Posts Tagged ‘upward mobility’

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

Social change and upward mobility: what numbers can’t tell you

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Photo Credit: Rajesh Aithal

Rajesh Aithal noticed this first, in a rural Indian haat or market. Macaroni displayed and sold like any other staple commodity. Pasta was not part of the staple Indian diet, at least not the rural one. It wasn’t mainstream even 10 years ago.

Is it a sign of the adoption of urban consumption patterns as signal of upward mobility? Or are there more pragmatic reasons for its popularity?

If nothing else, its certainly an indisputable sign of social and cultural change in rural India.

Upward Mobility is Changing Base of the Pyramid Consumer Aspirations

I’d observed earlier that upward mobility wasn’t simply about increasing incomes, but also a change in mindset, world view and values. Aspirational consumer behaviour trickles downward faster, as strivers seek to emulate the status signals sent by those they perceive as “arrived”.

The emerging middle class numbers may indeed be uncertain, as statisticians debate over the inclusion of the ‘floating class’ but regardless of their actual income (which in any case may be volatile, particularly if they’re part of the informal sector of the economy) people’s habits are certainly shifting towards more ‘middle class’ choices.

Kenyan news reveals some interesting trends. More people are using clean energy such as LPG for cooking, in the ‘slums’, than before.

In Mathare slum a few kilometers away, that residents are warming up to cooking gas is evident in the number of shops selling the commodity on the periphery of the informal settlement.

Prices for cooking gas are the lowest they’ve been since 2012, putting the smallest available size – 6kg- within reach of far more than before. LPG is an aspiration for both urban and rural cooks. A farmer’s wife in rural Makueni in eastern Kenya told me about her ambitions to cook with gas even though she was making do with firewood from the farm.

Even more interesting is this report on what the author calls the “reject economy” – the sale of seconds and damaged products. Its not so much that there’s an after market for these seconds, but the reasons for their brisk sale. Here are some selected insights from that fascinating article.

Well, the economy in Kenya’s informal sector has its own rules and the about 22 million people straddling the poverty line are masters at navigating it.

For instance, Ogola buys eggs with cracks or other tiny imperfections — known colloquially as vunjika — at Sh5 each; whole eggs retail at between Sh12 and Sh15 in middle-income neighbourhoods.

Korogocho, like many other slums in Nairobi, is also awash with charred or misshapen loaves of bread, which retail at Sh30 instead of the market price of Sh50.
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“The people in the village buy these products because they are cheaper and they cannot afford mainstream prices. They buy them because, just like other people, they would like to watch the news and have the family gather around the TV,” says Ngala.

The article goes on to quote some salaried professionals offering expert advice to the poor to be cautious about these rejected or secondhand products but I suspect that those with less income have no false impressions about their challenges in life.

“We also deserve the good life just like other people, or what do you think” Ogola asks with a smile.

As the article ends, just because someone may not have 50 shillings for a loaf of fancy bread doesn’t mean he doesn’t wish to have bread with his tea in the morning.

Without something to aspire towards, we would stagnate in our current circumstances, fatalistically accepting our status in life.

Beer as a symbol of aspirational consumption and upward mobility

sab labour to consumerI came across SABMiller’s recent presentation on their consumer market strategy and some of their infographics caught my attention. This one, for instance, not only shows the relative proportion of formal to informal alcoholic beverages prevalent in the market but also informs us that it costs 4 hours to buy a beer in Africa, compared to minutes elsewhere. A caveat here is to wonder where they are pricing the European beer as anyone who has been to the Nordic knows that beer is ridiculously expensive up here.

localization sabI like the way they’ve dived deep into understanding their target audience’s needs and aspirations as they seek to localize their offering. While we tend to feel superior to such discretionary vices as alcohol when considering lower income markets (the erstwhile “Bottom of the Pyramid”) there’s a lot to be gleaned from their marketing strategy as they have to work harder to reach their customers. Social enterprises could do worse than to take a leaf from their book.

consumer aspirationsIt was this aspirational upward mobility that offered food for thought when I tweeted it. Teddy Kinyanjui of Cookswell Jikos, Kenya observed that this consumer behaviour of seeking premium products by the emerging middle class was also responsible for his own product sales. He makes designer BBQs based on the traditional jiko – the humble charcoal stove used for cooking. He called this aspirational shift the upmarket version of the age old favourites nyama choma (roast meat) and pombe (homebrew).

chibuku31-e1400842601488Talking about homebrew, this was the most interesting part of the SABMiller presentation. They’ve formalized the informal. Home made sorghum beer is a regional favourite, what the company calls opaque beer. Its cheap and ubiquitous. The trouble starts when all kinds of additives and contaminants are used to boost its potency, leading to death, blindness and other such devastating side effects. Their version, naturally, is pasteurized, hygienic and safe.

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Yet, how to reach the vast informal market accustomed to no name local brews? This is where their packaging/price point strategy gets interesting, as it seeks to wean folks away from illicit liquor into branded quality even while creating an entirely new product category, with its own supply chain ecosystem.

I had always thought that it was innovations in the payment plan or business model that offered the flexibility to bridge the formal and informal, not the actual product category itself. This is a concept I’ll be exploring further with an indepth article on Cookswell Jikos.