In this article we will discuss about:- 1. Rural Marketing Strategies Adopted by Companies 2. Methods of Reporting that will help Rural Marketing Efforts 3. Future.
Rural Marketing Strategies adopted by Companies:
Companies are following various strategies to serve rural markets.
These are described as follows:
1. Product strategies
2. Pricing strategies
3. Cost strategies
4. Distribution strategies, and
5. Promotion strategies.
1. Product Strategies:
This article describes some of the common product strategies that companies have used to penetrate rural markets. These range from selling small packs, innovative product design, sturdy products and giving names that are more acceptable in rural India.
i. Small Units:
Keeping affordability in view, products have been made available in small packing in rural India, which also results in low cost. Offered at a convenient price point, such packs also encourage trial purchases. However, this strategy also necessitates change in supply chains as retailers have to be serviced more often and supplied in very small lots—say, six or ten sachets at a time. This strategy has been used in case of shampoos and biscuits. However, in products not bought in villages, large packs are preferred as they help in reducing trips to the town to buy them.
ii. Product Design:
Designs need to be modified to suit rural habits and lifestyles. Electric gadgets, for example, must sustain irregular voltage and long periods of electricity cuts. The Godrej ChotuKool is an example of complete product redesign for rural areas. “Rural consumers show a distinct preference for bright colours,” write Kotler et al. (2009), which is used by products such as Lifebuoy and Tiger biscuits. They give the example of Hindustan Latex Ltd, which found in a survey in Uttar Pradesh that rural households preferred bright colours. It then decided to re-launch its Rakshak condoms in bright yellow and red colours as these were considered the colours of festivity.
iii. Sturdy Products:
Products need to be redesigned for ruggedness, which are more suitable for rural markets. They must not only be sturdy but also look capable of withstanding rough transportation and usage. Very often products are required to be transported in carts over bad roads so that they survive the ordeal. They must also withstand usage by several family members.
iv. Brand Name:
People in rural areas now show brand name awareness. However, companies need to use a name that strike a chord with rural audiences. For example, Shaw Wallace named brands as Shabnam, Josh, Janeman and Rangeela to capture rural markets. Jha (2014) writes that portrayal of recognizable logos on the package assists in brand recognition and recall. These widely understood symbols help rural customers in making brand associations and generating recall.
2. Pricing Strategies:
Pricing for rural areas requires innovative approaches. The price points have to be kept in mind while, at the same time, not compromising with the utility and sturdiness of the product. While it is true that rural preference for branded products is increasing, companies must avoid the tendency to introduce frills and increase the price. Very often rural consumers prefer basic products at good prices.
Some of the pricing strategies that can be followed are given below:
i. Low-Unit Packs:
Companies have to avoid unnecessary frills as affordable packs have a better chance of trials and gaining acceptance. Many rural consumers at the lower end of the economic lifestyle, such as small and marginal farmers and labourers, do not purchase large packs. Cavinkare’s Chik shampoo became the trendsetter some years ago when it introduced shampoo sachets priced at Rs.0.50.
This helped the product succeed in rural and BoP markets. Godrej sold its Expert hair colour and Nupur henna at Rs.5 and Rs.10 price points. HUL introduced Pepsodent toothpaste in a sachet of Rs.4, while Pepsico introduced its Kurkure brand in packs of Rs.3 and Rs.5. Uninor, Vodafone and Tata Docomo provide daily recharges of as little as Rs.5. Such low-unit packaging is convenient for rural customers and results in high levels of trial purchase.
ii. Packaging:
Rural users reuse packaging for storage and price in the advantage gained from it. Reusable packaging is very popular as the boxes are used as containers to store goods. That is why, packaging must be rugged. Another reason for it is that products are required to be transported over long distances, over bad roads.
iii. Value Engineering:
Value engineering refers to the technique in which costly raw material is substituted with the cheaper materials, without sacrificing the quality or functional efficiency of the product. Companies follow this technique to create products that serve the purpose they are meant for, but at considerably lesser costs.
