The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.Learn More
The bottom of the pyramid (BoP) has become overshadowed by the emerging middle classes but it remains an important consumer group; which taken as a whole, represents a huge market. Nevertheless, this segment remains underserved and so opportunities abound particularly for those who can innovate to offer original and aspirational products and services.
In 2013, in the 85 countries for which we have data (which are home to 87% of all households globally) there were 401 million households earning less than US$5,000 per year, by 2030 that number will fall to 205 million (in constant 2013 prices). Nevertheless this remains a sizeable market, expected to account for 1-in-10 households across these 85 countries in 2030. To put this into context, this is a similar size in terms of the number of households, as Western Europe.
On an individual level these households of course have limited purchasing power – roughly US$14 per day or US$4 per household member per day – but that does not mean they should be overlooked. In India, the country with the largest number of sub-US$5,000 households, 52.3% of households fall into this category.
Source: Euromonitor International from national statistics/UN
Note: Data refer to a ranking of 85 large economies globally, accounting for 87% of the world’s households.
Bucking global trends, some of these countries are also seeing a strong increase in the number of low-income households -including Pakistan, Iran and Kenya; with these three countries adding a combined 7.7 million households between 2013 and 2030 to their ranks of those earning less than US$5,000.
Key to success is to lower the cost of ownership whilst still offering quality and features that consumers aspire to. Small pack sizes are the obvious and most well-known method for consumer goods companies to target low-income consumers, but are not necessarily the best. Other innovations should also be employed, the basis of which should be formed by gaining a real understanding of what consumers really need by immersing the business in the local market. This immersion strategy increases the chances of creating a sustainable business model.
Source: Euromonitor International from trade sources/national statistics
Note: Data refer to real growth in retail value RSP excluding sales tax
With increasing pressure on margins, and consumers continuing to suffer from tightened purse strings, business cannot afford to ignore households earning less than US$5,000 per annum. That’s not to say that making a profit at the bottom of the pyramid is easy, it’s not. Barriers to success at the BoP can be overcome by those who work hard to understand the consumer and are flexible – for example by being willing to change the business model, create new products and services and even entire categories. Serving quality brands to aspirational consumers at the BoP is a goal in itself but it can also lead to innovations which can be rolled out globally and to a range of income segments. A win-win scenario for business.