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How startup founders can cater to the base of the economic pyramid

India — home to the third-largest startup ecosystem — is going through a visible entrepreneurship revolution.

Encouraged by favourable government policies, a huge domestic market, and the economic rise of the country, more people are venturing into business today than ever before.

These entrepreneurs are contributing to both India’s economy by employing thousands of people and bringing social transformation by catering to the weakest sections of society.

Traditionally, corporates have catered to the middle and upper classes of society to maximise their profit margin. However, things have rapidly changed in the past few decades.

In the age of the internet and social media, entrepreneurship is not only seen as a means of making profits but also about giving back to society.

The base of the pyramid

The base of the economic pyramid represents a huge latent market waiting to be explored.

For a large country like India, the lower half of the pyramid comprises around 700 to 800 million people. Most live from hand to mouth, but they are full of aspirations.

A majority of them have access to smartphones and the internet and are aware of the happenings in the country and the world. Free healthcare, education, and food are seen as the solutions to the problems of any society. And, they know their value.

They also understand the concept of free services has not been helpful for them, and they are now ready to pay for quality products and services.

The paradox

The base of the pyramid are people living below the poverty line or having limited to no disposable income. So, how could this portion of the society become attractive for corporates?

The answer to this question lies in the numbers. The base is the widest and indicates a huge market potential. Corporates need to understand the real potential does not lie in the profit margin per product, but the economies of scale.

Entrepreneurship and the base of the pyramid

Due to its sheer size, the base of the pyramid offers a huge and rather untapped market for the corporates. Catering to this section provides an opportunity to make a fortune while also contributing to society.

Here, entrepreneurship is all about maintaining the delicate balance between profit creation for the organisation and value creation for the customers.

In more philosophical terms, an entrepreneur needs to strike a balance between doing good and doing well.

While there might not be a huge profit per product at the Balance of Payments (BoP), it gets compensated by the sheer size of customers waiting to be served.

Companies can make a fortune by expanding in this market, selling their products and services in large volumes. But, they need to be careful about their offerings. The product or services not only need to be affordable but should also provide quality.

Although there is a fair amount of internet penetration in this section, the levels of awareness and education are rather low. The reviews about any company’s services travel faster by word of mouth rather than advertisements or the internet.

One bad customer experience can do irreparable harm to the company’s image and prospects. Therefore, maintaining the highest level of quality is a prerequisite for success in this market.

Once a company has established itself as a quality product or service provider, it can introduce more products and ride on its reputation. Therefore, both economies of scale and the scope of work at the base of the pyramid can help organisations to flourish.

However, entrepreneurs should try to engage society rather than focusing on quick sell. While it might help in some cases, the success is always limited and does not go too far.

Some examples of successful entrepreneurship at BoP come from affordable healthcare, education, skill development, and microfinance.

It has also proved that people from this section are willing to pay for quality products and services.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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