Saturday, July 4, 2009

Recognizing the Poor as Customers in India: Business Success Stories and Examples [Part 1]

Back in my Technopreneurship class a year ago, my lecturer recommended some books to read. One of them is "The Fortune at the Bottom of the Pyramid" by C.K. Prahalad. I hadn't got the chance to read the book though, until one of my flatmates put the book in our flat's 'private library'.

Well, the book is an interesting read. It outlines many examples of success stories of companies who recognize the poorest of the poor (i.e. those at the bottom of the economic pyramid) as their (potential) customers, instead of thinking that they aren't because they probably can't afford to buy the companies' products. Most of these examples actually happen in India.

Before I move on, here are some statistics that may help put things into better perspective.

India's Characteristics in Brief
  • huge population (about 1.1 billion people)
  • about 72% of them living in rural areas and doing agriculture-related stuff
  • 22% lives below the poverty line
  • 61% literacy rate
  • large linguistics diversity (at least 10 major languages out of a total of more than a thousand languages) - most of the people I meet can speak 5-6 languages
  • more than 100 million mobile phone subscribers
With 22% of the population living below the poverty line, if a company recognizes the poor as its customers, that means a lot of customers. But of course, it's not as easy as it sounds. Designing products for the poor doesn't simply mean sacrificing quality in order to reduce price. It means tweaking your product so that it meets the needs of the poor - affordable prices, durability, user friendliness, among others.

During my time in India, through "The Fortune at the Bottom of the Pyramid" book, the Indian Innovative Summit sessions I attended, and others, I've come across some interesting case studies and examples of what companies and other organizations do here that either empowers the poor or turning them into customers or both.

Here they are, in categories:

  • Aravind Eye Care
    While a cataract operation costs about US$2,500 to US$3,000 in United States, it costs only US$50 to US$300 in Aravind Eye Care. However, over 60% of Aravind Eye Care's patients get their surgeries for free. Despite all this, Aravind Eye Care is very profitable.

    The reason in short: process innovation.

    Aravind Eye Care reduces the need for (pricey) specialized doctors in the various phases of diagnosis and treatment before and after the surgery. Dr. Venkataswamy, the founder, developed and standardized the Aravind process: patient care, testing for vision problems, and postoperative work are done by youth from local villages that are trained for one specific task. The doctors perform only the surgeries. With this system, the doctors can perform more than 50 surgeries per day. Every doctor performs more than 2,000 operations per year, while the national average in India is 300.

  • Jaipur Foot
    The cost of a prosthetic foot in the United States: about US$8,000.
    The cost of a prosthetic foot made by Jaipur Foot: US$30.

    Yet, Jaipur Foot is designed carefully to meet the needs of Indian customers:
    - it's made from local materials, because the government limits import of foreign materials
    - it's made considering the working lifestyle and culture of the vastly agricultural India: walking on uneven ground, squatting, sitting cross-legged

    Similar to Aravind Eye Care, they train the local people to be involved in the various stages of patient care, thereby reducing cost.

    More information: Jaipur Foot : Our Special Technology

[to be continued with more stories in IT, Energy, etc]



SoC Guest Blogger said...

I enjoyed reading your post. very informative and can u remember me???
the indian guy from the june

Tania said...

Hi Theepan! Thanks! Yups of course I still remember u, we talked for quite a long time that night right :)