Archives for posts with tag: bop

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.

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?

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.

Siim Esko wrote a short piece on his blog BoP Strategies after a conversation we recently had. Since much of his work focuses on the BoP in India and I’d just returned from the Kenyan tour, it was but natural for us to compare and contrast the challenges and the conditions of the lower income demographic in both these countries.  He refers to recent posts on NextBillion.net when he starts:

Ashoka is targeting the top of the BoP with their Housing for All project, but they can still say they are targeting the base of the pyramid – those who can’t afford current housing solution, but who are not the poorest of the poor. But Aneel Karnani talks about the destitute poor and how the BoP is misconstrued. It’s apples and oranges.

Its apples and oranges indeed but by only referring to them as fruit, that is, the BoP, one tends to forget that this acronym actually refers to the more than 4 if not 5 billion of the entire planet’s population. And they are not all alike in any way, shape or form.  And that’s why I told him that I’m increasingly concerned about unqualified use of the general term BoP for this market.  Siim continues in his post:

There is much use for there being one definition for what we used to call the poor segment. But it seems like people get confused by the ‘bottom’ in ‘bottom of the pyramid’. In fact, it’s a rabbit hole and the rabbit hole goes deep.

We don’t take the whole World and consider that our market. You will never get VC funding with an idea like that. We zoom in on the continent, which can be divided into countries, which divide into regions, into areas. The people in different micromarkets have different buying behaviour, different wants and aspirations. And catering to those wants and needs is different. Selling snow mobiles in Helsinki is different than selling them in the north of Finland where Santa Claus lives. For one, it is entertainment, for the other, about survival. We know that. Think of the BoP in the same way – divided into tiny segments all over. Some marketing strategies are replicable across areas, income segments and sexes, but many are not.

And maybe the use of the term by an Ashoka in their own context of what they are trying to achieve – affordable housing or by Karnani in what he’s attempting to say may work but in the context of the entire global community of people who are increasingly focused on this space (that is, for example, the audience of a site such as a NextBillion) it implies that one BoP reference is the same as another. And why not, they are all the Base of the Pyramid you say?

Kenya is very different from India, and Africa from Asia. Yet due to the singular BoP label, the implications often are that one’s BoP experience with big bad messy India will prepare one for those in Kenya (or that success in a favela necessarily implies success in the basti). How different is this current situation from the early days of globalization and mass production of consumer goods across the world, based on the now debunked theory that Theodore Levitt espoused?

Any global advertising agency will tell you that localization and understanding regional differences is critical for the sales of your detergent or shampoo – the challenges that multinationals who rushed into India and China in the closing years of the previous century are well documented. Those hundreds of millions of middle class housewives were, in fact, nothing like Mrs Saunderson back in Toledo or Cincinnati, were they? So why, now, as we extend our reach down the income stream to the rest of the world’s population, are we on the point of making the same expensive errors of judgment and assumption?

In the early days of awareness creation, that here was a world changing opportunity to effect positive change and impact wellbeing, the concept of the 4 billion micro producers, consumers and creators at the base of the global economic pyramid was a valuable and compelling visualization. It captured the imagination of many and much good has come out of this – CK Prahalad has left us with a legacy.

However, as the BoP market matures and competition increases, it will only get more difficult if this single label continues to be used – it implies a single monolithic entity, segmentable only by “income” – in itself a challenging proposition in an environment where most are on irregular income streams from a variety of sources and unable for the most part to evaluate what their weekly/monthly/annual income may be, much less feel they have $2 or $3 or $5 to spend each day.  We see this in our work and we see it in the field.

If there are truly to be outstanding successes in this area, then perhaps its time to consider this market with the same degree of seriousness that advertising does its audience, regardless of whether you are making a profit, sustaining yourself or simply giving it all away.

Poster in shop, Kagumo, Kenya 18th October 2011

After the past three weeks of focusing on cyber cafes and internet access in urban and rural Kenya, we’ve been questioning the value of the “mobile internet” statistics provided by operators to the CCK. Muchiri pointed out that since most of our feedback seemed to revolve more around SIM operated routers installed by cybers, or mobile broadband modems sold either to regular home and business users or even, in the smaller towns, used to link networked computers in small cybers to the internet, what did the information actually communicate?

A thousand shillings cheaper than in Nairobi, seen in Kagumo, Kenya

At the shop we were in, Jacqueline (who is saving for her own laptop for Christmas) explained to us that it was cheaper to buy a data bundle or use the modem, than to browse on the phone using the Ksh 2/min offer directly.  Extremely knowledgeable about the most cost effective ways to browse using whichever device you may have, she uses her phone for social networking constantly and prefers it to the cyber which she only visits occasionally. However it was she who pointed out to us that she didn’t think that it was internet enabled phones alone that were affecting the cyber’s business but also the fact that affordable devices (desktops, laptops and modems) were increasingly popular and easily available.

