Pricing it Right

So I do agree with CK Prahalad that there is a fortune at the bottom of the pyramid, but from what I learned last week in India tapping into that fortune is not as easy as we think.

I had the opportunity to visit two of our investments in hospital chains, AyurSeva and LifeSpring. AyurSeva provides ayurvaidic treatment to the poor and has two hospitals in the slums in Mumbai and Bangalore and LifeSpring provides maternity care to low income women and has nine hospitals in India with headquarters in Hyderabad.


It was so interesting to spend time talking with Acumen Fund Fellows, Satoko Okamoto (AyurSeva) and Meghan Simkins (LifeSpring), both of whom are working on marketing and outreach. While the services they provide are different there are many similarities in the models.


One way in which they are able to provide the service to the poor is by using price discrimination. AyurVaid has higher end hospitals that provide Ayurvaidic treatment to the rich, which in turn subsidizes their hospitals in the slums. LifeSpring, subsidizes the cost of their treatment to lower income women by providing more expensive private rooms to wealthier women.

Another key is that these hospitals are both specialized care providers. This enables them to streamline their operations, train specialized staff, and stay focused.

Third, they are transparent with their pricing so that their customers know what they are getting from the beginning.

But while all of this is working well they are still facing some real challenges to "price it right.”


Issue #1:Customers are willing to pay the consultation fee, 50 Rupees in both cases, but the retention rate of those doing the consultation fee is still pretty low. We know they can pay the fee, so what is the barrier to taking the next step?

Issue #2: To date the competition from nonprofits who charge nothing still really affects them, this is particularly true for AyurSeva. Even if the service is high quality it is still hard to compete with free. The only place where this is really not true is education, the poor are are more often than not opting out of free public options..so what can we learn from this?

Issue #3: Who is the customer? In LifeSpring's case it is actually the mother-in-law who makes the decision. Who makes the decisions at AyurVaid?

Issue #4: Bandaid vs. prevention. Ayurvaidic treatment heals patients over a long period of time. It is tough to convince a customer to invest particularly when they are living day to day..

Would be interested in others learnings as they work to build health care enterprises for the bottom of the pyramid.