Indian brands take Prahalad’s BoP challenge to heart

BOP7

Now that the design and development of innovative product solutions for customers challenged by income seems have become mainstream, a slew of products are  being launched by long established brands in India for the "BoP" market.

Tractor manufacturer Mahindra & Mahindra takes a leaf from Tata's book with the launch of the GiO, a

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half ton 4 wheel delivery vehicle for city center use that is directly aimed at the market currently served by alternatives like this,

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Kirana store deliveryman, Kanpur, September 15th 2009

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except that the GiO offers more than simply last mile connectivity or affordability. Their design aims to influence perceptions of the owner's respectability and status as well.  From the article,

Mahindra & Mahindra, on its part, does not want to bank on cost
calculations alone — there is the softer side too that it has worked
on. It aims to restore the pride and status that three-wheeler
driver-owners sorely miss. “They have always felt that despite the hard
work they put in, their families do not accord them the same respect as
the owner of a four-wheeler gets,” says Nayer.

The Gio, thus, has a distinct style, developed in-house by the
company along with design consultant Thairung. The interiors and ride
quality have been revved up to match, the company claims, one-tonne
trucks, so that buyers don’t feel shortchanged in any way. The driver
can enjoy roll-on windows, a roomy cabin, car-like steering, a sliding
seat, windshield wiper and gearshifts (all in sharp contrast to
three-wheelers). Larger tyres, a rear leaf-spring and front independent
McPherson suspension (not found in current one-tonne trucks) for better
stability and load-carrying ensure that the ride quality does not take
a beating.

Even the name for the truck was chosen to phonetically resemble the
verb ‘live’ in Hindi, jiyo. The TV campaign, launched on November 20,
too plays on the theme and is not product- or feature-centric. It
depicts an erstwhile three-wheeler driver-owner commanding respect with
a Gio as he goes about his tasks. “We want to tell them that this
vehicle is going to change the way people look at them,” says Nayer.

Also, tapping into the aspirational element of brand and product choice among lower income consumers is Cadbury Chocolate. From the interview with the MD,

Do small packs contribute significantly to your revenues and volumes?

Yes. They contribute a very material amount. I think for the CDM
(Cadbury Dairy Milk) brand, I would say that the Rs 2-pack could be
almost 15 per cent of the volumes of the brand now. And, it's been in
the market only for the last 15 months. The less-than-Rs 2 price is
about 7- 8 per cent of the market. This happened only recently. Only
when aspirational brands have offers which are accessible, the market
explosion truly happens. I think there is enormous opportunity at that
end of the market.

And finally that hoary old grandfather of healthfood drinks, Horlicks, chooses to extend the brand with Horlicks Asha (hope) for the lower income segment than risk a backlash on the stuff that made us grow up strong and tall,

Calling rural
‘absolutely critical’ for the company, Mr Sen said GSKCH has hinged
its rural strategy on two aspects —low unit packs (90 gm sachets of Boost,
and biscuits at Rs 5) and products tailored for rural consumers, Horlicks Asha
being an example. While regular Horlicks costs Rs 135, the cheaper variant Asha
is priced at Rs 85 for 500 gm.

Observations

Innovation in pricing, business models, distribution networks as well as product design seems to be proliferating now that addressing the BoP market seems to make ROI sense. Mahindra, for example, claims their entire product development cost for the Gio truck was Rupees 25 crore – under 5.5 million USD. Peanuts for a category creating four wheeled vehicle running on diesel.

And these "BoP business" influences are now spreading (virally?) out of the continent, as this Voice & Data interview with Afghan telco Roshan, implies:

Per-second billing has unleashed one of the
bloodiest tariff wars in India. What impact has per-second billing had
on the Afghanistan telecom industry?

In Afghanistan, one of our competitors entered
the market with per-second billing. When our other competitor also made
the switch to per-second-billing, we decided to go down that route.
From our perspective, moving to per second billing had a 30% negative
impact on revenues for the whole industry. Given the stage of growth of
the telecommunications industry, it was too early to move to this
pricing model and, therefore, had an impact on the overall development
and rollout of the services.

Ultimately, we see that price reductions is
good for the consumer, as it really helps the market to open up.
Through per-second-billing, the entry barriers have been reduced, and
it has really allowed us to penetrate to the bottom of the pyramid.

What happens when global market forces start to follow the BoP rather than bask in the current smugness implied by "reverse innovation" ?

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