The bottom of the pyramid

I have always been fascinated by C.K.Prahlad's theory on the bottom of the pyramid. Here's one interesting article on Red Herring titled Selling to the Poor

Here are a few excerpts

“There are five billion people in developing countries that are currently underserved, but can’t wait to join the global economy,” says Coimbatore Krishnarao Prahalad, a University of Michigan professor and author of best-selling business books, including The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits.

Consumers “at the bottom of the pyramid”—as Mr. Prahalad refers to the poor—can’t afford the same products as Western consumers. On average, they earn less than $2 per day. Mr. Prahalad, considered one of the world’s most influential business thinkers, believes companies can make a profit targeting this market, if they make their advanced technology affordable.

The funda:

First, price/performance ratios need to improve by a factor of 30 to 100, he says. “But contrary to popular belief, there is more to it than just taking existing technology and removing some functionality,” he says. “Products for developing countries often have to be more advanced than those for the developed world.”

How can one sell more advanced products at lower prices and still make money? “Through

innovation,” says Mr. Prahalad. The $39 you pay for a DVD player that was made in China isn’t all about low labor costs, he says. It is about doing things differently.

“In India, car manufacturers such as Tata and Hyundai sell cars for $7,000—for $9,000 you have a car with a video screen in the back seat and the quality is high,” says Mr. Prahalad. “Why do we sell cars in the U.S. and Europe for $20,000?”

Here are a few brilliant examples quoted:

Jaipur Foot, a self-sustaining company that makes artificial feet that allow amputees from rural India to continue working in their fields, is one of Mr. Prahalad’s favorite examples. With Jaipur’s advanced prosthesis, patients can squat, sit cross-legged, and walk barefoot on bumpy terrain—things that are impossible with artificial limbs made in the West. Priced at only $30, it’s more than 250 times cheaper, too.

U.S.-based Gillette is also adapting to serve emerging markets: its new razor designed for the Indian market can be cleaned without running water; millions of consumers lack access to a tapped water supply. Indian men like to use double-edge blades, Gillette researchers found, but they shave less often then men in the West, so have longer stubble. That, coupled with their use of still water, clogs twin blades. The “push clean” button on the new, cheap “Vector Plus” solves the problem.