Module 3: Household Marketing
Social marketing is fueled by experimentation, gathering evidence, altering programs, and disseminating the information universally so that it can be absorbed and applied by other companies. These case studies of household marketing experiences reveal some of the main challenges that social businesses run into, and provide lessons for future marketers.
Case Study: Sarvajal
Sarvajal is a business that institutes water franchises, serving as a clean water source for rural villages in India at an extremely reasonable cost (.005 cents per Liter). The franchise business development is potentially the most stimulating division of Sarvajal, as its short term and long term goals are pivotal for the enterprise’s future. (1) Presently, the franchise business development group is attempting to escalate the company’s income via door to door marketing, in addition to techniques such as public demonstrations and spreading information through word of mouth. In the long term, Sarvajal has plans to create a well-established reputation for itself, hoping that eventually whenever a person sees a blue drop, they will immediately associate the symbol with high quality water and affordability. Essentially, Sarvajal is developing “soft intellectual property”, which refers to the knowledge of how to market to the rural poor and create best practices.(2)
The significance of learning important lessons from each detail of the process is expressed by Jay, the CFO at Sarvajal, who explains that “almost all the literature on rural marketing focuses on the rural market as a whole, there is no talk about individual households, about what each of them think when you go and try to sell something.”(3) Once Sarvajal gains personal experience and carefully observes the outcomes, they can expand their ideas to other companies around the globe who are trying to market their products and services to rural India. NextBillion blogger Rishabh Kaul embarked upon a broad journey throughout India and reported back about the business circumstances in every area, including information about the target audience’s habits of buying, and about potential competing markets. Across time, Kaul notes that the franchise became more attached to the Sarvajal brand and began to firmly trust in the strength of social entrepreneurship, comprehending “how margin high volume businesses can work in these corners.”(4)
Kaul extracted several particularly interesting lessons from his experiences with Sarvajal. First of all, since the majority of residents already think of water as being a free, public good, the idea that they would now start paying for it was a novel and confusing one. It must be explained to them that water levels have gone deeper, and visuals showing the contamination levels of water can assist in these demonstrations. Cartels serve as a potential problem for commerce, as they sometimes participate in price fixing, creating “dead weight loss.” For example, “RO water in heavily industrialized South Gujarat sold at minimum of Rs 25 per 20 Liters, so Sarvajal’s 5 Rs per 25 Liters completely destroys the cartels’ business.” This creates challenges because people do not want to ruin relations with other townspeople. It is also important to remember that India is a diverse nation, and not all businesses are operated in the same way. There are discrepancies between the problems faced by Northern Gujarat (a more rural area), versus Southern Gujarat (a more industrialized zone). Also, different areas have different customs, and it is imperative to remain sensitive to all local traditions and beliefs.(5)
Case Study: Anza
“Anza” (name derived from the Swahili word for “start”) is a worldwide development start-up centered around technology, aiming to market affordable, highly functional, recycled resource merchandise to poor dwellers in Africa. Brian Korgaonkar, COO of Anza, set out to follow his love of technology and worldwide development by creating this “profitable, sustainable social enterprise,” with intentions of battling poverty via the retail market.(6) From his experiences, Korgaonkar stresses the need to experiment and adjust accordingly:
“The pilot trip enabled our development team to spend a significant amount of one-on-one time working with our target demographic in Mozambique and Tanzania which provided us with time and space to identify market needs and innovate on new products. The importance of this process cannot be understated – in any business, but especially at the BoP, taking the time to understand your customers’ needs and purchasing preferences is crucial to developing a product offering that resonates in the marketplace.”(7)
From this experience on the ground level, several needs were identified. First of all, there was a lack of a comprehensive clean water system, for drinking and washing hands. This observation was the impetus for “tip-taps,” created from “upcycled jerry cans.” Tip-taps were purchased by almost all of the community members during the trial period, and Mozambicans are continuing to broaden the local market for tip-taps along with solar cookers, another Anza product. Unfortunately, while both products are extremely successful in terms of popularity and health advantages, they do not offer employment opportunities or revenue for consumers.(8)
A second identified requirement was to expand water transportation due to the lack of reliable sanitary water. The product Anza created is comprised of recycled car tires and jerry cans converted into a cart and water roller. Due to the extensive dry seasons in Africa and ineffective water gathering systems, irrigation is prevented for half of the year and farmers therefore cannot use their land during the “off-season.” Collecting a sufficient supply of water so that irrigation can be conducted year-round will foster a rise in income for the majority of BoP farmers, therefore fulfilling Anza’s ultimate mission.(9)
Korgaonkar repeatedly emphasizes the need for frequent evaluation and alteration based on experiences at the household level:
“By continuing to interact with and gain real-time feedback from our target customers, we will be able to optimize our product design and extensively document our product's benefits. Whether it is with our water roller, solar cooker, tip-taps, or new innovations, we hope to sustain a business that will create the products to help people pull themselves out of poverty, clean up the environment, and change the world.”(10)
Through trial, error, and lessons learned, this social business is determined to create a product that is desirable and popular with the local people, environmentally sustainable, and economically profitable.
