brands can be multi-local or specific to a certain region(s). Some marketers may choose to remain regional players only, and that’s fine as long as the customers’ needs are being met. In India, there’s a dichotomy. On the one hand, digital penetration has been deep, and on the other, even basic needs are not met – inadequacy in food, water, power, education, and healthcare – in many parts of the country. For instance, a detergent’s sale may well be impacted by the amount of water which is required to wash clothes – particularly in drought-ridden areas. Indian marketers have to necessarily take into account the local conditions.

The fundamental blocks have to be built even before we are able to explore new business models. The much touted “demographic dividend” is likely to be there for another 20 years. If we really want to become a middle-income country then we don’t have much time. It’ll pass by in the blink of an eye.

Quick – get your strategy right for the next billion!





Share This Post

Leave a Reply