The quest for the fortune at the bottom of the

pyramid: potential and challenges

Dennis A. Pitta
The University of Baltimore, Baltimore, Maryland, USA, and

Rodrigo Guesalaga and Pablo Marshall

Pontificia Universidad Catolica de Chile, Santiago, Chile
Abstract
Purpose The purpose of this article is to examine the bottom of the pyramid (BOP) proposition, where private companies can both be profitable and
help alleviate poverty by attending low-income consumers.
Design/methodology/approach The literature on BOP was reviewed and some key elements of the BOP approach were proposed and examined.
Findings There is no agreement in the literature about the potential benefits of the BOP approach for both private companies and low-income
consumers. However, further research on characterizing the BOP segment and finding the appropriate business model for attending the BOP can
provide some answers to this issue.
Practical implications The article provides some guidelines to managers as to how they need to adapt their marketing strategies to sell to the BOP
market, and what type of partnerships they need to build in order to succeed.
Originality/value The article presents a thorough analysis of the key elements involved in the BOP initiative: companies motivations,
characterization of the BOP consumers, and the business model to attend the BOP.
Keywords Private sector organizations, Emerging markets, Consumers, Poverty, Disadvantaged groups
Paper type Research paper

underpin the concept, and refutes its basic premises. Instead

of a market of untapped potential, this literature stream sees a
financial desert that BOP principles may harm more than
help. The BOP may be a less a source of significant profits
than a source of serious losses. Karnanis analysis posits that
the poor may want the same products as the rich do but by
virtue of being poor, they cannot afford them. The poor
spend most of their income on food, clothing, and fuel. For
the poor, the mathematics are clear: buying a branded
product reduces the funds they must devote to survival. In
contrast, Karnani suggests that raising income will alleviate
their poverty, provide cost effective products to other
consumers, and allow the formerly poor to consume more.
Raising their incomes may require that they become
producers with stable jobs and wages.
Both viewpoints concentrate on the poor but draw different
conclusions about how to alleviate their poverty. The two
positions also differ in the nature and proper role of industry
and government. In light of the differences, the argument
would benefit from empirical data that tests the underlying
premises of each viewpoint. Verifying the premises would
allow further logical analysis of implications and applications
of the concept. In fact, the need for clarification is recognized.
In the next section, the authors provide some foundations
for the most traditional and still dominant approach to
market, i.e. the focus on the top of the pyramid (TOP). The
rest of the article focuses on the bottom of the pyramid
(BOP); it explores Prahalads proposition and the opposing
viewpoint, reviews key aspects of the BOP initiative
companies motivation; the BOP business model; the role of
microfinance; and the key participants and proposes some
implications and challenges for marketing theory and
practice, and finally some implications for marketers.

An executive summary for managers and executive

readers can be found at the end of this issue.

Introduction
The bottom of the pyramid (BOP) approach to earning
corporate profits has gained considerable attention in the
marketing literature. It has awakened managers to the
potential of serving an unserved market and alleviating the
level of global poverty while still earning a profit. However,
the BOP proposition, while clear, appealing, and enlightening
has not been accepted in an unqualified manner. One branch
of the BOP literature puts forth the elements of the BOP
proposition and supports its findings with numerous case
studies (Prahalad, 2004). Those studies portray the poor as
motivated by similar desires as the rich. They want quality
products and any company that can supply those products at
the right price will gain their business. Some of the case
studies show the strategies for reducing the effective price of
products through packaging and developing lower cost sizes.
Prahalad and others describe the untapped potential of the
BOP, and list strategies that companies may use to tap that
potential.
An opposing branch of the literature (Karnani, 2007a;
Martinez and Carbonell, 2007) analyzes the nature of the
BOP market, the applicability of the case studies that
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0736-3761.htm

Journal of Consumer Marketing

25/7 (2008) 393 401
q Emerald Group Publishing Limited [ISSN 0736-3761]
[DOI 10.1108/07363760810915608]

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Journal of Consumer Marketing

Dennis A. Pitta, Rodrigo Guesalaga and Pablo Marshall

Volume 25 Number 7 2008 393 401

The top of the pyramid

customers, and labeled them as Platinum or Gold. In

contrast, those with lower to very low LCVs earn the value
labels, Iron and Lead. They point out that a single Gold or
Platinum customer may have a Lifetime Customer Value,
many times higher than that of someone in the Iron or Lead
tier. Specifically, one Platinum customer may be worth more
than tons of those labeled as Lead. Conceptually,
identifying value and potential profit deriving from the top
of the pyramid is straightforward and represents traditional
organization goals. Companies can use standard market
segmentation and product differentiation to satisfy these tiers.
Dealing with these customers requires professionalism, but
the normal market research processes, product development,
channels of distribution, promotion, and credit functions
should result in success. Thus, Zeithaml and her coauthors
showed companies how to use their tried and trusted
marketing approaches to maximize effectiveness and
profitability. The key is to serve those customers most likely
to generate profits instead of losses. The justification is clear:
companies have limited resources and should concentrate
their efforts where the returns will be the highest. They
demonstrated the value at the top of the pyramid (TOP) and
shared strategies for serving those customers while
discouraging or even firing the lower, money-losing tiers.
For profit seeking companies, the customer pyramid approach
is appropriate and allows them the best chances to survive in
typically competitive markets.

