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Marketing at the bop elac 2015

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Presentación de Jessica Graf del Taller: "Marketing at the BoP" Durante el ELAC 2015, en México, D.F.

Published in: Leadership & Management
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Marketing at the bop elac 2015

  1. 1. Marketing Innovative Devices for the BoP Lessons learned from 15 global pioneers that challenge conventional sales & marketing approaches ELAC 2015
  2. 2. QUESTION 0: Which of these statements is true? 2 In order to solve most of the world poors’ basic needs (e.g., access to safe water, energy, sanitation, housing etc….), the bigger challenge today is to: 1. Find a way to get existing products into the hands of the BoP, as there are already many great innovations that do not make it to those who need it 2. Create new products and technologies, even better adapted to the needs of the BoP
  3. 3. Life-changing products exist… 3
  4. 4. …but struggle to reach families at the BoP 4 $PPP income/ year/capita for world population $1.5k Marketing Sales Financing After- sales 4 billion people at the Base of the Pyramid $20k Life-changing products Need for replacement parts Small transactions Geographic dispersion Poor infrastructure Risk aversion Lack of cash
  5. 5. To learn how to overcome these barriers we analyzed 15 pioneer organizations 5 Sakhi Retail Notes: some graphs in this presentation include data from other organizations studied later by Hystra
  6. 6. 6 The overhead curse: too much or not enough! It’s about economics! Risk-free solutions, not cheap products Financing is best done in-house Serving the BoP is a high gross margin business Below-the-Line marketing works betterSales force churn can and should be avoided Responsible and effective marketing happens after a sale It is worth Investing in a modern BoP sales force key lessons learned10 Four direct sales force models are emerging Value proposition Marketing Sales force
  7. 7. QUESTION 1: True or False ? 7 One of the reasons why the poor are poor, is that they do not have attractive investment opportunities. 1. True 2. False
  8. 8. 8 It’s about economics!#1Investing in innovative products offers very attractive economic returns to BOP families
  9. 9. A new technology substituting an old one can provide very, very large economic benefits! 9 150% 400% Solar home systems Solar lanterns Water purifiers * Irrigation pumps Improved cook stoves * Consumer IRR over product lifetime 2-5 months 4-9 months Product lifetime 3 1460% 5000% 2-3 months Payback 4-6 months 4-9 months 2200% 4 yrs 6 4 15-50% financing cost 1 * Assuming customers are paying for fuel or boiling water
  10. 10. QUESTION 2: Which of these statements is true? 10 Poor people do not buy life-changing durable goods mainly because: 1. They do not know these products exist 2. They do not understand the benefits of these products 3. They do not trust these products will bring them the promised benefits 4. They cannot afford them
  11. 11. 11 Risk-free solutions, not cheap products#2A risk-free, holistic solution is what customers want SELCO technician installs a solar home system
  12. 12. 11% 26% Clients do not look for cheap products, but risk free solutions… 12 2 Price premium paid by customers to reduce risk 90% rural clients forego a 10% discount to:  Test stoves at home for one month  Verify charcoal savings, deposited in Toyola box All clients pay a 26% premium to get protection from:  Poor construction design  Building material price increase  Waste (theft or damage) of building materials  Lack of saving discipline
  13. 13. 13 2 … and prefer premium products Price 80% 20% Penetration after 1 year Customers postpone installation of latrine until they can afford a better quality shelter 2% 1% $24 $14 latrine + natural shelter $40 + 5 zinc/cement shelter $40 + 50-200 latrine + Declared consumer preferencePrice Premium filter offered on credit at launch: >90% clients opted for the more expensive version
  14. 14. QUESTION 3: Which of these statements is true? 14 The best way for a distributor to help clients finance the purchase of durable goods is to: 1. Work with a microfinance organization 2. Work with NGOs that can distribute the products for free or partly subsidized 3. Sell directly the product on credit, by offering financing in-house
  15. 15. Financing is best done in-house#3In-house financing can provide value to customers, reduce operating costs, increase revenue and reach more clients
  16. 16. Financing in-house is a win-win arrangement for clients and product and service providers Access to credit without collateral or credit history Lower risks of product issues (tied to payments) 16 3 Up to 3 year loans Monthly service charge (maintenance, interest) Installments collected by technician during service visits Low default rates (tied to working device) Profitable activity Low operating cost (synergies with distribution or maintenance) For product and service providersFor clients
  17. 17. Working through MFIs is tempting but raises implementation questions Easier access to customers Faster penetration Lower commercial costs 17 How to avoid customers being pushed into buying? How many target customers are served by MFIs? What proportion of MFIs can become effective partners? ? 3 Benefits Questions How to effectively handle default payments and be paid for it?
