The article „segmenting the base of the pyramid“, written by V. K. Rangan, M. Chu, and D. Petkoski, gives us an introduction into the different segments at the base of the pyramid, and how to earn sustainable profits without taking advantage of the affected inhabitants. The poorest 4 billion people in the world who live on less than 3 to 5 USD per day define the base of the pyramid. In today’s global economy, the Bottom of the Pyramid is the largest segment in terms of affiliated people.
In order to conduct business properly at the base, you need to segment it by living standards and by its value-creating roles. You can distinguish between low income, subsistence, and extreme poverty. The low-income segment lives on 3 to 5 USD a day and typically has a couple of years of secondary education and the skills needed to enter the job market. They have reasonable hope that they will achieve a modestly higher living standard. Next comes the subsistence segment with 1 to 3 USD a day. They are poorly educated and low skilled. They have only irregular earnings and their nutrition is often substandard. They conduct transactions only in informal markets. The last segment is called extreme poverty. Those 1 billion people lack basic necessities as sufficient food, clean water, and adequate shelter.
In order to find the most suitable market strategy for each segment, you need to understand what kind of roles these people play in a relationship with your company. The first ones are the consumers. Companies can provide values by directly addressing their needs for services. You need to introduce innovations that enable people to devote fewer resources to basic activities and more to other pursuits. The role of consumers is most appropriate in the low-income segment, where individuals have the greatest resources for making purchases. In the subsistence segment, companies should