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The Wall Street Journal/MIT Sloan Management Review published a disturbing paper on why Western companies are failing to transform the Bottom of the Pyramid into a booming consumer market. The author argues that the base of the world’s economic pyramid – where people live on $2 a day or less – isn’t panning out as a market because potential consumers “haven’t been conditioned to think that the products being offered are something one would even buy.”
To support his argument, he cites the case of PUR, a low-cost water purification system developed by Procter & Gamble. The product provides the obvious benefit of affordable clean water where the risks of drinking contaminated water are high. But curiously, PUR* achieved low market penetration rates in test markets.
Why would consumers reject a product as salient as PUR? The author contends that Western companies simply haven’t created demand among low income consumers. “Companies must create markets—new lifestyles—among poor consumers,” he insists. His prescription is that Western businesses need to do a better job “conditioning” low-income people to be better consumers. Really?
He argues that Western businesses ought to show people in emerging markets how enjoyable life would be if they were using products like PUR. Companies, he says, ought to “make the idea of paying money for the products seem natural,” and “induce consumers to fit those goods into their long-held routines.” Get a load of our stuff!
The fact is that consumers in developing markets usually know value when they see it. For example, businesses don’t have to create demand for mobile phones bought by the millions at the Bottom of the Pyramid—the fastest growing mobile market in the world. Consumers in developing markets can see how phones improve their lives.
Low-income consumers often buy mobile phones from street vendors, and they continually invent ways to squeeze more value from the devices than designers could have imagined. Customers use the devices to handle tasks like transferring money and finding markets for their goods that were never conceived by the phone’s developers or market researchers.
Jan Chipchase, a field researcher at Nokia who studies user behavior in developing markets observes that however cleverly products and go-to-market strategies are designed, “the street” figures out novel ways to distribute and use them.
So what does it take to sell products in developing markets? Listen to and carefully observe potential users. It makes sense to educate and inform emerging market consumers, but businesses have a lot to learn from them about creating value in their markets.
A more enlightened approach to serving the needs of potential consumers in emerging markets is to bring them into both the product design, communication and distribution processes.
I don’t mean to sound flip but next time a Western company comes up with a hot new product for the Bottom of the Pyramid, they should keep it out of the hands of marketing gurus. Instead, they ought to consult vendors on on the street and figure out a way to share the revenue with them. If street vendors can’t sell it, no one can.
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* P&G now sells PUR in developing markets at cost and is partnering with non-profit organizations to distribute the product through humanitarian relief networks.
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What do you think? As always, I’d love to hear your views…
Want more on this topic?
Check out INSEAD’s piece, Social Innovation — Creating Products for Those at the Bottom of the Pyramid. For a broader perspective, read C. K. Prahalad’s classic, The Fortune at the Bottom of the Pyramid.
My related posts include Mobile Growth in Emerging Markets and various posts on emerging markets.
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Tags: BoP, Bottom of the Pyramid, Chipchase, cross-cultural, Emerging Markets, go-to-market, market research, MIT Sloan, mobile, P&G, Procter & Gamble, PUR, telcecommunications, Wall Street Journal, water purification, WSJ