Understanding market creation through the product lifecycle curve

September 21, 2017
(Photo courtesy of HELVETAS)
Market Building

Poverty alleviation starts from day one, but creating a sustainable market goes through several phases before profitability.

The challenge of creating a self-sustaining market supply chain for products can be complicated by the need to also develop a new product that conforms to the needs and desires of the target market. This is what iDE and HELVETAS had to do in Kyrgyzstan. To best understand how the process worked, a product lifecycle analysis (see figure below) can illustrate how a financially sustainable market that benefits the poor was created.

Used with permission from “Poverty Alleviation as a business” by Urs Heierli

R&D Phase

In 2009-2010 during the R&D phase, several prototypes were thoroughly tested in demo plots for various crops. There were only expenditures by iDE and HELVETAS and no sales took place. No private sector partner invested in the technology. However, market research and farmer interviews showed that over five percent of 120 interviewed farmers were willing to invest in drip irrigation in 2010. These farmers were—in rural marketing terms—innovators and early adopters with a high level of curiosity and the ability to take some financial risks due to their somewhat higher socioeconomic status. In Kyrgyzstan, these farmers are called opinion-leaders that neighbors often follow, and either cultivate fruit orchards (1-5 hectares), open-ground vegetables (>500 square meters), or own a greenhouse (>300 square meters), usually for cash crop production.

Introduction Phase

In the Introduction phase from 2011-2012, the product was test-marketed. The first customers and the first sellers appeared and the supply chain began developing. Early majority farmers, who saw drip irrigation technology effectively working in neighboring fields or during field demonstration days, wanted to adopt it and started buying. This phase requires extensive demonstrations, testing, and promotional efforts to create interest and to motivate stakeholders to enter the business. However, sales volumes were low and there was still no considerable profits in the supply chain. iDE and HELVETAS thus continued its intervention by financially supporting the process.

Maturation Phase

In the maturation phase, iDE and HELVETAS started to target mainstream customers including poorer farmers with marketing campaigns. Sales began to increase and profits along the whole supply chain—from manufacturer to the farmer—started to materialize.

During the maturation phase, more actors begin to notice the potential of the technology and join the supply chain.

In rural marketing terms, during this phase late-majority farmers who tend to be poorer than average and have less capacity to take risks also started buying the technology. In Kyrgyzstan, these farmers live in rather remote and mountainous areas and their livelihood is often based on keeping livestock.


Saturation Phase

Kyrgyzstan is currently moving from the maturation phase to the saturation phase, marketing to a wider range of potential customers, including poorer smallholder farmers. In this phase, sales growth starts to flatten or even decline. Because of this, current supply chain stakeholders have to either come up with additional products or move to other product areas. From a poverty alleviation and agricultural productivity point of view, however, the positive social and environmental impact of gravity-fed drip irrigation will continue even after the market is saturated and sales flatten, as farmers continue to adopt the technology in their fields, thus benefiting economically while at the same time considerably improving water productivity in the Kyrgyzstan agricultural sector. It is only during the saturation phase that laggards start adopting the technology. These farmers are risk averse (in the Kyrgyzstan context, these farmers typically have comparatively small landholdings of up to 0.5 hectares only), tending to be subsistence-level growers or, if they sell any produce, it is only in very local markets.

Exit Strategy

iDE’s project intervention goal is to reach a point within the saturation phase, where market creation objectives are accomplished and, by consequence, there is no longer need for financial project support to stakeholders in the market.

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