Transcript
Consumer-centred
research of Bottom
of the Pyramid
emerging markets
for entrepreneurs:
Case study from Kenyan
health and healthcare industry
The Fortune at the Bottom of the Pyramid (BoP) for Entrepreneurs
8
Observations and Insights from the Field 12
Guidelines for R&D Activities 17
The Logistics of Market Entry 20
Marketing Communication 23
A Highway to Creating BoP Business in Estonia 26
Note:
This report is one of the three versions presented of this research.
The other two versions are presented to Enterprise Estonia and SelfDiagnostics OÜ
Authors:
Priit Tinits,
Brinka Vatnsdal,
Liise Valma,
Erik Ehasoo
Authors would like to thank:
Kadri Humal Ayal,
Silvia Keskitalo,
Siim Esko,
Andres Raudmets (design)
The research is funded by:
Table of Contents
Foreword by Niti Bhan
4
Introduction
5
The Fortune at the Bottom of the Pyramid
8
Research Aim and Methods
Research Aim
10
Methods 11
Observations and Insights
Insights on People and Mindsets
12
Insights about the Street Environment
13
Insights on Perceptions of Health
14
Guidelines for Research and Development Activities
17
The Logistics of Market Entry
20
Marketing Communication
23
Discussion - A Highway to Creating BoP Business in Estonia
The Benefits of the Research for Companies
26
The Validation Showed Further Uses and Partners for Exploration Visits
28
Specific Suggestions for Implementing the Design Ethnography Method
29
Appendix: Timelines of Project Preparation and Suggested Schedule for New Research
32
Appendix: Overview of the Health Sector in Kenya
Kenya Macroeconomic Overview
34
Kenya Health
35
Kenya Healthcare System
36
Foreword by Niti Bhan
Given the scale of opportunities among the over-
There will be as much to learn from choosing to target
these extreme customers, as they emerge into the global arena wholeheartedly prepared and ready to embrace the latest innovations that technology can offer.
The only caveat remains that the task will not be one to
show highly visible success overnight but requires time
and investment in understanding these customers first,
in the context of their daily lives and the challenges of
their adverse and often uncertain environments.
looked and underserved populations of the developing world, the billions at the Bottom of the Pyramid (or
the BoP) have rightly captured global attention over
the past half a decade or so. However, these frontier
markets of our collective emerging future promise to
be among the most challenging to succeed in reaching
the world’s most demanding customer segment yet.
The mythical fortune at the
Bottom of the Pyramid is out
there, for those who
begin with understanding
The mythical fortune at the Bottom of the Pyramid is
out there, for those who begin with understanding,
and the Estonian team has already done well to break
new ground in this area.
The key to success will lie in taking this vast majority
as serious and discerning customers in their own right
rather than to assume their economic challenges and
inadequate infrastructure imply any less ambitions and
aspirations for their own and their children’s futures.
Markets need to be created, almost from scratch, in order to reach many of these segments, but as has been
noted by the Estonian team in Kenya, mobile phone
technology is extremely pervasive and very affordable.
The developing world is leapfrogging technology and
social and economic opportunities are evolving extremely rapidly.
Niti Bhan
Emerging Markets Strategist,
Founder and Owner at Emerging Futures Lab.
4
Introduction
Where does entrepreneurship come from? Typical
If something is possible in
Kenya (e.g., high mobile
penetration), it is also possible in other similar markets
on certain conditions
answers to that question might point to entrepreneurship programs in universities, design innovations or
lucky coincidences. There are many conditions that can
help to create entrepreneurship but a plain theoretical
study program or a creative idea is not enough. Entrepreneurship appears when the opportunity meets and
addresses someone with the right interest. Therefore,
in order to bridge the gap between a great design, idea
or theory and a marketable product, there is a need for
inspiration and knowledge. This, in turn, is best created
by hands-on experience and direct communication to
the consumers in your future markets.
The current project and study trip were initiated for
two main purposes:
1. To give practical advice for those interested in BoP
markets using Kenya as an example, as well to test
the method and the study-trip format that could
be replicated in companies and university degree
programs.
2. To better understand the behavioural purchasing
patterns of consumers making healthcare choices
and to get an overview of the healthcare system.
This design ethnography research project studying
Bottom of the Pyramid (BoP) consumers in Kenya follows the work of the Estonian Development Fund on
introducing BoP markets and Social Entrepreneurship.
The current work focuses on practical activities on how
to create entrepreneurship in Estonia through BoP
markets through an exploration trip (as one of the four
activities recommended in a theme paper by Estonian
Development Fund1).
This report is of interest as a “how-to” guide to various
groups of people that might organise similar visits in
the future, including:
Kenya has been selected as the destination due to preexisting support contacts in the country. Many insights
in Kenya might not exactly resemble the conditions
in other BoP countries but there are many similarities
and it certainly shows that if something is possible in
Kenya (e.g., high mobile penetration), it is also possible
in other similar markets on certain conditions. Kenya is
also interesting destination for research because there
have been many books and papers issued worldwide
on BoP consumers based on findings and examples of
India, other South and South East Asian countries and
South America but research and case studies on Africa
have been scarce.ˇ
•
•
companies looking for new products and markets
through user-led innovation and getting to know
their customers. The researchers (that could also
be the sales or R&D personnel) can also combine
the visit with establishing business-to-business
contacts;
students and youth “who do not yet know they
are entrepreneurs” but who have a potential to
turn the insights of a user-centred research into a
business plan. The practical experience in project
management and creating the contacts in difficult
surroundings is valuable in starting their own business;
Estonian Development Fund. Turud ja innovatsioon sissetulekute püramiidi põhjas.
http://www.arengufond.ee/upload/Editor/Publikatsioonid/sissetuleku-pyramiidi-pohi-mottealgatus.pdf
1
5
Introduction
•
•
university curricula (together with companies or
start-ups), where practical research activities could
replace some of the classroom tasks and these
could become the basis of future Masters’ and Doctoral theses in interdisciplinary programs, such as
Design and Engineering;
universities and research laboratories, where
technologies that have not found its users can be
applied in BoP markets. These technologies could
be teamed up with students, who will carry out
consumer research, to promote entrepreneurship
after the particular project (similar approach has
been used in Chalmers University of Technology in
Sweden).
By carrying out a user-focused research and recording
its results and suggestions in a publicly available format,
each subsequent exploration trip becomes less expensive and more affordable for small and medium-size enterprises and start-ups.
This report evaluates the benefits and drawbacks of
the exploration visit method, as well as presenting the
main findings of the research project in Kenya. Conducting a research as the method is difficult to be compared
with other methods as it depends greatly on the aims on
what is the quality of the activities, how practical should
be the information obtained, and what the available resources are. However, as design ethnography methods
provide the researchers with very hands-on information
and in a much larger quantity and variety that could fit
in a report, it is a very practical approach to learn about
new markets (provided that the researchers stay connected to the company or the project initiator).
Research is an essential part of entering new markets,
studying the feasibility of the idea before its execution
(see Figure 1). The exploration trip method is just one
way to promote interest in new markets and BoP consumers. Other methods that should be considered and
can be built on top of research are:
•
•
•
initiate business idea competitions for solving BoP
problems;
embed BoP issues in the curricula of international
business, design, and innovation;
use development aid to invite entrepreneurs and
companies to participate in project and idea competitions to address BoP consumer needs2.
Figure 1. The exploration trip is the essential step between the initial idea and trends analysis and execution activities.
The insights from the user-centred research help reduce errors in later activities.
Estonian Development Fund. Turud ja innovatsioon sissetulekute püramiidi põhjas.
http://www.arengufond.ee/upload/Editor/Publikatsioonid/sissetuleku-pyramiidi-pohi-mottealgatus.pdf
2
6
Introduction
The report is prepared in three versions, addressing
The report is written as a sequence of sections that can
be read in succession, or by a chapter of interest.
interest areas for all three of the funding partners. The
main focus of the consumer study is on health and the
healthcare sector, requested by one of the partners. The
current version is prepared for the Estonian Development Fund. The current report has also narrower aims
defined by the partners:
•
•
•
In the first part, background information is given by a
brief overview of global trends and the theoretical basis
of BoP markets. The second part follows with the presentation of research methods. The third part presents
the main findings and independent insights from various viewpoints.
learn and analyse about the user behaviour in
health and healthcare sector among Kenyan BoP
consumers to recommend activities for a particular
company strategy (incl. how to think differently for
successful operations, what has to be considered
during R&D process and when developing product
concept);
learn about the methodology of consumer-centred
research on BoP markets and evaluate its usefulness
as a tool for providing input on the product and
business model development for Estonian companies (incl. what does the method allow to take notice of that would otherwise have been unnoticed);
create and collect the knowledge about the differences of operating in remote markets in one
document and make recommendations for future
research projects.
The fourth part filters the insight according to which
insights and activities should already be considered in
the research and development stage (R&D) of product
development. The fifth part focuses on the logistics of a
market entry for a final product and the sixth part on its
marketing activities.
The final seventh part focuses on evaluation of the
method and provides recommendations for future work
on how to bring BoP and design ethnography closer to
Estonian companies. In the appendices, general macro
data about the economy and health in Kenya are presented to give the reader the opportunity to match the
insights with publicly available data. Supplemental information about recent economic developments and
opportunities in Kenya are presented in text boxes.
The authors would like to thank SelfDiagnostics OÜ,
Estonian Development Fund and Enterprise Estonia for
their support that made this project possible.
Each subsequent exploration trip becomes less expensive and more affordable for
small and medium-size enterprises and start-ups
7
“The river is made bigger by the small springs”
Kikuyu proverb
The Fortune at the Bottom of the Pyramid
The idea that “Bottom of the Pyramid“ (BoP) consum-
1. Wealthier consumer markets are saturated and
therefore highly competitive. BoP continuously provides a substantial growth opportunity.
2. Development of technology and infrastructure has
made it easier than ever to deliver the products and
services to new market segments.
3. Development aid towards United Nations Millennium Development Goals is changing its focus from
direct financial aid to cooperation with private sector in channelling the funds.
