Companies Targeting The Poor Yet Retaining Profits

By: Hilleman Laboratories on September 05, 2016

“Innovation is a change that unlocks new value.”

-  Jamie Notter

Innovations in today’s time have paved way for the Multi-National Companies to reach out to people, catering to their needs and making their life simple and easy. It is so phenomenal that companies who sell products targeting customers at the poverty line still manage to make profits despite selling the products at very lower cost.

In order to understand the different facets of such companies’ marketing approach,  Amrit Gill a sophomore, majoring in Business & Finance at the University of South Florida completed a project on a very distinctive area of interest- ‘How companies retain profits while selling goods at a cheap price to consumers at the poverty line’. His initial research showed that such companies face difficulties finding customers in the starting, but after changing their business model and tactics they are able to become profitable. Such companies manoeuvre helps develop a case for other companies to analyze the consumer behavior and compeer their business and marketing approach.

1.       Green Light Planet- Sun King

The product originated in Orissa, is made by two Indian and one American college student in order to improve agricultural productivity, but the villagers later utilised it as a source of electricity. It’s estimated that around two billion population of the world lives in darkness and this product comes as a life-saver by illuminating their lives with bright light. The product is an alternative to the pollution causing kerosene lamps and also reduces the risk of catching fire. The company has sold around 3,000,000 lamps with 6,000 active sellers across India, Kenya and Uganda. The product will be able to add up to 30,000 sellers.

Nearly 20% of the Indian population do not have access to electricity and dwells heavily on kerosene lamps. Kerosene is one of the sources for global warming and also responsible for lung cancer, strokes and other respiratory diseases. With the Green Light Planet’s product Sun King coming into picture will help in reducing such issues. The development of this product took approximately 3 years. The initial investors in this product were from ZS Associates.

 The marketing strategy of Green Light Product was different. They tried to convince important people in the villages such as teachers, police and other officials to gain their trust, as the villagers had a bad experience with the Chinese products of such kind breaking down at a very early level of usage.

After their products were successful among few people, they encouraged their customers to spread its importance by Word of Mouth. In order to gain more trust they partnered with an NGO who helped them in adding more customers to their bucket.

In the near future the company plans to expand with adding more products such as cooking stoves and water filtration systems, once they are able to reach the saturation levels. The company’s projecting a 5-7 year sustainability programme, then depending upon their market they will expand on the product range.

2.       Mpedigree

An organization started by Bright Simmons, an entrepreneur who wanted to terminate counterfeit drug production in Ghana. The company produces labels in order to regulate the sales of counterfeit products. Mpedigree initially worked with pharmaceutical companies, but has now expanded to electrical products, clothing, cosmetics and seeds used in agriculture.

For developing the product, Simmons hired engineers to develop software that creates unique 12 digit codes, which is printed on a label in China costing $0.09 per unit. The software was used to store the codes in a database, in- case when a customer texted the code they were able to receive instant counterfeit verification. It came as valuable tool for manufacturers as they were able to get notifications if the code had been used more than once.

Pharmaceutical companies, venture capitalists, and regulators for future investments/partnerships did not take Mpedigree seriously, because it was a small nonprofit organization and charities were not much successful in Ghana. In 2009 Simmons transformed his organization into a for-profit social enterprise, he made calls until he obtained a meeting with Hewlett Packard to obtain cloud servers for data storage and partnership. HP saw initiative in the rising mobile industry in West Africa and East Asia. In December 2010 HP announced that it would run the data that host Mpedigree’s code, which saved the company 10 million dollars or the infrastructure costs. The pharmaceutical world started taking the company seriously when Nigeria’s food and drug administration endorsed Mpedigree.

Mpedigree is developing a system, in which the customers and the seller can contact each other directly in order to ensure customer satisfaction. They are in the process of presenting the idea to various telecom mobile carriers in India and Nigeria.  The company has expanded to the cosmetic and textile industries and is on the verge of signing 7 new deals, 5 in Ghana and 2 in Nigeria.

What Hilleman Laboratories can do?

Hilleman laboratories can increase the transaction size by using upselling. They can increase the total number products sold to a consumer by selling upgrades or additional accessories. The organization should negotiate long term supply deals in order to buy the products for lower prices and create better terms with the supplier.

The organization can incorporate efficient promotion by effectively using promotion expenses to create as many connections as possible. This will help increase sales volume, which can lead to a larger profit margin.

There is also a need to reduce cost of production which can be done by reducing energy consumption, and taking precautionary steps to prevent accidents. The organization should focus on avoiding overproduction and reducing waste.