La Base De La Piramide

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Market size and business strategy
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executive summary
executive summary

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Market

Four billion low-income people, a majority of the world’s population, constitute the base of the economic pyramid. New
empirical measures of their behavior as consumers and their
aggregate purchasing power suggestsignificant opportunities for
market-based approaches to better meet their needs, increase
their productivity and incomes, and empower their entry into
the formal economy.

e x ec u t i v e s u m m a ry | t h e n e x t 4 b i l l i o n

The 4 billion people at the base of the economic pyramid (BOP)—all
those with incomes below $3,000 in local purchasing power—live in relative poverty. Theirincomes in current U.S. dollars are less than $3.35 a
1
day in Brazil, $2.11 in China, $1.89 in Ghana, and $1.56 in India. Yet together they have substantial purchasing power: the BOP constitutes a $5
trillion global consumer market.
The wealthier mid-market population segment, the 1.4 billion people
with per capita incomes between $3,000 and $20,000, represents a $12.5
trillion marketglobally. This market is largely urban, already relatively
well served, and extremely competitive.
In contrast, BOP markets are often rural—especially in rapidly growing
Asia—very poorly served, dominated by the informal economy, and, as a
result, relatively inefficient and uncompetitive. Yet these markets represent a substantial share of the world’s population. Data from national
household surveysin 110 countries show that the BOP makes up 72%
of the 5,575 million people recorded by the surveys and an overwhelming majority of the population in Africa, Asia, Eastern Europe, and Latin
America and the Caribbean—home to nearly all the BOP.
Analysis of the survey data—the latest available on incomes, expenditures, and access to services—shows marked differences across countries
in thecomposition of these BOP markets. Some, like Nigeria’s, are concentrated in the lowest income segments of the BOP; others, like those in
Ukraine, are concentrated in the upper income segments. Regional differences are also apparent. Rural areas dominate most BOP markets in



2007 | world resources institute

Africa and Asia; urban areas dominate most in Eastern Europe and Latin
America.Striking patterns also emerge in spending. Not surprisingly, food
dominates BOP household budgets. As incomes rise, however, the share
spent on food declines, while the share for housing remains relatively
constant—and the shares for transportation and telecommunications
grow rapidly. In all regions half of BOP household spending on health
goes to pharmaceuticals. And in all except EasternEurope the lower income segments of the BOP depend mainly on firewood as a cooking fuel,
the higher segments on propane or other modern fuels.
That these substantial markets remain underserved is to the detriment of BOP households. Business is also missing out. But there is now
enough information about these markets, and enough experience with
viable business strategies, to justify far closerbusiness attention to the
opportunities they represent. Market-based approaches also warrant far
more attention in the development community, for the potential benefits they offer in bringing more of the BOP into the formal economy and
in improving the delivery of essential services to this large population
segment.

A BOP Portrait

Spending
Population

Spending



Population

Thedevelopment community has tended to focus on meeting the needs
of the poorest of the poor—the 1 billion people with incomes below $1
a day in local purchasing power. But a much larger segment of the lowincome population—the 4 billion people of the BOP, all with incomes
well below any Western poverty line—both deserves attention and is the
appropriate focus of a market-oriented approach.
The...