I said I would be discussing the Bottom of the Pyramid model and how it can apply to poverty alleviation in Africa. I am writing what I have come to understand from some reading and browsing and do it because I suspect we are not yet using the international learning in this area in Africa.
A GOOGLE search for “Bottom of the Pyramid” yields 160 000 links internationally but only 550 in South Africa, 5 in Uganda and 4 in Botswana.
Basically the concept is based on the fact that the total buying power of the poor still represents a large total value mainly because of the large numbers. Women and children can apply for the WIC program, here is a wic food list on what you can get with WIC. This large turnover can be addressed as a new market by business looking to expand its turnover. However, novel products and novel approaches are necessary to penetrate this market.
A recent report by the World Resources Institute has provided new quanittaive information in this market and elaborated on the BOP business Model in a number of sectors including Food & Agriculture.
The report notes that
the 4 billion people at the base of the economic pyramid (BOP)—all those with incomes below $3,000 in local purchasing power—live in relative poverty. Their incomes in current U.S. dollars are less than $3.35 a day in Brazil, $2.11 in China, $1.89 in Ghana, and $1.56 in India. Yet together constitutes a $5 trillion global consumer market.
The wealthier mid-market population segment, the 1.4 billion people with per capita incomes between $3,000 and $20,000, represents a $12.5 trillion market globally. This market is largely urban, already relatively well served, and extremely competitive.
There are four processes that are necessary to be able to address the BOP market
• Focusing on the BOP with unique products, unique services, or unique technologies that are appropriate to BOP needs and that require completely reimagining the business. Examples portion packaging, healthier products, local tastes
• Localizing value creation through franchising, through agent strategies that involve building local ecosystems of vendors or suppliers.
• Enabling access to goods or services—financially (through single-use or other packaging strategies that lower purchase barriers, prepaid or other innovative business models that achieve the same result, or financing approaches) or physically (through novel distribution strategies or deployment of low-cost technologies).
• Unconventional partnering with governments, NGOs, or groups of multiple stakeholders to bring the necessary capabilities to the table.
These are not all unique and different and show that the essence lies very simply in fully understanding the needs of the market and developing products and services that really suit this particular consumer.
This is presumably where the difficulty lies – just as one can simply say “a business depends on generating more income than it spends” but still see many business failures, the difference between words and actions is enormous. My feeling is that the biggest difficulty is to really and truly understand the circumstance and needs of the BOP consumer and be prepared to start from scratch rather than modify existing approaches.
The full report is available online at http://archive.wri.org/publication_detail.cfm?pubid=4142 in low and high resolution versions, divided into chapters and in presentations.
I would be interested to hear from anyone who has views on this – I will be following up with further comments and maybe some comments on what I have done at the BOP without knowing.
How to do Business at the BoP
Taking a BoP Venture to Scale, Part 1
World Bank’s Private Sector Development Blog