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Product Development in Low Income Markets

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Product Development in Low Income Markets EXAMENSARBETE INOM TEKNIK, GRUNDNIVÅ, 15 HP STOCKHOLM, SVERIGE 2018 Product development in low income markets Identifying user needs and approaches in design in a low income market, with focus on the water filtration market in Malaysia NATALIA LINDGREN JULIA MORTENSEN KTH SKOLAN FÖR INDUSTRIELL TEKNIK OCH MANAGEMENT Preface This study has been carried out within the framework of the Minor Field Studies Scholarship Programme, MFS, which is funded by the Swedish International Development Cooperation Agency, Sida. The project is executed as a bachelor thesis in Integrated Product Development (MF131X) within the department of Machine Design at The Royal Institute of Technology (KTH) in Stockholm. It has been executed in collaboration with the water purification company Blöndal Group in Kuala Lumpur, Malaysia. We want to use this space of the publication to thank some of the people who were especially helpful during this project. First and foremost, a big thank you to the Blöndal CEO, Sophus Broberg, for inviting us to Kuala Lumpur, giving us a warm welcome and a lovely stay in Malaysia. We are also especially grateful to the company technical director Tommy Tan, for his constant guidance and the company engineer Yusri Hussin, for always coming forward when help was needed. Of course, thank you to our supervisor at KTH, Gunilla Ölundh Sandström, for supporting us throughout the project. Last but not least, a big thank you to SIDA for helping us realizing this project. 1 Abstract The water situation in Malaysia is not ideal. Due to the unsatisfactory quality of the piped water, the demand of domestic water filters in Malaysia is increasing. At the same time, 40 percent of the Malaysian population are described as a low income group who are especially vulnerable against increases in living costs. Developing products that meet the needs of consumers who are constrained in resources is vital for straining the growth of poverty and reaching the global SDGs. To ensure that the access to clean water is achievable for all, regardless of income group, established methodologies within product development in emerging markets with low income target groups needs to be identified. The intention with this study is to identify and evaluate some of the existing models and methods within this area through thorough research and a case study. The main focus is to analyse the methodologies for identifying user needs, as well as the approaches in design and conceptualization, when developing products for the lower income group. An extensive literature study has been made, in combination with interviews from Engineers without borders, Sweden. The results were that no models or methods were frequently used in their different projects but every project was individually structured. These results were then applied in a field study in Kuala Lumpur, Malaysia. During the field study, a market analysis took place and a new product concept was shaped. The project was in collaboration with the company Blöndal, a water purification company in Kuala Lumpur. Their point of use water filter called Källa 8 was ​ further developed, guided by the identified models and methods gained from the predevelopment research. Before the development of Källa 8, the user needs were identified through surveys, in-home visits ​ ​ and shorter interviews. To translate the identified user want and needs to product attributes, a House of Quality matrix was used and worked as a basis of discussion during the conceptualization of the new Källa 8. Throughout the conceptualization, the mindset originating ​ ​ from the theory of Frugal Innovation was constantly present. The result of the market analysis clearly pointed to a too high of a price of the product, but stating that the already existing design of the product was both attractive and important for the lower income group. These attributes were later realized by foremost changing the configuration of the piping in the product. The purpose was to make the filters easily changeable, sparing the users the service cost of changing the filters. This was done without interfering with the most valued features of the product. 