Only if he sees the need

It amazes me how senior managers of world’s largest corporations sometimes talk and think. Recently I was visiting a leading software company on the pacific coast and was talking to one of their senior managers responsible for gaming. He said that their pricing strategy in India failed. “We were trying to sell these consoles at the same price that we sell in US, at around $250”. In another visit to one of the largest computer manufacturing companies, a senior executive said, “One of the things that we are battling with is to find the right channel to sell thru in India”.

When I meet such people, I really feel sorry for them. It is not that they are not getting answers to their questions, but the fact is they are chasing the wrong questions. Chew on this…

Last year, of all the motorcycles that were sold in India, more than half of them were sold in rural. The cheapest motorcycle sold in the Indian market place is priced around Rs. 35,000 or $700 at today’s exchange rates. Rural farmer or trader has realized the value of owning a motorcycle. He understands that a motorcycle helps him satisfy the needs of transportation given the lack of good public transportation. Other than that it helps him in his business. Occasionally, he drives to the nearby town 30 miles away and loads it with sometimes close to a ton of products, say seeds and fodder. While he is in town, he buys some toys for his kids something to please his wife and then fills gas in his tank and is back home by evening. On some Sundays, if he has time and money, he loads his family on the motorcycle and they go for a movie. With an annual income of around Rs.100,000 ($2000), he took a loan and invested in a motorcycle as he understands that it serves as means of transportation primarily but also helps him in his business needs and sometimes fulfils his needs of entertainment.

A computer comes at $500. Instead of worrying about which channel to use to sell a computer, executives should worry about how to make a computer as important as, let’s say a motorcycle, for a rural Indian. If you have cracked that, then you are selling as many computers in rural India as you sell in United States of America. Like a motorcycle serves the need for transportation, a computer serves the need for information and communication. If the same person in the above example knew that instead of travelling 30 miles east, if he travelled 40 miles north, he would get a better price on seeds and save $10 in the process, he would be very grateful. If he knew that a computer can help him get this information, then it turns out to be as useful as a motorcycle. In stead of burning gas and spending on four tickets to watch a movie, he could watch it at home with his family renting a DVD, satisfying the need of entertainment, at a much lesser price.

I don’t buy the poor infrastructure logic that gets raised each time you talk about computers in rural India. The reason that motorcycle prospered is precisely because of poor infrastructure and public transport. If there were a bus every 20 minutes to a nearby town, why would you need a motorcycle? If the town was 3 miles and not 30 miles away, why would you need a motorcycle? Computers will work and should work despite poor infrastructure. In fact, that is the reason for success not failure.
If the farmer drives 30 miles of pot holed roads to reach the nearest town to fill gas in his tank, he could travel 10 miles to charge the battery of his computer during times when he needs it and there is no power! If he takes a loan for $700 product, he could for a $500 one. These obstacles can be overcome, if he sees the need.

Have the corporations been able to ‘sell’ the need before selling the product or struggling to find channels? No matter how rich an Indian is, he would scorn if his child asked for a $250 video game as an Indian parent has not been ‘sold’ to the idea of a video game. Understandably so. The fact that some video-games do improve your child’s lateral thinking, team building and leadership skill, has not been communicated. The fact that video games could be great family times together and perhaps one of the few ways a father and teen aged son can have uninhibited interaction, has not been sold. Forget video games, technology firms have not sold the idea of internet and computers as a result some Indian parents scorn net browsing as well. This may strike you as odd, but majority of Indians are buying computers not because they need it, but because the other family has it. (As happened with mobile phones initially) But if the need was sold, people would buy in hordes. One could argue that mobile phone companies never sold the need. But then the real revolution in mobile phones happened in India only when Reliance offered them at Rs.500 ($10). Till then it was still a top 5% population product.

Computers are not selling for Rs.500 or even Rs.5000, at least not in the near future. The issue here is not the price as demonstrated above. If a farmer can afford a $700 product, he can afford a $500 one, only if he sees the need.

Folks, there is money to be made at the bottom of the pyramid.