There are a number of new products being designed for the world’s poorest populations.
But almost all of these products are only offered by nonprofit organizations. Would it be possible for businesses to offer these products instead? Would this be more beneficial for the business and the consumers? Perhaps a business would know how to reap more profits and use these profits to provide a wider implementation?
I am curious!
Many of them can be seen here at JFrog
In my past experience working with these kinds of projects, business creates and sells the “product” but they sell to government groups, who become the distributor. Usually the only way that the business can make money is to sell to a very few customers (government groups) in very large volumes.
Not saying there could not be a new business model. Just giving the past one.
yes, P+G has a whole business model around single use personal hygine packaging. You can’t afford a whole bottle of toothpaste or shampoo but have an important event to attend…they sell qite well in rural India as I understand.
In response to Tim’s comment.
Why do companies make more money when selling to governments rather than directly to the people? Is this because taxes pay for the product? Or maybe its because the government knows how to distribute the product more effectively? Or maybe it is because of something else?
Because the governments pay for the products and give it to the users. Remember we are talking about poor people.
My experience was creating a non-spill infant cup for a company. They sold it to WIC (Women Infant Children) in different states who then gave them to poor mothers. The state WIC’s would order a million at a time. Big volume, quick order.
Ok I understand.
Besides P + G, does anybody know of any other businesses that sell directly to the people rather than the government, or perhaps has a different business model altogether?
I recall OLPC (one laptop per child) were offering a “buy 2 donate 1” deal, meaning you payed $200 for two laptops and received one, and the other one was donated. I don’t know how that went or if it even happened.
yes, P+G has a whole business model around single use personal hygine packaging.
I don’t know where it is anymore, but I had a “single serving” cigarette package; a plastic tube with tight fitting cap, labeled for 1 cigarette. I think it came from Mexico.
As far as marketing to the poor, I think it takes care of itself. There are a couple of mom-and-pop gasoline stations in our area that sell single cigarettes … it’s not legal of course, but apparently there are enough people who can not afford a pack of cigarettes and a meal. I quit twenty years ago and don’t know what a pack costs anymore… $5-6?
How does one tell “the poor” that they need something? Food, Shelter, and Clothing are needs… they’re self-evident. How do you “price” products for the poor? How does an individual qualify to purchase products for “the poor”?
Just playing devil’s advocate.
edit - you mentioned a number of products aimed at “the worlds poorest populations.” What are they? Links?
I’m refering to “absolute poverty” of an income of $1-2 per day without adequate fullfillment of basic needs. Some isolated populations may recieve this same income or less but do not fall into this category because their basic needs and quality of life are fulfilled independently.
Thanks for the links Chris… but I am at a loss.
You asked,
Would it be possible for businesses to offer these products instead?[for the world’s poorest populations]
Just how do the absolutely destitute people of the world acquire these products without the benefit of government or private donation? I would expect that the percentage of income allotted to “discretionary spending” by the very poor doesn’t include much more than the basics of life.
Don’t get me wrong, there is a real need here, and I’m always happy to see concern, and interest … … but I’m just not sure you have a complete grasp of how “economics” work. Manufactured products are not cheap to make; someone has to pay for them.
Am I missing your point?
I have to say, I think the answer is no if the business is located outside the developing country in question.
Cost of labor & means of production are too high. I think this one is pretty obvious. I remember seeing a documentary on a basket weaver in rural Japan from the 1990’s (!). He didn’t really have “stock”, he would weave a basket according to the needs of his client. He would charge something incredibly low, but from what I could gather, he had no overhead (owned his home, seemingly paid no taxes, ate only locally grown rice and fish he would catch). I’m sure a lot of those $1 a day people live a similar way.
Capital requires a 3% compound growth rate. That means that a capitalist in Kansas that has $100k needs to find a way to add $3000 to his capital for next year. A capitalist in Kenya with $10 only has to find a way to add $.30.
I’m with 914, I don’t think so. Businesses are all about making money. That’s what poor people do not have, many have to borrow just to live at the base level. Unless a business is going to be a charity and just spend money on something with no return on the money, they won’t do that. They want to somehow sell to somebody at a profit.
The only way they could do that is say if they make a killing with one product aimed at the luxury market and then decided to not be greedy and instead throw away half of those profits in order to make some charitable products for the poor where they’ll get no obvious financial reward. That’s the only way I could think of. And then they’d only do it if they thought they’d get better press and thus more paying customers by doing that. So it’s still just a money making strategy. They’re businesses, not charity.
Does this count?
They make shoes for major lifestyle markets like the US/Europe and for each pair they sell they give one pair away to a poor country. More than charity their success is obviously in part because of their philanthropy, not in spite of it.
All depends on your business model I suppose, but in the end the bottom line of a business plan and profit is key if you want something to be sold by “business”.
R
Perhaps you have answered my question in one specific way. If the poorest people of the world have absolutely NO extra money as you suggest, then businesses obviously can’t distribute directly to them. Although another person below has given the example of the business model of TOM’s shoes, of which is seperate from the government and non-profit organizations. This is precisely what I’m looking for. I’m looking for business models that are (once again) seperate from governments and non-profit organizations.
I definitely think profitable products can be developed for the poor from a pure cost of manufacture standpoint. The biggest problem is generally the other pieces in the business case. Distribution is one huge issue - most developing countries don’t have well developed markets. Infrastructure is poor, so getting your product on shelves is problematic. Advertising has limited reach, so you’re dependent on word of mouth. Licensing is opaque and often requires bribes. And if you find a way to figure all that out, you still risk having your product copied (it is profitable after all) in an environment that doesn’t offer much legal recourse.
Yes, these are all probable challenges. And additionally, there might be the challenge in some regions of dealing with organizations of crime of which could be crippling if not dangerous to a business.
In terms of distribution and manufacturing, perhaps manufacturing facitilities could be constructed near the communities that are primary consumers of the products? This way there aren’t high transportation costs and it also gives people jobs. These newly created incomes of the workers only injects more purchasing power into the local economy further allowing people to buy more of the product.
This way there aren’t high transportation costs
And the raw materials are coming to this manufacturing facility how?
And who is funding the construction of this “manufacturing facility”, and with what expectation? Profit? Personal redemption?
Perhaps it is less expensive to transport raw materials farther distances than it is to transport finished products. Or perhaps some products can be made with local materials. The funding for construction of manufacturing facilities usually comes from a business whether it be a contractor or not, unless the construction is subsidized by the government. And usually businesses operate under the expectation of making a profit. I highly doubt that a business would build a manufacturing facility to redeem themselves (from whatever it may be), unless I am misinterpreting what you are asking.
