GROWTH HACKING STRATEGIES FOR SCALING DEMAND AT THE BoP

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THE DEMAND ENGINEGROWTH HACKING STRATEGIES FORSCALING DEMAND AT THE BoP

The Demand Engine: Growth Hacking Strategies for Scaling Demand at the BoPFOREWORDTABLE OF CONTENTSEstablishing demand for social impact goods or services is often a complex andresource-intensive process, as it frequently requires changing or establishing newbehaviors. Scaling demand in base of the pyramid (BoP) markets is particularlydifficult due to low margins, lack of formal marketing channels, and the costs ofhigh-touch models that can involve additional personnel, such as last-mile salesagents and peer educators.FOREWORD. 1Social enterprises, large companies, and NGOs often struggle to make the leapand scale demand—and continue satisfying that demand in a sustainable and costeffective manner—after successfully piloting new, impactful goods for low-incomeconsumers.THE DEMAND ENGINE FRAMEWORK. 4DEEP DIVE INTO FIVE AREAS OF GROWTH HACKINGAs Erik Simanis points out in the Harvard Business Review (June 2012), Prahalad’s“BoP promise,” which posits that selling low-margin products in high volumes inBoP markets is profitable in the long run, has two conditions which are oftennot met. “One, the company can leverage an existing infrastructure that serveswealthier customers to offer a product or service to poor consumers; and two,the consumers already know how to buy and use the offering.”1 Experienceshows that these assumptions are often wrong: suppliers need to invest in 1) newdistribution channels to serve the last mile 2) awareness-raising and behaviorchange campaigns to make propositions understood, easy, desirable, rewarding,and, ultimately, to make them a habit (as explained in Unilever’s Five Levers ofChange2).1. Leverage Trusted Networks. 8Based on these experiences, the 2018 MIT PIA Scaling Demand at the BoPWorking Group sought to discover and learn from practices that scale up demandfor products and services in BoP communities, with the goal of achieving optimalbalance between cost effectiveness and adoption. The result of our efforts andlearning is The Demand Engine: Growth Hacking Strategies for Scaling Demandat the BoP, a practitioner-focused framework for product and service providersseeking to “hack demand” at the BoP.5. Digitize Loyalty Programs.16Amanda Epting, MIT D-LabEmile Schmitz, BoP Innovation CenterValéria Varga, BoP Innovation CenterApril 2019-1-THE DEMAND ENGINE SCOPE. 22. Offer Low-Risk Trials. 113. Invest in Multilevel Agent Networks.124. Incentivize Referrals.14THE DEMAND ENGINE IN PRACTICE: COPIA.18ENDNOTES AND REFERENCES.20ACKNOWLEDGMENTS.21

