Boston Consulting Group on Decoding the Next Billion Consumers
In recent months, Boston Consulting Group’s publications have tackled various aspects of BoP strategy, which Manuel and Julia have covered in detail.? From a high-level point of view, this is a positive trend, reflecting growing interest among BCG’s clients–large private sector corporations–in better understanding and exploring BoP markets.? And from a branding perspective, I couldn?t be happier that BCG has chosen “Next Billion” as the catchphrase tying these publications together.
BCG’s most recent publication, Decoding the Next Billion Customers (PDF), briefly but jauntily describes six ways that BoP consumers are different from other consumer segments, and provides a few hints about what this means for those interested in developing products for and marketing to BoP customers.? Mainly, these six points are common sense observations about circumstances that influence low-income individuals’ purchasing decisions:
- They manage fluctuating incomes
- They cope with domestic [spatial] constraints
- They are unfamiliar with many products
- They are smart shoppers
- They look for trusted advice
- They demand respect
When compressed altogether, however, these facts and their implications present a challenging and exciting picture–especially for companies scouting around for new marketing opportunities.? What’s helpful here is that BCG gets right to the visible and straightforward day-to-day differences that influence low-income customers’ value calculations and decision-making without going into long narratives about their socioeconomic limitations.It’s fast-paced and easy to read, though it opens with a lead that sounds much like a movie trailer and refers to the “next billion” in a way that might lead one to believe that they are a newly discovered species. (Kudos to the authors for following this with a more prudent acknowledgment that it’s time that companies “begin to look beyond the stereotypes” and explore this “segment of consumers that has been almost totally neglected by the world’s brand marketers.”)
Decoding the Next Billion offers valuable advice to private corporations that have little experience with consumers outside of the middle class. However, even though BCG’s report is all about getting to know the needs of the upper two segments of what we call the BoP market (the roughly one billion people earning $2,000-3,000 PPP a year), somehow it doesn’t overlap much with what I blogged about last week–under a nearly identical topic: ’Know Your Customer.’
In that post, I argue that smaller local enterprises are best positioned to access BoP customers and grow the BoP’s market potential–mostly because SMEs will be able to better manage higher overhead costs and personalized attention, and drive profits based on personalized knowledge about the customer.? Comments from Mbwana Alliy and Cat Laine support this hypothesis, comparing small enterprises to low-cost airlines and championing the design benefits of close proximity to the customer.
In this case, ’know your customer’ might mean something radically different to Boston Consulting Group than it does to a rural health franchisee in Kenya.? It could also be about segmentation within the BoP market. The next billion is very different than the next four billion, and BCG is looking primarily at those consumers whose incomes are set to grow fast, and who are possibly already at the point where they are “saving for washing machines and even computers.”
This focus on the upper segment could lead to greater BoP engagement overall–or to a damaging segmentation strategy in which the poorer BoP classes are further neglected.? Either way, businesses of all sizes that market to BoP consumers must know that one of the most important keys to success here is investing upfront in developing a solid, ground-level understanding of the customers, what they value, and how to enable them to access desired goods and services in ways that work for them.? Whether you hear that from C.K. Prahalad, Stuart Hart, the BoP Protocol, Boston Consulting Group or NextBillion.net is immaterial, at some level.