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PISCES E-conference


The Base of the Pyramid Distribution Challenge

Dear All,

We are very pleased to share with you our new publication “The Base of the Pyramid distribution challenge: Evaluating alternate distribution models of energy products for rural Base of Pyramid in India” by Sachin Shukla & Sreyamsa Bairiganjan.
Outline
With approximately 700 million people, India’s rural Base of the Pyramid (BoP) market segment presents a significant opportunity not only for multinational corporations but also for small and medium manufacturers and producers. For manufacturers / producers of rural-targeted BoP products, the distribution channel decision is crucial to successful product adoption. Distribution networks in emerging markets are experimental at this stage. Most companies operating in BoP markets have developed mix-n-match strategies to reach as many end-users as possible.

This paper from Centre for Development Finance (CDF) - IFMR analyzes the product distribution choices available in rural BoP markets to help enterprises evaluate the key drivers of distribution for successful go-to-market strategies. Based on extensive field work with commercial and social enterprises, rural BoP consumers and on rigorous secondary research, this paper elucidates why a one-size-fits-all strategy will not work in a rural market scenario. It highlights the complexities of operating in rural Indian markets and presents a new analytical framework to help companies identify viable alternate distribution channels and evaluate their capabilities. The aim of this paper is to help manufacturers, producers and marketers – particularly in India – to better realize the enormous potential of the alternate distribution structures in this market and engage them in a mutually beneficial way.

Challenges:

On close observation, rural BoP markets are demanding and complex for producers/ manufacturers because of multiple challenges that broadly fall into three categories:
a. Rural BoP Customer Profile
b. Product Challenges
c. Operating Environment (Eco-system)

Question:
Inspite of the demanding and complex nature of rural BoP markets, how does a manufacturer or a producer with his limited resources take his products to these markets in a scalable and sustainable manner?

Conclusions

• Demand in Indian rural markets is rising
• Supply chain gaps and fragmented markets continue to hinder rural prosperity via the BoP penalty
• Innovation in distribution holds the key to rural fortune
• A one-size-fit-all distribution strategy will not work effectively and efficiently for all classes of products
• The marriage of the products’ distribution requirements with the unique distribution capabilities of alternate channels will continue to gain significance
• Partnerships and hybrid values chain are the way forward for inclusive development


Authors
Sachin Shukla and Sreyamsa Bairiganjan

Select References and documents

Allen L. Hammond, William J. Kramer, Robert S. Katz, Julia T. Tran, Courtland Walker (2008). The Next 4 Billion - Market size and business strategy at the base of the pyramid. Washington D.C: World Resource Institute and International Finance Corporation.

Huhmann, S. (2004). Tapping India’s Rural Market. Journal of student research, p92-99.

Ergeneman, A (2003). Dissemination of improved cook stoves in rural areas of the developing world: Recommendations for the Eritrea Dissemination of Improved Stoves Program. Berkley: Goldman School of Public Policy, University of California. p1-49.

Christen, Robert and Ivatury, Gautam (2005). A Systemic View of SHG Bank Linkage Four Sustainable Models. Washington D.C: CGAP (Consultative Group to Assist the Poor). 1-12.

C.S. Reddy, G. Bhaskar Rao, S. Ramalakshmi, V. Samatha, S. Vanaja, M.K.S. Murali Krishna, K. Raja Reddy, N. Tirupataiah, P. Poorna Chandrika, G. Trivikrama Devi, V. Sreenivasulu, Sridhar Kolluru, Ch. S (2007). SHG Federations in India (APMAS). Hyderabad: APMAS. 1-155.

White, Chris and Fearnon, Karen (2010). Developing the Next Generation of Glowstar Solar Lantern. United Kingdom: University of Cambridge & University of Liverpool. 1-5.

Williamson, Lionel (1998). Conducting a Feasibility Study for Marketing Cooperatives. Kentucky: University of Kentucky Cooperative Extension Service. p1-3.

