Base of the Pyramid
Two-thirds of the global population is more often than not excluded from being served by businesses and not seen as a viable audience that a brand would consider catering to. But business has an important role in alleviating poverty, creating economic opportunities for the poorest 4 to 5 billion people who make up the base of the pyramid. And Professor Ted London is here to provide the proper framework to achieve social impact and economic profit for a business while co-creating with the base of the pyramid.
In deciding whether or not to cross over to the ‘dark side’ by going to business school for my Master’s, I scoured the course list to see if there was a place for me (a recent International Studies grad who avoided math at all costs) beyond the financial statements and spreadsheets. And there it was, a glimmer of hope, Strategy 445: Base of the Pyramid: Business Innovation and Social Impact. Professor Ted London designed this course to demonstrate how business can be an important tool in responding to the global challenge of alleviating poverty and giving agency to the poorest two-thirds of the human population (4 to 5 billion people) who make up the base of the pyramid. Professor London has spent over 30 years and has traveled to more than 100 countries, learning from the base of the pyramid and co-creating innovative economic opportunities from these learnings. And even with this incredible amount of experience and knowledge, he looks to his students humbly and states, “it is you who are the smartest in the room.” His faith and investment in us as students impart his passion for making a positive impact. By guiding students and organizations on how a business can simultaneously achieve economic profits and provide positive social impact, he equips people with the tools to make a difference at scale. I feel tremendously lucky and grateful to have learned from professor London last fall, and now to speak with him about the best practices working with the base of the pyramid through a marketing lens.
Favorite book you’ve read recently?
Where the Crawdad’s Sing by Delia Owens.
What is something that made you smile this week?
My eight-year-old daughter plays travel soccer with Liverpool. This weekend, she played up two-years with an older team. She scored the first goal of the game, had a really nice assist and some great defensive plays. That really made me smile, watching my daughter enjoy herself and seeing her confidence grow.
What is one of your favorite things about U-M?
Getting to know students that want to engage in ways about how to make the world a better place; who are interested in us learning together. I love learning from them, and the great diversity in the discussions, especially in class.
If you could give a lecture on any topic and anywhere in the world what would it be?
I would love to give a talk at the UN General Assembly about why there is no “them” and there is only an “us.”
When did you first realize that for-profit businesses have the ability to have a sustainable impact on poverty alleviation for the base of the pyramid?
The first time was when I went to Malawi as a Peace Corps Volunteer in 1989. I began to see that business played a really important role in having a social impact, both on the owners but also on the broader community. In Malawi, it was mainly small and micro-scale businesses. The organization I worked for helped these businesses operate more efficiently and effectively and you could see the power of a business as a way to have social impact in a country like Malawi.
What lessons can businesses learn from working with the BoP?
A lesson that businesses need to learn is that those in the base have to be part of the solution. So much knowledge resides with the base of the pyramid; the key is co-creation. I think that too many people think they are there to help the base of the pyramid, and that’s a failed strategy. It’s about what can we create together that neither could have done individually, that is where the real power lies.
What is the most important action a company can take when deciding to sell to base of the pyramid markets?
I think the number one thing they have to start with is the framing. It isn’t an at the base of the pyramid it is with the base of the pyramid, and everything builds from there. Following this, they create a value proposition with the BoP, co-create with the BoP, and scale with the BoP. There is so much more to that, but just starting with the right framing matters so much.
How has BoP marketing evolved over the years and where do you think it’s headed?
The idea that the base of the pyramid needs things and if it’s affordable then, of course, the base of the pyramid would buy/use it was the way of thinking it at first, but that idea was never right. Originally, the marketing relied on what we thought they needed. And that proved to be a very flawed approach. Two refinements that are really relevant are:
(1) Building a robust value proposition based on alleviating poverty. This requires an understanding of how the good/service you are providing impacts impoverishment on multiple dimensions, with multiple stakeholders that are impacted. Think of it in terms of net positive: How can we enhance the positives and mitigate the negatives? How do we understand the impacts in terms of alleviating poverty? That becomes a big part of building a value proposition: understanding the value creation from the perspective of the BoP.
(2) Segmentation. The base of the pyramid was often framed as a homogeneous market. The base of the pyramid, of course, is a very heterogeneous group and one of the ways to look at segmentation is through the lens of the Sustainable Development Goals. This includes understanding how the value of a product or service varies by gender, income, education, isolation, etc. We have to look more clearly at the best ways to segment this market to raise benefits not only to the market as a whole, but also specific segments within these markets.
What are some brands that have done/are doing this well?
Industry can play a role here. In fast-moving consumer goods, the brands may be transferable to a low-income context. This is more of a hypothesis than a fact, but the relatively low cost of most products and broader awareness of product categories can encourage trial. Just because you are impoverished doesn’t mean you don’t want access to the same products that a wealthier person has. This may not work as well with higher value goods because people in lower-income markets may value different functionalities than the wealthy, and thus have a different value proposition for this type of product.
I think you have to really think about your brand in this context: Does the brand value align with what the base of the pyramid might seek, and what are the implications for the broader branding strategy that you might have? Maybe the best brand strategy you need is a separate base of the pyramid branding approach, really tailored to this segment.
Do you think all companies should be mindful of including the base of the pyramid to some extent? Should it be optional as a business?
I don’t think all businesses should. I don't see the base of the pyramid as an attractive market if your focus, for example, is to sell really expensive watches. So yeah, there are a set of companies that probably don't make a whole lot of sense, such as the high-end luxury brands. And that’s a hard thing to say because you don’t want the base of the pyramid to be excluded from something just because of where they are now, but for a company, the market size is probably going to be hard to justify.
Then there are companies that are domestic and in a developed economy, so reaching low-income communities in emerging markets may be too big of a stretch.
But for many other companies, I do think the base of the pyramid is something they ought to at least consider. After all, it is an enormous and growing market, especially if you consider it in terms of people. So they should definitely be considering it, but it won't be for everyone. There has to be a vision, and there has to be the capabilities or desire to get the capabilities to execute. I think more companies are going to explore the base of the pyramid opportunities as we go forward, it almost has to be. Not only from an economic perspective but a social perspective. Businesses can’t continue to focus on serving only the wealthiest fraction of the world. The companies can’t say we are just going to serve one segment of the world, while the rest of the world is excluded from business strategizing.
How can we as marketers use this knowledge in our own practices, even if not at a company specifically targeting BoP?
We aren’t reinventing marketing, but we are thinking about how marketing best practices might need to be reconsidered. The idea of hearing the voices of your customers and understanding value from their perspective isn't new but the idea of understanding value as related to poverty alleviation is new. Co-creation isn’t new, but the takeaway is to rethink what your servable markets could be and the biases of why you see certain markets as the right ones. Maybe test those biases to see are we really targeting all of the markets we want to serve now and into the future. If we're not, how should we begin to think about that?
Marketing and other vital business functions still have much to learn about how to improve the equity of our global society. Marketers can take the first step to address this challenge by restructuring one’s framing of the base of the pyramid as a partner in value-creation and taking the time to learn about the many different segments that encompass this market. This will not be an easy task but like London, I feel there is hope businesses will move forward to include the two-thirds of our global population whose needs have been inadequately served by the modern marketplace.
If you are interested in learning more about building better scaled-enterprises and the key components that your strategy and business model must have to succeed in working with the base of the pyramid, check out his book The Base of the Pyramid Promise: Building Businesses with Impact and Scale!
This interview has been edited and condensed for clarity.
