product development for sanitation microfinance

MicroSaveMarket-led solutions for financial services

Sanitation Microfinance

Product Development

Presentation by George Muruka (Senior Consultant at MicroSave)

MicroSavMicroSavee

Market-led solutions for financial servicesMarket-led solutions for financial services

Sanitation financing Working Group Workshop at WaterAid Tanzania 3rd December 2013


A world in which all people have access to high-

quality, affordable, market-led financial services

Strengthening the capacity of financial service providers

to deliver market-led financial solutions

Inspiration

Mission

2

MicroSave believes in……


MicroSave Offices

Delhi Lucknow

HyderabadManila

Jakarta

Kampala Nairobi

Port Moresby

MicroSave (India)Head Office: LucknowTel: +91-522-2335734Fax: +91-522-4063773New Delhi Office:Tel: +91-011-45108373Hyderabad Office:Tel: +91- [email protected]

MicroSave (Kenya Office)Shelter Afrique House,Mamlaka Road,P.O. Box 76436, Yaya 00508,Nairobi, Kenya.Tel: +254-20-2724801/2724806Fax: +254-20-2720133Mobile: [email protected]

MicroSave (Uganda Office)Regency Apartments30 Lugogo By-PassP.O. Box 25803Kampala, Uganda.Phone +256-312 202342Mobile:+256-706 [email protected]

MicroSave (UK Office)The Folly, Watledge Close,Tewkesbury, GloucestershireGL20 5RJUK Tel. +44 1684 273729Mobile +44 796 307 [email protected]

MicroSave (Manila Office)Unit 402, Manila Luxury Condominiums,Pearl Drive corner Gold Loop,Ortigas Center, Pasig City,Metro Manila, Philippines.Tel: +(632) 477-5740Mobile: [email protected]

MicroSave (Indonesia Office)Jl. Penjernihan I No. 10,Komplek Keuangan - Pejompongan,Jakarta Pusat 10210, Indonesia.Tel: +62 82122 [email protected]

MicroSave (PNG Office)Corner of Musgrave Street and Champion Parade,Port Moresby, Papua New Guinea. TeleFax No.: +675 321 8823/321 8854 [email protected]

Tewkesbury

Buenos Aries


What informs MicroSave’ product development Process?

• Assumption of homogeneity by many FIs:

• Implicit assumption that microfinance clients are essentially homogenous.

• Essentially, a “one product fits all” approach continues to dominate the financial sector.

• In reality, poor people’s financial needs as as diverse and complex

• However, here is lies the opportunities that can be met on a profitable basis.


Evolution of Strategic Marketing

PRODUCT DRIVEN

CUSTOMER DRIVEN

time

Production concept

Marketing concept

Product concept

Selling concept


Why Systematic Product Development?

Product driven approach leads to:

► High level of clients drop outs

► Multiple membership - due to inappropriately designed products

► Exclusion of the poorest and the “missing middle”

Informal sector (usually unrecognised) is typically a major competition

Many FIs replicate existing models developed for other markets/clients

MicroSave’s calls this a Market Led Approach


Product Development &

Differentiation

Some more details

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Differentiated Markets/Segments

Systematically assess market/segment needsThis allows you to:► View a market from the customer’s point of

view► Exploit market/segment strengths► Develop focused strategies and► Identify gaps that offer new product

opportunities.

A market/ market segment should be:

1. Measurable, 2. Accessible, 3. Substantial, 4. Unique in its response, and 5. Stable in

behavior


Modifying or Developing New Products …

Refining your existing products or developing new ones is a complex and risky under-takingWe should use a systematic process to:► Minimise risk► Maximise likelihood of success

Use a market research and product prototype process and then pilot-test carefully before final roll out.


Product/Market Expansion Grid (Ansoff Matrix)

1. Market Penetration

LOW RISK

2. Product Development

HIGHER RISK

3. Market Development

MEDIUM RISK

4. Diversification

HIGHEST RISK

NEW PRODUCTSEXSTING PRODUCTS

EXISTING

MARKETS

NEW

MARKETS


What does successful product development Involve?

