Market Sizing: A Top Down BOP Approach

Wrapping one's head around market sizing within the realm of social innovation can be somewhat of a difficult and convoluted task. On one hand, there is a particular market being under served, yet on the other-hand this market may not be able to afford, or may not even desire the particular product or service offering. So how should one go upon sizing this particular market in order to pitch a business idea when such ambiguity exists?
One way is to first estimate the need for the particular product/service by examining macroeconomic trends.  In many cases of social innovation, the target market exists within the bottom of the pyramid, consisting of $4 Billion low-income individuals throughout the world. Here is an info graphic I found by the World Resource Institute highlighting the where particular needs exists within the BOP.

Out of the $5 trillion market that exists within the BOP, the largest industry is food. However, is this market relatively under served? Utilizing a market approach can be helpful in determining the size of of a market, but it may not be the best indicator of where to focus a social innovative startup in this market. First, let's drill down to examining relative spending habits by two markets within the BOP to get an idea of spending demographics. Next we can examine how to use this information to properly segment the market.

This chart, also taken from the World Resource Institute, compares spending by income segment (USD) within the BOP. This example is provided to show the inverse relative spending amongst residents of India and Mexico. India has a much larger relative percentage of individuals that spend $1000 a year than that of Mexico. But how is this spending allocated amongst the industries highlighted in the first graph? Lets take a look at India's energy sector:

This graph demonstrates that within India's BOP spending on energy, a majority of spending is conducted in rural markets, a phenomena unlike most other countries. Furthermore, spending on energy follows a fairly linear relationship to income. This spending can come in the form of actual electricity or the purchase of kerosene. Regardless, we can see that the rural BOP energy market in India is a market that needs to be addressed.

Using a top down approach to market sizing can be a beneficial way to examine opportunities for social entrepreneurship or how to pivot a current idea to meet a different need. As our social impact bond project progresses throughout the semester, sizing the market by starting large and narrowing down to different target markets will allow for a more comprehensive understanding of how to serve unmet needs.