The right package

As I read the articles assigned to us this weekend, a case study that was presented at the "India Today: Economics, Technology and People" workshop in CMU in Oct 2010 kept coming back to me. It was the success of the shampoo sachet in rural India. For the longest time, people in rural India (and many in urban India) used regular soap to wash their hair. The price of a bottle of shampoo, even though approx. Rs30 (less than $1), was unaffordable to most. In fact, the shampoo industry did not even consider rural India to be their target market.

However, sometime in 1990s a small company in South India (Chik Shampoo) started selling 10ml shampoo sachets for 25-50 paise (or 1/4 to 1/2 of a rupee) only in the rural markets. Instead of the shampoo bottles available in retail stores, these sachets were sold at local grocers and roadside vendors, easily accessible to almost every rural family, or what large companies thought was not even a viable market. These sachets became a huge success, so much so that everyone now sells not only shampoos, but sachets for everything - other personal products, detergents, food items, etc, all priced at for a few Rupees or less.

So what did the maker of Chik Shampoo do differently? His product was probably not the best shampoo available in the market, so he had nothing unique in terms of the "Product". The "Place" he was targeting was definitely at the bottom of the pyramid, people who were least expected to buy shampoos. But, he had the "Price" and the "Promotion (or Packaging in this case)" right. If shampoos, or any personal products, are made affordable to the poorest of people, then you are creating a huge market that never existed before!

In a similar case, soda companies like Pepsi & Coke introduced the Rs5 bottles in India. They realized that the Indian consumer did not consume at Rs10 bottle of soda (or 300ml as they originally sold them), in fact two people shared one bottle of soda. So they launched new bottles at half the price and about half the quantity (200ml). These new Rs5 bottles have allowed Pepsi and Coke to now target both urban and rural segments of India, hence significantly increasing their target markets.

To conclude, I believe that innovation can be applied to so many areas of a product, and we talked about this in the last class. Sometimes, you can change the whole game by introducing the same product to a completely different market by understanding their needs and buying power. In the case of the shampoo sachets, these minimally priced products actually work out to be more profitable than their more expensive bottle counterparts because of the economies of scale. Even OLPC is trying to adapt a similar reasoning to their laptops; manufacturing in numbers drives costs down. Obviously, this cannot be the strategy for every product, but with the immensely growing markets in developing countries, it is definitely something to think about!