Frugal products are simple, affordable solutions that meet customer needs in emerging markets. They are defined along the attributes "Functional, Robust, User-friendly, Growing, Affordable and Local" and are found in most industries.
The development of frugal products will play an increasingly important role for Western companies going forward. Their contribution to sales is rising significantly faster than, say, that of high-tech products. But the development of frugal products is not simply a question of technologically simplifying existing products and offering them at a lower price. To achieve long-term success, companies must pay attention to six key product characteristics and align the entire value chain to specific market requirements. Major success factors are a comprehensive knowledge of markets and customer needs; and competitive prices.
Our new study, "Frugal products", presents a holistic approach to a successful frugal products strategy.
"Frugal products are technologically simple and affordable solutions that are suited, above all, to fast-growing markets in the developing world," explains Oliver Knapp. "For Western companies, which tend to have a relatively weak presence in lower and mid-market segments, these products offer a strong sales potential and profit opportunities. But their manufacturers must first make the right changes to their value chain."