Bottom of the pyramid and the Indian reality

One of the greatest Management thinkers and Gurus of all time, Prof.C.K. Prahalad has researched and written extensively on the concept of the bottom of the pyramid. What this simply means is that there is a fortune to be made by making and selling goods and services to the poorest of the poor, and since there are huge volumes to be made here, the multi-national companies should innovate to provide goods and services to the really needy in this segment -- the lowest middle class or the poor, most of whom earn less than Rs.40/- per day (the current US dollar rate).

However,we need to look just at our neighbourhood to understand the realities. This bottom of the pyramid is the exclusive preserve of hundreds of small Indian entrepreneurs, who have simply made a killing in this market. In fact, it is these daily-wage earners, agricultural labourers, and maidservants, plumbers,fitters and freelance electricians who contribute actively to the success of this market.

What is going on? Just go to the booming Karol Bagh area of New Delhi or hop around the highly attractive payment shops in Chennai's T.Nagar. Or even in the busy upmarket localities of Bangalore. I have seen it in action in Ranchi, Indore, Kolkatta, Mumbai, and just about in every small town like Tiruchi, not to speak of booming B-class cities like Coimbatore.

Chances are very bright that you will get to buy, at prices that are atleast 40% cheaper than the regular shops, a whole range of textile goods and shoes, furniture, toys and whatever. Literally anything under the sun. So much for the kind of variety. In these same places you can eat dosas, cutlets, samosas or any other such food items at very cheap prices. In Chennai, these "kaiyendi bhavans"(small mobile eateries), flourish in every nook and corner. They offer a whole range of food items at very cheap prices.

In the city of Madurai (500 kms from Chennai), if you would visit that city to see its magnificent temples, shop around to eat in any one or more of the "aachi kadais" that specialise in selling food items late into the night. This is one speciality of this ancient city.

What makes the difference? It is simply the endurance of the poor classes. And of course, it does signify the spirit of Indian entrepreneurship. In fact, there is so much of a fortune to be made here,and even today, there are hundreds who buy goods from one place and sell it in another, to these same class of people, who anyway form the majority in India. In a huge number of small towns of Tamil Nadu, enterprising unemployed youth make it to Surat in Gujarat as it it were a tourist place, buy sarees in bluk and sell it on easy instalment basis in a very informal way to hundreds of poor women in Tamil Nadu,who cannot afford to pay even Rs.200/- at one point in time. Since they can pay in instalments, there is a huge market waiting to be tapped.

The success at the bottom of the pyramid has prompted even organized players to enter the market. Look at Rs.3 or Rs.4/- biscuit packets. Look at small pack Re 1/- wafers available in the smallest retail shop. Look at how the mighty Hindustan Unilever sells its shampoos for Re.1/-.

We, as Indians, are a very highly tolerant people. We allow our politicians to swindle as much money as possible. We allow our bureaucrats to join the party and squeeze us to the maximum limit. We allow our Governments to spend huge amounts of money on stupid and useless projects. And yet, we all learn to survive against heavy odds, buy everything in easy instalments, and still manage to educate our sons and daughters in the best of colleges.

It is this same spirit that is so overwhelming at the bottom of the pyramid too. Have you seen graduate engineers from families where the father is a daily-wage earner, making not more than Rs.60/- per day, and where the mother is a maid servant making Rs.2000/- by working 16 hours per day, in as many as ten houses? I know a few students from such families, who are now in engineeing colleges, thanks to some help from friends and relatives and some scholarships made available by the colleges. They would pool whatver they have to educate their children, and still manage to eat to keep their body and soul alive for the next day. They would go to the Government hospitals and manage to get some pathetic treatment, and combine that with home-made remedies.

This is the spirit that makes the market for the poor still attractive. This is the spirit that no Wall-mart can attract. This is the spirit that no computer ever on earth can understand. This is the spirit that lives on its own, supports hundreds of thousands of people to make their money, live their lives and make others happy too. It is this spirit of sacrifice that contributes to eating the iddlis at Re 1/- apiece, and drinking tea at Rs.2/ for half a cup at the kaiyendi bhavans.

If you think that these people do not have values,and are a nuisance to our cosy comforts in individual houses and flats, think again. You are way off the mark. They are very trust-worthy and kind. They would do a lot of good to good people. Of course, women in such families, particularly in Tamil Nadu, have to fight against butchers in the name of husbands, who kill all their (the women folk) enthusiasm by taking to boose and beating them at will. Still, women in such homes manage to survive, and have now woken up to the fact that their educated sons or daughters would take care of them, once they are gainfully employed.

The market at the bottom of the pyramid in India, is one of most fascinating markets in the world. There are very few marketing experts who have made an indepth study to understand the real needs of such a market. Those MBAs in the biggest B-schools, who run to every company to get a project to do, can jolly well study in-depth, the aspirations, the ambitions and coping mechanisms of this class. They could understand how the small money that is available is so judiciously spent. That will possibly offer them huge insights.

Of course, the bottom of the pyramid also has middle-class hopes and aspirations. That is exactly why a whole range of electronic goods and consumer durables are now purchased by these people in instalments.

Three cheers to the Indian bottom of the pyramid!!

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