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Serving the Bottom of the Pyramid: Strategy & Concept

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  • 00:00 Non-Traditional Customers
  • 00:54 Bottom of the Pyramid
  • 1:36 Serving the Bottom of…
  • 2:52 Ethics of Serving the Bottom
  • 3:43 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught history, and has an MA in Islamic law/finance. He has since founded his own financial advice firm, Newton Analytical.

More and more people are finally able to spend money on what many in the West have been buying for years. As the bottom of the global economic pyramid continues to grow, so does the potential for profit.

Non-traditional Customers

While it's almost trite to say, it's true that we enjoy a very high standard of living in the United States. It is simply taken for granted that most of us will have a television, a mode of transportation, and a cell phone. In fact, if you're studying this lesson right now, then you've got some sort of internet-capable device. Simply put, even those of us who budget money still present to companies as ideal consumers. So, what about the rest of the world? Should major companies just ignore the billions of people who survive on only a fraction of what most westerners make?

For some time, that was thought to be good business practice. However, in the past few years, we have noticed that this global rising class actually has impressive spending power. In this lesson, we're going to learn about these non-traditional customers and their place on the so-called bottom of the pyramid (meaning that they are the poorest but largest group within capitalism) as well as how companies are best interacting with them.

Bottom of the Pyramid

First, let's make sure we all understand who we're talking about by being at the bottom of the pyramid. I'm not necessarily talking about the super poor, those unfortunate people who only make pennies a day. Instead, I'm referring to the global rising class, those individuals who have seen wages go from a dollar a day to much higher. Take China, for instance. A couple of decades ago, much of China's population couldn't afford a bicycle. Now they are a vibrant consumer economy. The same could be said of places like India, Indonesia, Nigeria, and others. For smart companies, finding ways to sell goods to these groups is a big step forward.

Serving the Bottom of the Pyramid

However, this does require an adjustment in the thinking of many businesses. Simply put, you cannot charge someone making $200 a month the same prices as someone making twenty times that. However, if a company can adapt, there are massive profits that could be made. After all, many of these rising economic powers have enormous populations. China and India each have more than a billion people, while Nigeria and Indonesia have more than 150 million each. Therefore, companies that can engage them do extremely well. However, what does that engagement have to look like? Again, high prices won't do, but that doesn't mean that quality can be sacrificed. After all, people will likely be saving up to purchase the goods in question. So, what does all of this look like?

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