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

1. No Frills
“One generation’s indulgence
becomes the next generation’s
necessity”
James Twitchell, University of Florida

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. 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. 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. 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. 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. 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. Fashion Apparel

9. No Frills Today
Banking Services Electronics Mass Transport
Personal Transport
No Frills
Household Consumables Today
Healthcare
Telephony Household Appliances
Fashion

10. Drivers
Growing Affluent Middle Class

11. Aggregate Consumer Power Shifts to
Affluent Potentials and Rural Poor

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. 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. 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. Creating Buying Power

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. No Frills
As A Business

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. 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. End

33. Disposable Everything!
- quicker replacement cycles
• Razor blades
• Furniture
• Mobile phones
• Clothes
• Cars
• Computers
• Software