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May 2007
There are four billion people living in relative poverty at the base of the economic pyramid - but combined, these people have a purchasing power representing a $5 trillion market.
By finding innovative ways to penetrate low-income markets and respond to the needs of the poor, companies can unlock new business opportunities, and contribute to social and economic development.
The International Business Leaders Forum (IBLF) has produced a set of guidelines and case studies showing how companies can develop successful base of the pyramid products and services.
The guidelines include:
- Respond to specific needs: Take into account local conditions and cultural norms, rather than repackaging a product or service that has been developed for another market.
- Adapt product and brand development timeframes. Base of the pyramid business models take time and patience to mature.
- Build trust. Work to build relationships with customers and local governments.
- Engage non-traditional business partners. Civil society organizations and NGOs can contribute knowledge of the market or the social need that a product or service is designed to help meet.
- Measure development impacts. Measure development impact as well as business impact.
- Harness innovation. Consider how products/services are used by low-income consumers, and be flexible so they can evolve as a result of learning and changing needs.
- Find the right people to work on projects. Look to local communities as potential sources for recruitment.
- Achieve scale. In many cases, the margins on individual products are very small.
- Collaborate. Work collectively across sectors to add value and help scale up existing initiatives.
The guidelines also include case stories of companies that have developed successful base of the pyramid products and services, including:
BP and its partners have developed a pioneering combined appliance integrating a liquefied petroleum gas (LPG) and biomass burner. The stove provides customers in India with sustainable energy for cooking, and reduces emissions of smoke by 90% – in part through a process of re-burning initial emissions.
Since 1998, CEMEX’s Patrimonio Hoy initiative has been organizing low-income families into self-financing cells that facilitate and expedite the typical home-building process. CEMEX and its network provide the products needed but also the technical assistance, including an architect who helps design homes to optimize space and reduce waste.
SAB Miller has produced a low cost, good quality lager made from locally sourced sorghum in various African countries – most recently in Zambia. As many people could not afford other branded lagers, people would make their own crude, unrefined alcohol, with severe health implications. Eagle Lager is taxed at a lower rate than other brands, therefore bringing a revenue to the government which the home brewed alcohols did not. It is also made using locally harvested sorghum, thus creating employment for local farmers.
Tetra-Pak runs a School Feeding Program, aimed at primary school children, using Tetra Pak packaging to distribute milk or other fortified nutritional drinks in various developing countries. The program has created production jobs and provided milk or other drinks to 47 million children, 16 million of which live in developing countries.
Unilever pioneered a program to fortify salt with iodine in an attempt to tackle the symptoms, particularly in mental health, that are caused by iodine deficiency. In Ghana, Unilever managed to get the cost of a small packet of fortified salt down to the equivalent of six cents, so that people living on less than $1 per day (much of the population) could afford it. In 2002, around 50 percent of the population were regularly using fortified salt, in comparison to 28 percent four years prior.
Read the full guidelines at http://www.iblf.org/resources/general.jsp?id=123917 |