  18. 18. QUESTION 4: Which of these statements is true? 18 What marketing activities are more effective to trigger first sales among BoP clients? 1. Awareness campaigns, so that clients understand the benefits of the products 2. Proximity marketing (below-the-line), to demonstrate the product and answer directly client concerns 3. TV or radio campaigns, to reach as many users as possible cost- efficiently
  19. 19. Below the line marketing works better#4Effective marketers excel at village-level tactics and shy away from investing in expensive awareness-raising campaigns BRAC Village Wash committee
  20. 20. Awareness and purchases after health campaign 69% 83% 2% Awareness of impact on health People stating they would purchase People who purchased Improved cook stoves High levels of awareness and understanding are not sufficient to trigger sales 20 88% 98% "Not convinced of promised benefits" "Too expensive" Remaining barriers to purchase (% of non-buyers) Raising awareness about health impacts of cookstoves does not overcome barriers to purchase Impact of marketing campaign on purchase2 NP: Only first 3 arguments + combine with Kickstart slide Irrigation pumps Awareness and penetration after year-long marketing campaign 84% 63% 13% Product awareness Product understanding Sales penetration 4
  21. 21. 21 ATL spending does not correlate with commercial success4 ATL Marketing (% of sales) Total yearly revenues 12% 7% 6% 2% 2% 1% 1% 0% 0% 0% 0% 0% 0% 0% Profitable Covering field ops costs Not covering field ops costs
  22. 22. Leading practitioners concur 22 “People need to see the product, touch it, and ask questions: an advertising campaign will not be sufficient.” Suraj Wahab, Toyola, CEO Upamanyu Patil Sakhi Retail, CEO “Most people in rural area need to see the product work long enough at their neighbor’s.” Deepak Saksena, Pureit, Partnership Director “Above-the-line campaigns work for middle-high class, rural people would never buy without further Below-the-Line marketing.” Iwan Baskoro GERES, ICS Program Director “Only 20% customers bought based on our 3 marketing campaigns (posters, TV, and radio). Word-of-mouth was the main trigger.” 4
  23. 23. Village WASH Committee looks over map of homes still without latrines Most organizations use similar village-level tactics with varying degrees of excellence in execution 23 All 15 best-in-class organizations use BTL marketing 4 3 3 6 7 2 5 11 Peer pressure Free trials for opinion leaders Demonstrations (small group) Vendors among trusted locals Endorsement from trusted institutions/people Demonstrations (public place) Free trials for poorest Agents ask prospects to pour water on solar panels to prove its durability
  24. 24. QUESTION 5: Which of these statements is true? 24 What is the most important moment for your marketing and sales activities? 1. During the first sales 2. After sales start picking up
  25. 25. Responsible and effective marketing occurs after the sale#5Despite the fact that word-of-mouth is key, few organizations systematically measure and manage customer satisfaction
  26. 26. 26 Word-of-mouth from satisfied customers is key5 92% 60% 60% 49% Solar home systems* Improved cook stoves Home improvement package Irrigation pump** Customers citing neighbors or relatives as trigger for purchase *Customers citing neighbors or relatives as first source of information about product **Customers may have cited more than one source
  27. 27. 20% 40% 50% 69% Example 1 Example 2 Example 3 Example 4 And the number of dissatisfied customers can be significant5 Customers no longer using purchased product/service after 2 years Drivers of non-compliance :  Need for replacement purchases  Need for behavior change
  28. 28. For each product and service Patriomonio Hoy tracks the Net Promoter Score - NPS (i.e. number of clients who say they will recommend it minus those who say they never will) Measure customer satisfaction Organizations can systematically measure and ensure customer satisfaction 28 5 80% 82% 84% 86% 88% 90% 92% 94% 96% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 NPS score 1 Immediately identifies and follows-up with dissatisfied customers to prevent negative word-of-mouth Ties sales force compensation with personal NPS Act on dissatisfied customers2
  29. 29. 2. Implement systematic high-quality execution of marketing and sales practices at village level 29 In a nutshell, marketing efforts should shift from raising awareness to ensuring customer satisfaction5 1. Reassess levels of ATL spending in light of customer awareness 3. Invest in “after the sale” activity to ensure and improve customer satisfaction Above-the-Line marketing: Radio, TV, billboards Dissatisfied users Aware, tempted prospects Village Buyers Satisfied, loyal users Positive word-of-mouth Negative word-of-mouth Encouraging word-of-mouth Follow-up and problem-solving (user coaching) Initial demonstration Active selling (addressing remaining barriers to purchase)
