BOP Markets (Excerpt from the WRI Report)

The 4 billion people at the base of the economic pyramid (BOP)—all
those with incomes below $3,000 in local purchasing power—live in relative
poverty. Their incomes in current U.S. dollars are less than $3.35 a
day in Brazil, $2.11 in China, $1.89 in Ghana, and $1.56 in India. Yet together
they have substantial purchasing power: the BOP constitutes a $5
trillion global consumer market.

The wealthier mid-market population segment, the 1.4 billion people
with per capita incomes between $3,000 and $20,000, represents a $12.5
trillion market globally. This market is largely urban, already relatively
well served, and extremely competitive.

In contrast, BOP markets are often rural—especially in rapidly growing
Asia—very poorly served, dominated by the informal economy, and, as a
result, relatively inefficient and uncompetitive. Yet these markets represent
a substantial share of the world’s population. Data from national
household surveys in 110 countries show that the BOP makes up 72%
of the 5,575 million people recorded by the surveys and an overwhelming
majority of the population in Africa, Asia, Eastern Europe, and Latin
America and the Caribbean—home to nearly all the BOP.

Striking patterns also emerge in spending. Not surprisingly, food
dominates BOP household budgets. As incomes rise, however, the share
spent on food declines, while the share for housing remains relatively
constant—and the shares for transportation and telecommunications
grow rapidly. In all regions half of BOP household spending on health
goes to pharmaceuticals. And in all except Eastern Europe the lower income
segments of the BOP depend mainly on firewood as a cooking fuel,
the higher segments on propane or other modern fuels.
That these substantial markets remain underserved is to the detriment
of BOP households. Business is also missing out. But there is now
enough information about these markets, and enough experience with
viable business strategies, to justify far closer business attention to the
opportunities they represent. Market-based approaches also warrant far
more attention in the development community, for the potential benefits
they offer in bringing more of the BOP into the formal economy and
in improving the delivery of essential services to this large population
segment.

[Full report at WRI site]