4. In order to stay competitive among increasing
number of businesses grown out from emerging
markets, Western businesses need to recognize BoP
markets as a source of innovation.
5. Consumer culture in Western world is not sustainable and there is a need for innovative business
models. BoP markets are perfect for testing new,
more sustainable approaches.5
ers constitute a huge market was introduced at the
beginning of the century by C.K. Prahalad in his 2004
book “The Fortune at the Bottom of the Pyramid“. This
concept was developed to introduce the “top of the
(income) pyramid” product users and decision makers
that there are 4-5 billion people that are “unserved or
underserved by the large organised private sector, including multinational firms“3), and the way to alleviate
poverty is to promote entrepreneurs and businesses to
address their needs. In the original definition BoP consumers were the people earning US$ 8 or less per day.
The globalisation and the development of the emerging
markets since the first edition of the book have changed
the perspective on BoP. This disadvantaged group are
estimated to have a total annual income of $2-3 trillion4. In addition to the size of the untapped market
today, BoP has received attention because of the fast
developments in the market. The urbanisation of BoP
consumers and the new technologies allow reaching
the huge number of customers cheaper than ever.
The challenges of BoP consumers (e.g. low and fluctuating incomes, illiteracy) have caused them to be excluded
from most of the conventional business models, and to
rely on informal markets. The products and services that
are not available for the BoP consumers (e.g., information, banking) are often the ones with a capability to improve one’s incomes and living standard. Therefore the
business models that take account the particularities of
BoP consumers can earn profit and reduce inequality
and poverty, achieving corporate benefits with social
impact. There are also other reasons, why BoP markets
should more carefully be looked into:
Prahalad, C.K. (2011) “The Fortune at the Bottom of the Pyramid“, 5th edition, pp. 6
The World Economic Forum publication: „The Next Billions: Unleashing Business Potential in Untapped Markets“
http://www3.weforum.org/docs/WEF_FB_UntappedMarkets_Report_2009.pdf
5
Estonian Development Fund. Turud ja innovatsioon sissetulekute püramiidi põhjas.
http://www.arengufond.ee/upload/Editor/Publikatsioonid/sissetuleku-pyramiidi-pohi-mottealgatus.pdf
3
4
8
The Fortune at the Bottom of the Pyramid
The challenges of BoP consumers have caused them to
be excluded from most of the
conventional business models
the population in BoP is rather young (i.e. In India the
median age was 26.2 years in 20117). The young and
growing population allows predicting that these people will soon affect employment, demand, savings and
investment behaviour throughout the world.
Although BoP is not a homogeneous set of customers
(e.g., differences based on urban vs. rural, age, religion,
language)), there are several common characteristics
that businesses need to understand in order to successfully enter the market:
Understanding the BoP
According to World Economic Forum, “within the BoP
group, income levels vary greatly. The 1.1 billion top
earners in BoP population earn $2-8 a day (2009 data)
and have some opportunities to save and grow their
savings. In the mid-range, 1.6 billion people earn $1-2
a day, spending largely on essentials. This consumer
group is followed by one billion people that earn under
$1 a day placing them in extreme poverty (all figures in
PPP USD). Their spending patterns also differ (see Figure 2). BoP consumers live in every part of the world
but most notably in Asia, Latin America and Africa. 60%
of the BoP population is in India and China”6.
1. Low and fluctuating incomes, and limited access to
credit or insurance, drive the BoP to be smart shoppers and risk-averse investors.
2. Domestic constraints, difficult living conditions,
and high prices for products or services are among
the daily challenges at the BoP.
3. BoP consumers lack information on many commercial products, and therefore rely on trusted sources
or demonstrations to make purchase decisions.
4. BoP consumers and workers conduct their lives
with dignity and demand both respect and quality
from service providers and employers.
PwC research8 finds that successful pioneers to BoP
markets understand the trade-offs that a low-income
consumer is forced to make and build their value propositions around actual needs of the customer. The low
price is not the only factor and in order to overcome
the market’s challenges, businesses need to build alliances with government, other businesses and the local
community. The products can lack some of the nice-tohave features common in Western world, but they need
to fulfil the same high standards used globally.
Figure 2. Total household expenditure of BoP consumers by
PPP adjusted income.
Although currently most of BoP population is living in
rural areas (68% globally), urbanization process is rapidly changing the situation. Compared to the aging
population in developed world, high-income countries,
The World Economic Forum publication: „The Next Billions: Unleashing Business Potential in Untapped Markets“
http://www3.weforum.org/docs/WEF_FB_UntappedMarkets_Report_2009.pdf
7
CIA World Factbook. https://www.cia.gov/library/publications/the-world-factbook/geos/in.html
8
PwC. „Profitable growth strategies for the Global Emerging Middle Learning from the ‘Next 4 Billion’ markets.“
http://www.pwc.com/en_GX/gx/corporate-strategy-services/assets/4-billion-report.pdf
6
9
Research Aim and Methods
Research Aim
The terms and their usage in developed world are often vague and misleading, and therefore mere reading
of statistics, books or internet resources do not give
much relevant information about the potential of any
particular market (the middle class means very different groups of people in OECD and emerging markets9).
Therefore, for a company or a person seeking to sell
their products in that prospective market, should experience it first-hand to learn about its specifics. There
are multiple ways of visiting other countries, most common being tourism or business contact and learning
tours; however both of these methods do not provide
much representative contact with end-consumers.
The research work has multiple layers of goals. The
practical activities and data collection was conducted
mainly in the interest of a start-up health diagnostic
test developer SelfDiagnostics OÜ. The questions were
directed in getting to know the end consumer and the
logistics of the particular market. The results of the
fieldwork were to bring in valuable advice for product
research and development activities.
The main goals of Estonian Development Fund were
the following:
•
•
The exploration trip conducted with the methods
of design ethnography provide a much closer and inexpensive look at what are the real needs of the endconsumer and what should therefore be considered
in research and development, logistics and marketing
activities of bringing the product to the end-user.
to test the method and to study the possibilities of
consumer-centred field research and its usefulness
to provide inputs to a client company;
to collect information on whether and how this
method provides a way to arrange BoP exploration
trips for Estonian companies and entrepreneurs
more broadly.
There are multiple ways of
visiting other countries from
tourism to learning tours but
these do not provide much
representative contact with
end-consumers
In addition the report format of presenting the results
serves the following purposes:
•
•
•
to summarise the BoP consumer research insights
for Estonian readers in a storable format and to
introduce an emerging economy with a growing
market of increasing importance in the world (using Kenya as an example);
to raise interest in BoP among entrepreneurs and
create an example report for a company interested
in BoP consumers;
to raise interest in (social) entrepreneurship among
students and youth by underlining the need to
think about less talked about opportunities.
Bhan, N. (2012). „Thirty years of emerging market strategy: a review.“
http://www.nitibhan.com/2012/06/thirty-years-of-emerging-market.html
9
10
Research Aim and Methods
Methods
weeks (March 15 – April 1) contained intensive interviewing (the main part of the project), the rest of the
days were used for writing and additional information
checks. Interviews and fieldwork were organised during 4 days in semi-rural areas of Kenya with 12 days in
Nairobi. The analysis and synthesis of the data were
concluded in May 2012.
The study was conducted as a series of interviews combined with methods of design ethnography emphasizing beliefs about healthcare. The research process of
design ethnography is a growing research method to
obtain consumer-centred data. The photo documentation of streets, stores and homes allows questioning
in some information given by the interviewees and
adding more relevant questions in the interview. After
data collection, the observations are merged into “consumer profiles” to describe and understand better the
everyday life of the consumer.
35 people and organisations were interviewed, which
can be divided by target groups in the following way:
•
•
•
The consumer-centred approach is the reverse of large
sample quantitative studies, but according to Jakob
Nielsen (2000)10, in usability and design studies, five
respondents can provide up to 85% of the relevant information. Therefore, this study conducted in a limited
time period focused on obtaining 3-4 interviews in
various subgroup settings to generalise under which
conditions the answers were similar or differed.
The interviewed end consumers were found and approached through local contacts. The interviews were
conducted in English, Swahili or Kamba (in the case of
the latter two, they were translated by a local person).
The interviewees then signed the informed consent
forms personally or with the help of a witness if the interviewee’s English literacy was not sufficient.
The interviews and observations were supplemented
by in-depth desk research before, during and after the
fieldwork, and interviews with different stakeholder
representatives (e.g. hospitals, NGO’s, foreigners in Kenya). The results were presented in a format of insights
and recommendations for research and development
(R&D) activities and logistics for reaching the customer.
The recommendations for the private sector partner
SelfDiagnostics OÜ are arranged on Osterwalder’s Business Model Canvas framework11, which on request by
the company will not be disseminated publicly.
No incentive to participate was mentioned before the
interviews (not to have any influence on the answers)
but after the interview the participants were usually
thanked with a kilo of sugar or rice. The interview answers were written down on paper by the interviewers and typed in the computer the same day. The first
analysis was usually done in the evening after the interview, but the report was compiled after all the data had
been collected.
The evaluation of the methodology in light of the
current project is presented in the end of the paper
in chapter “The validation showed further uses for the
method”.
Preparation and secondary research were held in February-March 2012. The project data collection in Kenya
took place from March 15 – April 24 2012. The first 2.5
10
11
End consumers: 11 people
People and organisations related to the health industry: 16 people and organisations.
Start-up companies and entrepreneurial environment: 8 people and organisations.
Nielsen, J. (2000). „Why You Only Need to Test with 5 Users.“ http://www.useit.com/alertbox/20000319.html
http://www.businessmodelgeneration.com/
11
Observations and Insights
Observations
The social system and the banking services in the Western sense do not reach the majority of population and
people often rely on informal borrowing from the networks and sharing their wealth within these informal
networks. Many people are earning irregular incomes
from agriculture or seasonal employment and have to
combine jobs to maintain a steady income. Community
support helps to alleviate income shock and because
of strong community ties corruption is ever present
in the community and difficult to eliminate. The loan
availability is also low for new or foreign businesses,
but the situation is improving as international-minded
banks are growing in size and importance. In 2012, one
Kenyan bank was awarded the Ernst & Young World
Entrepreneur of the Year prize for fast growth in Kenya
and other African countries12.
from the fieldwork and information
from the interviews form insight that is can be seen
as a generalisation of how people act in various situations; which people could be expected to behave that
way, and under which conditions. Behavioural insight
is closely related to traditions in the social systems and
limits of the environment.
