Need or Want? Creating Demand at the Base of the Pyramid
Understanding what poor people purchase with their very limited resources, and why, is notoriously difficult. Those of us reading or writing about this are unlikely to have ever experienced anything like the life situation that drives these decisions. We can enter a poor person’s home and wonder why they have a television, when they are unable to buy fertiliser for their crops or send their children to school.
In ‘Poor Economics’ Banerjee and Duflo examine this phenomenon:
‘’These “indulgences” are not impulsive purchases of people who are not thinking hard about what they are doing. They are carefully thought out, and reflect strong compulsions, whether internally driven or externally imposed……….We are often inclined to see the world of the poor as a land of missed opportunities and to wonder why they don’t put these purchase on hold and invest in what would really make their lives better……[instead] they focus on the here and now, on living their lives as pleasantly as possible, celebrating when occasion demands it.”
However, while being careful to avoid easy assumptions or being over simplistic, inclusive business is achieving some success in addressing a range of poor people’s needs – in addition to providing goods and services that they feel enrich their lives in the short term . As the Rolling Stones observed:
‘You can't always get what you want
But if you try sometimes well you just might find
You get what you need’
Looking at the Business Innovation Portfolio, we think that we can see some lessons about how inclusive business can be successful in meeting demand and meeting needs at the BOP.
It is not simply about ’meeting a fixed demand’, however. We see three related issues:
1. Successful IB may be about creating demand. Poor people may not yet know the benefit of products or services that have not been available in their context before. They may be interested in making longer term decisions about benefits that may only emerge in the future, but lack awareness of the long term impact of, say, poor nutrition, especially where traditional practices are being challenged (‘what my mother fed me’).
2. Affordability is clearly a major issue. Poor people have low purchasing power and also need to be able to buy – or save – in many small instalments that meets their earnings.
3. Linked to affordability, products and services also need to be accessible. Cost of transport is a major factor for people to reach a market, but there are many cultures where it is also difficult for people (mainly women) to leave the home or village in order to procure goods.
In our new Insider on BOP demand, affordability and accessibility we outline the challenges and strategies used by projects in BIF .