If so, then the 98% of Kenya’s internet users who are on mobile internet may not be doing it through mobile phones alone as is so often assumed but via a variety of SIM based devices. A detailed breakdown of devices under the heading of ‘mobile internet using SIM’ as reported to the authorities might begin to offer a clearer perspective on user behaviour and modes of access.

Downtown Kajiado, Kenya, 21 Oct 2011

It wasn’t the first time we’d heard this from a cyber cafe operator, but apparently the biggest challenge to mobile phone users wishing to get online by using their spanking new phones was whether they were a cheap Chinese phone or a fake.  Up and down Kenya, or right in the heart of Masai country which is where we were today in the hot sunshine, if a customer bought a cheap phone and wanted to get online they ended up coming to the nearest cyber cafe for help setting it up. The problems are legion – from the fact that only genuine brands like a Nokia or Samsung are easily and directly set up with the mobile operator’s internet connectivity by receiving an SMS to the fact that the OS was rarely well configured or programmed.  One lady we’d met earlier this week  confessed shamefacedly to using a fake Nokia for browsing – she worked for a Safaricom dealer – apparently she was saving every penny towards buying a laptop for Christmas.

It makes me think that as social networking drives many more online to connect and communicate with their extended networks, global brands have less to worry about than they imagine they do.

Recently, this call for action by Infodev was shared with me and I was pleased to notice that they’ve referenced one of my former projects - the Finnish BoP project funded by TEKES and conducted by Aalto University.  Now that was a challenging one to wrestle down into some kind of viable action plan but that’s a topic for another post. Here, I was reminded of the lens through which we finally decided to observe and understand the BoP consumer’s mindset for the Mass Communication section of the four continent study.

I remember struggling through this vast topic in a series of brainstorming sessions with our Project Manager, Arno Kourula (who was to travel with me to our first location in Kanpur, India). Which aspect of mass communications would be the most valuable to look at more closely? Since our first location was India, we finally decided that (in 2009) the greatest value would be to look at the impact or influence of the advent of global mass comm that had flooded the Indian market in the previous 20 years rather than simply looking at what was, out of context of history.

How had perceptions and mindsets changed due to the proliferation of information and easy access, particularly among the lower income demographic?

Chotu's shop, Delhi, India

One voice I still recall very clearly, though its been two years since we traveled and talked. Chotu is a paanwallah – he runs an open air kiosk at the corner of a busy neighbourhood market in urban Delhi and is family man with three sons in a private English language school. He himself has not completed his 10th standard nor did he ever study in English. I’d asked him what was the biggest change, in his opinion, for the aam admi (a euphemism in India that usually covers the majority of the BoP and politer to use in context than gharib or ‘the poor’) and his answer has stayed with me.

It was an empowering sense of having a voice that could now be heard.

Recall if you will that in India, as in much of the unevenly developed world, there is a vast disparity in income and lifestyle exacerbated by historic hierarchies. The common man tended not to get heard, if seen at all and certainly not when some injustice like a roadside hit and run took place and the perpetrator could drop names or spread wealth in order to escape.

Chotu said that now all this had changed. There were numerous TV channels blaring news 24 hours a day and they were ready to show up and shine the spotlight if a call was placed (with a mobile phone).  They were there when major accidents took place and counting the dead – gone were the days that the Government could get away with miscounts (due to the cash renumerations paid out to victims or the families) and everything could be brought out in the open rather than being hushed up.

Cable TV and the mobile phone had offered a way to empowerment. Had in fact given a voice to the voiceless. This was the biggest impact, in his opinion, of the changes that had taken place regarding the flow of information in the past couple of decades.

R.K. Laxman's Common Man or Aam Admi

Giving him a voice at last.

Jakarta, Indonesia March 2010

The Monitor Group has made available the complete HBR article “Is the Bottom of the Pyramid Really for you?” (PDF) where the authors frame the debate for multinationals questioning whether to consider entering this challenging though untapped segment of the global marketplace.  They list some of the common barriers faced by executives during their attempts to serve this demographic, the majority of whom live in the developing world:

  1. Uncertain cash flow.
  2. Gauging demand.
  3. Sales and distribution challenges.
  4. Disaggregated providers.
  5. Undeveloped Ecosystems.

Issues of demand and distribution as barriers are part of the undeveloped ecosystem – or rather, to reframe these barriers in the context of the local operating environment, all the points are elements of the informal markets that currently serve their customers needs.  They become barriers to entry for organizations accustomed to sophisticated information and delivery systems, that is, from their perspective, there is no pre-existing consumer market and one must then create entire value chains from scratch.

