This is the eleventh in a series of posts discussing themes raised in The Fortune at the Bottom of the Pyramid by C K Prahalad. In chapter 2 the author discusses the importance of adopting the right philosophy for developing products and services for consumers at the bottom of the pyramid. During the 1990s many multi-national corporations unsuccessfully tried to use an existing portfolio of goods and services to target the poor as customers.
The basic economics of the bottom-of-the-pyramid market are based on small unit packages, low margin per unit, high volume and high return on capital employed. These new economics are surprising to most multi-national corporations. Further, it is not safe to assume that customers will have access to Western-style infrastructure such as refrigerators, transportation, credit, electricity and literacy.
It has proved relatively easy for multi-nationals to tap into the top of the economic pyramid in emerging countries such as China, India and Brazil. It is the other end of the pyramid which proves more challenging although, given the enormous population sizes, potentially more lucrative. Just 5% to 10% of the population of China or India can represent a new market of 50 to 100 million people.