The 86% Solution: How to Succeed in the Biggest Market Opportunity of the Next 50 Years

By: Kamini Banga, Vijay Mahajan

Wharton School Publishing

With regard to the meaning and significance of the title, Mahajan and Banga explain that 86% of the world has a per capita gross national product (GNP) of less than $10,000 per year. So what? Not only do those markets represent the future of global commerce; “they also present rich opportunities for companies that have the imagination and creativity to envision [consumers within those markets]. But you won’t recognize these opportunities through the lens of the developed world. You won’t reach these consumers through the market strategies that work in the current 14% Developing markets have no smooth superhighways, no established consumer markets, no distribution networks, and, in many cases, no electricity. Developing markets are younger, behind in technology (but rapidly catching up), and inexperienced as consumers. These markets are very different. Yet with creative solutions tailored to their distinctive characteristics, you can realize the rich opportunities of these 86% markets.”

Mahajan and Banga have carefully organized their material within 11 chapters, which range from a rigorous analysis of “the lands of opportunity” to a “Conclusion” in which they explain why the markets in under-developing countries are “not to be missed.” More specifically, they discuss what they describe as a “complex tapestry” of convergent civilizations in which there really does seem to be almost unlimited opportunities to increase both the standard of living and quality of life for hundreds of millions of consumers. The challenge for those companies that attempt to market various goods and services in those markets is to understand their unique characteristics. To me, it seems at least as important to understand what they are not as it is to understand what they are...or can (and will) become.

Here are two brief excerpts and then a checklist that indicates the scope and depth of Mahajan and Banga’s analysis.

  • “There is no Chinese market. There is a market in Shanghai, or in a neighborhood in Shanghai. There is no Indian market. There is a market in Mumbai or Chennai, or in their local neighborhoods. Developing countries are a collection of fragmented local markets in a country that is gathered loosely under a single flag.” (Page 77)
  • “Think English is the language to know for business? Maybe not for long. Consider that Mandarin Chinese has the largest number of speakers in the world -- a billion, including second-language speakers. This is followed by English, with about half as many speakers, and then Spanish, Hindi, Arabic, Bengali, and Russian. If you want to work with 86 percent of the world, you need to speak the languages of the 86 percent.” (Page 83)

Which strategies will be most effective when “taking the market to the people”? Mahajan and Banga suggest seven:

  1. Position for the paanwalla (i.e. small shop)
  2. Create multiple levels of distribution (e.g. Hindustan Lever’s “Project Shakti” based a direct-to-home model involving self-help groups, each comprised of 10-15 underprivileged women)
  3. Use distribution bubbles (i.e. carnivals, market days, and vans which come and go) to find customers where they are
  4. Take the bank out of the branch (e.g. Citibank’s use of vans and a network of 9,000 direct-selling agents, called “Citi Friends,” who visit homes)
  5. Develop on-the-ground insights (i.e. understand and adapt to local and even neighborhood regulations and conditions)
  6. Create distribution systems from scratch (e.g. a new distribution system, based on grassroots networks, which built a supply chain for a camel’s milk dairy in Mauritania)
  7. Use existing networks creatively (e.g. the “dabbawala” system in Mumbai, India, probably the world’s most efficient lunch delivery system which collects 175,000 home-cooked meals from workers’ homes and delivers them to their offices)

Thoughtfully, Mahajan and Banga provide a section at the end of each of the first ten chapters, The 86 % Solution, which summarizes key points and facilitates subsequent review of them. Before concluding their brilliant book, Mahajan and Banga share these thoughts when explaining why numbers are on the side of the developing world: Population Equals Profits. “The transformation is just beginning. There will be hiccups along the way and further surprises over the next two decades as the next ‘Chinas’ and ‘Indias’ emerge. The only certainty is the 86 percent markets are here to stay. These markets are young and growing. Even though they won’t become developed tomorrow, they are the future, and the companies that can develop the right solutions to meet their needs will find a rich source of growth.”

Who will derive the greatest benefit from Mahajan and Banga’s book? The greatest benefactors are decision makers in two different categories of companies: Those which now market or are about to market in under-developing countries, and, other companies which now do business with–or plan to do business with–those in the first category. This book will be of substantial interest and value to public officials who are now actively involved with helping to support global commerce.

Congratulations to Mahajan and Banga on a brilliant achievement!

Related Industries

Related Enterprise Solutions

Click here to print PDF file