And yet, another way of looking at this would be to embrace rather than attempt to replace the elements of the informal ecosystems that exist. How can you leverage the characteristics of what makes them suit the needs of customers who live in conditions of uncertainty?  Flexibility, adaptability, improvization – all of these have been mentioned numerous times in as many reports and articles.  This PDF recommends in conclusion that the most successful companies have been those that have created new kinds of businesses:

The most encouraging business-model innovations at the bottom of the pyramid manage to surmount multiple barriers at the same time. They represent not incremental adaptations but new, groundbreaking, end-to-end strategies.

Leapfrogging conventional wisdom just the way technology has been leapfrogging the inadequate infrastructure in most these locales. But where can we seek the ways in which to inspire such innovation? Imho the challenge that also exists for all these multinationals and their esteemed consultants is that their frame of reference and understanding is so well grounded in the frameworks and structures of the formal economy in which they’ve trained and learnt to operate.

This slide presentation by Gerry van Dyck (source) offers some fascinating insights on informal markets from the perspective of global FMCG brands. Mr van Dyck’s key point being:

if the market woman can succeed in the fierce competitive environment in the unbranded produce sector to create loyal customers then it is possible to use them as a reliable ally in driving change among consumers

Why stop at simply using them as an ally – lets take the thought a step further and see if we can learn from this study on buyer behaviour in the informal sector. Here’s a snapshot of a slide from Mr van Dyck’s presentation:

In a crowded market with numerous shops all selling the same unlabeled, unbranded produce how does a customer differentiate and choose to purchase? Through relationships – personal interactions over time build a rapport between customer and shopkeeper and ultimately it is this bond that drives the purchasing decisions.  In other words, it is the people and the personalities that ultimately matter, not anonymous communications from faceless entities.

And that’s something I see very little mention of in all the fancy documents and presentations being made on how to address the undeniable opportunities available in this space – where are the people? And why aren’t they the starting point for innovation?

This  PDF report on the emerging consumer market opportunity in Sub Saharan Africa comes to us from Accenture, the most recent in the long line of consulting firm offerings that started with McKinsey’s in June 2010.  In order to differentiate themselves from the migrating herd, they offer us a single customer segmentation model for the combined population of ~ 43 countries :

Our segmentation identifies five broad consumer segments:

  • Basic Survivors are the largest consumer group in Africa and are characteristically low income consumers. They tend to make day-to-day decisions based on basic needs.
  • Working families are the second-largest consumer group. They focus their spending on their children’s needs and value stability and routine.
  • Rising Strivers value upward mobility and buy based on convenience, quality, or even more “expressive” factors.
  • Cosmopolitan Professionals are typically located in urban areas. They value pragmatic products but are also brand conscious and influenced by the media.
  • The Affluent of Africa have disproportionately high purchasing power, and are considered wealthy regardless of where they travel across the globe. This group is extremely small and very fickle.

Their segment of choice for future focus are the “Working Families” ($100 to $250 a month), described so:


Working Family Profile – The Biya family resides in a small city called Mbouda in Cameroon and has four children ages seven to 13. Francis (the father) works as a mechanic servicing local farmers’ trucks, while Calixthe (the mother) works as a housekeeping lady in a hotel. Due to both parents’ late working hours, they often make quick prepared noodle dishes for dinner and give their children small biscuit packets for snacks. They spend extra on laundry detergent for school uniforms.

I see the “consumer market opportunity too big to ignore” alright, lets see how they fare in the “African markets  in accordance with African realities”.  These insights are from their section titled Analysis, and it reminds me of Dean Roger Martin’s most recent HBR blogpost  “You Can’t Analyze Your Way to Growth” where he writes:

The fundamental reason is that analysis of data is all about the past. Data analysis crunches the past and extrapolates it into the future. And the past does not include opportunities that exist but have not yet happened. So, analysis conspicuously excludes ways to serve customers that have not been tried or imagined or ways to turn non-customers into customers.

Hence the kids being fed Maggi 2 min noodles and packets of glucose biscuits, most likely from Parle.   Martin goes on to add:

Organizationally and behaviorally, analysis and appreciation are two very different things. Analysis is distant, done in office towers far from the consumer. It requires lots of quantitative proficiency but very little experience in the business in question. It depends on data-mining: finding data sources to crunch, often from data suppliers to the industry. Appreciation is intimate, done in close proximity to the consumer. It requires qualitative proficiency and deeper experience in the business. It requires the manufacture of unique data, rather than the use of data that already exists.

