The cost benefit analysis of localizing your design

The Jugaad Team was discussing this news article from The Hindu today, where it was said,

A uniform financial product for rural customers across the nation will
not work. "Local culture has to be taken into account," said Ms Usha
Thorat, Deputy Governor, RBI. She added banking in rural areas should
deal with cash flows rather than offering a bouquet of loan products.

As rural banking in India becomes the topic du jour, and also one of our pet project areas for research and analysis, niblettes followed up this article with some insightful questions that I’ll attempt to answer. I look forward to your input in the comments section, lets get this conversation started.

Of course mass volume markets are only profitable with one-size fits all solutions–and with razor thin margins providing services to the poor there is even less room to customize to local flavours (unless doing so comes at no marginal cost).

So, is it true that local culture must be taken into account?  If so, how much does it cost to take into account local culture?  What does it mean to "take into account"?  And does doing this make banking the unbanked cost prohibitive?

Imho, niblettes, I believe you may have a point about the extent of localization that could economically be viable being linked proportionately to marginal cost of manufacturing that product. This only highlights the need for uber efficient supply chain metrics – two cost leaders that come to mind are Walmart and Dell, both of whom are thoughtleaders in this field as well.

As to your second question, one could say that an analogy of the answer would be the break-even point in a cost benefit analysis of localizing design – one I think that Dell might find interesting to answer if they do indeed wish to restructure to enter new and emerging markets in today’s world.

But bringing it back to banking, hypothetically, is there a cost addition that adds greater value than its marginal cost differential implies such as offering a mobile solution with localization of the interface to the regional written language at the very least. Or taking it one step further into user research, rural india desperately needs to be studied from the ethnographic point of view, what are the valid unmet needs of the rural user or the bottom of the pyramid user with respect to services and applications currently available on the mobile platform.

Yes, I realize I’m beating some of my favourite drums here but I would like to hear other opinions and answers to nibby’s question posed above.

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6 Responses to The cost benefit analysis of localizing your design

  1. neelakantan says:

    Interesting, I spoke to our maid just recently. Her microfinance works like a “chit fund” – the kind of thing that is popular down south. If it were something different from that, because it was not familiar, it would not take off so easily. Now, for them, it looks like something they and their families know and since this being rural India. Indeed, her microfinance is not even named as a microfinance – it has an innocuous name like some mahila samaj or something.
    So to answer your question, my guess would be – localize to the extent of making it “culturally familiar” so that you attract people to it as “better than what you already know “and over time standardize it.

  2. niti bhan says:

    Neelakantan, so what you’re saying is that by making the “microfinance” scheme that your maid uses similar to something that she is already aware of, such as a chit fund or a local bania, might be what leads to greater acceptance, thus this is an area that requires localization to culture, regardless of the cost. that is, it become the tool to lowering the barrier to acceptance or entry for the customers?

  3. neelakantan says:

    i think you got it spot on. the only question that i have is, how much of a cost implication would this have? is it not basically the same thing – the ‘chit fund’ is just an avatar….

  4. niti bhan says:

    Neelakantan, you bring up an interesting question, in this case, the need for the avatar, such as chit fund similarity or local bania similarity is needed only insofar as creating a recognizable cue of trust and quality vis a vis “banking” or “finance” micro or otherwise. Thus the cost implication of the marginal acculturation would be ameliorated by the proportionately greater increase in value of the localized feature – that is, more customers would be gained than you would have otherwise got if you had not done this localization exercise.
    This is why understanding the unbanked customer or the “grey market” customer is crucial if business is to grow in any significant manner in countries like India.
    If you had not thought to ask your maid, would you know that the chit fund model is culturally familiar to her and thus reliable?
    just talking in examples of course.

  5. neelakantan says:

    If I had not asked, I would not have known since for us city dwellers, chit funds are classified as “pyramid schemes” or thereabouts…

  6. niti bhan says:

    yes, that is true. I was surprised as well when I heard about this chit fund aspect. I guess its close to a ponzi scheme or lottery system. The upper class ladies do “kitty” parties and use the money for shopping trips to hte USA, I kid you not !

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