Innovating for the Middle of the Pyramid in Emerging Countries

Abstract

The middle of the pyramid, i.e., the middle-income classes, in emerging countries are increasingly becoming a large consumer market but one that is little understood. This increasingly growing middle-of-the-pyramid group is the result of the recent economic progress of many emerging economies. Individuals who until recently were very poor, and commonly ignored as consumers by most companies, are no longer so. They have become entrepreneurs or are employed in jobs that provide them with higher and more stable income. As a result, their consumption patterns have shifted, becoming an attractive but underserved and in most cases misunderstood market. The middle of the pyramid in emerging markets differs significantly from the middle classes in advanced economies that most companies are used to serving, especially multinationals from advanced economies. One reason is that the middle of the pyramid in emerging economies has much lower levels of income. Although they are middle class in the emerging markets in which they live, they would be considered poor in advanced economies by their level of income alone. Another reason is that their consumption patterns differ markedly. Up until recently, the middle of the pyramid in emerging economies was very poor and just able to purchase necessities. As their income has grown, they are not just replacing older, basic products with upgraded ones but rather buying new products and services that fulfill previously unmet needs. At the same time,