Value proposition, and value delivery in emerging markets through trust

Life is hard for people with low and irregular income streams in developing countries. Under these circumstances, opportunity cost for your time and money weighs in heavily. The implications of losing time, or losing money usually mean that you are not able to buy food for the day, or worse even that you need to somehow expand your debt to be able to survive. With such a burden of consequences, you can imagine that the prevalent uncertainty fundamentally influences the way in which this demographic makes its choices.

One of the affected key factors in making a choice on spending time and money, or supporting choice making, is trust. Just taking someone’s word that something will turn out well is probably not a good bet. This is because the uncertainty of something not turning out as expected comes fully at your own expense. This burden won’t be shared. Hence trust is hard to come by.

Lack of trust has huge implications for delivering value in the markets we’re discussing. Products or services should be sure to deliver exactly on the promised value in line with what the customer would expect. If they don’t, then you won’t be a business. Companies seeking to target these customers need to put a lot of effort in to mitigate uncertainty to the consequences of the customer’s choice, way more than we’re used to in predictable developed countries.

Trust, what is it good for?
An example of a successful business, which leverages trust is the Baricho Farmers Store in Karatina, Kenya (One stop supermarket for farmers), which I recently visited. The lady running the store told me that when she gets new varieties of seed, she will test them on her own farm herself first.

Baricho Farmers Store

The Baricho Farmers Store in Karatina, Kenya

An example of this test and its result is the picture below, where she displays a laminated picture of the Faida Seeds maize plant variety. In the back you see the maize plant’s corn cobs hanging upside down from the shelf. Farmers can have a look for themselves and get assurance that they will be getting what they pay for: the cobs can really get that big! This store was reputed as one of the best running agro-input businesses in the area, which is no wonder, given the various sources for creating assurance and trust on display

 Faida Seeds

Corn cobs on display of new varieties of seed in the store

So what would we need to take into consideration when creating trust on delivering value as effectively as the Baricho Farmers Store?

Radical usability and applicability are important. These ensure that customers get what they pay for, which in itself provides for a basis of trust. Under the assurance of usability and applicability, customers might even pay a premium if a really relevant problem is solved (again the Farmers Store is a case in point for this; not the cheapest, but it is the best).

But usability, and applicability are product factors, and thus not the only factors to take into account for value delivery. My conjecture is that successful, widely adopted products or services in emerging markets, also offer the customer multiple sources for verification of a product’s potential value: multiple testing points to assure that customers will be getting what they pay for. From a collection of my observations during my last field visit in Kenya, like the Farmers Store, I would suggest that providing multiple sources of verification implies that:

  • the point of sale is personal, allowing for two-way interaction in communication
  • reputation (accumulated trust) is backing the transaction, like a (personal) brand
  • the customer has access to, and is informed through independent and ubiquitous -visual/audio- information resources

If you provide these sources of verification, and customers get what they pay for, then you’re effectively creating trust. In the worst case your customers will be able to discuss defective products with neighbors as a check (“Did you see the picture and the cobs in the store?”,  “How are those seeds working out for you?”, etc) These sources of verification will thus ensure that lemons are sorted from the market as swiftly as possible. Under such levels of verification, the resulting trust might even bear witness to customers knowingly forgoing a meal to acquire the value of your product or service.

Conclusion
Lack of trust and its origin is rarely recognized enough when marketing products and services to people with irregular income streams, living under conditions of uncertainty. I would conjecture even that lack of exhibiting trust is the factor which most often causes failure in value delivery in emerging markets, even if the proposition itself, in essence, would be perfect.

What this means for organizations like (social venture) startups, multinational corporations, and development projects, seeking for a position with the lower income brackets in emerging markets, is that they need to design new business models that convey trust by allowing customers to easily verify a product’s value through multiple channels. Positive intent alone will not suffice.

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This is the fifth piece in a continuing series of posts (starting here) on what the role of human-centered design could be in development work. I’m working on this together with Niti Bhan, who will also be posting her observations at her Perspective blog. Posts are categorized as VCD

The minimum viable product for physical products; what we can learn from the makers.

Imagine you live in rural India and you own a motorbike. Every once in a week or so, you are approached by a passer-by or a neighbor to help out because his bike has run out of gas and the nearest station is 16 kilometers away. Sometimes they’re lucky. You have enough gas to share and you’re able to perform the icky job of siphoning off your gas with mouth and hose. People even pay you extra for your discomfort, enabling you to buy a pack of gum to clear away the taste from your mouth.

So, after a couple of times of doing this, and the unintended near swallowing of petrol, it hits you! Could there by a market for this? Could I build a filling station with the purpose of helping people reaching the next village? A solid discovery of a customer problem, and a potential solution to tackle that problem.

Now the question is what a physical prototype of your business model would look like. Fortunately you’re strapped for cash at your 2 dollar a day income, imperative for lean decision making. It prevents you form asking the wrong type of questions for your prototype like:

  • What colors should my uniform be to look credible enough for my customers to buy from me?
  • Do I serve Coke or Pepsi at my station?
  • How about a drive-through bike wash?

In this case you need to earn before you spend. So no, it won’t be a lavish, fully furbished, high-tech unmanned petrol station. It might look more like something below:

 ….the Minimum Viable Gas Station (photo credit to Niti Bhan).

This prototype would be the most reduced concept (generally referred to as the Minimum Viable Product (MVP)). The MVP enables you to test the most essential parts of your business model: How do customers interact with and value my product? The downside is that it looks scrappy, but the dominant positive side is that you will naturally test better questions about your business model:

  • Would customers pay extra for this type of filling service? And, how much?
  • What volumes will they need, and how much stock do I need to keep?
  • Is there a pattern in demand which is prevalent throughout rural areas?

Through such essential questions you are also more inclined to focus on gathering essential data for testing your idea. So it’s not so much the total number of motor bikes that zip by your station that count as an indicator for the potential of your idea. Depending on that in your case will make your family go hungry. Naturally, it’s the number of people that actually make a stop for a fill that does.

What’s more is that through playing with pricing, you might discover that customers are willing to pay 4-5 times the market rate for petrol, because your service saves so much effort (so radical affordability as the main constraint in servicing the BoP appears to be an assumption). Now you have found the essentials for scaling a profitable business: franchise anyone?

What we can learn from the makers
In short the MVP emphasizes what matters, and prevents you from wasting resources on testing the non essentials and using non-essential data. But conceiving your MVP is hard. How do you define your product in the most undressed way possible to test your product and its features? It is even more difficult to build an MVP for physical products like a gas station than for a web application (where the MVP concept naturally originated from), as you often incur more costs in time and materials to test them.

But, as the example in rural India shows, constraints like money and time spark creativity and can invoke “the maker” in all of us. Play around with representation: there is always a prototype! In our case we redefine the gas station to a jerry can and a funnel: the smallest representation with which all essential features of a gas station can be tested. People like Steve and Woz of Apple started out with just a motherboard.

Invest in defining, and cutting & pasting your MVP. It keeps you from carrying around stupidity for too long; it prevents you from filling the bucket with so much water that it starts spilling over the rim once you start walking. Build with less.