The relevant insights of the current report are summarised in three categories: insights on people and
mindsets, the perception of health, and the surrounding street environment. Those categories were selected
before the departure to knowingly search for differences with Estonia in each of the three spheres.
Insights on People and Mindsets
In a business environment, where the population supports their kin and short term customer relationships
dominate over long term partnerships, the people
have incentive to cheat. It is rather widespread to offer
newcomers different conditions than the frequent visitors because of the information asymmetry.
Kenyan families are large and the society is clan- or
tribe-based. This has an effect on how social capital
is built and how the family and extended community
networks and determine, who gets powerful positions,
which area receives finances as well as who is helping
the ones in need.
This leads to a high systemic mistrust within the population, hindering economic development (e.g., quality
goods are more difficult to be sold, where nobody believes promises about quality). From job interviews to
customer relations, people tend to confirm that they are
proficient in a longer list of qualities than they actually
are, and when problems arise, the responsibility is seldom taken.
Politicians are cursed by the people for being corrupt,
however people still take great interest in the affairs of
the state (although the news headlines often resemble
more of telenovela’s than the democracy). The parliament members are elected to represent the region
Loans are offered for public servants on a billboard in Ministry
of Health but they are not available for the people on the streets
12
http://www.ey.com/GL/en/Newsroom/News-releases/Press-release_WEOY_2012_Winner
12
Observations and Insights
that they were elected from and this is taken literally
as people often turn to the Member of Parliament from
their region with pledges for assistance. The community ties are strong and when a person reaches high
position with others’ help, they are expected to repay
generously.
Corrupt countries are often suspected of lack of property rights enforcement. In Kenya, there have not been
any scandalous cases. Surely, foreign entrepreneurs
should consider this as a possibility but this affects
mostly large-scale infrastructure investments. As a
Danish venture capitalist investing in technology startups put it “if they’d take away the office buildings, the
teams can just move to a next location to continue
their work”. Despite the corruption holding Kenya back
from its economic potential, the people are generally
optimistic and hardworking (especially in agriculture
and manual working). Kenya has not undergone times
of socialist-type society (unlike Tanzania) and entrepreneurship is common and having to work for one’s own
benefit is widely understood.
Komarock - suburb in Nairobi. Houses are being built brick by
brick depending on the available finances
The urban houses are usually built from stone or clay
bricks or concrete, the rural areas have 1-2 floor brick
or concrete houses, 1-floor mud houses or thatched
huts. The “brick-by-brick” or “floor-by-floor” construction is common in the urban areas, indicating the lack
of housing credit offered by banks or lack of access to
it by many people14. The construction sector is flourishing, there are many new apartment and office blocks
built in the city and new roads and highway junctions
being built within and outside the cities.
The fight against corruption is not hopeless as Rwanda having been through civil war has reduced corruption to the levels of Lithuania and Macau13.
Housing is not the only way of “saving money” by unorthodox ways. The people with no access to the banking services sometimes also store money in non-perishable food
grains or livestock and then sold if case of an urgent need
for cash. In the past years, the extensive networks of mobile payment services have made it easier to send cash
from relatives in other regions of the country or abroad.
Insights about the Street
Environment
Income inequality
The income inequality in Kenya is big (2008 Gini coefficient 42.5, which is similar to Russia), both within bigger cities and between urban and rural areas. Income
inequality is visible in the street environment in many
ways: what one does in the streets, the clothing one
wears, as well as the differences in housing.
The sidewalks are dominated by small businesses offering anything from metalwork to furniture (the street often works as a display salon), many of those businesses
accept payments in the form of mobile money (m-Pesa,
Airtel Money, Orange Money, etc.). It is common to see
people making extra or living by selling small products
Transparency International corruption perception index (2011). http://cpi.transparency.org/cpi2011/results/
Banerjee, A.B., Duflo, E. (2011). „Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty.“
PublicAffairs: New York, p. 183
13
14
13
Observations and Insights
(soft drinks, sunglasses, plastic toys, detergents) to the
passing people and cars or even in public transport.
Those products are bought from street businesses and
many sellers have invested considerable working capital
in it. Therefore the end consumer might not buy many
products from the closest street store but from middlemen who have purchased it for resale.
use wall spaces, though not by artistic hand but rough
graffiti texts. For start-up companies this method is not
feasible and needs more targeted activities. The wall
marketing is also used for informational purposes,
many stores and institutions – including in healthcare
and herbal medicines – have displayed a painted list of
products and services they offer.
It is common to see people
making extra or living by
selling small products
The advertising takes place also in the public transport – buses and minivans (matatus). The interiors of
the matatus are often covered with stickers advertising
local services while the otherwise standard exteriors
are sometimes decorated by foreign companies taken
from the shirt sponsors of the biggest football clubs
(that are praised by the owner or the driver). Football
is a great tool of marketing for companies as well as
countries (we were asked once what football club is the
nearest to Estonia) – the Emirates (sponsor of Arsenal)
or AON (sponsor of Manchester United) get a lot of secondary advertising in Kenya and other African countries. The sponsoring through international football is
well understood by South African mobile operator MTN
(present in 16 African countries) that has signed exclusive sponsoring deals for African broadcasts of top European leagues15. The European top league teams are
far-fetched for Estonian companies and start-ups, but
sponsoring local teams is a less expensive activity. For
example, a Danish venture capitalist supports a team
in Nairobi and issues local football news in the internet.
Outdoor marketing
The marketing channels for a Bottom of the Pyramid
consumer in remote areas that cannot access TV or internet cannot rely on channels that are used by foreign
companies in their home markets. One of the most
visible advertising is painted houses, restaurants and
small stores in the colours and the logo of the product
in exchange for free paints and extra fee.
Insights about Medicines Supply
The pharmaceutical products reach end consumer usually by a sale to the end consumer at the local chemist
or by a hospital recommendation after a diagnosis. In
the first case, the costumer has to pay the full price of
the product (with prices varying greatly between the
chemists), in the latter case the drugs are often given
for free, especially in the case of national priority diseases (HIV/AIDS, tuberculosis, malaria).
Roadside houses are often painted in the colours and brands of
consumer goods
The strategy will make the logo visible for extended periods but it could be rather costly to have wide reach.
Therefore it is used by companies with substantial
marketing budgets – mobile networks and producers,
beverages (Coca-Cola, breweries), Procter & Gamble,
construction materials. Even election advertisements
15
http://www.football-marketing.com/2010/08/20/mtn-scores-again-for-football-fans-in-africa/
14
Observations and Insights
only on the information given by the clinic staff or the
chemist. The dispensaries in small towns and rural areas
have general information posters (how to eat healthy,
keep cleanliness) in Swahili and regional languages
that do not appear even in the street environment. The
literacy level in Kenya is high, so if a patient has a question, it is likely that s/he could get scientifically proven
health advice by a fellow community member.
Human pharmacy and Agrovet combined in one store in Kapsabet, Rift Valley Province
I
n rural areas, the pharmaceuticals are sometimes sold
together with animal products under Agrovet signs,
although our interview with one such entrepreneur revealed that there are laws regulating it on floor space
and the cleanliness, so it is not as common as the signs
suggest. The chemists in towns and cities are often
equipped with laboratory equipment to perform diagnostic tests for various diseases.
Illustrated health information in local Kamba language in Kitui
dispensary
The private chemists get their supplies through distributor networks (there are many and they drive
down the prices as well as the quality), the government
system health institutions get their supplies through
government tenders. The government tenders guarantee the suppliers big orders but corruption can be a
problem as well as the delayed payments for the stock.
Many interviews with people confirmed the availability
to be a problem in government clinics, in which case
they need to turn to chemists to get the prescribed
drugs. Despite the widespread talk about tight checks
on drugs’ expiry dates, we noted expired drugs in one
institution we visited. There are also problems with
more specialized equipment but there the supply
problem is combined with limited available funds.
Insights on Perceptions of Health
The interviews confirmed that despite the health services are expensive, health is perceived as a very important priority in a Kenyan family. If there is something
wrong with the health of any of the family members –
an action is taken, but there are different opportunities
(in the order of the seriousness of specific situations):
First steps in treating illnesses
The people of Kenya are very well aware of the main
types of illnesses (flu, cold, malaria etc.), their symptoms and the reasons for illnesses. These illnesses are
handled at home and being cured using what people
have (incl. herbal medicines). In a typical Kenyan family, the mother makes decisions on health and father
makes decisions on money and family budget. In case
The information booklets within the medicine packages are often given in English language only, so the
patients lacking the command of English have to rely
15
Observations and Insights
are also very personal – they know their clients and their
families personally, they understand their language and
culture. It is clear that alternative doctors have an important role in Kenyan health system but it is almost impossible to measure their true scale and effects.
of an expensive treatment when money and health issues coincide, the health decisions are up to the father.
In case of a lack of money, the herbal medicines could
also be turned to but this knowledge is disappearing –
the younger generation can ask their grandparents but
do not know what to use when they are alone.
Doctors and national health institutions
The new Kenyan constitution approved in 2010 states
that every Kenyan citizen has the right to access the
health care16. Of course, in reality it takes time to be
realized fully and it is still expensive for the average
Kenyan to get the help they need. The doctors and
national health institutions are chosen in case of bigger and more serious health issues. Those who do not
have the money for private hospitals often have to wait
for months to get to a doctor in national hospitals and
even there the services are not necessarily free.
If people need some external help or medicines, the common first step is to visit the pharmacist. Pharmacists are
important because people trust them but they do not
ask money for counselling services– people can go to see
the pharmacist just to ask for advice. For BoP consumers
it is helpful that the drug can be bought in very small
amounts – if people have money for only one pill; they
only buy one pill even if it is not enough to cure the illness.
