The Semacraft Blog

Consumer electronics stall in informal market, Nairobi Kenya 23 January 2012

Increasingly I have been getting the sense that there are some fundamental issues with the way BoP focused organizations are developing, creating and implementing their market entry strategies.  Here are four of the most obvious errors that I’m seeing:

Assuming there’s no competition

Most of these firms, particularly those coming in from the outside and seeking to serve the ‘poor’ in the developing world seem to be operating in a vacuum. Observing their market entry actions point to an underlying assumption that they are entering a virgin market where  no competing solutions for their product or service exist.  If this fundamental premise is mistaken then every element of their marketing, communication, distribution and pricing strategy will naturally suffer.

A caveat here is that it might indeed be a virgin market for branded international solutions in the formal market but this is where overlooking the informal markets and existing practices in user behaviour can be far more dangerous since this is where the competition will come from in the form of substitutes or alternate solutions.

Because of the above assumption, little effort is made to uncover information about the customer, the market or competition or the operating environment. Whether this is due to a vacuum of information on BoP markets or the developing world, or this subject simply not being taken into consideration, the fact remains that this oversight then gives rise to a series of errors (like the domino effect) – those in marketing strategy viz., marketing communications, value propositions and positioning not to mention pricing.

Conflating company mission with marketing strategy

While this is most commonly found among well meaning social enterprises entering these markets for the first time with their life saving products for the poor, large multinationals with previous experience in the developing world are not immune the minute they choose to focus particularly on the BoP (or poor) market.

Tata Nano is the most obvious example of this although here one wonders how much of this had to do with their actual marketing communications and advertising for the Nano and how much to do with all the media hype around the car being specially for the ‘common man’? All the positioning and branding in the world through formal advertising and communication channels could not overcome the public perception of the ‘poor man’s car’ created by every other article – from engineering news to international styling – on the Nano.

Similarly, if all the marketing communications, press reports and online information is geared towards the ‘poverty alleviating” mission of the company then this lack of clear focus or understanding of who the target audience is will come through in the positioning and branding of the product in the marketplace.  And no one will aspire to buy the ‘poor man’s product’ if it means a clear signal of having failed to succeed or admitting defeat among their friends and neighbours.

Confusing value proposition with need

This lack of clarity and understanding about the target audience for a product or service and thus, its marketing communications and messaging then snowballs into incorrect positioning of the product or incorrectly identifying the value proposition for the end user.

The end result might be the same – the customer choosing to buy your product – but the pain points may differ tremendously across geographies and regions, not to mention socioeconomic strata. An example is water saving flush toilet mechanisms being sold in Nairobi as a sustainable, greener alternative – that is, the same positioning and value proposition as that used in the eco-conscious parts of the Northern European continent. Sales are sluggish. But when you take into consideration that there is a water shortage or that many communities need to purchase water in tankers to fill their household storage tanks, a simple shift in positioning to “Spend less money flushing down the toilet” or some such clever quip could in fact make a more sensible approach in this situation for the very same product.

This gets more obvious the lower down the income stream you go – Mama Mboga with her vegetable stand may not have the same priorities nor relate to the same value propositions that social impact investors do.

Overestimating the ability of a faceless brand to communicate value

There is probably a snappier sentence to capture this aspect but at this stage of understanding the BoP markets and their challenges its perhaps better to be clear than pithy.  Some have called this issue one of Trust and in the past, I’ve referred to it as Commitment but the fact remains that this aspect is the most challenging and difficult to overcome as a barrier to acceptance.

Even megabrands accustomed to instant global recognition such as Google may find that not only is their brand unknown and unheard of in these new and emerging markets but others may have gotten there before them.  Which, in a way, brings us back to the first point in the assumptions made at the very beginning of considering market entry strategies in the rising global middle class.

One of the most surprising things that struck me over the past couple days of running around doing recce visits for our upcoming rural research was just how rapidly and how well the concept of the user centered design (UCD) process and thus, the human centered approach to research and development was not only understood by our rural hosts but how much it was appreciated. As others in the field know, it can often be a challenge to explain to clients why user research is critical and what kind of difference it can make, more so in the former rich world.

