Portfolio expansion strategy in rural India for a clean energy enterprise

Client: Frontier Markets

Provided technical assistance to Frontier Markets to expand their product portfolio and introduce relevant products for the rural markets of Rajasthan.

Identified three key products relevant for rural Rajasthan; and FM’s existing and potential customer base.

As per estimates FM can expect to increase revenues by INR 5-9 crores by addressing 2-3% of the market size of the three relevant products; while improving access to appliances in underserved areas.

Identifying relevant appliances to help the enterprises expand its offerings while improving the quality of life for its rural customers that are largely underserved by the national grid.

Frontier Markets (FM) seeks to meet the challenge faced by rural households in accessing quality, clean-energy products. While product solutions for rural markets exist, their penetration has been limited due to unavailability of rural touch points, as well as the lack of training and servicing facilities. FM bridges that gap by ensuring last mile distribution of high-quality, relevant, clean-energy products and strategically placed service centres.

However the appliance penetration in the region remains low due to low income levels of the consumers, low levels of product awareness and exposure levels. For instance, in FM’s target regions, about 80% of households earn less than INR 1,00,000 per annum. Most families with income levels below INR 50,000 tend to own only basic appliances such as lighting solutions (bulbs or tube lights), fan, and sometimes, a television. Further most target regions received only about 12-15 hours of electricity in a day.

Intellecap assessed the potential role of appliances on customers’ lives and mapped consumer needs and aspirations. Followed by, mapping customer preferences, exposure levels, buying processes, triggers for purchase and usage patterns for the prioritized list of products based on a survey of 1000+ households.

The study focused on eight products and the findings highlighted that backup enabled fans, power banks and curd percolators were the most relevant products for Frontier Markets to introduce in the short term given their utility, price points and existing distribution channel of FM that could be leveraged. For instance, fans with a battery backup garnered interest amongst both customers and retailers. The main reason for high customer interest for the product was that most customers need fans during summers but the regions witness erratic and long power cuts. As a result, despite spending on fans, consumers are not able to use them when required. While solar home lighting systems can power DC fans, the high price of such systems renders them unaffordable for large segments of the target customer groups.

As a result the study did not just focus on identifying the relevant products but also channeled efforts to ascertain relevant features, buying behavior of customers, and a relevant distribution strategy to help FM in successfully expanding its product portfolio. For instance, it was found that purchase of appliances is typically event based- weddings (November-February), the harvest season (April, July, and September) and festivals (October-November). Further it was seen that customers prefer purchasing appliances from shops in their nearest towns. This is especially true for high-value products such as televisions, refrigerators. However, customers were willing to buy need-based products, such as fans from village-level retailers. Hence, FM could utilize its network of rural retailers and dealers to strengthen its market footprint.