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Sunday, March 02, 2008

?How to do Business at the BoP? - Conference Wrap-Up

By Manuel Bueno

BoP Portada BoP BrochureAs Robert Katz posted last week, a BoP Conference entitled ?How to do Business at the BoP? was held on February the 27th in Madrid. The conference had pretty impressive speakers and visitors, since it was mainly directed at the corporate world.

Robert was the first speaker of the day. He kicked off by explaining the reasons for BoP studies and briefly went through the three main penalties suffered by BoP customers: price, quality and access. After giving an overview of business strategies at the BoP, he presented ?The Next 4 Billion? study and explained some of the most important conclusions that the study sheds light upon, such as the significant unmet needs in the ICT and Transport industries.

The second part of the conference introduced several BoP case studies from different industries, presented by members of the BoP companies themselves. The case studies were the following:

  • Adopem, a microfinance bank from the Dominican Republic, presented by its Vice President, Mercedes Canalda.
  • Procter and Gamble, multinational manufacturer of products including personal care, household cleaning, laundry detergents, and prescription drugs, which started working in BoP markets 5 years ago. They were presented by Beatriz Rodriguez, president for Colombia and Ecuador and responsible for BoP markets in Latin America.
  • Codensa, an energy retailer about which a post was done some time ago, presented by Commercial Director, Felipe Acosta.
  • TIA-Multiahorro, an Equatorian retailer, presented by IDE professor, William Jacome

All these four presenters offered their insights into what had been the most important factors for their respective businesses in allowing them to succeed. Factors common to all four cases are well-known to NextBillion.net readers: knowing the customer, accessible products, products and services adapted to meet BoP needs and with a pricing structure that allows purchasing by BoP customers.

Finally, Juan Luis Martinez, professor at Instituto de Empresa, gave several take-away messages about the BoP that I feel are worthy of delving into.

Firstly, the BoP is not a segment, it is a market unto itself. This means that the BoP market has within itself several different segments and niches and thus different strategies can be successful depending on the targeted segment.

Secondly, to enter BoP markets one should turn on its head the standard analysis done by many firms in western markets. Firms should start by analyzing the capacity of target customers to pay, then check which margins they need and finally decide on the target costs.

Thirdly, quantitative information, such as that provided in "The Next 4 Billion" is important, but it is at least equally important to develop a feeling, an intuitive understanding, of the BoP customer. Thus, no BoP firm can be efficiently managed from western markets, regardless of the quality of the available data. This is something that Moses, pointed out in one of his posts recently.

Juan Luis also gave out a copy of his recent article published at the Business Strategy Review on Autumn 2007 (covered in one of our posts), a long interview to Codensa?s CEO and a study about Mobile Phone Financial Services that I finished last month and which has been published by IE as a Teaching Note. I had not been able to post it here yet, due to bureaucratic issues and legalese but I will do so very soon.

Overall, one of the most enjoyable parts of the conference were the debates that ensued after the presentations, touching such varied issues as the new role of NGOs as corporate partners at the BoP level, environmental concerns with BoP economic growth or the difference between Fair Trade products and the integration of BoP individuals into the value creating process in BoP firms (each worthy of a post by itself!).

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