Photo by Riya Kumari:

Going through my Library during my vacation, I came across one of my most insightful reads – a book by P.C.K Prahalad, titled “Fortune at the Bottom of the Pyramid.” It changed my view about making money and investing in Emerging Markets. There is a tendency to view the Low-income consumers or the Bottom of the Pyramid (BOP), those who live below 2 USD/day, as victims or a burden, rather than value-conscious consumers, creative entrepreneurs with opportunities. This book helped change the way I saw this segment of the market.


The Market Segment

With over 8 billion people in the world, about 720 million are assumed to live on less than 2 USD/day or BOP. Old solutions have involved using Aid agencies, NGOs, Civil Societies, Politicians, and policies to try and elevate poverty. The assumption being that the private market or market-based solutions cannot lead to poverty eradication or economic development. The assumption that the poor have no purchasing power or a viable market can be challenged. There is data that proves that there is purchasing power at the BOP, but it cannot be compared to those in developing countries. That said, by virtue of their numbers (Checkout India, Bangladesh, Nigeria), they represent a significant latent purchasing power needing to be unlocked.


Photo by Brett Sayles:

Photo by Brett Sayles: man-standing-beside-table-with-vegetables-


The BoP usually is penalized by local monopolies, inadequate access, poor distribution, and traditional intermediaries and they pay a premium for everything because most times due to urbanization the poor tend to reside in high-cost ecosystems in emerging or developing countries. You will be shocked that the BoP spend on items traditionally considered luxuries.

1. BoP Markets are Brand conscious too! They are extremely value conscious by necessity. They expect great quality at prices they can afford. The challenge for businesses is to discover how to address these two variables: price and quality.

2. BoP consumers are now accessing the power of being connected. They are leveraging the benefits of connectivity with solutions like Mobile internet and Mobile Money. Most consumers in Africa in the BoP were first introduced to the Internet via their mobile phones and not via cable or Fixed wireless or Fiber.

3. BoP consumers are open to adopting new technologies that create value. They have no baggage to move from. A great example is the proliferation of Mobile money in Africa because the traditional banks struggle to address the rural areas with their traditional brick-and-mortar branches, ATMs and Debit Cards. Going down memory lane, It was easy to adopt Mobile phones because there were no landlines to move from.

What can be done?

1. Product Adaptation: It is not all about charities and free products or services. It does not solve the problem of poverty in a scaled and sustainable way. We need to create the capacity to consume. A great example is the evolving trend kicked off by FMCG companies, packaging products like milk, soap, beverages, and even bread affordable unit packagesble.
2. Innovative Distribution Channels: Give them access using BOP distribution channels. Traditional distribution channels may not effectively reach consumers in remote or underserved areas. Exploring alternative distribution methods, such as community-based networks or partnerships with local entrepreneurs, can improve market penetration.
3. Affordable Pricing: Make the product/service affordable not necessarily cheap. Consider microfinancing for BoP and inclusive business models. The BoP consumers are highly price-sensitive, so offering products and services at affordable prices is crucial. This may require reevaluating production costs, supply chain efficiency, and distribution strategies to keep prices low. Then make sure the products and services and available.
4. Leveraging Technology: Technology can play a vital role in reaching the BoP market. Mobile phones and internet connectivity can facilitate communication, payments, and information dissemination.

By catering to the unique demands of the BoP market and developing sustainable, inclusive business practices, companies can not only make money but also create a positive social impact. This approach can lead to long-term success and help uplift communities while expanding their customer base.

Have you done business with the BoP or low-income consumers? What was your experience? How do you think businesses can make money while creating value for this segment? Please share your thoughts below; I would love to hear from you.


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