by Vijay Mahajan, Kamini Banga
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Product Description
Most global businesses focus nearly all their efforts on selling to the wealthiest 14% of the world's population. It's getting harder and harder to make a profit that way: these markets are oversaturated, overcompetitive, and declining. The Invisible Market shows how to unleash new growth and profitability by serving the other 86%. Vihajan Mahajan offers detailed strategies and implementation techniques for product design, pricing, packaging, distribution, advertising, and more. Discover radically different 'rules of engagement' that make emerging markets tick, and how European and Asian companies are already driving billions of dollars in sales there. Mahajan shows how to understand and manage lack of infrastructure and media, low literacy levels, and 'unconventional' consumer behavior. Learn how to redefine the 'real' competition; tap into the informal economy and unconventional channels; leverage expatriate word-of-mouth; pool demand to reach critical mass; piggyback innovations on local tradition; and price and package to reflect local realities. As traditional markets become increasingly unprofitable, emerging markets become the #1 opportunity for growth.
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Average Customer Review:
1 of 2 people found the following review helpful:
So, True, 2006-10-26
In the last couple of years several books have been published focusing on the huge, largely untapped, and unfocused upon, regional/local markets of people in LDC nations. Focusing on the needs, preferences, and wants of the people in these markets pave the way for mutual benefits and stronger symbiotic relationships. Authors Vijay Mahajan and Kimini Banga continue this relevant discourse with "The 86 Percent Solution." Their focus on the 'local and regional' instead of a national market is important for knowledge and understanding. Instead of focusing on national borders, businesspeople are focusing on Shanghai, Mumbai, town X, or city Y, or region Z. Not the "Indian Market, Chinese Market," or "Russian market." The crux likes back to this fact: eighty-six percent of the people on planet Earth earn less than $10,000 USD per year.
Many points in this book are common sense. If you're doing business in an area, then of course you have to learn about local area, and a neighborhood's conditions, wants, and needs. There is focus on marketing here, which seems to mean: dump products down people's throats and profit from it at the same time. (I understand the necessity for mutual benefits.) But at times this book sounds like "How to do business in LDC regions for dummies." To be fair, the information in this book is needed by many that come to foreign countries with very little insight into "how things really work" at the local and cultural level. This includes not only market needs, but how to behave, be culturally sensitive, and understand local, cultural etiquette. I frequently witness first-hand MBA grads and experienced western business people come to a foreign country with immense business, product knowledge, and marketing expertise. And they fall flat on their faces because they didn't have the proper information, training, and exposure to culturally deal with the local people. Oft-times these people didn't consider this knowledge or awareness to be important.
With globalization and increasing WTO-country membership, this book and others will be increasingly important to those doing business overseas and having business relationships with customers, employees, fellow managers, and even strangers. Cultural awareness is often equally just as important as "business knowledge." Sometimes, it's more important.
A note by the authors on English as the International Language:
The authors claim that English may not be the International Business Language in the future. This assertion is completely false and without merit. The authors state that "If you want to work with 86 percent of the world, you need to speak the languages of the 86 percent."
Yes, business people need to learn foreign languages. True, it's important for foreigners to study and attempt to learn the local language of a region if they are going to do business and/or live somewhere for a period of time. It leads to more cultural understanding and less instances of mis-communication. But the demand for English is skyrocketing in China and many other countries of the world. The demand for learning other non-English languages will increase - but the demand to learn and use English will not decrease. It will continue to grow, and much faster than other languages.
The contention that students and future business people from all over the world will learn Mandarin, Arabic, and Hindi because the *number* of people who speak these languages is greater, is oversimplified and unrealistic.
Just ask the Chinese: "Do you want foreigners to learn Mandarin?" Or, is it better for Chinese people to learn English?
The Chinese want to learn English. They also benefit tremendously from foreigners *not* learning Chinese. Ask a Vietnamese, Russian, Korean, Japanese, American, or German if they want to spend over 7+ years studying intensive Mandarin?
Chinese and Arabic speakers who learn English can communicate and do business all over the world in all continents. Mandarin speakers can do business only in certain parts of China. Big difference.
Non-native English speakers currently outnumber native English speaker by 4 to 1, and this gap is increasing.
Kudos to Mahajan and Banga for this book and their work in this field, which is finally getting more attention. Attention that is just, and far over due.
A related point:
The recent Nobel Prize awarded to Mohammed Yunus and his Grameen Bank for his micro-loans provided directly to poor people living in rural areas who are otherwise considered "not bankable." Most banks focus on large public projects and require collateral and credit. These large projects often involve corruption and embezzlement. The percentage of borrowers who repay their loans under Yunus's micro-lending program is very high. It works.
This is an informative and helpful book.
