Question: If you build a better mousetrap will the world beat a path to your door?
Answer: Without superb marketing and distribution nobody beats a path to your door.
In my work with a multitude of affordable technologies over the past 30 years, one key feature has become abundantly clear: If you have met the challenge of designing a transformative, radically affordable technology, you’ve successfully solved no more than 10-20% of the problem. The critical other 80% of the solution lies in designing an effective marketing, distribution, and profitable business strategy that can be brought to scale. Of these, perhaps the most important is designing an effective scale strategy.
Some technologies are simply not scalable. They solve a problem that exists only in a village or two but is not applicable to a thousand villages. The first step in designing an effective scaling strategy is therefore to put first priority on technologies that, if successful, can be applied to address parallel problems in at least a thousand villages.
For example, an Engineers Without Borders team successfully fixed a broken motorized pump that supplied drinking water to several hundred families in a village in Rwanda. This mechanized piped water system was too expensive to be implemented in many other villages, but fixing it addressed an important problem in one village. Designing a robust, affordable hand pump, on the other hand, could have addressed a drinking water problem for many of the other families in the village and in thousands of other villages as well.
In many instances, the design of a scaling strategy is not very complicated. What development practitioners usually miss is the importance of building design for scale into a project from the very beginning of the design process. For example, if you need to sharpen ten pencils, the way to do it is simple. If you need to sharpen a thousand pencils, you need to use a different strategy, but it can be done. If you need to sharpen 100,000 pencils, you need a still different strategy. Each of these problems is eminently solvable, but each one requires a different series of logical steps; it’s very difficult to efficiently change from a ten-pencil strategy to a hundred-thousand-pencil strategy if you’ve already committed your resources and your time to the former.
25 years ago iDE (International Development Enterprises) recognized the transformative potential of a simple, $25 treadle pump installed on a tube well. The design of that technology incorporated affordability, easy reparability, and applicability to millions of small farms.
Yet the key challenge was to design the mass marketing and distribution strategy that would make it available to several million farmers. In Bangladesh 25 years ago, there was no pre-existing system of mass distribution in rural villages, and many of the one-acre farmers who needed a treadle pump had never heard of the technology; didn’t know how to read and write; and had no access to mass media.
To address the problem of distribution, we recruited 75 small private sector workshops who manufactured the treadle pumps; 3,000 village dealers who sold them at a 12% margin; and we trained 3,000 well drillers through a three-day course with a diploma, who then installed the treadle pump in the field for a fee. This set up the treadle pump market infrastructure, but that alone wasn’t enough.
The next step was to create market demand, so that each of these small enterprises could sell enough volume to make a decent living. For an illiterate population unreached by mass media, flyers, brochures, or radio campaigns wouldn’t work. So we recruited several village troubadour and theatre groups to write songs about the treadle pumps, and had them perform at markets and larger celebrations, incorporating demonstrations of working treadle pumps into their performances. Finally, we created a Bangladesh-style 90-minute Bollywood movie featuring the treadle pump that played off of a truck-mounted projector to an audience of a million people every year, in village open-air settings. Our film was often the first movie that our customers had ever seen.
Without the design of a scalable manufacturing, distribution, and installation network involving thousands of small entrepreneurs, we never could have sold the first million treadle pumps in Bangladesh. Without a large-scale marketing program incorporating activities like the Bollywood movie, neither the 75 manufacturers, the 3,000 village dealers, nor the 3,000 well drillers could have earned a reasonable living by making, marketing, and installing the treadle pump. The design of the mass distribution and mass marketing strategy turned out to be much more important to the success of the treadle pump program than the design of the treadle pump itself. Design of a transformative affordable technology was a necessary, but far-from-sufficient, condition for its success.
The design of an effective for-profit business strategy, of course, pulls all of this together. Every key player in the distribution chain has to make an attractive profit. The most important person in this chain is the end customer. A basic principle I’ve learned over the past 25 years is that for $2-a-day customers, income generation is the single most important feature of a successful technology. I don’t work with any technologies for dollar-a-day customers unless the customer can get three times his money back in the first year by using the technology. A treadle pump installed on a tube well costs $25, including a profit for the manufacturer, the dealer, and the well driller. The average farmer who buys it earns $100 net income in the first year, and could potentially earn $500 a year – 1/5 of purchasers of treadle pumps earn $500 in net income right away.
