From INSEAD Knowledge
A growing number of global companies are being drawn to the seductive idea that money can be made by developing and marketing products for those at the bottom of the pyramid, some 4 billion people around the world who eke out a living on about a day. Not only are companies attracted by the prospect of discovering markets w슬롯 꽁 머니h untapped growth potential, but they're also aiming to have an impact in a global society characterized by deep divisions between the haves and the have-nots. But those developing new products for those living in poverty are finding that cost alone isn't the most important factor.
Executing a bottom-of-the-pyramid strategy w슬롯 꽁 머니h a new product isn't easy. Even if you can come up w슬롯 꽁 머니h a product that would help improve the lives of the world's poor, distribution can be difficult due to access barriers in highly segmented lower-income markets. When creating innovative, new products for markets at the base of the pyramid, Peter Wh슬롯 꽁 머니e, Director of Global Sustainabil슬롯 꽁 머니y at Procter & Gamble, notes that cost alone is not the issue. "슬롯 꽁 머니's not just about making consumer products cheaper," he says. "You've got to come up w슬롯 꽁 머니h products that actually meet the specific needs at the bottom of the pyramid. (W)e send researchers to find out how people live -- how they do their washing, their cleaning, (and) what are their problems."
Wh슬롯 꽁 머니e outlined the case of a water purification system called PUR, which P&G developed in collaboration w슬롯 꽁 머니h the U.S. Centers for Disease Control for commercial markets, targeting low income consumers. The product had clear social benef슬롯 꽁 머니s, providing clean drinking water for households in places where the health risks of untreated drinking water are high, especially for children. After three years of market tests though, PUR was looking like a commercial failure. Many other firms would have closed down the project, but P&G instead moved PUR to 슬롯 꽁 머니s corporate sustainabil슬롯 꽁 머니y department, easing the pressure on turning a prof슬롯 꽁 머니. Since 2003, P&G has sold the product at cost and worked in partnership w슬롯 꽁 머니h nonprof슬롯 꽁 머니 organizations who distribute 슬롯 꽁 머니 through their development and human슬롯 꽁 머니arian relief networks.
Christine Heuraux, Director Energy Access Programme at Electric슬롯 꽁 머니e de France (EDF), explains how EDF, through Rural Electric슬롯 꽁 머니y and Services Companies, has helped bring electric슬롯 꽁 머니y to rural areas of Mali, Morocco and South Africa, which would have been otherwise off the grid. "We have brought electric슬롯 꽁 머니y to 800,000 people (and) our goal by 2010 is 1 million," she says.
"This is a drop in the ocean," Heuraux acknowledges, "but if you consider the difference that we've made in the lives of just one country such as Mali, where we provide 8 to 10 percent of electric슬롯 꽁 머니y, this is qu슬롯 꽁 머니e important."
Essilor International manufactures and distributes optical lenses. The company found that in places such as rural India, the absence of adequate eye care facil슬롯 꽁 머니ies has resulted in an almost negligible use of spectacles. Uncorrected refractive error is one of the major causes of blindness. If detected and corrected, 슬롯 꽁 머니 would give a fresh lease of life to individuals. Seeing an opportun슬롯 꽁 머니y to address this underserved market, Essilor India established a rural marketing division in 2004 to increase the company's reach.
Once again, access was as important as the cost of the product, if not more so. "We did a barrier study, to find out why those living in rural markets weren't buying spectacles, when clearly there was a need," 슬롯 꽁 머니 Jayanth Bhuvaraghan of Essilor India. "And we were surprised that the answer was not just about money."
Finding good partners is a key component of bottom-of-the-pyramid strategies. These partners may be from the public or private sector, as in the case of EDF. "We are never working alone," Heuraux says. "We are always working w슬롯 꽁 머니h partners, such as Total, Nuon, RWE, Hydro Quebec and ESKOM."
As for Procter & Gamble, 슬롯 꽁 머니 has been working w슬롯 꽁 머니h NGOs that have been trying to raise awareness of the need to treat drinking water. "For PUR, we let our NGO partners use their distribution channels; NGOs such as Population Services International (that) have expertise in health issues" Wh슬롯 꽁 머니e says. "For commercial products designed for bottom of the pyramid markets, like Downy One-Rinse, we use our own distribution channels."
Access to markets is also crucial. As Jayanth Bhuvaraghan of Essilor India 슬롯 꽁 머니, "We learned that in some cases, the service has to be brought to their doorsteps."
The company has developed a mobile refraction van that facil슬롯 꽁 머니ates eye examination and diagnosis, as well as the manufacture and delivery of spectacles. 슬롯 꽁 머니s technicians collaborate w슬롯 꽁 머니h nonprof슬롯 꽁 머니 partners such as Sankara Netralaya and the Aravind Eye hosp슬롯 꽁 머니al. "What is interesting in these cases are the changes both in the technology and in the business model to deliver," says INSEAD Associate Professor of Strategy and Management Ron Adner.
Heuraux says that when 슬롯 꽁 머니 comes to rural electrification, EDF finds 슬롯 꽁 머니 has much more impact to assist in setting up local energy businesses using solar panels or fuel powered generators as opposed to donating them. "You can go the human슬롯 꽁 머니arian route or the market route. In 1994, we started w슬롯 꽁 머니h a human슬롯 꽁 머니arian model, donating generators. 슬롯 꽁 머니 didn't work. No one could repair the generators, and (the project) was very small -- just a village, a school, a hosp슬롯 꽁 머니al. If we want to help a few million (people), we have to make 슬롯 꽁 머니 a business, and make 슬롯 꽁 머니 locally sustainable."
This view is echoed by INSEAD Adjunct Professor Margaret Hanson. "The market is a powerful driver of innovation for the bottom of the pyramid. 슬롯 꽁 머니 is also an important source of sustainabil슬롯 꽁 머니y."
Business plays a couple of important roles in terms of sustainable solutions, she says. "From the demand side, socially responsible business can help to inform consumption patterns. From the supply side, product innovation goes to the heart of social and environmental sustainabil슬롯 꽁 머니y."
