The major emphasis of Frugal Engineering paradigm is on
ensuring that organizations fully understand the needs of bottom of pyramid
customers and then devise their products/services to ensure customers can have access
to the products/services at minimum possible cost without comprising on needs
of target customer segment. However in my opinion, it is equally important that
products developed through Frugal Engineering are marketed to target customers
in the right way. We may be able to produce perfect product as a result of
Frugal Engineering but if that product is not marketed in the right way to the
target market, the product may end up as failure.
Branchless
banking industry in Pakistan is actually a practical example of successful implementation
of Frugal Engineering. In Pakistan, only 15% of the adult population has access
to conventional banking channel. The primary reasons for this trend are:
·
With around 62% of population[1] based in rural
areas, large portion of population is unable to access conventional banks
located primarily in urban centers
·
Conventional bank branches are not focused on serving
micro transactional needs of lower income classes.
·
Lower income class customers often feel
intimated by the up-scale surroundings they encounter at bank branches and
hence avoid using Banks
In order to
address the issue, government and business sector colluded to launch branchless
banking in Pakistan in 2009. Salient features
of branchless banking framework were:
·
Financial services were provided through network
of ordinary retailers through their shops located in communities where
potential customers resided. These retailers were signed up as “banking agents”
for branchless banking services. This ensured reach of service to target
customers; it also minimized cost of providing service by eliminating need of setting
up “brick and mortar” bank branches
·
Only basic financial services were provided through
branchless banking which were mostly used by target market.
Branchless
banking framework provided lower income class customers with a cheaper,
convenient way to get access to basic financial services. Since its launch in
2009, branchless banking sector has shown tremendous growth [2].
The success of branchless
banking in Pakistan is not only due to the quality of end service; its success
is also linked with how it was marketed to target customers. Branchless banking
was promoted as innovation in Pakistan and people who adopted it were portrayed as
trendsetters. This notion of trend setters sat well with target customer base
and helped in rapid uptake of service.
Compare this
with TATA’s Nano launch which on paper appears to be perfectly good output of
Frugal Engineering but which has failed to take-off as per expectations [4].
While this can be attributed to multiple factors, one factor that has
contributed to this has been the marketing of Nano as “cheapest car” which has
not fallen well with target customer base who did not want to be associated
with purchase of “cheapest car”.
Given these two examples,
perhaps going forward, literature on social innovation models should also focus
a bit more on appropriate ways to market social innovative products amongst
target customer base as this can have profound effect on uptake of the social
innovation. I would like to invite thoughts of others on this as well.
[1] http://www.tradingeconomics.com/pakistan/rural-population-percent-of-total-population-wb-data.html
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