3. Cost Strategies:
Cost is a great deterrent for a rural marketing plan. Marketing managers struggle to control costs in serving rural markets—large distances, small orders, lack of economical transportation, non-availability of warehouses, excessive spoilage and damages. Each of these adds to the cost. It would not be wrong to compare the cost model for rural India to organizing an Indian wedding—budgets can quickly go out of control and unforeseen expenses may arise suddenly. Rural marketing also need long-term interventions and their results are difficult to measure in the short term. Managers used to serving urban markets, find it difficult to anticipate the many costs in reaching villages.
Identifying consumer clusters calls for heavy expenses as data is not available and has to be collected personally. Rural India does not have data such as Indian Readership Survey (IRS) or Broadcast Audience Research Council (BARC), which can provide some basis for a marketing manager to work with.
Apart from information cost, logistical costs are a major component of rural marketing costs. The cost of acquiring customers is also high, according to The Economic Times (2015). If the cost of acquiring an urban consumer is Rs. 100, the acquisition cost comes to Rs. 180-200 in a rural market, since BTL techniques must be used. This becomes uneconomical if the company is selling a low-cost stock keeping unit (SKU) since profits do not justify the cost. This is the reason that most rural marketing plans fail.
Several strategies are suggested to keep costs under control in rural marketing:
i. Target One District at a Time:
Instead of rolling out an all India rural plan, companies should approach one district at a time. These initiatives require full commitment of the company. Since each district is different, it is important to focus energies on one district before adding more areas.
ii. Avoid Dependence on Third Parties:
A company must build its own dedicated team to tackle rural marketing. A third party can be involved only when the company wants to scale up. In this way, it can create benchmarks for costs and potential benefits.
iii. Do not Extend Urban Strategies:
The common mistake made by many companies is to replicate urban strategies in rural areas. This does not work. Rural areas require their own pitch, advertising and distribution. These must be worked out for each specific area. That is why, it is important to treat each area as distinct.
iv. Find Data for Each Village:
A lot of factors will have to be considered to assess market potential. Some of the factors to consider in each village are: penetration of TV and mobiles, number of school-going children, state of the economy and social exclusion and connectivity to the highway. Consumer behaviour has also to be looked at closely. For instance, if the objective is to introduce cleaning products in a village, it would be important to see how many people use ash for cleaning dishes and then progress to those using counterfeit bars.
v. Use BTL Techniques:
Instead of looking for advertising media, which is difficult to find in villages, companies must demonstrate products via live skits or kiosks in fairs, haats (weekly markets) and gatherings. For example, Godrej Consumer Products monitors brand awareness levels pre and post the activity to determine whether to scale it up or not. Keeping track of the cost per contact and keeping a targeted payback period helps as well.
vi. Work with Local People:
Companies should work with local people who can be helpful in providing reach and service. For example, after struggling to increase penetration in rural areas for three years, Tata Sky started identifying local repairmen with whom they could partner. The local repairman, usually called Sonu, became the local contact for the company.
The repairmen were volunteers and not permanent hires with Tata Sky, so the distribution worked on a variable cost model. The company trains the repairmen but saves on infrastructure cost, because it does not have to set up offices in villages. This is a good way of keeping costs in check.
4. Distribution Strategies:
Distribution to villages requires new and innovative approaches. Companies have to figure out how to reach villages—through existing wholesalers or establishing dedicated channels.
