Karnani’s response to Prahalad’s work The Fortune at the Bottom of the Pyramid (2002) has two main points; reasoning is not sound and the suggestions are full of fallacies. Karnani’s argument that there not a huge amount of money to be made by selling products specifically to the poor makes sense. The bottom of the pyramid does not have that much money to offer to the businesses. It is difficult to argue with Karnani’s reasoning as the points mentioned are legitimate.
However, it is not the details that matter but the essence or the idea that Prahalad has put forward. There is no doubt that the poorest section if a society ‘bottom of the pyramid’ is usually ignored by the marketing departments of companies. The focus always remains on the elite, upper, middle, and lower middle classes of a society, while a huge population all over the world lives at the ‘bottom’.
Karnani dissects Prahalad work into sections and evaluates them one by one. Prahalad seems to ignore the fact that poor in any society do not represent a unit. This section of the society needs to be studied (from a business and marketing perspective) according to its needs and priorities. Simply applying theories to the ‘poor’ in general will not work. For instance, expecting the poor to make rational choices while buying products or services will not be beneficial. A person earning $50,000 a year has a different approach to their healthcare and wellbeing.
An example mentioned by Karnani highlights this point; the poorest people have the greater number of alcohol abusers compared to the less poor section of the same society (Karnani 98). Despite earning less, they spend more on alcohol. Similarly, a rickshaw driver complaining that he does not have money to buy eggs for his children while spending $0.2 every day on a pack of cigarettes shows the unique buying motivators among the poor people.
However, Karnani becomes too generic in his critique of Prahalad’s work. The number ‘4 billion’ poor people mentioned in Prahalad’s work (Prahalad 2) is a rough estimation. It would be a mistake to get lost in the precision of numbers and forget the bigger picture. The point that Prahalad tries to make is that a huge chunk of the population is completely ignored by the companies.
Even if his estimation is bloated they still count over a billion according to Karnani. These section of the society belong to different cultures. The poor of Africa are very different from the poor of the United States. Businesses need to consider them as a unique set of customers in their brainstorming sessions. Another problem in Karnani’s proposition is that all the major arguments revolve around ‘consumption’ as if businesses need to sell products to the poor. Prahalad’s suggestions go beyond the mere suggestion of selling goods to the poor, the focus is on innovation. Selling them products is not really a solution.
Karnani’s critique could also be attributed to the fact that Prahalad’s article seems like a pitch advising big companies to notice the poorest section of the society. It should not be considered a pitch. However, the fact remains that companies tend to ignore this section assuming that they do not have the buying power. Despite being true it is not the whole puzzle, just one piece. Therefore, Karnani’s critique does seem overreaching at times.
For instance, when there are talks of improving the life quality of the poor, this could mean more than just selling shampoos to them in sachets. The emphasis should be on innovation to help the poor. Selling information products or such products that could help the poor set up businesses and generate better revenues can be part of the solution.
The poor people are usually desperate to find ways to make more money that would improve their life situation. As mentioned by Karnani that the poor just lack the power to buy better or more products. The will or wish is there but the money is missing. They want to buy better clothes and to send their children to better schools.
If products are targeted that will help them achieve that, then it is not just selling them a product, it will be an investment from their perspective. The poor people will invest in products that will help improve their lives.
One can frequently see many products launched on social media that are especially to target the poor parts of a society. These include products such as water filters. If a poor person can assemble this product and sell it to his community, this will solve the problem of dirty water. The people will be able to drink clean water at minimum cost.
This product will help them improve their health and most importantly keep away the water-related diseases. Hence, it will help in saving costs of doctors and medicine. The person who would sell or assemble this device will make money and generate business in the poor section of the society.
This could expand into something bigger. This ‘entrepreneur’ might hire a worker or two from the same section generating market activity. Also, to distribute the product transport arrangements can be made, this is will bring revenue to the poor, not the other way.
Another example is to ‘Warka Water’ project; a bamboo structure that can collect up to 100 liters of drinking water from the air (“Warka Water”). The function of this device is to condense water from the air and turn them into tiny droplets that can be collected at the bottom of this small tower. This helps provide clean drinking water for the poor. At the moment this is being made in Ethiopia for the people that do not have access to clean drinking water. Prahalad’s work can be understood in this context; to invest and innovate in products that improve the quality if life. This will help improve the lives of poor as well as generate cash for the companies.
The back and forth argument about the accuracy of data and numbers does not help either of the authors. Karnani’s critique focuses much attention on numbers such as defining the poverty line at $2 and how many people in the world live below this line. While Prahalad says in his counter argument that his work was never about the numbers nor was he researching to measure the poverty.
It is practical to look at the essence of both the articles and not get bogged down by the details of data and statistics. For instance, the fact that Prahalad’s work stresses on innovation as an economic driver could help provide a better economy in the poorest sections of society. If the decisions need to be made based solely on numbers and data then Prahalad’s work is still valid. A company can sell the lower quality product at the lower price to the poor section of a society, and the mass volume of the purchase will generate profit.
Karnani’s argument that sachet shampoos do not solve the problem as the poor are not buying the product at a cheap rate is valid. However, there is more to it than price vs. quantity debate. People buy sachets simply because it comes in an affordable package. These people would not have bought the shampoo at all if only the full bottle was available. Also, the product helped in making their hair better.
The suggestions by Prahalad should not only be considered as means of alleviating poverty. The products that the companies are selling them improve lives. A poor person in India might be using salt, coal or twigs to brush teeth if the companies were not making cheaper or mini size toothpaste. Such business strategies improve the quality of the poor section of the society even if by a small margin.
Reference
Karnani, Aneel. "The mirage of marketing to the bottom of the pyramid: How the private sector can help alleviate poverty." California management review. 49.4 (2007): 90-111.
Prahalad, C. K. & Stuart L. Hart. The Fortune at the Bottom of the Pyramid. Strategy + Business. Issue 26 (2002).
"Design." Warka Water: Every Drop Counts. Warka Water Inc., n.d. Web. 5 July 2016.
