Convenience as a service

Shredded cabbage for sale, Wote, Kenya 3rd February 2012

Convenience can mean different things to the household consumer, depending on their location. In urban Chicago, its stocking up the freezer and pantry with a trip to a megastore like Costco while in Singapore it might be the ubiquitous neighbourhood hawker stand where rice, meat, two veg can be had for as little as $2.50 per person. Here in the mostly rural, arid Makueni district of Kenya where the concept of leftovers is moot and only bars and restaurants tend to have a refrigerator, convenience means stopping by the cabbage lady for just enough for tonight’s meal.

Kerosene sales, Wote, Kenya 4th Feb 2012

Purchasing patterns observed previously among those on irregular income streams have been clustered into  four major categories:
1. Prepaid or pay as you go
2. Bulk purchases of non perishables
3. Sachetization or as its called here in Kenya, kadogo
4. On demand, for immediate use

The shredded cabbage, being sold by weight or “amount” (half a cabbage or quarter) is a clear example of the last pattern and common across the world while the way kerosene is being sold could be said to be closer to a ‘sachet’ or small purchase as it tends not to be a daily or on demand purchase.

Interestingly, here I saw bulk purchasing for firewood or charcoal rather than foodgrains since most families have some land where they grow maize.  The maize is first and foremost for household use and only the surplus is sold.

So why have I called this ‘convenience as a service’?

There is a premium one is paying for the convenience – whether its the shredding being done for you or the difference in price of kerosene between the town and the village.  Someone has saved you the time and effort thus it costs money. There’s an entire economy around water and its supply chain that I’ll be taking a closer look in a forthcoming post.

Immersion in rural Kenya

Next week's office

We start the immersion phase of our project tomorrow and leave for our first location in rural Kenya today. Our focus is to better understand household consumer behaviour and our methodology is inspired by the early stage of the human centered design process.

Ukambani has been the traditional homeland of the Kamba people for at least the last four or five centuries. Although oral history acknowledges that the Kamba came from the south, in the region of Mount Kilimanjaro, the creation myth which is most popularly cited places their origins in the heart of Ukambani: Mulungu (God), who created the universe, also created the first Kamba man and woman, and placed them on top of Mount Nzaui in the fertile Mbooni Hills (roughly 20km north of Emali).

We’ll be based in the market town of Wote, capital of Makueni district.

Why so much “BoP” marketing fails in the developing world

Consumer electronics stall in informal market, Nairobi Kenya 23 January 2012

Increasingly I have been getting the sense that there are some fundamental issues with the way BoP focused organizations are developing, creating and implementing their market entry strategies.  Here are four of the most obvious errors that I’m seeing:

Assuming there’s no competition

Most of these firms, particularly those coming in from the outside and seeking to serve the ‘poor’ in the developing world seem to be operating in a vacuum. Observing their market entry actions point to an underlying assumption that they are entering a virgin market where  no competing solutions for their product or service exist.  If this fundamental premise is mistaken then every element of their marketing, communication, distribution and pricing strategy will naturally suffer.

A caveat here is that it might indeed be a virgin market for branded international solutions in the formal market but this is where overlooking the informal markets and existing practices in user behaviour can be far more dangerous since this is where the competition will come from in the form of substitutes or alternate solutions.

Because of the above assumption, little effort is made to uncover information about the customer, the market or competition or the operating environment. Whether this is due to a vacuum of information on BoP markets or the developing world, or this subject simply not being taken into consideration, the fact remains that this oversight then gives rise to a series of errors (like the domino effect) – those in marketing strategy viz., marketing communications, value propositions and positioning not to mention pricing.

Conflating company mission with marketing strategy

While this is most commonly found among well meaning social enterprises entering these markets for the first time with their life saving products for the poor, large multinationals with previous experience in the developing world are not immune the minute they choose to focus particularly on the BoP (or poor) market.

Tata Nano is the most obvious example of this although here one wonders how much of this had to do with their actual marketing communications and advertising for the Nano and how much to do with all the media hype around the car being specially for the ‘common man’? All the positioning and branding in the world through formal advertising and communication channels could not overcome the public perception of the ‘poor man’s car’ created by every other article – from engineering news to international styling – on the Nano.