8 of 10 people found the following review helpful:
Tactical/Neighborhood Implementation for Ethical Profit from the Poor, 2006-03-16
This book is best appreciated if you have first read C.K. Prahalad's "The Fortune at the Bottom of the Pyramid," William Grieder's "The Soul of Capitalism," and Stuart Hart's "Capitalism at the Crossroads." It is a tactical or foreign neighborhood (both in the Third World and in the immigrant sections of the First World) implementation manual for profiting from sales to the poor.
It makes many obvious points as well as many not so obvious points, and I will not list them here. This is a book that requires patience and careful reading. The author has brought forward a great deal of detail in a very easy to read way.
I will end with thought that the Wharton School's publishing arm has really catalyzed for me with these varied book. The five billion at the bottom of the pyramid are the last remaining super-power on this planet. The good news is that we can profit from enriching them. The bad news is that we still have morons in power that think we can keep them down by using guns. Newsflash: there are not enough guns on the planet to keep the five billion and their off-spring from over-running us. Capitalism, and the rapid nurturing of indigenous self-sustaining wealth that includes the rapid education of women (which leads to saner men, less disease, limited growth) is our only salvation.
This book is one of a handful that could be said to be truly revolutionary in terms of transforming the planet from one beset by poverty, to one inspired by entrepreneurship at the neighborhood level.
12 of 12 people found the following review helpful:
Very unique look into the biggest market for years to come., 2006-01-17
The 86 Percent Solution : How to Succeed in the Biggest Market Opportunity of the Next 50 Years (Hardcover)
by Vijay Mahajan, Kamini Banga
ISBN: 0131489070
The authors provide a very unique look into the biggest market for years to come.
The book The 86 Percent Solution provides rich insights into the emerging markets where per capita incomes of individuals is as low as $300 but still provide tremendous scope for growth.
Developing markets offer the greatest potential for gains unheard of in the developed markets. To venture into these markets companies will have to (un)learn all that worked elsewhere. The things that worked in developed economies and the basic presumptions made will not work in most developing nations of today. The concept of consumer is king is a myth in these places, where in fact a consumer is a person with limited purchasing power, bargaining power and storage capacity.
What works for marketing Fast Moving Consumer Goods won't work for Consumer Durables or for Services. Even though developing markets seem risky as there is little or no credit risk monitoring at the dealer level besides the usual problems of lack of infrastructure there will always be a first mover advantage for companies willing to invest in infrastructure.
Products like water filtration systems for individual homes will find a ready market where potable drinking water is unheard of. In the rural markets even with the sweltering heat it is difficult to sell an air conditioner where uninterrupted power supply is neither available nor expected.
To sell in these markets region specific plans rather then country specific ones will need to be formulated and implemented, due to the fragmented nature of the markets having their own special needs.
Through various example the authors explain all that works and doesn't work and why.
This book is a must read for all those who wish to tap this market and also all those who always wondered why all their wining strategies which worked so well for them for so many years everywhere else, just don't work in these markets.
The coauthor Vijay Mahajan is a former dean of the Indian School of Business and holds the John P. Harbin Centennial Chair in Business at McCombs School of Business, University of Texas at Austin.
The coauthor Kamini Banga is an independent marketing consultant and managing director of Dimensions Consultancy Pvt. Ltd.
17 of 17 people found the following review helpful:
Expert Guidance to Almost Unlimited Opportunities, 2006-01-05
With regard to the meaning and significance of the title, Mahajan and Banga explain that 86% of the world has a per capita gross national product (GNP) of less than $10,000 per year. So what? Not only do those markets represent the future of global commerce; "they also present rich opportunities for companies that have the imagination and creativity to envision [consumers within those markets]. But you won't recognize these opportunities through the lens of the developed world. You won't reach these consumers through the market strategies that work in the 14 percent markets. Developing markets have no smooth superhighways, no established consumer markets, no distribution networks, and, in many cases, no electricity. Developing markets are younger, behind in technology (but rapidly catching up), and inexperienced as consumers. These markets are very different. Yet with creative solutions tailored to their distinctive characteristics, ...you can realize the rich opportunities of these 86 percent markets."
Mahajan and Banga have carefully organized their material within eleven chapters which range from a rigorous analysis of "the lands of opportunity" to a "Conclusion" in which they explain why the markets in underdeveloping countries "not to be missed." More specifically, they discuss what they describe as a "complex tapestry" of convergent civilizations in which there really do seem to be almost unlimited opportunities to increase both the standard of living and quality of life for hundreds of millions of consumers. The challenge for those companies which attempt to market various goods and services in those markets is to understand their unique characteristics. To me, it seems at east as important to understand what they are not as it is to understand what they are...or can (and will) become.
