Making Big Money on Poor

My microeconomics teacher used to tell me that if one want to make money she/he should target people with low income. Most starting businesses I see in Bishkek are focused on luxury, upper class goods and services. Those are either bars & restaurants or stores with expensive brand clothing and accessories. They promote themselves as unique and only for wealthy people type of business. As a result, not all of those businesses succeed and they either close or do "re-branding". Where do businessman look? Do they see the sad reality??? Yes, there are people with high incomes, but it is only a small fraction of the total country population. I think that if business start to focus on a wider part of the population, they will not only get greater profits, but will also bring 'good' with affordable in price products for many and will contribute to more developed markets in the region, not only in the city.

However, there is always the other side of the coin. Ethan Kay and Woody Lewenstein in their article in Harvard Business Review (April, 2013) discuss the problem with the "Poverty Premium" as they call it. Earlier in 2002 HBR printed the article on the concept of poverty premium, claiming that   serving poor consumers in emerging markets would bring multinational corporations big money. But after implementing new cheaper products such as soy protein by Solae company, P&G's PUR sachets for bottled water, smokeless stoves by Philips and BP and Grameen Danone yogurt in emerging markets, these companies failed to succeed. During the research in one of the biggest slums in the world Dharavi in Mumbai, authors tried to find out why this strategy with creating and implementing cheaper products in India did not work and as a result they found that local prices can be lower than those offered by big companies and that there may be some governmental programs that support the poor and they buy certain products with discounts.

Thus, this strategy seems to be more appropriate for local businesses, rather than for TNCs to implement. I would suggest local small companies to re-brand and to transform their strategies to meet the demands of consumers with lower incomes as they make up the majority of population. Of course a thorough market research should be conducted, but the chances are that the local companies will succeed are higher since they are better aware about the current country situation and the needs of local people rather than multinationals are.