The term Bottom of the Pyramid is one that has garnered significant attention in recent years. C.K. Pralahad championed the term in his book, The Fortune at the Bottom of the Pyramid, and numerous other publications have taken hold of it. The term aims to classify the poorest segment of the world population — those 4 billion people living on anywhere from $2-4 per day depending on the source. Pundits like Pralahad urged businesses to view this market segment as potential customers, focusing on low margin, high volume goods that could potentially turn this massive demographic into potential customers.
Many multinational and domestic companies have taken on this challenge in recent years, with the hope that they can establish a footprint in a market that will drive future growth. However, the prospect of generating a profit off the BoP has proven easier said than done. In a recent article in the Economic Times, companies have revealed ongoing struggles with being able to monetize and scale products targeting the world’s poorest. Instead, many companies have refocused on what has been termed the Emerging Middle, those consumers who are entering into the middle class and have a greater amount of disposable income. In India, the numbers are staggering:
they are the largest chunk of the population at 470 million; and by 2021, they are projected to still be the largest, at 570 million, or 42% of the population. By then the EM base is expected to account for $1 trillion of consumption, up from $450 billion currently. Perhaps that is why Philips no longer has BoP in its lexicon. Instead, the Dutch electronics multinational prefers to call its strategy to reach consumers at the mass end ‘Philanthropy by Design’ (PbD).
Given these figures it no surprise that for-profit entities have found it irresistible to resist, even at the expense of other customer segments. Major corporations have relegated the BoP to their philanthropic wings putting faith in other areas of social enterprise, NGOs, and the public sector to provide the resources necessary to uplift the BoP into the EM. Some examples of this shift can be seen in the graphic below (also from ET).
This trend raises significant concerns. Companies, while no means altruistic, still serve a significant role in product innovation, capital investment and knowledge transfer. Their deeper pockets also mean that they can invest in R&D that others cannot. In choosing to shift their attention to the more immediate gain of the EM, it raises the question — who will have the resources needed to ensure that those people in the BoP today will ever reach the EM segment in the future?