I have been talking for a long time that the product should be designed keeping the target market in the mind. Today, India and China are seeing phenomenal growth and almost every company is trying to target these markets. But I see their marketing is still flawed because they want to sell their product at the same price as they sell in the western world. I disagree with this for two reasons. First, production cost is much lower in the developing markets. Second, most of the population of the countries is poor and still living on less than $2 dollars a day wages. So some of the companies can say that they comfortable even if they get the top 10% of the total market. They are targeting a very small segment of the total market. But this is not the right approach. Product should be designed keeping the needs and expectations of the market as whole, the bigger market. (Related articles: US $2500 People's car by TATA Motors - A need and Affordable mobile phone)
This is not to say that the companies should not earn profit, they should. Capitalist corporations are to make profit. But it can be done in a smart way and even by keeping the prices low. For example, Ginger Hotels and IndiOne are providing hotel rooms for under $40 where the luxury rooms are available for over $250 in the cities like Bangalore, India. They are providing all the basic amenities for the visitors but they are still able to make profit on this low price. Same thing has happened with the world’s cheapest car, Tata Nano. For product development for the masses, companies need to remember few points
1) Product should be of international standards (it should not be strip-off version like Windows OS for poor people)
2) Product should be at a much lower cost than the western product (I will suggest 80% price reduction)
3) These must be acceptable by the society in terms of the culture and the price
4) They should be scalable
Indian customers cannot pay the same price for the services as paid by western customers. As I discusses earlier they are want to have new generation products and services but they don’t have the money to buy them. Increasing income of the masses is not possible in near future (next 10-20 years) but reducing the price of the products is possible if the solutions are thought keeping the restriction in mind.
One of the ways of reducing the cost is bypassing the tradition way of doing things. For example in India many people break their bones while working or playing but they don’t time and money to go to cities and hospitals (hospitals are not so many their either). In traditional way, one needs to go for Xray and other checkups and then doctors applies the plaster that needs to be kept for a few months depending on the severity of the break. But these poor people don’t go to doctors and they have some local people who will apply some basic medicines (mainly turmeric power and lime) and hold the broken bones by pieces of bamboo. It cost almost one tenth of the cost of the traditional plaster and it works. I am not suggesting that always works but in most of the cases it works. Companies can provide the same solution with the help of technology after doing proper X-rays. Now digital X-ray machines are available so no need to have X-ray films either and it save money.
By inventing solutions that will help the customers in large number is good way of making money while helping the society.
This is not to say that the companies should not earn profit, they should. Capitalist corporations are to make profit. But it can be done in a smart way and even by keeping the prices low. For example, Ginger Hotels and IndiOne are providing hotel rooms for under $40 where the luxury rooms are available for over $250 in the cities like Bangalore, India. They are providing all the basic amenities for the visitors but they are still able to make profit on this low price. Same thing has happened with the world’s cheapest car, Tata Nano. For product development for the masses, companies need to remember few points
1) Product should be of international standards (it should not be strip-off version like Windows OS for poor people)
2) Product should be at a much lower cost than the western product (I will suggest 80% price reduction)
3) These must be acceptable by the society in terms of the culture and the price
4) They should be scalable
Indian customers cannot pay the same price for the services as paid by western customers. As I discusses earlier they are want to have new generation products and services but they don’t have the money to buy them. Increasing income of the masses is not possible in near future (next 10-20 years) but reducing the price of the products is possible if the solutions are thought keeping the restriction in mind.
One of the ways of reducing the cost is bypassing the tradition way of doing things. For example in India many people break their bones while working or playing but they don’t time and money to go to cities and hospitals (hospitals are not so many their either). In traditional way, one needs to go for Xray and other checkups and then doctors applies the plaster that needs to be kept for a few months depending on the severity of the break. But these poor people don’t go to doctors and they have some local people who will apply some basic medicines (mainly turmeric power and lime) and hold the broken bones by pieces of bamboo. It cost almost one tenth of the cost of the traditional plaster and it works. I am not suggesting that always works but in most of the cases it works. Companies can provide the same solution with the help of technology after doing proper X-rays. Now digital X-ray machines are available so no need to have X-ray films either and it save money.
By inventing solutions that will help the customers in large number is good way of making money while helping the society.
Luxury products exist becoz they cater to a higher need, a need that poor people don't feel.This need is not based on economic reasons but psychological. The need for exclusivity.
ReplyDeleteThe reason Oberoi Mumbai charges $500 for a room night is bcoz they're clear what kind of people they want to cater to, and what level of service they wish to offer. Similalrly, if one pays Rs.650 for a coffee in the lobby, part of it is the desire to be seen spending that kind of money.
It is not practical to always develop products the entire society can use. It goes against the general human need to be better than the rest.
Forgot to leave my name above :)
ReplyDelete- Harsha
Harsha,
ReplyDeleteYou are right every company targets to different market segment. If you see my examples they are from the company Indian Hotels that manage and own the Taj Hotels in India. I was trying to say that companies can still make profit if they want to target the lower income group but they need to be more innovative.
http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/7257347.stm
ReplyDelete