Alternative medicine doctors
Although people do not admit to visiting alternative
medicine doctors publicly, it is clear that it is widely
used in Kenya. There are many street advertisements
for alternative doctors, they appear in television series
and the alternative or “witch” doctors is a big business
and these “doctors” are known for being able to afford
relatively expensive lifestyles.
Budget constraints
It is unusual for lower income Kenyans to save money
for future (health) expenditures. In case of unexpected
health costs it is common turn to the family and friends
to organise a fundraiser and to get help. The family
and community centred approach also works in saving
for bigger purchases – there are savings clubs, where
the members make payments and get paid in bulk on
rotational bases. This helps people save, where banks
are not available and the income is unstable.
There are very different types of alternative medicine
doctors: herbal doctors (people curing with herbals and
nature products), spiritual doctors (often like psychologists where you can discuss all kinds of problems from
career, health to love) and quacks, who have often failed
to become doctors (not graduated their studies, etc.) but
still might use very modern methods to cure people.
The high health expenses and lack of official health
check-ups does not encourage forward-looking activities in healthcare – the interviewed people commonly
admitted they almost never go to official health checks
in the hospital or to a doctor. Some exceptions are when
there are free eye-checks and HIV tests in the community or when children have health checks in schools. However, there is no regularity in these participations as they
are organised by NGOs or within big campaigns.
In many of cases those three types of alternative doctors
are mixed in one and cannot be categorized as clearly –
they also have different names in different regions. People prefer the alternative doctors as it is often cheaper
than the official healthcare. The local alternative doctors
The Constitution of Kenya, 2010.
http://www.constitutionkenya.com/chapter-four-part-2-rights-and-fundamental-freedoms/
16
16
“If you are good you are known”
Kikuyu proverb
Guidelines for Research and Development
The observations and the synthesis of insights were
examples and the concurring thoughts that should be
followed already in the early research and development
phase are:
• Development of the industry is key driver for
value proposition. The social and economic development of the community allows raising the
incomes of the families and increasing the market
size. Some of the community development activities show results in short-term (e.g., increased employment in the community) while others need attention for longer term (e.g., thematic education,
health improvements). In many countries the more
remote areas are often neglected by the government institutions and are addressed by NGO’s.
The community development activities are often
accompanied with the logos and slogans of the
supporters but the visibility of the brand is not the
main goal in the long run as the demand will grow
with the development of the society.
necessary to make the experience relevant to every
phase in the product development – from research and
development to marketing. The analysis work of the insights is helpful to be built on existing product development frameworks. The observations and insights should
also have helped the company engaged in research to
have more clear overview of which population segment
they want to pursue (e.g., urban vs rural, age group, income group, other special features like literate vs illiterate).
Two common broad viewpoints of Companies approaching BoP customers of emerging economies are:
• the people (consumers) all over the world have similar needs for products and services and universal
designs are cost-effective and the way to go
or
• the BoP customers need special designs for products and services to address the challenges of their
everyday life, the specifics of the environment or
lack of access to utilities.
In the R&D activities it is therefore worthwhile to
think about the associated trainings that could
be carried out with distributing the product (e.g.,
self-diagnostics devices could make use of general health classes and consultations or free health
checks) and the local partners organisations that
are already involved in the community development and whose activities to join.
While the first is certainly true in many cases, and the latter is increasingly popular among social entrepreneurs
and innovators, there are almost no design innovations
that have only focused on BoP and become a widespread success all over the world. The main reason in the
failures to succeed is that the design is not the only important component the companies need to think about
in the BoP R&D activities for the product. To systemize
the components that create the difference for the BoP
customers, Niti Bhan has proposed the 5 D’s model17,
where the success depends on the integrated product
development strategy addressing the following five
components: development, design, distribution, demand, and dignity. The brief descriptions with some
The social and economic
development of the community allows raising the
incomes of the families and
increasing the market size
Bhan, N. (2009). „The 5D’s of BoP Marketing: Touchpoints for a holistic, human-centered strategy.“
http://www.core77.com/blog/featured_items/the_5ds_of_bop_marketing_touchpoints_for_a_holistic_humancentered_
strategy_12233.asp
17
17
Guidelines for Research and Development
•
Design does not only mean the physical design but
it includes the product’s or service’s capability to
match consumers’ needs (including the price). The
design of a product that is meant for BoP consumers in the emerging economies should take account
of the income instability (“pay when you can” taking account the seasonality and temporary jobs by
reminders, community support and allowing for delayed lump payments), the education level (possibly
requiring simpler products), and the environment
(dust or waterproof depending on the areas).
a passenger in a long-distance bus about to depart
would pay more for a soft drink when the agent sells
it to her though the bus window.
The R&D activities of a BoP-oriented product could
therefore already take into account the most likely
distribution channels. If the sales strategy foresees using agent networks, it is useful to plan the
product with features of convenience for the sales
agent (e.g., ability to earn profit, convenient carryboxes for multiple products).
•
The R&D activities should regularly be compared
with the available research on the needs of the
target market. If the product is being developed or
just entering the market, it is useful to demonstrate
the intended designs to find shortcomings and suggestions (as it is very difficult to adequately describe
a product the consumer has no prior experience
with). Design ethnography methods are not sufficient to give reliable estimates of the preferred retail
price of the product and that has to be determined
by a quantitative market research (using trial and error could lead to confusion around the perfection of
the fair price or post-promotion dips in sales).
•
Distribution is crucial for your product to get to
where people really shop. Street kiosks are thriving
in Kenyan emerging economy selling all the necessary every-day goods. Supermarkets and chain
stores exist in bigger cities but are not common in
smaller towns and rural areas. Informal sales agents
have important role in bringing consumer products
to many people by buying an item and distributing
it where it is not present but demanded by a person.
For a company it would therefore beneficial to keep
the price lower than the maximum amount the end
consumer is willing to pay in various sales points –
Demand for many products is often generated by
the advertising messages linked to people’s everyday life. For BoP markets, the messages should be
simple (especially in the areas of low literacy), and
underline the benefit of using the products (e.g.,
“saves money”, “lasts long”). If the product itself has
become interesting for the consumer, it not might
still be enough when the consumer experiences
budget constraints. In these cases, the demand can
be increased by offering flexible payment terms or
smaller packages. The budgeting cycles are considered in retail business even in the Western world
– Walmart stocks up larger packages in the beginning of the month that will be replaced with smaller
packages towards the end of the month18.
The commercial messages are important to get the
consumers’ attention but it is even more important to
deliver the advertised promises. Therefore it is important to realise in the beginning of the R&D activities,
which is the value proposal that is the most important
to the end-consumer and what promise to build up in
the later campaigns. In the later stages of R&D process, the bundle packaging and the payment scheme
questions will become more important to decide how
much flexibility is needed for the current product.
The New York Times (2010). „Stores Scramble to Accommodate Budget Shoppers.“
http://www.nytimes.com/2010/09/22/business/22dollar.html?src=me&ref=business
18
18
Guidelines for Research and Development
•
Dignity means that the product for the BoP segment should not just be scaled down in features to
obtain an affordable price but to develop the product or service with the clear understanding of having the user in the centre of respect. Special features
might be needed for the illiterate or other discriminated groups.
As such, the observations from fieldwork directly contribute to the development of the product in its nascent
stages. The usability and the applications of the products should be prepared for the end user already in the
early research and development activities because later
mismatches cannot be changed easily. A systematic
5D approach on customer needs helps to see various
perspectives in what would make a product successful
and find combinations of it. Some examples integrating
multiple D’s in real life examples in Kenya include Nokia
advertisement message “Loud music” (appealing to Dignity with its promised feature and using simple slogans)
and small value prepaid mobile call time (Design of paying when it is convenient to you in small “packages”).
The products and services are not bought and used
to create profit for the producer but to improve the
quality of life in one’s family and create benefits for
the future. The poorest consumers also desire selfesteem and social recognition and buy items that
not only fulfil their needs but look nice and make
them feel better. An example of that could be found
in stores or pharmacies where the products are
stacked in piles in nice colourful packages to catch
an eye of the consumer better.
The concerns for dignity are addressed in the R&D
process by having a holistic human-centred planning of the product. The ease of use, good feeling
and come about when other aspects are thought
out from the user perspective but consumers from
minority groups might need to receive extra attention.
The poorest consumers also
desire self-esteem and social
recognition and buy items
that not only fulfil their needs
but look nice and make them
feel better
Nokia street ad with simple promises
19
“The cooking pot from which many people await for their food,
does not lack someone to take it from the fire” Kikuyu proverb
The Logistics of Market Entry Activities
When the product is developed in line with the needs
service. The private pharmacies and clinics have usually
signed their delivery contracts with one or many suppliers active in the area, the governmental institutions receive their goods and equipment through state tenders.
The larger distributors find an edge over the smaller
ones by signing exclusivity contracts and then employ
personalised sub-distributor advertising in clinics / hospitals for the producer brand (the distributor name is just
mentioned in small print on the packaging). In healthcare supplies those contacts are usually made in large international trade fairs (e.g., MEDICA in Düsseldorf, ARABLAB in Dubai). Tender procedures have been simplified
over the last years, but there are still complaints about
the conditions and unequal payment terms with the
companies that have close contacts within the ministries
(e.g., the favoured company can receive money fast but
other companies have to wait up to 3 years).
of its prospective user, the next big question is how to
deliver it to the user and facilitate the logistic and legal
procedures that will be required. The following recommendations base on the observations and secondary
research as well as from interviews with industry players.
The logistics of how to reach a BoP consumer depend
greatly on the product or service to be sold and their
point-of-sales. Small enterprises and kiosks dominate
the streets in the smaller towns and larger cities, this is
where the consumers find the products closest to their
living and everyday routes. Retail chains or franchising
under a common umbrella brand is very uncommon
and exists only in cities. Therefore one can assume, the
market for consumer goods distribution is very scattered and many companies operate in wholesale trade
and transportation. These logistic networks provide
living for very large number of middle-men and the last
step to the end consumer is often provided by extra
sales agents who buy their goods from the last publicly
visible sales stand (a kiosk or a supermarket).
