At the Bottom of the Pyramid (CK Prahalad)

What strategy should we use to put TerraCottem on the market, and most of all on the market for the poor farmers and families?
We tried to learn from the book: "The Fortune at the Bottom of the Pyramid" by C.K. Prahalad. This book describes several methods of how to do trade with the poorest of the earth and still have a profitable business! Most cases come from South and Latin America, or India, but we are going to give it a shot to translate this to our case. The description you will find here, is not a summary of the book (which we think everybody, who calls himself a manager should read) but more or less the adapted version of what we think is useful in this case.

The author starts with some principles which should be in place to have a reasonable chance of success. It is not very certain that all these conditions are met with, but it is important to be aware of them:
1. Customers or potential customers should be treated as one: with respect.
2. Institutional organisation: right of ownership must be able to be enforced.
3. Making profit with trade with the poor is not a crime.

The poor are confronted with a dominant logic which turns against them:

• They have no money
• A cost structure is given
• They do not cope with technology

In most cases, trading with the bottom of the pyramid demands a very strong businessplan which challenges the difficult circumstances, but if well adapted could be useful for upper markets.

We will make a description of what we thought could be useful for our plan. On a regular basis we will point to this description to give you an insight into where we thought this would be useful.

1. Treat the customer as a customer : with respect. Stop thinking about your customers as poor people with no money. They do have money, not as much as the upper market, but they do have money. And above all: there are many more of them ! In this respect, do not think of them as poor but rather as an unserved market. Adapt what you are offering, service and products, to their needs and demands. They surely demand no lower quality, but on the other hand, they do not want to pay for something they do not need. Also, they often only want to buy what they need at that moment, as their money is "working capital" and should not be immobilised. Adapted quantities is an important factor. Often products are sold in quantities to be used in one time. Treating your customer with respect also means that the offerings come to the market at the right price, with a "poverty premium" which is as low as possible. Lower margins for higher quantity is often needed. Trust your customer. When he is satisfied with your product he will come back, and the BOP people are very well connected! Brand placement is a critical success factor. BOP customers buy when they need it so availability, short distances and affordability are key words.

2. Treat the market as a developing market. This means give information and training where needed. As money is relatively more precious to them, they will take care that it is well spent. If they correctly understand what your product/service stands for, and this can be matched to their needs, they will become customers. Work together with governement and NGO's to achieve this.

3. Be innovative. Give special attention to the distribution network. No given cost structure is really given. Adapt the distribution network in the way that absorbs the least money. Be innovative. Use existing, trustworthy structures such as schools, hospitals etc. Often different parts of the value chain are excecuted by a different partner, NGO or Governement institution.

4. High return on capital used. A way of reaching the high demands for rentability of the rich economies, is to assure the needed capital to run the business is as low as possible. Low "working capital" is a critical success factor.

5. Use what is cheap in that particular environment: workforce - materials. Solutions for the werstern world are not adapted for a environment where work labour and a lot of basic materials are cheap.

6. Technology gap BOP-people are rather more adaptive for new technology then standard markets. A lot has to do twith the fact that they do not have to "forget" another technological habit

7. The default percentages for (micro-) credits are often lower then those known in standard markets. Lending money to (small) groups of people, often women, where every individual is accountable for the debt of the group is in most cases a more secure business then known in western regions. It is important to take time to teach people first to save, before lending them money. Building on trust is a way of doing business which gives the client a lot of respect with which he will respond in loyalty and trustworthy behaviour. Several exemples show that included in the financial -lending- aspect in the buying process could be the solution for investment products. (Not for consumer goods!)

8. Health is a commodity for the bottom of the pyramid. In relative terms, the bottom of the pyramid is very sensitive to products that can preserve health, often this is the only real long-term capital.