Similarly, if all the marketing communications, press reports and online information is geared towards the ‘poverty alleviating” mission of the company then this lack of clear focus or understanding of who the target audience is will come through in the positioning and branding of the product in the marketplace.  And no one will aspire to buy the ‘poor man’s product’ if it means a clear signal of having failed to succeed or admitting defeat among their friends and neighbours.

Confusing value proposition with need

This lack of clarity and understanding about the target audience for a product or service and thus, its marketing communications and messaging then snowballs into incorrect positioning of the product or incorrectly identifying the value proposition for the end user.

The end result might be the same – the customer choosing to buy your product – but the pain points may differ tremendously across geographies and regions, not to mention socioeconomic strata. An example is water saving flush toilet mechanisms being sold in Nairobi as a sustainable, greener alternative – that is, the same positioning and value proposition as that used in the eco-conscious parts of the Northern European continent. Sales are sluggish. But when you take into consideration that there is a water shortage or that many communities need to purchase water in tankers to fill their household storage tanks, a simple shift in positioning to “Spend less money flushing down the toilet” or some such clever quip could in fact make a more sensible approach in this situation for the very same product.

This gets more obvious the lower down the income stream you go – Mama Mboga with her vegetable stand may not have the same priorities nor relate to the same value propositions that social impact investors do.

Overestimating the ability of a faceless brand to communicate value

There is probably a snappier sentence to capture this aspect but at this stage of understanding the BoP markets and their challenges its perhaps better to be clear than pithy.  Some have called this issue one of Trust and in the past, I’ve referred to it as Commitment but the fact remains that this aspect is the most challenging and difficult to overcome as a barrier to acceptance.

Even megabrands accustomed to instant global recognition such as Google may find that not only is their brand unknown and unheard of in these new and emerging markets but others may have gotten there before them.  Which, in a way, brings us back to the first point in the assumptions made at the very beginning of considering market entry strategies in the rising global middle class.

“This is wealth in Wote”

Sweet, fresh water, Ukambani Kenya 18th January 2012

The owner of this shamba specially asked his man to remove the pipe so that he could proudly share his ‘wealth’ – sweet, fresh water piped in from a submersed pump with pipe and power laid down under the dry river bed and his fields.

Value is always contextual.

Fuel, Food and Fone – The necessities of modern life

Highway stands, Kirinyaga, Kenya 19th January 2012

Human centered design: Surprising insights from rural Kenya

One of the most surprising things that struck me over the past couple days of running around doing recce visits for our upcoming rural research was just how rapidly and how well the concept of the user centered design (UCD) process and thus, the human centered approach to research and development was not only understood by our rural hosts but how much it was appreciated. As others in the field know, it can often be a challenge to explain to clients why user research is critical and what kind of difference it can make, more so in the former rich world.

Even the local councilor’s political protege beamed when he heard that it was critical to understand ‘his’ people first and their daily life before coming up with any product, service or plan. In fact it makes me wonder whether his little part of the world is in for any changes?

Mind you, we were extremely blessed during our visit to Makueni district – one of the more challenged parts of Kenya, where the arid landscape can suffer from insecurity of such essentials such as food and water.  Our contact there introduced us to his old friend, who was in between contracts, and Rafael (whom I’m sure I’ll be mentioning more in future posts) turned out to be an experienced expert in poverty alleviation programs and a trained anthropologist to boot.  Our initial meeting rapidly turned into a project planning session.

But that’s a welcome side note. I started this post because as we were discussing the methodology and approach that I intended to use for our consumer insights research, I found that not only was the UCD process grasped rapidly by all the others at our table, its value was also appreciated and understood.

As our local businessman friend explained, too often products for their market were simply direct imports or secondhand and shoddy goods “sent to Africa”. The fact that their community’s lifestyle and daily challenges were considered important enough to be understood first before the development of any strategy or device was felt to be a mark of respect.

It makes me ponder whether we do the economically or infrastructurally challenged a disservice to continue to think of them as the BoP – no one, if asked, would ever consider themselves the base or bottom of anything.  And I wonder if that’s why so many of these socially beneficial products or poverty alleviation products and programs fail because to embrace them would imply to one’s peers and community members that one was ‘beyond hope’ or ‘poor’ regardless of one’s one economic challenges?

