Direct sales with microfinance in Cambodia
PATH and Hydrologic introduce an evolved ceramic water pot and test a new commercial approach in Cambodia
Buoyed by an effective product and a committed, well-aligned commercial partner, PATH is launching two pilots in Cambodia to test multiple direct and retail distribution and sales strategies for two different versions of a ceramic water pot (CWP). The original version of the CWP has been in production since 2001 in Cambodia by International Development Enterprise (IDE) (www.ideorg.org) and now Hydrologic (www.hydrologichealth.com), and consists of a terra cotta ceramic pot nested inside a large clear plastic bucket with a tap.
In extended user testing studies in India and research in Cambodia it was found that while users did not like the external look of the CWP, once they had the opportunity to use it they often rated it more highly than other available products and stated a desire to make it their primary source of water treatment. Encouraged by this finding, PATH has developed a more aesthetically pleasing exterior shell for the CWP, based on preferences identified by users themselves, that will be manufactured in Cambodia and tested in the upcoming pilots.
Both products will be sold side by side in each of the pilots described below, thus generating useful data on relative uptake and consumer preferences.
Retail sales pilots
Retail sales were among the sales models tested through Safe Water Project pilot projects. Photo: PATH.
A retail pilot in Kampong Cham province will monitor sales of the two products when sold head to head at different price points. In one region both products will be sold at their full price of approximately US$12.50 for the original CWP and US$22 for the new CWP. In another region, customers will be given a US$5-off coupon for the new CWP, and in yet another region customers will receive a US$10-off coupon. With data from these pilots, we can identify more clearly the optimal price for the new CWP. Our hypothesis is that despite the higher cost of the enhanced CWP it will out perform the original CWP because of its higher perceived value.
PATH’s experience in the field indicates that commercial enterprises like Hydrologic are impaired when their product is given away for free through nongovernmental organizations (NGO). The retail sales pilot will also test whether a coupon delivery scheme could be a
viable way for NGOs to target subsidies for CWP purchases to the lowest income populations without undermining the commercial market.
Direct sales pilots
In a Kampong Speu province, PATH will test a direct sales approach, employing a managed sales force to sell the filters door to door. In one region, the salespeople will sell both products at full price. In another region, the salespeople will work with a local microfinance institute (MFI) to offer financing to existing customers over 6 months at 20% interest.
The 10 salespeople involved in the direct sales pilot have been through a training program that PATH developed with input from our own experience as well as the experience of qualified organizations and consultants. The training program is part of a larger tool kit for Hydrologic that includes guidance on recruiting optimal sales personnel and using sales tools such as a highly visual flip-book that has been field tested and translated in Khmer to help salespeople achieve maximum results.
Monitoring and evaluation surveys
For each pilot, PATH is collaborating with Abt Associates (www.abtassociates.com) to conduct two cross-sectional population-based surveys plus several qualitative studies in the regions where the pilots are taking place. Endline and baseline surveys will measure uptake of both filters, attitudes toward water filtration, customer satisfaction, and correct and consistent use over six months. Commercial viability will be measured using monthly sales reports to determine profit and loss, margins per product, sales per product, sales per salesperson, and other useful statistics to determine whether, when, and at what price each strategy can become financially sustainable.
Within Cambodia, these data will help both private companies and NGOs better understand the possibilities and limits of market-based approaches to addressing an unmet need for clean drinking water in low-income areas. Any successful strategies related to product sourcing, production, marketing, sales, and distribution can also be shared with public-sector partners to improve their own efforts to disseminate subsidized products to low-income households.
Globally, this pilot helps PATH understand more about the role that culture, market maturity, and choice can have in uptake and use of commercial products among low-income households. It tests the viability of a more attractive filter, and it builds on our work with local entrepreneurs to advance distribution and marketing strategies that can overcome some of the difficulties of reaching low-income markets.Source: sites.path.org
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