What are the characteristics of the solutions for the MicroConsignment Model?
How are new solutions identified and vetted?
What are the current products in the basket of solutions?
Do entrepreneurs sell all of the solutions at once?
What is the value of having a basket of products versus being focused on offering just one or two?
How do you work with product suppliers?
How do you classify different solutions?
What are the different roles that the solutions play within the basket?
What do you do for solutions that require maintenance?
Can’t entrepreneurs take advantage of this to sell products that could be harmful?
How can adding “low cost” products to the basket be advantageous?
Why do certain products/technologies fail?
What are some solutions that haven’t worked and why?
Besides the products, what else is consigned to the entrepreneurs?
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What are the characteristics of the solutions for the MicroConsignment Model?
- The product should have a positive social impact (health, economic and/or environmental)
- There must be a felt/perceived need and want and not simply a real need
- The product benefits can speak for themselves
- Volume sales are the driver
- The product should work with the local culture
- Ideal products create a positive economic impact (equity generation) for the product purchaser
- The buyer should be the user
- The “Gracias a Dios” Factor is extremely helpful
- The product is currently inaccessible for sellers
- The product should be inaccessible for buyers
- There should be multiple sources for purchasing products
- The product may be perceived as being complicated but in reality require relatively little training from a seller and user perspective
- A service approach should be the driver
- The product shouldn’t require a fundamental change in habits
- Portability or easy local construction is key
- Avoid “transitional” products
How are new solutions identified and vetted?
The MCM uses both a bottom-up and a top-down approach to push new products out into the communities. From the bottom up, an entrepreneur discovers a need and looks to the implementing organization for a product solution. From the top down, the organization first finds a new product and then looks to the entrepreneurs to assess the need for it, as they are a continuous, reliable source of real-time market knowledge. To succeed, the entrepreneurs must be responsive to villagers’ needs—and the organization must be responsive to the entrepreneurs’ need to serve those villagers.
As an example of the bottom-up approach, in 2005, two of the first MCM entrepreneurs, Esperanza and Margarita, identified a need to treat pyterigium, a noncancerous growth of the thin tissue over the white part of the eye (conjunctiva). There is no cure for this condition and the precise cause is not known, but it is aggravated by exposure to sun, dust, and smoke, all of which affect individuals living in the rural developing world. These two women identified the need for treatment and asked us for a solution. Now, working within our model, these entrepreneurs have sold over 5,500 pairs of UV protection glasses to address this problem in Guatemala—part of the tens of thousands sold through VisionSpring worldwide.
When approached from the top down, MCM entrepreneurs are an unbeatable initial vetting resource for new technologies and marketing strategies. They have a vested interest in responding quickly about what will and will not work. For example, in June of this year we presented one-watt solar panels with LED lights to the MCM entrepreneurs as a potential new product. As a true test we discussed the benefits and then offered to sell them to them outright at a price only slightly discounted from the projected village price. They bought them all on the spot. For further confirmation, we then worked with them to conduct surveys in the field. The word came back that they would “sell like hotcakes.” We have now ordered 1,000 units as an initial pilot. We had an idea for a solution, and they confirmed a need for it by “voting” with their purchase; together, through the surveys, we have confirmed an perceived need throughout Guatemala. Now we both have “buy in”; together we can confidently pilot a new solution.
What are the current products in the basket of solutions?
Do entrepreneurs sell all of the solutions at once?
What is the value of having a basket of products versus being focused on offering just one or two?
Building out a basket of products has been challenging from a prioritization and financial perspective at times but has proven the underlying fundamental strength of the model and benefited all of the key stakeholders. Villagers have increased access, MCM entrepreneurs earn more and are happier and SolCom earns more and lessens any negative effects of short term regional saturation and/or donor competition for any one product.
One way to think about the benefits of the products, somewhat in jest, is to think about the story of a woman weaver in Guatemala. It goes something like this – Juana the weaver is 45 and she can’t see up close to weave anymore so she needs reading glasses. In order to see while she weaves she is going to need an energy efficient light bulb. But the light goes out sometimes so a solar powered light would be very helpful. After weaving for a while she will probably get thirsty. She could use a water purification bucket. She will surely get hungry. She needs vegetables to cook, hence the need for vegetable seeds for her own garden, and of course a wood burning stove. Having the stove will also help her allot more time to weaving. Because she only recently got her stove her eyes hurt so she can use eye drops. And when she goes out to sell her weavings, because she lives in the mountains, she should be wearing UV protection glasses. The question then is, “What else does Juana need to help her improve her standard of living?”
How do you work with product suppliers?
How do you classify different solutions?
