In an article published in today’s Wall Street Journal, Erik Simanis, Co-Director of the BoP Protocol project at the Center for Sustainable Global Enterprise at Cornell University's Johnson School of Management, analyzes some of the key characteristics and hurdles for developing inclusive businesses that target low-income consumers.
He argues that Western companies have yet to figure out how to turn the billions of people living in poverty into customers. In Simanis' view, when selling to poor consumers, companies need to begin by doing something basic: create markets among poor consumers. "They must make the idea of paying money for the products seem natural, and they must induce consumers to fit those goods into their long-held routines.”
According to him, the billions of people with a low income have a lot in common, but they are “not actually a market”, as they lack “two of the vital characteristics you need to have a consumer market. They haven't been conditioned to think that the products being offered are something one would even buy. And they haven't adapted their behaviors and budgets to fit the products into their lives. A consumer market is nothing less than a lifestyle built around a product.”
In his article, Simanis analyzes a.o. the reasons for the commercial failure of Procter & Gamble’s PUR water treatment product, for which three years of test marketing in four countries returned mostly low penetration rates as well as a weak return on investment. And he advises companies to overcome consumer inertia by getting the community involved in creating, implementing and shaping the business itself. “The sense of ownership this brings will help ensure that interest in the company's product will be widespread and sustained.”
More information:
Social inclusion meets environmental sustainability – summary of Cornell event on “The Great Convergence” (June 2009)
Innovation form the Inside Out (pdf, 12 pages), written by Simanis and Prof. Stuart Hart (summer 2009)
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