By Geetanjali Shahi, a Researcher at the Centre for Development Finance

Beyond Profit’s recent article, “Is India Really a Hotbed for Social Enterprise?” discusses how India is experiencing a boom in the social entrepreneurship space and most of the case studies on successful social enterprises are from India. This should not come as a surprise, as these are the responses to problems the country is facing.

Problems, such as lack of affordable housing, poor availability of clean drinking water, scarcity of low-cost and environment friendly energy alternatives, need urgent attention. The writing on the wall is clear, “innovate or perish.” Consequently, start-ups are mushrooming up in all corners of the country. “Doing well by doing good” has become a catch phrase. But the catch here is that in a country as diverse as India with shifting cultural preferences/needs/problems across the geographical terrain, one has to devise tailor-made solutions. Market estimation, or demand assessment studies, for such services and products play an important role in understanding the rural markets. Products, which have an ever-ready consumer base in one area, might have no takers in another. Market research studies help to gauge consumer perceptions about product use, price and if it is a worthwhile investment, become the first step in the product development cycle and shape the company’s product strategy.

In a recent market estimation study for Frontier Markets the Rural Market Insight team (RMI) at Centre for Development Finance assessed rural BoP consumer perceptions and willingness to pay for a range of products like solar lamps and low smoke cook-stoves. The results came as a surprise. The word village in India stirs up a different image than what we saw in the sample areas in the Chittoor district of Andhra Pradesh. In stark contrast to a village in, say, Bihar or Uttar Pradesh, the sample villages had a stable, subsidized supply of electricity, non-agriculture sources of income and a decent level of literacy. Contrary to the expectations, there were more takers of aspirational goods than alternative energy products like solar lamps/low smoke cook stoves. Low smoke cook-stoves did better than solar lighting, even though the market for liquefied petroleum gas (LPG) is fast catching up. With a market study, the social venture can actually test its assumptions about a particular product in the target market. They must expect that even the most practical assumptions can fail at times.

Knowing the prospective customers beforehand helps determine whether the product in question can address their problems. Defying common perception, today’s rural customer is very aware and thinks deeply before investing hard-earned disposable income. This finding was also echoed in a recent study conducted by RMI in collaboration with Sarvajal, where we found that understanding context is a critical first step for any new enterprise.

Social enterprises are making a huge entry in rural BoP markets. Some of them have already become success stories, while some are yet to see the light of the day. With the pressures of demand, competition from other products, sustainability of products/timely value additions on social ventures, a market /demand assessment study can become the differentiating factor of success and a worthwhile investment to get social business to the second step.

Photo Credit: Geetanjali Shahi

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2 Comments »

  1. Chandan Kumar Said,

    February 9, 2011 @ 10:53 am

    This article gives a holistic view regarding the boom in Social Entrepreneurship Space and especially regarding the enterprises involved with BoP. It would definitely motivate the social entrepreneurs to analyze the need of Demand estimation before venturing into new and unexplored areas.

  2. karthik Said,

    February 28, 2011 @ 11:15 am

    Very well written, demand estimation involves more time and money to be spent on it, apart from mysterious issue of demographic diversity we have.

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