STRATEGY 46 BUSINESS STRATEGY REVIEW ISSUE 4 – 2010 Would your company like to add thousands, if not millions, of new customers? Jamie Anderson, Martin Kupp and Sandra Vandermerwe believe that serving the world’s poorest people in developing markets can be both profitable and socially rewarding — if it’s done right. As it turns out, what’s good for business in developed countries also applies to emerging markets. To date, few irms have used a customer-focused approach to serve the world’s poorest people — a full two-thirds of the world’s total population at the so-called ‘bottom of the economic pyramid’ (BOP). Much more prevalent has been a mass-produced approach that assumes that the poor in developing economies can only afford basic, cheap products emphasising functionality. In this classic product approach, often little more is done than push existing or barely adapted products onto shantytown dwellers and rural villagers. Consequently, real value that opens up new market spaces for GOOD BUSINESS MAKES POOR CUSTOMERS GOOD CUSTOMERS companies and produces longer-term value for the customer has been lost. Our research reveals that contemporary enterprises that have taken the leap to the customer- focused way of doing business in the developing world grow markets and their stake in them, outperforming traditional enterprise and industry product approaches. The crucial steps in this approach are becoming better known but deserve much more attention. Articulate and define the new market space Deining the market space is the irst step towards achieving customer focus in developing markets. The market space articulates the desired outcome for customers, which directs strategy from discrete products and services, easy to copy or marginalise, to outcomes. It uniies the parts of an offering across the company/division/ industry, which produces a result in which a company’s core products and services may be one small part. When Zain, Nigeria’s second largest mobile network operator, began to explore the needs of the poor, the irst action of the company’s COO was to admit that he and his management staff knew almost nothing about the behaviour and activities of low-income rural customers, a segment that represented more than half of its local market. To overcome this lack of knowledge, the irm sent project teams into some of the country’s poorest communities, and this experience led to revelations about the needs of low-income consumers. Zain’s ethnographic research identiied a range of activities undertaken by low-income Nigerians — before, during and after accessing telecommunications: – Before Zain’s research revealed that many rural Nigerians were travelling up to 50 to 80 kilometres to access telecommunication services — not because there was not a network coverage in their area but because handset ownership was at less than two per cent of rural consumers. Consumers had very low levels of understanding about the correct costs of mobile telephony or even how to use a mobile phone. – During Pay phones were not available in the smallest villages. THE BOTTOM OF THE PYRAMID