#GNW2015: Pay as You Go

March 2, 2015

Prof. John Luiz says that pay-as-you-go models make goods more accessible more quickly to more people across Africa.

From a business perspective, is it possible to ignore a continent where 40% of the world’s population growth is taking place? As people in the northern hemisphere age, the markets there simply won’t be as viable, says Prof. John Luiz, who focuses on international business strategy at the University of Cape Town Business School. The base of the pyramid in Africa—that is, the poorest citizens—has some of the biggest business opportunities.

For a model of how to do business in this market, Luiz, says, look to one of the most successful technologies on the continent: cellular phones. Two-year cellular contracts are not as common in Africa as in the United States, but pay-as-you-go phones are flourishing, because they are affordable to even the poorest citizens. 

“It’s a sweet spot for where money is to be made,” Luiz said.

More and more companies are starting to pay attention to what pay as you go means for other industries. For example, Unilever has introduced small packets of one-time-use shampoos. Sales have soared, because the product is accessible and cheap, he says.

“Companies are looking to adopt that model for the base of the pyramid,” Luiz said. “Do not dismiss the market. You may not have the right product—or rather delivery of the product—but find a way to make the product cost more digestible to a market.”

Matthew O’Rourke is blogging this week from the University of Cape Town’s Global Network Week module on emerging markets.