The 86 Percent Solution: How to Succeed in the Biggest Market Opportunity of the Next 50 Years

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 involvin

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...

"Around the same time that we were engaged in this work, C.K. Prahalad and others were focusing attention on the same areas of the world from a different perspective. In his insightful work ‘The Fortune at the Bottom of the Pyramid,’ he points out the potential of the poorest citizens of the world. But the poorest of the poor are just one segment of these markets. Will you know how to meet the needs of the growing middle class or luxury segments? In 2004, a single Rolls Royce was sold in India for more than $700,000, some 1,500 times the average per capita gross national income in that country. This book focuses on the entire spectrum of business opportunities in these emerging markets, for both very poor and more affluent consumers. It also discusses the characteristics of these markets that must be addressed in market strategies. In addition to the specific strategies explored in this book, we hope the examples in the following chapters will encourage you to think more broadly about the approaches that might work in your part of the world (from the Preface)." In this context, Vijay Mahajan and Kamini Banga divide this excellent study on emerging markets into ten chapters. They define main idea behind the chapters with the following sentences: • Chapter 1. The Lands of Opportunity: The rapid development of the 86 percent of the world population in countries with a per capita gross national product (GNP) of less than $10,000 has made these areas the new lands of opportunity. But their complexity and distinctive characteristics will require different market strategies to realize these opportunities. • Chapter 2. Don’t Build A Car When You Need A Bullock Cart: Product design needs to reflect the challenges of the local environment and the demands of the local culture and religion. When you’re looking for creative solutions to these needs, sometimes a bullock cart is better than an automobile. • Chapter 3. Aim for the Ricochet Economy: With high rates of immigration to the developed world, the 86 percent market is stretched across zigzagging global diasporas. To reach the developing world, companies sometimes need to ‘ricochet’ off social networks of the developed world. • Chapter 4. Connect Brands to the Market: Global brands often have been humbled by small, local rivals in fragmented, developing markets. Companies need to find the right balance of global and local brands, or reinterpret these brands, to connect with the market. • Chapter 5. Think Young: While the developed world is facing a crisis of aging, the 86 percent markets are a fountain of youth-although these youth may be different from their peers in developed countries. To understand this opportunity, companies have to think young. • Chapter 6. Grow Big By Thinking Small: While the developed world may want to be super-sized, big successes in developing markets often come in small packages. Small payments, sachets, and products tailored to small spaces can create big opportuni

The 86 percent" here is an estimate of people living in countries with per capita gross national product of less than $10,000. Of the world's six billion-plus inhabitants, only 14 percent live in countries where this measure is over $10,000. According to Vijay Mahajan and Kamini Banga, companies can no longer afford to not pay attention to emerging economies. Their book is a persuasive argument that is full of nitty-gritty advice and practical examples. The book is likely to appeal to managers trying to expand market reach as well as managers in developing countries who want to think differently about strategies that may succeed in their own environment. This book may also benefit leaders of governments, non-governmental organizations, and other organizations who want to better understand the complexities of the developing world's business environment. Both authors are well-versed in the challenges of marketing to the poor. Vijay Mahajan holds a chair in business at the University of Texas at Austin and is a former dean of the Indian School of Business. Kamini Banga is an independent marketing consultant and managing director of Dimensions Consultancy Pvt. Ltd. She travels widely conducting training programs on market research and consumer behavior, and writes and edits articles for top Indian business publications. Beginning even in the first few pages, their practical ideas make sense: Scale down the product size for bulk items to a sachet. Provide built-in cooling for products that are best kept refrigerated. Create mechanisms to allow products purchased by someone in a developed economy to be used or consumed by someone in a different country. These basic concepts mean learning to think small-in terms of package size, installment pay options, and products that fulfill just bare-bones minimal needs; building your own infrastructure to develop and deliver products; and creating a "ricochet economy" that serves the needs of immigrants abroad who maintain strong connections to their country of origin. It is very important that as companies refocus their strategies they also consider customer needs most appropriately. For example, how could people in villages and cities without reliable sources of electricity be expected to purchase and use products that don't come with a back-up source of energy? Mahajan and Banga challenge all managers to reevaluate what they believe about customer needs in developing countries and to make them more basic and realistic. If you don't know what an inverter is, then you're not there yet.

For years the developed world has been viewed as the "mother lode" for worldwide business. Companies poured their resources into serving the 14 per cent of the world's population that is fortunate enough to live there. According to the authors, Vijay Mahajan, former dean of the Indian School of Business and current holder of the Harbin Centennial Chair in Business at the university of Texas in Austin and Kamini Banga, an independent marketing consultant, these markets are over-saturated, over-competitive and aging. The growth, they argue, lies in reaching the rest of the world. Focusing on the 86 percent of the world with a per capital gross national product of less than $10,000 year offers a rich opportunity. These markets have been largely invisible to worldwide companies and even some firms operating there. Yes, the authors acknowledge, these countries lack infrastructure and media. They have low literacy rates. Their consumers react in unconventional ways. Yet with the right solutions, these markets represent staggering opportunities. The authors suggest realizing that potential by: 1. Reaching middle class and the affluent consumers along with the poor. These markets are larger, wealthier and more diverse than you realize. 2. Designing products that reflect local environments and cultures. 3. Using expatriates to ricochet your products into the local economy. 4. Growth big by thinking small. 5. Bringing your own infrastructure with you. 6. Take the market to the people. To illustrate these strategies, the authors draw on dozens of emerging market examples. They offer actionable strategies and tactics for product design, pricing, packaging, distribution and advertising. Emerging markets are different. Yet, worldwide companies are already reaping billions of dollars in sales from them.