Olivier Kayser and Valeria Budinich: The Wealth of the Poor

By Olivier Kayser and Valeria Budinich, Authors of “Scaling up Business Solutions to Social Problems”, Palgrave MacMillan, February 2015.

I don’t know about you but I struggle to think of a device I could purchase that would improve my work productivity or help me save money. Actually, looking at the gadgets that clutter my desk I have probably been over-equipped for a long time.

By contrast, poor families at the “base of the pyramid” are surrounded by a wealth of attractive investment opportunities. Buying a $15 improved cookstove would help them reduce by up to 50% the quantity of biomass used, producing a staggering 5000% annual return on investment. Incidentally, such cookstoves almost eliminate toxic fumes that cause 1.8 million deaths a year. Similarly, replacing a kerosene lamp with a $20-30 solar lantern brings brighter and safer lighting in the evening, powers their mobile phones and saves the $8 monthly spent on kerosene and candles, corresponding to a 150% return on investment. Buying a $20-40 water filter brings safe drinking water to a family and eliminates the cumbersome and costly task of boiling water every day. A 400% return on investment.

Irrigation pumps, latrines, home improvement packages or bicycles could be added to this list. The cumulated impact of these investments would literally transform the lives of these families. So, why aren’t these families seizing these attractive investment opportunities?

These formidably high returns come with similarly high risks, at least as seen by these families. Hence the challenge of marketing these innovative devices is not to reduce their price (returns would remain high enough if prices were actually higher) but to reduce the perception of risk, in other words to be able to guarantee and to demonstrate that the families will actually get the promised benefits.

From a low income family’s point of view, it is extremely risky to purchase a $300 Grameen Shakti’s Solar Home System (SHS) supposed to last 15 years. To mitigate this risk, Grameen Shakti’s customers are offered to pay monthly installments that are collected by the maintenance technician coming every month to check on the SHS. Thus, families are sure that the system will keep on working.

In the same vein, instead of paying cash immediately - a 10% cheaper option - Toyola’s customers choose to differ their payment, by putting the money they save daily on charcoal in their “Toyola box”, which is usually picked up 3 months later by the sales agents. They can make sure they get the promised savings from the cookstove before actually paying for it.

Relying on strong consumer brands can be another way of reassuring customers and reducing their perception of risk. Indeed, these brands are usually seen as a guarantee of quality and reliability. When Total, the energy multinational, sells its Total Awango solar lamps to African families, these know they can return any faulty product to the closest of Total’s close to 4000 gas stations.

Marketing innovative solutions for the BOP is not about selling cheap products or reducing the size of packaging. It is about caring enough about customers to ensure that all of them get all the benefits that these products claim to offer.

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