Emerging Markets, Emerging Models

Market-Based Solutions to the Challenges of Global Poverty
Authors: Karamchandani, Ashish; Kubzansky, Michael; Frandano, Paul
Source: Monitor Group
Year: 2009
Company Name: Servals
Number of pages: 144

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Abstract:

Several years ago, Servals, a small company in Chennai, India, introduced a new product it believed would greatly benefit low-income consumers. Most such consumers cooked on kerosene burners and Servals’ Venus burner used 30 percent less kerosene than conventional models. It also was smaller, safer, required less cleaning, and lasted more than twice as long in service. In short, it seemed like a clear winner, delivering significant savings of money and time.

Servals is a for-profit commercial enterprise that serves extremely price-sensitive customers. It is also a mission-driven company determined to deliver real value to its clientele. Taking into account the costs of developing the Venus burner as well as its benefits, it introduced the product for a price about double that of conventional burners, reasoning that it would pay for itself after about two months because of its superior fuel efficiency.

But sales of the Venus burner fell below expectations in the early stages. The biggest problem was distribution, compounded by a comparatively steep price. Servals couldn’t convince retailers to invest in educating customers about the benefits of the Venus. As a result, a potentially great product that could have made life better for many seemed likely to fail because of a fl awed business model.