Frugal innovation: A strategy for emerging market penetration and beyond

The huge potential of emerging economies has attracted numerous multinationals as well as small and medium businesses to develop and introduce products to penetrate these markets. However, constraints such as incomplete infrastructure and low purchasing power often invalidate products developed elsewhere. Frugal innovation, initiated from products developed in emerging markets to overcome resource constraints and address the needs of the “bottom of the pyramid”, has attracted broad attentions. The no-frill, cost-cutting, and resource-saving nature of frugal innovation has enabled many firms to create successful, affordable products. This paper uses case studies to delve into details of how various businesses harness frugal innovation to develop simple, affordable products to penetrate emerging markets. The cases were chosen through purposeful sampling to select information-rich cases. The data required for the study were collected mainly from publicly available archival sources, including company websites and documents. The data obtained from different sources were triangulated, revealing a high level of consistency. Four major findings were drawn from the results: First, successful frugal innovations to penetrate emerging markets call for the maintenance of product quality and robustness while cutting costs. Second, firms need to cater to different price sensitivities in different emerging markets while penetrating these markets through frugal innovation. Third, firms need to avoid the association of poor product image to the low price. Forth, successful frugal innovation may also enhance firms’ capability of developing outstanding products under constraints, leading to possible “adversity advantages”.