Product development for sanitation microfinance
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Presentation given by George Muruka from MicroSave in Dar Es Salaam. It highlight the needs to conduct proper marketing activities before lauching sanitation-focused microfinance products. Sanitation can be a business case when customer needs and preferences are identified. The oresentation also includes Microsave's experience in supporting microfinance insitutions in Kenya in developing sanitation-related products.
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Product development for sanitation microfinance
- 1. MicroSav e Sanitation Microfinance Market-led solutions for financial services Product Development Presentation by George Muruka (Senior Consultant at MicroSave) Sanitation financing Working Group Workshop at WaterAid Tanzania 3rd December 2013 MicroSave Market-led solutions for financial services
- 2. MicroSave believes in…… Inspiration A world in which all people have access to high-quality, affordable, market-led financial services Mission Strengthening the capacity of financial service providers to deliver market-led financial solutions MicroSave 2 Market-led solutions for financial services
- 3. Tewkesbury Delhi Kampala Nairobi Lucknow Hyderabad Manila Port Moresby Jakarta Buenos Aries MicroSave Offices MicroSave (India) Head Office: Lucknow Tel: +91-522-2335734 Fax: +91-522-4063773 New Delhi Office: Tel: +91-011-45108373 Hyderabad Office: Tel: +91- 40-23386140 info@MicroSave.net MicroSave (Kenya Office) Shelter Afrique House, Mamlaka Road, P.O. Box 76436, Yaya 00508, Nairobi, Kenya. Tel: +254-202724801/2724806 Fax: +254-20-2720133 Mobile: +254-0733-713380 info@MicroSave.net MicroSave (Uganda Office) Regency Apartments 30 Lugogo By-Pass P.O. Box 25803 Kampala, Uganda. Phone +256-312 202342 Mobile: +256-706 842368 info@MicroSave.net MicroSave (UK Office) The Folly, Watledge Close, Tewkesbury, Gloucestershire GL20 5RJ UK Tel. +44 1684 273729 Mobile +44 796 307 7479 info@MicroSave.ne MicroSave (Manila Office) Unit 402, Manila Luxury Condominiums, Pearl Drive corner Gold Loop, Ortigas Center, Pasig City, Metro Manila, Philippines. Tel: +(632) 477-5740 Mobile: +63-917-5977789 info@MicroSave.net MicroSave (Indonesia Office) Jl. Penjernihan I No. 10, Komplek Keuangan Pejompongan, Jakarta Pusat 10210, Indonesia. Tel: +62 82122 565594 info@MicroSave.net MicroSave (PNG Office) Corner of Musgrave Street and Champion Parade, Port Moresby, Papua New Guinea. TeleFax No.: +675 321 8823/321 8854 info@MicroSave.net MicroSave Market-led solutions for financial services
- 4. What informs MicroSave’ product development Process? • Assumption of homogeneity by many FIs: • Implicit assumption that microfinance clients are essentially homogenous. • Essentially, a “one product fits all” approach continues to dominate the financial sector. • In reality, poor people’s financial needs as as diverse and complex • However, here is lies the opportunities that can be met on a profitable basis. MicroSave Market-led solutions for financial services
- 5. Evolution of Strategic Marketing Marketing concept CUSTOMER DRIVEN Selling concept Product concept PRODUCT DRIVEN Production concept MicroSave Market-led solutions for financial services time
- 6. Why Systematic Product Development? Product driven approach leads to: ► High level of clients drop outs ► Multiple membership - due to inappropriately designed products ► Exclusion of the poorest and the “missing middle” Informal sector (usually unrecognised) is typically a major competition Many FIs replicate existing models developed for other markets/clients MicroSave’s calls this a Market Led Approach MicroSave Market-led solutions for financial services
- 7. MicroSav e Market-led solutions for financial services Product Development & Differentiation Some more details MicroSave Market-led solutions for financial services
- 8. Differentiated Markets/Segments Systematically assess market/segment needs This allows you to: ► View a market from the customer’s point of view ► Exploit market/segment strengths ► Develop focused strategies and ► Identify gaps that offer new product opportunities. A market/ market segment should be: 1. Measurable, 2. Accessible, 3. Substantial, 4. Unique in its response, and 5. Stable in behavior MicroSave Market-led solutions for financial services
