by Therese Miranda
How will it be possible to meet the needs of the 1.4 billion people who lack access to electricity? One of the most common arguments is that developing countries will leap-frog developed countries to implement cutting edge technology just as they did in eschewing landlines in favor of mobile phones. New technologies emerge, costs drop, and developing countries take advantage of the R&D money spent by developed countries, bypassing traditional costly centralized infrastructure solutions in favor of light-weight decentralized solutions.
I espoused that view on more than one occasion before spending twelve weeks on the ground in Rwanda, where I worked with Nuru Energy, a company that provides human- and solar-powered LED lighting and mobile phone recharging to rural villagers who lack access to electricity. It became clear that the argument ignores some fundamental differences between phones and lights including:
- The absence of substitutes in the case of phones
- The difference between lighting needs in developed and developing countries
- The ability to easily connect the product with meaningful benefits
Yet, it is precisely these differences that make access to lighting a much bigger challenge than mobile phone adoption.
Substitutes Exist
A rural villager’s phone provides communication capabilities that simply are not otherwise available, whereas most villagers without electricity do have alternate lighting. In Rwanda, 81% of households use traditional lighting sources such as kerosene, candles, and wood. That means that companies looking to sell lighting solutions don’t need to convince customers that their product meets a need, but rather that the product meets the need better than the product they currently use. The latter means that companies need to develop a relationship with their potential customers, building trust—this is especially challenging in insular rural villages.
Lighting products also face a much higher bar than mobile phones when it comes to customer satisfaction. Villagers in Rwanda tend to be skeptical about new products. Demonstrations of the benefits are crucial to sales. Purchasers want to carefully examine the products in person before they are willing to put their hard-earned cash on the line, and even after the purchase, they are likely to default back to their old lighting source if something about the new light makes it more difficult to use than anticipated. The availability of other options is simply not an issue with mobile phones and helps explain why phones are seen as more essential than lighting, as demonstrated by consumer willingness to pay.
Consumers already have a benchmark for what they are willing to pay for lighting. New solutions need to either match that price point or demonstrate significant additional value in order to be appealing. For mobile phones, the only benchmark is what others have paid for their phones, leaving companies more flexibility in pricing as they enter a new market.
Needs Differ
The way someone in the developing world uses a mobile phone isn’t all that different than the way someone in the developed world uses one. Concerns about battery life, price, and data usage may vary, but the fundamental communication need is the same. That isn’t the case when it comes to lighting. The needs of grid-connected customers in the developed world are not the same as the needs of villagers without grid access. Because the market for off-grid lighting solutions in the developed world is primarily a niche market among outdoor enthusiasts, companies in the developed world have not invested in solutions that can be easily transferred to the developing world.
Innovation in the developed world has helped bring down the cost of components, such as the LEDs themselves, but unlike the mobile phone market, there is no product in the developed world that can simply be ported to the developing world with little or no modification. Like many off-grid lighting solutions, Nuru’s products were custom-designed in collaboration with their customers, leading to the high level of customer satisfaction required to woo potential buyers away from current lighting sources, but also adding to the cost. This additional cost can be a significant impediment for reaching customers earning less than $2 a day.
Benefits are Indirect
The benefits of having a mobile phone are easy to see: you can communicate rapidly with people who are far away, saving you time and effort. Business opportunities may become more accessible and you may gain access to financial services. However, the benefits of switching to a new lighting product are not always as immediate and apparent, making it harder for villagers to see why a new product is worthwhile and reducing willingness to pay.
When I spoke with Nuru’s customers, they almost universally liked our products better than our competitors’ simply because it was brighter. Few of them recognized the myriad other benefits of switching from kerosene or candles to our products. These include:
- Better respiratory health
- Reduced risk of fire
- Lower energy expenditures
- More productive studying
- Fewer carbon dioxide emissions
Although important, these benefits are harder to observe directly than the benefits of a mobile phone, making it challenging to include them in a compelling value proposition. And, in contrast to a mobile phone purchase, since so many of the benefits of innovative lighting solutions are indirect and/or long-term, they do not typically factor into the purchase decision.
Combined, these three factors mean that off-grid lighting companies will need to demonstrate significant local knowledge, aggressively pursue cost-cutting measures, and focus on the benefits that customers actually value in their purchase decision in order to effectively scale their business models.
It is not enough to simply follow the model of mobile phones: successful companies will recognize the ways in which lights and phones are different in the eyes of their customers and adapt their strategy to factor in these differences.
Therese Miranda, Erb ’15, seeks to promote energy efficiency through both technical and behavioral solutions. She is particularly interested in helping technology companies craft sustainable energy products that users will embrace and using energy efficient technologies to promote sustainable development. She explored these interests during her internships with EnerNOC, an energy management software company where she worked with the Product Management team, and Nuru Energy, a social enterprise start-up based providing LED lighting solutions for rural Africa and India, where her work involved a bit of everything. Before school, Therese worked for Deloitte Consulting’s Federal Energy & Resource Management practice, where she helped military clients better understand and manage their energy usage. Previously, Therese served as the Junior Fellow for Energy & Climate at the Carnegie Endowment for International Peace. Therese holds a BSFS in Science, Technology and International Affairs from Georgetown University’s School of Foreign Service. She is a 2013 Dow Sustainability Fellow and the co-President of the Ross Energy Club.