Here are two brief excerpts and then a checklist which, I hope, indicate the scope and depth of Mahajan and Banga's analysis.
"There is no Chinese market. There is a market in Shanghai, or in a neighborhood in Shanghai. There is no Indian market. There is a market in Mumbai or Chennai, or in their local neighborhoods. Developing countries are a collection of fragmented local markets in a country that is gathered loosely under a single flag." (Page 77)
"Think English is the language to know for business? Maybe not for long. Consider that Mandarin Chinese has the largest number of speakers in the world -- a billion, including second-language speakers. This is followed by English, with about half as many speakers, and then Spanish, Hindi, Arabic, Bengali, and Russian. If you want to work with 86 percent of the world, you need to speak the languages of the 86 percent." (page 83)
Which strategies will be most effective when "taking the market to the people"? Mahajan and Banga suggest seven:
1. Position for the paanwalla (i.e. small shop)
2. Create multiple levels of distribution (e.g. Hindustan Lever's "Project Shakti" based a direct-to-home model involving self-help groups, each comprised of 10-15 underprivileged women)
3. Use distribution bubbles (i.e. carnivals, market days, and vans which come and go) to find customers where they are
4. Take the bank out of the branch (e.g. Citibank's use of vans and a network of 9,000 direct-selling agents, called "Citi Friends," who visit homes)
5. Develop on-the-ground insights (i.e. understand and adapt to local aND even neighborhood regulations and conditions)
6. Create distribution systems from scratch (e.g. a new distribution system, based on grassroots networks, which built a supply chain for a camel's milk dairy in Mauritania)
7. Use existing networks creatively (e.g. the "dabbawala system" in Mumbai, India, probably the world's most efficient lunch delivery system which collects 175,000 home-cooked meals from workers' homes and delivers them to their offices)
Thoughtfully, Mahajan and Banga provide a section at the end of each of the first ten chapters, "The 86 Percent Solution," which summarizes key points and facilitates subsequent review of them. Before concluding their brilliant book, Mahajan and Banga share these thoughts when explaining why numbers are on the side of the developing world: Population Equals Profits. "The transformation is just beginning. There will be hiccups along the way and further surprises over the next two decades as the next `Chinas' and `Indias' emerge. The only certainty is the the 86 percent markets are here to stay. These markets are young and growing. Even though they won't become developed tomorrow,,, they are the future. And the companies that can develop the right solutions to meet their needs will find a rich source of growth."
Who will derive the greatest benefit from Mahajan and Banga's book? In my opinion, they are decision makers in two different categories of companies: Those which now market or are about to market in underdeveloping countries, and, other companies which now do business with -- or plan to do business with -- those in the first category. I also think this book will be of substantial interest and value to public officials who are now actively involved with helping to support global commerce.
Congratulations to Mahajan and Banga on a brilliant achievement!
9 of 9 people found the following review helpful:
The markets are there, but the rules are vastly different..., 2005-12-16
Business is obviously always on the lookout for growth opportunities. In the book The 86% Solution - How To Succeed In the Biggest Market Opportunity of the 21st Century by Vijay Mahajan and Kamini Banga, the argument is made (and quite effectively) that the largest new markets are in the developing countries... 86% of the world. However, the rules are significantly different in those markets...
Contents: The Lands of Opportunity; Don't Build a Car When You Need a Bullock Cart; Aim for the Ricochet Economy; Connect Brands to the Market; Think Young; Grow Big by Thinking Small; Bring Your Own Infrastructure; Look for the Leapfrog; Take the Market to the People; Develop with the Market; An Opportunity Not to Be Missed; Index
Many companies that have tried to move into these developing countries did so by following the same rules that worked in the richest 14% of the world. They more often than not failed miserably. The economies are different, the purchasing power is different, and the market plays by different rules based on culture. The authors do an excellent job in showing how a different approach to these markets are necessary in order to succeed. For instance, in "Grow Big by Thinking Small", they explain that developing country consumers are using to buying what they need when they need it, and only the amount they immediately need. They often don't have either the space to store bulk quantities nor the extra income to stockpile. Trying to sell laundry detergent for 100 loads will fail. Selling enough soap for one load for a few pennies will work. The margins are thin, but the volume is huge. Your company needs to figure out how to make it all work. In "Take the Market to the People", you'll learn that the concept of going to the nearest Wal-Mart is completely unknown. Your "store" may be a stall at a weekly market bazaar or a person cycling your wares from village to village. You better understand that and package/price accordingly. And what do you do when you're marketing electrical items in a country where power is normally unavailable for hours each day? That's your new reality...
For any business or entrepreneur looking to tap into the vastly underserved global markets, this book is required reading. Even if you're just moderately interested in business and markets, the information here is fascinating. What we consider normal, really isn't...
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