- 9. Modifying or Developing New Products … Refining your existing products or developing new ones is a complex and risky under-taking We should use a systematic process to: ► Minimise risk ► Maximise likelihood of success Use a market research and product prototype process and then pilot-test carefully before final roll out. MicroSave Market-led solutions for financial services
- 10. Product/Market Expansion Grid (Ansoff Matrix) EXSTING PRODUCTS MARKETS 1. Market Penetration 2. Product Development LOW RISK HIGHER RISK 3. Market Development EXISTING NEW PRODUCTS 4. Diversification MEDIUM RISK HIGHEST RISK NEW MARKETS MicroSave Market-led solutions for financial services
- 11. What does successful product development Involve? • The team. Multidisciplinary skills and a product champion. • Buy-in. Support within the institution for the process. • Market research. Identification of unmet or poorly met financial service needs among the target market segment. • Market segmentation. Definition of the customer/client group to be targeted. • Appropriate product design • Effective product prototype pilot test. • Careful product rollout MicroSave Market-led solutions for financial services
- 12. Sanitation finance MicroSave Market-led solutions for financial services
- 13. 1. Case for Sanitation Finance Majority of people in developing country use pit latrines • For example, in Tanzania, up to 93% • Sources: Tanzania: Household Budget Survey (2009) 1. 2. 3. Public utilities are limited CBOs are important providers to communities Need to leverage on private sector finance to improve access to sanitation facilities and services. MicroSave Market-led solutions for financial services
- 14. Experiences in Africa-KWFT • Developed financial products to improve access to water and sanitation services • Product range • Household sanitation-structure, seat, hand wash and a slab • Institution toilet loans MicroSave Market-led solutions for financial services
- 15. Experiences in Kenya –ECLOF-K • Conducted situational analysis to generate information that would help with development of suitable WASH products Product Developed Loans for ► ► ► ► Acquisition of fully fitted Water tanks Construction of latrines/toilets, bathrooms Construct their own fully fitted shallow wells Start up or working capital for WASH enterprises MicroSave Market-led solutions for financial services
- 16. Experiences in Kenya-Family bank • The bank in partnership with practical Action ( a local NGO is involved in providing credit to landlords in Nakuru town of Kenya • The loan cover hardware investment related to sanitation like septic tanks, latrines or garbage collection • Family bank did not develop a new product but adjusted existing microcredit • Action conducted need assessment since they were involved in other sanitation projects in the area • They recommend client to family • Family bank does the loan appraisal MicroSave Market-led solutions for financial services
- 17. Maji na Ufanisi NGO: Supporting CBOs to develop Sanitation facilities MicroSave Market-led solutions for financial services
- 18. Resource Implication Core Activities Estimated Time Specific Activities Staff Partner Selection 1 month • Application form • MoU • Planning next activities CEO Senior Managers Market Research Course 11 days • • • • Marketing manager Field Officers Product concept development 10 days • Iterative process involving in house meeting and deliberations Field Officers Managers Concept Testing 5 days • Field based test with clients • Reporting to institution Field Office Clients/Customers Prototype finalization 2 days • In house debrief and finalization of the product prototype • Management commitment Senior manager CEO/Managing Director Pilot Testing 6 – 10 months • Pilot test launch • Pilot performance monitoring • Impact evaluation & product rollout Field Offices Managers Clients In class training on skills Field based market research Reporting Planning for other institutions MicroSave Market-led solutions for financial services
- 19. What are the Lessons and Impact? Impact on clients ► Improved health and high level of participation ► Inclusion of the poorest into sanitation finance ► Improved human dignity Other impacts ► FI brand building and posititoning ► Product development capacity. MicroSave Market-led solutions for financial services
- 20. MicroSav e Market-led solutions for financial services Part II Product Development Process Version MicroSave 0401 Market-led solutions for financial services