While it’s the most important, for the ultimate purchaser alone to earn a profit is not enough. The manufacturer has to make an attractive enough profit that he is likely to continue making the treadle pumps. Each dealer has to sell at least 20 treadle pumps in a season to earn enough income so that it is in his interest to continue to market treadle pumps to customers, year after year. And finally, the well driller must install enough treadle pumps in a season to make it worth his while to continue installing them. All of these active participants in the supply chain need to earn attractive profits before the technology can be successful.
A successful social enterprise serving $2-a-day customers begins with the design of a radically affordable, scalable, transformative technology. But this is only the beginning. It will fail to make a meaningful impact unless 80% of the designer’s energy is successfully turned towards designing a profitable business capable of reaching a million customers through an effective branding, marketing and distribution system.This post was taken and adapted from Acumen Fund’s blog series on lessons in social entrepreneurship
Developing new practical and profitable ways to cross the last 500 feet to the remote rural places where poor families now live and work is the first step towards creating vibrant new markets that serve poor customers.
In rural Orissa, India, the women are not permitted to walk more than 150 feet from their homes to fetch water. So how can they transport water to their homes from the closest safe water source, located 300 feet away?
Fortunately, it’s not that difficult to transport 100 kitchen drip kits from Kathmandu to Pokhara on the roof of a bus. The challenge is in getting those kitchen drip kits to the hundred scattered farms in hill villages that are a day’s walk from the nearest road!
From anything including drip irrigation kits, oral rehydration salts, penicillin, and disaster relief food, moving goods and services over the last 500 feet is especially difficult. And the reverse is equally daunting. Moving marketable goods produced by the hands of poor people in remote villages to the town and city markets where they will fetch the best prices is just as difficult.
Moving goods and services across the last 500 feet of the last mile in and out of scattered rural villages is a challenge crying out for practical solutions.
The Last Mile
I was surprised to learn that the “last mile” concept comes from telecommunications industry, which has learned that it’s much cheaper to lay a fat cable carrying television and phone signals almost all of the way to the end customer rather than it is to split it up into a multitude of smaller wires that extend directly to individual homes. As it turns out, wireless communication has helped telecommunications industry address the last mile challenge, but the movement to end rural poverty has found few solutions to the even bigger challenge of crossing the last 500 feet.
Practical Steps for Crossing the Last 500 Feet
1. Create hundreds of thousands of sales and distribution points in small rural villages that can profitably sell a range of affordable income producing tools and products to poor customers.
Several organizations have developed models that train villagers to market key goods and services to their neighbors.
Here are some examples of this approach:
Living Goods. Following the Avon lady model, Chuck Slaughter founded Living Goods, which trains women in Uganda to sell 3 or 4 basic medicines to treat poverty related illnesses like malaria, diarrhea, worms, and tuberculosis. “We retail a child’s dose of malaria medicine for 75 cents,” Slaughter says. According to Fast Company, Living Goods has trained more than 600 women in Uganda, and some of them are making more than $100 a week. (Fast Company Article) . Hiring and training villagers to go door to door to sell important products is a rapidly growing strategy for covering the last 500 feet.
- Brac, a large non-profit organization, has mobilized 1,880 village women in Uganda to act as community health volunteers who distribute products like oral rehydration salts, iodized salts and antibiotics for a small fee to villagers. (Brac article ) .
- Green Light Planet, a for profit company in India, which recruits village entrepreneurs to sell $18 solar lanterns to replace kerosene lamps in villages. (The Hindu Business, Lighting a billion lives)
A promising way of moving goods and services across the last 500 feet is to take advantage of the hundreds of thousands of village mom and pop shops that are already selling consumer items in every developing country. I’ll come back to this later.
2. Create hundreds of thousands of village based aggregation centers. It costs much more for a volume buyer to collect spices, coffee or vegetables from a thousand scattered one-acre farms than to deal with a single 1,000-acre farm. Families that produce cloth for sale from one or two hand looms face the same problem. One solution is to create practical cost-effective aggregation strategies to centralize quality control and collect goods made by the hands of villagers in sufficient volume to attract traders and and/or rent a pickup truck to carry them to the town market offering the most attractive price.
IDE Nepal’s Vegetable Collection Centers. Using remote village dealers and exemplary farmers as distribution agents, IDE Nepal sold thousands of low cost drip irrigation systems that enabled small farmers in remote hill areas to grow off-season vegetables. Then they organized 150 village collection centers which could rent storage space and hire a commissioned sales agent with a cell phone. A farmer who produced five kilos of cucumbers a day could team up with 50 others to accumulate 250 kilos of cucumbers a day, is enough to attract traders to the collection center or pay for a pickup truck to carry them to the most attractive market identified by the sales agent through his phone calls.