Gupta, R.C (2005). The Role of Co-operatives in Community Economic Development. Canada: Rural Development Institute Brandon University. p6-14.

Allen L. Hammond, Robert S. Katz, William J. Kramer, Julia T. Tran, Courtland Walker (2008). The Next 4 Billion - Market size and business strategy at the base of the pyramid. Washington D.C.: World Resource Institute and International Finance Corporation.

Prahalad, C.K., 2004. The Fortune at the Bottom of the Pyramid. 1st ed. San Francisco: Wharton School Publishing.
Dear Sachin,

This is am extremely informative paper and highlights well
the challenges faced in marketing to the base of the pyramid. I think the
question you ask is a very important one and yet with no easy answer
otherwise we wouldn't be holding this e-conference. From the market
models shown, it would suggest that support from enabling environment (as
termed in the Participatory Market Mapping approach) are needed. This is
highlighted by the variety of case studies shown where micro finance
institutions or NGO input has been required in order to effectively support
he scale up and distribution of the product.

However you state in your conclusions that gaps in supply
chain networks still remain. How can we effectively overcome these supply
chain gaps? Do you think these relate to some of the earlier discussions on
gender balance in market approach or perhaps through addressing cultural
sensitivity? Some of the differences you highlight between models and that
there is no "one size fits all" would be to do with cultural differences as
Gillian highlighted earlier in the week. Did you find this affected
uptake of certain products more than others in India from the research you
have conducted?

Best wishes

Mriaim



On Wed, Mar 23, 2011 at 2:03 PM, <hedon@hedon.info> wrote:

>
> Dear All,
>
> We are very pleased to share with you our new publication The Base of the
> Pyramid distribution challenge: Evaluating alternate distribution models of
> energy products for rural Base of Pyramid in India by Sachin Shukla &
> Sreyamsa Bairiganjan.
> Outline
> With approximately 700 million people, Indias rural Base of the Pyramid
> (BoP) market segment presents a significant opportunity not only for
> multinational corporations but also for small and medium manufacturers and
> producers. For manufacturers / producers of rural-targeted BoP products, the
> distribution channel decision is crucial to successful product adoption.
> Distribution networks in emerging markets are experimental at this stage.
> Most companies operating in BoP markets have developed mix-n-match
> strategies to reach as many end-users as possible.
>
> This paper from Centre for Development Finance (CDF) - IFMR analyzes the
> product distribution choices available in rural BoP markets to help
> enterprises evaluate the key drivers of distribution for successful
> go-to-market strategies. Based on extensive field work with commercial and
> social enterprises, rural BoP consumers and on rigorous secondary research,
> this paper elucidates why a one-size-fits-all strategy will not work in a
> rural market scenario. It highlights the complexities of operating in rural
> Indian markets and presents a new analytical framework to help companies
> identify viable alternate distribution channels and evaluate their
> capabilities. The aim of this paper is to help manufacturers, producers and
> marketers particularly in India to better realize the enormous potential
> of the alternate distribution structures in this market and engage them in a
> mutually beneficial way.
>
> Challenges:
>
> On close observation, rural BoP markets are demanding and complex for
> producers/ manufacturers because of multiple challenges that broadly fall
> into three categories:
> a. Rural BoP Customer Profile
> b. Product Challenges
> c. Operating Environment (Eco-system)
>
> Question:
> Inspite of the demanding and complex nature of rural BoP markets, how does
> a manufacturer or a producer with his limited resources take his products to
> these markets in a scalable and sustainable manner?
>
> Conclusions
>
> Demand in Indian rural markets is rising
> Supply chain gaps and fragmented markets continue to hinder rural
> prosperity via the BoP penalty
> Innovation in distribution holds the key to rural fortune
> A one-size-fit-all distribution strategy will not work effectively
> and efficiently for all classes of products
> The marriage of the products distribution requirements with the
> unique distribution capabilities of alternate channels will continue to gain
> significance
> Partnerships and hybrid values chain are the way forward for
> inclusive development
>
>
> Authors
> Sachin Shukla and Sreyamsa Bairiganjan
>
> Select References and documents
>
> Allen L. Hammond, William J. Kramer, Robert S. Katz, Julia T. Tran,
> Courtland Walker (2008). The Next 4 Billion - Market size and business
> strategy at the base of the pyramid. Washington D.C: World Resource
> Institute and International Finance Corporation.
>
> Huhmann, S. (2004). Tapping Indias Rural Market. Journal of student
> research, p92-99.
>
> Ergeneman, A (2003). Dissemination of improved cook stoves in rural areas
> of the developing world: Recommendations for the Eritrea Dissemination of
> Improved Stoves Program. Berkley: Goldman School of Public Policy,
> University of California. p1-49.
>
> Christen, Robert and Ivatury, Gautam (2005). A Systemic View of SHG Bank
> Linkage Four Sustainable Models. Washington D.C: CGAP (Consultative Group to
> Assist the Poor). 1-12.
>
> C.S. Reddy, G. Bhaskar Rao, S. Ramalakshmi, V. Samatha, S. Vanaja, M.K.S.
> Murali Krishna, K. Raja Reddy, N. Tirupataiah, P. Poorna Chandrika, G.
> Trivikrama Devi, V. Sreenivasulu, Sridhar Kolluru, Ch. S (2007). SHG
> Federations in India (APMAS). Hyderabad: APMAS. 1-155.
>
> White, Chris and Fearnon, Karen (2010). Developing the Next Generation of
> Glowstar Solar Lantern. United Kingdom: University of Cambridge & University
> of Liverpool. 1-5.
>
> Williamson, Lionel (1998). Conducting a Feasibility Study for Marketing
> Cooperatives. Kentucky: University of Kentucky Cooperative Extension
> Service. p1-3.
>
> Gupta, R.C (2005). The Role of Co-operatives in Community Economic
> Development. Canada: Rural Development Institute Brandon University. p6-14.
>
> Allen L. Hammond, Robert S. Katz, William J. Kramer, Julia T. Tran,
> Courtland Walker (2008). The Next 4 Billion - Market size and business
> strategy at the base of the pyramid. Washington D.C.: World Resource
> Institute and International Finance Corporation.
>
> Prahalad, C.K., 2004. The Fortune at the Bottom of the Pyramid. 1st ed. San
> Francisco: Wharton School Publishing.
>
> --
> HEDON PISCES E-conference - PISCES Market Mapping E-confernce
> Unsubscribe www.hedon.info/Groups | Visit the forum online
> http://www.hedon.info/forum17
>
>


--
  • Miriam HANSEN MEng*
Community Coordinator | *HEDON Household Energy Network*
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Dear Miriam,

Supply chain gaps are part of part and parcel of developing economies when you treat rural segment both as a consumer as well as a producer. As you rightly pointed out there are no easy answers. Obvious answers that exist are either very investment intensive for private participation or involve government interventions (for e.g. Indian government allocating 58,000 Rs. on rural infrastructure for FY12 budget) which are slow to come by. For small and medium sized entrepreneur partnerships and creation of hybrid value chains alone hold the key - so that each participant can stick to there core competency areas and deliver in the process of market making.

Personally I am not very fond of gender based approaches as in my own experience I have seen women taking loans from MFI's to arrange working capitals for there husband's shops - and if the husband fails to deliver they are in problem from both both domestic and social sides. The MFI mishaps in Andhra Pradesh (India) are no secret which have led to premature regulation in this space.

For product uptake, I think it would help more to identify the opinion influencer and communicate the value proposition of a certain product. However we need to observe that the opinion influencer might differ from product to product in the same geography so that needs to be take into account as well.

Hope I am able to answer your question.

Regards,
Sachin
 
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