Not surprisingly, the top of the pyramid (TOP) approach is

at the heart of Western business practice. Traditionally,
businesses require a set of four conditions to operate
successfully in a market segment. The segment must be
identifiable, measurable, substantial, and accessible. In
Western economies, business and communication
infrastructures are developed sufficiently to meet all of the
criteria for most segments. Arguably, while all four conditions
are important, the substantial and accessible elements are the
more important. For a profit-making firm, the segment must
be large enough to generate profits. If that condition is
satisfied, it is critical that consumers in the segment be
reachable by communications media to receive promotional
messages. In addition, they must be physically accessible to
distribution alternatives. From a profit perspective, companies
concentrate on those areas in which they can be effective,
namely segments that meet all four requirements.
Serving the TOP inevitably means a focus on profits instead
of revenues, and profits are central to Western business. In
practice, over time, numerous Western companies have ceded
market share or entire markets to others when the profits
declined. One prime example is the computer memory chip
market. Memory chips were once produced exclusively in the
US and Europe. As Asian competitors entered the market,
they cut prices at the expense of profits. Their goal was to
make chips; the US firms wanted to make profits.
Consequently, US firms abandoned the marketplace and
searched for targets that were more profitable. European and
US companies still make chips. Their dominance of the
microprocessor markets is the result of the strategic quest for
profitability. However, European or US players do not
dominate the huge market for memory chips. To be
accurate, the US companies actions are not driven solely by
the desire to earn profits. Their organization, corporate
culture, and internal processes require economies of scale,
which demand exploiting the richest target markets. In many
cases, successful companies have evolved into efficient
machines whose foundation is high structural cost. Thus
targeting the most lucrative segments is vital for continued
success.
Profit, in its simplest form, is the surplus of revenue over
costs. If companies can drive costs low enough, it is
conceivable that prices might be low enough for the poor to
afford and high enough to generate a profit. However, earning
a profit with such customers today takes enormous effort.
More important, companies that exist today may be unable to
drive costs low enough to succeed. In fact, costs are only one
part of the equation. The underlying problem is that
companies are ill equipped to serve the poorest customers.
They dont really know what the poor want and dont know
what benefits they seek in products and services. In addition,
companies may not know what mix of product benefits, price,
quality, promotion, and distribution works best for this
segment. However, the focus on profits has led to success.
Recognizing the importance of profits, Zeithaml and her
colleagues have worked on the customer pyramid concept
(Zeithaml et al., 2001). Without using the term, they focused
explicitly on the top of the pyramid, those consumers with
the highest lifetime customer value (LCV). By dividing the
customer pyramid into four sections called customer
profitability tiers, they identified the best, most profitable

The bottom of the pyramid approach

Prahalads proposition
In the book The Fortune at the Bottom of the Pyramid:
Eradicating Poverty through Profits, C.K. Prahalad (2004),
provided that initial conceptualization that had been missing
in marketing thought. His book succeeded in planting the
perception that consumers with low levels of income could be
profitable customers. He painted a picture of the double
bottom line: social goals combined with the business
objective, profit (Harjula, 2005). Coincidently, he appealed
to the best motives among those at the top of the pyramid. By
citing examples of successful attempts to empower the poor
and share in global wealth, he kindled the imagination of
those who want the world to be a better place. This is an
appealing proposition: low-income markets present a
prodigious opportunity for the worlds wealthiest companies
to seek their fortunes and bring prosperity to the aspiring
poor (Prahalad and Hart, 2002).
Prahalads proposition is an invitation to company
executives, politicians, managers of non-profit organizations,
and ordinary citizens, to view poverty as something that might
be alleviated rather than inevitable. He presents a wellreasoned conceptual view supported with case study data
of how companies might mine profits from the lowest
economic strata (Hart, 2005; Prahalad, 2004). Much of the
treatment centers on the nature and scope of profits and the
collective wealth of consumers at the bottom of the pyramid
(BOP).
The main thesis of Prahalads work rests on the idea that
the potential growth for many multinational (MNC) and
medium sized companies does not rest on the small highincome market in the developing world. Instead, its source is
the mass low-income people that are joining the market for
the first time. This idea goes against the following
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Volume 25 Number 7 2008 393 401

assumptions, which, according to Prahalad, most MNCs

make: it is not profitable for them to attend the BOP due to
their high cost structure; the low-income segment cannot
afford the products and services they sell; and only developed
markets value innovation and will pay for new technology.
These arguments imply that governments and nongovernmental organizations (NGOs) should take care of the
low-income segment.
According to Prahalad, marketers who believe that the BOP
is a valuable unserved market also believe that even the poor
can be good customers. Despite their low level of income,
they are discerning consumers who want value and are well
aware of the value brands favored by more affluent
consumers. This school of thought recognizes the obstacle
that low income creates. It postulates that if companies take
the correct steps and devote sufficient resources to satisfying
the needs of the BOP, they can overcome barriers to
consumption. This view rests on Prahalads calculations of the
immense size of the global BOP, in his view, a $1.3 trillion
dollar market.
Prahalad recognizes that serving the low-income sector
requires a commercial strategy in response to the needs of
those people; to succeed, other players have to get involved
mainly local and central government, financial institutions,
and NGOs. He proposes four key elements to thrive in the
low-income market:
1 creating buying power;
2 shaping aspirations through product innovation and
consumer education;
3 improving access through better distribution and
communication systems; and
4 tailoring local solutions.

