I’m continuing to write on these topics on Perspective, my blog.

Shredded cabbage for sale, Wote, Kenya 3rd February 2012

Convenience can mean different things to the household consumer, depending on their location. In urban Chicago, its stocking up the freezer and pantry with a trip to a megastore like Costco while in Singapore it might be the ubiquitous neighbourhood hawker stand where rice, meat, two veg can be had for as little as $2.50 per person. Here in the mostly rural, arid Makueni district of Kenya where the concept of leftovers is moot and only bars and restaurants tend to have a refrigerator, convenience means stopping by the cabbage lady for just enough for tonight’s meal.

Kerosene sales, Wote, Kenya 4th Feb 2012

Purchasing patterns observed previously among those on irregular income streams have been clustered into  four major categories:
1. Prepaid or pay as you go
2. Bulk purchases of non perishables
3. Sachetization or as its called here in Kenya, kadogo
4. On demand, for immediate use

The shredded cabbage, being sold by weight or “amount” (half a cabbage or quarter) is a clear example of the last pattern and common across the world while the way kerosene is being sold could be said to be closer to a ‘sachet’ or small purchase as it tends not to be a daily or on demand purchase.

Interestingly, here I saw bulk purchasing for firewood or charcoal rather than foodgrains since most families have some land where they grow maize.  The maize is first and foremost for household use and only the surplus is sold.

So why have I called this ‘convenience as a service’?

There is a premium one is paying for the convenience – whether its the shredding being done for you or the difference in price of kerosene between the town and the village.  Someone has saved you the time and effort thus it costs money. There’s an entire economy around water and its supply chain that I’ll be taking a closer look in a forthcoming post.

Next week's office

We start the immersion phase of our project tomorrow and leave for our first location in rural Kenya today. Our focus is to better understand household consumer behaviour and our methodology is inspired by the early stage of the human centered design process.

Ukambani has been the traditional homeland of the Kamba people for at least the last four or five centuries. Although oral history acknowledges that the Kamba came from the south, in the region of Mount Kilimanjaro, the creation myth which is most popularly cited places their origins in the heart of Ukambani: Mulungu (God), who created the universe, also created the first Kamba man and woman, and placed them on top of Mount Nzaui in the fertile Mbooni Hills (roughly 20km north of Emali).

We’ll be based in the market town of Wote, capital of Makueni district.

Consumer electronics stall in informal market, Nairobi Kenya 23 January 2012

Increasingly I have been getting the sense that there are some fundamental issues with the way BoP focused organizations are developing, creating and implementing their market entry strategies.  Here are four of the most obvious errors that I’m seeing:

Assuming there’s no competition

Most of these firms, particularly those coming in from the outside and seeking to serve the ‘poor’ in the developing world seem to be operating in a vacuum. Observing their market entry actions point to an underlying assumption that they are entering a virgin market where  no competing solutions for their product or service exist.  If this fundamental premise is mistaken then every element of their marketing, communication, distribution and pricing strategy will naturally suffer.

A caveat here is that it might indeed be a virgin market for branded international solutions in the formal market but this is where overlooking the informal markets and existing practices in user behaviour can be far more dangerous since this is where the competition will come from in the form of substitutes or alternate solutions.

Because of the above assumption, little effort is made to uncover information about the customer, the market or competition or the operating environment. Whether this is due to a vacuum of information on BoP markets or the developing world, or this subject simply not being taken into consideration, the fact remains that this oversight then gives rise to a series of errors (like the domino effect) – those in marketing strategy viz., marketing communications, value propositions and positioning not to mention pricing.

Conflating company mission with marketing strategy

While this is most commonly found among well meaning social enterprises entering these markets for the first time with their life saving products for the poor, large multinationals with previous experience in the developing world are not immune the minute they choose to focus particularly on the BoP (or poor) market.

Tata Nano is the most obvious example of this although here one wonders how much of this had to do with their actual marketing communications and advertising for the Nano and how much to do with all the media hype around the car being specially for the ‘common man’? All the positioning and branding in the world through formal advertising and communication channels could not overcome the public perception of the ‘poor man’s car’ created by every other article – from engineering news to international styling – on the Nano.

Similarly, if all the marketing communications, press reports and online information is geared towards the ‘poverty alleviating” mission of the company then this lack of clear focus or understanding of who the target audience is will come through in the positioning and branding of the product in the marketplace.  And no one will aspire to buy the ‘poor man’s product’ if it means a clear signal of having failed to succeed or admitting defeat among their friends and neighbours.