Low Income Household consumer research in rural Kenya

Roadside clothing shop, somewhere between Emali and Wote, Kenya Nov 2011

In a couple of weeks, I’ll be starting a whole new set of fieldwork in rural Kenya.  This time we’re doing something closer to the better known applications of our human centered design approach for increasing our understanding of people. It will be among rural ‘BoP’ households on behalf of a consumer product that’s retailed in leading supermarkets. While our previous client project allowed us to delve deeply into a topic that interests us both – mobiles, internets and cyber cafes – I’m looking forward to the opportunity being made available to me to finally be able to do something approaching the ‘prepaid economy project‘ from two years ago.

That is, I’ll have the chance to find out how those on irregular income streams manage their household finances and share this openly on the blog. Since it is also a rural location, it maps on almost exactly to the criteria of the previous locations in The Philippines and in India thus permitting an excellent opportunity for contrast and comparison. What’s exciting me however is that this will be in Kenya, home of the mPesa mobile money transfer system, and I want to see if it will be mentioned by any of the respondents in their answers to the same set of questions I’d used previously.

That is, without any mention of it from my side, I want to see if MPesa has made any difference to the way rural folk deal with emergencies or planned expenses or any other aspect of their daily life.  If there’s anything of note, my hope is to be able to write a comparitive paper on it and extend the findings from the previous research. Of course, our current client will also receive what they have asked us to find out for them – its just that its all under an NDA.

This series will be categorized under the Project category titled “Prepaid Kenya series” and I’ll be using “prepaidkenya” as a tag to all relevant posts, if you’d like to follow along.

Social enterprises and the target audience for their value propositions

It struck me while browsing through some ‘design for social impact’ product websites recently that while their focus might be on the poor, their communication and messaging was geared towards the Western or top of the pyramid audience.  I’d rather not link to nor name names, select your favourite cookstove/solar lantern/water purifier social enterprise and look at it from the point of view of their intended customers – the erstwhile poor in the developing world.

Their marketing communications tend to look and feel no different from that of the big name charitable organizations – big eyed brown child seeking your help to drink water/study/eat food etc.

Modern technology helps Muchiri navigate Nairobi's terrible traffic jams thus giving him less of a headache*

Whats the problem, you say, these are well meant start ups and they need all the help we can give them to get these wonderful life changing products out to make that better world for the 99% er 90%, whatever?

The problem comes down to the value propositions that these organizations identify as being critical for their target audience.

“Cooking with cow dung gives Mrs Rajarani terrible hacking coughs everyday, SupercleanCookStove helps ensure her lungs are healthy enough to do all the housework”*

“Kerosene emits enough noxious fumes to equal smoking 2 packs of filthy cigarettes a day, our CleanFreshBriteLite takes over the burden of keeping encroaching darkness away”*

et cetera

Where’s the problem, you continue asking me, these products are well designed modern technology that will help alleviate these side effects?

Agreed, but is the value proposition being made one that resonates with you, dear reader on the broadband internet, browsing their photoshopped website, ready to donate a few extra lamps/stoves/watercoolers or one that will resonate with their intended customer?

Who is the customer? What do they want? What value proposition resonates with them?

And how many entrepreneurs have been frustratedly asking “Why aren’t they putting down good money for this fantastic product of mine?“

Because the demand being addressed by these messages is not that of the target audience, who are ultimately the ones for whom these products are made.

Everyday, research shows that the barriers to adoption include:

Improved cookstoves rank poorly on all three dimensions: their benefits are rarely valued highly by customers at the outset, they are expensive, and they require a significant change in lifestyle to be put into use.

Lets start with benefits alone – which is where the topic of identifying the correct value propositions for the target audience comes in. If your messaging and marketing is all about the best selling drill addressing an audience of home improvement contractors but what your actual customers need is a hole in the wall, how will you manage to bridge this gap in communication when you face your customers directly?

By focusing on the value propositions – be they environmental, healthcare related or otherwise – meant for every other stakeholder but the end users aka the customers of the product themselves – organizations may never quite identify nor refine the benefits as they relate to the poor customer, in the context of their lives, and their decision to purchase and use the said products.