opportunities and poverty eradication through profits may set

unrealistic expectations for business executives (McFalls,
2007). Second, the traditional timelines for achieving social
goods versus profits differ (Harjula, 2005). Businesses may
use a five-year horizon as their benchmark for returns. In
contrast, social goals like reducing smoking and other
unhealthy lifestyle behaviors may take generations.
Thus, rather than viewing the poor primarily as consumers,
this group suggest a focus on this segment as producers, i.e.
potential entrepreneurs that can improve their economic
situation by increasing their income level. Companies must be
willing to invest time, resources and training to insure that the
producers create products with some barriers to entry and a
reasonable level of productivity. They need to do so to avoid
the trap of producing commodities that are easy to duplicate
and, thereby, keep the poor, poor. Otherwise, alleviating
poverty becomes very unlikely.
Reconciling the two opposing viewpoints
It is clear from the previous discussion that findings in the
literature about the nature, scope, and value of the BOP
proposition are mixed. More research is needed on this topic
to gain an accurate view of the presence and extent of
opportunities at the bottom of the pyramid.
The following sections examine some key elements of the
BOP initiative that have been, acknowledged in the literature;
specifically, the firms motivations to attend the BOP market,
the characterization of the BOP consumers, and the BOP
business model. The latter element focuses on three major
issues: the role of microfinance, the importance of
establishing alliances among different actors (e.g. for-profit
firms, NGOs, governments), and how for-profit companies
need to adapt their marketing mix to attend the BOP
profitably.

The opposing viewpoint

The second literature thread emerged years later in the
discussion and represents a thoughtful attempt to verify the
bottom of the pyramid (BOP) concept. It questions the ease
with which companies may tap the BOP and whether profits
exist there at all (Karnani, 2007a).
First, this group dismisses the published calculations about
the size of the BOP and its wealth. They describe the
economic size of the BOP as considerably smaller than
Prahalads estimate and cite the inherent subsistence problem:
the poor spend 80 percent of their income on food, clothing,
and fuel. There is hardly anything left to spend after that
(Karnani, 2007b).
Second, they argue that it is very unlikely that companies
will be able to attend the BOP market profitably. In fact, the
costs of serving this segment can be very high. BOP customers
are usually much dispersed geographically; they are very
heterogeneous, which reduces the opportunities for obtaining
significant economies of scale; and their individual
transactions usually represent a low amount of money. In
addition, consumers at the BOP are very price sensitive,
which, again, makes profitability a difficult goal to achieve.
Those factors show that the ideal that both profits and
social good can result from serving the BOP is questionable.
First, each goal has different motivations, demands, and
mechanisms to satisfy and they can be contradictory. The
differences between business realities and development
imperatives are not easy to reconcile. Some recent case
study work suggests that the early language around the
inclusive capitalism idea that emphasizes unlimited business

Firms motivation to attend the BOP market

A comprehensive examination of the BOP approach requires
first an understanding of why for-profit companies engage in
such an initiative. The literature suggests two main
motivations that companies have to attend the BOP market:
1 they can convert this segments purchasing power into
profits; and
2 they can bring prosperity to the poor, and thus alleviate
poverty.
For example, in the 1970s, Nestle was able to contribute to
social progress while developing a competitive advantage and
making profits in Moga, a district in India. With the purpose
of establishing local and diverse sources of milk, Nestle built
many refrigerated diaries and then sent its trucks to collect
product while providing financing, nutritional supplements,
and assistance and training to the farmers. With this action,
Nestle increased its milk production and the suppliers
productivity, improved the quality of the product and
processes, and increased the penetration of other Nestle
products in the region. In turn, farmers raised their standard
of living; Nestle was able to pay higher prices, and farmers
were then able to obtain credit.
A second case illustrates how a focus on the BOP can be an
important strategic goal, with two dimensions: profitability
and corporate social responsibility. Masisa is a leading
company in the production and trade of wood boards for
furniture and interior architecture in Latin America. It has
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established the goal of generating 15 percent of the revenues

from inclusive businesses, i.e. the bottom of the pyramid,
before 2012. Under their definition, inclusive businesses must
be profitable, and socially/environmentally responsible. They
expect to help improve the standard of living for low-income
people by facilitating their participation in the value chain as
suppliers, distributors, or other element of the channel, and
by providing them with access to products and services that
can help them improve their socio-economic condition.

cooperatively owned items like a television, a telephone, an

electric generator, medical services, or even something to help
make products for sale. Managing that sum for the common
good presents a major dilemma: community welfare versus
individual choice. People in the BOP would need a high sense
of community involvement and consumer education to make
responsible choices. A non-profit community action
organization or a socially conscious business would be very
helpful in marshalling cooperation. However, too many of the
poor make poor choices like spending money on tobacco
instead of food for their children. Even if this optimistic level
of potential purchasing power exists, harnessing it for profit
will be extremely difficult.
One further concern questions this premise. Traditionally,
serving the poor was the role of charities, not for profit, and
other non-governmental organizations. Much of the
excitement that the BOP proposition has generated stems
from the inclusion of profit making companies in the process.
The thought is that profit will be a powerful goad toward
achieving success. Profit is clearly an incentive but beyond the
cases cited in Prahalads work, there is little proof that
companies can make the shift. More empirical data would aid
the process of developing purchasing power.