In doing so, it will have to consider various options as described in the following:
i. Direct Distribution or Appointing Sub-Dealers:
One of the major decisions a company has to take is whether to distribute through existing channels and wholesalers or establish a direct rural channel. Though extending the reach of existing dealers is much cheaper, the company is limited in terms of penetration—dealers will only supply at places where they incur minimal cost. On the other hand, direct channels will help reach the most remote regions but call for very high investments.
ii. Depots:
To ease distribution, a company must establish its depots at places from where villages can be served easily in the manner of hub-and-spoke models. Identifying such places and getting adequate space in backward areas is a difficult task. Usually warehouses are not available in rural areas.
iii. Seasonal Demand:
Annual events like melas provide buying opportunities to villagers. Accenture (2013) finds that about half of a rural household’s purchasing takes place during these annual events. Supply chains have to be geared to meet such seasonal demand even while the demand is minimal in the rest of the year. Annual events provide a very good platform for sales because people visit these events to make purchases.
It is estimated that there are about 8,000 melas that are held in rural India every year. By making products available in these annual melas, mandis and agricultural markets, a firm can cover a large section of the rural population. This does not include haats and melas.
iv. Logistical Challenges:
Companies venturing into rural markets face great logistical challenges such as scattered markets, poor roads and infrastructure, lack of financial intermediaries, and so on.
5. Promotion Strategies:
Communication is important in marketing. Promotion plays a major role in changing behaviour and product adoption among rural consumers. However, it is difficult to find communication channels that are favoured by rural consumers since reach of mass media is limited. Moreover, messages have to be tailor-made for each region.
A number of issues like illiteracy and socio-cultural values pose challenges in developing communication strategies for the rural markets. Experience marketing and BTL techniques are more effective than media in villages but organizing such activities for lakhs of villages is an arduous and costly task.
However, some of the strategies followed by some companies is described below:
i. Indian Models and Actors:
Popular Indian models and actors attract rural audiences. Sports stars are also popular among rural audiences.
ii. Wall Paintings:
Wall paintings are the advertising method where the reach of mass media is limited. Companies such as Coca-Cola, Pepsi and Tata, along with some smaller companies, advertise their products through paintings.
iii. BTL Techniques:
Rural consumers are better networked and proactively seek information through multiple sources. Additionally, women and children now play a more empowered role in purchasing decisions and travel farther to buy goods and services. Providing product experience to them is best done through BTL techniques.
iv. Using Local Languages:
Ads in local languages have more probability of being noticed than those in English and Hindi. Salesmen trained in local language are required. Local events must be organized in villages and the community should be involved.
v. Personal Selling:
Rural marketing involves more intensive personal selling efforts as compared to urban marketing. To effectively tap the rural market, a brand must associate it with the lives of rural folk. Rural sales strategy will include hiring employees who spend time in rural areas and who are comfortable with the local language and customs.
Although the BoP 1.0 strategies have worked for companies, sustained success in rural markets is gained when they go beyond the traditional understanding of marketing and sales. Companies also do not need negative publicity that they are making profits off poor people. Hence the next approach evolved, which consists of involving consumers as co-creators.
The Challenges of Viability, Legitimacy and Competitiveness:
Though social enterprises have a major role to play in BoP marketing, they find it hard to earn profits. Foster and Bradach (2005) found that such ventures have unrealistic expectations and therefore are not able to generate revenue.
Peter Drucker had pointed out that businesses need a ‘functioning society’ to be able to make profits. But, emerging countries have weak government institutions and markets. Millions of poor are kept out of the developmental process as these countries pursue policies mainly for the rich. Jager and Sathe (2014) write that companies must learn to find solutions to basic everyday challenges such as erratic electricity, bad roads, low education, unstable political environments, poverty, criminality and much more.
Their study of strategy and competitiveness in Latin American markets illustrates that the construction of a community road may not be a matter of corporate social responsibility as much as it is a ‘business necessity’ since business cannot operate without it. Such investments may be essential for the company to be able to operate at all.
Often, social enterprises fail to see the challenges of viability, legitimacy and competitiveness in emerging markets. In less developed markets with poor infrastructure, investments to improve social and environmental performance are necessary to ensure the firm’s viability and legitimacy.
