News

07.16.2013

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CORALIE GATE

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What is the BoP ?

Since the past few years, we see the emergence of the "BoP market", in other words the market at the Base Of the Pyramid. The Bop was conceptualized by CK Prahalad and Stuart L. Hart in two books: "The Fortune at the Bottom of the Pyramid" (2004) and "Capitalism at the Crossroads" (2005).

As you probably figured it out, the BoP and practices that are inspired, are developed in emerging countries and refer to the billions of people located on the first level of the economic pyramid and living with less than $ 5 per day.

Indeed, the concept would be to consider the poor as potential consumers by offering affordable products or services and tailored to their specific needs in order to significantly improve their quality of life and help them getting out of poverty.

The BoP is as much a business strategy as a tool in the fight against poverty: a way to reconcile the logic of the market and the help of poor people.

This phenomenon is present in the emerging countries where people are poor like African countries, India or Bangladesh for example, but also it is increasing in so-called "rich" countries that do not escape poverty.

Despite numerous opportunities, the most interesting ones are in the sectors of food, access to water, health, housing, energy and transport.

Why do companies invest more in this new market?

The BOP market represents today 4 billion potential consumers, an estimated market at about 5,000 billion dollars.

This market has been for a long time underestimated and therefore has little competition for an impressive number of market opportunities !
Especially because these potential consumers, although deemed "insolvent" today could be tomorrow's middle class.

Moreover, in a society where everyone is looking more and more to give meaning to their work, companies with a "human face" use their market presence to mobilize their employees on projects with high ethical and societal value and attract the talents of tomorrow.

However, we need to not confuse BoP from Low Cost strategies of some companies. Indeed, their fundamental difference is that the BoP requires a profound change in business organization both in the products and services they offer and in the process they mobilize.

What are the difficulties that may be faced by companies in the BoP market?

These key challenges can be summarized in three points called the "rule of 3A":

1. "Affordability"

The very low purchasing power of the BoP requires companies to develop products and services in line and scope of their purchasing power, but both very qualitative to adapt it to their living conditions and use.

In addition, the financial exclusion of that part of the population, requires companies to provide them with suitable payment such as microcredit.

2. "Access"

The lack of infrastructure is also a major obstacle to supply outlets: companies must be innovative to bring the product or service directly to potential customers (marketing by local, door-to-door, cycles ...)!

3. "Awareness"

The classic marketing don't touch these people and modern communication techniques are sometimes not suitable when consumers do not not read or do not own a television. Companies should explain the usefulness of products and services according to local contexts and subjectivities to generate consumer interest.

If this concept is still under construction, it puts forward the dialogue with the communities as the starting point for new business models.
The goal is to include the concerns of poverty reduction at the heart of the logic of the market, not to mention the creation of mutual value.

Sources: Youphil, BoP Observatory

Tags: BoP, base of pyramid, fight against poverty, the BoP market, microworld, microcredit