1. Why selling to the poor makes for good business.
- Author
-
Prahalad, C. K.
- Subjects
POOR people ,MARKETING strategy ,CONSUMERS ,EMERGING markets ,DEVELOPING countries ,CATARACT surgery ,MARKET segmentation - Abstract
The author discusses opportunity in marketing to the poor. There is an invisible market waiting at the bottom of the world economic pyramid--a market of five billion people who live on less than $2 a day. Businesspeople think that the poor cannot afford their products and services, and also assume, naively, that the poor have no use for advanced and emerging technology. In fact, selling to the poor is a uniquely powerful way to achieve breakthroughs in products and management practices: The bottom of the economic pyramid is a sandbox for innovation. In India, China, the Philippines, and other countries, single-serve packs of shampoo, detergents, pickles, tea, aspirin, cookies, matches, and ketchup are common. Fully 60% of the value of all shampoo sold in India is in single-serve packets. They go for about a penny apiece and are a very profitable business not only for global corporations like Unilever and P&G but also for many local firms. Profiting on penny sachets of shampoo is only the start. The markets at the bottom of the economic pyramid force managers to rethink their costs, quality, scale of operations, and use of capital. When Aravind Eye Care set out to provide cataract surgery to the poor in southern India, for example, it knew customers could never afford the $3,000 per procedure that it cost in developed lands. The company devised a system that enables it to provide the surgery for an average of $25 to $30 per procedure. Debt-free and highly profitable, Aravind boasts an annual return on equity of more than 75%.
- Published
- 2004