Saturday, May 1, 2010

Few misconceptions regarding the BOP customers?

Often companies who want to cater to the BOP customers suffer from some kinds of misconceptions. These misconceptions are not only untrue but they also demotivate big enterprises to see the huge potential available in the BOP segment .Some of them are :-

(1)Bop customers don't have buying potential:- this is the biggest misconception that private enterprises have.BOP customers  have huge potential, albeit they do not have buying power like their well off counter parts.  These people who constitute 4-5 billion of the world population with there own latent needs and demand should not be ignored at any cost .These people might look poor at the surface but they do have capacity to spend and they are doing it .It's estimated that 85% of the population living in Dharavi(mumai's slum) have tvs, more than half of them have mobile phones and so on .
One another important fact thta is often ignored is that these people often pay much more than there well off counter part to make purchases . In economy there is a special term for this known as POVERTY PREMIUM ,often this premium amount is paid on account of poor distributions, lot of intermediaries, lack of accessibility ,vested interest etc.For exp:- a comparatively well off person can go to a bank and can get loan at a decent rate of 10-12% ,but if a poor person has to do the same then due to lack of accessibility he will be forced to go to a local money lender who might charge interest as high as 600-1000%.Similarly due to water mafias generally poor people are forced to pay a much higher price for water than there fortunate counter parts living in middle class areas . Thus this poverty premium provides a real time challenge as well as opportunity for the firms to cater to the BOP customers .

(2)BOP customers don't have collective strength :-This again is a very short sighted vision which firms have for BOP customers . As said earlier most of the BOP customers have access to tv, radio ,mobile phones etc as a result they are also well connected with each other, they have their own minimum requirements and expectations which they expect from various external agencies such as the govt.,NGOS and private players .

(3)BOP customers cannot be catered because of poor distribution facility :-
The genesis of this view lies in the misconception that BOP consumers reside only in rural area and since in most of the developing nation rural infrastructure is not well developed it is often tough to reach to them .Now its true that rural infrastructure is not well developed but a very large chunk(around 35-40%) of BOP customers reside in cities not in villages, as much the rural customers are concern there also the demand is high but due to lack of roads, transport, un availiblity of electricity and tv signals they donot constitute a measure customer base. Companies ought to think innovative and cost effective methods to cater to them. There are companies like Avon and Hul who have catered to such markets by appointing distributors from there own local population who can understand there needs and demands in a much better way .

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