Scrolling through pictures of ancient monasteries and towering peaks, I try to relive the awe and excitement of my recent trip to Tibet. Even from my computer screen, the Potala Palace commands a sense of historical permanence, isolated from the urban development that radiates from its foundations far below. While certainly on the road to modernization, the city of Lhasa has a long way to go. The daily activities of many local Tibetans seem frozen in time, unchanged by the heavy Chinese presence or the shiny new infrastructure. While some of the locals have profited from increased market opportunities as a result of Chinese-driven development, most Tibetans remain in the low-income bracket….in Lhasa, that is.

Flipping to a picture taken on a trek in the countryside, I am reminded that the majority of Tibetans (living in Tibet) make little to no income at all. Instead, these farmers, herders, and nomads live off of the land, devoting their lives to subsistence-based agricultural and animal-husbandry activities. I stayed in a few of these households while trekking, observing first-hand the simplicity and honesty of these non-material livelihoods. Sure, there was always enough food, but water and electricity were continually scarce. Attempting to relieve myself one night in the dark (no electricity), I almost stepped directly into the designated hole in the ground (no water for toilets) when frightened by an approaching, curious baby goat. Indeed, there were some hardships during my week in the remote regions of Tibet; however, it was not difficult to find amusements and other such tokens of joy to bring back lightheartedness and curiosity.

One such moment of pure amusement occurred when obtaining water from the kitchen of one of these households. Waiting for my Nalgene to fill, I noticed a rather large appliance with a huge, yellow base, sitting on the shelf. Confused, I walked closer to what appeared to be an enormous blender. But it couldn’t be. How could a blender facilitate a diet of barley and yak meat? How can they spare the electricity to power the blender? I hadn’t seen one electrical outlet in the entire house. With no method of transportation and no sizeable market within miles, how could they have acquired this appliance? And with little to no cash income, how did they pay for it? Trade a baby goat? To my surprise, upon closer inspection I confirmed that yes, that thing on the shelf was indeed a shiny, yellow, industrial-strength blender. Intrigued, I turned to my friendly host, attempting to communicate my curiosity as to the machine via animated hand motions (alas, I do not speak Tibetan, nor they Chinese). After many failed attempts, I decided to put my questions on the back-burner until returning to Lhasa. Perhaps there, I could find some answers.

Upon returning to the city I began to notice that, strewn amongst the myriad souvenir shops and small eateries, there were entire stores devoted to industrial-strength, yellow blenders! Mon Dieu, there was even a life-size, plastic blender that stood like a monument on the Barkhor circuit. Delighted, I quickly solved the mystery. The blenders were used for the sole purpose of churning the national beverage of Tibet: butter tea. While it is considered by most foreigners to be an acquired taste, butter tea could arguably be its own food group in the eyes and stomachs of Tibetans. Yes, it is so widely-consumed that some genius who manufactures a standard, yellow blender has made a fortune off of its popularity. The yellow blender dominates the Tibetan market; I never saw another of any make, model, or color in all my time in Tibet.

So what is the point of this anecdote? Why should we care about yellow blenders and butter tea?

The point is precisely that Tibetans, with little disposable income and little demand for other modern appliances, will purchase a good that facilitates a basic need. This concept seems rather obvious when explained as such; however, few have actually made any attempt to market products to the Tibetans and to the bottom-of-the-pyramid, more generally. There exists a long-standing misconception that the poor have neither the demand for modern appliances, nor the disposable income to purchase them. The same goes for superior, or name-brand goods.

The problem with the first misconception is that the poor are expected to demand the same goods that are marketed to the middle and upper classes. There is no reasoning behind this assumption: why would one demand a product that is not tailored to his or her specific needs and wants? Why purchase an RMB300, multi-function food processor to churn butter tea when there is a RMB50, single-function blender available that serves the specific need? In this case, the misconception is not actually a lack of demand, but a lack of a suitable product.

The second misconception, the inability to purchase goods, is also a misguided theory. While the extreme poor are indeed hard-pressed to save, they represent a small percentage of the world’s impoverished and low-income populations. The latter groups have proven that, given the need for and availability of a certain product, they can come up with the cash necessary to pay for the good. Many have savings stashed away under mattresses, others in the form of valuable material possessions. Still others pool money from family and friends if their own funds are insufficient. And finally, some have been fortunate enough to encounter forward-thinking companies (like Cemex in Mexico and Casas Bahia in Brazil) which offer credit-based purchasing programs to low-income customers.

Closer to home, the Haier Group, China’s leading home appliance manufacturer, has used strategic innovation to target the nation’s largest market, the bottom-of-the-pyramid. Instead of blenders, the appliance manufacturer has leveraged the demand for washing machines to gain the acceptance and loyalty of China’s rural poor. In line with the misconceptions discussed above, the demand for washing machines arises not from the need for rinse and spin options, but from the need to wash vegetables. Yes, that’s right, vegetables. After continued problems with voided warranties due to clogged drainpipes, Haier discovered that their poor, rural customers were using washing machines to clean produce. Instead of instructing customers on the proper use of these appliances (as determined by the middle and upper classes), Haier managers asked the company’s engineers to install wider pipes in existing products so as to prevent clogging due to vegetable peels. Moreover, the machines now come with instructions on how to clean produce using the appliance’s various functions. The success brought about by the modification of these machines has led Haier to develop a new model of washing machines that makes cheese from goats’ milk. Of course, laundering clothes is still a standard function.

By marketing products tailor-made for the bottom-of-the-pyramid, the Haier Group has won market leadership in China’s rural provinces. Its success among low-income Chinese consumers was one of the key reasons why Haier was the first mainland Chinese company to be featured in a Harvard Business School case study. With the highly-publicized growth of China’s middle class, it is easy to forget about the even faster-growing population that makes up the rural poor. However, the resounding successes of the butter-tea blender and the vegetable washing machine should remind us that there is, indeed, a fortune at the bottom-of-the-pyramid. What strategic innovation will be next?