CK Prahlad’s new marketing strategy
Posted : July 28, 2004 at 2:04 am [IST]
Prahalad has placed all consumers in world in 4 tiers:
| Tier category | Annual per capita Income | Population, millions | Characteristics |
|---|---|---|---|
| Tier 1 | More than $20,000 | 75-100 | Affluent, a cosmopolitan group of middle-and upper income people in developed countries and few rich elites from developing world |
| Tier 2 & 3 | $1,500-$20,000 | 1.500-1,750 | Poor customers in developed nations and the rising middle class in developing countries |
| Tier 4 | Less than $1,500 | 4,000 | Poor of the developing countries |
Tier 4 provides a unique business opportunity because of its size, but with a
very innovative challenge to our corporate. Most of these people in
Tier 4 live in rural villages, or urban slums. They usually do not hold
legal title or deed to their assets (e.g., dwellings, farms,
businesses). They have little or no formal education. They are hard to
reach via conventional distribution, credit, and communications. The
quality and quantity of products and services available in this tier is
generally low. Normally, $1,500 is the minimum annual per capita income
that is considered necessary to sustain a decent life. But for well
over a billion people, per capita income is less than $1 per day.
Unfortunately
it is significantly worrisome that the income gap between rich and poor
is growing. According to the United Nations, the richest 20% in the
world accounted for about 70% of total income in 1960. That figure
reached 85% in 2000. Over the same period, the fraction of income
accruing to the poorest 20% in the world fell from 2.3% to 1.1%.
However, Tier
4 represents a multi-trillion-dollar market. According to World Bank
projections, the population at the bottom of the pyramid could swell to
more than 6 billion people over the next 40 years, because the bulk of
the world’s population growth occurs there.
This massive
market opportunity has remained invisible to the corporate sector and
so untapped because of some mistaken assumptions on which it works.
Mr.Prahalad lists some:
- We can not profitably compete for that market.
- The poor can not afford and have no use for the products and services sold in the market of the top 3 tiers. .
- The poor can not appreciate or pay for new technology.
- The poor can very much live with the previous generation of technology.
- The tier is not important to the long term viability of our business. Let us leave it to governments and
nonprofit organizations. - Managers are not excited by business challenges that have a humanitarian dimension.
- It is hard to find talented managers who want to work among this tier.
Corporate and MNCs must come with some innovative models of business for this group. They must recognize
that this market poses a major new challenge: how to combine low cost, good quality, sustainability,
and profitability.
HLL when challenged by Nirma in India has proven the opportunity that this Tier 4 market provides.
- Indra
Category: Industry/Management |
5 Comments »
December 5, 2005/ Monday/ 04:00 p.m./ 717565.
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Honourable Dr. C. K. Prahlad:
True.
It is the old Indian concept that unless the weakest person at house is satisfied, you cannot keep your family happy.
Similarly in the bigger context, unless the poor people, village economy, SSI sector, BPL people are satisfied you cannot have healthy economy anywhere in the world.
I have designed a model for this purpose if Honourable Dr. C. K. Prahlad/you is/are interested I can send you the same.
Dr. Prahlad I have attended your session once in Nagpur in Vidarbha Industries Association (VIA). I was fascinated by your idea about the biggest asset of India is its population/people as they pose the biggest market right from spirituality, business, and education to market for everything we do.
Prof. Dr. Ashish Manohar Urkude,
Management Guru,
Symbiosis-SCMHRD, Pune, India.
Posted by: Prof. Dr. Ashish Manohar Urkude at December 5, 2005 @ 3:49 pm
hello sir
read your article, good one to read.
if you can send me the model that you have specifically designed for the purpose mentioned in your article as am preparing a seminar on the same. or if you can tell me the site name where i can get the required information.
regards,
Pooja Sharma
Posted by: Pooja Sharma at January 25, 2006 @ 3:48 pm
respected sir, I have read your article. I think you hv written wonderful thing that there is fortune at the bottom of pyramid. Its a truth no one can survive in this world without serving at the bottom of the pyramid
sir i have presentation on pyramid has false bottom & I have to speak against the motion can u send some data to me in this regard.
especially how entrepreneurs can grab this market.
thanking you.
Posted by: sandeep thakur at December 18, 2006 @ 10:03 pm
I have read about your idea and very much impressed by it. I wonder whether we can transform countries like India into a knowledge economy where its people will be its biggest assets because they will have right knowledge, skills and an encouraging climate all around to develop these skills further. At present I am trying to gain skills and knowledge by working with an engineering consultancy company in UK . Thereafter I intend to do some enterpreneurial activity by setting a company which will help knowledge and skills of Indian engineers and technicians to develop engineering consultancy solutions for UK. First I want to start with railway consultancy and then develop it to other desciplines. Inspired by your thought I intend to use engineering/business/business support skills available with people living in most remote places of India( i.e going to the bottom of pyramid which is handy for me because I hail from one of remotest places of Jharkhand with my parents still living in a remote village without electricity and all weather road and people are constantly living under threat from Naxalite violence) and try to serve the most value added services in UK and other developed countries. This ,I believe, will help raise living standard of these helpless people and in long run looming naxalite culture there. If I get good money I would like to use for running hospitals and educational/vocational institutes which will help raise the skills and knowledge of these helpless people and also some higher educational institutes to improve knowledge/skills of already existing higher class in urban areas and channelise and direct their skills and knowledge so that it can be immediately helpful for developing the consultancy services solutions for UK and other deveoped markets.
I am sure that this will present a winning proposition for markets of developed nations also because of cost advantage.
I am hopeful that present IT technology has made it feasible and in future development in IT will help more in achieving the efficiency of operation.
The set up developed to serve the advanced economies will also be utilised to provide similar services in India thereby raising the quality of enginering construction there.
But at the moment these are just good ideas. I am seeking active support from my friend, collegues and anyone who can to get it into practice.
I need your support, if possible, in providing me guidance to put mu idea into practice. Your immense experience of corporate world will be of great help to me.
Posted by: Sanjay Kumar at December 21, 2006 @ 3:31 am
“islands of prosperity cannot survive in the ocean of poverty”.I think the model of aravind eye hospital and narayana hrudyalaya should be emanicipated to provide efficient healthcare to the people of India. similerly viable model needs to be developed for education also.
Posted by: Feroz Ikbal at January 19, 2007 @ 12:42 pm
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