NextBillion.net - Development Through Enterprise - What's in a Buzzword: Use and Misuse of "Bottom of the Pyramid" - Comments

Play does not seem like BoP

Lokesh Kumar — Sat, 05 Jan 2008 15:33:36 -0500

Rather the play seems like the Indian Private Tuition Market, which is very very large. Almost every student in any Urban setting (whether the student comes from rich and educated parents or parents that perform petty work) not only goes to public school, but also goes to private tuition, be it competition exam preparation or simple year end exams. It seems like that is the market segment that TutorVista is after, trying to consolidate it, rather than reach at the lowest levels.

BOP ideology a threat to the poor

Mr Ano Ny — Fri, 04 Jan 2008 15:20:39 -0500

So what do BOP people say to critics who claim that this entire BOP ideology is a threat to the poor? BOP comes down to eroding the state. It's the state's responsibility to provide basic health care, education, energy and infrastructures. Everyone from the development community knows that if you privatise these sectors, you get more poverty and generalised misery. For this reason, states, international agencies and development economists are all reappraising the key role of the state and are calling for its strengthening. Is the BOP neoliberal ideology an anachronism? It has never proved to work, and nowadays it comes at a time when the privatisation mania has passed and has no credibility left. BOP seems to have had its best day. In fact, it never really had its day. And maybe that's for the better.

Thanks

Rob Katz — Fri, 04 Jan 2008 08:44:31 -0500

Mbwana and Nitin - thank you for your comments.

Mbwana, I think you are right that the value of education is high for BoP Indian families - but so is the opportunity cost. Saving Rs 25000 for 8 hours/week of tutoring means that family does not have that money for food, housing, transport, healthcare, or income-generating activities. While the returns to education (presumably, a high-paying job for the student) are high, they are also far out on the time horizon, and therefore difficult to justify on a very tight family budget.

Nitin, thank you for your firsthand insight into the pricing here, as well as the technology constraints.

Segment Mismatch?

Nitin Rao — Fri, 04 Jan 2008 01:15:48 -0500

I am struggling to understand how the segment of those who do not have a PC and Internet connection at home could match the segment to be charged Rs 25,000-40,000 per year.

Of course, my assumption here is that these households do not have a PC and Internet connection because of money considerations. In practice, there are other issues including awareness and familiarity.

That said, I belong to the Indian upper middle class and even after adjusting for inflation, cannot recall having ever spent nearly as much as Rs 25,000-40,000 per year in school.

Value as well as price...

Mbwana Alliy — Thu, 03 Jan 2008 23:41:53 -0500

Hi Rob, I will like to turn your argument on its head- what do you think the value of an education to an BOP/middle class Indian versus a US/UK student is? I would guess vastly different. You may be right that this is still too expensive for an BOP customer- but if they value it enough and can see the investment getting them into IIT or some great school that they can step out of poverty they might actually do it and risk what looks like a vast sum. I still think the price point is high. I think of another scenario here- why do some BOP individuals save up to $200 to buy a nice looking mobile phone? Social Status? Perceived quality? Yes, a $30 phone may be the "perceived" price point- but some people may still spend $200 for a nice phone for other unseen benefits. Why might a BOP customer not buy a $100 laptop for his/her child- we may find out in the coming years.

What's in a Buzzword: Use and Misuse of "Bottom of the Pyramid"

Rob Katz — Thu, 03 Jan 2008 17:37:48 -0500

Today, I read with interest an article from the Business Standard entitled "TutorVista Readies Indian Rollout; [Firm] To Raise $15m to Address Bottom of the Pyramid." Perfect for the NextBillion Newsroom, right?

Perhaps not. TutorVista, a leading online education firm, matches India-based tutors with students in the U.S. and U.K. For $100 per month, students have unlimited access to certified, trained tutors in subjects ranging from Calculus to Geography to GMAT test prep. Just over two years old, the company has over 10,000 registered students, 850 employees, and an estimated annual run rate of $5 million. Not bad for a start-up!

What caught my eye is the report that TutorVista is expanding back into the Indian market. According to the Business Standard,

Around 300 learning centres will be set up in B and C class towns, mostly on a franchisee basis, with TutorVista managing them and controlling quality. This will seek to address the gap in such towns for quality tutoring which cannot be accessed by those who do not have a PC and Internet connection at home...The rates have not been frozen yet but Indian students are likely to be charged Rs 25,000-40,000 per year, for eight hours of coaching a week.

As I read the article, I wondered to myself, "Is this really a 'bottom of the pyramid' business model?" Curious, I did some calculations - based on today's exchange rates, Rs 25,000-40,000 equals USD $636-$1,015. With such a high price point, can BoP households afford TutorVista?

Based on our research in The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, the answer is easy: no, it is not. Not even close.

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