3. Stimulate the emergence of profitable transport enterprises. The fact is just about all the elements of efficient and profitable transport systems for poor villages are already available in different countries. For example, India has an abundance of bicycles equipped with racks and trailers, rickshaws, motorcycle rickshaws, and three wheelers that can operate as miniaturized delivery trucks. Cambodia has motorcycles with transport racks and motorcycle pulled trailers. Kathmandu uses Chinese rototillers to pull trailers that can carry one ton loads. Somalia has donkey carts. What is missing is a global network of village-based enterprises capable of harnessing available and affordable transport devices to profitably move goods and in and out of remote rural villages.
Donkey Carts in Somalia In the 1980s, IDE helped blacksmiths in refugee camps in Somalia build and sell 500 donkey carts. The refugees who bought them on credit for $450 immediately began earning net income of $200 a month. They did this by hauling everything from water to firewood, repackaged disaster relief food to construction materials. They became instant millionaires in the context of Somalia’s economy.
A Failed Attempt to Address The Rural Transport Deficit in Zambia.
Ten years ago, I was struck by the fact that farmers in Zambia who grew vegetables irrigated by treadle pumps regularly had to pay out one third of the money they got when they sold their vegetables, just to cover the cost of transporting them from their farm to the nearest highway, where they could be put on a passing truck at a reasonable cost and carried to the nearest city market.
Several things contributed to this outrageous short haul transport cost. Rural roads were non-existent or terrible. The government had decided to make rural transport free, which put a large number of rural transport enterprises out of business. Then the free government rural transport system went broke, an epidemic of ridge disease wiped out a lot of cattle, decimating access to bullock carts.
To help address the short-haul rural transport barrier, I proposed a small grant that could help establish five rural entrepreneurs in different rural locations to launch a donkey cart transport businesses, five more to launch bicycle trailer based enterprises, five more using motorcycle trailers, and yet another five harnessing Chinese rototiller trailers (the ones profitably operating in Kathmandu).
This would pilot test 20 small transport enterprises in different rural locations in Zambia, and we could learn by experience which approach would work best in which situation.
I failed to find a single donor willing to back this initiative.
A Cornucopia of Enterprises Capable of Crossing the Last 500 Feet
The World’s 10 Million Mom and Pop Shops in Rural Village.
According to the 2001 census, there are 638,365 villages in India. Since each of these villages has two or three small shops and the bigger villages have more than five, it’s reasonable to assume that there are more than two million small rural village shops in India. But as far as I know, nobody has ever counted them. My guess is that there are at least 10 million small shops in small rural villages in developing countries all over the world. There are also small vegetable carts, milk carts, and other kinds of peddlers’ carts bringing goods and services directly to rural homes. Many of these shops are little 10 x 10 foot cubicles, with shutters that swing open when the shop opens and can be padlocked when it’s closed. These shops sell items like cookies, candies, soap, cigarettes, spices, bulk cooking oil, bananas, sometimes chilled soda pop, small flashlights, and a variety of small consumer goods.
Since they are already patronized by most poor rural customers in small villages, and can have easy access to bicycle home delivery and pick-up, these small shops are a priceless resource already in place and capable of carrying goods and services across the last 500 feet. But only a tiny percentage of their potential is being utilized.
Some Interesting Features of Small Village Shops
For the last two years, my partners and I have been interviewing small shopkeepers in rural villages in eastern India and the customers that patronize them, and I was surprised by some of the things they told me:
1. Most of them only sell 150 – 400 Rupees (US$3.30-$9) worth of goods a day, on which they average a margin of bout 15%, or US 50 cents – $1.30/ day. Typically this is just one of the ways the family earns its livelihood.
2. Only a quarter or less of the products on their shelves is delivered by distributors. The owner takes the bus into the nearest town and buys most of what he stocks on the shelves at the town market. One shopkeeper told us he made twenty trips to town in a single month.
3. Shopkeepers often barter with villagers for products like bananas and rice.
4. Items sold in small shops include laundry soap in small packages, upscale bars of soap like Camay and Lux, small packets of Chile and many different herbs and spices, chewing tobacco, cigarettes, cooking oil in bulk, and chilled Pepsi, Coca-Cola, and local soft drinks, all delivered by a single distributor.
5. Shopkeepers are extremely brand conscious, but big business has little or no brand identity in the small villages in developing countries where some 40% or so of the world’s population lives.
