Re-constructing The Elements Of The Process – How Did IDE Do It In India International Development Enterprises (India)
Background • Started in 1991 • Set up as a representative office in 1991 of IDE-Canada, headquartered in USA • Registered in India in 2001 under section 25 of Indian Companies Act
Key Technologies • Treadle Pump (1991) • Drip irrigation (1995)
Concept of Product Life Cycle • Different stages of a product – introductory, growth, maturity, decline • Shape of a PLC
Phases TP:Introductory 1991-1995 Growth 1996-1999 Maturity 2000 onwards
Key intervention areas for IDEI • R&D – Product identification, design, development, testing, refining • Supply chain management – identification, appointment, training, relationship mgmt • Sales – primary (to supply chain) and secondary (to farmer/end user), after sales service • Promotion – elements, mix/strategy
Treadle pump Introductory phase 1991 – 1995 • A period of slow sales growth as the product is introduced in the market. Profits are non existent in this stage because of the heavy expenses on product introduction.
Intervention IDEI’s Role – Activities Outcomes Product identification Brought pump from Bangladesh • Product was rejected • Length of cylinder • priming Product adaptation Modified pump for differing contexts • Bamboo pump – popular as low in price-where bamboo and mechanics were available • Concrete pump most stable but heavy • In areas where there was surface sources – supply chain innovated and provided a standwith metal pump
Intervent -ion Outcomes IDEI’s role –Activities Promotion • Promoted through a local NGO • Product was virtually given away free • Cost recovery as low as 10% Supply chain • Initiated process of setting up supply chain in all states • In one region had to work withgover-nment subsidy • Private supply chain set up in all regions • Subsidy pushed price of pump higher
Marketing strategies adopted in introductory stage • IDE knew it had a killer product • offering clearly differentiated • met specific needs of customers • low priced • easily available • a quick payback • high return on investment • self selected the poor
Marketing strategies adopted in introductory stage … • Rapid penetration strategy – launched at a low price (relative to existing options) with high expenditure on promotion. • market was large • price sensitive • unaware of product • manufacturing costs would fall with scale of production.
Key learnings in introduction stage • Understand local context and needs and adapt product to needs and requirements of the area • Important to maintain control over the process to avoid dilution
Key learnings in introduction stage… • Need to quickly work through market forces (private sector) • Withdrawal from a potential area due to dilution of approach not a choice – as high incidence of poverty • If subsidy is inevitable maintain control over the product and process
Growth phase 1996 -1999 A period of rapid market acceptance and expansion Intervention IDEI’s Role –Activities Outcomes Supply chain creation • Appointment of distributors and dealers • IDEI as a direct player – both as distributor and as selling directly to farmers • Credit was extended to supply chain and farmers • 200% growth in sales
Intervention IDEI’s Role – Activities Outcomes Supply chain management • IDEI staff closely assisted the supply chain in collection of money, order -processing and delivery • Very high growth in sales • Growth in sales was directly proportional to the no. of sales staff After sales service • Village mechanics were trained • Installation, maintenance and repair was not a problem • But spares were sometimes not available
Intervent-ion IDEI’s Role – Activities Outcomes Promotion • Detailed promotion strategy drawn up • All promotion expenses borne by IDEI • Aggressive promotion by IDEI staff • Very high growth in sales • Enhanced brand image • Unique positioning in several areas – “vegetable pump”.
