We Need to Talk About Product Market-Fit in the Last Mile
Updated: Apr 13, 2019
The truth is, the product might be great, but there isn’t a market fit for it in rural Uganda.
By Aneri Pradhan, Founder of ENVenture
How does ENVenture source the energy access products that are promoted within our last mile network?
We get this question often, and we get pitched by solution providers often for their latest energy access technology. The truth is, the product might be great, but there isn’t a market fit in Uganda’s last mile. Product-Market fit is defined as “being in a good market with a product that can satisfy that market.”
Here are the three questions we ask when it comes to working with a supplier in our market:
1. Is the product affordable?
Last mile consumers in Uganda earn less than $3 a day. Even with innovations in pay as you go technology, these financing schemes still struggle to land base of pyramid consumers. That is because most cannot afford the down payment required, crop seasonality affects their ability to pay on time regularly, and financial illiteracy keeps rural consumers from understanding why products are marked up when paying in installments. Thus, ENVenture primarily works with solar, cookstove, water filter, and briquette products that cost less than $50 retail. Willingness to pay is far higher below this price point.
2. Is the product high quality?
Unfortunately, the last mile is now being swamped with inefficient cheap energy products, such as AA powered flashlights/torches, fake “improved” cookstoves that look improved, but are not, and inefficient briquettes. While the ones we promote are typically in the $10 - $50 range, these inefficient products are anywhere from $1 - $5. It can be confusing for a rural consumer to differentiate and understand price and quality correlation. This does affect the enterprises we support, but through increased awareness we believe higher quality will still win out. That being said, there is also a difference between high quality and supreme quality. Some donors reject ENVenture because our organization is not promoting for example, zero emission cookstoves (which are the cleanest) or productive power systems. This is an example of the lack of understanding from donors around last mile product-market fit. In our experience, last mile consumers will not buy supreme quality products. They are perceived as too expensive and are not motivated or convinced by the supreme quality factor. Thus, ENVenture has had to focus on products that still improve the quality of life for rural consumers, but at less of an impact than supreme quality products in order for our entrepreneurs to achieve product-market fit.
3. Does the supplier provide expert after-sales and support for the product?
This factor is the most important one in weighing our decision on evaluating new products. ENVenture does not work with any companies that are not already operating in Uganda, because we do not believe products can simply be dropped in and find product-market fit. Suppliers must understand the Ugandan market, price accordingly to the Ugandan market, have logistics in place for the rural Ugandan market, and be able to offer customer support. The entrepreneurs we support have immensely hard business models – selling expensive products to the poorest people. Their cash flow is a daily struggle as well as inventory financing. In order to meet the demands of rural consumers, satisfy their local markets, and ensure that their businesses stay open, strong open communication channels with suppliers is critical. Unfortunately, we have discovered many suppliers who operate in Uganda that prioritize bigger deals, and fail to adequately support and supply products to the last mile entrepreneur. The entrepreneur may only be ordering 5 solar lanterns at a time, but if the supplier fails to deliver, communication breaks down and the entrepreneur will not want to do business with that supplier. ENVenture strongly looks for this after-sales support in negotiating contracts.
Solar lanterns and improved cookstoves have found product market fit in the last mile. Evidence of this is shown by the volume of sales many of these suppliers have made. Pushing for expensive high quality technologies that cannot demonstrate this is not only a waste of effort, but demonstrates an ignorance for what last mile consumers are demanding.
ENVenture is a social enterprise that is building out the ecosystem in the last mile for clean energy access through financing, capacity building and technology.