To quote an old post about the Tata Group’s approach to low income customers,

Their primary criteria – as a business – for the design and development of this product was to take the concept of the Bottom of the Pyramid as a viable demographic to serve, setting the design criteria and constraints for both the product itself as well as their revenue model and pricing structure accordingly. The fact that it will “do good” or “improve life” is as important but this aspect has not been permitted to overshadow the need for the product to be competitively priced and attractive to the consumer, offering value for their hard earned rupee, even as it prevents their children from suffering from diarrhea.

By taking their BoP customers as seriously as they would any other demographic, they focus on delivering a clearly identified and on target customer value proposition, thus a clearly defined benefit, to the end user. This aspect will show up in their marketing and communications as well.

What strikes me the most is that these are the basics of marketing and strategy, imparted in any MBA program around the world.

 

 

*exaggerated to amuse myself

But why aren’t they buying my fantastic life saving product?

Smallest size in Kenya, October 2011

An all too common a question blurted out in frustration by well intentioned social enterprises attempting to crack the code of the informal economy at the base of the pyramid, usually ending with the rejoinder “when they can spend double the amount on a phone!”

So why aren’t people sensibly rushing out with their hard earned shillings or kwacha or rupee to bring home that life saving potable water gadget or heart warming bit of solar sunshine to add to their clean and efficient cookstove in their kitchens?

There are two separate questions being conflated in that exasperation.  One of the fundamental errors in evaluating this dilemma lies in assuming the mobile phone as an object of ownership equals any one of these artifacts i.e. you’re comparing apples to oranges. You may as well ask why someone could spend money on medication for a sick child instead of on your [insert BoP product here].

What seems like a very long time ago, back  in 2006 when I first started pondering the BoP and their consumer habits more closely, an online colleague who blogs as niblettes put forth an answer. I’m yet to find a better explanation than his  – from a December 2006 post titled “Wealth flow key to BoP product success“:

For instance, cell phones are an incredibly popular product in developing countries, despite the fact that their cost relative to income makes them very expensive. Certainly part of the reason is a lacking wireline communication infrastructure. But this is only helps explain demand, not their capacity to pay for a cell phone nor the high priority placed on cell phone ownership.

What allows people in developing countries to afford the high relative cost of a cell phone is the fact that these devices provide an actual return on investment–they make money. Cell phones do this by accelerating the flow of existing wealth within an economy.

If you have $1 it takes a year from the day you spend it for it to come back to you (you buy a loaf of bread from a baker who buys some wheat form from a farmer who buys the charcoal from you), you will not be in a hurry to spend that $1. However if it takes only a day for the $1 to come back, you won’t think twice about spending it.

Now, what makes cell phone ownership a high priority for people of limited capacity? Cell phones accelerate the flow of wealth which grows purchasing power without having to first increase the total money supply in the economy. This gets into all sorts of arcane macro economics, so lets keep this practical. Imagine you live in a part of the world where it can take weeks just to negotiate a replacement part for your broken tractor. It costs you the same price for the part, but getting it this part tomorrow means harveting your crops on time, while getting it in three weeks means getting a lower price for over ripe produce.

Accelerating the flow of wealth like this is almost like getting something for nothing: increased purchasing power with no foreign direct investment, no charity and no bloating work hours.

Toothpaste, dvd players, and even dishwashers will not have this same kind of direct and immediate effect on an economy. So while folks in bottom of the pyramid market may want such things, they can neither pay for nor will they prioritize such purchases because these kinds of products don’t repay their investment price the way a cell phone does.

Distinguishing products this way (those that accelerate the flow of wealth vs. those that don’t) seems to provide a lot of insight into what kinds of new products will and won’t succeed in bottom of the pyramid markets. However, like i warned, this theory is still pretty fresh (it may even have to go back in the oven for a while).

Well, I think its time to bring this idea out of the oven now – I can attest to this finding after having looked at how those at the BoP managed their household incomes on uncertain income streams – their cellphones did indeed help them accelerate their decision making and the responses i.e. accelerate the cash flow, primarily because they increased their span of control over time – periodicity and frequency or money – in cash or kind.

