This is more or less the written version of my Life is Hard presentation (slides,video, reference) as first given in October 2008 in Providence, Rhode Island at the Better World by Design conference held at Brown University. Some of the details have become more nuanced since then, some parts have spun off into blogs, projects, grant funded research and more. But the fundamentals remain. Of that I’m glad, as it implies that the basic principles are sound while additional observations in numerous countries since then have only fleshed out the details even more. This is original work and the slides have never been shared previously outside of a presentation environment. Note: This talk has primarily addressed audiences living and working in the first world’s mainstream consumer culture and is given  from that frame of reference.

Life is Hard. 

Without systems that work, inadequate infrastructure, little or no social security or welfare, and general chaos, life is hard at the bottom of the social and economic pyramid in developing countries. If you have survived to functional adulthood while growing up in the slums and shanties of Africa or South Asia, you’ve come of age experiencing life as adversity and challenge.

The only certainty is uncertainty.

Natural disasters or random riots, anything can happen at any time. Planning for the future, much less tomorrow, can be challenging and a sudden shock can spiral the whole family into destitution.

Uncertainty of time and uncertainty of money. 

Uncertain Incomes

Not knowing how many shoes you will shine today or whether you’ll have a call for daily wage labour means you have no way to predict or plan based on your cash flow. You rarely know how much you make each month, and are more likely to be living hand to mouth, getting by with the cash you earned that day.

Inadequate Infrastructure

When systems are lacking or insufficient, they add to inability to plan. You’re waiting for water, or a shared toilet, you’re walking two hours to catch a bus, there’s not enough light or the power is out – it all adds up to uncertainty of time. And is out of your control.

A different worldview

So this life of adversity and uncertainty, surviving (and thriving) in challenging conditions of scarcity, leads to a different worldview than what we’re familiar with. Buyer behaviour and purchasing patterns on irregular incomes are very different, as is the mindset and what is value.

There is daily juggling of income versus expenses, a complex processing of whom to pay for what, and when and for how much. People are familiar with all the financial tools of loans, barter, credit, debit, trade and interest rates, though they may not always call it the same names or be aware of sophisticated financial terminology or use tools like ATMs, credit cards and banks.

The BoP as Customers are strategic money managers

Every decision to spend money – with the exception of an impulse buy of sweets or a newspaper when there is some change available – made by those who manage on uncertain incomes at the base of the pyramid could be said to be analogous to making an investment. Usually in their future, in some way or the other. Whether the decision is a tradeoff between purchasing shoes for a school going child and meat for a meal or choosing to buy some airtime instead of a meal, each of these is an investment – in the child’s future, in future income if work is dependent on being accessible by phone or simply, the next meal.

 How best do we optimize the return on our investment in this single shopping basket with this amount of money available today?

Trade offs are a fact of life.

Purchasing patterns on irregular and unpredictable incomes

When income is irregular and unpredictable, both in amount and frequency, such as it is for the majority at the bottom of the pyramid, buying behavior is not quite the same as for mainstream consumers. At least four patterns emerge based on a combination of need and money available.

1. Bought in bulk – Usually food staples or something you cannot live without would be purchased in this manner, either when there is a sudden influx of cash or a payment at the end of manual labour or if managing on a fixed amount each month such as remittances from abroad. This ensures that there is something to eat even if money runs out before the next payment might be due. If its a sudden influx of cash for someone not on a pension or remittance then these are the funds that often go towards a consumer durable purchase or big ticket item of some kind.
2. Paid for in advance – Usually a service which can be used or consumed over time can be purchased in advance when funds are available and then made to last as long as possible. The best known example of course is prepaid airtime.
3. Sachets or single portions – A form of on demand purchase. Interestingly, I came across this working paper by Anand Kumar Jaiswal at IIM, saying that sales results in rural India seemed to imply that only shampoos and razor blades were more successful in sachet form, whereas things like milkpowder, jam etc sold more in the larger size. The author cautions against assuming all sachets will sell. I believe it could be based on the usage pattern of the product in question or its nature – what if you packaged a perishable item in single servings that didn’t need refrigeration until opened?
4. On demand or daily purchase – mostly perishables like bread, eggs, fresh vegetables purchased for the day’s needs. Partly cultural but also influenced by availability of cash in hand. Cigarettes sold loose or two slices of bread and an egg are some examples we’ve seen. Indian vegetable vendors are also willing to sell you a small portion of a larger vegetable either by weight or by price. You can buy 50p worth of cabbage for a single meal. Minimizes wastage whether you’re cooking for one or have no fridge. This is also the most common pattern if you earn small amounts daily, like the vegetable vendor, shelling out what you have for what you need and then if there’s some change, debating what do with it.

What is the buyer behaviour observed among BoP “consumers”? 

1. Maximizing the return on their investment – When you have a limited amount to spend, usually at the end of each day, you’re seeking to minimize risk and maximize the value of your investment. From our observations in the field, we have seen some core values emerge in the pattern of buyer behaviour at the BoP in the way they think about and use their possessions or the products and brands they choose to buy.
2. Repair and renew – Limited incomes mean there is no wriggle room for the easy convenience so beloved of consumer product manufacturers of ‘just throwaway and replace’. Products must be durable and are treated as such – whether its renewing the old mobile phone with a new keyboard after the numbers fade from prolonged use or continued repair of 20 year old cars using spare parts that may not be new themselves.
3. Maintain and extend – How long will this bar of soap last me? I’m willing to pay a little more if this bar will wash more clothes for my family than that cheaper bar that quickly dissolves into a puddle of soapy goo. Let me tape some plastic sheeting over the television that occupies the pride of place in our one room shack, it will last much longer and still look shiny and new. Cobblers repair sandals with bits of tires and small nails while someone will offer to make like new the grinding stone worn too smooth from constant use.
4. Recycle and reuse – Nothing ever goes to waste, not even old plastic bottles dug up from rubbish heaps. But even those who are not rag pickers think twice about throwing away something that could be used elsewhere or put to another purpose.

A different mindset, a different worldview

All of these qualities are part of the BoP consumer’s mindset, although many seem obvious or familiar to us. The critical difference, imho, is that while we have the wriggle room for experimenting with the ‘new and improved’ or rather then untried and unproven, those at the BoP cannot take the risk. Proof of performance over time is what establishes the brand’s reputation and trustworthiness. And this influences the messaging that resonates with their values when responding to information about products and services. This is where the ‘sensitive bullshit meter’; the skepticism about marketer’s claims comes into play. The ‘tried and true’ carries weight as Coca Cola, Toyota or Tata can tell you.

We may find that a soap lasts a long time after we’ve purchased it and its advertising message maybe based on nuanced lifestyle messaging, usually a beauty queen lathering up in the shower and then shown on the arm of a rockstar or some such. But when targeting the market at the BoP, these qualities must become easy to confirm and identify, they form the core values which are at the foundation of every purchase decision. What’s on sale must be not only be easy to use but also easy to choose.

(smile at draft)