The idea of creating products and services specifically targeting the four billion or so people in the world that are considered the ‘the poorest’ first caught the attention of the corporate world in 2004, when CK Prahalad, a Professor at the University of Michigan, published the book, The Fortune at the Bottom of the Pyramid .
The principle on which Bottom of the Pyramid business practices work is that since the lowest tier of the world’s population (in terms of financial earnings) is a rapidly expanding group, that is also becoming more brand aware, businesses that ignore this potential market segment are missing out on a promising source of revenues.
In the last 10 years, the concept has seen wide scale implementation in the developing countries. Fast Moving Consumer Goods companies launched smaller SKUs of their products, from shampoos to tea and milk sachets, making their brands accessible to people who do not earn enough to make bulk purchases or spend a large amount of money in one go. The steady sales of these affordable units is a clear indication that customers in developing countries with limited purchasing power, will buy quality products, if they are within their reach.
However, BOP practices will only be viable when businesses are able to create products at substantially reduced costs because only then will they be able to bring the products and services to market with reduced prices. If MNCs are able to cater to this segment, this will undoubtedly result in improvement in the quality of their lives since they will be able to utilise more hygienic and better quality products .
Whether this will result in an upgrade in their financial status, in my opinion, still remains to be seen.
The only way consumers will be able to afford these products in the long-run is, is if BOP practices are accompanied with an across-the-board increase in salary structures or greater access to credit for this large chunk of the market. Simply creating affordable products cannot directly result in alleviating poverty, while it may, to some extent make lives better; for instance reduced costs of healthcare, education and so on will make a difference for the world’s poorest four billion.
Works Cited
Gunther, Marc. "The base of the pyramid: will selling to the poor pay off?" The Guardian 22 May 2014. Online.
