Doing Business at the Bottom of the Pyramid

The “bottom of the pyramid”

The global BOP can be roughly defined as comprising of households with an annual disposable income below US$10,000 (in purchasing parity power), because with this income level households can barely afford any discretionary items beyond the essentials of food, non-alcoholic drinks and housing.

The BOP is important

Taken as a whole, the BOP is a sizeable market with over 290 million households globally in 2015. Selling to the poor can be a smart strategic move by businesses to establish a new customer base as well as helping to alleviate poverty, reducing income inequality and improving the business environment.

The BOP is a highly diverse consumer market

Not only do low-income households in emerging and developed markets contrast sharply, as one would expect, in their consumption patterns, but between emerging markets BOP consumers can also differ in access rates to facilities and infrastructure, which in turn impact consumers’ behaviours, purchasing preferences and habits.

Business strategies that work at the BOP

Businesses succeeding at capturing the BOP market tend to be those that focus on innovation, education, established distribution networks, partnership with local stakeholders, and also on creating purchasing power for low-income consumers.

Outlook

By 2030 there will still be 152 million households with an income below US$10,000 (in PPP terms). While the basics of food, non-alcoholic drinks and housing will still absorb over half of low-income households’ budget, communications will be the fastest-growing spending category. This will in turn make BOP consumers more connected and easier to reach.