Creating Vibrant New Markets Serving Poor Rural Customer by Activating Networks of Small Village Shops
There is a huge unmet demand for affordable distribution of a wide variety of branded consumer products to small village shops all over the world. Since these small shops are within 500 feet of many of the world’s poor customers, small village shops could also provide natural collection and aggregation points for goods produced by the hands of villagers. Because daily sales volume at each shop is low, and the shops are widely scattered, most attempts so far to commercially distribute to small shops have failed to be profitable.
Ten million small shops in villages all over the world are waiting for viable business models for distributing a cornucopia of branded income generating products and tools for village shops to sell to poor customers, and collecting income generating goods produced by the hands of villagers and transporting them to markets in cities and towns where they can be sold profitably.
The single biggest reason that the appropriate technology movement died and most technologies for developing countries never reach scale is that nobody seems to know how to design for the market.
Over the past 30 years, I’ve looked at hundreds of technologies for developing countries.
Some provided elegant solutions for challenging technical problems. Some were big and clumsy. Some were far too expensive. Some of were beautifully simple and radically affordable.
But only a handful were capable of reaching a million or more customers who live on less than two dollars a day.
If you succeed, against all odds, in designing a transformative radically affordable technology, you still have addressed only 25 % of the problem. The other 75% is marketing it effectively, which requires designing and implementing an effective branding, mass marketing and last mile distribution strategy.
Any competent electrical engineer can design a beautiful solar lantern that provides enough light to read or cook by in a village thatched roof house. But designing it with the features that a poor family is willing to pay for, at a price providing them a 4 month payback from savings in kerosene, batteries and candles, is an entirely different matter.
Designing a branding and marketing strategy and a last mile supply chain that will put it in the hands of a million or more customers is three quarters of the design challenge.
Eight Practical Steps to Design for the Market
1. Interview 25 Likely Customers before you start.
We planned to sell battery charging services to villagers in eastern India using affordable solar technology, but when we interviewed 30 customers in ten remote villages, we learned that there wasn’t enough market demand to justify it. Many villages were being electrified, and what we learned is that when one village gets electricity, the fifty villages around it within a half hour bicycle ride get functional electricity, because villagers prefer to put a battery on a bicycle and plug it in at a village with electricity, to paying more money to a village solar powered battery charging service.
2. Design to a Customer-Derived Target Price-point from the very beginning
The reason US $10 is a sweet spot price point for solar lanterns for customers in developing countries who earn less than $2 a day is that most of them spend $3-$5 a month on kerosene, flashlight batteries and candles. If they save $2 a month after subtracting costs like battery replacement for the lantern, they get their money back in five months, which falls into the 2-300% return on investment most poor customers look for.
3. Select the price/effectiveness Tradeoffs Acceptable to Customers to reach the target price
Government standards for a subsidized solar lantern in India called for 8 days of reserve light for days when the sun didn’t shine. But when I interviewed 25 people who had used solar lanterns in Kenya for a year and asked them what their source of light was before the solar lantern, they said they used kerosene lamps, which they still had. So one trade-off to reach the target price of $10 is to bring the number of days of reserve light to zero. Any rational poor customer will gladly use their kerosene lamp on dark days if they can bring the price of the solar lantern down to what is affordable for them
4. Create a Proof of Concept Prototype
When we designed the first proof of concept prototype for a low cost drip system in Nepal, we simply drilled holes as emitters in black High Density Polyethylene Pipe lateral lines, and let water flow through them from a 55 gallon drum about 2 meters above the ground. Then we put a glass under each emitter and measured how much water came out over a fixed period of time. The proof of concept prototype worked well.
5. If it Works, Put it in the Hands of at Least Ten Customers, learn what’s wrong with it, and fix it.
When we put these prototypes in the hands of ten one acre farmers in the hills of Nepal for one growing season, they told us that water squirted sideways out of the holes away from the plants, so we put plastic sleeves over the holes. Then the plastic sleeves came away from the holes when the lateral lines were shifted, so we designed and extruded a baffle that fit snugly over the holes and didn’t move when the lateral lines were shifted.
6. Design a Branding, Marketing and Distribution Strategy capable of reaching a million customers
With the treadle pump in Bangladesh, we used staff from a commercial marketing firm in Dhaka to create the name Krishak Bandhu, meaning farmers’ friend, which is also now being used in India. We implemented a strategy of recruiting 75 small manufacturers, 3,000 village dealers, and about 3,000 well drillers, each of whom acted in their own economic self-interest to make market and install treadle pumps. Then we launched a national marketing initiative, including Bollywood type movies, to create sufficient volume sales to make each of the small enterprises in the last mile supply chain profitable
7. Field Test the Technology and the Branding, Marketing and Last Mile Distribution Strategy in at least five different villages for at least four months, and modify it from what you learn.