2 Titel: Produktutveckling inom låginkomstmarknader Identifiering av användarbehov och utformning av produkter med låginkomsttagare som målgrupp, med fokus på marknaden för vattenfilter för hushåll Sammanfattning Vattensituationen i Malaysia är inte ideal. På grund av den dåliga kvalitén av kranvatten, har efterfrågan av vattenfilter för hemmabruk i Malaysia ökat. Samtidigt beskrivs 40 procent av Malaysias befolkning som en del av en låginkomstgrupp som är särskilt sårbara för ökade levnadskostnader. Att utveckla produkter som möter behoven hos konsumenter som är begränsade i ekonomiska resurser är avgörande för att förhindra tillväxten av fattigdom och för att uppnå FN:s Millenniemål. För att försäkra att tillgången till rent vatten är uppnåeligt för alla, oavsett inkomstgrupp, måste beprövade metoder inom produktutveckling i tillväxtmarknader med låginkomsttagare som fokusgrupp identifieras. Målet av denna studie är att identifiera och utvärdera vissa av de existerande modellerna och metoderna inom detta område genom grundliga studier och en fallstudie. Huvudfokus ligger på att analysera metoder för att identifiera användarbehov samt konceptualisering och utformning av produkter för låginkomstgrupper. En omfattande litteraturstudie har gjorts samt intervjuer med Ingenjörer utan gränser. Resultatet från intervjuena visade på att inga specifika metoder användes frekvent utan varje project utformades på eget vis. Detta resultat applicerades sedan på ett fältarbete i Kuala Lumpur, Malaysia. Projektet var i samarbete med företaget Blöndal, ett vattenfilterföretag med huvudkontor i Kuala Lumpur. Deras så kallade “point of use”-vattenfilter, vid namn Källa 8, vidareutvecklades med de identifierade modellerna och ​ ​ metoderna från förstudien som ledsagare. Före vidareutvecklingen av Källa 8, identifierades användarbehoven genom enkätundersökningar, ​ ​ hembesök och kortare intervjuer. För att översätta de identifierade användarbehoven till faktiska produktegenskaper, utarbetades en så kallad House of Quality-matris som sedan användes som diskussionsunderlag under konceptualiseringen av det nya Källa 8. Tankesättet som användes ​ ​ under utformningen av den nya produkten härleddes av konceptet Frugal Innovation. Frugal Innovation visade sig vara en värdefull teoretisk ramverk, men var inte så lätt att implementera på just denna fallstudie. Resultaten från marknadsanalysen visade tydligt att produkten kostade för mycket men att den yttre designen var attraktiv och viktig för låginkomstgrupper. Dessa attribut realiserades i produkten genom att främst förändra konfigurationen av rören i produkten. Anledningen till detta var att minska underhållskostnader för användaren, eftersom hen själv ska kunna byta ut filtrena. Detta gjordes utan att större förändringar på produktens högst värderade egenskaper. 3 Table of contents 1. Introduction 6 1.1 Problematization 6 1.2 Objective 8 1.3 Research questions 8 2. Theory 10 2.1 Malaysia 10 2.2 Low income consumers 11 2.3 Understanding the user 12 2.4 Conceptualization from collected user needs 14 2.5 Product development concepts for low income markets 15 2.6 Källa 8 16 2.7 Domestic water filtration systems 19 3. Method 20 3.1 Literature studies 20 3.2 Interviews 20 3.3 Processing of interviews 21 3.4 Comparison of literature studies and interviews 21 3.5 Market analysis 22 3.6 Product development 25 3.7 Conceptualization 25 4. Results 25 4.1 Models/methods/processes for customer integration 25 4.2 Models/methods/processes for product development 26 4.3 Identified customer needs 28 4.4 Development of Källa 8 30 5. Discussion 36 6. Conclusions 40 Bibliography 41 Appendix A: Interview guide for interviews with Engineers without borders, Sweden Appendix B: Survey used during market analysis Appendix C: Results from the surveys Appendix D: Comments and observation from short interviews Appendix E: Comments and observation from in-home visits Appendix F: Comments and observation from sales staff encounter Appendix G: Used standard tube fittings 4 1. Introduction In the following section, the problematization, objective and research questions are being presented. 1.1 Problematization At the UN World Summit in September 2015, world leaders adopted to the 17 Sustainable ​ Development Goals (SDGs) of the 2030 Agenda for Sustainable Development, which aims to end all forms of poverty, fight inequalities and tackle climate change (UN, 2017). Significant progress has been made in reducing poverty, but the amount of people still living in poverty is unacceptably high. Furthermore, the progress is often temporary for people who have been lifted out of poverty. Food insecurities, economic shocks and climate change are a constant threat (Worldbank, 2016). Whilst it is common to believe poverty only implies to people living in rural surroundings, urban poverty is an existing problem and implies to a great number of cities around the world (Lawhon et al., 2013). One of the main reasons for a growing urban poverty is a growing portion of people in the city not affording their living situations (UCLG, 2014). Hence, developing products that meet the needs of consumers who are constrained in resources is vital for straining the growth of poverty and reaching the global SDGs. In 1992 a Chinese firm developed an energy-efficient and low-cost microwave that was small enough to fit inside small apartments in China.
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