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.

mHealth - a New Level of Maturity?

The who's who in mHealth gathered a few weeks ago at the second annual mHealth Summit in Washington, DC. Organized by the National Institutes for Health and the mHealth Alliance, the event featured globally-known keynote speakers including Bill Gates, Ted Turner and Dr. Judith Rodin (President of the Rockefeller Foundation). The mHealth Summit also attracted 2,400 attendees from 48 countries, 125 exhibitors and several hundred members of the media. This represents a dramatic change from just a few years ago when mHealth gatherings were small-group discussions and workshops on how to put this nascent field on the global radar. Yet it begs the question: has mHealth reached a new level of maturity, or just a new level of attention?

 

Collaboration with the broader eHealth community (of which mHealth is a sub-set) is a good indicator of maturation in the mHealth space. Indeed, eHealth and mHealth leaders are coming together to establish common principles and standards for implementations in the space. Another notable development is the increasing focus among mHealth organizations on Maternal and Child Health. This focus was inspired by the need to accelerate progress on the Millennium Development Goals. It has also prompted discussion on how mHealth could be used to improve the health of poor men, which is linked to maternal and child health indicators as well as to markers of community well-being. This subject was the topic of two recent workshops organized by the Collins Center for Public Policy.

Despite these achievements, true maturity of a field like mHealth can be measured by one concrete achievement: scale. From the inception of organizations like the mHealth Alliance and the mHealth Initiative, the goal of scale has been top-of-mind but elusive. mHealth pilots abound, but scale is necessary for market-driven sustainability of mHealth. Such drivers will come from private-sector involvement motivated by credible impact assessments and proof of potential profits (or at least financial sustainability). The development community and private sector alike would benefit from focusing on mHealth impact assessments, cost saving analyses, and market sizing, as well as the application of these research outputs to motivate the investments necessary for scale.