The challenges are described as follows:
i. Viability:
Companies must be able to function despite informal markets, weak institutions and poor infrastructure, such as bridges, roads and security systems. Sometimes investments may be required in these before the business can be viable.
ii. Legitimacy:
Their second challenge is to find legitimacy within the local communities and societies in which the company operates. In less developed countries like India, where a large percentage of the village population lives in poverty, a company must not be seen as profiting from the poor.
iii. Competitiveness:
A company’s competitiveness is its ability to provide products and services that create greater value for customers than those of the competition. Further, if the company works on open systems for co-creation, the ideas can quickly be copied. Competitiveness is developed by creating some system or investment that the competitor finds hard to replicate.
Methods of Reporting that will help Rural Marketing Efforts:
Triple Bottom Line:
The move to becoming social businesses has spawned new thinking in measuring the outcomes of business. The Triple Bottom Line (TBL) is an accounting framework that incorporates three dimensions of performance – social, environmental and financial. It differs from traditional reporting as it includes ecological and social measures that are often difficult to measure.
Along with profits, companies are inspired to measure their impact on social aspects also through TBL. This accounting framework goes beyond the traditional measures of profits and economic returns to include environmental and social dimensions. First coined in 1994 by John Elkington, it says that companies should be measuring three different outcomes. One is profit, the first ‘bottom line’. The second is the company’s ‘people account’, measuring the social responsibility of an organization in its operations and the impact it makes on people’s lives. The third is the company’s ‘planet’ account, measuring how environmentally responsible it has been.
The triple bottom line changes the focus of business almost completely. It consists of 3 Ps – profit, people and planet. It aims to measure the financial, social and environmental performance of the corporation over a period of time. It is a governance concept in which companies provide quantitative and qualitative descriptions of their financial, environmental and social performance over one year.
Interest in TBL accounting has been growing. Many businesses, non-profit organizations and even governments have adopted the TBL framework to evaluate their performance.
Behind the TBL is the principle that companies will measure things that they are required to report. Elkington (1997) calls it sustainability auditing, which will make businesses transparent. Companies focused on revenues like to go on cost-cutting sprees, often ignoring the hidden social and environmental costs. But this is changing because of public pressure.
The Fairtrade movement, which adds its brand to products that have been produced and traded in an environmentally and socially fair way, also added to this awareness. From small beginnings, the movement has picked up steam in recent years. Nevertheless, the Fairtrade movement is still only small, focused essentially on coffee, tea, bananas and cotton, but may well spread to other crops.
TBL reporting is becoming common in the developed world and some developing countries, too. Suttipun (2012) studied the TBL reporting by Thai listed companies and shows that the development of regulations has increased the disclosure of social and environmental information. Mandatory TBL reporting is likely to be introduced by countries globally in the future, as sustainability issues gain importance.
Measuring TBL:
The first step in measuring and quantifying social and environmental impacts is to know what to measure. Environmental performance refers to the quantity of resources that a firm uses in its operations and the reduction of waste, pollution and its carbon footprint. It incorporates air and water quality, energy consumption, natural resources, solid and toxic waste and land use/land cover.
Social variables refer to social dimensions of a community or region. They include measurements of education, equity and access to social resources, health and well-being, quality of life and social capital. The measures listed in Table 12.3 present a small snippet of potential variables measured in TBL. Such reporting may well become mandatory in the near future.
When companies start reporting on these measures, their activities will necessarily include their social and environmental activities. The TBL, thus, gives an impetus to rural marketing initiatives that include social objectives. However, measuring performance against these measures is not an easy task.
One problem with the TBL is that the three separate accounts cannot easily be added up. It is difficult to measure the planet and people accounts in the same terms as profits, that is, in terms of cash. The full cost of dumping wastes, for example, is immeasurable in monetary terms, as is the cost of displacing communities to make dams or the cost of child labour.
The Sustainable Balanced Scorecard:
Another approach to measure organizational sustainability is to include social and environmental issues in the existing Balanced Scorecard (BSC) framework to produce a Sustainable Balanced Scorecard (SBSC) that integrates the TBL and BSC frameworks.
