The Core Market Segment in Africa – Middle of the Pyramid

The Core Market Segment in Africa – Middle of the Pyramid

This is my playbook: Rwanda, Gambia and most less populated African countries are not good places to launch a business to consumer (B2C) startups  except in healthcare and broad food areas. In those countries, I only get interested if the company is in business to business (B2B) space. I do think the population is small to provide numbers which can enable leverageable factors towards scaling a business. In other words, in those countries, B2B could work but B2C will struggle as the scalable advantages are severely limited.

But when it comes to Nigeria, Kenya, and South Africa, anything is possible. You can launch a B2C or B2B because they have the numbers.

Now, you want to do business in the B2C space in Nigeria, the question is “where do you position the company”? You need to go back to this plot (above). It is called the Fortune at the middle of the pyramid:  “the most significant opportunity for African B2C startups lies with consumers who earn between $4 — $8 per day … This is largely because that income band holds the highest concentration of discretionary spending power on the continent, as the graph below shows.”

Companies like Bigi Cola and La Casera understand this redesign. You can also make a case that the satchetization in places like Nigeria where everything is now bundled in sachets has a root therein. Simply, there are not many consumers outside that $4-$8 per day segment for any big B2C business (if you focus outside this segment, your business must have a dose of B2B).

Interestingly, that is also where I see a big percentage of my popular 30 million people who earn relatively decent income in Nigeria; those 30 million are the core of the consumer market.

This is the full summary from DFS Lab, the researcher which did the study:

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One thought on “The Core Market Segment in Africa – Middle of the Pyramid

  1. The major code to crack is knowing how to stimulate demand of your product, if you do, the people will spend. The list of ‘essentials’ is elastic, you have to force your products or services to enter that bucket.

    If larger number of people keeps increasing the list of what constitutes ‘necessities’ in their spending habits, productive will greatly improve.

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