I like the term appreciation but my caveat would be that appreciation of any thing, person or environment emerges from understanding.

So, how exactly do you make this thing work again? (Jan 2009)

The Rural Market Insight Group at the Centre for Development Finance (CDF) conducted a six-week product test with a Base-of-the-Pyramid (BoP) household in Chennai, Tamil Nadu. The purpose was to explore whether urban user testing of rural-targeted BoP products yields relevant user insights in early design stages. Surprising results warrant further research of this potentially valuable technique.

It was with great interest that I browsed through the results of the CDF’s research conducted for a newly designed cook stove.  Their rationale for evaluating the applicability of their research results across the urban/rural divide was framed thus:

However, extensive rural user testing that would provide the necessary design insights is demanding for companies with limited time and budgets, looking to scale up quickly. Companies must locate rural test sites, target households willing to test and provide user feedback, make multiple site visits to collect data and analyse insights, modify prototypes and repeat the process several times in several locations.

A valid point. Particularly when the BoP market’s pricing requires minimizing sunk costs during the R&D phase.  The research team then tests the user testing process/methodology with an urban BoP user who shares many similarities with her rural cousins in her kitchen. Their findings include:

 While it will always be necessary to conduct BoP product testing with a rural target audience, urban testing can alleviate financial and logistical challenges that researchers face when conducting early-stage usability and design testing on BoP consumer energy products. Urban spaces offer high densities of BoP-product users, many of whom retain rural behaviours. Close proximity to potential testers allows for low-cost, high-contact interaction with testers and continuous tracking of user behaviours that would go unnoticed with less contact.

So why should there be any reason for concern? The team emphasizes the need to put the user at the center of the design process and articulates the challenges and limitations well.

Timing, context and relevance

The success of these findings should not imply that that understanding user behaviour among urban migrants from rural regions offer actionable insights for rural BoP users in their own environments.  User testing is not the same thing as user research, and certainly not exploratory or applied user research of the kind implemented to identify  opportunities or develop new market strategies.

What is the difference between user testing and user research as applied to the context of the user centered design process?

From Josh Walsh’s linkSimply put, the biggest difference is when they are used in the process.

Here, a product that has already been designed and prototyped is being tested in the field [implementation] in order to apply the findings to refine the design of the particular prototype. The basic idea or concept for a product emerges from the insights which are based on the initial user research (immersion) – the findings from prototype testing offer insights for improving an existing design but by this stage, but  will not answer the question of whether the basic design was appropriate for the user’s environment in the first place.

And if these research findings are also to be used to offer affordable and relevant products, then the financial behaviour as well as access to and affordability of the relevant fuel will change significantly between the urban and rural environments.

From the researchers’ own document:

The Quality of User Experience – Alben 1996
The UCD concept is based on questions about user experience with the product:

1. Does the user understand how to use the product?
2. How does the user feel while using the product?
3. Does the product serve its purpose?
4. How well does the product fit into the user’s environment?

Cost, Convenience and Caution

Refining an already designed prototype can certainly be done conveniently and cheaply nearby, however initial concept development and design strategy should not be assumed to rely on the same findings.

Another grey area of confusion emerges from the UCD process popularized in the development of softwares and websites, being conflated with the human centered design approach when it is implemented for industrial design of tangible artifacts that are manufactured with materials and resources.  It is far easier and cheaper to tweak a prototype for user interfaces or software applications and then test it with the users, after requirements gathering, than to change the basic engineering or mechanical aspects of a product’s design even in the prototype phase, once the concept has been developed.

Therefore, it is far more important to get the initial research done correctly among the target audience for actionable insights that lead to concepts and design criteria before the product is designed or prototypes are even built and test.  In the long run, that saves far more time and effort, not to mention costs, than attempting changes much later in the product development path. It is where major commitments are typically made involving time, money, and the product’s nature, thus setting the course for the entire project and final end product.

Here is a snippet on the role of User research or User centered research and the when and why  during the product design and development process:

User-centered research is regarded as an integral part of the design and development process. To most, UCR is presented as an essential component of how concepts are conceived, developed and tested in contemporary design. It is involved in all parts of the design process used to best address user needs and expectations. This entails using the research during early phases to identify new design opportunities as well as testing concepts during later development and postproduction phases. As such, the UCR is defined as a tool for  generating new opportunities as well as evaluating concepts in development.

Value for money and a return on investment

There are far too many well designed products for improving the lives of those at the Base of Pyramid that have never quite managed to achieve their goals than those that have succeeded.  Understanding the variety of powerful tools design makes available for observing our potential audience, their needs and their environment and knowing when to apply what and why can often save far more time, effort and money in the long run while improving the chances of success for the new product introduced.

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