Windhorse International, the new private company I founded, is currently testing our strategy to sell safe drinking water to people without it in ten villages for six months, with a full independent evaluation. We have changed our strategy in at least six important ways already. For example, we introduced attractive jerry cans, but when they fell off the rack of customers bicycles, they dented easily, so we had to double their wall thickness.
8. Scale Up Systematically to Reach at Least a Million Customers
IDE reached 1.5 million customers in Bangladesh simply by replicating the model of manufacturers, dealers, and well drillers supported by IDE staff to reach scale in more and more geographic regions, and putting a lot of emphasis on supporting the Krishak Bandhu brand and national mass marketing campaigns.
Design for the Market: Practical Examples
The following video is a little long, but if you can suffer through it for nine minutes, it describes how three real social enterprises need to change what they are doing to reach a mass market.
In the late 1980’s after launching IDE, I knew we had a big problem. We were convinced that treadle pumps, a simple $25 StairMaster device that could earn a net income of $100 a year or more for one-acre farmers could make a huge impact in Bangladesh. And we knew that market forces were the best way to bring them to scale. But how could we put
them in the hands of millions of small farmers?
We started out by energizing a private sector network of 75 small manufacturers, 2500 village dealers, and 3,000 village well drillers who we trained a three day course with a paper diploma. None of these small rural enterprises could survive without reaching a threshold volume of sales. And nobody in rural villages had heard anything about the treadle pump- it was like a politician with no name recognition.
The first thing we tried was hiring wandering troubadours, were common in rural Bangladesh. They wrote songs about the treadle pump, and performed at farmers’ markets and festivals, where our customers gathered. While the others sang their song and played their musical instruments, one member of the troupe operated a re-circulating demonstration pump, and another handed out pamphlets saying, you want to buy a treadle pump go to Honest Sam the dealer.”
But this didn’t reach the large number of potential customers we were looking for.
So we decided to make a Bollywood Movie about the treadle pump We hired Mrinal Sarkar, who was working for a commercial marketing firm in Dhaka, and he put together a list of the key messages we wanted to communicate about the treadle pump to small farmers. To make a 90 minute Bollywood movie, we hired the top movie director in Bangladesh, the top male lead, and the top female lead, at a total cost of $25,000.
A typical Bollywood movie in Bangladesh has a wedding, a funeral, a near suicide, and lots of singing and dancing. The plot for the first movie was boy meets girl, (lots of singing and dancing) but they can’t get married because her father
is too poor to come up with a dowry. So she falls into the clutches of a dowry bandit (near suicide, more singing and dancing). As the movie nears its climax, the movie suddenly stops. Its intermission time! Now local dealers put
the potential customers they have invited on re-circulating treadle pumps, so they can get the
touch and feel of them.
When the movie resumes, the father meets an old friend, who tells him about the Treadle Pump! So he buys one, earns enough to pay the dowry, and they get married and live happily ever after. It sounds a little hokey, but this movie played to an audience million customers a year. We used a mobile video-van with a generator. With publicity from village dealers and a Barnum and Bailey rickshaw procession with loudspeakers blaring before the show, two to five thousand people showed up at each open-air performance.
Remember, most of our customers couldn’t read or write, and had no access to mass media. The Bollywood movie was a major contributor to IDE’s success in convincing and one and a half million families in rural Bangladesh to buy and use a treadle pump.
Since then, treadle pumps quickly spread to many countries, including India, Nepal, Myanmar, Kenya, Tanzania, Malawi, and Zambia. Well over two and a half million habeen bought by very poor farmers and used to increase their net annual income by more than $250 million a year!
The happy use of Bollywood movies to inform small farmers lives on.
Amitabha Sadangi and the excellent staff of IDE India continue to produce and show them with great success.
Take a look at the highly compressed three minute segment of Lakshmi, a real tear-jerker about a poor family in India who didn’t have enough to eat because their land has no water. Their youngest daughter just about dies from cholera because they have no money for food and Medicinesut the older daughter saves the day. She goes to work at a prosperous farm that uses IDE India’s Krishak Bandhu low cost drip system, brings it back to her family’s farm, and
rapidly transforms her family from paupers into prosperous happy farmers who joyfully sing and dance!