Global Investor

Wealth at the base of the pyramid

Arvind Jayaram | Updated on January 24, 2018


World Bank data showcases opportunities in this $5-trillion consumer segment

For companies looking to penetrate emerging and developing markets, consumers at the bottom of the pyramid are said to be the biggest opportunity.  The World Bank’s global consumption database which captures the results of surveying more than a million households in 92 emerging and developing countries has some interesting findings on this segment.

Four levels of consumption are used to segment the market in each country: lowest, low, middle, and higher. This is based on income distribution data, which ranks population by income per capita.

What to make of it

What does the data show? Spending on food and beverages decreases as total spending goes up. Therefore, the market for food and beverages in the lower consumption segments is significantly larger than the market in the middle and higher segments combined. In segments such as clothing and footwear, housing, education, health and water too, people in the lower segments spend roughly as much as those in higher segments. But it is on services that higher segments spend more. Their spending exceeds the lower segments in the case of transport, financial services and information and communication technology (ICT).

Overall, the 4.5 billion people at the base of the pyramid (BOP) cumulatively spend $5 trillion - more than half of all consumer spending in developing countries and emerging markets. This means that companies need to sell products and services at low price points to cater to them.

Diverse group

This bottom of the pyramid is a diverse group, encompassing 3 billion people spending less than $3 a day and 1.5 billion spending up to 3 times as much. Of this, 1.7 billion live in crowded urban environments and 2.8 billion in vast rural areas. So, to succeed in the many different segments at the BOP requires different products, marketing strategies, distribution channels as well as pricing and payment options. The BOP population is young. Forty-four per cent of this segment is under age 20, and 61 per cent under age 30.

Young people are particularly open to trying out new products, services, and business models — especially technology-enabled ones. That’s a great opportunity to engage them as customers, suppliers, distributors, retailers and employees.

Published on March 22, 2015

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