Churn: Observing the low income emerging market

Unpredictable income and the lack of a safety net – this best describes the decision making environment that influences purchases and consumer behaviour at the bottom of the pyramid.

What differentiates this market from the other 10% is the inability to forecast income with any level of confidence, and thus the inability to plan expenditure. Making even the oft quoted $2 a day would be better, if you knew for sure that every single day you were going to be earning that money. But for the majority of those at the BoP its almost impossible to say how much money you will make and when you will receive it. Whether you beg on the streets or are a skilled craftsman, you’re still dependent on the providence of fate for the amount and frequency of money you will receive.

So what does this mean for companies looking to enter these markets?

We’ve nicknamed this constant and consistent state of uncertainty ‘churn’. It is this characteristic that leads to subscribers of any kind of installment payments to drop out or change service providers regardless of the service. Traditional marketing and business models designed for low income demographics such as hire purchase require a commitment based on the ability to predict a regular income source. Variability in income’s frequency and amount lead to random purchasing patterns. Business models and services need to take this distinguishing factor into account as a criteria for their design if they are to be sustainbly successful in serving the needs of the poorest and the not so poor at the bottom of the pyramid in emerging markets.

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