Looking for Four Billion New Customers?

The largest market in the world does not show up on most corporations’ radar screen. Odds are, it doesn’t make an appearance on yours either.

With 6.3 billion people in the world, less than 40% are tapped as markets for the vast bulk of goods and services offered by today’s corporations. These unseen four billion consumers represent the base of the global economic pyramid.

Picture a pyramid with Bill Gates, the richest person in the world, sitting on the top. Right beneath him are the 476 other billionaires in the world. Beneath these folks are the world’s nearly 10 million millionaires. Then comes the 1.8 billion people who comprise the wealthiest 10% down through the global middle class. At the base of this pyramid are four billion people — usually thought of as the “poor,” or as living in “developing countries.” What will become clear shortly is that these labels and many of our assumptions about the consumers they are attached to are no longer valid — and this has enormous significance for your company.

Seeing as this pyramid is arranged according to spending power it is understandable that your company is focused on selling to the top third — but you would be making a serious mistake if you thought the base of the pyramid is not interested in your current products or what your company’s core competencies could produce. You would be making another, perhaps bigger, mistake if you thought these four billion consumers did not have any purchasing power with which to buy your products or a version of your products. They may be at the base of the economic pyramid, but these consumers spend over $2 trillion each year — and a good portion of that is on meeting needs that your company’s products and services your company might fulfill. In addition, 95% of the growth in the world’s population is coming from these regions of the world, so the sooner you come to grips with this vast market the better you will be in positioning your company for the long term.

There are extraordinary opportunities for profitable enterprises that meet vital needs of the under-served 60% of the global economic pyramid. There are even more opportunities for responsible and sustainable business in these markets. There are nearly two billion people in our world who have yet to turn on a light switch (or make a phone call). These people, their families, and communities all need affordable and safe supplies of clean energy for cooking, lighting, pumping water, heating, running motors, harvesting and processing their crops, powering communications equipment, and transport. Surprisingly, if the products that meet these needs are well-designed, manufactured in creative ways, and have slim profit margins, the base of the pyramid can afford them– and afford them in large quantities. Part of the reason for the seeming paradox of the poorest of the poor having the purchasing power to obtain these products is that they are locked out of purchasing property, a house and other high-ticket items. What they have, they spend on what will improve their family’s well being. And your renewable energy harnessing device, your water conserving or purifying technology, your pump, lighting, cooling systems — if you can make them good enough, have them meet a real need, at an affordable cost — you can sell, literally, millions.

Your company and your products can open new markets in emerging markets in ways that are responsible, sustainable, and profitable. Odds are you won’t do this as exports — meaning the exact same product you are selling today to wealthy North Americans will have a hard time selling in rural Bangladesh or Nigeria. To market successfully to the base of the global economic pyramid, for example to the two billion without access to reliable and clean sources of energy, demands a new way of thinking.
Here are a few guidelines:

• Don’t think exports. It is crucial to realize that the base of the pyramid market is not the same as what is traditionally thought of as the export market. (The export market caters to those who live in overseas markets who are in the top third of the economic pyramid.)
• Big-picture thinking is essential. The company wanting to tap the base of the pyramid market needs to be willing to re-conceptualize what they are doing and how they are doing it. They need to look at their business and business model through the lens of the big picture and see the connections between their product line and the vital needs of the millions of people in emerging markets. They need to think in terms of their core competencies, not just their current product line. They might need to re-think products, packaging, distribution channels and production. (Unilever’s new lower-cost detergent has been packaged into single-laundry packets — instead of 5- to 25-pound boxes that are purchased by the wealthier middle class. They are manufactured in hundreds of regional manufacturing plants, and sold by everyone from small shops to street vendors.)
• Start small. Start with one product in one country. Emerging market economies are complicated enough. If you are just starting out and your resources are limited, you don’t want to be in more than one new market. Learn everything you can about one emerging market– the lessons can be applied to the next market you decide to enter, and you will be on strategic high ground where you can see and pick the market that has the most transference and profitability.
• Partner creatively. You will need a local partner. This doesn’t need to be a local business; it could be a government agency, NGO, co-op or other group. In Bangladesh, the Gameen Bank, the very successful micro-lender, is the partner of cell phone manufacturers. Gameen loans women in rural Bangladesh the money to purchase a cell phone that they use to set up a “phone booth” in their village. The women make enough in the first four to eight months to pay off the loan and are earning two to three times the national average income after that. The village is now connected to the rest of the world– including sons who are off working in Malaysia, seed distributors in the city, and come harvest time, the buyers who are now competing to provide a fair price for the village’s rice. And not quite incidentally to this virtuous circle, the cell phone manufacturer is selling lots of phones.

The four billion additional customers are out there. They are growing in number and purchasing power. It will be the bold and visionary business person who goes after them. Coupled with risk-reducing knowledge, a local partner, and the right product or service in the right emerging market, such vision, boldness and pragmatism will be richly rewarded with sustainable profits and expanding markets in a shrinking world. Equally important in today’s dangerous world of haves, have-nots, and have-no-hopes, the world will be a better place as more and more people reap the fruits of sustainable business. Corporate social responsibility with bottom line results never had it better.

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Medard Gabel is author of Global Inc.: An Atlas of the Multinational Corporation and president of BigPicture Consulting, a company that links corporate enterprise with meeting basic needs in emerging markets in sustainable and profitable ways.