No Frills



“One generation’s indulgence
becomes the next generation’s
         necessity”

  James Twitchell, University...
Outline

 • What is No Frills
   Examples of No Frills
   No Frills Industry Trends

 • Drivers of No Frills
   Growing Af...
Mass Transport
Budget airline                         Low-cost European airline
• Asia’s leading no-frills, low-fare   • E...
Personal Transport

    38 m
  small cars bought
annually in 2012, up 65              =
percent from a decade
        earl...
Healthcare

                                                 • Incorporated in 1961
• India’s third biggest pharmaceutical...
Consumer Electronics
Meizu Electronic Technology                Feb 12, 2008

• Electronics manufacturer from           To...
Household Appliances

Galanz
♦ Chose to compete against non-consumption
  in the domestic market
♦ Simple, energy-efficien...
Fashion Apparel
No Frills Today
Banking Services               Electronics               Mass Transport




                              ...
Drivers


  Growing Affluent Middle Class
Aggregate Consumer Power Shifts to
 Affluent Potentials and Rural Poor
What Does this Mean for Your Business?
              1. Massive growth opportunities is in serving the 
                 n...
What does it mean to go no frills?

 ♦ Create new buying power for new customers
 ♦ Price as the starting point
 ♦ 6 Sigma...
Creating Buying Power
                     Create new
                     buying power     ♦ Capturing new share of non-c...
Creating Buying Power
“Ask one billion people,                  “The Problem is…
and 99 percent of them are                  How many can
 going...
Creating Buying Power
                     Create new
                     buying power
Disruptive
                     wi...
Price as the Starting Point
                    Create new
                    buying power    Pricing a average car
Disru...
Price as the Starting Point
Pricing the Nano                          Pricing an average car
                 $2,500      ...
6 Sigma overshooting
                     Create new
                     buying power
Disruptive           with new
Innov...
OverFrilled?
Trends: Phone Features over the years



                                                 Maps and GPS
      ...
Daily Updates
December 2005
                                                                               Emerging Lesson...
Stripping away “frills”

                      Price $800                            Price $300
 1. Personalized          ...
Understanding Masses
                    Create new
Disruptive          buying power     In India…
Innovation with     wit...
Case Study 1: Flip Ultra
                            Compromise:
                             Low quality 640 x 480
      ...
Case Study 2: MP3

Compromise:                         Quality of sound
Low audio quality
Worse than CD

SUCCESS: MP3 ubiq...
Case Study 3: Skype
                         Compromise:
                          Net-based calls laggy
                 ...
Case Study 4: Netbooks
                     Compromise:

                       Small storage
                       Low p...
No Frills



            As A Business
No Frills – A Franchise?
• The ‘Easy Group’ was founded in 1998
• Focused on taking away frills to make a product more aff...
We want to hear from you…

♦   Is your industry subject to a No Frills Disruptive Innovation?
♦   What new brands can or h...
End
Disposable Everything!
               - quicker replacement cycles

•   Razor blades
•   Furniture
•   Mobile phones
•   C...
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No Frills Economy

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No frills economy, bottom of the pyramid, emerging markets, how to sell to non consumers