The Demand Engine: Growth Hacking Strategies for Scaling Demand at the BoPMIT Practical Impact AllianceTHE DEMAND ENGINE SCOPEThe Demand Engine: Growth Hacking Strategies for ScalingDemand at the BoP builds on the research of several BoPmarketing frameworks and publications, including TedLondon’s Co-create, Innovate, Embed framework;3 thefour scaling strategies described in the Ready, Steady,Scale publication co-written by MIT PIA, BoPInc, andDanone Communities; and BoP Innovation Center’s ATEARframework.At what phase is this tool most relevant?As outlined in London’s Co-create, Innovate, Embedframework4 (see top of following page), the Pilot phaseof a BoP-focused venture is focused on testing specifichypotheses about whether and how the envisioned businessmodel is creating mutual value (for the venture itself as well asfor BoP communities). Enterprises prepare for and transitionto scale over three phases.The Demand Engine assumes that these hypotheses havebeen thoroughly tested and that the value proposition forBoP consumers has proven to be relevant, ensuring “mutual value creation,” to use the terminology of Ted London.The five strategies described in the Demand Engine describe strategies which may enable ventures to successfully scale demand at the BoP in the “Expand” phase. Ourframework, however, is marketing-focused; it is not a holistic venture management tool.Although differentiating between the “Pilot” and “Expand”phases may appear straightforward, in practice it is oftenchallenging to assess whether the business model is readyto exit the pilot phase. Ready, Steady, Scale5 offers a practical, holistic checklist that BoP-focused ventures can useto determine whether they are ready to scale and whichscaling strategy is most appropriate.What do we mean by scaling?In 2016, MIT PIA explored how to advance scale-readinessin social ventures and developed the Ready, Steady, Scaletoolkit. Scale for an inclusive business means more thansimply growing the size of the business. It means increasing a venture’s impact at a greater rate, while also adding resources incrementally. There is no standard formulafor successfully scaling inclusive businesses, but Ready,Steady, Scale outlines four scaling strategies to choosefrom:SCALE DEEPBeing more efficient at what a company currently doesfor existing consumers, or with the same producers or entrepreneurs related to the products produced or servicesdelivered.SCALE UPGetting more customers, producers, or entrepreneurs fora company’s regular business. Scale can be achieved bytargeting new geographies or developing new distribution networks or pricing policies.SCALE OUTDeveloping new products for existing consumers or intensifying BoP engagement. Scaling out could entail theintroduction of new products in existing markets or themodification of existing products and services.SCALE ACROSSDeveloping new products for new consumers, or a newbusiness proposition with new producers or entrepreneurs. This scaling strategy is similar to what business literature calls the diversification growth strategy.NEW BoP MARKETSAME PRODUCT/SERVICESCALE DEEPSCALE UPNEW PRODUCT/SERVICESCALE OUTSCALE ACROSS-2-The 2018 PIA Scaling Demand Working Group set out toexplore one of the four BoP market strategies in moredetail: scaling deep. This strategy, as outlined above,explores proven product/service value propositions,not new offerings. We asked ourselves: how do socialenterprises, multinationals, and NGOs find cost-efficientways to create more demand and improve adoption andretention in their current BoP market? Even though thefocus is on scaling deep, the framework can be relevantwhen scaling up to new markets that have similarcharacteristics.The 4 As identify the most important prerequisites tosuccessfully marketing to BoP customers, while the BoPInnovation Center’s ATEAR framework7 focuses on theprocess of relationship-building with BoP customers,from creating interest to maintaining a loyal customerbase. ATEAR stands for the elements of a good marketing strategy: attracting Attention, building Trust, enablingExperience, triggering Action, and Retaining your customers. Each element contains a set of strategies commonly used in BoP markets to activate these different aspects of demand creation.The Demand Engine provides value by describing strat-How does this framework differ from other egies to maximize effectiveness across these differentscaling and BoP marketing frameworks?aspects of demand creation and identifying cost-efficientWithin the topic of scaling deep, The Demand Engine focuses specifically on marketing strategies for scaling demand, not a holistic roadmap to scale.Among the most well-known marketing frameworks forBoP markets is the 4 As framework originally developed in2012 by C.K. Prahalad.6 Inspired by the 4 Ps of marketing,the 4 As refer to:Affordability: Target groups are (financially) capable ofbuying the product or service. The product is not too expensive and/or payment conditions and financing opportunities are appropriate.Awareness: Target groups are aware of the product orservice and its attributes. They know of its existence andunderstand its attributes and functionalities.SUMMARY OF THE FOUR SCALING STRATEGIESSAME BoP MARKETAdapted from Ted London’s Co-Create,Innovate, Embed FrameworkAvailability: Target groups have actual access to the product or service; it is available for them to buy. They do nothave to travel long distances to purchase it.Acceptability: Target groups have no objections to adopting and using the product or service. There is a sufficientconnection with their perceptions, customs, and behaviorsto adopt the product or service.ways to reach economies of scale.WHEN TO USE THIS TOOLLeveraging the aforementioned scaling andmarketing tools, The Demand Engine is mostrelevant for BoP-focused product and serviceproviders who: Offer a market-based solution, withthe aim of generating revenue fromselling products and/or services to BoPconsumers; Are preparing for or have already enteredthe “Expand” phase; Have validated their value propositionas relevant to the BoP communitiesthey aim to serve, thus enabling mutualvalue creation for the enterprise andcommunities; and Are looking for effective and efficientmarketing strategies to scale deep.-3-

