Not everyone is going 3G

For the past week I've been having fun with my new BlackBerry phone, which is pretty much an extension of my life. I couldn't live without instant access to corporate e-mail, to my private gmail account, being able to blog on-the-go, taking a picture of a product I just saw on a trip or googling anything that comes to mind while waiting for plane. On the other hand, with the amazing rise of lower-income consumers in emerging markets, like Brazil (which now has over 110 million mobile users), there has to be a great market for a very low-cost handset. I was happy to read that an operator from India called Spice is coming out with a $20 mobile phone, which is... well, just a phone. Although 3G capability is where the market is heading, for thousands of small business owners in Karachi or cab drivers in Manaus, having basic access to a mobile phone service means staying in business. It will be interesting to see how, while technology provides means for various categories to go high-end, there will always be opportunities for simple hassle-free products and services for a fast-growing lower-middle class in emerging markets.

The challenges of reaching the lower-income consumer

Every marketing professional I've spoken to this year has told me about the challenges of reaching lower-income consumers. Brazil is witnessing the phenomenal rise of the C/D socio-economic demographic, clearly one of the main drivers of GDP growth.  There are a few companies that are doing an outstanding job in making a real connection to a segment of the population that is finally coming of age from an economic standpoint.  Casas Bahia - Brazil's largest furniture and appliance superstore (and the country's #1 advertiser) - is one of the best examples of a company that knows how to reach out to the lower-economic consumer.  This week's Veja magazine brings a fantastic interview with Michael Klein, the genius behind the successful model.  One of the most famous campaigns from Casas Bahia asked consumers to 'name the price'.  That is, store sellers would ask how much a person was willing to pay per month for a stereo equipment, for example, and then they would calculate how many installments would be needed.  This is a company that understood before others that monthly disposable income for many consumers is more important than the total price. A long installment plan is the only way many consumers can afford to buy. The interview brings some amazing insights.  Mr. Klein explains how C/D consumers have evolved over time and how they are demanding products with strong brands instead of shopping only for low prices. Or how many of the store's customers prefer wardrobes with mirrors on the outside because they create a larger feel for bedrooms that are typically very small.  He also said that their best-selling category is mobile phones.  Because many of his customers live in communities with no public phone service, the mobile phone is the only phone.  Therefore, these customers are not willing to settle for the basic phone.  They want a cell phone with extra features.

I became a fan when we came back to Brazil last year. After shopping around for a washer, dryer and refrigerator, we ended up buying at Casas Bahia.  Prices were great, the salespeople were incredibly knowledgeable and the items were delivered exactly when we agreed.  Last week, my wife had a stove delivered to her assistant as a surprise birthday gift.  The next day, the assistant said how excited she was to see the Casas Bahia delivery truck at her door.

For those targeting lower-income consumers, this is a case study to learn from.

Wood-burning Stove that Produces Electricity... a hot idea bringing comfort for isolated families in the Amazon Region

Brazilian mechanical engineer and researcher Ronaldo Sato spent 7 years developing a hot innovation (hot... literally): a wood-burning stove that also produces electricity. The first prototypes generate enough electricty for five light bulbs and a TV set. The project, called 'Geralux', was designed to save 50% firewood versus conventional stoves and does not release ashes in the environment. The energy produced by the stove is stored in the same type of battery used in automobiles. The innovation is very practical because it can generate electricity, for example, for a public school while the cafeteria lunch is being prepared. After several trials in the Xapuri region - a rubber tapper settlement - a final prototype is ready for roll-out. The State of Acre has announced plans on using this innovation for 20,000 families who live in isolated communities in the Amazon region. A valuable lesson that even an old product like a wood-burning stove can be recycled to become something entirely new.

The Little Car That Might Change The World...

Every once in while a disruptive innovation comes around and completely changes the status quo. This month, it happened in the auto industry. India's Tata Group unveiled the Nano. The innovation isn't a new hybrid technology, the innovation is all about the value proposition. The Nano will be sold for only US$2,500... a price tag that will certainly revolutionalize the auto business in India, but it may also generate a major disruption beyond the Indian borders. Tata is tapping into the millions of consumers in developing countries starving for the comforts and conveniences that many of us take for granted. What I love about this base-of-the-pyramid story is that this affordable car for the developing world is not being produced by GM, Toyota or Ford... it was designed and is being produced by a company from India. 

The year has just begun... but I believe that we will look back and consider this innovation among the most significant of 2008.  I hope we will see more innovation like this coming from BRIC countries.