This document discusses economic poverty and the "bottom of the pyramid" (BOP) market. It notes that over 4 billion people live on less than $15,000 per year and represent a latent market for goods and services. While the poor have little income, their total purchasing power is significant. The BOP market provides opportunities for private sector growth and innovation through products tailored to local needs at affordable prices. However, concerns exist that some may take advantage of the poor or focus on creating needs rather than addressing the root causes of poverty.

1. ECONOMIC POVERTY:
BOTTOM OF THE PYRAMID
Bagus Aryo, PhD
Magister of Social Welfare
University of Indonesia

2. THE MARKET AT THE BOP
>$15.000
(4000 million people)
The Fortunes at the Bottom of the Pyramid, C. K. Prahalad, 2005
>$15.000 -
$20.000
(1500 - 1750 million
people)
>$20.000
(75-100 million
people)

3. THE ECONOMIC PYRAMID
The poor represent a “latent market” for goods and services
BOP provides a new growth opportunity for the private
sector and a forum for innovation

4. THE REAL NATURE OF THE
BOP MARKET
• There is Money at the BOP
e.g The GDP per capita in China is US$1,000 - US$1.2 trillion economy (1.2billion people).
But its purchasing power parity is US$5 Trillion, making it the second largest economy
globally
• Local Monopolies
Due to local monopolies, inadequate access, poor distribution, and strong traditional
intermediaries, the poor pays 5 to 25 times what the rich pays in the same economy -->
potential of unlocking the talent purchasing power

5. THE REAL NATURE OF THE
BOP MARKET
• Access to BOP Markets
Rural markets are inaccessible to audio and television signals. Example: Media Dark - the rural
poor do not know what products / services are available and how to use them.
One solution: HLL Ltd (a subsidiary of Unilever) in India trained entrepreneurial women to
become distributors. They earn US$60-150 per month and become a new class of
consumers themselves
• The BOP Markets are Brand-Conscious
They are indeed brand-conscious and value conscious by necessity; they expect good quality
at the prices they can afford
• BOP Consumers Accept Advanced Technology Readily
Evidenced by the rapid spread of wireless devices, PD kiosks, etc.

6. THE COMMERCIAL INFRASTRUCTURE
AT THE BOTTOM OF THE PYRAMID
Creating Buying
Power
Access to credit
Income Generation
Shaping Aspirations
Consumer education
Sustainable Development
Tailoring Local
Solutions
Targeted product
development
Bottom-up innovation
Improving Access
Distribution systems
Communication links

7. MARKET DEVELOPMENT
IMPERATIVE
1.Create the Capacity to Consume
Cash-poor and with a low level of income, the BOP consumer has to be
accesed differently
Make unit packages (single-serves) that are small and much more
affordable
Based on 3 principles
• Affordability (without sacrificing quality)
• Access (e.g. the poor may start their shopping after 7.00 pm)
• Availability

8. MARKET DEVELOPMENT
IMPERATIVE
2.The Need for New Goods and Services
The involvement at the BOP can provide opportunitiesfor developing
new goods and services
e.g. access to good quality housing, clean energy from solar and wind
power, good quality furniture. (from an IKEA for the middle class to an
IKEA for the developing world!)

9. MARKET DEVELOPMENT
IMPERATIVE
3.Dignity and Choice
When the poor are converted into consumers, they also acquire the
dignity of attention and choices previously reserved for the middle-class
and rich
Switching costs for single-serve goods are negligible for the BOP
Consumers
Trust is a Prerequisite
Firms must focus on building trust between themselves and the
consumers
The default rate among the poor is actually lower than the rich: they pay
on-time

10. CONCERNS ABOUT BOP
• Creating non-existent needs
• Confusing BOP business with the CSR concept and taking attention
away from the need for ODA
• Unscrupulous players taking advantage of BOP consumers vulnerability
• Who carries the innovation risk?
This has developed as a business concept
• Foundation of BOP was the business need to find new markets, not as a
development tool
• Therefore does not explore the wider needs of poverty alleviation

11. I don’t think there is much middle ground between
Professor Prahalad’s Bottom of the Pyramid proposition
and my views. The BOP emphasizes selling to the poor:
I emphasize viewing the poor as producers and buying
from the poor. The primary issue is to increase the
income of the poor: we need to create employment
opportunities for the poor”
- Prof. Aneel Karnani, University of Michigan
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