- 21. An Important Distinction … Product Refinement v. New Product Development Product Refinement “tweaks”/adjusts existing products often with limited effect on the existing systems. Example: Changing interest rate or marketing strategies of an existing product New Product Development is the process of developing a brand new product. Example: A housing loan or a contractual savings product MicroSave Market-led solutions for financial services
- 22. Product Development Process Overview Research Issue Qualitative Research Plan Costing & Pricing Qualitative Research: FGD/PRA Understanding clients’ needs Product Ready for Pilot-test Quantitative Research: Prototype Testing Concept Development Refine the Concept into a Prototype Refining/Testing the product prototype Risk Analysis & Process Mapping MicroSave Market-led solutions for financial services
- 23. Why Develop New Products? Respond to client needs and preferences Operational & financial sustainability Deepen and broaden outreach/growth Help clients manage risk and vulnerability Raise new sources of capital Reduce delinquency rates Retain good clients/reduce drop-out rates MicroSave Market-led solutions for financial services
- 24. Steps for Product Development • Form the Product Development Team under the Product Champion • Identify the research issue & research plan. Driven by analysis of secondary data and focuses the market research effort on the specific issue(s). • Involves a variety of qualitative research techniques including focus group discussions and Participatory Rapid Appraisal (PRA) sessions. • Iterative concept development and concept testing • Prototype pilot testing with clients or target market segment • Product rollout to a wider market/market segment Handout 6.3 BN#14 Systematic Product Development MicroSave Market-led solutions for financial services
- 25. MicroSav e Market-led solutions for financial services Examples of PD Activities MicroSave Market-led solutions for financial services
- 26. Tools to Understand Customer Needs Focus group discussion sessions: Sessions with target customers to discuss needs PRA: Detailed practical activity sessions e.g Seasonality of income, expenditure, savings, and credit Seasonality of migration, casual employment and goods/service provided by the poor Life cycle analysis to trace lump sum cash needs over time Times series of sickness, death, loss of employment, theft, natural disaster Cash mobility mapping MicroSave Market-led solutions for financial services
- 27. Data collectoin can be fun too!!! MicroSave Market-led solutions for financial services
- 28. Developing the Concept Concept is considered using the 8Ps or marketing framework: •Product (design) - specific features, terms etc. •Price - interest rates, transaction cost etc. •Place - distribution, accessibility etc •Promotion - advertising, PR, etc. •Positioning - in target customer’s mind •Physical Evidence - the physical appearance of the product/service •People - the human interactions as the product/service is delivered •Process - how the product /service is delivered: the steps/systems to “sale” MicroSave Market-led solutions for financial services
- 29. Concept Refinement: The Process Concept introduced to clients Reaction / understanding assessed Reaction / understanding assessed Incorporated into refinement of concept Refined concept introduced to clients MicroSave Market-led solutions for financial services
- 30. Product Risk Management (1) Motivation risk: What is the strategy behind the new product introduction? Management/Board commitment risk: Does it have high-level commitment? Staff availability risk: Are sufficiently skilled staff available to lead its development? Orphan-product risk: Will the new product be mainstreamed or left orphaned? Demand risk: Will there be insufficient demand for the product in the market place? MicroSave Market-led solutions for financial services
- 31. Costing of Products Allows MFIs to (1) 1. Determine the full-costs of delivering products 2. Determine the profitability/contribution of the products (including analysis of changes over time) 3. Refine cost/profit centres and the MFI’s management information systems 4. Identify hidden-costs MicroSave Market-led solutions for financial services
- 32. What is Pilot Testing? • Prior to full launch, the product can be pilot tested by launching it in a limited area – e.g. at one branch. • Various aspects of the product’s performance are then monitored/measured over time. • In addition, the FI can examine the implications of offering the product e.g. financial/human resources, performance, community etc • Multiple product introductions must be conducted in separate branches for each product • See MicroSave’s “Toolkit for Planning, Conducting and Monitoring pilot tests for MFIs” MicroSave Market-led solutions for financial services
