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Review the Case Study at the end of Chapter 12, p.451: “Success at the Bottom of the Pyramid? P&G’s Gillette Guard Shows It’s Possible”.
In your paper respond to all three questions of the Case:
The Case Study paper
SUCCESS AT THE BOTTOM OF THE PYRAMID? P&G’S GILLETTE GUARD SHOWS IT’S POSSIBLE
Consumer behavior is influenced by internal and external factors. One of the external factors that sets real boundaries for consumers is their levelof income. Some marketers refer to strategies directed at different income tiers as targeting certain levels of a pyramid. Marketing to the “bottomof the pyramid,” focusing on consumers with very limited financial means, became well-known in 2004 when C. K. Prahalad wrote The Fortuneat the Bottom of the Pyramid. He envisioned companies marketing affordable products to the millions of consumers around the world with limitedincome and unmet needs. He believed that companies could help consumers and be profitable at the same time.
A number of companies have attempted to make this model work. Puriet, an in-home water purification system manufactured by HindustanUnilever Limited, was developed for low-income consumers and has found success by offering a 6-month installment plan to make the $25 pricemore manageable. The Nokia 105, introduced by Microsoft, is a $25 basic cell phone with an alarm clock, flashlight, and FM radio. It was pricedspecifically for low-income consumers and has sold millions of phones since its introduction in 2013.
However bottom of the pyramid strategies are not always as workable as companies would have imagined. The Nokia 5 has struggled to befinancially sustainable and has faced challenges as low-income consumers gravitate toward smart phones that are decreasing in cost. Othercompanies missed the mark because of a lack of research, discovering in the end that consumers could not afford their product or could opt for acheaper, more local offering. Some companies have been pushed by investors to show profitability in the short-term with their low-income marketinitiatives, which has been difficult to accomplish. In some instances the only way to make their business model work over the long term is topartner with a nongovernmental organization (NGO) which could help them to gain access to consumers through their established connectionswithin countries.
Let’s consider the possibilities in India, a country with considerable bottom of the pyramid potential. World Bank 2013 data show India’spopulation at 1.24 billion people and per capita income at $125 a month. The McKinsey Global Institute estimates that 78 percent of the thatpopulation fall into the bottom of the pyramid category, with the majority living in rural India. They predict that this market may be worth $1.5trillion by 2020. The sheer numbers of consumers and the overall potential make this market appealing to marketers, but still the low level ofincome poses considerable challenges.
For years Procter & Gamble (P&G) has worked to find ways to capture market share of the men’s razor market in India. They felt that there was asignificant opportunity to meet the shaving needs of Indian men at the bottom of the pyramid. Unfortunately, early efforts, like their Vector razor,were undermined by a misunderstanding of the shaving process for men in India, many of whom did not have access to running water. Morerecently, P&G introduced the Gillette Guard. This razor was developed based on 3,000 hours of research over 18 months, some of it conducted inthe homes of low-income Indian men. They asked the men about their shaving rituals and observed them in the process of shaving. What P&Gfound is that they typically shave on the floors of their huts with no electricity, using a bowl of water and no mirror. Their primary objective is toavoid cutting themselves. This research proved to be invaluable in the development of the new razor.
The Gillette Guard was the result of what Alberto Carvalho, vice president, global Gillette, described as a focus on not only producing a razor thatwould meet the needs of these consumers, but doing it at “ruthless cost.” This meant paying attention to the smallest details, designing a strippeddown single blade razor with only four components versus the 25 found in more sophisticated razors. Jim Keighley, associate director for productengineering, says “I can remember talking about changes to this product that were worth a thousandth, or two thousandths of a cent.” In the endthey were able to produce a razor that cost one third of the previously introduced Vector. Selling price for the Gillette Guard ended up at 15rupees (34 cents) and razor blades at 5 rupees (12 cents).
As a result of their painstaking research and attention to the needs of this unique target audience, P&G’s market share for razors and blades hasgrown significantly in India and at a faster rate than any other P&G brand in India. Despite the challenges they encountered it appears that theGillette Guard can be considered a bottom of the pyramid success story.
CS 12-1 Using the “4A’s” framework in Figure 12.1, analyze the considerations that went into the development of the Gillette Guardrazor for the Indian market.
CS 12-2 Are companies targeting the bottom of the pyramid taking advantage of vulnerable consumers with limited resources?
CS 12-3 More than half of U.S. workers earn less than $30,000 a year, barely above the poverty line for a family of five. What wouldyou recommend to a company looking to target the bottom of the pyramid consumers in the United States?
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