Purchasing patterns on unpredictable incomes

Some of the uniqueness of supplying consumers at the Bottom of the Pyramid is illustrated by this view of what drives product purchase by the very poor from the Perspective 2.0 Blog.

When income is irregular and unpredictable, both in amount and frequency, such as it is for the majority at the bottom of the pyramid, buying behavior is not quite the same as for mainstream consumers. At least four patterns emerge based on a combination of need and money available.

Paid for in advance – Usually a service which can be used or consumed over time can be purchased in advance when funds are available and then made to last as long as possible. The best known example of course is prepaid airtime.

Bought in bulk – Usually food staples or something you cannot live without would be purchased in this manner, either when there is a sudden influx of cash or a payment at the end of manual labour or if managing on a fixed amount each month such as remittances from abroad. This ensures that there is something to eat even if money runs out before the next payment might be due. If its a sudden influx of cash for someone not on a pension or remittance then these are the funds that often go towards a consumer durable purchase or big ticket item of some kind.

Sachets or single portions – A form of on demand purchase. Interestingly, I came across this working paper by Anand Kumar Jaiswal at IIM, saying that sales results in rural India seemed to imply that only shampoos and razor blades were more successful in sachet form, whereas things like milkpowder, jam etc sold more in the larger size. The author cautions against assuming all sachets will sell. I believe it could be based on the usage pattern of the product in question or its nature – what if you packaged a perishable item in single servings that didn’t need refrigeration until opened?

On demand or daily purchase – mostly perishables like bread, eggs, fresh vegetables purchased for the day’s needs. Partly cultural but also influenced by availability of cash in hand. Cigarettes sold loose or two slices of bread and an egg are some examples we’ve seen. Indian vegetable vendors are also willing to sell you a small portion of a larger vegetable either by weight or by price. You can buy 50p worth of cabbage for a single meal. Minimizes wastage whether you’re cooking for one or have no fridge. This is also the most common pattern if you earn small amounts daily, like the vegetable vendor, shelling out what you have for what you need and then if there’s some change, debating what do with it.

I feel there might be three issues counterbalancing each other in this namely cash in the pocket, the potential of future income and the perceived risk of a purchase. What products work, surely depends on the balance of the three factors above and is not a universal either across countries or consumer groups in a country.

The sachet or single portion sale definitely works for food, I have seen bulk broken pasta in plastic bags in Senegal.

What about

lower specification products– addressing the same consumer need? In South Africa the bottlers of coke launched a diluted cordial in a small well decorated plastic sachet and seem to have established at least some market as the product has been available for many years.

sharing of bulk packs – in South Africa’s townships it is well known for neighbours to by large packs together and share directly without splitting and repacking. A product and package design could bedeveloped to make this process easier/ more efficient.

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One Response to Purchasing patterns on unpredictable incomes

  1. Chris Moran says:

    Nice writing style. Looking forward to reading more from you.

    Chris Moran

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