The Demand Engine: Growth Hacking Strategies for Scaling Demand at the BoPMIT Practical Impact AllianceTHE DEMAND ENGINE FRAMEWORKThe Demand Engine framework is meant to be read from the centeroutwards, with the blue innermost circles representing a business’s core andrequired preconditions for considering how to scale demand at the base ofthe pyramid. The first requirement is a relevant and proven value proposition,and the second requirement is rigorous internal business processes. Theoutermost blue ring represents a business’s data feedback loop, whichpropels and reinforces the business’s core. By utilizing mechanisms thatcontinuously collect information on demand, sales, and customers, a businesscan grow and increase its customer base and begin to consider five distinctmarketing strategies for growth hacking demand at the BoP — representedin the graphic as the five multicolored blades.At the heart of the framework is a Proven Value Proposition. The DemandEngine’s five growth hacking strategies can be successful only if the BoPvalue proposition is proven to be understood, relevant, and attractive to thetarget consumers. This relevant value proposition is a business’s engine forgrowth.While the pilot phase focuses on testing and iterating the value proposition,and is characterized by high uncertainty and room for experimentation,BoP business models must ensure a level of standardization andRigor in Processes before entering the scaling phase. Strong internalprocesses reinforce and strengthen a business’s value proposition.The Ready, Steady, Scale publication specifies these processes in moredetail, and its checklist can be used for assessing whether the businessmodel has the level of rigor in processes necessary to enable scale.A business’s value proposition and internal processes are not static, butrather evolve and iterate as the business begins to grow based on theintake of new information and data from customers, sales, and markets.They require continuous improvement and adaptation to new markets andnew circumstances, and it is crucial to build a data loop into the businessmodel, represented in the above graphic by the outermost blue loop in TheDemand Engine.MULTILEVELThis data loop states that in order to inform its marketing strategy, a businessrequires Continuous Customer Feedback and Analysis of Sales Data andDemand Data. Customer Feedback is collected in various ways: for example,Triggerise allows for collecting data directly from the customer through itsmobile solution after each transaction, but more traditional ways such ascall centers or systematic collection of anecdotal evidence from vendorsalso provide valuable input for strategic decisions. Increasingly, there aredigital solutions enabling collection and Analysis of Sales Data at the pointof sales designed for last mile settings, such as FieldBuzz. Demand Dataindicates changes in demand (e.g., market saturation, changes in availabilityof competing solutions) as well as potential demand in new markets. Oneof the best practices emerged from the Working Group’s case studies washaving demand-related data among the criteria to choose new markets (e.g.purchasing power), rather than focusing only on development-related data(e.g. potential to partner with governments and NGOs in the new area).-4--5-

The Demand Engine: Growth Hacking Strategies for Scaling Demand at the BoPMIT Practical Impact AllianceTHE DEMAND ENGINE FRAMEWORK, cont.Lastly, the outermost circle represents The Demand Engine’sfive growth hacking strategies:1. Leverage Trusted Networks2. Offer Low-Risk Trials3. Invest in Multilevel Agent Networks4. Incentivize Referrals5. Digitize Loyalty ProgramsThe 2018 MIT PIA Scaling Demand at the BoP Working Groupidentified these five strategies from case studies as ways to scaledemand and increase adoption in a cost-efficient manner. It is not anexclusive or exhaustive list of scaling demand strategies, but rathera collection of best practices identified through the Working Groupcase studies. Each of these five strategies builds upon the previouslymentioned well-known marketing frameworks for BoP markets, suchas the four As and ATEAR, and present businesses with ways topropel and accelerate demand creation. They can stand alone or beleveraged jointly with complementary benefits. With more than onegrowth hacking strategy in place, it is easier for a business to growwhile driving down its costs, increasing its performance, and reachingeconomies of scale.The following section describes these five strategies in detail anddiscusses examples from social enterprises and multinationalsoffering products and services to BoP communities. These casestudies were generously shared by the businesses who presented tothe 2018 PIA Scaling Demand at the BoP Working Group.-6-MULTILEVEL-7-

