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.

…………………………….

* 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.

***

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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Paris Urban Pattern

I’ve recently noticed a subtle but perceptible attitude shift among Americans working in foreign markets. My overseas colleagues are noticing, too. American business people, they say, are displaying more thoughtfulness than usual. U.S. companies operating overseas seem less inclined to approach global business as though its epicenter is in New York or Palo Alto.

It’s too soon to call this a new Zeitgeist, but change is in the air. The global economic crisis, which has its roots in the U.S., may be partially responsible. I think the new vibe is also influenced by Washington’s new tone in its approach to global  affairs.  As an American doing business abroad, this is promising.

Historically, many American firms have approached business from a decidedly ethnocentric perspective–more so than many of our European rivals.  U.S. companies have missed opportunities as a result.

Things seem to be moving in a better direction now.

More Americans are coming to terms with the fact that global power is shifting away from America. It’s not that the U.S. is declining. Instead, other nations are rising. The U.S. is still a hothouse for science and technological innovation, but emerging markets are coming into their own.

We now find ourselves in a multi-polar world–one that Fareed Zakaria describes as the “Rise of the Rest“.  It’s a world where more people in other markets are well-informed and better-skilled than ever before. This is true in markets where living standards are considerably lower than ours.  The pool of business and technology talent in emerging markets is growing deeper every day. In my view, this isn’t a problem. It’s a golden opportunity, but one for which we have to prepare.

Globalization has created more homogeneous markets, but there are marked differences in the pace, etiquette and style of conducting business. These differences are more pronounced in emerging regions.  In any case, it’s immensely helpful to learn about the customs, behaviors and culture of markets where we’re doing business.  It starts by taking a considerate view of other cultures and appreciating what makes them unique. The most obvious benefit to this approach is that it helps build more durable business relationships and friendships.

How can greater respect and appreciation be demonstrated for colleagues in foreign markets?

I suggest five practices that we can undertake to improve the way we engage clients and colleagues in other cultures.  More enlightened business people working in foreign markets–including Americans–already use these practices:

1) Learn the language. At least learn enough to greet your clients but, ideally, strive for more. If your linguistic skills aren’t strong, at least how to how to greet, thank and toast your host in their native language. Go beyond merely learning “please” and “thank you”. Work on your pronunciation. Ideally, take language courses, download language lessons or–and this is my preference–hire a native-speaking tutor.

English is the language of global business, and it’s likely that your clients speak English. But, recognize that it’s often their second or third language. Never assume they understand your meaning.  Avoid slang or jargon. In any case, I suggest following up formal discussions with written summaries using direct, simple terms to recap key points.

2) Broaden the lens. Get as much contextual background information about the local culture as possible. It’s not only enriching, it helps you see your client’s challenges from their perspective. When I’m studying a new market, I gather market research as dictated by the project. But, I also try to learn about the region’s history and current affairs. I read as much as possible and talk to as many people from the region as I can before stepping foot in the market.

Learn about your client’s business culture, management practices and technology, but also get a feel for the “market context”. What’s the local business climate like? For example, many governments have recently privatized and deregulated  industries resulting in greater competition. Will such reforms continue in light of the economic downturn and, if so, how will they affect the problems you’re helping clients solve?

3) Be flexible. When booking client conferences, I observe their schedule. That means early morning, sometimes pre-dawn, conversations with clients who are 10 or more hours ahead of me. The upside is appreciative clients. (The downside, of course, is sleep deprivation.) It also means conferences on weekends with Middle Eastern clients whose days of rest are Thursday and Friday, or Friday and Saturday, and who observe different holidays. Flexibility is essential, but the rewards are substantial.

4) Integrate and collaborate. Happily, the days when a team of high-priced consultants flies into a region to fix problems for clients are over. Next generation collaboration tools like wikis are making it possible for distant, cross-cultural teams to integrate their skills and minimize project costs from start to finish. For example, our U.S. based technical team will work with a client’s process owners to develop solutions that neither team could produce on their own. Much of our team stays behind as the project unfolds. The result is a more cost-effective solution that is validated on a real-time basis by the client which also means fewer surprises.

5) Assume an attitude of humility and consideration. Approach assignments in other markets from the standpoint that the client knows what works best on the ground. Sometimes they need help seeing it from a different perspective, but their insights are valuable. My team lets foreign clients know at the start of an assignment that we recognize this fact.

An appreciative stance toward the client and their culture helps us build trust so we can move swiftly toward a more integrative solution.  A humbler, more considerate approach paves the way for a more enriching and successful assignment.

The global marketplace has undergone a seismic shift. Business people who bring a considerate attitude to their assignments in foreign markets will fare much better in a world that is now being defined and driven by talented, skillful people in those markets.

_____________________

Want more info on this subject? Read Newsweek editor Fareed Zakaria’s The Post-American World (W.W. Norton & Co., 2008).

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