An effective and inexpensive way to reach out for new
companies on the market could be using NGO’s networks. The NGO’s and aid organisations do not promote
profit causes but to meet their own goals, they have often spread well to many regions as well as the rural areas.
If the need the product addresses is similar to the NGO’s
focus activities, the NGO’s could agree to many forms
of cooperation, including shared promotion, free sample distribution, and trainings. Cooperation with NGO’s
was also recommended by Kenyan technology start-up
companies, which have developed an innovative service
or solution but have to grow under severe budget constraints.
The lack of employment opportunities, which give a
widespread aspiration to get involved agent and middleman activities have been understood by many multinational companies and social entrepreneurs. Coca-Cola
has been admired for its ability to reach and be visible
in the most remote corners of Africa through giving an
opportunity of earning extra income to local women.
A social enterprise ColaLife realised that and came out
with an idea to piggyback the Coca-Cola distribution by
adding medicines and oral rehydration salts to the beverage crates.
In healthcare industry it might be beneficial to partner
with chemists as the first reliable advisors to the many
people on health issues, and even those quacks or
witchdoctors, who use scientifically proven methods.
However, since there are only a few chain pharmacies
and those do not operate many outlets, reaching out to
The competition for distribution of pharmaceutical
products and medical supplies are also very fierce and
the cost pressure is compromising the quality of the
20
The Logistics of Market Entry Activities
the chemists independently is a very difficult task. The
street sales agents could also be used for the sales of
pharmaceutical products or self-diagnostic devices but
only if the sales of product will not be regulated by the
government agencies (KEMRI or KEMSA) and the retail
price allows the agents to make a small profit.
The region’s two most important ports are Mombasa
in Kenya and Dar-es-Salaam in Tanzania. However, since
the road and rail network in Tanzania are inadequate,
Mombasa-Nairobi-Kampala route also serves majority
of Uganda, Rwanda, Burundi, South Sudan and NorthEastern Democratic Republic of Congo freight.
Hub of the East African Community
Kenya was not chosen as the destination for this research for any particular reason and whereas there are
differences between countries, there are also many similarities. The foreign companies interested in BoP would
understandably not be interested in entering only one
country markets (unless there is a very good reason for
it) but are interesting in testing the strategy and implementing it in other emerging economies. This is a valid
idea, but some caveats must be discussed.
In 2005, Mombasa port served 68% of the 19.6 million
metric tons of cargo that passed through the region’s
ports21. In recent years the port has had some setbacks
as the port has been associated with inefficiencies and
the increase in shipping times has had its impact especially for the importers of raw materials or final goods.
For a step-by-step guide on
how to establish a company
in Kenya and how much does
it cost, see the following link:
http://goo.gl/ysFcr
Many companies like to look at the aggregate international indices and rankings to determine their next
market entry19. This makes logical sense but there are
many considerations why it can sometimes fail. For example, Niti Bhan has suggested that a popular choice of
South Africa as a market entry to Africa is not the best20.
It is difficult to know the best choice at the distance and
whereas education, wage levels, and bureaucratic procedures certainly make a difference, it is important to
also look for existing hub of common historic areas.
Kenya is the most developed nation and the biggest
economy in East African Community (Kenya, Uganda,
Tanzania, Rwanda, Burundi) common trade area. The
132 million people living in the area also share a common trade language – Swahili.
Swahili speaking areas (green) and main transportation routes
(blue), including Mombasa-Nairobi-Kampala
Khanna, T.., Palepu, K.G., Sinha, J. (2005) „Strategies that fit emerging markets.„ Harvard Business Review.
http://turbo.kean.edu/~jmcgill/global.pdf
20
Bhan, N. (2012). „Why South Africa should not be the entry point to reach Africa’s emerging consumer markets.“
http://www.nitibhan.com/2012/05/why-south-africa-should-not-be-entry.html
21
Improving transit transport in East Africa: Challenges and opportunities, United Nations Conference on Trade and Development,
2007. www.unctad.org/en/docs/ldc20072_en.pdf
19
21
The Logistics of Market Entry Activities
Swahili Singapore
The position of the regional hub of a high-growth region
is supported by the young entrepreneurial population
(73% of the population are younger than 30 years), and
the focus on English language over Swahili and regional
languages.
With its proximity to a major oil transit route through
Gulf of Aden, there are similarities with Singapore (being
the international transit and translation hub for Chinese
and Malay population), especially if the situation in Somalia would improve. The increasing costs of production in China and South-Eastern Asia have already driven
some textile companies to move their factories to Africa,
where the labour is still cheaper and in abundance.
The current government is continuing with big infrastructure projects, including Lamu-South Sudan-Ethiopia (LAPSSET) pipeline, highway and railroad project to
Ethiopia and South Sudan that should increase the regional importance of Kenya further. The very recent oil
discovery in the northern region of Turkana (announced
in March 26th 2012) could make Kenya less dependant
on foreign energy as well as improving the country’s revenues.
22
Marketing Communication
After addressing the market entry and the delivery
a pity as the produced music has been influenced by
sponsor messages as well as live concerts serve interests of companies. As an example, Samsung has been
touring around regional cities with a party van stopping at streets to give whole day concerts of local stars.
network problems, marketing and brand recognition
creation become the key activities. Today’s Kenyans see
and hear many advertisement messages (esp. in urban
areas), so placing it in a visible and audible value-effective channels will be crucial to be noticed.
Local commercial messages and context are used
with success mostly by mobile operators and banks.
Mobile operator Safaricom has been especially successful by bringing general Swahili language words
(e.g., m-Pesa means “m-Money”) in their product
names. However, according to one social entrepreneur,
the local context is appealing mostly for the young and
successful urban population. For the poorer and older
consumers, acknowledging the product being made in
Kenya can be a drawback. For this part of the population even Indian and Chinese production were said to
carry the quality mark compared to the Kenyan origin
products.
Traditional marketing channels
There were 8 TV stations and 112 radio stations (24 AM,
82 FM and 6 shortwave) in Kenya in 200822. In 2007, the
media reach of radio channels was 91%, TV stations
56%, newspapers 43%, magazines 24% and cinema
screens 2%23 The radio is also preferred by local advertisers due to its low production and flighting costs,
immediacy and regional flexibility. Television viewers’
number is growing owing to increased number of local
production and wider penetration. The digital media is
still little used but the rapid increase in mobile phone
usage suggests the situation could change soon.
In the selection of marketing strategy, it is important to
turn back to the observations and the selected target
groups to approach. Various population groups are
within the country access different channels and user
awareness becomes important. A healthcare products
provider who targets the urban slum dwellers as the
purchase decision makers might consider street ads
and painting of buildings with simple slogans and foreign look. Another healthcare products provider who
approaches their customers through medical staff
might only go for radio and TV airtime to explain about
the importance of their medical procedures (as the
message would spread around wider range of people,
who can afford a TV and the treatment, and at the same
time develops the community).
Billboards are also widely used as a cheap marketing
method visible to consumers from all income levels.
Billboards are still considered to create wow-effect
among consumers and for a rough price of a newspaper advertisement for one day (€4000 in 2010), the
billboard could be displayed for one month24. Street
advertising also appears in another notable way – in
wholly painted buildings (see also: Insights about the
Street Environment). The initial bigger investment in
paint and brand supervision (that the logos and images would not look distorted) is there paid off by a much
longer visibility of the advertising.
The popularity of radio has caused local performers to
be employed by advertisers. One interviewee called it
Economy Watch. http://www.economywatch.com/economic-statistics/Kenya/Television_Radio_Statistics/
Pan African Media Research Organisation Country Reports (2009).
http://www.pamro.org/2009_Presentations/Liz%20Pillay%20-%20Final%20Presentation.ppt#1
24
Kenyanentrepreneur.com. http://www.kenyanentrepreneur.com/ogilvy-east-afric
22
23
23
Marketing Communication
A healthcare products provider who targets the urban
slum dwellers as the purchase decision makers might
consider street ads and painting of buildings with simple
slogans and foreign look
Mobile usage in Kenya started increasing rapidly during
2005-2007, when it increased from 7.8% penetration to
33.7% in just three years25. By September 2011, it had
increased to 67.2%26. There is no official data about the
share of smartphones but it is estimated to be about
10%. The increase in the spread of mobile phones has
been supported by cheaper tariffs and mobile phones
but also by popular services, such as money transfer
service m-Pesa27 (which started in 2008). In September
2011, there were 18.4 million mobile money transfer
subscriptions (45% of Kenyan population) and total
deposits of 56.7 billion KES (€567 million). The total
number of internet users in September 2011 was estimated at 14.3 million and 99.1% of the total internet
subscriptions were mobile data / internet subscriptions.
Fast growth in the spread of technology
The technology innovation in Kenya has clustered
mainly around mobile services. Most people can access
websites through mobile phone and mobile money
transfer services also started in Kenya.
The benefits of mobile services also spill over to other
unlikely fields. For instance, the spread of m-Pesa and
other money transfer services boost the national ID
card applications, as it is required at the registration.
The government has talked about a one-card-for-all
ID card with a chip, which in a developing nation with
many remote areas would help the government keep
in track of the population, collect data more easily and
to offer better and more electronic services, but that
has so far been delayed28.
The extent of use of the mobile services gives much
hope for the ID-card project if it was to be implemented. The pro-technology vision of the government and
mindset of the people has also been the main reason
for the mobile sector multinationals to establish research centres in Nairobi. They see Kenya as the test
platform for new services and technologies that
would later be replicated elsewhere in Africa. There are
local and foreign entrepreneurs in Kenya, some of whom
we met, that already take advantage of that position.