The BSC is commonly used in strategic planning and management to align business activities to the vision and strategy of the organization, improve internal and external communications and monitor organization performance against strategic goals. Given by Kaplan and Norton (1996), it translates a company’s vision and strategy into a set of performance measures consisting of financial measures, customer knowledge, internal business processes and learning and growth.
Figge et al. (2002) give ways of including sustainability in the BSC to develop the SBSC. The SBSC includes economic, environmental and social perspectives in a company’s strategic management system and provides a method of measuring it. The SBSC embeds the TBL and the BSC framework; for example, water use and energy efficiency fall within internal processes, while developing renewable, recyclable resources is a financial measure.
Hubbard (2009) gives four areas in the environment and social areas that can be added to the existing framework of BSC. In the environment section, material or resources used per unit and emissions are included as a measure of the efficient use of resources. In the social performance area, a broad view of stakeholders is included, such as employees, suppliers and community.
Table 12.4 shows the measures of an SBSC. The six measures are illustrated with examples covering different stakeholder perspectives. Companies can add additional measures, depending on their operations. The SBSC gives a dashboard for companies to measure social and environmental impacts; however, to be successful, they have to install systems to collect data on community relationships and social actions and highlight them in their annual reports.
Both the TBL and SBSC frameworks give methods to quantify impacts of a company’s operations. Whether these methods are used in developing countries depends on either the companies themselves or may well be introduced in the future by legislation. However, it cannot be denied that reporting on nature, society and well-being is an idea whose time has come and will be used widely in the future.
Social Enterprise:
Finally, we discuss transformation of commercial businesses into social businesses. Social enterprises are businesses that trade to tackle social problems, improve communities, people’s life chances or the environment. They make their money from selling goods and services in the open market, but they reinvest their profits back into the business or the local community.
Sabeti (2011) describes the emergence of ‘for-benefit’ organization. Such organizations have two characteristics: a commitment to a social purpose and a reliance on earned profits. They are emerging as a whole new sector of the economy—one powerful enough to change the course of capitalism. Bornstein (2007) in his book, How to Change the World, writes that social entrepreneurs advance systematic change, changing behaviour patterns and perceptions.
The book shows how this change can be brought about. Martin and Osberg (2015) define social entrepreneurship as direct action aimed at transforming, rather than incrementally improving an existing system called ‘equilibrium shifting’. Social entrepreneurs are able to bridge the need to earn profits with efforts to provide services to citizens, and the creative combination of elements from both poles enables them to build innovative models. Yunus et al. (2015) describe the social business model that is emerging and demonstrate how radically it differs from traditional low-cost business models.
i. Customer Exclusivity:
Unlike low-cost models, social business models are exclusive. Companies determine the target beneficiaries and the product or service is offered to no one else. The target may also be narrowly defined, such as poor consumers older than 60 (Essilor) or poor families with a child aged 6 to 24 months (Danone). Companies usually work with NGOs and local communities to identify such persons.
ii. High-Quality Products and Services:
In contrast to producers who sell low quality, low-cost goods to poor consumers, in a social business model, the offer can remain unchanged if the economics allow. This is what Aravind and Nirmal Hridalaya offered. The only difference was in the choice of room and fewer choices for other services. Social businesses do not lower their costs by redesigning products or manufacturing processes but instead change the economics of sales and distribution.
iii. Carefully Designed Solutions:
A social business often offers products and services as a solution to a problem that customers have. E-wallets, for example, were created for micro-payments, which solved many problems of unbanked customers. Thinking in terms of solutions can help companies with the challenge of costs.