Case Study: The Grameen Experience
The Grameen Group is a system of approximately thirty programs, all connected with the Bangladeshi Grameen Bank. The alliance is founded on the idea that many poor individuals would succeed greatly as entrepreneurs, but they do not have access to startup funds and the bank refuses to grant them loans. The Grameen Bank has enabled 68% of its customers to rise above the poverty line, and almost all borrowers have strong enthusiasm to eventually repay the loans in full. Reputable companies from around the globe have expressed fascination with the Grameen experience and the concept of “corporate social responsibility,” and some have made efforts to establish more responsible programs, leading to an increase in “social businesses.”(11)
An alliance with Telenor allowed for the creation of “Grameen Phone,” which has now evolved into one of Bangladesh’s chief taxpayers. “Grameen Veolia” emerged from a partnership with Veolia Water, one of the most highly regarded water providers. The business strives to offer inexpensive drinking water to poor communities via public drinking fountains or cans. A partnership with Danone led to the creation of “Grameen Danone,” allowing for affordable dairy yogurt to be provided to malnourished Bangladeshi children. Each undertaking is founded on the basic social business principle, defined as “a self-sustaining company that sells goods or services and repays its owners’ investments, but whose primary purpose is to serve society and improve the lot of the poor.”(12) Through evaluation of past ventures, many lessons can be learned about social businesses and can help shape the model for future endeavors.(13)
There are five essential lessons to be extracted from the Grameen experience. The first three are comparable to a traditional business structure, while the last two are specifically applicable to social business models.
- Lesson one is to “challenge conventional wisdom,” meaning that one should constantly question the current rules and norms of the field. The Grameen Bank’s model utilizes “double loop learning in contrast to single loop learning,” driving the group to change its major orientations and adopt new ones. For example, Grameen Danone takes the “basic assumption” that dairy product can only be made inexpensive if it is created in massive amounts and dispersed through retail factories, and creates the “new recipe” that community manufacturing and door-to-door delivery can in fact create an accessible and affordable yogurt.(14)
- Lesson two is to “find complementary partners.” Teamwork is essential for social businesses to succeed. For example, with Grameen phones, Telenor had no past involvement with developing markets, while the Grameen Group lacked the knowledge to establish a wireless network. Dynamic partnerships like these are extremely industrious.(15)
- Lesson three is to “undertake continuous experimentation.” A sequence of trials is lower risk because lessons can be learned along the way and appropriate alterations can be made. For example, Grameen Danone established its first plant in Bogra serving families within a 30 km radius and observed the outcomes before immediately implementing them everywhere else.(16)
- Lesson four applies more exclusively to social businesses, as it is to “favor social profit-oriented shareholders.” The “value proposition” and “value constellation” of the social business system should connect all investors, containing those who comprehend and agree to the social mission.(17)
- Lesson five is to “specify social profit objectives clearly.” Sometimes, collaboration can lead to decision-making struggles and differences in opinion. For example, the Grameen Group’s vision was that Grameen Phone would be an entirely social business, and that most of the business shares would go to the poor so that they could reap the rewards from profits. However, Telenor would not sell its shares, which created conflict within the business.(18)
These lessons learned from past experiences can help shape future planning. For example, in order to sidestep the disagreement described in Lesson Five with Telenor, Grameen Danone created an official mission statement at the very start of its endeavors. Since the goal is to construct a social business, the model must be adjusted accordingly. Investors must all be supportive of a social profit, not just a financial profit. Grameen Danone’s mission statement straightforwardly specifies that its goal is “to bring daily healthy nutrition to low income, nutritionally deprived populations in Bangladesh and alleviate poverty through the implementation of a unique proximity business model.” In the construction of Grameen Danone, multiple types of social profit were considered and sought after, including nutritional profit (calciums and proteins in shoktidoi yogurt), employment profit (creation of local jobs), and environmental policy (ecologically conscious packaging). Intrinsic continuous conflicts exist between economic and social profit goals, and Grameen Danone’s model strives to show that “social and environmental goals do not have to conflict with long-term economic goals.” Nevertheless, conflicts are bound to arise. For example, in 2008 an upsurge of milk prices caused difficulty for Grameen Danone to even break even. This caused many to question whether economic objectives or social objectives should be prioritized. (19)
There is widespread hope that social businesses will continue to grow. Social businesses do not tend to compete with one another, and they can instead learn from mistakes and apply knowledge across a broad spectrum – knowledge that can potentially also be applied to conventional business models.(20)
(1) Kaul, Rishabh, “Stories from Sarvajal’s Turf.” Development through Enterprise, NextBillion Blog. Accessed on 26 July 2010.
(5) Kaul, Rishabh, “Stories from Sarvajal’s Turf.” Development through Enterprise, NextBillion Blog. Accessed on 26 July 2010.
(6) Keepper, K. “Entering the African Retail Market to Combat Poverty.” Development through Enterprise, NextBillion Blog. Accessed on 27 July 2010.
(9) Keepper, K. “Entering the African Retail Market to Combat Poverty.” Development through Enterprise, NextBillion Blog. Accessed on 27 July 2010.
(11) Yunus, M., Moingeon, B., & Lehmann-Ortega, L. “Building Social Business Models: Lessons from the Grameen Experience.” Long Range Planning, 43, pp 308/325, (2010). Accessed on 25 July 2010.
(14) Yunus, M., Moingeon, B., & Lehmann-Ortega, L. “Building Social Business Models: Lessons from the Grameen Experience.” Long Range Planning, 43, pp 308/325, (2010). Accessed on 25 July 2010.
(19) Yunus, M., Moingeon, B., & Lehmann-Ortega, L. “Building Social Business Models: Lessons from the Grameen Experience.” Long Range Planning, 43, pp 308/325, (2010). Accessed on 25 July 2010.