Towards a More Inclusive Economy: Key Takeaways from the BOP World Convention and Expo 2016
Euromonitor International was pleased to lead an engaging and informative workshop on “Strategies That Work at the Bottom of the Pyramid (BOP)” as part of the BOP World Convention and Expo 2016 in Singapore. This year’s convention focused on the theme of “The Future Inclusive Economy: Mass Collaboration across All Sectors”, which aimed at bringing public and private entities together to serve the needs of consumers at the BOP better, faster and cheaper. Business leaders, impact investors, government and trade officials, social entrepreneurs and prominent academics analysed inclusive business models and discussed how to build a sustainable economic ecosystem in emerging markets.
Sizing the BOP in emerging markets
Our workshop started off by exploring the size and profile of the BOP in emerging markets through the lens of Euromonitor’s Income and Wealth Distribution Model, which is an analytical tool that uniquely combines joint income and wealth distribution data. We defined the BOP as comprising of adults (aged 18+) with an annual disposable income below US$5,000 (in purchasing power parity – PPP terms) and a net wealth of less than US$10,000 (PPP).
In absolute terms, the top five BOP markets with the highest number of adults concentrating at the bottom income-wealth segment in 2015 were India, China, Indonesia, Nigeria and Brazil. However, as a share of total adult population, the top five BOP markets in 2015 were: Nigeria ( 48.4%), India ( 45.1%), Indonesia ( 33.0%), South Africa ( 32.1%) and China ( 22.2%).
BOP consumers everywhere have in common very low incomes and a weak discretionary spending capacity. But beyond this, BOP consumers are truly diverse in terms of culture, consumption habits, spending patterns, and access to key facilities and infrastructure. On this note, workshop participants engaged in interactive group activities to uncover the best strategies to market a range of products and services – from laundry detergent and fresh milk through to mobile phones and educational service – to consumers at the BOP.
Key themes emerging from the convention
Some key themes emerging from the BOP World Convention include:
- The social business sector is experiencing a rapid growth, outstripping that of conventional business. This is due to the greater involvement of global businesses in the corporate social responsibility (CSR) movement while companies also increasingly recognise the BOP as an overlooked consumer base. For example, in the Philippines where Hyundai Motor Company has been for many years active in poverty reduction initiatives, it is observed that when children from poor families get an education and succeed later in life, the first car they would normally buy would be a Hyundai.
- In order for a company to be competitive while also delivering social impact, it is important to create shared value between different stakeholders. In fact, creating shared value at the BOP is an inclusive business model, which emphasises corporate policies and practices that enhance the competitiveness of a company while simultaneously benefiting the poor communities in which the company sells and operates.
- Education at the BOP is the key to raising awareness and knowledge of products and services; shaping tastes and aspirations; converting the poor into active consumers; and improving their living conditions. In 2016, hygiene products company Kimberly-Clark launched ‘Toilets Change Lives’ initiative in India that focuses on fixing dysfunctional school toilets in an effort to provide hygiene, safety and dignity for children. The company’s effort is expected to also drive behavioural change among poor communities at large, as children having experienced safe and hygienic toilets at school will subsequently influence their families, advocate good toilet habits, and help reduce the incidence of open defecation in India’s poor communities. For Kimberly-Clark, this will help to forge a bond of trust with their potential consumers, which in turn will create brand loyalty in the long term.
- Technology is driving and transforming the BOP consumer market, as it helps to social enterprises achieve scale and unlock opportunities at the bottom of the pyramid. Technological innovations can convert the very poor into active consumers; improve access; and help social enterprises raise much-needed funds more effectively (through on-line channels such as crowd-sourced funding, for example). Furthermore, the BOP represents a massive opportunity for high-tech businesses such as financial services, mobile communications and renewable energy among others.
- Social entrepreneurship often focuses on the ‘social’ angle, but a much greater emphasis must be placed on ‘entrepreneurship’ in order to succeed. ‘Entrepreneurship’ encompasses a wide range of aspects including leadership, management, capital efficiency, financial resources and profits. Since the BOP market is more challenging – often with less capital and lower financial returns – than regular markets, social entrepreneurs need to be as smart, practical and pragmatic as ‘non-social’ entrepreneurs in order to build successful social ventures.