Social enterprises should have the following ideals weaved into their missions:
i. Social and/or Environmental Mission – The primary aim of all social enterprises must be social or environmental. The organization’s social mission must be explicit in its governing documents and that social enterprises should be able to explain and justify the value of the social change they aim to bring about.
ii. Trade – Social enterprises are businesses. Hence, they must generate more than 50 percent of their income through trade. This separates them from NGOs that rely on donations.
iii. Reinvest Profits – Though social enterprises make profits, more than half of the profits should be reinvested to further its social or environmental mission.
iv. Autonomous – An important condition is autonomy. Social enterprises must be autonomous organizations that are independent of the state or commercial interests.
v. Ownership and Control – The majority of shareholders should be oriented towards the social mission. An asset-lock is introduced to ensure that a social enterprise operates in the wider interests of society and is not at risk of sale.
vi. Accountability and Transparency – Social enterprises are accountable to their members—consumers, staff or community members.
Technology is by far the biggest catalyst in this endeavour. The Internet has helped spawn technologies that promise to provide solutions to age-old problems. These include mobile devices and apps that have been designed for life-saving services and social media platforms that help people to connect and create online communities to tackle social issues, opening up collaboration, crowdsourcing and engaging directly with government agencies.
Data mining and analytics can be used to know about consumers and their habits. Cloud computing allows large numbers of people to collaborate and work together and helps people launch new initiatives and resources quickly and cheaply.
Using Big Data:
Big data is a technology that may change the face of rural marketing. As smartphones become cheaper and popular in rural areas, consumers will leave data trails about their online activities. Analyzing such data will give companies insights into consumer behaviour. Goyal et al. (2012) explain how data analysis can be used to identify micro-markets.
They write that companies have to slice and dice geography into hundreds of micro-markets and identify areas that are underexploited or find the pockets of prosperity, and then deploy their sales force to the greatest effect. The process involves combining and analyzing huge amounts of data on villages, customers and competitors to identify communities, for which solutions are developed.
The first step in pursuing a micro-market strategy is to create an ‘opportunity map’ of potential areas. The map uses internal and external data sets from a number of sources. Data analytics is used to build a picture of the future opportunity. After the map is made, the company examines why markets vary across areas and looks at drivers of consumer behaviour. Growth opportunities can thus be spotted.
Getting data for villages will be a shortcoming, but as data gathering techniques improve, companies can collect data sets from government and other agencies. Sales and marketing teams have to work together with data analysts to identify and create solutions for each micro-market. The micro-market in this case can mean a village or village cluster, or homogenous groups within a village.
Once micro-markets are identified, the company devises solutions for them, and also creates sales ‘plays’ for each. This includes identifying salespeople, opinion leaders, local communities and other partners that can help implement the strategy in each village. Products are also tested with different price points and service bundles to see which would work best. The maps will also help the company in making sales route plans so that salespeople do not have to travel far from their homes. The salespeople should be trained on how to use the opportunity map to approach the villages.
Micro-Markets are identified through five steps:
1. By defining the optimal micro-market size.
2. By determining the growth potential for each.
3. By gauging the market share in each.
4. By understanding the causes of variation in market share.
5. By prioritizing markets to focus on.
Future of Rural Marketing:
Many businesses in developing countries have realized that serving rural markets is not about simply selling products. They have expanded the nature of their businesses from mere commercial motives to social ones as well. The businesses succeed if they go beyond their mandate of making profits. The future rests on three paradigm shifts taking place in rural approaches – innovation, transformation of companies into social enterprises and technological advancements that bring rural consumers closer to companies.
This means that companies need to reinvent their business models and their very approach of doing business. Such companies stand a greater chance of success and long-term survival in rural areas. We have taken elements from the business models of these companies to figure out what the future looks like.
The companies, we find, followed the design thinking pattern – a solution-focused and action-oriented mindset towards creating a preferred future. Vaitheeswaran (2012) writes that to tackle the world’s most wicked problems, we need a paradigm of design thinking, the open-minded, no-holds-barred approach that designers bring to their work, rather than the narrow, technical view of innovation traditionally taught at many business and engineering schools.
Firms that think like designers, which means embracing experimentation via rapid prototyping and fast failure, stand to win huge new markets and profits. They invest in distribution and training of local resources, develop innovative products and processes, involve stakeholders and, above all, build a social purpose in their objectives.
