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BW Businessworld

Getting To The Bottom

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C.K. Prahalad, management guru and professor at the University of Michigan, did not coin the term ‘bottom of the pyramid'. But he has done more to popularise the concept of the ‘fortune' at the bottom of the pyramid than almost anyone else.

The bottom or base of the pyramid refers to the poorest people around the world — the people at the bottom of the socio-economic or financial pyramid. These are people who earn around or less than $2 a day. And there are more than 4 billion such people around the world.

Prahalad's point was that business models that could figure out ways to innovatively tap this segment of the market could literally make a fortune. This segment is the fastest growing market for many goods and services, and its unmet needs are immense. It needed fresh thinking to tap this market but any businessman who could do it successfully would be rewarded immensely. Prahalad debunked the notion that corporations could only run profitable businesses if they aimed at the top or middle of the financial pyramid.

One person who has stumbled upon a huge market at the bottom of the pyramid is Deepak Khaitan of Eveready. Khaitan did not invent LED lamps. These already existed, and he was essentially looking to add them to his product line-up to boost the sales of his mainstay dry cells. When he introduced a branded range of LED lamps, though, sales took off far faster than he had expected. Villagers around the country with little or no access to electricity embraced these LED lamps as the perfect substitute to the kerosene lamps they used for lighting purposes till then. It helped that LED lamps are cheaper in terms of running costs than a kerosene lamp.

The Eveready lamps are selling so briskly that Khaitan can't keep up with demand. His big worry currently is to ramp up supplies to more villages and make sure that his potential customers are not picking up unbranded, cheap LED lamps because they can't get hold of his products.

Though the LED lamp was introduced only in April, Eveready's quarterly revenues are already up 19 per cent and stock price is up five times. Khaitan thinks that if he can manage his supplies properly, lanterns and lamps can account for 30 per cent of the company's revenues by the end of 2010-11.

(This story was published in Businessworld Issue Dated 07-12-2009)