Purchasing power and profitability

Karnani (2007a) notes that BOP concept rests on a fuzzy
definition of the target market. It is difficult to find an article
in the BOP literature that does not cite the now popular
figure: four billion. Four billion originally referred to those
people who primarily live in developing countries and whose
annual per capital income is under US$1,500 per annum.
Some of the literature takes as an article of faith that the BOP
exists and earns that level of income. The perception is that
individually the consumers are poor but together they
represent massive purchasing power. However, authors
define the BOP income level using several standards, which
obscures its true nature. For example, Hammond et al. (2007)
consider the bottom of the pyramid as composed of people
with per capita incomes below $3,000 in local purchasing
power.
Prahalad (2004) states that there are more than four billion
people with per capita income below $2 per day at purchasing
power parity (PPP) rates ($750 per year). This is a significant
reduction in previous estimates: four billion people with per
capita income below $1,500 per year ($4 per day) (Prahalad
and Hart, 2002), or four billion people with per capita income
below $2,000 per year ($6 per day) (Prahalad and Hammond,
2002). Other contemporary sources like the World Bank
estimated the number at 2.7 billion, in 2001. However, other
researchers characterize the World Bank projection as an
overestimation, with some experts estimating the poor at 600
million (The Economist, 2004). The differences range from
four billion to 600 million, a large enough gap to cause
concern.
The three reported income levels range from $2-6 per day.
The $2 per day criterion is consistent with previous literature
in development economics. It is important to understand that
how to alleviate poverty depends on the definition of poverty.
Using the $2 per day figure presents different challenges than
the higher levels: people who earn less than $2 per day have
very different needs and priorities than people who earn $4-6
per day. Adopting the higher poverty line obscures these
differences (Karnani, 2007b) and overestimates the potential
at the BOP.
In principle, it is clear that collectively the mass of poor
customers do hold wealth. However, an additional problem is
that they do not hold it in the right concentrations. If one
considers a hypothetical example, the nature of the wealth at
the BOP may become a bit clearer. If a village of 1,000 adults
earns an average of US$750 per year (the $2 per day figure),
the gross earnings of the village are significant. However, the
question becomes how much remains after satisfying the
necessities. Even if an impressive 10 percent of income
remains per household, that translates into $0.20 per day. It is
difficult to perceive how such small sums might generate
profits. Collectively, the village may have $200 per day in
disposable income. That might translate into community-

Poverty alleviation and prosperity to the poor

From a social responsibility perspective, there are distinct
differences between a market-based approach to poverty
reduction and approaches that are more traditional.
Traditional approaches often focus on the very poor,
proceeding from the assumption that they are unable to
help themselves and thus need charity or public assistance. In
contrast, a market-based approach starts from the recognition
that being poor does not eliminate commerce and market
processes: virtually all poor households trade cash or labor to
meet a significant part of their basic needs. The latter
approach is the one for-profit companies have embraced to
pursue the BOP initiative.
The argument regarding poverty is that the poor face
undeveloped distribution outlets and must pay monopoly
prices for the goods they desire. In addition, they are unable
to afford the standard quantities and qualities of products
offered to richer consumers. This is consistent with
Hammond et al. (2007), who describe people at the BOP as
having significant unmet needs, and being dependent on
informal or subsistence livelihoods. They are vulnerable,
poorly integrated to the formal economy, and impacted by a
BOP penalty under which they pay higher prices for basic
goods and services than wealthier consumers.
Successful attempts to bring quality products to the poor at
affordable prices would overcome the high price of poor
distribution (Martinez and Carbonell, 2007). In that sense, it
would increase their purchasing power by bringing previously
unaffordable goods within their budgets. However, the $2 per
day income limit is a significant obstacle and may make this
goal impossible to attain.
There is some hope in alleviating poverty but it is more in
line with Karnanis vision of the poor as producers who are
able to boost their income sufficiently to rise above the
bottom of the BOP. The very recent example of ITC Limited
outlined the distribution based economic problems faced by
poor farmers in India. There are many factors that affect the
flow of goods and services in and out of rural areas, and thus
reduce the rural populations income and quality of life
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(Vachani and Smith, 2008). While the major source of

