Marketing to the bottom of the pyramid

[this short essay (long blog post) is inspired by and related to this video. You can engage one without the other, but they go together.]

Part 1: The bottom is important.

Almost a third of the world's population earns $2.50 or less a day. The enormity of this disparity takes my breath away, but there's an interesting flip side to it: That's a market of more than five billion dollars a day. Add the next segment ($5 a day) and it's easy to see that every single day, the poorest people in the world spend more than ten billion dollars to live their lives.

Most of that money is spent on traditional items purchased in traditional ways. Kerosene. Rice. Basic medicines if you can afford them or if death is the only alternative. And almost all of these purchases are inefficient. There's lack of information, high costs because of a lack of choice, and most of all, a lack of innovation.

There are two significant impacts here: first, the inefficiency is a tax on the people who can least afford it. Second, the side effects of poor products are dangerous. Kerosene kills, and so does dirty water.

Part 2: The bottom is an opportunity (for both buyer or seller).

If a business can offer a better product, one that's more efficient, provides better information, increases productivity, is safer, cleaner, faster or otherwise improved, it has the ability to change the world.

Change the world? Sure. Because capitalism and markets scale. If you can make money selling someone a safer item, you'll make more. And more. Until you've sold all you can. At the same time, you've enriched the purchaser, who bought something of her own free will because it made things better.

Not only that, but engaging in the marketplace empowers the purchaser. If you've got a wagon full of rice as food aid, you can just dump it in the town square and drive away. You have all the power. But if you have to sell something in order to succeed, it moves the power from the seller to buyer. Quality and service and engagement have to continually improve or the buyer moves on.

The cell phone, for example, has revolutionized the life of billions in the developing world. If you have a cell phone, you can determine the best price for the wheat you want to sell. You can find out if the part for your tractor has come in without spending two days to walk to town to find out. And you can be alerted to weather… etc. Productivity booms. There's no way the cell phone could have taken off as quickly or efficently as a form of aid, but once someone started engaging with this market, the volume was so huge it just scaled. And the market now competes to be ever more efficient.

Part 3: It's not as easy as it looks

And here's the kicker: If you're a tenth-generation subsistence farmer, your point of view is different from someone working in an R&D lab in Palo Alto. The Moral Economy of the Peasant makes this argument quite clearly. Imagine standing in water up to your chin. The only thing you're prepared to focus on is whether or not the water is going to rise four more inches. Your penchant for risk is close to zero. One mistake and the game is over.

As a result, it's extremely difficult to sell innovation to this consumer. The line around the block to get into the Apple store is just an insane concept in this community. A promise from a marketer is meaningless, because the marketer isn't part of the town, the marketer will move away, the marketer is, of course, a liar.

Let me add one more easily overlooked point: Western-style consumers have been taught from birth the power of the package. We see the new nano or the new Porsche or the new convertible note on a venture deal and we can easily do the math: [new thing] + [me] = [happier]. We've been taught that an object can make our lives better, that a purchase can make us happier, that the color of the Tiffany's box or the ringing of a phone might/will bring us joy.

That's just not true for someone who hasn't bought a new kind consumer good in a year or two or three or maybe ever. As a result, stores in the developing world tend to be stocked with the classic, the tried and true, because people buy refills of previous purchases, not the new.

No substistence farmer walks to a store or stall saying, "I wonder what's new today? I wonder if there's a new way for me to solve my problems?" Every day, people in the West say that very thing as they engage in shopping as a hobby.

You can't simply put something new in front of a person in this market and expect them to buy it, no matter how great, no matter how well packaged, no matter how well sold.

So you see the paradox. A new product and approach and innovation could dramatically improve the life and income of a billion people, but those people have been conditioned to ignore the very tools that are a reflex of marketers that might sell it to them. Fear of loss is greater than fear of gain. Advertising is inefficient and ineffective. And the worldview of the shopper is that they're not a shopper. They're in search of refills.

The answer, it turns out, is in connecting and leading Tribes. It lies in engaging directly and experientially with individuals, not getting distribution in front of markets. Figure out how to use direct selling in just one village, and then do it in ten, and then in a hundred. The broad, mass market approach of a Western marketer is foolish because there is no mass market in places where villages are the market.

The (eventual) power of the early adopter

Swami This gentleman is a swami, a leader in his village. He owns a d.light lantern. Why? He could fit all his worldly positions into a rollaboard, and yet he owns a solar lantern, the first man in his village to buy one.

For him, at least this one time, he liked the way it felt to be seen as a leader, to go first, to do an experiment. Perhaps his followers contributed enough that the purchase didn't feel risky. Perhaps the person he bought it from was a friend or was somehow trusted. It doesn't really matter, other than understanding that he's rare.

After he got the lantern, he set it up in front of his house. Every night for six months, his followers would meet on his front yard to talk, to connect and yes, to wonder how long it would be before the lantern would burn out. Six months later, the jury is still out.

One day, months or years from now, the lantern will be seen as obvious and trusted and a safe purchase. But it won't happen as fast as it would happen in Buffalo or Paris. The imperative is simple: find the early adopters, embrace them, adore them, support them, don't go away, don't let them down. And then be patient yet persistent. Mass market acceptance is rare. Viral connections based on experience are the only reliable way to spread new ideas in communities that aren't traditionally focused on the cult of the new.

This raises the bar for customer service and exceptional longevity, value and design. It means that the only way to successfully engage this market is with relentless focus on the conversations that tribe leaders and early adopters choose to have with their peers. All the tools of the Western mass market are useless here.

Just because it is going to take longer than it should doesn't mean we should walk away. There are big opportunities here, for all of us. It's going to take some time, but it's worth it. [More info: Acumen]