  30. 30. QUESTION 6: Which of these statements is true? 30 How attractive is selling durable goods at the BoP? 1. Distributors earn lower margins than in richer markets, to keep products affordable. They accept these low margins, hoping to realize big volumes instead 2. Distributors must build high margins to cover all marketing, sales and distribution costs. And clients are ready to pay a higher price 3. Distributors must build high margins to cover all sales costs. But clients cannot afford higher prices and subsidies are needed
  31. 31. 31 Serving the BoP is a high gross margin business#6The15 organizations we analyzed face different degrees of marketing challenges, yet all require relatively high gross margins to sustainably serve BoP customers KickStart’s irrigation pumps
  32. 32. 32 Serving BoP customers sustainably requires high gross margins6 Upgraded value chains (single product) Product in a box (single product) Multiproduct distributors Equipment and service 25-30% 35-45% 30-50% 25-40% What gross margins are needed to sustainably serve the BoP?  Actual gross margins of profitable companies or  Estimated gross margins required for companies to achieve breakeven at scale Gross margins* *Calculated over total value chain revenues, including all servicing and financing revenues, and Output Based Aid
  33. 33. QUESTION 7: Which of these statements is true? 33 Which of these is true about the BoP market for innovative durable goods? 1. One cannot keep a stable field force in developing countries, because salespeople will always leave for better prospects 2. A key factor to lower field force turnover is to recruit people who really care about the business’s social mission, and in exchange for that commitment provide them a career path and continuous rewards 3. A key factor to lower field force turnover is to pay them well
  34. 34. 34 Sales force churn can and should be avoided#7Competitive compensation and close management can reduce undesirable sales force churn to 30% or less Greenlight Planet
  35. 35. ✓ ✓ ✓ ✓ ✓ ✓ ✓ 35 7 <30% sales force churn can be achieved, with appropriate levels of compensation and oversight Field sales force yearly churn* Career Opportunities Compensation Partly fixed Notes: Competitive compensation compared to other local opportunities; churn does not include management Awards and rewards ✓ ✓ ✓ ✓✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Close mgmt ✓ Competitive* 80% 60% 60% 40% 40% 30% 30% 25% 20% 10% 8% 7% ✓✓ ✓✓ ✓
  36. 36. QUESTION 8: Which of these statements is true? 36 The best distribution strategy for durable goods at the BoP 1. Is to employ local people as sales people, as they know their neighbors well and can overcome the trust issue 2. Is to employ mobile, professional sales people as only them can deliver a very convincing pitch to overcome the trust issue 3. Is to give sales people more, various goods to sell so that they can earn better revenues from this activity 4. Is to use different sales force for different products because each product needs a specific pitch to sell
  37. 37. 37 Four emerging effective sales & marketing models#8Four methods of solving the sustainability equation (enough customers and sales per customer to cover sales force costs) Clockwise from top left: SELCO, Toyola, Sakhi Retail, Pureit
  38. 38. 20 22 35 42 42 47 52 56 72 128 3 4 5 5 7 11 12 38 Sales per FTE sales person per year ($k) per sales agent FTE per “local entrepreneur” FTE Full- time sales people Part- time sales people 8 Solving the sales force productivity equation
  39. 39. 39 0 3000 0 50 100 150 200 250 300 350 0 500 1000 1500 2000 2500 3000 Clients per FTE sales person per year ‘Farming’ model 4400 9000 Client spending ($) 1300 ‘Hunting’ model ‘Shifting cultivation’ model ‘Gardening’ model 8 Four sales models emerge, at different levels of maturity
  40. 40. QUESTION 9: Which of these statements is true? 40 A sophisticated IT system (for sales and customer management) 1. Is an ‘luxury’ for social businesses operating in BoP markets 2. Is even more important in environments with poor infrastructure and limited resources
  41. 41. 41 It is worth investing in a modern sales force for the BoP#9A full-time, mobile sales force, with referrals, CRM tools and close management, can be more loyal and effective Living Goods sales person
  42. 42. 42 9 Our recommendation: Invest in a modern sales force for the BoP 1.Employ a full-time mobile sales force 2. Choose good managers 3.Leverage referrals to aggregate sales Village 4. Leverage technology
  43. 43. 43 LG cloud-based mobile platform Client Sales manager Treatment reminders Tailored education, e.g. for pregnant mothers Promotions Coaching Real-time patient treatment registration Daily sales reporting Client inquiries Sales agent performance statistics Sales agent Agent performance feedback Treatment quality control Client follow-up reminders Announcement of new products and programs Headquarters Inquiries Technology enables superior CRM and sales force management 9 Living Goods mobile platform
