Innovative Water Sector FinancingInnovative Water Sector Financing

BYCUSH NGONZO LUWESI

bfz Expert

Mombasa ,Kenya

7-11 November 2011

•To provide some economic tools used to implement the “User pays” and “Polluter pays” principles in the water and sanitation sector

Goals of this Lesson•To introduce economic concepts applied in Integrated Water Resources Management (IWRM)

•To explore different ways of achieving performance in the water sector through application of economic instruments

Learning objectives

•They are also expected to understand how to recover the full cost in water and sanitation services provision as well as in watershed management to ensure efficiency

They shall finally grasp key water pricing instruments and marketing strategies

• At the end of this lesson, participants shall be able to explain the difference between water as a social /public good and water as an economic good; public water management and private water provision related services

• They need to be keen with basic concepts of water services provision: consumer and producer behaviours; demand and supply curves; water market equilibrium (value and price)

THE NATURE OF WATER IN THE NATURE OF WATER IN ECONOMICSECONOMICS

A SOCIAL, PUBLIC AND ECONOMIC GOODA SOCIAL, PUBLIC AND ECONOMIC GOOD

The Nature of Water in EconomicsQuestion

What do you this about water in each of these pictures?

Question

What do you this about water in each of these pictures?

Please! give me a cup

Go to stream ... There is plenty of it.

I’d better go to the fountain … A rice field

A dam

The Nature of Water in Economics

•Water as a res communes is a fruitage of the nature and a product of ancient civilizations for sustaining life.

•Water as an industrial output is a scarce resource and can be a normal as well as a luxury good

•Water as a raw material is used as a dissolving agent

Question

What do EAU PURE, H2O, the Nile and Ganges waters, the cities of Amsterdam and Rotterdam… mean to you?

Question

What do EAU PURE, H2O, the Nile and Ganges waters, the cities of Amsterdam and Rotterdam… mean to you?

•Water as an necessity commodity for health and environment is an inferior good

•Water as express demand and supply is a local, national, regional and international market essential for poverty alleviation and development.

Environmental Scarcity of Water

Total

percentage

Oceans 96.969 96.969Glaciers

+ Snow2.1 2.1

Rivers + Lakes

0.52 0.4 0.92

Biosphere

0.01 0.01

Atmosphere

0.001 0.001

Total percent

97.489 2.1 0.41 0.001 100

WATER

% Salty water

% locked up freshwater

% Available freshwater

% water vapour

Three categories of water stress that would be exacerbated by climate change: (i) Too little (I (ii) Too much (iii) Too dirty (Zbigniew W. Kundzewicz 2007)

Question

Do you recall the three categories of water stress?

Question

Do you recall the three categories of water stress?

1. High water demand for irrigation and food production, hydropower generation and industrial uses due to population and economic growth

2. High variability of the available water resource due to the impact of pollution, environmental degradation and climate change

3. Lack of adequate infrastructure and technologies to, maintain and conserve water

4. Increasing risk of failure of socio-economic activities in the course of climate change

5. Insufficient funds available for cleaning and channeling water for domestic and industrial consumption as well as sanitation purpose.

6. Insufficient technical and technological competence from water users to ensure efficiency

7. Lack of water use efficiency metrics (thresholds)

8. Lack of coordination of water abstraction among private users, especially in rural areas

1. High water demand for irrigation and food production, hydropower generation and industrial uses due to population and economic growth

2. High variability of the available water resource due to the impact of pollution, environmental degradation and climate change

3. Lack of adequate infrastructure and technologies to, maintain and conserve water

4. Increasing risk of failure of socio-economic activities in the course of climate change

5. Insufficient funds available for cleaning and channeling water for domestic and industrial consumption as well as sanitation purpose.

6. Insufficient technical and technological competence from water users to ensure efficiency

7. Lack of water use efficiency metrics (thresholds)

8. Lack of coordination of water abstraction among private users, especially in rural areas

Environmental Scarcity... Cont‘dQuestion

Do you recall the three categories of environmental water scarcity (stress) ?

Question

Do you recall the three categories of environmental water scarcity (stress) ?

Rivalry and Exclusion in Water useLOW HIGH HIGH

Private aesthetic Recreational uses(Club goods)

Drinking,Cooking,Sanitation

FishingHydroelectric IndustrialTransportation

Public aesthetic Crop IrrigationRecreational uses Livestock

Ecological Base FlowAvoidance or control of water-related risks Waste Assimilation Protected areas

RIVALRY

Water Value in Use / Human benefits

E

X

C

L

U

S

I

O

N

MEDIUM

HIGH

MEDIUM

LOW

Environmental services

Box 3.1: Definitions of rivalry and exclusion

Rivalry: A good or service is said to be rival in consumption, if one person’s use thereof in some sense precludes or prevents uses thereof by other individuals or businesses. It refers to the nature of the consumption process. Food, for example, is a typical rival good, as consuming one unit of bread implies that one fewer unit of bread is available for the rest of potential consumers. Light from the sun (to some extent) has low or no rivalry, as consumption by one does not necessarily reduce availability for others.