The Demand Engine: Growth Hacking Strategies for Scaling Demand at the BoPMIT Practical Impact AllianceDEEP DIVE INTO FIVE AREAS OF GROWTH HACKING1. LEVERAGE TRUSTED NETWORKSAs a marketer, establishing trust in your proposition isone of the key challenges. Trust indicates confidencethat the proposition will deliver the promised value. It isimportant in all markets, but it is of special importance inBoP markets, where customers require the highest valuefor money and where they are unlikely to invest in a newsolution just to “try it out and see what happens” (seeHYSTRA report, 20138).How to establish trust? You could invest in a networkof community agents to go door-to-door with a socialmarketing toolkit, explain your solution, show a demo,spend quality time, and develop personal relationshipswith your potential clients. However, while this methodis often necessary to activate demand in underservedmarkets, it quickly becomes too expensive during growth.A more cost-effective strategy is to leverage existingnetworks of trust, such as a network of health centers, anetwork of community saving groups, or, as in Ecofiltro’sexample, a network of schools. In addition to acceleratingtrust building, this growth hacking strategy also lowersthe cost of creating product and/or service awarenessby leveraging existing, well-known networks, rather thanbuilding new ones.CASE: ECOFILTROEcofiltro is a Guatemala-based social enterprise whosemission is to provide clean drinking water to 1 millionrural Guatemalans by 2020. Its filtering unit, known asEcofiltro, is based on a ceramic pot filtering technology.The organization started as a traditional non-profit, butCEO Philip Wilson realized that the challenge of providingaccess to clean water at scale required self-sustainable,market-based solutions rather than a “philanthropist”approach. He decided to adopt a hybrid approach inwhich urban sales of high-margin, high-end filters wouldsubsidize the distribution of rural filters at an affordableprice.Ecofiltro got its foot in the door of rural householdsthrough schools. As the CEO put it, “We followed the samestrategy as Microsoft.” As kids start to use the Ecofiltro atschool, they get used to it, develop a preference for thetaste, and become advocates within their families to buyfilters. Ecofiltro has donated over 25,000 filters to ruralschools as a way to provide filtered water for kids andraise familiarity and trust in their product.Ecofiltro field representatives contact schools andidentify the most motivated schools with active parentparticipation. Upon the delivery of the filters (one filter per-8-classroom, plus one in the kitchen), Ecofiltro presents itsproduct’s value proposition and benefits, and the school isresponsible for ensuring that enough parents participatein that awareness-building event. Parents have the optionto buy an Ecofiltro through a monthly payment plan (Q100during delivery and 4 monthly payments of Q50).As the social enterprise replicates its model in other LatinAmerican countries, Ecofiltro’s school distribution modelis still the preferred entry point, as it has proven to be theappropriate channel for establishing and scaling demand.Partnerships with schools also contributed to the successstory of d.light in Tanzania.9 Just like teachers andheadmasters, health professionals — doctors, pharmacists,and health agents — are also trusted members of thecommunity. Companies, social enterprises, and NGOsoften engage these professionals in sales and behavioralchange activities. Examples include Protein Kissée-La,which distributes infant fortified porridge flour throughpharmacies to improve children’s nutrition in Côte d’Ivoire(HYSTRA report, 201410), and SC Johnson, which sellsmosquito repellents through peer educators to preventmalaria in Rwanda.11Between 2014 and 2018, Ecofiltro partnered with over 4,500 schools andreached over 800,000 children through its School Program.12However, marketers should be mindful of the fit betweena value proposition and a trusted network, as well as thecustomer’s journey, when initiating such partnershipsto establish and scale demand. This was an importantlesson learnt in PSI's project aiming to improve the accessand uptake of sexual and reproductive health (SRH)products among adolescent girls in Mozambique. Theproject aimed to leverage the assumed trusted networkof pharmacists. After a session about SRH with a peereducator, girls were recommended to visit a pharmacyand engage with these assumed trusted sources, by,for example, requesting to receive oral contraceptives(OCs) and clarify any questions they might have on theproduct. However, in the first trial period, only one-thirdof the girls actually visited the pharmacy, and out of thisgroup, only a few visited the pharmacy a second time.The project discovered that pharmacists and adolescentsare not a love marriage: pharmacists were not keen toprovide a consultative service to adolescent girls andgirls did not view the pharmacy as being a safe space. Forpharmacists, adolescent girls represented a very smallsegment of a pharmacy’s current client portfolio and alsoa low purchasing power client that required too much ofthe pharmacists’ time to explain the use of products suchas OCs. In the eye of the pharmacists, taking too muchtime with one customer would result in complaints fromother customers’ — with potentially higher purchasingpower — a situation pharmacy business own

learning is The Demand Engine: Growth Hacking Strategies for Scaling Demand at the BoP, a practitioner-focused framework for product and service providers seeking to “hack demand” at the BoP. Amanda Epting, MIT D-Lab Emile Schmitz, BoP Innovation Center Valéria Varga, BoP Innovation Center April 2019 TABLE OF CONTENTS

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