- 33. Essential Elements of the Pilot Test 1. 2. 3. 4. 5. 6. Composing the Pilot Test Team Developing the Testing Protocol Defining the Objectives Preparing All Systems Modelling the Financial Projections Documenting the Product Definitions and Procedures 7. Training the Relevant Staff 8. Developing Marketing Materials 9. Commencing the Pilot Test 10.Evaluating the Test MicroSave Market-led solutions for financial services
- 34. What is Rollout? Roll-out is a process that includes: ► Transfer to permanent department ► Preparation of: Site Staff Systems Marketing ► Launch ► Assessment Roll-out is NOT just the launch (launch is only a small part) ► Starts with recommendation letter approval ► “Ends” after roll out to all target locations, but analysis continues (actually the roll-out process simply opens into the regular continuous and periodic product monitoring processes) MicroSave Market-led solutions for financial services
- 35. What is Needed Before Rollout? • Capacity re-assessment after the pilot test e.g. institutional strategy, financial viability, organizational culture, HR, delivery networks, and systems etc • Other requirements: • ► Management commitment ► Project Management skills ► Flexibility ► Infrastructure e.g. marketing capacity ► Compliance with regulatory matters Formal approval of management/Board MicroSave Market-led solutions for financial services
- 36. Organising the Rollout • Deciding on full/phased/partial rollout (provides a questionnaire to help assess this) • Determining order of rollout to branches (based on review of infrastructure, market demand, projected profitability, geography, and staff demand to offer it.) • Project management aids (in many ways roll-out can more complicated than pilot testing. Structured processes –critical path analyses (Gannt or PERT) – can be helpful as a means to manage the roll-out) • Setting Rollout Objectives (by institution and branch helps confirm product progress, and helps get branches more involved) MicroSave Market-led solutions for financial services
- 37. Successful Rollout = Clients & Profits! MicroSave Market-led solutions for financial services
Hinweis der Redaktion
- Strengthening the capacity Through the dissemination of information, development of toolkits and practice-focused training Financial service providers Financial institutions and those that provide them with technical services to support their work Market-led Client centric in the context of the competitive environment Financial solutions That respond to customer or institutional problems through sharing lessons and facilitating innovations
- The Five Concepts There are five alternative concepts under which organisations conduct their marketing activities. The concept include the production, product, selling, marketing and societal marketing concepts.
- Type of Action Where the company is looking to increase sales by: MARKET DEVELOPMENTIncreasing current product/service sales in current markets by better marketing PRODUCT DEVELOPMENTDeveloping new products/services for its current markets MARKET DEVELOPMENTTaking its current products/services to new markets DIVERSIFICATIONDeveloping new products.services for new markets
- When Clients Needs are Not Met…. When clients’ needs are not met, an MFI will typically experience slowed growth as word-of-mouth marketing dissipates. The signal that often prompts an MFI response is desertion, as frustrated customers look to the competition to meet their needs for lower rates, better terms, more convenient service, different products, and so on. Increased deliquency or default desertion as frustrated customers look to the competition to meet their needs If staff/officers are not attentive to clients’ concerns or complaints, or if they are unable to translate customers’ needs into product refinements, negative signals can spur new product development amongst the competition in the formal and informal sectors*. Unfortunately, many MFIs do not carefully track the reasons clients leave, and lose a valuable information opportunity. Other negative signals could be increased delinquency or default, which triggers a loan officer follow-up with the borrower. * Of course, if MFI holds a monopoly, these negative signals will take much longer to surface, if they do at all.