Exclusion: refers to the possibility of excluding persons who are not entitled from using the good or service. A good is excludable if there is some mechanism (physical or institutional) that restricts potential users from consuming it at some time or place. Property rights are institutional devices to restrict or exclude potential consumers (or users) from goods or resources, which are generally supported by some physical mechanism to restrict access by third parties (fences, access codes, etc.). Land is generally an excludable resource, whereas “air” (not necessarily clean air) is a resource with very low, or no, excludability. (Source: Young, 1996)

Box 3.1: Definitions of rivalry and exclusion

Rivalry: A good or service is said to be rival in consumption, if one person’s use thereof in some sense precludes or prevents uses thereof by other individuals or businesses. It refers to the nature of the consumption process. Food, for example, is a typical rival good, as consuming one unit of bread implies that one fewer unit of bread is available for the rest of potential consumers. Light from the sun (to some extent) has low or no rivalry, as consumption by one does not necessarily reduce availability for others.

Exclusion: refers to the possibility of excluding persons who are not entitled from using the good or service. A good is excludable if there is some mechanism (physical or institutional) that restricts potential users from consuming it at some time or place. Property rights are institutional devices to restrict or exclude potential consumers (or users) from goods or resources, which are generally supported by some physical mechanism to restrict access by third parties (fences, access codes, etc.). Land is generally an excludable resource, whereas “air” (not necessarily clean air) is a resource with very low, or no, excludability. (Source: Young, 1996)

Question

Is the practice of rationning an exclusion or a rivalry?

Question

Is the practice of rationning an exclusion or a rivalry?

“Water has an economic value in all its competing uses and should be recognised as an economic good as well as a social good” (Dublin Conference, 1992).Ignoring the full value of water results in the failure of IWRM

If misperceptions about the value of water persist the maximum benefits from water resources cannot be derived.Valorizing water resources does not mean backsetting the fundamental human right of water access to all, but enabling access to potable water and sanitation to all at an affordable price

Dublin Principle 4Question

Why do you remember why water price is a catalyser to its efficient use?

Question

Why do you remember why water price is a catalyser to its efficient use?

Why To Be Treated as a Social Good?

In many countries, water is a public and social good due to the facts that:• Its unrivalled utilisation preserves life and promotes culture and development (i.e. It is vital commodity) •It is particularly important to view water allocation as a means of meeting social goals of equity, poverty alleviation and safeguarding health where there is no competition in its use (i.e. its consumption by some does not reduce the potential consumption of others) as well as exclusion (i.e. it is difficult or very expensive to exclude a potential water user to benefit from the resource use)• water is finally a social good for the purpose of environmental security and protection

Why To Be Taken as an Economic Good?

Water as environmental scarce resource deserves to be a necessity economic good; It becomes necessary when extending supply is no longer a feasible option.

In IWRM, the economic value of alternative water uses helps in guiding decision makers to prioritise it as a prior investment option

Being considered as economic good is imperative for logical decision making on water allocation between competing sectoral alternative uses

As an input and output of any production process, it has a Value-Added and can be considered a normal as well as a luxury good

Why…an Economic Good, Cont’d In countries where there is plenty of water resources, water is less likely to be treated as an economic good since the need to ration water usage is not so urgent.

Yet, in IWRM encourages stakeholders to consider the economic value of alternative water uses so as to guide decision makers to prioritise water resource development as a priority in investments

QuestionIn the real world, in a situation of water scarcity, should water be provided to a steel-manufacturing plant because the manufacturer has the ability to pay more for water than thousands of poor people who have no access to safe water? Can you find any similar examples from the ground level in your country? How was such a situation solved?

Necessary commodities such as water have ever had lower prices compared to prices of luxury commodities such as diamond

Yet, it is not “necessity” or “luxury” that determines the price in the market but demand and supply

To answer this question, we must go behind the market demand curve.

The Paradox of Water & Diamond Value

Question

So, what’s the problem? Water has high demand than diamond , and its price shall be higher than that of diamond! Does it not seem odd to you? Your opinion, please!

Question

So, what’s the problem? Water has high demand than diamond , and its price shall be higher than that of diamond! Does it not seem odd to you? Your opinion, please!

PRIVATE WATER PROVISION PRIVATE WATER PROVISION SERVICESSERVICES

Demand Curve

The utility obtained from consuming one unit more or one unit less of the total basket is the consumer’s “marginal utility”

The motivation of each demander to purchase such an item is based on its “marginal utility”

The satisfaction someone receives from consuming commodities is called his/ her “utility”

Question

Why is the demand curve descendant while the utility curve is ascendant?

Question

Why is the demand curve descendant while the utility curve is ascendant?