The task is not easy, of course. Haanaes et al. (2013) write that straying from their core purpose could well attract the ire of shareholders who invest in companies for financial returns. They could well see a company’s social investments as reducing their returns.
Still, the thrust for transforming business has happened because of the following reasons:
1. To seek growth and market shares.
2. The growing need for sustainable business activities.
3. To reach a large, underserved market.
4. To develop good corporate citizenship and corporate image.
1. Growth and Market Shares:
Because of saturated markets in the West and of saturated urban markets in developing countries, it is increasingly being recognized that growth will come from- (a) emerging markets and (b) underserved markets within emerging countries. Radical changes in business models to serve the poor have helped the companies to achieve high growth rates and outperform their competitors. These companies report better revenues, growth rates and market shares than other companies in the category.
2. Sustainable Business:
Another reason for this huge change is the realization that companies must work sustainably and that the unchecked consumption of natural resources cannot continue unabated. Increasingly, there is pressure on companies to operate in a sustainable manner.
3. Serving Larger Markets:
Radjou and Prabhu (2012) write that multinationals have realized the importance of enhancing their capabilities in emerging economies. Products developed in the West and imported to developing countries are too expensive to be sold in rural markets, so MNCs are stepping out of their comfort zones by investing in local R&D and factories to design and produce locally relevant products and services.
Between 2003 and 2007, multinationals have invested some US$24 billion in more than 1,100 R&D centres in India and China. “This approach has clear advantages over importing and selling high-priced products and services developed and produced in the West,” they write. The challenge for them is to move from serving urban customers to the much larger BoP population of urban and rural poor.
4. Good Corporate Citizenship:
Pressure is also mounting on organizations to focus on good corporate citizenship. Such organizations pursue their objectives while building a social business. Kanter (2011) writes that firms have to think of themselves as social institutions than merely profit-making companies. This gives them a long-term perspective to invest in-the human side of the organization.
These four driving forces have resulted in interventions like the invention of microfinance, information and problem-solving apps and impact-investing for difficult problems in rural markets. These ideas are becoming popular as private companies, NGOs and development agencies are increasingly applying BoP ideas to their initiatives. Eggers and Macmillan (2013), in their book, The Solution Revolution, explain how this is giving rise to the ‘Solution Economy’ in which individuals, businesses and, sometimes, governments work together to solve societal problems and also make a profit.
The solution revolution can be seen as an interaction between three crucial factors:
1. Wave-Makers.
2. Disruptive Technologies.
3. Business Models.
All three have to operate simultaneously.
1. Wave-Makers:
Wave-makers are firms and individuals that further social agendas by developing or funding compelling solutions. There are different types of wave-makers – investors, conveners and MNCs. For instance, investors such as Warren Buffet and the Bill & Melinda Gates Foundation who pledge large sums of money to social causes can be termed as wave-makers.
Conveners are individuals and organizations that can assemble groups of people and leaders to solve societal problems—opinion leaders like the Honeybee Network are examples of conveners. MNCs that integrate social missions into their corporate missions while serving markets help a great deal in providing much needed rural solutions.
2. Disruptive Technologies:
These are technologies that have the power to transform Indian villages.
3. Business Models:
Business models have to incorporate public benefits. These help in solving societal problems by economic relationships, facilitating knowledge sharing and through technology. The most successful rural marketing interventions are those that have helped solve problems in some way, whether it is providing reading glasses for people in villages or helping rural people to start small distribution businesses of FMCG products.
To be successful, a solution must have a working technology, a wave-maker to spread the good word and a business model by which the idea can be commercialized. By doing this, companies are changing themselves to serve larger markets. Sabeti (2011) writes that there is a blurring in boundaries between for-profit and non-profit models and a different model is emerging, called ‘for-benefit’ corporations, “that generate earned income but give top priority to an explicit social mission.” At heart of these models is social innovation.