problems was the poor transportation infrastructure, other
factors operate to keep disadvantaged groups like poor Indian
farmers in poverty. Buyers bully them into accepting buyers
prices. Moreover, farmers are ignorant of their rights and the
market value of their crops. In addition, they pay monopoly
prices for the items they need. These factors act to keep them
at a disadvantage and unable to earn the proper income from
their efforts. By addressing farmers lack of information about
the current value of their crops, the best seed to use for high
yields, proper farming practice, and alternative outlets for
their crops, ITC increased their welfare. To accomplish this,
ITC set up a parallel distribution system, which led to
increases in farmers income and consumption. The effort
started at the grassroots with ITC hiring agents already in the
field and rewarding them for improvements in farmer welfare
and consumption. The company placed computers with
satellite based internet connections in each village and taught
farmers to use them to assess current crop pricing. ITC
guaranteed to match or exceed the prices offered by others. In
addition, ITC provided products farmers needed like seed at
a discount from the existing retailers. There was significant
missionary education aimed at allaying the farmers fears of
exploitation. After a few farmers tried the system, more of
them signed on. The result was increased income, higher
satisfaction, more independence, and lower cost to purchase
supplies.
The example is encouraging and demonstrates the
commitment and stamina organizations need to operate at
the BOP. ITC set up a private distribution network that was
more closely associated with a cooperative than the typical
channel. Farmers and grassroots agents who knew their needs
very well cooperated to operate the channel and share in its
economic benefits. In essence, ITC adopted Karnanis model
of buying from BOP producers to raise their level of income
developing them into profitable customers. Can companies
really generate profits and alleviate poverty at the BOP? This
example seems to show that they can. It also shows the extent
to which companies will have to re-engineer their approaches
and operations to succeed.

There is some data on the changes in the size of the BOP

that aid in forecasting the future. Chen and Ravallion (2007)
report a decline in the proportion of people living under the
poverty line in the developing world over the period 19812004. That represents a reduction of about 0.8 percent points
per year over the period.
Separate from the numbers, the question remains, Who
are BOP customers? Current demographic labels such as
blue-collar or working-class, fail to capture the extreme
level of poverty. As marketers gain more experience with the
BOP, it is possible that other useful differentiations may
emerge based on specific variables, such as behavioral or
psychographic.
The global distribution of BOP customers adds another
factor to consider: culture. The cultures of Latin America,
Asia, and Africa differ widely. It is logical that differences in
culture will affect future attempts to understand the needs of
the BOP segments. In general, DAndrea et al. (2004) find
that consumers at the BOP spend a higher portion of their
income on consumer goods (50 to 75 percent), as compared
to wealthier segments (around 35 percent). These authors
also find that, due to their limited and unstable cash flow, lowincome consumers tend to shop daily and spend small
amounts of money each time. Then too, they are reluctant to
buy in places that are located far away from their homes. The
findings show that stay at home mothers make most of the
purchases and family spending decisions; by doing this, they
fulfill roles as wife, mother, and household manager.
Companies currently devote resources to listening to the
voice of the customer and are confident in their efforts with
currently serviced segments. A change of focus to the BOP
will require new techniques, and freedom from accepted
knowledge. The BOP is so radically different that companies
will have to ignore what they know as truths that may not
apply anymore. Faulty new product development eradicates
the potential for profit and unfamiliar product development
(NPD) territory increases the risks of failure. Firms can
increase their NPD success rates by integrating consumers
into the process as boundary spanning team members instead
of mere respondents to surveys. Thus, product development
will benefit from the input of customers at the lowest levels of
income (Pitta and Franzak, 1997). However, that initiative
will be supremely different from current successes.
A good example of how companies, NGOs, governments,
and other institutions can collaborate in this aspect is the
formation of BOP learning laboratories (McFalls, 2007). The
laboratories were designed to investigate the complex factors
that interact at the BOP as well as opportunities for both
sustainable and human development. More initiatives like this
one are needed, as well as research on the characteristics of
the BOP consumers.

Characterization of BOP consumers

A fundamental requirement to attend the BOP market
successfully is to know deeply the characteristics of the people
in this segment. Some academic studies and reports from
NGOs have contributed refining the understanding of the
BOP: how many they are, where they are located, what their
income level is, and what some of their characteristics in
terms of needs and habits are.
According to Hammond et al. (2007), the BOP is
concentrated in four regional areas: Africa, Asia, Eastern
Europe and Latin America and the Caribbean. 12.3 percent
of the BOP lives in Africa, 72.2 percent in Asia, 6.4 percent in
Eastern Europe and the remaining 9.1 percent lives in Latin
America and the Caribbean. Rural areas dominate most BOP
markets in Africa and Asia while urban areas dominate most
in Eastern Europe and Latin America and the Caribbean.
Estimates of the size of the BOP in US dollars or buying
power approximate $1.3 trillion. The Asia market has a
buying power of $742 billion, Latin America market is $229
billion, the Eastern Europe market $135 billion and Africa
$120.

The BOP business model

In spite of the opposing viewpoints in the literature regarding
the extent to which there is a business opportunity at the
BOP, there is agreement that serving the low-income sector
profitably requires a different business model (Chesbrough
et al., 2006; Prahalad and Hart, 2002). Prahalad and Hart
(2002) state doing business with the worlds four billion
poorest people two thirds of the worlds population will
require radical innovations in technology and business
models. Moreover, the market at the BOP requires a
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combination of low cost, good quality, sustainability, and

profitability (Prahalad and Hart, 2002). As a result, for-profit
firms need to understand how the BOP segment differs from
upper tiers, and adapt the marketing approach to meet the
characteristics of consumers at the bottom.
Prahalads concentration on the bottom of the pyramid
requires a sea change in a companys approach to business.
Attempts to reap profits from the BOP using current
marketing techniques will fail. Failure will result because the
products are too expensive or complicated, are not available in
small enough quantities or sizes, or are simply not what the
poor want. The BOP is not low hanging fruit. It is a market
with potential, and achieving that potential will require costly
effort and innovative strategies (Seelos and Mair, 2007). Even
with a completely new management approach, evidence
suggests that profits at the bottom of the pyramid may be
elusive (Karnani, 2007a).
The literature suggest that the three most critical aspects in
developing a new business model to serve the BOP are the
access to credit, the establishment of alliances, and the
adaptation of the marketing mix. The following subsections
address these issues.

