Companies
are yet to unlock the fullness of the revenue potentials in the low-income
market. Businesses serving this market have failed in delivering exceptional
value to this huge consumer base. This article focuses on Africa as a
low-income/bottom of the pyramid market goldmine for companies interested in
expanding their revenue base in this most promising emerging market. The size
of the bottom of the pyramid global consumer market is figured at a whopping
$5trillion. Available data shows that consumer expenditures in sub-Saharan
Africa in 2010 was about $600bn.
This figure accounted for almost eight percent
of all emerging market spending, and it is expected to reach nearly $1trillion
by 2020. Of notable interest also is the size of the sub-Saharan Africa
population responsible for the expenditure. The population in this region was
put at over 856million consumers in 2010. This is expected to rise above
1.3billion consumers by 2030.
The largest category of consumers in Africa which
accounts for a little above 60 percent are the low-income earners (bottom of
the pyramid market). It is this class of consumers that have mostly been under served. Companies have taken them for granted. They have targeted this
huge portion of consumers' spending with dysfunctional strategies that do not
allow for consumer allegiance to be formed for the brands. Huge fortune slip by
companies thought to be in this market thereby creating an ocean of opportunities
for companies that can truly offer exceptional utility to this market. A number
of companies came into the market with what seemed an interesting offering at
first but later betrayed consumers trust by compromising their offerings. In
the quest to exploit the opportunity at the bottom of the pyramid market
companies have managed to adapt their products to the market by reducing pack
sizes, for example, selling toothpastes, detergents in small packages and so
on. Our study reveals that these offerings often come with strings attached. They
turn out to be a trade-off between value (utility) and price. This has left a
large number of consumers more dissatisfied. They are hungry for better options.
Current
assessment of the market situation reveals that African consumers are becoming
more exposed and wiser and will make their buying decisions with cautions. They
are in need of true value-laden offerings. Their kind of companies are those
that can value innovate--produce an offering with exceptional utility at an
accessible price-no more no less. Consumers adjudged the value of the company's
offerings from the utility derivable and the price place on the offering.
In
value innovation companies generate for themselves same value given out to consumers
from their price and cost structure. However, this can only be attained when
the entire system of the company's utility (satisfaction), price and cost is
properly aligned. Companies can save costs by eliminating and reducing factors
that other players in their industry compete on, while increasing value to the
consumers by improving and introducing elements the industry has never offered.
Overtime, costs will be further reduced as economies of scale set in due to the
high volume of sales that the exceptional value offering generates.
For
companies looking to make sustainable success in unlocking the full potentials
of the bottom of the pyramid market in Africa the following steps will provide
an invaluable guide:
1.
INDEPTH UNDERSTANDING
OF THE MARKET DYNAMICS. Putting the right foot forward is critical to success
in capturing the goldmine in the bottom of the pyramid market in Africa.
Without sufficient research it is easy to misunderstand the dynamics of the
low-income market in Africa. The nature of the economy (Informal economy) makes
accurate data on consumer spending sparse. This constitutes a barrier of some
sort. The question now is how can companies find a way around this? A
partnership with some long established businesses with relevant consumer data,
partnership with the academia and other means such as careful observation of
the low-income consumers and so on will provide valuable insights. The
diversity of the culture and traditions of these consumers is another key
element executives must study to enable them develop appropriate offerings. African
consumers are unique in their own right and companies that will leverage the
inherent opportunities in this market for growth and revenue expansion must be
ready to deep dive in understanding the behaviors and expectations of the
consumers.
2.
OFFER TRUE VALUE.
Companies that will unlock the abundance fortune in the bottom of the pyramid
must be ready to consistently deliver true value offerings at a fair price. A
peep into the present situation in the market ( For example, in Nigeria)
reveals that some companies that made triumphant entry into this market are now
sabotaging consumers’ trust by not sustaining the quality of the initial
product offering. Some have been accused of unethical practices in dealing with
the consumers. African consumers have unique requirements and are in dire need
of companies that will respect their peculiarities and offer them true value at
a reasonable price; as price remains the key consideration for majority of
consumers in this region.
3. DEPLOY THE RIGHT STRATEGY. The size and
diversity of the continent’s population makes it difficult for companies to
deploy the same strategies they have successfully applied in other parts of the
world. It must be noted that what separates the winners from losers in
capturing any market is their choice and approach to strategy. The individual
purchasing power of the low income earners may be low but strategizing right
can effectively aggregate their collective purchasing power and unlock a
significant market too attractive for a company to ignore. Focusing on the
limited purchasing power of an individual in the low-income market is simply a
reflection of a company’s inability to imagine and develop an appropriate
product offering and viable business model for the market. Companies must
adjust their strategies and expectations when entering Africa. Every strategy
regardless of where and when it is applied involves opportunity and risk. It is
the responsibility of the strategizing company to maximize the opportunities
and minimize the risks. Right strategies will uncover and tap into the wealth
of the “Poor”, while generating values to the consumers and the company.
TIPPING POINT
Valued offerings are tailored to
substantially meet the needs of the target market. African consumers are hungry
for valued offerings. The market longs for exceptional value delivery and not
sophisticated technology, which has led to overly complicated offerings that
miss the key commonalities valued by the mass of the people. The new African
consumer is a force to contend with and represents an opportunity no visionary
company can afford to ignore. African economy is fast evolving; access to
consumers are improving, a healthier and more stable business environment is
becoming a reality are trade restrictions are being loosened. Accenture
research has revealed that between 2010 & 2050 Africa’s economically active
population will grow from 56 percent of the continent to 66 percent – a striking
contrast to mature continents whose populations are aging and moving into the
dependent category. Expansion of the economically active population will lead
to increased demand for goods and services. This represents the face of one of
the fastest growing emerging markets in the world. Companies therefore must step
up with offerings buyers can’t resist and must keep it that way to win and
retain consumers’ allegiance. So, for companies looking for growth via emerging
market, sub-Saharan Africa looms large. Someone once said “Learning to serve
bottom of the pyramid may be the next frontier of globalization and growth”.
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