Even the local councilor’s political protege beamed when he heard that it was critical to understand ‘his’ people first and their daily life before coming up with any product, service or plan. In fact it makes me wonder whether his little part of the world is in for any changes?

Mind you, we were extremely blessed during our visit to Makueni district – one of the more challenged parts of Kenya, where the arid landscape can suffer from insecurity of such essentials such as food and water.  Our contact there introduced us to his old friend, who was in between contracts, and Rafael (whom I’m sure I’ll be mentioning more in future posts) turned out to be an experienced expert in poverty alleviation programs and a trained anthropologist to boot.  Our initial meeting rapidly turned into a project planning session.

But that’s a welcome side note. I started this post because as we were discussing the methodology and approach that I intended to use for our consumer insights research, I found that not only was the UCD process grasped rapidly by all the others at our table, its value was also appreciated and understood.

As our local businessman friend explained, too often products for their market were simply direct imports or secondhand and shoddy goods “sent to Africa”. The fact that their community’s lifestyle and daily challenges were considered important enough to be understood first before the development of any strategy or device was felt to be a mark of respect.

It makes me ponder whether we do the economically or infrastructurally challenged a disservice to continue to think of them as the BoP – no one, if asked, would ever consider themselves the base or bottom of anything.  And I wonder if that’s why so many of these socially beneficial products or poverty alleviation products and programs fail because to embrace them would imply to one’s peers and community members that one was ‘beyond hope’ or ‘poor’ regardless of one’s one economic challenges?

Roadside clothing shop, somewhere between Emali and Wote, Kenya Nov 2011

In a couple of weeks, I’ll be starting a whole new set of fieldwork in rural Kenya.  This time we’re doing something closer to the better known applications of our human centered design approach for increasing our understanding of people. It will be among rural ‘BoP’ households on behalf of a consumer product that’s retailed in leading supermarkets. While our previous client project allowed us to delve deeply into a topic that interests us both – mobiles, internets and cyber cafes – I’m looking forward to the opportunity being made available to me to finally be able to do something approaching the ‘prepaid economy project‘ from two years ago.

That is, I’ll have the chance to find out how those on irregular income streams manage their household finances and share this openly on the blog. Since it is also a rural location, it maps on almost exactly to the criteria of the previous locations in The Philippines and in India thus permitting an excellent opportunity for contrast and comparison. What’s exciting me however is that this will be in Kenya, home of the mPesa mobile money transfer system, and I want to see if it will be mentioned by any of the respondents in their answers to the same set of questions I’d used previously.

That is, without any mention of it from my side, I want to see if MPesa has made any difference to the way rural folk deal with emergencies or planned expenses or any other aspect of their daily life.  If there’s anything of note, my hope is to be able to write a comparitive paper on it and extend the findings from the previous research. Of course, our current client will also receive what they have asked us to find out for them – its just that its all under an NDA.

This series will be categorized under the Project category titled “Prepaid Kenya series” and I’ll be using “prepaidkenya” as a tag to all relevant posts, if you’d like to follow along.

Siim Esko wrote a short piece on his blog BoP Strategies after a conversation we recently had. Since much of his work focuses on the BoP in India and I’d just returned from the Kenyan tour, it was but natural for us to compare and contrast the challenges and the conditions of the lower income demographic in both these countries.  He refers to recent posts on NextBillion.net when he starts:

Ashoka is targeting the top of the BoP with their Housing for All project, but they can still say they are targeting the base of the pyramid – those who can’t afford current housing solution, but who are not the poorest of the poor. But Aneel Karnani talks about the destitute poor and how the BoP is misconstrued. It’s apples and oranges.

Its apples and oranges indeed but by only referring to them as fruit, that is, the BoP, one tends to forget that this acronym actually refers to the more than 4 if not 5 billion of the entire planet’s population. And they are not all alike in any way, shape or form.  And that’s why I told him that I’m increasingly concerned about unqualified use of the general term BoP for this market.  Siim continues in his post:

There is much use for there being one definition for what we used to call the poor segment. But it seems like people get confused by the ‘bottom’ in ‘bottom of the pyramid’. In fact, it’s a rabbit hole and the rabbit hole goes deep.

