Dave Ferguson

Beyond Opinion: Understanding Consumer Demand in Developing Countries: A March 7 USAID forum will showcase new techniques

We’ve all heard the stories: the subsidized water pumps that decay into oblivion, because no one in the village actually used them. Or the ultra-cheap lamps that could illuminate millions of poor households, if only consumers would start buying them…

These failures have been told and retold by generations of development professionals and social entrepreneurs. But why do they still happen? Why do pro-poor technologies fail to achieve scale — even when they offer proven benefits?

Part of the problem is that we aren’t getting reliable information about what low-income families actually want. And as a result, we make lots of assumptions.

At USAID’s Office of Science and Technology, we have been thinking hard about this puzzle. And we have come to realize that we probably need better tools to understand consumers at the base of the economic pyramid.

On Friday March 7, we will be showcasing some very innovative techniques for measuring consumer demand in low-income communities. You can join us for the event, which will be held at Georgetown University in Washington, D.C.

But exactly why do we need better tools?

One reason is that poor households are often priced out of the market for new technologies. They don’t have the assets or income to invest in a new water pump or solar lamp. And without competitive markets, it is difficult for people to signal their willingness to pay. So we never know exactly how to price a product, or how to design for affordability.

Some will argue that you can just ask people, in market surveys or focus groups, how much they would pay for a given item. But as the saying goes, actions speak louder than words.

Here in the U.S., we have sophisticated data streams and analytics to measure consumer preferences. We know exactly how many units of a product are sold or returned—and at which price. We can use auctions, like ebay.com, to directly observe peoples’ willingness to pay. And if a product isn’t selling in the marketplace, it gets pulled off the shelves. We know how to figure out what “works” for the consumer.

In the absence of reliable information about the choices people make it is difficult to design a desirable product or service.

The upcoming event will describe innovative approaches being used to understand the demands and desires of poor households, including tools like behavioral experiments, sensing devices, ‘big data’ analytics, and even improved qualitative approaches. We will hear from a handful of start-ups, social enterprises, and researchers that are using these methods.

The day is organized by the Development Impact Lab (DIL), an innovation network headquartered at the University of California, Berkeley. DIL is one of seven university programs supported by USAID’s Higher Education Solutions Network. The Network harnesses the intellectual power of great academic institutions to solve some of the world’s most challenging development problems.

Dave Ferguson is Deputy Director of USAID’s Science and Technology office.

product design