Abstract:
The ‘bottom of the pyramid’ (BoP) refers to the world’s poorest socio-economic group. In South Africa, consumers in this segment are an increasingly attractive target market for multi-national corporations (MNCs), partly because they constitute more than one-third of the population. However, a key managerial challenge remains in distributing goods and services to these consumers. This research sought to identify the alternative channels of distribution that firms develop to reach the BoP.
Using a qualitative research methodology, eighteen depth interviews were conducted tracing the channels of seven firms from firm to end-user. The results suggest that many MNCs are indeed developing BoP channels, with varying degrees of success. Further, success seems to be driven by the level of managerial commitment. In addition, the BoP in South Africa is best understood as two distinct sub-segments, the urban BoP is characterised by more competition and crime, while the rural BoP has lower population density which heightens logistical challenges. Community involvement, where locals serve as distributors or salespeople, is a central feature of successful strategies to reach the BoP. Finally, the findings suggest that alternative distribution channels present benefits for MNCs in terms of cost to serve, local knowledge and increased penetration.