Paying for various services by simple mobile applications is common
Communication Statistics Report 2008. Communications Commision of Kenya. http://www.cck.go.ke/resc/statcs.html
Quarterly Sector Statistics Report July-Sept 2011. Communications Commision of Kenya.
http://www.cck.go.ke/resc/statcs.html
27
http://www.safaricom.co.ke/index.php?id=250
28
http://www.iq4news.com/osombah-sw/kenya-delay-issuance-national-identity-cards
25
26
24
“The house of the talkative man perished
long after that of the quiet” Kikuyu proverb
Marketing Communication
Kenya as Mobile Success Story
With high mobile penetration and literacy rate, popular
mobile applications are very efficient way to reach the
Bottom of the Pyramid consumers with services from
various fields. For example, MedAfrica allows the users to find info about the nearest relevant clinics based
on signs and symptoms, M-Farm on the other hand
helps farmers collect information about market prices
of products and buy and sell them. Their data is also
quoted daily in the TV.
The mobile developers got a huge boost in 2007. One
year before the Let’s Do It campaign helped Estonians
map the garbage nationwide; Ushahidi application
let Kenyans map post-election violence incidents. The
group of enthusiasts continued meeting and another
workgroups were established:
•
•
Hub (www.ihub.co.ke), which allows 7000 Kenyan
youth interested in technology exchange their
ideas and work and which gives workspace for 50
start-ups and 250 people;
m-Lab (www.mlab.co.ke), an incubator for mobile
businesses, which is one of five worldwide set up
in partnership with mobile giants Nokia and Samsung, both of who also have their research labs in
Nairobi.
25
“It is he who travels that finds the tusk”
Kikuyu proverb
Discussion –
A Highway to Creating BoP Business in Estonia
The conclusion of the research is presented in three
a valuable customer (e.g., payment conditions, sales
of healthcare devices to pharmacy use instead of to
the end-customer).
parts. First, the implications of the exploration visits
and design ethnography for enterprises are presented.
It follows with the discussion of possible solutions for
cash-strapped companies and start-ups. Finally, specific
recommendations are presented that could be valuable
tips to anyone thinking of planning a similar exploration
visit or conducting their own research.
Design ethnography is a way to learn about the new
market before the decisions on market entry and the
value proposition strategies. First-hand observations
and interviews can deliver insights that could not have
been thought about by literature, common sense or
business school lectures. The understanding of your industry of interest (e.g., healthcare) and enquiring simple
questions (e.g., where do they buy their products today,
how do they save) can determine the set of necessary
local partners and the payment schemes that increase
the number of customers. This knowledge saves money
compared to the trial-and-error method.
The Benefits of the Research
for Companies
The BoP consumers worldwide are an enormous and
growing market that should at least be considered by
every internationally ambitious company. It is always difficult to enter new markets or market segments, but BoP
consumers’ particularities add an extra layer of complication, figuring out the right products and strategies to
introduce these products. The good news is that the BoP
population would like to consume just as any other market segments when they can, and the BoP markets are
not saturated, so the agile and clever can earn substantial market share by addressing BoP needs. The aspects
that can only be learned through a hands-on field
research (and not through the usual business contact
visits) include:
•
•
•
•
•
A great deal of business innovation today takes place
in previously atypical locations, where the inhabitants
are in acute need for new solutions (Kenya is just an example of an emerging markets BoP country and there
are similar processes happening around the world). The
improvements fitted to the most cost-conscious consumer already take off from the emerging economies,
and the producers from the developed west have to deal
with such competition even in their home markets. The
easiest way to learn is to follow what successful companies are doing right (e.g., distribution channels, usage
of social bonds and marketing messages,) and discuss
how it is relevant to your own enterprise. In order to remain successful in this race, one has to continue being
updated, discover the habits of current and prospective
customers, constantly study the new opportunities and
be present in innovation hotspots.
channels that reach the end-consumers (e.g., where
do people really shop);
what are the social bonds in the society and “who
holds the wallet?”;
what are the marketing messages that are being
used for various population groups;
who are the most visible and audible competitors,
what do they exactly sell and how do they operate;
how to turn a “penniless consumer” eventually into
The search for innovation at BoP markets is something
the companies with global ambitions cannot ignore
in any industry. The primary interest of a company may
26
Discussion –
A Highway to Creating BoP Business in Estonia
be to expand to new growth markets, to keep track of
the competitors and new solutions or finding new product ideas. The dynamic environment, where many new
businesses are born attracts open-minded students and
youth that could find their opportunities, is an important source for entrepreneurship.
mation with the lowest cost for any participant. Start-ups
and small-and medium-size enterprises (SME) often lack
resources to collect the necessary information through
networks or full-size market research.
A hands-on design ethnography research (up to 3
months) is an inexpensive way to study a new market
and it will give the most reliable and tailored information
about any markets that lack publicly available insights.
The underlying question for the researchers is: Can we
create a handbook and support networks for SME’s who
don’t have the financial resources of Skype but whose
core markets are in emerging markets?
Due to the research costs, accessibility to the hands-on
program could become an issue but mapping and teaming of the interested parties (the clients as well as the
researchers) could help to solve this. The BoP markets’
research is an ideal occasion for entrepreneurs and universities to cooperate – students can be the researchers,
universities can provide with technologies and entrepreneurs with business understanding, funding and credibility.
One Estonian start-up company has now received valuable input for its strategic processes, without the cost of
a full-scale market research. The experience of SelfDiagnostics OÜ indeed shows that the research is relevant to
facilitate the opportunity discovery and strategic processes of start-ups, who have limited means. The business
opportunities are not constrained to low-cost health diagnostics, they are also relevant in mobile, IT, clean-tech,
and other industries.
A great deal of business innovation today takes place in
previously atypical locations,
where the inhabitants are in
acute need for new solutions
The particularities of BoP consumers or many other new
markets cannot be wholly understood by browsing
the internet, learning in the curricula or reading books.
These activities are useful but they do not give the entire
picture. The current research tested a method of visiting
the end consumers in their habitat and received satisfactory results despite the limited time and resources. The
current report serves as a collection of insights about
differences in end-consumer perceptions in another
country and gives practical advice for any successors.
The authors recommend the method for any researcher
or company interested in BoP markets and wanting to
unleash the innovation potential.
However, the innovation does not happen with just the
research, but it needs integrated activities from collecting insights through R&D and logistics to marketing activities. For financially challenged enterprises, there is a
need to set up a structure for rapid and cheap testing
of new markets, consumer segments and product prototypes. The costs can be shared with partners that be
domestic or foreign, from private sector, government
sector or education institutions. The more information
there is collected the easier it is for all parties get a share
of benefits in new innovation and growth markets. Clustering up by sector or interests gives the most infor-
27
Discussion –
A Highway to Creating BoP Business in Estonia
The Validation Showed Further
Uses and Partners for Exploration Visits
The visit could also be suitable for Masters’ and Doctoral
thesis studies, although in Estonia, university by itself
would be an unlikely funding source. Part of the funding should probably come from interested companies
(as was the case with the current project). To bring the
parties together, the first step would have to be made
by either the students themselves or the companies interested in these markets.
Formulated research proposal and exploration visit
report can be a vital signal for deciding on the strategy
and investment decisions on new market entry. In addition to the in-house use, a report can be presented to
external investors who do not invest in companies that
lack proper market understanding. The strict analysis
and clear wording of the findings helps bring about the
next concrete steps within the enterprise. The validation of the results would certainly benefit from an input
from external parties.
The companies to partner up can also be spin-off enterprises of universities. These start-ups, basing their
products on campus-developed technologies and
research, have shortcuts in access to student and professor research. Universities often support conducting
academic research in practical interest– for example in
one study program in Tallinn University of Technology
up to 40% of the theses focus on case studies from specific companies. If the consumers of those technologies
lie in emerging markets, a design ethnography study
would be relevant as one of the first steps to business.
As usual for start-ups, they often lack funding for research and exploration trips, and combined efforts of
financing, technologies and design, and research activities and knowledge is useful for all of cooperation
partners – e.g., well-established companies, spin-offs/
start-ups, and university programs.
One of the possible partners for entrepreneurs to discover opportunities in the BoP markets can be universities. Estonian universities start to gain interest for multi-disciplinary insights from the bottom of the pyramid
markets. For example, one university has shown interest in including some insights of the current research
in their Marketing module courses – to exemplify how
efforts are needed to understand the consumers. This
underlying search for understanding of the end users
forms the basis for many different business-related subjects (and not constrained to business – e.g., design,
engineering). The exploration visit method has also
attracted interest as a possible award travel for outstanding students. Similar awards have been offered to
students to visit Silicon Valley29, which is also an innovation hub. In the award setting, the visit would serve for
study purposes as well as for inspiration to think more
broadly about global markets.
29
There are enterprises and start-ups that show interest in BoP research, universities are interested in cooperating with private sector and giving the students
experience in practical research activities, and most
likely there are also a number of students interested in
conducting the research. What seem to be missing are
program funding and the body of initiative. Whereas
the first is complicated to be raised without successful
examples, the latter can easily be created in a formal or
informal forum for interested parties (enterprises, universities and researchers).
http://www.e24.ee/871258/kuidas-silicon-valley-ttu-tudengeid-sokeeris/
28
Discussion –
A Highway to Creating BoP Business in Estonia
Specific Suggestions for
Implementing the Design
Ethnography Method
The preparation and research process benefits greatly
on international contacts in similar research fields. The
current project team also contacted students from
Finland having gone through an analogous study.
Estonian companies can team up with Finnish partners
(companies or universities), who are among the leading
countries in consumer-centred design ethnographic
research. Research proposals introduced with “Nordic
dimension” would also attract greater public interest,
and business partners in Nordic countries would allow
benefitting from range of governmental international
business agencies with extensive office networks
(e.g., FinPro30, FinNode31, and Danish Trade Council32).
The experience in Kenya suggests that Estonians are
welcome to ask for help, especially if the bureaucratic
requirements (e.g., the country of origin) are resolved.
The Nordic initiatives are government-funded and the
proper consultation and assistance needs a clear understanding how the financing country would benefit from
the initiative.
