Value proposition, and value delivery in emerging markets through trust

Posted on by Bart Doorneweert

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 Business to Business of Customer Development

Posted on by Bart Doorneweert

Selling your work in progress product or service as a startup to an incumbent company is very hard. You can find yourself offering a value proposition that competes head-on with existing products, for instance on price or efficiency benefits. In that position you have to elbow your way into an existing value network that is already servicing your designated customer at a satisfactory level. In contrast, you can also find yourself in a position that you actually have no competition, because there is no reference to the solution you have developed. That is equally difficult as muscling your way into an existing market, but a different challenge: how are you going to convince your customer to change their existing value network relations based on a solution for which they have no clear conception of a problem? In this post I’ll share some of my first-hand experiences on this issue.

Creating a new value proposition
My experience in business to business work stems from the cotton processing and marketing company I co-founded in early 2006 in India, Zameen Organic. Our idea was to set up a farmer-owned company that could supply top branding customers with a sustainability ambition like Marks & Spencer’s and H&M.

We saw that these customers were interested in Fair-Trade and Organic certified produce. At that time the market for Fair-Trade and organic was growing explosively. Cotton production was nowhere near the growth rate of demand. Our proposition in this market was thus to provide a professionally run company of farmers that would be able to grow at the rate of the market, and supply the demanded quality. This was in a time when organizing trade relations between big brands and small producers was mostly the domain of NGO’s.

In developing our proposition we also saw that enabling our customers to put a label like Fair-Trade and Organic on their products was not a unique enough proposition to capture the value we intended to create. Lots of suppliers were doing that. That wouldn’t make us unique. We thus set the bar for our marketing ambitions a bit higher than just creating access to brands. We wanted to also develop systems of co-branding, where brands could affiliate themselves with social and environmental progress of their supplying smallholder producers. In return for supplying quality produce and growing supply, we wanted to let our company and our farmers in on the value that was captured downstream in the consumer market.

Selling ‘new’ in an existing market
Filled with ambition, I set up several meetings with potential big brand customers to discuss our idea. I started off with just the guy from procurement at the table. Unfortunately he didn’t want to take the discussion further than product price, quality, and quantity specs. My conclusion was that this guy apparently was not authorized to set any kind of innovation into motion. So I conjured my way into follow-up meetings with procurement, CSR, and marketing around the table, hoping to make each part of our proposition understandable to each relevant silo within the company. Hopefully they would come to an ‘aha!’ moment together, and that would get the ball rolling…

…But no such luck! There was no emotive response from any of the parties at the table. No recognition that our story could latch on to the problem they were facing. Why? Well, purchasing was only told to procure certified produce at the lowest possible price and secure the supply that the company required, regardless of working against odds of tight supply in the market. CSR’s job was focussed on making up the reports that showed the company was seriously picking up its responsibility. This department wasn’t involved in actual company decision making. And marketing, well marketing was not much into the business of understanding how the supply chain operated. Rather they preferred to put creative thinking into how to put the brand into a positive limelight with the end consumer. So, none of the people at the table could properly assess the value of the proposition we were trying to sell.

Selling ‘new’ in a new market
Our proposition didn’t connect with our larger customers. But on the other hand, we also serviced a segment of smaller apparel branding companies who were dedicated solely to ethically produced garments. One of our more successful branding customers was Pants to Poverty, a non-profit awareness raising company on equitable trade, under leadership of Ben Ramsden. Pants to Poverty had released a line of undergarments, conveniently lifting on Nelson Mandela’s campaigning to Make Poverty History which made the Pants brand go viral.

Ben understood the proposition of co-branding, and securing the supply for their operations. With him, we were able to set up a branding initiative advertising the link between Zameen farmers, and the underwear made from their fibers. Pants’ website till date still uses images of the Zameen Organic farmers holding up their product, demanding riddance of poverty.

Zameen farmer Pants to Poverty

Zameen Farmer Pants to Poverty Man

Zameen farmer showing ‘their’ pants

Pants to Poverty was able to create a unique value proposition to the consumer market by showing their direct contact and collaboration with farmers. Our collaboration gave PtP a more secure position in the supplying market, amidst bigger competing buyers. Farmers in return were able to negotiate better terms of trade, also including farmer training on cultivation practices in pricing, as well pre payments, on top of the regular investment of the Fair-Trade premium in meaningful projects for community development.

Existing vs. New
So what made the difference? For one it’s the fact that PtP was looking for our proposition. There was no other supplier out there that could provide the same kind of consumer marketing opportunity. Zameen enabled them to do it. But the more interesting distinction is that we succeeded to form the collaboration because Ben embodied the function of purchasing, CSR, and marketing all in one. Ben was a fully integrated customer, better able to critically assess the performance contribution that our proposition might bring. This made life much easier in pitching the idea for making Zameen part of the PtP value network.

What we saw in our other discussion with the larger companies was the symptom of dealing with a new proposition and a dispersed customer. Even though the reality of the market of short supply begged for a change in assessment of relations in their supply chain, there was no way that our large customers could recognize the value we intended to provide. They did not have the joint understanding and feedback mechanisms in their own internal cooperation that would allow them to properly assess the proposition. Nor did they feel in any way inclined to discuss the opportunity with their superiors. The proposition was too new. Hence they preferred the possibility of leaving value lying on the table and sending us home over taking a chance with us and assessing the actual potential of Zameen as a supplier on its merit.

Conclusion
The story above describes a challenge that entrepreneurs often face (social entrepreneurs almost by definition). It happens when you’re so very early to market with a solution, that people generally would dismiss it as a market opportunity. This is what Bright B Simons refers to as the struggle of creating “a new value class”.

In our Zameen case, things got rolling when we shifted focus to working with smaller companies. With these companies it was easier to come to an integrated assessment of our proposition with the people who fulfill the critical roles of user, purchaser, and beneficiary. They were organized informally enough to have a validly critical discussion about our proposition in relation to their performance priorities. At the least it ensured us that our product wouldn’t be dismissed based on false-negative arguments.

My key learning from this experience is that the more a product or service relates to the norms within an existing value network, the better you can deal with the dispersed customer. The further a product or service is removed from that network, the more you’ll need to look for your integrated customer to get a substantial discussion going. As a rule of thumb, I would say that your chances of finding integrated customers is highest with companies with up to a billion euro in revenue. Over a billion in revenue, things get layered and segmented, and you’re likely not to get a proper early assessment of your product’s market potential. Start your proof of principle with smaller companies. They might provide you with the insights and reputation that allow you to enter the big league after.