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No Frills Economy

  1. 1. No Frills “One generation’s indulgence becomes the next generation’s necessity” James Twitchell, University of Florida
  2. 2. Outline • What is No Frills Examples of No Frills No Frills Industry Trends • Drivers of No Frills Growing Affluent Middle Class • How to No Frills • Successful case studies • Questions to ponder
  3. 3. Mass Transport Budget airline Low-cost European airline • Asia’s leading no-frills, low-fare • Established in 1995 airline since 1993 • Marketing strategy: • First in the region to implement “Making flying as affordable as a ticket-less travel and unassigned pair of jeans” seating • Urged travelers to “cut out the tour agent”
  4. 4. Personal Transport 38 m small cars bought annually in 2012, up 65 = percent from a decade earlier. 50% A car which sells for the Projected increase of microcars in Western price of a laptop computer Europe from 2004 to is transformational 2011
  5. 5. Healthcare • Incorporated in 1961 • India’s third biggest pharmaceutical company • India’s largest • Sale of low-priced generic drugs pharmaceutical company • Cost-effective alternative to highly-priced originals • Ranked among the top 10 generic companies • Accomplished through process of reverse worldwide engineering $170 $54 For Heartburn (90 pills)
  6. 6. Consumer Electronics Meizu Electronic Technology Feb 12, 2008 • Electronics manufacturer from To hit our shores this year: China since 2003 Apple iPhone: • Copy-cats of the iPod, with • Movies improvisations • Maps • Music • Termed ‘iPod’ killer because of its ability to function without $800 - $1500 proprietary file formats and procedures • Better camera Meizu M8: • GPS • Movies • Multiple file • Maps format support • Music • More Meizu M6 Miniplayer $450
  7. 7. Household Appliances Galanz ♦ Chose to compete against non-consumption in the domestic market ♦ Simple, energy-efficient product small enough for Chinese kitchens ♦ Moved up-market to manufacture larger machines that had more features ♦ Began to disrupt the microwave-oven markets in developed countries ♦ It took Galanz 2 years to become China’s no.1 and 6 years to global no. 1 in microwave oven production
  8. 8. Fashion Apparel
  9. 9. No Frills Today Banking Services Electronics Mass Transport Personal Transport No Frills Household Consumables Today Healthcare Telephony Household Appliances Fashion
  10. 10. Drivers Growing Affluent Middle Class
  11. 11. Aggregate Consumer Power Shifts to Affluent Potentials and Rural Poor
  12. 12. What Does this Mean for Your Business? 1. Massive growth opportunities is in serving the  now inadequately served markets 2. GE, Panasonic, Nokia, Unilever, P&G starting to  shift focus to these markets 3. By 2020, established MNCs + local players will  make entry to these markets even more difficult 4. Lower margins yes, but entrenching brand into  mindshare of new consumers is vital. As is  learning what frills are extras and what are must‐ have features 5. Largely still blue ocean for services
  13. 13. What does it mean to go no frills? ♦ Create new buying power for new customers ♦ Price as the starting point ♦ 6 Sigma overshooting. Reverse engineer to further strip  costs and frills ♦ Understanding what masses really want‐ discerning frills  from must haves
  14. 14. Creating Buying Power Create new buying power ♦ Capturing new share of non-consumers Disruptive with new group as oppose to selling down to existing Innovation with of consumers consumers PRICE as the 2 1 ♦ Tata Motors target are motorcyclists, starting point public transport commuters of yesterday 6 Sigma overshooting. 3 Reverse engineer to further strip costs and frills 4 Understanding what Giving new … New buying masses need and consumers… power want and can do without
  15. 15. Creating Buying Power
  16. 16. “Ask one billion people, “The Problem is… and 99 percent of them are How many can going to say they want a afford it?” car.” Jagdish Khattar, MD of Maruti Suzuki India
  17. 17. Creating Buying Power Create new buying power Disruptive with new group Innovation with of consumers PRICE as the starting point 2 1 6 Sigma 3 overshooting. Reverse engineer to further strip costs and frills 4 Understanding what masses need and want and can do without
  18. 18. Price as the Starting Point Create new buying power Pricing a average car Disruptive with new $81,000 Innovation with group of PRICE as the 2 consumers 1 Dealer starting point markup Advertisement and marketing Wholesaler 6 Sigma markup overshooting. Assembly Reverse 3 Overheads engineer to further strip Parts costs and frills Body frame 4 Braking system Understanding what Engine masses need and want and can do without R & D/Design
  19. 19. Price as the Starting Point Pricing the Nano Pricing an average car $2,500 $81,000 No tubes in tires saves weight and Advertisement & money Branding Power steering Body panels glued instead of Leather seats welded Intermittent Wheels hooked windshield wipers onto body to Remote controlled save costs side mirrors Manual windows Advanced airbag system No air conditioner Cruise control Light-weight to Traction control enhance fuel warning lights Automatic performance No radio Braking System Radio