• The team. Multidisciplinary skills and a product champion.

• Buy-in. Support within the institution for the process.

• Market research. Identification of unmet or poorly met financial service needs among the target market segment.

• Market segmentation. Definition of the customer/client group to be targeted.

• Appropriate product design• Effective product prototype pilot test.• Careful product rollout


Sanitation finance


Case for Sanitation Finance 1. Majority of people in developing country use pit latrines

• For example, in Tanzania, up to 93% • Sources: Tanzania: Household Budget Survey (2009)

2. Public utilities are limited 3. CBOs are important providers to communities 4. Need to leverage on private sector finance to improve access to

sanitation facilities and services.


Experiences in Africa-KWFT• Developed financial products to improve access to

water and sanitation services• Product range

• Household sanitation-structure, seat, hand wash and a slab

• Institution toilet loans


Experiences in Kenya –ECLOF-K• Conducted situational analysis to generate

information that would help with development of suitable WASH products

Product Developed

Loans for ► Acquisition of fully fitted Water tanks ► Construction of latrines/toilets, bathrooms ► Construct their own fully fitted shallow wells ► Start up or working capital for WASH enterprises


Experiences in Kenya-Family bank

• The bank in partnership with practical Action ( a local NGO is involved in providing credit to landlords in Nakuru town of Kenya

• The loan cover hardware investment related to sanitation like septic tanks, latrines or garbage collection

• Family bank did not develop a new product but adjusted existing microcredit

• Action conducted need assessment since they were involved in other sanitation projects in the area

• They recommend client to family • Family bank does the loan appraisal


Maji na Ufanisi NGO:Supporting CBOs to develop Sanitation facilities


Resource ImplicationCore Activities Estimated

Time Specific Activities Staff

Partner Selection 1 month • Application form• MoU• Planning next activities

CEOSenior Managers

Market Research Course

11 days • In class training on skills• Field based market research• Reporting• Planning for other institutions

Marketing managerField Officers

Product concept development

10 days • Iterative process involving in house meeting and deliberations

Field OfficersManagers

Concept Testing 5 days • Field based test with clients • Reporting to institution

Field OfficeClients/Customers

Prototype finalization

2 days • In house debrief and finalization of the product prototype

• Management commitment

Senior managerCEO/Managing Director

Pilot Testing 6 – 10 months

• Pilot test launch• Pilot performance monitoring• Impact evaluation & product rollout

Field Offices ManagersClients


What are the Lessons and Impact?

Impact on clients

► Improved health and high level of participation

► Inclusion of the poorest into sanitation finance

► Improved human dignity

Other impacts

► FI brand building and posititoning

► Product development capacity.


Part II

Product Development Process

Version 0401

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An Important Distinction …Product Refinement v. New Product Development

Product Refinement “tweaks”/adjusts existing products often with limited effect on the existing systems. Example: Changing interest rate or marketing strategies of an existing product

New Product Development is the process of developing a brand new product.Example: A housing loan or a contractual savings product


Product Development Process Overview

QualitativeResearch:FGD/PRA

ConceptDevelopment

Qualitative Research

Plan

Refine the Concept intoa Prototype

Research Issue

QuantitativeResearch:Prototype

Testing

Product Ready forPilot-test

Understanding clients’ needs

Refining/Testing the product prototype

Costing & Pricing

Risk Analysis &

Process Mapping


Why Develop New Products?

Respond to client needs and preferencesOperational & financial sustainabilityDeepen and broaden outreach/growthHelp clients manage risk and vulnerabilityRaise new sources of capitalReduce delinquency ratesRetain good clients/reduce drop-out rates


Steps for Product Development

• Form the Product Development Team under the Product Champion

• Identify the research issue & research plan. Driven by analysis of secondary data and focuses the market research effort on the specific issue(s).

• Involves a variety of qualitative research techniques including focus group discussions and Participatory Rapid Appraisal (PRA) sessions.