The design ethnography method (making observations and conducting interviews, storing them in various
formats, and analysis of data of all configurations) was
well suited for the current research. It was easy to set up
interviews with the help of the locals and foreigners in
Kenya, and collection and recollection of visual data was
not interrupted. Audio recordings were used only once
because it turned out that the equipment brought from
Estonia (analogue tape recorder) was not good enough
to distinguish the speech from background noise. The
notes were recorded on paper without difficulties – one
researcher asking question and other researcher writing.
In order to have wide viewpoint on the market opportunity, it is useful to combine as heterogeneous team as
possible. The current team consisted of backgrounds
in social sciences, business and healthcare but lacked
design and engineering skills for proposing product designs.
Cooperation with Finland and emphasizing our expertise areas (e.g., e-services) will also support bilateral
business and research contacts, where both parties have
benefits to gain. Some examples of international cooperation in learning about BoP consumers include:
Aalto University International Design Business Management programme33 (IDBM) that sent teams of students
to India, Brazil and Vietnam on low-cost industry assignments; Global Institute for Tomorrow (GIFT) pan-Asian
community development and leadership programme
that builds leaders by emphasizing co-creation of solutions and user-driven learning34; and Stanford University BioDesign programme partnering with Indian and
Singapore hospitals to learn about innovation in medicine35.
Design ethnography aims to answer qualitative questions (e.g., about the needs of the consumer, their habits, points of sale). Quantitative research questions (e.g.,
pricing, market size) require qualitative questionnaires
and data analysis. The method or (mix of methods) selected for the market entry study depends on budget
and ultimately on the goal of research for the company. The best mix of data is collected by using multiple
methods of research – background interviews, field research, questionnaires and focus groups.
http://www.finpro.fi/web/english-pages
http://www.finnode.fi/in_english/
32
http://um.dk/en/tradecouncil/
33
http://idbm.aalto.fi/
34
http://www.global-inst.com/executive-education/young-leaders-programme/overview.html
35
http://blogs.hbr.org/govindarajan/2011/09/how-to-build-a-reverse-innovat.html
30
31
29
Discussion –
A Highway to Creating BoP Business in Estonia
might for a black or a local researcher asking the same
question. Some respondents maybe be seeking recognition, sympathy or are looking for material support, not
understanding the purpose of the study and importance
of accuracy of answers. These intentional manipulations
of answers can be reduced to minimum by organising
focus groups of end consumers or other stakeholders,
where the group processes would hold back the situations of social desirability or assuming the information
when one is not sure.
The time frame of the current research (2.5 weeks)
turned out to be enough to collect some evidence
about the market but not enough to compose reliable
consumer profile and set them in the right context to
propose the market entry strategy. The usual length of a
design ethnographic study is up to 3 months, assuring
that there are enough subjects from various backgrounds (urban/rural, age, gender) to set up consumer
profiles for creating valid comparative conclusions.
Scheduling is an issue – unpredictable traffic, tardiness
and lack of punctuality are not conducive to efficient arrangements (on the other hand some aspects like traffic provide business opportunities like for instance realtime traffic information). It is unrealistic to assume that
more than one or two meeting a day would be possible,
consequently data collection is time consuming. In addition, some more sensitive areas of study (e.g., health
issues, children, body measurements) require prior permits to conduct a study. Kenyan Medical Research Institute (KEMRI), issues permits for any healthcare related research. Hearings are six times a year and proposals must
be submitted two weeks in advance (the processing fee
is $800 per procedure). Therefore, the required bureaucratic process for any health sector research would take
about 2-3 months to get approved.
Fieldwork is the most expensive part of the study for a
foreign researcher, as it usually requires transportation,
accommodation, and a hired guide and/or translator.
The cost of a visiting researcher in a Kenya is €40-80 per
day, excluding the flights and local transport, depending
on the preparatory work on location and local networks
(cf. €5000-10,000 for two weeks of field research in urban slums of Metro Manila, Philippines36). The prices of
quantitative surveys vary depending on their extent but
according to a market research company, a nationwide
survey on simple questions could be done for €7000.
More elaborate surveys would cost €10,000-30,000,
which is not expensive for knowledge of where to make
an initial investment in any market entry.
If the study trip is short and the main goal of the visit
is to collect a considerable amount of quantitative data
(as opposed to gain qualitative first-hand experience interviewing the BoP consumers), it might be worthwhile
to split up the responsibilities and cooperate with local researchers. After a 2-3 day training session on the
questionnaire and the methods, the groups of local researchers can be sent to their home town covering the
transportation and a small allowance.
Conducting the research in a foreign country adds difficulties to work organisation and data collection but
good planning and preparation should reduce many
of the concerns. Foreign researchers should be aware
of different expectations towards foreign researchers
could result in different prices being told for locals and
foreigners or other exaggerations of data. The appearance of a white researcher as a typical aid worker in the
region can cause people to answer differently than they
Bhan, N. (2009). „Understanding BoP household financial management through exploratory design research in rural
Philippines and India.“
36
30
Discussion –
A Highway to Creating BoP Business in Estonia
The analysis process should include all the researchers and field workers as all observations from different
viewpoints are valuable and give additional insight into
the consumer behaviour. The companies that have been
clients for consumer-centred studies in other countries
have underlined practical advice and new knowledge
as the main benefit. SelfDiagnostics OÜ valued the most
the information on what is the order in which the consumers seek help in healthcare system, what specifications does the product need and emphasized the knowledge on entry barriers as one very important advantage.
Such a group of 5 people could run a day of study for
€20-50 (with no lodging and translators needed) and by
already knowing the community, the amount of information collected would be much greater. In this setting
it would be worthwhile to use back-checking on the interviewed people and to train 10-20% more researchers
for possible drop-outs. If there is sufficient knowledge
about the destination (reading the available material as
well as talking to people with travel or research experience in that country) and time for the preparatory work
of creating local contacts, one month could be the minimum amount of time to conduct a consumer research in
a foreign country.
Online sources do not provide actionable insights. The
close and personal approach at the end customers and
other agents allows compiling expanded understanding on multiple layers from product development to
marketing needs. Then a business can feel much more
secure about establishing a business that addresses the
high-growth emerging markets.
To ensure the best result, different research methods
should be combined and the rough schedule could be
the following (see the comparison between the schedule proposal and the preparation schedule for the current project in the appendices):
1. 1st week – in the capital or the main city collecting
background interviews with stakeholders, foreigners and set up support contacts (e.g., consulates);
meeting and selecting the local researchers; finalising the questionnaire on the basis of background
information, and test-runs;
2. 2nd week – training the local researchers (how to
collect and store data in multiple formats in design ethnography); start of the fieldwork with local
groups collecting the quantitative data and the foreign researchers collecting the qualitative observations around the country;
3. 3rd week – fieldwork continues; the preliminary
analysis of the results and back-checks;
4. 4th week – more analysis and writing and extra interviews with the contacts established in the 2nd
and 3rd week or in case of conflicting data.
31
Appendix: Timelines of Project Preparation
and Suggested Schedule for New Research
The preliminary schedule prior to the current exploration visit. The main change to the proposal at the location was the
shorter fieldwork time mostly due to the budget limitations.
32
Appendix: Timelines of Project Preparation
and Suggested Schedule for New Research
The suggested schedule of a cost-effective design ethnography research, corresponding to the mixed quantitative /
qualitative research organised with the help of local researchers.
33
“The good millet is known at the harvest time”
Kikuyu proverb
Appendix:
Overview of the Health Sector in Kenya
Kenya Macroeconomic Overview
tion in 2010 went peacefully and transparently, but the
upcoming elections in March 2013 will be important litmus for political stability in the country.
General information
Kenya is the 11th biggest economy in Africa and the
biggest in East Africa region. The country lies on Indian
Ocean and is bordered by Tanzania, Uganda, South Sudan, Ethiopia and Somalia. The country’s population of
43 million consists of many ethnic groups: Kikuyu 22%,
Luhya 14%, Luo 13%, Kalenjin 12%, Kamba 11%, other
African 27%, non-African (Asian, European, and Arab)
1%. 22% of the citizens live in urban areas.
Global Competitiveness Report 2011-2012 by World
Economic Forum placed Kenya 102th position40 (on par
with Serbia, Bosnia-Herzegovina and Ecuador and ahead
of Ghana and Pakistan). Kenya’s strengths lie in innovative capacity (52nd), international standards in financial
markets (26th) and efficient labour markets (37th). The
main concerns were health, corruption, government inefficiency and security.
World Bank Doing Business report 2010 ranked Kenya
98th out of 183 economies in the “Ease of doing business”. Poor infrastructure, political risk, staffing, and
access to credit and financing were among the major
constraints faced by small and medium-size enterprises
(SME’s). Many of these problems are hoped to be mitigated in Kenya’s ingoing administrative devolution process, where significant resources and responsibilities will
be shifted to regional governments that are closer to the
SME’s.41
English and Swahili are the official languages of the
country, but a number of indigenous languages are
used by different ethnic groups. 45% of the Kenyans
are Protestants, 33% Roman Catholic, 10% Muslim and
10% of indigenous beliefs 10%. Literacy rate is among
men is 91% and somewhat lower among women – 80%.
