Emerging Lessons

Monday, October 20, 2008

By Madhubalan Viswanathan, Jose A. Rosa and Julie A. Ruth

Businesses, take note: An underserved and poorly understood consumer group is poised to become a driving force in economic and business development, by virtue of sheer numbers and rising globalization.

They are subsistence consumers — people in developing nations like India who earn just a few dollars a day and lack access to basics such as education, health care and sanitation.

As these consumers gain access to income and information over the next decade, their combined purchasing power, already in the trillions of dollars, likely will grow at higher rates than that of consumers in industrialized nations. The lesson for multinational companies: Understanding and addressing the needs of the world’s poorest consumers is likely to become a profitable, as well as a socially responsible, strategy.

A characteristic associated with low-income consumers, and one that has major implications for doing business with them, is that many struggle with reading and math. Like the 14% of Americans estimated to be functionally illiterate in a U.S. government survey, subsistence consumers have difficulty reading package labels, store signs or product-use instructions, or subtracting the purchase price of an item from cash on hand — all of which hampers their ability to put their limited incomes to best use.

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Source: The Wall Street Journal (link opens in a new window)