Tapping into the poor market

Ashley Milne-Tyte Mar 19, 2007

TESS VIGELAND:How do you market to the world’s poorest populations?The 4 billion people who earn less than $3,000 a year? Might sound a tad mercenary. But a report out today from an arm of the World Bank says businesses should be doing just that. And not just for their own benefit. Ashley Milne-Tyte has more.

ASHLEY MILNE-TYTE: The report found the 4 billion poorest people have $5 trillion worth of purchasing power. And that sits largely untapped.

Still, it’s less about marketing to the poor, says Alan Hammond of the World Resources Institute, and more about letting the market work for them.

ALAN HAMMOND: The poor are victimized by having uncompetitive, inefficient markets. And if we made them more efficient and more competitive, the prices they’d pay for basic services would go down, not up.

Hammond says when the poorest peoples’ incomes increase, the percentage of income they spend on food drops. What shoots up, he says, is how much they spend on transportation and communication, like bikes and cell phones.

HAMMOND: And that’s sort of fascinating. Because it says they’re actually being very smart consumers, they’re voting with their pocket books, and they’re picking those things that really improve either their quality of life or their ability to earn income.

He says if more businesses courted this group, prices would get more competitive. That would help improve everybody’s bottom line.

Michael Klein is the World Bank’s vice president for financial and private sector development. He says it really wouldn’t take much to make a big difference.

MICHAEL KLEIN: If by more innovation, more competition, you could just lower costs by 1 percent, or having quality improvements in that order, you actually transfer as much value to poor people as the whole of official aid together.

Official development aid will never reach 4 billion people, he says, so the sooner business steps up to the plate, the better.

In New York, I’m Ashley Milne-Tyte for Marketplace.

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