  20. 20. 6 Sigma overshooting Create new buying power Disruptive with new Innovation with group of PRICE as the 2 consumers 1 starting point “Perfection of quality to what extent? 6 Sigma The difference may NOT be discernible overshooting. to this new group of consumers and Reverse 3 even if it was, they most certainly will engineer to not be willing to pay for the marginal further strip difference.” costs and frills 4 Overshooting: Understanding what 1. Standards masses need and 2. Features want and can do without
  21. 21. OverFrilled? Trends: Phone Features over the years Maps and GPS Microsoft Office Instant messaging Internet “I am looking for a Organizer Organizer simple cell phone. I Infrared Infrared don't need a digital Bluetooth Bluetooth camera, Internet, fancy Camera Camera ring tones, or any of Games Games that stuff. I just want Time Time Time to be able to send and Messaging Messaging Messaging receive calls…Does such Communication Communication Communication Communication a cell phone exist?”
  22. 22. Daily Updates December 2005 Emerging Lessons No-frills, low- Mad Dash for tech cell Handset makers the Low End learn that the phones come Nokia leads in cell poor want style, phones for the masses. to Europe But rivals are hoping to FM radio and steal market share After spending billions of more -- at a low News February 7, 2008, 5:00PM EST euros on acquiring new by Jack Ewing price 3G (third-generation) mobile broadband By DIONNE SEARCEY February 12, 2008 licenses, billions more on building the sophisticated wireless networks and Analyst Projection of Ultra Low "We thought there would still more on promoting Cost Market be demand," says Kai the high-speed data Oistamo, Nokia's service, numerous mobile 200 175 executive vice president phone operators in 150 of devices. "But the speed Europe are now Million 100 Ultra Low Cost of growth has beaten all launching new no-frills, 50 Devices expectations." low-tech cell phones and 12 0 services. 2006 2010
  23. 23. Stripping away “frills” Price $800 Price $300 1. Personalized 1. None entertainment 2. On purchase screens 3. Minimal or none 2. Meals on board 4. Standard seats 3. Magazines 5. Shared ground crew 4. More legroom 6. DIY everything 5. BA ground crew 7. Airports located at 6. Booking agents outskirts and worst 7. Prime location locations within airport and terminal within terminal
  24. 24. Understanding Masses Create new Disruptive buying power In India… Innovation with with new group • Displays of luxury are taboos and hair PRICE as the of consumers grooming is often a woman’s only starting point 2 indulgence 1 • Many low-income women prefer a single soap for hair and body 6 Sigma overshooting. Reverse 3 engineer to further strip Hindustan Lever Ltd., began selling an costs and frills inexpensive, general-purpose soap, 4 called Breeze 2-in-1, with special ingredients for healthy hair. It gained Understanding what masses need and 48.5% market share. want and can do without
  25. 25. Case Study 1: Flip Ultra Compromise: Low quality 640 x 480 Small viewing screen No color adjustment features No optical zoom SUCCESS: Best selling camcorder in US with 17% market share in 2 yrs When asked why the Flip has succeeded where Sony have failed Fleming-Wood: "I think it's because we have a better product." What's odd is that executives at Sony and Canon would likely say the same thing — after all, their models have Good Enough far more features and often produce sharper Trifecta images. But he is using a different definition of 1. Less expensive "better." He now defines quality entirely in terms 2. Easier to use of ease of use — how easy it is to shoot and 3. Portable share the video.
  26. 26. Case Study 2: MP3 Compromise: Quality of sound Low audio quality Worse than CD SUCCESS: MP3 ubiquitous today. Can we imagine life without it? Good Enough Reduced size of audio files =  Trifecta shareability = Easier to  1. Free manage/personalize music 2. Ease of use 3. Portability
  27. 27. Case Study 3: Skype Compromise: Net-based calls laggy Connection cut in mid conversation Poor sound quality SUCCESS: Skype accounts for 8 % of international calling minutes. Added nearly 38 million users in 2Q of 2009, a 42 % increase over the same period last year. Good Enough Trifecta 1. Free 2. Ease of use 3. Extras
  28. 28. Case Study 4: Netbooks Compromise: Small storage Low processing power Poor graphics capability SUCCESS: Netbook shipments were up sevenfold in the first quarter of 2009. Good Enough Trifecta 1. Cheaper 2. Ease of use 3. Portable
  29. 29. No Frills As A Business
  30. 30. No Frills – A Franchise? • The ‘Easy Group’ was founded in 1998 • Focused on taking away frills to make a product more affordable • Franchised business to expand model; rapid growth Founder: Stelios Haji- loannou
  31. 31. We want to hear from you… ♦ Is your industry subject to a No Frills Disruptive Innovation? ♦ What new brands can or have emerged from your industries? ♦ Do you think it No Frills is more likely to occur with products or services? ♦ What kinds of services are primed for No Frills Disruptive Innovation? ♦ Does No Frills benefit large firms or small ones? Incumbent or new entrant? ♦ What top 3 factors will stop you from going after this market?
  32. 32. End
  33. 33. Disposable Everything! - quicker replacement cycles • Razor blades • Furniture • Mobile phones • Clothes • Cars • Computers • Software

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