Some of the world’s largest corporations have utterly failed to penetrate the vast new market represented by the 2.7 billion people who live on $2 a day or less. Why? Because they think in rich-country terms, imagining that the products and services they already sell can be repurposed for the base of the pyramid merely by using cheaper materials, cutting bells and whistles, and slashing the size of their packages. It should be obvious from the outset that this approach will fail, not just because BOP customers must be even more value-conscious than rich-country consumers but also because the result of these efforts to cut prices rarely achieves reductions of more than 20 to 40 percent. In fact, to fit the budget of those who get by on $2 a day or less, products and services must be dramatically cheaper than they are in Global North markets — as much as an order of magnitude cheaper. That means prices lower by 80 to 90 percent than Northern customers will tolerate.
In designing products that will open up new markets among the world’s poor, ruthless affordability is the single most important objective.
Paul Polak and Mal Warwick’s award-winning book, The Business Solution to Poverty,highlights 20 “takeaways” that encapsulate much of the book’s essence. Today we have featured the ninth of those takeaways. Future posts will include others.