Challenges in Marketing Socially Useful Goods to the Poor

The University of California; Bernard Gerrette, Aneel Karnani2010

Birgit Pulk (X) José Stênio Melo Rodrigues Júnior (Y)

Prof. Carlota Perez

Tallinn 2012

A case study

Summary

– Text about Marketing of Socially useful goods to the poor– Allign profitability with goods that are effectively improve the life of the poor (BOP)

– The traps: Danone, Essilor and P&G (Unmet needs, affordability, distribution, multiple objectives)– Sucess stories that avoid these traps: Mobile Phones and Nirma

The traps Success stories

Locating the case: product (X)

– Essilor and vision correction, P&G and cleandrinking water, Danone and child nutrition: unmet need does not constitute a market, products ment for BOP, used by middle class, companies focus products and technolgies on their existing markets, adapting them to the BOP market

– Nirma, Cell phones – maturity phase; standardization, ruggerization and simplification; Nirma case: products suffer from commodification.

Prod

uct

sale

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Maturity phase mobile phones and Nirma products

Locating the case: context (Y)

– Nirma – 1969/1970, Maturity Phase : Oil, Automobiles and Mass Production (1970) Disadvantages: Several but most relevant is logistics.

– Cell Phone, Frenzy Phase Age of TI and Global Telecommunications: Nokia 1001 (2003) Disadvantages: less pronounced than the detergent mainly in distribution, infrastructure already existed in many cases.

1. Strategy: reach the BOP segment2. Impact of the context – alleviate poverty minimizing public spending and in case of Nirma fighting an industry whose paradigm phase often leads to the existence of oligopolies.3. No or minimal role of the government/ but not meant to replace government – unmet need is not a market.4. Public opinion favorable but there was backlash in case of cell phones – India and USA

Lessons and applicability

Lessons1. Choice of Technology: Products use simplest technologies to reach a public that had no previous acess to certain type of products: increased complexity can be a problem (low quality: better than no product, brand image)

2. Organizational aspects: existing models don’t work, the need for creating new products and production processes

3. Need for large price and cost reduction

Applicability1. Simple technologies can be applied, yet most important is to keep in mind the level of simplifaction and ruggerization

2. New businessmodels for both to the developed and in developing world (concepts can’t be too complicated)

3. Businesses that could sell socially needed products to the poor, being profitable at the same time

Key points for the lecture

1. Frugal innovation can be applied to several technologies across several types of products and services (Medical, automotive, aviation, etc).2. Demand for affordable and reliable products is not fulfilled in BOP/Emerging Markets segment.3. Opportunity for in developing countries to industrialize due to large number of consumers4. The generics pharmacy Philippines/Medley Generics Brazil5. Innovation not only exists in product, but in business models and processes 5.1 Cost trade off is not an excuse: Reliability Engineering/Quality management essential. 5.2 ICT is pervasive

6. Need for continuous innovation - Nirma7. Frugal innovation can revamp products/services in maturity8. BOP is an economy of scope that has some of the advantages of scale and positive sum games.

Thank you!