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A shifting base: the BoP in context

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A shifting base: the BoP in context

The Base of the Pyramid (BoP) is on the move – and the hope and optimism of those living there is creating an unprecedented opportunity for growth in emerging markets.

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A shifting base: the BoP in context Few people have transformed attitudes to the global poor to the extent that the late C.K. Prahalad did in his path-breaking 2004 work, The Fortune at the Bottom of the Pyramid. Only a few years earlier, those living in poverty were still considered the rich man’s burden, their economic role restricted to needy recipients of charity. Prahalad helped us to see them as the future: dynamic individuals who together form a vast, untapped potential market.

In a sense though, Prahalad’s book is only the beginning of the work that needs to be done in understanding the Base of the Pyramid (BoP). This work is constant, because the BoP itself is ever-changing. Companies that want to do business in this area must invest in understanding the BoP’s great variety of potential innovators, entrepreneurs, producers and consumers – and they must be prepared to face the setbacks

and challenges of doing well by doing good. In many cases this requires questioning developed world thinking when it comes to making a profit. Innovative thinking on business models can be as essential for doing business with the BoP as innovative product development and branding.

Size matters – and so does distributionIts sheer scale puts the BoP centre-stage in any discussion of emerging market opportunities. The BoP’s population numbers 4 billion, its combined purchasing power of $5 trillion is more than 2.5 times the GDP of the UK, and its geographical distribution is concentrated on those regions promising to drive global growth over the next decade. Of those inhabiting the BoP worldwide, 40 percent live in India with a further 23 percent in China, 16 percent in Africa and 10 percent in Latin America. In India, 75 percent of the population are members of the BoP.

4 billion

75%40%

The BoP’s population numbers 4 billion

of India’s population are members of the BoP

Live in India

A shifting base: the BoP in context

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Seeing the BoP as individualsIt remains a tragedy that 4 billion of the world’s population survives on less than $8 per day. However, it is important to recognise that this definition of the BoP covers a large range of very different scenarios, aspirations and opportunities. An understanding of the BoP population’s varied situations is essential for companies looking to target its growth opportunities effectively.

TNS segments the BoP into three categories of potential consumer: ‘Strugglers’ surviving on less than $1 per day, ‘Fighters’ living on between $1 and $2 per day and ‘Strivers’ with purchasing power of between $2 and $8 per day. Encouragingly, ‘Fighters’ and ‘Strivers’ together represent more than 70 percent of the BoP according to World Bank statistics. This is an emerging consumer class, ready to join the market economy, and its ranks are swelling.

In 1995, consumers earning less than $2 per day represented 73 percent of the population of rural China; by 2007, they represented only 11 percent.

73%

11%

1995

2007

Striver

Fighter

Struggler

$2 - 8 per day

$1 - 2 per day

Less than $1 per day

A shifting base: the BoP in context

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Hustlers or entrepreneurs?Those waiting to emerge from the BoP have the characteristics of a middle-class-in-waiting: educated, earning a semi-regular income and starting to own consumer goods. They look forward to the future with hope and optimism. They can see their own potential and they are confident in their ability to fulfil it. And they have great motivation and self-respect. Many would describe themselves as hustlers – but we recognise their ‘hustling’ for what it is – energetic and dedicated entrepreneurialism.

These top tiers of the BoP represent an immense concentration of ‘unmet needs’, the type of opportunities that companies in developed markets invest significant time and money to uncover. In this respect the BoP can appear like a gold mine for global brands. But prospectors beware.

They must be prepared to overcome initial setbacks – and they must be ready to relearn how to do business, and build brands. To meet BoP needs effectively they

must have the dedication to help their consumers overcome the daily challenges and barriers that they face.

Reinventing the brand wheelBoP consumers show a strong preference for buying brands over commodities – but they demand a great deal from those brands in return. This isn’t surprising when you consider the significant proportion of

disposable income that any brand purchase represents. A successful proposition for the BoP must combine affordability with robust functionality, delivery against priority needs and credible perceptions of quality. Increasingly, trusted brands are also asked to provide guidance and emotional affirmation in the midst of the tensions arising from social and economic change. The brands that embrace this multi-dimensional role will be the ones to succeed.

Brand credibility and strategy cannot be imported from other markets.

A shifting base: the BoP in context

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International brands have far less resonance amongst the BoP than they do amongst the existing middle-class. Developed world notions of rebelliousness, ego and counter-culturalism (the mainstay of many brands across different categories) have no place in an environment where a sense of isolation and exclusion is something to be feared. And brands accustomed to targeting individual desires must adapt strategies to collective decision-making, in which husbands and fathers often wield a veto over their family’s purchases.

Crafting a successful proposition may require a company to reinvent more than its brand identity. Successful BoP strategies often embody a shift in business model as well: from focusing on margin to focusing on volume. Such changes can play a vital role in delivering the affordability that the BoP requires without undermining the credibility that it demands.

Doing well by doing goodFor those prepared to embrace the challenges of building brand propositions from the ground up, the BoP today represents a greater opportunity than at any point in history. Although it remains financially impoverished, its population is not emotionally or imaginatively so. Those BoP consumers on the point

of joining the market economy have clear aspirations and great confidence in their ability to achieve them. And although meeting their needs is challenging, the rewards for doing so are immense. The BoP is essential

to realising the promise of growth and success in emerging markets – and the importance that they attach to brand relationships gives first movers a major, long-term advantage in tapping their potential.

A shifting base: the BoP in context

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About Opinion Leaders Opinion Leaders is part of a regular series of articles from TNS consultants, based on their expertise gathered through working on client assignments in over 80 markets globally, with additional insights gained through TNS proprietary studies such as Digital Life, Mobile Life and the Commitment Economy.

About TNS TNS advises clients on specific growth strategies around new market entry, innovation, brand switching and stakeholder management, based on long-established expertise and market-leading solutions. With a presence in over 80 countries, TNS has more conversations with the world’s consumers than anyone else and understands individual human behaviours and attitudes across every cultural, economic and political region of the world. TNS is part of Kantar, one of the world’s largest insight, information and consultancy groups.

Please visit www.tnsglobal.com for more information.

Get in touch If you would like to talk to us about anything you have read in this report, please get in touch via enquiries@tnsglobal.com or via Twitter @tns_global

About the authorPoonam Kumar is Regional Director in TNS’s Brand & Communication practice bringing more than 20 years experience in brand development, brand strategy planning, ethnography and consumer insight to her role. Poonam has specific expertise on marketing to the Base of the Pyramid, and on motivational research and market segmentation and is a regular presenter on BoP consumers at ESOMAR and other industry events. Poonam holds a degree in Electrical Engineering from a premier Institute (IIT Chennai) and a post graduate degree in Management from a top management school in India (IIM Calcutta).

A shifting base: the BoP in context