still in its early stage in countries like Brazil, Mexico, and

Argentina.
Most of the banks that have participated in microfinance
are large commercial banks in search of new and attractive
markets. The main reasons for commercial banks to attend
the BOP have been:
.
the strong competition among large banks;
.
the evidence by NGOs supporting the BOP initiative;
.
the social responsibility dimension;
.
the opportunity to diversify their business operation; and
.
the possibility of working together with other institutions,
like NGOs and governments.
According to Westley (2007), by the end of 2005, there were
30 commercial banks in Latin America oriented to the microentrepreneurs.
The establishment of alliances
There is recognition that serving the BOP requires the
involvement of multiple players, including private companies,
governments, nongovernmental organizations (NGOs),
financial institutions, and other organizations e.g.
communities (Prahalad and Hart, 2002).
By infusing the profit motive into value creation, the hope is
that private companies will take the leading role in serving the
BOP and, thus, the purpose of alleviating poverty will more
likely succeed. Prahalad and Hart (2002) suggest that, among
private companies, multinational corporations (MNC) with
extensive financial resources are in the best position to lead
the process of selling to the poor. However, MNCs have
built-in weaknesses that limit their potential for success with
these consumers. They are simply too large, too rigid and too
far from the customer to be effective. Instead of the top down
approach that MNCs represent (McFalls, 2007; Harjula,
2005), a bottom up process is necessary (Karnani, 2007a).
Changing perspectives from top down to bottom up is so
complicated that if MNCs are to be involved, they may have
to create flexible subsidiaries free from the corporate
structure, processes, culture, and assumptions. ITC has
succeeded using that model and has done so at the grassroots
level. Therefore, more research is needed to find out under
which circumstances MNCs or other types of private
company should lead the BOP initiative. This line of
reasoning is consistent with DAndrea et al. (2004) who, in
the context of retailing in Latin America, suggest that smallscale independent supermarkets and traditional stores are
more likely to reach emerging consumers than MNCs.
Likewise, NGOs have been critical in the development of
the business model infrastructure in several successful cases of
for-profit firms serving the BOP. For-profits have created
sustainability for the technology used (Chesbrough et al.,
2006); NGOs, understand peoples needs. In addition,
NGOs are closer to people at the BOP, and are better
prepared to educate them. For example, in Uganda, Africa,
the NGO Infectious Disease Institute in Kampala
collaborated with Pfizer by educating people about the
causes of AIDS, and how to prevent and combat it. This
facilitated Pfizers initiative to provide these people access to
drugs that combat HIV/AIDS (Chesbrough et al., 2006).
Lastly, the public sector has an important role in developing
the BOP proposition. The focus is changing from traditional
governmental assistance delivery, to different ways of creating
a sustainable environment for aiding the BOP. For example,

Microfinance
Microloans are well known and originally seemed like the
answer to self-sufficiency. The concept that a poor consumer
could gain a small loan and become a producer contributing
to family income and independence is tantalizing. There is
evidence that microloans have succeeded in aiding the bottom
of the pyramid. There is also evidence that many of the
would-be entrepreneurs failed to capitalize on such credit.
They got deeper into debt (Karnani, 2007a). Some authors
point out that the entrepreneurial skill that can lead to success
is rare. Most individuals would rather have a guaranteed
income rather than assume the risk that entrepreneurship
entails. This adds to the argument that if businesses can
create jobs and boost the poors income, then consumption
will follow. Those businesses may not be able to obtain
outside financing. The BOP segments are not able to generate
sufficient profits to justify a high cost of capital. To reduce the
cost of capital, perhaps collaboration with funding sources like
the World Bank or other NGO will be necessary. With
financial aid, companies trying for the BOP market may be
able to succeed.
The creation of buying power is one of the key elements
that allow low-income segments to reach product and
services. Formal commercial credit has been unavailable to
this market and the cost of accessing and getting financial
services in the informal financial market is enormous. Since
the pioneering initiative of Grameen Bank, in the mid of the
1970s, several financial institutions have been very successful
in offering financial services to low-income people who were
not traditionally served by the formal bank system. Programs
for microcredit have characteristics that are specific and
different from those of the traditional banking sectors. These
differences include property and corporate governance of the
institutions, characteristics of the consumers, the technology
used to manage credit, and the characteristics of the product
and service.
The growth of the microcredit market has been
heterogeneous across countries. For example, in Latin
America, the microfinance industry has had a significant
growth in countries like Peru, Bolivia and El Salvador but it is
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Journal of Consumer Marketing

Dennis A. Pitta, Rodrigo Guesalaga and Pablo Marshall

Volume 25 Number 7 2008 393 401

the provision of funding and training to entrepreneurs is a way

governments can support consumers and producers at the
BOP. Another example is engineering supportive tax
structures that promote private sector investment in BOP
initiatives.

