Vital Wave Consulting quoted in The Economist

Vital Wave Consulting comments on commercializing mServices in The Economist:

Not just talk: Clever services on cheap mobile phones make a powerful combination—especially in poor countries

Undercut on the Low End: Rethinking Strategy in the Mobile Handset Market

The huge and rapidly growing Indian mobile handset market once seemed like a boon to developed-country manufacturers, but lately it is starting to cause them some sleepless nights.  Formerly the dominant player with over 70% of the market, Nokia has seen its share slide to 31.5%.  Samsung, meanwhile, recently lost the number-two spot to the relatively unknown Chinese brand G'Five, which now holds a 10.6% share to Samsung's 8.2%.  Although Nokia and Samsung still make up the largest share of the market, fierce competition from domestic and Chinese companies is quickly changing the market landscape.  Last year alone the number of Indian domestic handset manufacturers grew from five to 28. These companies have learned that they can score by addressing rapidly changing consumer preferences, such as longer battery life and feature-rich phones with low price points.

The shake up in the Indian handset market points to the challenges Western companies are having in maintaining a strong presence in emerging markets as new players offer value products in the low- and mid-markets with rock-bottom prices and novel features.  While not alone in struggling in the Indian market, Nokia stands out because it is being squeezed on the low and high ends, and in both emerging and developed markets.  In the global smartphone market, rising competition from such large players as Apple, Research in Motion, and Motorola has eaten away at Nokia's market share.  Commentators note that Nokia's market share loss is due in part to an insufficient focus on consumer needs and the emphasis consumers place on style and design, which rings similar to what is driving its loss in the Indian market - a lack of understanding the demand the Indian consumer has for cheaper, feature-rich products.  The fierce competition in markets such as India means that companies like Nokia need to find a way to stand out in the crowd, as they risk losing their competitive edge in low-cost device markets to homegrown emerging-market players.

One potential strategy is for multinational companies to move into solutions that require more than just the ability to manufacture cheaply, such as offering ancillary or end-to-end services that bind consumers and business customers more tightly to certain brands.  Nokia is pursuing this path with its Ovi suite of mobile services, with some success so far. Focusing on offerings that go beyond hardware can help shield companies from competition in low-end device categories by increasing customer loyalty and providing a new revenue stream.  Learning how to do this requires an understanding of evolving local preferences and trends, but it can help companies hold their own as competition intensifies.

Microinsurance: Rising Star or Tough Sell in Emerging Markets?

A report released last month by the insurance company Swiss Re claims that there is a $40 billion market opportunity for targeting microinsurance to low-income people earning less than $4 a day in emerging markets. Microinsurance products can include life, health and weather insurance and feature lower premiums and coverage levels than traditional offerings. According to the report, the Asia-Pacific region is the largest and fastest-growing microinsurance market, though the segment is also growing in Africa and Latin America. Many companies are already in the process of extending insurance to low-income customers in both rural and urban areas. China Life Insurance Company has provided 4 million microinsurance policies covering approximately 8 million farmers, while Bradesco Seguros, the largest insurance provider in Latin America, hopes to add an additional 20 million new clients on the strength of its microinsurance products. Panama's Nacional de Seguros recently announced that it will be launching a number of microinsurance products in 2011, and Malayan Insurance is expanding its reach in microinsurance by partnering with other organizations to develop new insurance products for the poor in the Philippines. 

Microinsurance products can benefit low-income clients and insurers alike.  Poorer individuals targeted for microinsurance tend to by very risk averse. External shocks such as a death in the household or a drought can force them to sell off the few assets they have to stay afloat, stifle their future investments and ultimately cause them to fall even further into poverty. Microinsurance can help the poor guard against events that could otherwise wipe out their family's assets overnight. Meanwhile, microinsurance allows insurers to enter a new market and build a brand image, paving the way for microinsurance policyholders to become conventional insurance customers as their assets grow.

Despite these benefits, there are many challenges to making microinsurance profitable, including customer perception and price sensitivity. Low-income customers, who may not be aware of insurance or may perceive it as a luxury item, need to clearly understand the value added to their business or families before purchasing the insurance product. Conducting in-depth research can help insurance companies develop compelling products and messaging. Additionally, technology could be utilized to both educate customers and bring the products to market. Since the brick-and-mortar model is not always feasible for reaching poor, rural consumers, insurance providers would benefit from technology solutions that both market and sell policies, particularly as mobile payment systems develop.