Kenya is one of the mist literate African countries; the
average literacy rate among total African population is
only 63%.37
Kenya’s estimated nominal GDP (PPP) in 2011 was $35.8
billion ($875 per capita), placing it close to the middleincome countries by World Bank (the threshold for lower
middle income is $100638). The GDP growth rate is 5.5%
(2010) and the inflation 2.1% (2010). Agriculture is a major employer employing 75% of the labour force despite
contributing only 23% to GDP. Service industry, which
contributes 62 percent of GDP, is growing mostly due to
the telecommunications sector. 16% of the GDP is produced by manufacturing and industry.39
Investment climate
After the post-election violence in 2008 in Kenya, the
elections for the new constitution for more decentraliza-
Newly constructed office buildings in Nairobi Central Business
District
UNESCO Institute for Statistics Data Centre: http://stats.uis.unesco.org
World Bank. http://data.worldbank.org/about/country-classifications
39
Wikipedia. http://en.wikipedia.org/wiki/Kenya
40
World Economic Forum. Global Competitiveness Report 2010-2011.
http://www3.weforum.org/docs/WEF_GCR_CompetitivenessIndexRanking_2011-12.pdf
41
World Bank. Kenya Economic Update. December 2011, Edition no.5 “Navigating the storm, Delivering the promise”.
http://siteresources.worldbank.org/KENYAEXTN/Resources/KEU-Dec_2011_Full_Report.pdf
37
38
34
“A sore is a really bad thing, still it means
luck to the doctor” Kikuyu proverb
Appendix:
Overview of the Health Sector in Kenya
International trade relations
The main export products of Kenya are tea (23.6% of
the total exports in the first 6 months of 2010), horticulture (14.5%), and manufactured goods (12%). 46%
of the products were destined to other African countries. The main export destinations are Uganda (12.4%),
United Kingdom (10.7%), Tanzania (8.4%), the Netherlands (6.9%), Egypt (4.5%), United States (4.5%), Pakistan
(4.5%), and United Arab Emirates (4.4%), and Sudan (4.3%).
rael’s investments are mainly focused on the agricultural
sector (mainly in machinery and irrigation)43.
Kenya Health
There are wide disparities in health indicators across the
country, linked to underlying socio-economic, gender
and geographical differences. The main health challenges include HIV/AIDS, malaria and tuberculosis, the
degree of risk for infectious diseases is continuously
high. Most common diseases are: food or waterborne
diseases - bacterial and protozoal diarrhea, hepatitis and
typhoid fever; vector borne diseases - malaria and Rift
Valley fever; water contact diseases – schistosomiasis;
animal contact diseases – rabies. An estimated 1.5 million adults are living with HIV/AIDS, which kills around
80,000 people yearly.44
The current account deficit stands above 10% of the
GDP caused by weak exports and high dependence on
oil imports. Although Kenya’s labour costs are lower than
in Asia, high price of energy keeps Kenya relatively expensive for international investors in manufacturing42.
Foreign investors
Historically, the main sources of foreign direct investment (FDI) have been European countries: the United
Kingdom, Germany, Italy, Netherlands and France; and
India. However, in 2010 new countries have topped the
list: Australia (€160 million) and Israel (€40 million).
Healthy life expectancy at birth for men is 54 years, for
women 59 years. Yearly expenditures on health in Kenya
are $27 per capita. World Health Organization has valued the health spending to 35.9% of the budget of the
household. In 2009, the health expenditures in Kenya
reached 12.2% of GDP in 200945.
India and China are getting more active, as do the United
Arab Emirates. Indian companies have been investing in
petrochemicals and chemicals, telecommunications and
floriculture sectors. China considers Kenya as a gateway
to Africa and is the first origin of imports before UAE and
India. Chinese companies mainly prefer to invest in construction, tourism and manufacturing sectors. A typical
investment is a massive road construction project, which
also provides thousands of jobs for local Kenyans. China
also provides monetary and non-monetary aid (equipment and plants, academic and technical training) to
Kenya, on a project basis. United Arab Emirates is the
most important trade partner for importing oil but it is
increasingly more popular for Kenyans as a shopping
destination for household and office electronic appliances, automobile spare parts and motor vehicles. Is-
Combating HIV/AIDS and malaria have shown some
progress, but these diseases remain major issues for Kenya. In 2008, the overall prevalence of HIV was estimated
to stand at 7.4% (8.7% for women, 5.6% for men) among
the 15-64 age group. Yet, according to a radio interview
with a government official, only 10% of the country’s
population have been tested for HIV/AIDS. Malaria is
the cause of 20% of all admissions to health facilities in
Kenya and 20% of all deaths in children under the age of
5 in 2010. Infant mortality has been significantly reduced
from 2003 to 2009 – from 77 per 1,000 live births to 52.
Immunization coverage has increased to 77% in 2008/09
from 57% in 200346.
African Economic Outlook. http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/Country_Notes/2011/Full/Kenya.pdf
African Economic Outlook. http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/Country_Notes/2011/Full/Kenya.pdf
44
African Economic Outlook http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/Country_Notes/2011/Full/Kenya.pdf
45
CIA. The World Factbook. https://www.cia.gov/library/publications/the-world-factbook/geos/ke.html
http://www3.weforum.org/docs/WEF_GCR_CompetitivenessIndexRanking_2011-12.pdf
46
World Bank. Kenya Economic Update. December 2011, Edition no.5 “Navigating the storm, Delivering the promise”.
http://siteresources.worldbank.org/KENYAEXTN/Resources/KEU-Dec_2011_Full_Report.pdf
42
43
35
Appendix:
Overview of the Health Sector in Kenya
The investments in health facilities do not match the
government’s ambitious programs. According to the
African Economic Outlook, 50% of health facilities
lack electrical power, water and sanitation services. In
2010/11 budget, the government had planned to allocate €10 million for the recruitment of 15 additional
nurses and 5 public health technicians in each district to
increase the current doctor-patient ratio of 17 per 1000
and the nurse-patient ratio of 120 per 1000.
Kenya Healthcare System
Dispensary in Kitui town, Eastern Province
Kenya’s healthcare system faces similar problems as
other African countries with bottlenecks lying in not
enough medical staff, lack of investments in facilities
and the difficulties setting up private facilities, where the
government does not reach. An IFC / McKinsey report
has estimated that in the next decade the Sub-Saharan
Africa needs $25-30 billion in health care assets, out of
which $11-20 billion would be done by private investors47. Roughly half of the investments are estimated to
be going to support activities, such as distribution and
retail, medical and pharmaceutical product manufacturing, risk pooling and medical education.
Dispensaries treat outpatients’ basic pain and wounds,
cold and uncomplicated malaria cases. They are run by
registered nurses who are supervised by nursing officer
of the respective health centres. Health centres serve
population of 80,000 people, employ tens of staff and
are run by clinical officers. These take deliveries, admit
inpatients, are equipped with laboratories and minor
operation theatres. Sub-district hospitals have more surgery procedures available than the health centres. The
three top levels provide a wider range of medical, consultation and surgery services and are classified by the
available equipment.
Levels of Kenyan healthcare system
There are 6 levels of healthcare facilities in Kenya: dispensaries (there are 3996 of them in the whole country),
health centres (912), sub-district hospitals (127), district
hospitals (129), provincial hospitals (9) and national referral hospitals (3)48. The cases are referred to a next level
facility if they cannot be treated in the point of first referral. These are complemented with private hospitals and
nursing homes that are often run by churches. In 2006,
there were 2217 health institutions run by the private
sector, 792 by the non-profits, 2120 by the public according to the Ministry of Health.
47
48
Vision 2030 by Kenyan government and its goal to have
an “equitable and affordable healthcare at the highest
achievable standards” have also called upon the national e-Health Strategy. The strategy focuses on developing
health information systems, especially: patient centric
information; supply chain information management;
financial information (incl. insurance and payments);
health workforce management and training; and regulation. The pilot program is to be started in three level 4
and two level 5 hospitals.
The Business of Health in Africa. International Finance Corporation, 2006
http://www.ehealth.or.ke/facilities/default.aspx
36
Appendix:
Overview of the Health Sector in Kenya
Private contribution
According to a World Bank 2010 report, Kenya’s private health sector is one of the most developed and
dynamic in Sub-Saharan Africa49. The large number
of private health facilities makes them important not
only for the rich – in 2005, 47% of the poorest quintile
of Kenyans used private facility when a child is sick50.
The main challenges in the private sector by the report
were: too many suppliers (that drives down the price
and the quality), the limited capacity of the government to monitor substandard and counterfeit drugs,
and the separate public, private and non-profit supply
chains that duplicate the health relief efforts.
National Hospital Insurance Fund (NIHF) offers all salaried employees an opportunity to cover medical expenses for a 160 to 320 KES/month (€1.60 to €3.20). The
costs are subsequently covered in the amount of 400
to 2000 KES/day (€4 to €20), depending on the hospital status and position of the employee. In addition to
NIHF, there are also private insurers but they cover just
2% of Kenyan population51, usually the top-earners or
through insurance paid by the employer.
The size of legal pharmaceutical products in Kenya in
2006 was estimated to be $160 million ($13 million
of local production), the East African Community and
Economic Community of Central African States regional market size combined was $597 million ($76 million
of local production)54.
Kenyan market forms a big opportunity for self-diagnostics devices in the next 10 years with the advances
in technology. The estimated size for medical supplies
in Sub-Saharan Africa in 2006 was $2.2 billion, out of
which instruments and appliances for medical science
(incl. diagnostics) made up $460 million55. As Kenya is
also a leading economy in East Africa, it offers a great
starting point for entering even other African countries.
Legal and illegal market size
All the medical facilities as well as supplies must be
approved by Kenya Medical Supplies Agency (KEMSA)
Pharmacy and Poisons Board (PPB) before introducing
in the market. The PPB lacks resources to act fully in line
with their mandate – for example, a 2005 survey of a
random sample of 116 anti-malarial drugs found that
30 percent of them were counterfeit52. Kenyan Association of Pharmaceutical Industries estimated the market
size for counterfeit medicines then to be $130 million53.
Medical clinic in Naivasha, Rift Valley Province
Private Heath Sector Assessment in Kenya. World Bank Working Paper no. 193. World Bank, 2010
Marek, T. et al., 2005. http://www.hrhresourcecenter.org/node/1550
51
Private Heath Sector Assessment in Kenya. World Bank Working Paper no. 193. World Bank, 2010
52
Amin, A.A., R.W. Snow & G.O. Kokwaro. „The quality of sulphadoxine-pyrimethamine and amodiaquine products in Kenyan retail sector.“
Journal of Clinical Pharmacy and Therapeutics, 30, 559–565
53
WHO (2006). Counterfeit Medicines: an update on estimates.
http://www.who.int/medicines/services/counterfeit/impact/TheNewEstimatesCounterfeit.pdf
54
The Business of Health in Africa. International Finance Corporation, 2006
55
The Business of Health in Africa. International Finance Corporation, 2006
49
50
37