Intervention IDEI’s Role – Activities Outcomes Quality control (QC) • Highly centralized QC • Tight control on quality of product • Good quality pump sold to farmers at a reasonable price • Good brand image and high brand recall • Manufacturers unable to conform to the quality standards were restricted from entering the market – limited competition
Marketing strategies adopted in growth stage • Maintained quality • Price was kept at same level • Promotion was maintained at high levels – maybe even increased • High service levels • Expanded distribution coverage
Key learnings in growth stage • Important to put in place an after sales service strategy from the very beginning • A limited positioning could restrict the market • High quality, affordability and high visibility were key to high brand image • Direct service provision may be necessary when the market is weak/ not there • Necessary to quickly move into facilitation • Danger of very high growth rates delaying facilitation role
Key learnings in growth stage… • Facilitation in markets is critical • IDEI realized the need to hand over the physical and financial transactions to channel partners -reduce dependence on IDEI stafffor sales • Gradual handing over of the demand creation function to the market players must be done as early in the project as possible
Key learnings in growth stage… • Build some marketing costs into price of product • Easier to hand over marketing function • Pricing also allows room for competition • Make room for competition IDEI = max 25% market share
Intervention IDEI’s Role – Activities Outcomes Maturity phase – 1999 onwards A period of a slow down in sales growth because the product has achieved acceptance by most early adopters Organisational rightsizing • Review of field operations • Revised staffing structure put in place • Redundancies reduced • Insecurity amongst staff • Staff turnover increased • Sales did not fall
Intervention IDEI’s Role – Activities Outcomes Sustainability of operations • 1999 – 2001 was declared as the sustainability phase for TP • “sustainability” = “withdrawal” ? Quality control • Quality systems were reassessed with IDEI staff having a minimal role • Co-branding • Manufacturers could maintain a good level of quality. Involvement in product increased
Intervention IDEI’s Role – Activities Outcomes Supply chain management • Policy changes (reduction in subsidy) in Orissa led to private sector supply chain being revived • Introduction of new pump (STP) • Sharp drop in sales in Orissa initially • Sales in other states stable • STP received a very positive response from the market
Intervent-ion IDEI’s Role – Activities Outcomes Promot -ion • Gradual handing over of promotion to supply chain • Static promotion largely managed by supply chain • Greater involvement of supply chain in dynamic promotion and marketing Product variants • Quality checks reviewed • Product quality reviewed • Pricing reviewed • Price – Quality combination pumps towards local fabrication
Intervent-ion IDEI’s Role – Activities Outcomes Impact assessment • External studies were sponsored • Fresh insights on smallholder incomes
Marketing strategies adopted in maturity stage • Shift in role. Reduced interference in market forces with a focus on sustainability • Product variants, price-quality combination to bring in next level of price sensitive customers
Key learnings in maturity stage • A large sales force is difficult to sustain after the growth phase - In maturity phase, reduction in staff need not reduce sales • Important to clearly lay out your strategy leaving no scope for ambiguity and misinterpretation • A continuous dialogue with donors, partners, staff essential.
Key learnings in maturity stage… • Quality must always be looked at in the context of affordability, willingness and ability to pay • IDEI could have launched price-quality variants earlier, possibly in growth stage • An external impact assessment study led to not just looking at impacts of our work but also opened the way for future program design
From supply chain to value chain (from 2001 ) • External study highlighted differences in income impact • Further studies provided factors affecting differences in incomes • Indepth field studies by IDEI staff • Donor apprehensions on limited supply chains focus • Shift in thinking within IDEI – from supply chain to value chains
Before Now Shifts in IDEI’s role Supply chain management Direct involvement in order processing, monetary transactions Facilitates co-ordination and linkages between supply chain members Promotion By IDEI staff directly Gradual handing over to supply chain Quality control Highly controlled and centralized Shifting to supply chain with periodic quality checks by IDEI
Before Now After sales service Trained mechanics Extra spares with product • Facilitate supply chain and new alternative channels to stock spares Quality input supply Nil • Train input suppliers • Understand local require-ments and facilitate adequate and appropriate stocking Agronomic advice Some staff interacted locally • Organize training programs using local resource persons from village, researchers, govt officials, etc.
Before Now Crop selection Nil • Assist in selection of crop to be grown/ diversification • Facilitate training on cost benefit analysis, production techniques, best practices Information and market access Nil • Facilitate the setting up of agri-service centres, use existing ICT services available • Train farmers on how to use information for better returns
Key challenges for IDEI • Change in orientation • Facilitation role • Working through others • Skills and capacities • Mindsets and attitudes