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

1. Marketing Innovative Devices for the BoP
Lessons learned from 15 global pioneers
that challenge conventional sales & marketing approaches
ELAC 2015

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. Life-changing products exist…
3

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. 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
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. 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
It’s about
economics!#1Investing in innovative products
offers very attractive economic
returns to BOP families

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. 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
Risk-free
solutions, not
cheap products#2A risk-free, holistic solution is what
customers want
SELCO technician installs a solar home system

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
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. 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. Financing is
best done
in-house#3In-house financing can provide value to
customers, reduce operating costs,
increase revenue and reach more clients

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. 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. 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. 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. 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
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. 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. 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. 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. 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
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. 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. 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. 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. 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
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
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. 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
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
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. 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
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. 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
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. 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
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
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
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. 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
#1
The overhead
curse: too much
or not enough!
Investments in overhead should be temporary
0

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
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. 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. 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. 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. 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. Questions?