Bottom-of-the-pyramid customers are 'the most ruthless on the face of this Earth' says cleantech entrepreneur Ajaita Shah

Largely unchanged for centuries, village life in India is slowly modernising. Motorbikes and vans now appear beside bicycles and bullock carts. Yet basic services remain just that: basic.

With more than 32,000 villages continue to lack power, the absence of electrification represents a particular concern. Even those villages that have grid access, power outages represent a frequent frustration.

In sun-drenched Rajasthan, Ajaita Shah is working to change that. Through Frontier Markets, a social enterprise she co-founded back in 2011, the 29-year-old cleantech entrepreneur is looking to provide solar-powered lighting solutions to some of the state's poorest citizens.

"Clean energy is the base foundation that's required before you can drive any other services", says Shah, who was brought up in New York to émigré parents from Rajasthan. And the reward for the consumer is immediate, she adds. "If you can provide light where there's no light, or power where there's no power, people are instantly satisfied."

To date, Frontier Markets has helped shift around 20,000 zero-carbon lighting units across its network of 185 retail points. Low-cost solar lanterns and torches comprise the majority of the firm's sales, although its product range includes sophisticated home lighting systems and even streetlights too.

Photovoltaics aren't new to India. Where Shah differs is in her focus on the poorest segment of the market – what the Indian management guru C K Prahalad famously terms, the base of the pyramid (BoP). Most solar manufacturers in India lack the capacity and knowledge to access this hard-to-reach sector, she says: "No retailer or distributor today really knows their customers. They're just dumping their products in the market."

Village life in India is slowly modernising. Photograph: Biswaranjan Rout/AP

Frontier Markets pitches itself as different. Shah's own insights into India's low-income market derive in large part from hands-on experience. Fresh from graduating in the US, she relocated to India to work in the country's rapidly expanding microfinance industry. "I've lived in Jharkhand, Orissa, Bihar, Andhra [Pradesh], Karnataka, really just trying to find out how villagers think and what they prefer", says Shah, who was recently named in Forbes magazine's 30 under 30 list of social entrepreneurs.

Yet the sheer size of India's low-income consumers - the total number of BoP households is estimated at 114 million – defies generalisations. So whenever Frontier Markets enters a new area, its researchers hit the ground with their notebooks, survey sheets, focus group materials and so forth. "If they have five rupees, what would be the first thing they'd spend it on?" That's the level of detail Shah wants for the 16 districts in Rajasthan where Frontier Markets operates.

Shah might know who her low-income customers are and what energy needs they have, but the knotty question of how to physically get suitable products to them still exists. For the most part, companies tackle this so-called "last mile" problem through itinerant salespeople: "Basically someone with a backpack who runs from door to door selling a product", as Shah puts it. That's neither scalable nor sustainable, she insists.

Instead, Frontier Markets opts to work with existing small retailers in its target communities, providing shop-owners with its products on credit. "Essentially, we started converting existing bricks-and-mortar stores into solar shops", Shah says. Where her start-up really breaks the mould is in its offer of after-care service. Frontier Markets operates six customer service centres, all located close to the communities where it works.

"If you're sitting in Delhi and the person who bought that product is in a village in Rajasthan, how are you going to replace that product? How are they getting it to you, and how are you getting it to them?" she asks. "After-sales service is so important because you need to be accountable for what you've sold."

Price, as ever when selling to low-income communities, is critical as well. BoP consumers typically spend less than 3,453 Indian rupees (£34) on goods and services per month. Shah's solar lanterns retail at 645 rupees (£6) - a price point born of "negotiating like crazy" with her company's suppliers. That's just about affordable. At around 6,000 rupees (£59), its Pico home lighting system units probably aren't. For these bigger ticket items, Shah envisions making a low-interest loan option available via a non-profit or microfinance partner in the future.

She challenges the general notion that those at the bottom of the pyramid lack spending power, however. "They have money", she insists (albeit not very much). "But they're the most ruthless consumers on the face of this Earth because there's an opportunity cost of where that money goes".

The key is creating a willingness to pay, she continues. To that end, Frontier Markets recently partnered with the International Finance Corporation on an awareness campaign about the benefits of solar energy. The publicity blitz forms part of IFC's Lighting Asia initiative, which aims to bring lighting to 400 million Indians living off grid. It's an ambitious goal. And one that will only be reached one "last-mile" at a time.

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