1. Product improvement : the product may be improved over its counterpart for northern markets so as to optimise its performances for the target population. This is particularly apparent in the health segment, as can be seen from the following examples (P&G case study):
- In the food sector, food and beverages are sometimes enriched with essential nutriments.
- The chemicals sector can also provide value added to simple products to enhance their performance, as with repellent-impregnated mosquito nets (Grameen-BASF).
2. Access innovation to adapt to distribution constraints. Accessibility does not just relate to price but also to the product's characteristics, namely its geographic availability and the advertising it requires. Product innovation centres on adapting to local conditions, particularly weather-wise. For food retailing, for example, products need to be storable at room temperature, especially if they are designed for immediate consumption. Best-by dates for fresh produce should also be extendable or distribution alternatives found when products reach their sell-by date.
The geographical scope covered: Geographic distribution is a fundamental element in BoP ventures given the challenge of reaching remote populations or those in illegal dwellings (slums). The road-to-market in these zones often has to be invented as traditional distribution networks cannot normally get to these areas.
In developed countries, there is also the issue of geographic accessibility, but this relates more to the notion of communication. In general, it is a question of making the people aware of the product or service. In France, social pricing for electricity was not used because of the very low level of awareness. A portion of the population continued to suffer from low energy security until the government realised what was happening and asked power companies to apply means-tested prices automatically (the state provides companies with a list of the households concerned).
3. Adapting production capacity : In areas such as energy access, the challenge is not the same and more technical in nature: companies need to innovate to design small, light-weight and easy-to-operate units, all of which is a long way from the idea of critical mass and the western economic orthodoxy: the emphasis is on less capex and more labour, given the low labour costs and the positive social repercussions.
Eoin Treacy's view
My view – We are living through the greatest age of humanity that is every likely to occur. Improving infant mortality rates, higher calorie intake and life enhancing treatments have contributed to a surge in population growth over the last few decades. This trend is likely to persist for at least another few decades.
For the first time, not only is the global population expanding rapidly but economic growth is outpacing it and swelling the ranks of the middle classes in the process. This report focuses on the challenges of marketing to the poorest half of the global population. However it is also important to note that hundreds of millions of people are being lifted out of poverty as a result of economic growth and improving standards of governance. This is creating opportunities for the companies best equipped to market to this batch of nascent consumers.
The reason we focus so intently on the Autonomies is because these are the companies which have been most successful in adapting to globalisation. They have the experience required to break into new markets, foster brand recognition and have the balance sheets to fund such expansion. They are truly globally diversified and as such have the flexibility to cater their efforts to the economic environment presented in different regions. Since most of the Autonomies have persisted for some time they often have solid records of dividend payouts and competitive yields.
I last reviewed the Autonomies on October 23rd.