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‘frugal innovation’ – why cheaper, simpler products are ideal for emerging markets

24 Aug

Think “innovation” in the West, and most likely, you’ll be thinking of groundbreaking new technologies, cutting-edge design and a high price point to match – but for your business to succeed in the promising field of emerging markets (which includes countries such as Russia, India, China and Brazil), you need to turn your preconceptions on their head. “Frugal innovation” refers to the process of reducing the complexity and cost of a product, which may seem the exact opposite of what Western businesses have been trying to achieve for more than fifty years now – but focusing on improving the functionality and simplicity of a product, rather than putting a premium on sophistication and variety, is perfect for appealing to developing countries.

Emerging markets have traditionally been overlooked as low-cost production hubs, but they’re a fantastic, ever-increasing source of demand – and by appealing to these overseas consumers, you can rapidly grow your business in an exciting new field. India has a middle class of some 267 million strong, with numbers expected to more than double to approximately 547 million between 2025-26; Asia overall is expected to have 900 million middle class citizens by 2020 and Africa has the fastest growing middle class in the world – can your business afford to ignore these numbers? Yet the spending power of an emerging market’s middle class is still much lower than that of Western middle classes – and that’s where the importance of frugal innovation comes in.

So, with such incredible potential for growth and profit up for grabs, how can you succeed in this exciting field? Can you adapt existing products for emerging markets? How can you reduce costs and add value to appeal to this demographic, and what strategies can you employ to ensure your approach is the best? First things first…

Affordability Is Everything

Price point is important with any product, but when it comes to frugal innovation, it should be your key concern. By understanding what affordable means to your target customer, you can better suit their needs – and what seems good value to you may seem laughably expensive in, say, Nigeria. Do your market research, and try starting your development process with a price point already in your mind – this will limit the temptation to begin adding unnecessary features. And simply redesigning an existing product and removing some “frills” may not work, because…

You Need to Know Your Customer Inside Out

Not only will this help you hit on the right price point, it’ll make it easy to create a product which adds value for your consumer. Understanding how your customer lives, the challenges they face and how they will use your product is everything when it comes to frugal innovation – for example, when Tata Chemicals came up with Swach, an affordably priced water purifier aimed at emerging markets, they understood that most of their target market would not have running water in their homes, or even electricity. They designed their product so as to work without these two things – while also keeping it the lowest-cost water purifier in the world. Only by understanding your customer’s needs can you meet them – so research, research, research!

Frugal innovation represents an exciting new challenge for Western companies, and by entering the market early, you’ve got an opportunity to really establish your product as a market leader. And it’s not just for abroad, either – since the global financial crisis in the late 2000’s, Western consumers have been showing increased interest in no-frills solutions to meet their needs, too – so forget about high-end demand, and esoteric innovation. It’s time to go back to basics – and simplicity, functionality and affordability are the way to go.

By ensuring you’ve a full understanding of the market you’re planning on expanding into, you can ensure your product is primed for success – and just because you don’t have an office in Mumbai or speak fluent Marathi doesn’t mean you can’t grow your business abroad. By consulting with experienced advisors, you can gain insider insights into your prospective market which will smooth the path to success – leaving you free to focus your efforts on developing the best possible product for launch.

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