Confusing value proposition with need

This lack of clarity and understanding about the target audience for a product or service and thus, its marketing communications and messaging then snowballs into incorrect positioning of the product or incorrectly identifying the value proposition for the end user.

The end result might be the same – the customer choosing to buy your product – but the pain points may differ tremendously across geographies and regions, not to mention socioeconomic strata. An example is water saving flush toilet mechanisms being sold in Nairobi as a sustainable, greener alternative – that is, the same positioning and value proposition as that used in the eco-conscious parts of the Northern European continent. Sales are sluggish. But when you take into consideration that there is a water shortage or that many communities need to purchase water in tankers to fill their household storage tanks, a simple shift in positioning to “Spend less money flushing down the toilet” or some such clever quip could in fact make a more sensible approach in this situation for the very same product.

This gets more obvious the lower down the income stream you go – Mama Mboga with her vegetable stand may not have the same priorities nor relate to the same value propositions that social impact investors do.

Overestimating the ability of a faceless brand to communicate value

There is probably a snappier sentence to capture this aspect but at this stage of understanding the BoP markets and their challenges its perhaps better to be clear than pithy.  Some have called this issue one of Trust and in the past, I’ve referred to it as Commitment but the fact remains that this aspect is the most challenging and difficult to overcome as a barrier to acceptance.

Even megabrands accustomed to instant global recognition such as Google may find that not only is their brand unknown and unheard of in these new and emerging markets but others may have gotten there before them.  Which, in a way, brings us back to the first point in the assumptions made at the very beginning of considering market entry strategies in the rising global middle class.

Sweet, fresh water, Ukambani Kenya 18th January 2012

The owner of this shamba specially asked his man to remove the pipe so that he could proudly share his ‘wealth’ – sweet, fresh water piped in from a submersed pump with pipe and power laid down under the dry river bed and his fields.

Value is always contextual.

Highway stands, Kirinyaga, Kenya 19th January 2012

Kirinyaga, Kenya 19th January 2012

Seeing signs of increasing competition around as next evolution requires interconnectivity and platform agnosticism.

Even the local councilor’s political protege beamed when he heard that it was critical to understand ‘his’ people first and their daily life before coming up with any product, service or plan. In fact it makes me wonder whether his little part of the world is in for any changes?

Mind you, we were extremely blessed during our visit to Makueni district – one of the more challenged parts of Kenya, where the arid landscape can suffer from insecurity of such essentials such as food and water.  Our contact there introduced us to his old friend, who was in between contracts, and Rafael (whom I’m sure I’ll be mentioning more in future posts) turned out to be an experienced expert in poverty alleviation programs and a trained anthropologist to boot.  Our initial meeting rapidly turned into a project planning session.

But that’s a welcome side note. I started this post because as we were discussing the methodology and approach that I intended to use for our consumer insights research, I found that not only was the UCD process grasped rapidly by all the others at our table, its value was also appreciated and understood.

As our local businessman friend explained, too often products for their market were simply direct imports or secondhand and shoddy goods “sent to Africa”. The fact that their community’s lifestyle and daily challenges were considered important enough to be understood first before the development of any strategy or device was felt to be a mark of respect.

It makes me ponder whether we do the economically or infrastructurally challenged a disservice to continue to think of them as the BoP – no one, if asked, would ever consider themselves the base or bottom of anything.  And I wonder if that’s why so many of these socially beneficial products or poverty alleviation products and programs fail because to embrace them would imply to one’s peers and community members that one was ‘beyond hope’ or ‘poor’ regardless of one’s one economic challenges?

Take two regions in a country, one far more fertile and having a better overall economy than the other. Yet both areas face the same lack or unmet need. Take a product which fills this need. Yet it’s sales in the far more economically challenged area are more than double that of the first region. Why?

The numbers provide the managers a means to identify a problem. But they are not able to provide any explanation for the discrepancy.  It was the numbers themselves that originally identified the first region as one which would be a good location to launch a product – average income was X, unmet need was felt by almost 90% of the population etc etc.

This is where putting people first, followed by supporting metrics (data) makes sense. Or rather in the case of those who attended today’s meeting, where their data now needed answers that only the people generating those numbers could answer themselves.