I define these different intervention levels very roughly as such: (the distinction is primarily drawn as a result of the product cost and delivery as you will see)
High intervention:
High product cost (need to structure a payment plan)
High need for awareness/marketing
High need for entrepreneurial training
Difficulty in delivery
Very good earning potential for entrepreneurs relative to sales
Examples: Wood burning stoves, latrines, water cachment systems
Medium intervention:
Medium product cost (possible need to structure a payment plan)
High need for awareness/marketing
High need for entrepreneurial training
Medium difficulty in delivery
Very good earning potential for entrepreneurs relative to sales
Examples: Reading glasses, water filters
Low intervention:
Low product cost
Low need for awareness/marketing
Low need for entrepreneurial training
Low difficulty in delivery
Low earning potential for entrepreneurs relative to sales
Examples: Rehydration salts, light bulbs, seeds, band aids, mosquito nets
In my experience if you are focused on low intervention and build your strategy/tactics around that, you will have difficulty moving “up” in intervention levels. However, if you start with higher intervention you can somewhat easily move “down” in intervention levels.
For myriad reasons, the “sweet spot” for entering and for a push and pull strategy is to primarily focus on medium intervention. To note a few reasons:
- Higher earnings for women (less attrition)
- Low intervention products added easily as complementary
- Training is a priority
- Entrepreneurs are seen as true value add providers
- A service mentality is the focus
- Microcredit as a financing mechanism for entrepreneurs is good for low intervention but may be problematic for medium to high intervention. Credit could work well for the end clients but not necessarily for the entrepreneurs. This is why we use MicroConsignment. This is because:
The perceived and real risk for entrepreneurs is higher
Training is a priority and consignment forces training
A “partnership” focus is more easily constructed
Trial and error is possible and actually encouraged
Entrepreneur territory distinction is very important for high and medium intervention and less important for low intervention.
With a focus on only low intervention it will be very difficult to create compelling earning opportunities for women if you hope to use a push strategy. To cover costs higher earning products are needed.
It is more difficult to leverage existing organizations as the local “leader” for high and medium intervention than for low intervention. This is why a macro and micro franchise strategy works best.
Once you have decided who your market is and what your intervention level is for the products the entrepreneurs are selling is, you are in many ways “off to the races” and the strategy and tactics should flow accordingly.
What are the different roles that the solutions play within the basket?
What do you do for solutions that require maintenance?
Can’t entrepreneurs take advantage of this to sell products that could be harmful?
How can adding “low cost” products to the basket be advantageous?
The light bulbs and seeds are generally what we call piggy-back products; Miguel Brito, the president of SolCom, calls them propinas (tips). Because both entrepreneurs and villagers already appreciate the benefits of these products and because they are relatively cheap, they fit more into the risk than the uncertainty paradigm. From SolCom’s economic perspective they are in many ways “free riders”: they benefit from being in the product mix but contribute little to the bottom line. However, these propinas are important for other reasons.
First, they benefit the users tremendously; the fact that they turn over fairly quickly is already enough reason to include them. Second, they provide an easy way for an MCM entrepreneur to earn extra money with relatively little effort—they simply place the propinas on their tables and offer them along with other products and services. And third, in the eyes of community leaders, villagers, and the MCM entrepreneurs themselves, offering these other products reinforces that fact that the women are visiting communities not as sellers, but as service providers. So we continually seek more propinas.
Why do certain products/technologies fail?
Oftentimes when I speak to the power of the model and the challenges of identifying beneficial products and innovations that can be sold to the rural poor, I find myself referring to the Anna Karenina principle and its application by Jared Diamond in “Guns, Germs and Steel”. This principle describes an endeavor where a deficiency in any one of a number of factors will result in failure of the entire endeavor. Consequently, any successful endeavor requires that all deficiencies be averted or eliminated. Diamond uses this principle to explain why there are so few domesticated animals in the world. In order to be able to be domesticated, an animal must pass a number of tests, and when it to fails even one, as most do, domestication becomes an impossibility. Did you know that many animals are impossible to domesticate simply because they are finicky eaters? Seems trivial but it’s true. Or, that animals cannot be domesticated because they won’t breed in captivity. I think I get that one. Captivity can be a real turn off.
While at times it is more art than science, within the MCM both the MCM entrepreneur and implementing organization have the ability to assess every factor involved in the four P’s of marketing, (price, place, product and promotion) service and product solutions before investing the time, money and effort required to add them to the entrepreneurial basket. Unfortunately, it can be challenging at times to find products that can pass every “test.” Products must be both compelling for the end purchaser to buy and for the entrepreneur to sell. Oftentimes due to one small deficiency a product is doomed to failure from a village sales perspective. It might work for donations but not for sales. For example, maybe the product requires electricity where there is none or where there are power surges (electric water filters), or it breaks when transported on top of a chicken bus (clay water filters), or it’s too expensive given the value proposition (dry latrine), or it is not accepted culturally (adding bleach to water) or the purchaser is not the user (children’s adjustable myopic glasses) or it appears too good to be true (water purification drops). Finding the right product solution that can be sold in a village can at times be difficult to say the least. However within the MCM the cost of failure is low and the ability to obtain great market feedback for product innovators and manufacturers is extremely high. The MCM can be a great tool not just for the rural poor but for the product innovators of today and tomorrow to help them better understand what “tests” need to be passed to design solutions so that the needs of both entrepreneurs and their clients can be met. They can both be a bit finicky at times. But then again, who isn’t?
What are some solutions that haven’t worked and why?
Besides the products, what else is consigned to the entrepreneurs?
