Moving Beyond Yesterday’s Markets

By Cate O’Kane, Director Corporate Partnerships, PSI 

What does a functioning market actually look like for those at the bottom of the pyramid? Is it a utopia where everyone has their needs met at a price that doesn’t unduly lighten their wallets? Are products available in a convenient location just up the street? Is there enough clear information available to make a choice?

For the lucky ones among us who live higher up the socioeconomic pyramid, this is today’s market experience thanks to services like Amazon Prime and Uber. Despite these models working so well for those of us living in the United States, we are still struggling to devise strategies that work as well for so many others around the world.

Corporations, practicing a form of selfish altruism, are increasingly focused on this issue. Great minds do spend time wondering why they can ensure access to products in Oslo, Norway, but not in Oyo State, Nigeria. They ask why prices may work for customers in Denver, but not Delhi. They question why people accept the need for their product in developed markets, but can’t understand its use in emerging ones.

Teaching an old market dog a new trick is hard. As Mark Kramer, Managing Director of FSG acknowledges, “The business models that most major companies operate on today were developed years ago with the idea of serving rich customers in developed nations. Those models simply don’t work for reaching low income populations and emerging markets.”

It’s time to move beyond traditional approaches and devise models that work for a new market base and a new consumer.

Beyond product approval to prototype design

Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” Maybe in 1908 his consumers couldn’t conceive what was to come. But today’s new market makers aim to engage their consumers at the start of the design process, not simply at the end. Philips[1] and SC Johnson now base research, design and innovation teams in emerging markets to take advantage of this talent and enterprise. But they are still the minority. Are enough pharma companies going beyond normal medical research to gain consumer insights that would fuel future product R&D? Are fast-moving consumer goods companies sourcing new packaging ideas from the markets where they are most needed? Are designers hired from the very communities that need these innovations, or do we too often introduce the final product for their approval?

Beyond old value chains to new value generation

Successful companies know how to compete in existing markets by streamlining their value chains. Yet when a market still requires development, it often requires a reworking of traditional competitive strategies and an openness to new methods that may raise eyebrows at headquarters. It’s important to remember that controlling 100 percent of a non-existent market isn’t going to make shareholders happy. New market makers know that investing in unusual opportunities can yield surprising rewards. Yara, a global fertilizer company, helped expand the Southern African Growth Corridor of Tanzania, a multi-stakeholder effort to develop agriculture, and in doing so increased its market share by 50 percent. They built transportation infrastructure, helped link supply chains, and included even their competitors, to make sure the market worked first and foremost[2]. After that, it’s in everyone’s best interest to ensure the market functions.

Beyond today’s price to tomorrow’s impact

“When markets are commodity-based with price as the determinant of what is being purchased, other determining factors tend to get pushed aside,” says Tom Putzer, managing principal of SC Johnson’s Base of Pyramid Learning Laboratory. “Success is so often measured in terms of distribution, but maybe a true metric of success should be how many people are using the product and ultimately, what long term impact is being created.” New market makers are thinking beyond short-term numbers and instead to longer-term success measured by positive change and healthy outcomes for both their sales and their consumers.

So what does a functioning market look like for consumers at the bottom of the pyramid? There is no one answer, because a functioning market serves consumers first and foremost. New partners bring in new skills that focus on long-term success for both the maker and the buyer.

[1] For more, visit https://www.annualreport.philips.com/#!/about-sector_innovation
[2] For more information, visit https://hbr.org/product/yara-international-africa-strategy/715402-PDF-ENG

This article is part of an ongoing conversation about #MakingMarketsWork in Impact Magazine No. 22 “Are We Thinking Big Enough” issue. Join in the conversation with @PSIImpact.

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Photo Credit: Trevor Snapp