Data, charts, graphs, metrics and numbers all have a role to play but when they are about human beings (and not just the number of cars per minute produced in an automated factory line) I believe that role is a supporting one, not the Oscar winning star of the show.

Bangkok's Suvarnabhumi Airport, Jan 13th 2012

The 21st century’s version of the old Silk Road that led caravans of traders from around the world to China and back is the flight path between the African continent and China. Bangkok Airport is one of the oasis on the New Silk Route, where I caught the Kenyan Airways flight on its stopover between Guangzhou and Nairobi. Sitting next to me were entrepreneurs – the lady from Kigali returning after deal making in electronics and new clothes and the Congolese traders from Brazzaville exuberantly enjoying their after dinner cognacs, all chattering away in French.

Extent of the old Silk Road. Red is land route and the blue is the sea/water route (source: Wikipedia)

It was the onboard announcement made just prior to landing in Nairobi that made me realize what I had just experienced – connecting flights out of Nairobi reached across the Sub Saharan landscape from Accra to Kigali, Harare to Lubumbashi – exotic names in distant places, yet gathered under one roof, if only for a short moment in time. How different was this from caravanserais of yore as the mishmash of “small small English” mingled with la langue francais et every mother’s tongue? Kenya Airways had Thai stewardesses and I heard each safety instruction being repeated in fluent Mandarin, Gujerati and Swahili as well. Only the technology and the means of transportation and communication have changed, the bazaar is still the marketplace for exchange of goods and services as it has always been.

Until now I’d only read about increasing trade between these two far flung places, the majority of which emerging from the so called informal economy or Neuwirth’s systeme D. But this short immersion in the energy flow in between underlined the reality and scale of what was happening. The flight was full and there were few getting on in Bangkok, the vast majority of passengers returning to their various destinations after their short sojourns in Guangzhou. The other flights out of Bangkok – to Brisbane or London – were full of holidaymakers but not this flight unless one counted the group of young Koreans going on a volunteer trip with an NGO.  Perhaps its time the old Silk Road map was updated with current day flight paths in bright purple.

Here’s a snippet from an article article translated from the Japanese on the unique model of globalization displayed by “Little Africa” in southern China:

 Including undocumented immigrants, it is estimated that there are an astounding 150,000 Africans in Guangzhou, a majority of them male. It should come as no surprise then that among Guangzhou’s foreign residents, those from Africa make up the largest proportion. These immigrants essentially operate on an individual basis. Working in China as buyers, they can be seen determinedly ranging the streets of central Guangzhou’s wholesale district. There are variations in density, but among the passersby on some bustling streets, half will have African features. There are those from East Africa and West Africa, of all kinds of builds from all different countries. They come to stock up on goods ranging from clothes to cosmetics and sundries, even fake brands – probably collected from factories forced to compete with prices in the Guangzhou region – seeking out deals for everything. Gathering together enough to fill a shipping container, they send these miscellanies home and then flip them for twice the cost, with Guangzhou’s customs duty apparently accommodating such motley trade.
[...]
The individual buyers are supervised by North African or Middle Eastern controllers, and when night comes they gather at restaurants to carry out microloan-style finance meetings. There are several such restaurants near Xiaobei station, all observing Halal practice. Based on their appearances, the staff at these family-run establishments seem to be Chinese Muslims – probably from Xinjiang – who are recruited through ethnic networks. As night deepens, the restaurants become sites for the buyers to exchange information among themselves, with groups of men gathered around different tables, all speaking intently in any number of languages. (On one visit coinciding with the recent revolutions in North Africa and the Middle East, several men looked as though they were about to be sucked into a television relaying broadcasts from Al Jazeera.) All the services necessary to support their lives are concentrated in these enclaves. There are restaurants serving cuisine from the Congo and Nigeria, stalls with cheap telephone rates to Africa, mobile phone brokers, specialty barbers, vendors hawking cassettes and CDs of African music, and in some buildings that have been completely occupied by African tenants, the rare African-run intermediary wholesaler doing order-made customization.

To put it simply, Guangzhou’s African enclaves can be seen as an effect of globalization. African buyers seeking cheap products come to China, “the world’s factory.” Yet if globalization is generally understood as the reproduction of standardized conditions across the world – as with the buildings of Pearl River New Town and McDonalds franchises – the African enclaves present an exceptional case study of globalization.