Question

1. As a junior member of your company’s committee to explore new markets, you have received a memo from the chairperson telling you to be prepared at the next meeting to discuss key questions that need to be addressed if the company decides to look further into the possibility of marketing to the BOP segment. The ultimate goal of this meeting will be to establish a set of general guidelines to use in developing a market strategy for any one of the company’s products to be marketed to the “aspirational poor.” These guidelines need not be company or product specific at this time. In fact, think of the final guideline as a checklist—a series of questions that a company could use as a start in evaluating the potential of a specific BOP market segment for one of its products. 2. 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? 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? 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.

Answer 1

I do not think that marketing to the bottom of the pyramid (BOP) for selling soaps, shampoo, personal computers, and ice cream, and so on, to people with little disposable income, is in any way exploitation. I believe that it would be unethical to deny products and services to people at the BOP just because the profit margins in this segment would be much slimmer than margins of products and services targeted to the middle class or to the top of the pyramid. That being said, I believe ethical issues can arise at the BOP depending on the strategy employed in the marketing efforts.

Further, selling to the BOP can be a very ethical business practice. Ethical issues arise when companies push products on this segment that do not improve their lives, or prey on their fears and prejudices. Companies need to provide products that improve living conditions and ensure that the target consumers fully understand how to get the most benefit from their very limited resources. Finally, governments need to align their policies to ensure that favorable treatment is given only to companies and products that will truly benefit the poorest of the poor. There are a number of benefits of the activities and strategies of companies doing business at the BOP.

However, the biggest negative in the strategies of companies developing the BOP markets is the effect it will have on existing local businesses. Multinational firms will be much more efficient than local companies, and thus, they will be able to provide superior products at lower prices. This will cause displacement and loss of jobs for people in these markets that are employed by the local firms. The question becomes, does the gain outweigh the pain?

To this I would say, people in local companies that lose their jobs to more efficient, lower cost competition are not better off unless they can find employment elsewhere; however, the society as a whole will benefit from a larger selection of better products at lower prices. After a period of readjustment, this should lead to an upward spiral in the local economy and more opportunities for all.

Socially and economically there are many benefits to the development of the BOP market. However, they do come at a cost. There will be economic and social displacement for people who lose their traditional livelihoods to more efficient competition. The displaced will be forced to adapt to a new market reality.

Criticism of any major change is a given. Some will criticize that the change in and of itself is bad, while other will criticize that the change does not go far enough. In the case of BOP marketing, the criticism is that people are being offered products that they don’t need. This forces them to divert the limited resources that they have from necessities to non-necessities. The implication here is that since people at the BOP do not have enough resources for the basics of life, any diversion of money is bad. Companies pursuing a BOP strategy may also be viewed as taking advantage of a poor, uneducated population in the quest for greater profits. Make no mistake about it. Companies pursuing a BOP strategy are looking for extra profits. Many times, profit is equated with “consumerism.” This is especially true in the developed world where a significant amount of profit is generated from products that could be considered as non-necessities. However, profit is not a four-letter word. Profits are necessary to keep the business going and to keep people employed. The effects of the recent global recession are proof enough that lack of profits leads to lack of employment. The important thing to remember is that profit can be obtained without exploiting the target market. The companies discussed here have provided a real and tangible benefit to the markets they are trying to serve. Children have better nourishment which allows them to perform better at school. Sanitary conditions have improved due to the use of soaps and shampoos. Access to solar power has improved living conditions in the small villages of developing countries. If companies could not make profit, these positive effects would not be possible. As stated before, the key to this discussion is, do the products and services improve the life and living standards for the people at the bottom of the pyramid? If the answer to this question is yes, then the activities of these companies should be encouraged and spread to other BOP markets. If the answer is no, then criticism is warranted. When marketing to the poorest of the poor, it is incumbent upon companies to ensure that their products and services fulfill a need for these people. Their limited resources cannot be wasted on frivolous products. It is also important for companies to ensure that the people understand the proper use of the product so they can get the most benefit for the money that they spend. If the products are able to achieve these high standards in a market, then it becomes a moral obligation of the company to develop a similar approach for other BOP markets. Products and service that can improve living conditions for the BOP market should be disseminated throughout the underdeveloped world. It is hard to argue with improving living conditions for the world’s most disadvantaged people. Profits will accrue to the companies that follow this strategy. These profits are necessary for the dissemination of the benefits to continue, and for the development of new products and services that can have the same effect.

So, NO, 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.