Floating Upwards: The Bottom of the Pyramid Segment is No More

Pew Research Center’s latest results on global income distribution show some rather large shifts among the lowest income segments.

PG-2015-07-08_globalClass-00The Bottom of the Pyramid or Base of the Pyramid (BoP) segment, defined as those who live on less than $2.50/day has just lost a significant percentage of the population. While one can quibble that $2.50 is greater than $2.01 and thus they are still there in the low income segment, you’ll recall that the BoP segment was originally $2/day in its heyday, estimated to be 4 billion strong in the old days.

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The low income segment, as defined by Pew, ranges from $2.01 to $10 a day, which overlaps with the African Development Bank’s ‘floating class’ and the ‘lower middle’ class. Lets look at the ‘floating class’ so as to cover all bases when it comes to the income range of people whose cash flows are irregular and unpredictable. One day might be only $2 but the next could be $10. This daily amount, it floats.

From the Pew report:

This study divides the population in each country into five groups based on a family’s daily per capita consumption or income.3 The five groups are labeled poor, low income, middle income, upper-middle income, and high income. Of the four thresholds that separate these different income groups, two are especially important to keep in mind. The first is $2, the minimum daily per capita income that must be exceeded to exit poverty.4 The second is $10, the threshold that must be crossed to attain middle-income status. The thresholds are expressed in 2011 prices and 2011 purchasing power parities.

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700 million people exited poverty.

They’re not rich yet nor middle income, but their upward mobility and emergence is undeniable, and their consumption is increasingly visible. They are part of the reason why African statistics on the middle class market are so volatile. Obvious and visible consumption is taking place yet few fit the traditional description of what an emerging middle class segment should look like.

Aspirations change even one rung up the ladder

Income is not the only reason for my confidence in making the claim that the era of the Bottom of the Pyramid, the BoP, is over. Along with the few more shillings or rupees a day, comes a shift in mindset. Suddenly, from worrying non-stop about the next meal, we’re thinking about the possibility of investing in a motorcycle, or a cow. Sending the smart one to high school or taking computer classes.

Some old habits remain as the need for frugal buyer behaviour hasn’t changed with a few more dollars a day, and we’ll still see purchasing patterns influenced by cash flows and informal retail. But the dreams have grown and changed.

Once this happens, even if there might be dips in cash flow, one’s  worldview is very different from those who are still struggling to survive. We learn to make do if there’s a tight patch, but we don’t go back to living like “the poor”. And it is this transformation that has broken the back of the BoP forever.

Your product or service for the BoP might now be too small for their newly expanded hopes and dreams and ambitions.

 

Related post predicting this moment from 2013

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