Tuesday, May 29, 2007

The Next 4 Billion

The World Resources Institute recently published a report called "The Next 4 Billion: Market Size and Strategy at the Base of the Pyramid." Any BOPreneur worth their salt will want to download this report and study it carefully. Together with Banerjee & Duflo's "Economic Lives of the Poor" published last fall, there is now much better data on how the poor spend their money.

The commonly used "triangle" used to depict the wealth of the world's 6 billion people hides so many individual stories. Knowing that 3 billion people live on less than $3 per day is interesting, but it is not actionable information for entrepreneurs. The numbers are too huge, and the need too ambiguous. Prahalad's work on the "Fortune at the Bottom of the Pyramid" and other related works have been hamstrung by having to jump from this macro knowledge to micro anecdotes. Now, however, we have some intermediary data to help us understand differences in purchase patterns between countries, between rural and urban, and between types of goods and services.

Some of the MNCs and BINGOs had done some market research on specific countries or interventions (for instance, Shell's work on cookstoves, or P&G's work on water purification) but these were also problematic because the context of what the poor spend on other things was not available.

So take a few hours and BOP around these reports. The markets for health, energy, transportation and communications are huge and unserved (or at least quite underserved) and some are starting to change rapidly. All indicators of entrepreneurial BOPportunity.

And read the reports for another reason. Do it so you stop thinking of the poor as a mass of humanity with unlimited problems, and instead see them as potential customers with purchasing power, who want to improve their family's lives. If you can help them do this, you will bring value to their lives and yours. And that is what enterprise is all about.

Here are a few quotes to get you thinking:

"In either case, it is hard to escape the conclusion that the poor do see themselves as having a significant amount of choice, and choose not to exercise it in the direction of spending more on food─the typical poor household in Udaipur could spend up to 30 percent more on food than it actually does, just based on what it spends on alcohol, tobacco, and festivals." Banerjee and Duflo (p 6)

"Many in the BOP...pay higher prices for basic goods and services than do wealthier consumers...this high cost of being poor is widely shared." WRI (p 5)

"A consortium of 19 mobile operators, serving more than 600 million customers... announces a system that will transfer remittances entirely through their phones... predicts global remittances of more than $1 trillion by 2012." WRI (p 104)

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