Companies forge lean business models to tap rural India

SITAPUR: Carrying two worn bags full of toothbrushes and toothpaste, Raj Verma rides his battered bicycle around villages in Uttar Pradesh, leaving fresh supplies of Colgate products at the small shops he visits. 

For centuries, Indians cleaned their teeth with a piece of bark from the Neem tree, known for its antiseptic properties. While most urban Indians have long used toothpaste, many of the 700 million rural Indians still brush with a Neem twig or their fingers. While that represents an obvious opportunity for toothpaste brands, the marketing and distribution methods to reach those remote customers are not so clear. 

Enter blue-sky thinking Indian style. India has pioneered the science of breaking up complex products or business models into their most basic forms and then rebuilding them in the most economic manner possible to tap the bottom of a market. 

They call it frugal engineering. 

The term was coined by Carlos Ghosn, the chief executive of Renault and Nissan, to describe the automotive engineering that went into Tata Motors' Nano, a small car that retails for just $2,000 in India. 

Tata itself sometimes refers to its low-cost innovations as "Gandhian engineering" in honour of Mahatma Gandhi, a renowned proponent of self-sufficiency. 

Over the past few years, India has gained a reputation for creating a wide range of products sturdy enough to handle its demanding environment, easy enough for a wide range of people to use - and most importantly, affordable -- from solar-powered ATM bank machines to a detergent requiring little water. 

But getting these mean, lean products to consumers is not as easy as distributing them in the developed world. 

Anil Gupta should know. He started the Honey Bee Network to support India's grassroots innovators and is an advisor to the National Innovation Council. He can rattle off a list of fantastic bricolage inventions, from an amphibious bicycle to a washing-cum-exercise-machine, that had no chance in the market. 

"Innovators are not necessarily good entrepreneurs," he noted. 

This is where big corporations have the advantage. Domestic and multinational companies based in India are taking that frugally motivated mindset and applying it to their entire business models. 

SACHET MARKETING 

One of the earliest and most simple business process innovations was started by a south Indian health and beauty company, Velvette, in the 1980s. Keen to reach Indians who aspired to use shampoo but could not afford to buy a bottle of it, Velvette began putting small quantities, enough for one or two washes, into plastic sachets. 

The idea spread. Multinationals such as Unilever and Procter & Gamble, which distributes Colgate products, adopted it. Now in small shops throughout India you can find streams of sachets dangling from crowded shelves and filled with anything from detergent and cough syrup to potato chips and mobile phone minutes. 

"The aspiration for these products was there, but consumer 'money in the pocket' to afford a large cash outlay was not there. So success at the lower cash-out lay in these sachets," said Geetu Verma, Executive Director of Innovation with Pepsico India, which sells small packets of its sports drink powder.