  44. 44. QUESTION 10: Which of these statements is true? 44 The social businesses that have achieved largest scale and impact today are: 1. Those that started as ‘boot-strapped’ businesses, but invested in a professional (well paid) management team and solid processes (IT, HR) as they grew 2. Those that started as a socially-oriented business with a management team accepting lesser wages than in the traditional business sector so that profits could be (re)invested into reaching the poor 3. Those that started as NGOs, which have time to test and refine their models without the pressure of making profit, and started to grow only once they had a proven model
  45. 45. 45 #1 The overhead curse: too much or not enough! Investments in overhead should be temporary 0
  46. 46. 0% 20% 40% 60% 80% 100% 0 1 2 3 Fast-growing organizations invest ~30% revenues in building professional overheads (likely to decrease to 10% as they grow) The overhead curse: not enough or too much! * Logarithmic scale 100 300% Overhead as % of total revenues Very large, successful organizations with professional management structures Total yearly revenues ($m)* 10 Donor-dependent organizations with corresponding fundraising expenses including impact monitoring Large, stable organizations maintain low overheads but may fail to invest in professional management ? 10 ? ?
  47. 47. 47 The overhead curse: too much or not enough! It’s about economics! Risk-free solutions, not cheap products Financing is best done in-house Serving the BoP is a high gross margin business Below-the-Line marketing works betterSales force churn can and should be avoided Responsible and effective marketing happens after a sale It is worth Investing in a modern BoP sales force Your score/ 10? Four direct sales force models are emerging Value proposition Marketing Sales force
  48. 48. 10 questions to benchmark and improve your business 48 A. Are you offering a comprehensive and competitive solution compared to alternatives? C. Is your sales strategy both economically sustainable and socially effective? Are you sustainably* providing as many people as possible with access to your products’ benefits? 7. Are you maximizing sales force productivity? 6. Are you creating attractive local income opportunities? 8. Is your sales organization cost-efficient? 2. Are you providing a comprehensive solution to users and society? 3. Is your Gross Margin sufficient? 1. Is your price competitive compared to alternatives? 4. Are you reaching your target users? 9. Can you sustainably finance core central activities? 10. Are your headquarters equipped to scale up and replicate while continuously improving quality? D. Is your central organization able to drive network performance, impact, growth and replication? * Sustainably: guaranteeing your clients quality service in a long term financially viable way for your company B. Does your marketing leverage/reinforce positive community dynamics? 5. Are you efficiently allocating your marketing budget along the penetration cycle?
  49. 49. Where do you stand? 49 7. Is your sales organization cost-efficient? 6. Are you creating attractive local income opportunities? 5. Does your marketing leverage/reinforce positive community dynamics? 8. Is your sales organization cost-efficient? 1. Is your price competitive compared to alternatives? 4. Is your Gross Margin sufficiently high? 2. Are you providing a comprehensive solution? 3. Are you reaching your target users? 9. Can you sustainably finance core central activities? Key indicators  % sales from core products Benchmark* You 28-87%  Product IRR over lifetime  Range of prices 20-5000% ×2-4  Gross margin (incl. commissions) 35-45%  Max penetration reached  Time to full penetration 10-30% 3-10 yrs  % of continued use after 2 years  ATL costs as % of revenues  Systematic focus on satisfaction 95%-100% 0% Yes  Sales force churn  Sales force compensation/FTE 7-10% $2.4-4.9k  Sales/FTE  % salesforce time spent on sales  Sales people doing 80% of sales >$50k 60-80% >60%  Spending on sales force  Spending on sales managers  Manager span of control (FTE)  Vendor to manager compensation <10% 3-4% 3-8 ×1-4 *These data correspond to range observed among best practices of comparable projects  Overhead costs (% of revenues)  Net margin 8-30% 0-10% Possible levers More than 60 tried- and-tested indicators to help you track performance
  50. 50. A two-day interactive workshop for management teams 50 Benchmark your performance against your peers Identify priority areas for improvement Design new sales and marketing approaches inspired by best practices 1 2 3 Company indicators Best practices Database
  51. 51. Marketing Innovative Devices for the BoP Lessons learned from 15 global pioneers that challenge conventional sales & marketing approaches Full report available on www.hystra.com Contact: Jessica Graf, jgraf@hystra.com
  52. 52. Questions?

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