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Innovation
Since the term "bottom of the pyramid" was coined, the poor living in low- and middle-income countries have received increasing attention. The bottom of the pyramid attracts multinational companies because of its large population with pending demand, low consumer expectations and slight competition.
At the beginning of 2008 Tata Motors unveiled the Tata Nano, a small car made for India's poorer population. Four years earlier Tata had come up with a new concept of developing a car for people who previously could not afford one. A price tag of 100,000 rupees (about US$2,350 or £1,500) became the goal and by 2008 the reality.
Even though the Nano is not affordable by the poorest, it does, however, serve the needs of those within the bottom of the pyramid who so far could afford a motorcycle but not a car. Indian households spend some 2.5 percent of their expenditure on transportation; about 71 percent of all transportation expenditure comes from the bottom of the pyramid.
Tata believes that the market potential of the car industry in India is larger than the presumed 1.7 to 2 million units per year. After all, there is a market for two- and three-wheelers of about six million units per year. Tata believes that car producers can tap the lower end market and compete with the two- and three-wheelers if they can produce a low-cost car with an acceptable level of safety and comfort.
Tata is convinced that selling low-cost cars with low margins can be profitable when volumes are high. Starting with a low-cost car provides opportunity to add features and produce upgraded variants to sell upmarket. Most of the profits for the product line will come from the upgraded variants. Tata's objective is to sell about 1,000,000 Nano cars per year.
Transactional marketing
Transactional marketing (the four Ps) still dominates within companies despite arguments by some that relationship marketing has become the new paradigm. These four...