- This slide provides an overview of the product development process. Define the problem/research objectives -> Understand the clients’ needs (through qualitative research techniques) -> Develop the product concept/ prototype -> Test the product prototype (through quantitative research techniques) -> Get ready to pilot test the product.
- “What is often missing is going to the field and asking dumb questions, and smelling and feeling and getting in bed with the problem so that you understand the other side of it.” - Joe McPherson, Director of Innovation Programs, SRI International. Why Develop New Products? The need to effectively respond to the demands and preferences of customers. The poor are not one homogeneous group with similar needs ! They need products that present a solution to their problems. The need and potential for deeper outreach especially to the hard-core poor who are currently not reached by most MFIs. The need to create mechanisms to bridge the gaps created by poverty, illiteracy, gender, and remoteness. The need to have products that are simple enough to be understood by clients and easily administered by the MFI. The need to have an impact on reducing income-poverty. Need for reducing vulnerability by introducing asset protection services. The need for sustainability by generating higher revenues to cover operational costs. Need to raise new sources of capital for loans. Need to reduce delinquency built upon customer service / appropriate products Need to retain loyal clients and reduce client loss
- Finalising the Prototype To create sophisticated new products, the new product development team must consider the entire prototype in terms of all its component parts, and solicit client feedback on factors referred to as the five (5) Ps: Product (design)—includes specific features, terms, packaging, liquidity, ancillary services such as loan review and disbursement times, collateral or guarantees, amortization schedules, repayment structures (e.g. balloon payments or interest-free grace periods etc) Price - includes the interest rate, loan fees, prepayment penalties, prompt payment incentives, withdrawals costs, transaction costs and other discounts. For example, Fundusz Mikro has a graduated pricing schedule based on group size that offers price incentives to borrowers to form larger groups that provide additional security to the lender. Promotion - includes advertising, public relations, direct marketing, publicity; and all aspects of sales communication Place - this refers to distribution and making sure that the product/service is available where and when it is wanted. This includes consider such options as mobile bankers, ATM etc, working with the informal sector financial services etc. Positioning - it the effort by the MFI to occupy a distinct competitive position in the mind of of the target customer. This could be in terms of low transaction cost,low price, high quality, quick turnaround time, professional service, etc. It is a perception.
- Client Concept Evaluation - The Process The entire process begins with the concept being introduced to consumers whose understanding is assessed. Their reaction is incorporated into refining the concept. The new refined concept is introduced to another set of consumers and again their understanding is assessed. The process goes on until the client feels that they have a concept that is optimal and if developed into a product will yield positive returns in the long run.
- What is Pilot Testing? (1) Prior to full launch, the product can be pilot tested by launching it in a limited area - perhaps at one branch. Various aspects of the product’s performance are then monitored/measured over time. In addition, the MFI can examine the implications of offering the product on financial/human resources and performance For more information on Pilot-Testing see: Handouts: MicroSave-Africa’s “ Planning, Conducting and Monitoring pilot tests for MFIs” (Summary) “Beyond Basic Credit and Savings: Developing New Financial Service Products for the Poor” by Graham A.N. Wright
- Essential Elements of a Pilot Test There is a series of activities that make up the formal process of product development, and one of the most important is pilot testing of the product. The pilot testing process can be broken down into ten steps that, if followed carefully, can minimise the chance for a loss of control of the test and provide valuable information that management can use to improve the product. If all steps are followed, management can ensure a successful decision about the roll-out of the product in its final form. These steps complement each other in a comprehensive manner, and flow easily from one activity to the next: Composing the Pilot Test Team Developing the Testing Protocol/performance indicators Preparing All Systems Modelling the Financial Projections Formalizing the Objectives Documenting the Product Definitions and Procedures Training the Relevant Staff Developing Customer Marketing Materials Commencing the Product Test Reviewing the Product as per the Protocol For details see Handout “Summary of MicroSave-Africa’s “A Toolkit for Planning, Conducting and Monitoring Pilot-Tests for MFIs”. For even more details, see the toolkit itself !