Posts Tagged ‘upwardly mobile’

Target market strategy for upwardly mobile BoP segments

* BoP – referring Prahalad’s Bottom of the social and economic pyramid, MoP – middle

This visualization of the emerging consumer market opportunity in India is by the insightful analysts at Nomura Research Institute, Japan. When taking this in conjunction with the information collated in my previous post on the imminent boom in upward mobility currently being seen in rural India, one can instantly perceive the logic of their target market strategy.

Why stumble around in other rural areas, when the first ones most likely to benefit from the economic changes taking place will be in teh vicinity of the smaller cities which are themselves rapidly growing? And if they themselves aren’t, its likely that their local market’s shops will source new products from the nearest city. Innovation diffuses outward from the urban areas, as do new ideas and thinking. We saw this same pattern with the way the internet cafe industry was evolving across Kenya during the Village Telco project last year. And its the same pattern of diffusion for new product introductions in the informal trade – the ones who are ultimately serving the BoP customer in their rural village. Thus, this target is a focused one with greater impact than seen in the first instance.

What Nomura’s gurus have added however is a layer of nuanced caveats on this analysis – one, not to forget the fact that even as people’s upward mobility takes them up the food chain to ‘middle of the pyramid’ (their MoPs in the diagrams), this very same economic change will have visible impact on the local business environments, so stay cognizant of that, and two, that even as people migrate upward economically, they do not automatically change their system of values in terms of purchasing patterns and buyer behaviour to resemble the existing higher income strata, instead they still think like the “BoP” they were.

Thus, the emphasis in the strategies to choose how and at which point to enter the market whilst straddling both the MoP and BoP population segments. An example of all of the above comes from the recent Daily Yomiuri article about Yamaha’s activities in Asia and Africa:

Yamaha Motor Co. has started selling water purification facilities in emerging countries in Africa, Southeast Asia and other areas, as part of its so-called bottom of the pyramid business plan, which aims to generate profits by improving the livelihood of low-income earners in such countries.
[…]
Yamaha has built small water purification facilities in five locations in Senegal and Indonesia, including local water service public corporations. Each facility is designed to provide a community of about 200 households with 8,000 liters of water daily. The firm also received an order in Mauritania.
[…]
By selling its name in untapped markets in Africa and small villages in Asia, Yamaha also aims to boost its sales of outboard motors and motorcycles in the future.

Emerging evolution of global BoP markets by mindset and income

 Japan’s Nomura Research Institute have an interesting take on the evolution of the existing global population currently demarcated as the BoP (Base or Bottom of the Pyramid). While it is not surprising that income levels are expected to increase, given the signals already observed in frontier markets and rapidly growing economies, what was intriguing was their assertion that the newly emerging “Middle of the Pyramid” (or rather, emerging global middle class since that’s a diamond not a pyramid) will display an entirely different sense of value i.e. a different mindset, from mainstream consumer culture prevalent today.

This values gap between the customers at the BoP and those immersed in the global mainstream is something I’ve written extensively about previously, having identified and framed it in “Design for the next billion customers” back in 2008. It is one thing, however, to describe my observations of differences in mindset and buyer behaviour, and another, to see this aspect in terms of population and income, that too, taking the increasing upward mobility into account.

That is, what this diagram is saying is that not only is there a difference in value (and thus, mindset) between the BoP customer and his brethren higher up on the social and economic pyramid, but even as their income rises and they evolve into ‘middle income’ customers, their mindset is more likely to remain the same as when they were classified as BoP than to suddenly shift into the mindset and values of those in the higher income brackets.

That these emerging global middle classes will continue to have more in common with their rural cousins and their BoP roots.

Yes. This makes perfect sense. And to see it visualized like so offers valuable insight into the emerging consumer markets of the near and medium term future.