• Iterative concept development and concept testing

• Prototype pilot testing with clients or target market segment

• Product rollout to a wider market/market segment

Handout 6.3 BN#14 Systematic Product Development


Examples of PD Activities

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Tools to Understand Customer Needs

Focus group discussion sessions: Sessions with target customers to discuss needs

PRA: Detailed practical activity sessions e.gSeasonality of income, expenditure, savings, and credit

Seasonality of migration, casual employment and goods/service provided by the poor

Life cycle analysis to trace lump sum cash needs over time

Times series of sickness, death, loss of employment, theft, natural disaster

Cash mobility mapping


Data collectoin can be fun too!!!


Developing the Concept

Concept is considered using the 8Ps or marketing framework:Product (design) - specific features, terms etc.Price - interest rates, transaction cost etc.Place - distribution, accessibility etcPromotion - advertising, PR, etc.Positioning - in target customer’s mindPhysical Evidence - the physical appearance of the product/servicePeople - the human interactions as the product/service is deliveredProcess - how the product /service is delivered: the steps/systems to “sale”


Concept Refinement: The Process

Concept introduced to clients

Reaction /understanding

assessed

Incorporated intorefinement of

concept

Refined concept introduced to

clients

Reaction / understanding

assessed


Product Risk Management (1)

Motivation risk: What is the strategy behind the new product introduction?Management/Board commitment risk: Does it have high-level commitment?Staff availability risk: Are sufficiently skilled staff available to lead its development?Orphan-product risk: Will the new product be main-streamed or left orphaned?Demand risk: Will there be insufficient demand for the product in the market place?


Costing of Products Allows MFIs to (1)

1. Determine the full-costs of delivering products

2. Determine the profitability/contribution of the products (including analysis of changes over time)

3. Refine cost/profit centres and the MFI’s management information systems

4. Identify hidden-costs


What is Pilot Testing?

• Prior to full launch, the product can be pilot tested by launching it in a limited area – e.g. at one branch.

• Various aspects of the product’s performance are then monitored/measured over time.

• In addition, the FI can examine the implications of offering the product e.g. financial/human resources, performance, community etc

• Multiple product introductions must be conducted in separate branches for each product

• See MicroSave’s “Toolkit for Planning, Conducting and Monitoring pilot tests for MFIs”


Essential Elements of the Pilot Test

1. Composing the Pilot Test Team2. Developing the Testing Protocol 3. Defining the Objectives 4. Preparing All Systems 5. Modelling the Financial Projections 6. Documenting the Product Definitions and

Procedures7. Training the Relevant Staff 8. Developing Marketing Materials9. Commencing the Pilot Test10.Evaluating the Test


What is Rollout?

Roll-out is a process that includes:► Transfer to permanent department► Preparation of:

Site Staff Systems Marketing

► Launch► Assessment

Roll-out is NOT just the launch (launch is only a small part)

► Starts with recommendation letter approval► “Ends” after roll out to all target locations, but

analysis continues (actually the roll-out process simply opens into the regular continuous and periodic product monitoring processes)


What is Needed Before Rollout?• Capacity re-assessment after the

pilot test e.g. institutional strategy, financial viability, organizational culture, HR, delivery networks, and systems etc

• Other requirements:► Management commitment► Project Management skills► Flexibility► Infrastructure e.g. marketing capacity► Compliance with regulatory matters

• Formal approval of management/Board


Organising the Rollout

• Deciding on full/phased/partial rollout (provides a questionnaire to help assess this)

• Determining order of rollout to branches (based on review of infrastructure, market demand, projected profitability, geography, and staff demand to offer it.)

• Project management aids (in many ways roll-out can more complicated than pilot testing. Structured processes –critical path analyses (Gannt or PERT) – can be helpful as a means to manage the roll-out)

• Setting Rollout Objectives (by institution and branch helps confirm product progress, and helps get branches more involved)


Successful Rollout = Clients & Profits!