There are of course numerous other nuances at play in choice of purchases including social status, but sadly, in the case of social enterprises, the majority of their offerings tend not fall under the category of “bling”. But at the very least, we would be doing ourselves a disservice if we consider a mobile phone just another consumer product, at least on this side of the planet.

The other issue, or question, is then “Why aren’t they buying X or Y, when X will save more money for them in the long run and emit less smoke/more light/clean the windows/prevent diarrhea?”

Embedded in this question are frames of reference and as yet undiscovered value judgments – from our perspective, it seems like it should be common sense to make this sensible purchase – I hesitate to call them subtle patronization even though in some cases that may also be a factor.

One of the elements that had emerged from the Prepaid Economy work was the concept of “willingness to pay” vs. “ability to pay” – that is, we should not assume that the ability to pay for a product implies a willingness to pay for it. Conventional frameworks such as disposable income and whatnot operate on this implicit assumption, but once we tease out the underlying influence of mainstream consumer culture, so carefully cultivated over three or more generations, we can take a clearer look across the ‘values gap’ into the BoP consumer’s mindset and values, as a discerning and demanding customer in his or her own right who is making ends meet and a better life for their children in very challenging environments.

I believe framing it this way would then allow for an indepth look at  the area of “Demand” – not demand creation, which implies an artificial stimulus of ‘want’ rather than ‘need’ but instead the existing patterns of behaviour, tradeoffs made, the Why behind the decisions to continue to use something instead of replacing it with the socially beneficial solution. One can then see why there is no demand, or if the demand exists, what are the barriers to purchase.  In plain English, what’s really going on if we are not to simply assume entire populations lack the common sense of the product’s creators.

At the inflection point of high growth to mature plateau

Focus Cyber - the largest one in town, Wote, Kenya 1st Nov 2011

The only other cybers we’d seen this packed till now had been those in Nakuru – a veritable boom town for the industry- since in the past 5 years, the numbers had grown from 10 cybers to the current 77 not including the ones in the process of opening.  Focus Cyber in Wote, in an entirely different province on the other side of the country was the largest among the 5 or 6 cafes in this town among a mostly rural area thats more economically challenged than the other places we’ve seen.

Alex the manager mused upon the future of his business -  it actually struck him during the course of our conversation that the boom had begun suddenly in late 2009, gone on for a while and he felt that it had begun to taper out earlier this year around April or May. In fact, he conjectured, would next year be as good as this one and was the boom period over the business?

This observation inspired us to take a closer look at Wote’s ‘cyber boom’ aka the growth phase on the industry growth curve – here, it was less to do with increasing numbers of cybers the way it was in Nakuru. The push towards increasing use in internet – Alex’s cyber had been the first in town, opening its doors back in 2007 – had been impelled the increasing digitization of Kenya’s institutions – both government offices as well as educational institutions.  A recent spike in business seen by cybers in Wote (we’d also visited another location in town) was in September, just before the national examinations.  Now that examination registration for high school students could only be done online (just like KRA pins and VAT submissions) even teachers were coming into town from remote rural locations to register their students. The town itself had seen parents, students and teachers – the educational system as a whole – go online for a variety of reasons such as exam prep, registration and research, during this period.

Now though there was  directive from on high that all schools were to obtain their own computers and this factor was what made Alex ponder the future of his cyber traffic.  In a very different way from the urban digital plateau and decline seen by the industry in Nairobi, Wote was reaching a saturation point in that anyone who wanted to go online was already going online and there were enough cybers to support the existing business.

Single computer outpost off tarmac on the way to Wote, 1st Nov 2011

In way this could be said to be an inflection point for internet awareness in this region – Elizabeth from the other cyber cafe felt strongly that mobiles were not at all having an impact on their business. Her rationale was that customers found going online with the phone too expensive, approximately 4 Ksh a minute versus the 1 Ksh a minute that was standard in Wote. Only those who came in to town from remote locations were using the phone to browse – they’d stop by the town’s cyber to set up all their browsing needs.

Neither cyber cafe had observed any increase in ownership of personal computers or other devices. The computer and the internet seemed to have found its place in the community, allowing cyber cafes to continue their roles as intermediaries across the digital divide as well as business bureaus and office support services.