distribution makes the poor poorer. Today, with escalating

global fuel costs adding to the cost of transportation, the poor
face an increasingly rigorous future. The lack of infrastructure
serving rural areas also increases prices. For example, in
Chile, consumer goods prices in the remote North and South
of the country are 20-25 percent higher than the more highly
populated central zone of Santiago and Valparaiso (Ferreira
and Litchfield, 1999).
The idea of closeness in distribution channels for
consumers at the BOP is very important. This means, for
example, having stores that are both geographically close and
affectively close. In other words, emotional proximity is also
very important. A good example is Banco Estado, a stateowned commercial bank, which consumers consider the
closest to the BOP segment. The reasons are its extensive
distribution, its perception of being adaptive to peoples
needs, its flexibility, and its position as affectively close. In the
context of retailing, DAndrea et al. (2004) show that the
development of personal relationships with the stores
personnel has a positive effect on consumers self-esteem
and well-being.
Pricing for the bottom of the pyramid is, of course, also very
critical. The challenge here is twofold. On the one hand, there
is the issue of affordability: prices need to be affordable to
BOP consumers. Ramaswamy and Schiphorst (2000)
demonstrate the challenges in companies trying to serve the
poor. In order to achieve affordability, they must reduce the
costs of production and simplify the products. On the other
hand, flexibility in payments is also very important. Providing
options of how and when low-income consumers can pay for
their products and services constitutes both a challenge and a
source of competitive advantage to private companies. To do
this, private companies may need the assistance of
commercial banks and NGOs as key partners.
Some marketing theorists (Karnani, 2007b) view the BOP
as a collection of producers rather than consumers.
Therefore, innovative payment models, which allow BOP
consumers to pay using a marketing exchange model would
increase their ability to pay for the things they consume. The
Nestle milk agricultural exchange model cited above comes to
mind. In that model, Nestle actually paid farmers for their
milk at attractive prices. They could use the money to buy
seed at equally attractive prices. It is a small step to consider a
more traditional barter system. As long as the barter system
offered fair pricing it would present a win-win situation that
would help sustain the arrangement.

The marketing mix

It is no surprise that serving different market segments may
require different marketing mixes. Therefore, for-profit firms
need to understand how the BOP segment differs from upper
tiers, and adapt the marketing approach to meet the
characteristics of these consumers.
Since affordability is at the heart of serving the BOP,
product modification will help lower the price and improve
affordability. The parallel strategy, reducing product size
works in higher customer tiers but has limited usefulness at
the lowest levels. In India, unit-use reduced size cachets of
shampoo do promote consumption but are not the answer.
The higher cost of packaging erodes profits, and the resulting
discarded packaging adds to pollution. The problem remains
that the customer still has to allocate scarce income to the
shampoo.
One answer is to create a bare-bones product with fewer
product features that the poor can afford. One example,
Nirma detergent made in India, highlights a poorer product
that is affordable. A single entrepreneur created Nirma to
compete with Hindustan Levers market leading detergent,
Surf. Surf gained market share because it is an excellent
product. It has numerous additives that make it effective yet
gentle to humans. Its cost was significant. In fact, Nirma does
not contain many of the ingredients and safeguards of its rival.
It works but can cause blisters on the skin (Ahmad and Mead,
2004). Despite its harshness, the poor embraced it because
they could afford it. The implication is that research must
also seek to adapt foreign solutions to local needs (Prahalad
and Hart, 2002).
Evidence shows that consumers at the BOP care about
branded products, because leading brands are a guarantee of
product quality, which is particularly important to this
segment because the financial loss from an underperforming
product is greater for people with limited incomes
(DAndrea et al., 2004, p. 6). However, emerging
consumers are not very loyal to specific brand names,
although they do not experiment with unknown brands. In
practice, they switch among a few known brands (DAndrea
et al., 2004).
DAndrea and colleagues also argue that low-income
consumers prefer products in small sizes, even if the perunit cost is higher, because of their income and space
constraints. Moreover, too many varieties of products can
harm emerging consumers purchasing experience. They may
feel tempted to buy things they dont need or cant afford,
which can produce a feeling of inferiority or frustration
(DAndrea et al., 2004).
Marketers also need to revisit distribution channels also to
attend the BOP market effectively. Vachani and Smiths
(2008) recent work dealing with inclusive distribution has
merit as a model for success. In essence, their examples
infused a social action philosophy into a business model. One
of their focal companies, ITC, demonstrated the vision
necessary to discern profits in the future and the
determination to invest in a new distribution channel as a
win-win proposition. Undoubtedly, the high cost of

Conclusions and challenges for marketing theory

and practice
While the picture is not completely clear, the bottom of the
pyramid may offer opportunities to create value for both the
poor and companies. Early promises of a fortune seem to have
been overstated. The degree of wealth present among the
poor is much lower than first reported. In addition, that
wealth is too fragmented to be tapped under the current
business models. It now appears that the basic concept
overestimates the role that BOP consumers can play in
contributing to company profits.
There is still no agreement in the literature about how
beneficial selling to the BOP can be for private companies, or
for alleviating poverty. However, there are several elements of
the BOP proposition that have been identified as critical to
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Journal of Consumer Marketing

