I wanted to comment on a June 2008 article from The Economist from June 2008 since it directly relates to my previous post on being successful in emerging market countries.

A multinational company, Vodafone, builds their business and brand locally in Kenya through their local subsidiary Safaricom. Vodafone is completely behind the scenes. The visionary leader is Michael Joseph, a South African who took over in 2000. I was in Kenya in 2006 and clearly remember the big Safaricom billboards. I never realized they were owned by Vodafone and I’d argue most Kenyans didn’t know either.

This is an emerging market success story because they did the right things to grow business in emerging markets, blowing away expectations with Vodafone’s top brass:

“Vodafone’s bosses reckoned that the Kenyan market would top out at 400,000 customers. Yet Safaricom alone now has 10.5m. It is the most profitable business in eastern and central Africa, earning profits of $223.7m in the financial year to the end of March, up 16% on the previous year.”

So what was Safaricom’s approach?

“Michael Joseph quickly decided to go after “pay as you go” customers, who pay for mobile airtime in advance, and therefore do not pose a credit risk to the operator, though they spend much less than wealthier (and less numerous) contract customers. He introduced billing by the second—a big deal for those earning just pennies a month. And he revamped the firm’s brand, reasoning that the poorest customers are the most price-sensitive, and that a strong brand can help keep them loyal.”

So # 8 on my Top 10 list was:

  • Evaluate alternative business models for packaging, selling, distributing, financing and servicing your products and services. What works in developed markets (e.g. Dell’s direct-model) does not necessarily work in emerging markets (e.g. retail PC stores prevail).

Safaricom introduced billing-by-the-second vs. billing-by-the-minute, and pioneered a text-based payment service which they are now taking outside Kenya to countries like India. They are making money from very, very poor people.  This type of service is not without its challenges, which I discuss in another article here.

The second highlight from the article comes from point #4 from my Top 10 list was:

  • Localize marketing campaigns and where possible tap into national pride.

Here’s how they did it:

“Keeping the Safaricom name inherited from Telkom, the state fixed-line monopoly, Mr Joseph … set out to create an “emotional connection” between Kenyans and Safaricom. He took an “old school” approach, playing on the company’s status when it had been established a decade earlier as a symbol of national pride. These days only Kenya’s national beer, Tusker, with its elephant label, can match Safaricom for national appeal. Some think Safaricom offers a lesson to mobile operators in Europe and the Middle East: take advantage of your affiliation with a multinational brand when it comes to technological know-how and buying equipment, but keep quiet about it to your customers, and dress up your network in national colours.”

If this company can innovate their business models and tap into national fervor to grow revenue and profit in a very poor country in Africa, imagine what companies with similar mojo could do in India, China and the other emerging markets of the world.