Marketing To The Bottom Of The Pyramid Case Studies Example

Marketing to the BOP raises a number of issues revolving around the social responsibility of marketing efforts. Write a position paper either pro or con on one of the following:
a. Is it exploitation for a company to profit from selling soaps, shampoo, personal computers, and ice cream, and so on, to people with little disposable income?
It is not exploitation for a company to profit from selling soaps, shampoo, personal computers, and ice cream, and so on, to people with little disposable income. The profit, on the one hand, is any commercial company’s goal and on the other – the result of its activity. Making a profit is the direct purpose of the enterprise. But the company can make a profit only if it produces goods or services that are implemented, i.e. satisfy public needs. Subordination of these two goals is to meet the needs and make a profit – the next. The company cannot make a profit, not having studied the needs and do not begin to produce a product that meets the needs. Needs, in turn, are divided into needs and solvency needs. It is necessary to produce a product that will satisfy the needs and, moreover, at a price that would satisfy solvency needs. A reasonable price is possible only in the case when the company maintains a certain level of costs, when the resources are consumed, the expenses are less than revenue received, i.e., when it operates at a profit. In this sense, it is said that profit is an immediate objective of the company functioning and at the same time is the result of its activities. If the company does not fit into the framework of such behavior and not make a profit from its operations, it is forced to withdraw from the economic sphere, to plead bankrupt.
Speaking about people with little disposable income it is worth to state that these people have income, thus, they can be considered as the target segment, but with the necessity to satisfy other needs and in another ways. These consumers are able to make a choice on the product purchase, namely they can refuse it, if they do not want to or cannot afford to. Consequently the customers regardless of being poor have the rights to select, they are not forced to spend their money if the certain price exceeds the maximum price they are willing or capable to pay for. They can be an engine of the next stage of global trade and prosperity. Creating goods for the BOP doesn’t mean producing cheap items but about providing technologically innovative goods affordable. BOP market makes profit through price cut, advance technology and effective distribution. Under market conditions product manufacturers are competing for that best ability to meet the needs of customers, consumers in the broad sense of the word, because only in this case they can prosper as manufacturers. Thus, BOP requires the great efforts of companies to cooperate with public organizations and local authorities.
b. Can making loans to customers whose income is less than $100 monthly at interest rates of 20 percent to purchase TVs, cell phones, and other consumer durables be justified?
It can be justified only based on the fact that interest for other customers is extremely higher in Indian market. Loan gives anyone, who will dare to take it out, some financial freedom. And one of the most important factors is that people are increasingly taking out the loan. To no longer ask the question: where to get money for the necessary needs or not to think, where they can take a credit card, which will have the required amount for a very important purchase, and many use the services of credit.
However, customers shouldn’t forget that earning less than $100, they have to live the whole month (if the salary is regular) and pay the maximum of $20 out of it. Also, disbursing loans at 20% interest rate to customers whose income is less than $100 monthly is not appropriate. This is not socially responsible, because the concept of corporate social responsibility is based on the fact that the organization, especially a commercial, carries the obligation to take care of all the people who are relevant to them, that is, community in which there is this business. The external social responsibility of business includes sponsorship and corporate charity; promotion of environmental protection; interaction with the local community and local authorities; willingness to participate in crisis situations; and responsibility to consumers of goods and services (production of quality goods). In case of specified loans, their disbursement doesn’t belong to any of mentioned actions.
Such action won’t solve the problem of poverty, but only expand it or move it to a new level. It won’t improve the wealth-being of customers whose income is less than $100 monthly, but will increase financial institutions’ profits. All possible loan interest and fees significantly increase current expenses of personal budget. Therefore, a less amount of money can be spent to cover other expenses; moreover, there is no opportunity to make provisions and savings. Products taken on credit especially, if they are of highly technological production (computers, mobile phones, etc.), have the ability to lose their cost due to constant appearance of innovative models. Thus, when the person completely reimburses loan, the product is morally obsolete, costs much less and possibly requires update, but the overpayment is huge.
c. One authority argues that squeezing profits from people with little disposable income—and often not enough to eat—is not capitalist exploitation but rather that it stimulates economic growth.
The level of poverty in the country does not depend on the volume of production, but on the distribution of the existing mechanisms of the national income. Karl Marx believed that poverty is the generation of capitalist society based on profit maximization, not the welfare of the workers. Marx argued that over time, the process of impoverishment only expands: the poor will become poorer and the rich – richer. Today, however, this prediction did not come true. Capitalists have made the necessary conclusions and part of their profits was directed at improving the situation of employees, pensions and other social needs. This is not only and not so much for humanitarian reasons, but for purely economic reasons. Ensuring sustainable living conditions of employees increases their return, their productivity in the scientific and technological revolution.
Prahalad considers that squeezing profits from people with little disposable income isn’t capitalist exploitation. The reason is that if to tap the spending power of the poor, it is possible to decrease poverty. According to his opinion, development by corporations into different markets forms new jobs – product-distribution complexes and stores, for example –and income received from mentioned occupations flows through domestic economies, forming more additional occupations, a wonder that economists call the multiplier effect. Due to such circumstances the huge pool of individual entrepreneurs involved in an extended economy is created. In this case an organization generates more amounts of revenue, and the publics’ lifestyle modifies. The poor get advantages as well because they are given an access to amenities such as banking and insurance that once were denied them.
However, economic growth cannot be an end in itself. It is necessary to improve the quality of life and development of the human or otherwise – to overcome poverty and catastrophic income inequality (even at the cost of some slowing of planned growth rates). Such growth will eventually balance the country’s development, long-term conditions for socio-economic stability and strengthening human potential.

References

Kotler, Ph. and Armstrong, G. (2012). Principles of Marketing, 14th edition, Pearson Prentice Hall.
Robbins, S. P. and Coulter, M. (2007). Management, 9th ed., Pearson Prentice Hall.