Dennis A. Pitta, Rodrigo Guesalaga and Pablo Marshall

Volume 25 Number 7 2008 393 401

succeed. First, an accurate characterization of the low-income

sector both as consumers and as producers is required to
understand their needs, perceptions, and behavior, which in
turn will help companies to design a better business approach.
Second, it is important to recognize that serving the BOP
market requires a different business model, one incorporating
access to microcredit, the establishment of alliances of
collaboration among different types of institutions, and the
adaptation of the marketing mix. Until companies better
understand the needs of emerging consumers and adapt their
business models to serve them more efficiently and effectively,
their growth will be limited (DAndrea et al., 2004, p. 3).
It is well known that BOP markets involve managing
substantial challenges in technical and economic
infrastructure, education, financial resources, and cultural
differences. As participants from the economic sectors
progress, a number of questions need to be addressed.
Gardetti (2005) articulated them clearly. They include: How
can a company turn its strategy at the BOP into a competitive
advantage? What kind of business model will work? How can
it build trust in the informal economy? What kind of
education do business schools need? How does new
technology integrate? How can we develop the educational/
social infrastructure? Moreover, from the viewpoint of
regulatory and policy formulation, if entering the markets at
the base of the pyramid is a sound choice for both
development and business, what does it take to turn this
into a reality?
Scholarly research, as well as practitioners participation in
BOP initiatives, can provide some answers to clarify the true
nature and scope of the fortune at the bottom of the pyramid.

example in India showed its value in distribution and in

customer relationship management. It will be equally valuable
in research, product development, pricing, and promotion.
Fourth, pricing is of paramount importance in serving the
poor. In a for-profit enterprise, consumers must pay for the
cost of serving them. Microcredit is one potential solution. It
may be a limited solution, useful only to consumers with the
skills necessary to manage it. However, innovative exchange
models may offer even those without financial management
skills a chance to improve their condition.
Fifth, given the economies of the BOP, it is likely that if
profits come, they will come later rather than sooner.
Organizations need to choose a long-term involvement in
order to avoid disappointment and a financially ruinous
midterm decision to exit.
Finally, marketers should understand that some products
are simply not suited for the poorest of the poor. Some
products of dubious value to this segment, like Armani
handbags, or even cheap counterfeits, will have no place at the
BOP. More importantly, some products and services related
to health care will always be simply too expensive. Altruistic
surgeons may care for uniquely disadvantaged patients by
donating their time but they are only one part of a surgical
team. Even if the hospital and every member of the team
donate facilities, their time, and the resources to save a
patient, that model is not sustainable as a for-profit venture.
Similarly, the cost of a ten-day supply of a life-saving
antibiotic cannot be reduced realistically using the smaller
package size option. The implication would be either
reduced daily doses or fewer full strength doses. Both are
likely to breed drug resistant organisms and thereby threaten
the life of the patient and society. To remedy this situation,
other players like governments and NGOs will be important.
Many marketers must realize that collaborating with them is
important.
To be effective, the collaboration must be proactive.
Marketers wishing to serve the BOP, who recognize the
importance of alliances with others, should seek out
relationships with both government and NGOs. Early and
persistent outreach will be valuable in alerting all of the
players to each others strengths and in creating an accurate
picture of the challenges. Politically, coalitions of
organizations with different fundamental objectives are
prone to misunderstanding. Often their terminology is
similar but the meaning is different. Alternatively, their
objectives may be so totally different that they are
fundamentally foreign to one another. If the goal is poverty
eradication at a profit, all the players must collaborate. The
goal may be so difficult and achieving effective teamwork is
essential.

Implications for marketers

In general, if profit-seeking companies plan to serve the BOP,
numerous factors will have to change. First, marketers will
have to approach the BOP in a novel manner different from
any they used in their prior successes. The BOP is mostly
unknown territory. They may have to reinvent themselves or
create divisions with substantial independence. If the old
segmentation rules that worked at the TOP no longer apply,
neither will the product development, sales, pricing,
distribution policies, and management. In addition, the
profit objectives and revenue goals will have to be changed.
Those who are not prepared to address the sea change in
marketing approach should avoid entering this market.
Second, simply modifying products and selling them is a
path to failure. Success will depend on knowing the BOP
intimately. Currently the BOP is terra incognita in terms of
segments and their needs. To succeed, marketers must be able
to differentiate different income segments and their value.
Within the various BOP definitions, there are three apparent
segments, under $2 per day, $4 per day, and $6 per
day. The needs and incomes of the segments seem to differ
enough to indicate that they be treated differently. Marketers
need to know which ones to serve and how to serve those
successfully.
Third, in order to understand the voice of the BOP
consumer, companies need grass roots sources of intelligence.
Collaborating effectively with agents on the ground who
have direct contact with relevant BOP segments is vital.
Moreover, companies must train those agents to seek
information that will help serve those customers. The Nestle

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Further reading
Anderson, S.N. (1994), Unions/management create
collaborative culture, Communication World, Vol. 4 No. 1.

Corresponding author
Dennis A. Pitta can be contacted at: dpitta@ubalt.edu

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