We don’t take the whole World and consider that our market. You will never get VC funding with an idea like that. We zoom in on the continent, which can be divided into countries, which divide into regions, into areas. The people in different micromarkets have different buying behaviour, different wants and aspirations. And catering to those wants and needs is different. Selling snow mobiles in Helsinki is different than selling them in the north of Finland where Santa Claus lives. For one, it is entertainment, for the other, about survival. We know that. Think of the BoP in the same way – divided into tiny segments all over. Some marketing strategies are replicable across areas, income segments and sexes, but many are not.

And maybe the use of the term by an Ashoka in their own context of what they are trying to achieve – affordable housing or by Karnani in what he’s attempting to say may work but in the context of the entire global community of people who are increasingly focused on this space (that is, for example, the audience of a site such as a NextBillion) it implies that one BoP reference is the same as another. And why not, they are all the Base of the Pyramid you say?

Kenya is very different from India, and Africa from Asia. Yet due to the singular BoP label, the implications often are that one’s BoP experience with big bad messy India will prepare one for those in Kenya (or that success in a favela necessarily implies success in the basti). How different is this current situation from the early days of globalization and mass production of consumer goods across the world, based on the now debunked theory that Theodore Levitt espoused?

Any global advertising agency will tell you that localization and understanding regional differences is critical for the sales of your detergent or shampoo – the challenges that multinationals who rushed into India and China in the closing years of the previous century are well documented. Those hundreds of millions of middle class housewives were, in fact, nothing like Mrs Saunderson back in Toledo or Cincinnati, were they? So why, now, as we extend our reach down the income stream to the rest of the world’s population, are we on the point of making the same expensive errors of judgment and assumption?

In the early days of awareness creation, that here was a world changing opportunity to effect positive change and impact wellbeing, the concept of the 4 billion micro producers, consumers and creators at the base of the global economic pyramid was a valuable and compelling visualization. It captured the imagination of many and much good has come out of this – CK Prahalad has left us with a legacy.

However, as the BoP market matures and competition increases, it will only get more difficult if this single label continues to be used – it implies a single monolithic entity, segmentable only by “income” – in itself a challenging proposition in an environment where most are on irregular income streams from a variety of sources and unable for the most part to evaluate what their weekly/monthly/annual income may be, much less feel they have $2 or $3 or $5 to spend each day.  We see this in our work and we see it in the field.

If there are truly to be outstanding successes in this area, then perhaps its time to consider this market with the same degree of seriousness that advertising does its audience, regardless of whether you are making a profit, sustaining yourself or simply giving it all away.

Poster in shop, Kagumo, Kenya 18th October 2011

After the past three weeks of focusing on cyber cafes and internet access in urban and rural Kenya, we’ve been questioning the value of the “mobile internet” statistics provided by operators to the CCK. Muchiri pointed out that since most of our feedback seemed to revolve more around SIM operated routers installed by cybers, or mobile broadband modems sold either to regular home and business users or even, in the smaller towns, used to link networked computers in small cybers to the internet, what did the information actually communicate?

A thousand shillings cheaper than in Nairobi, seen in Kagumo, Kenya

At the shop we were in, Jacqueline (who is saving for her own laptop for Christmas) explained to us that it was cheaper to buy a data bundle or use the modem, than to browse on the phone using the Ksh 2/min offer directly.  Extremely knowledgeable about the most cost effective ways to browse using whichever device you may have, she uses her phone for social networking constantly and prefers it to the cyber which she only visits occasionally. However it was she who pointed out to us that she didn’t think that it was internet enabled phones alone that were affecting the cyber’s business but also the fact that affordable devices (desktops, laptops and modems) were increasingly popular and easily available.

If so, then the 98% of Kenya’s internet users who are on mobile internet may not be doing it through mobile phones alone as is so often assumed but via a variety of SIM based devices. A detailed breakdown of devices under the heading of ‘mobile internet using SIM’ as reported to the authorities might begin to offer a clearer perspective on user behaviour and modes of access.