Consumers express their needs to the market in terms of “ demand”

This demand is an aggregate of all households’ desired purchases at each possible price

Producers express their prices according to their marginal variable costs, which obey to the law of

diminishing returns and diminishing marginal product of the capital

The law of diminishing returns states that as one type of production input is added, with all other types of input remaining the same, at some point production will increase at a diminishing rate

This is mainly explained by the variations of the short-run marginal cost (MC) curve, which at first decline and then go up at some point, and will intersect the average total cost and average variable cost curves at their minimum points.

Supply CurveQuestion

Why is it that the supply curve is ascendant while the marginal product of capital is likely to be descendant?

Question

Why is it that the supply curve is ascendant while the marginal product of capital is likely to be descendant?

Water Pricing NegociationsOne (1) Supplier

Some few providers

Many Suppliers

One (1) water user

Duopoly/ Duopsony

Oligopsony Monopsony

Some few users

Oligopoly Oligopoly/ Oligopsony

Oligopsony

Many water users

Monopoly Oligopoly Pure and Perfect

Competition

Pure and Perfect Competition

Monopoly Monopsony

Question

What is the difference?

Question

What is the difference?

Case: Monopsony of Water Service (Labour)

Question

At this point , what do economic instruments of water mean to the private water developer?

Question

At this point , what do economic instruments of water mean to the private water developer?

What Economic Instruments EntailRational rules (« economic

principles ») and incentives that influence the behaviour of both consumers and producers to allocate optimally their resources for demand and supply

.

Expression of the demand in a competitive market

Need of a Scarce Ressource

Rational choice

Market Negociations(Demand-Supply Game)

Market Equilibrium Price

Payment & Product Delivery

Rational Use/ Consumption

Question

Is there a need for economic instruments in managing water resources in Kenya?

Question

Is there a need for economic instruments in managing water resources in Kenya?

PUBLIC WATER MANAGEMENT PUBLIC WATER MANAGEMENT SERVICESSERVICES

Public services are designed to be State monopolies by the rule of the law

They can only appreciate their satisfaction level through improvement of their welfare and environment.

Public administration subjects pay taxes and other administrative charges without oftenly not knowing their actual utility

They are designed to satisfy the needs of a whole decentralized administrative entities; but not of a specified individual person or community

Question

Why are stakeholders in your watershed unable to measure their consumption of public service?

Question

Why are stakeholders in your watershed unable to measure their consumption of public service?

Nature of Public Water Management

• Actions intended to solve grievances and market failures created by high external costs from its environment to restore the efficiency of private water projects. E.g. Inflation, Forex, natural disasters, etc.

• Major tools used encompass: (a) rule making; (b) legal empowerment of private parties; (c) structuring of private incentives by permitting fees, charges, tariffs, taxes, subsidies, and penalties; (d) provision of public utilities (e.g. delivery of watershed infrastructure and services)

• Regulations for a competitive water market economy, where fairness, transparency, accountability and oversight by public administrations are enhanced

• Policies that create a conducive environment for provision of water services and distribution of natural resources to enhance accessibility and equity

Question

What the difference between the instruments in (c) ?

Question

What the difference between the instruments in (c) ?

Economic Instruments for Public Water Management

The Government also intervenes in the water market to fix or adjust the price to the benefit of both water users and providers.

Economic Instruments…, Cont’d

Besides “rational use of water” and “the user pays”/ “the polluter pays” principles, the government also takes into account economic principle of “cost recovery” to determine water use and effluent discharge charges and fees.

It is not usually left to the market, especially when poor people cannot bear the load of inflated prices

MAINSTREAMING SUSTAINABLE MAINSTREAMING SUSTAINABLE COST RECOVERYCOST RECOVERY

Why Sustainable Cost Recovery?

Potable water provision being often supplied directly or regulated by the State, the price formation will not be the result of supply–demand market interactions to an automatic cost recovery. Thus the need for efficient methods of water services provision that mainstream full cost recovery.

Private water users and providers seldom interact competitive markets to form an equilibrium price for the firms to recover their production costs

This type of competitive market is seldom feasible for the operation of water service providers, owing to the fact that water is a public and a social good

Even where competitive markets can be organised (e.g. potable water), water development projects tend to follow the monopolistic behaviour that features public water management services, and public water provision utilities, which operate large water treatment plants

Full Water Cost Recovery

•Water Use Efficiency (WUE) is mainly assessed by the relation between the total output (Y) and the total cost (TC):

Question

Do you recall the expression of agricultural water use efficiency?

Question

Do you recall the expression of agricultural water use efficiency?

TC

YWUE

Mainstreaming sustainable cost recovery in IWRM requires: that: (i) Service providers should aim for revenues sufficient to cover recurrent costs, and should develop sustainable long-term cost recovery policies; (ii) should Water users’ associations as a group cover service provision revenues from charges

• Water providers need to act rationally by: (i) purchasing skilfully inputs and materials at a low cost (ii) Using efficiently these inputs and materials in production to avoid wastage or loss, with respect to the production process thresholds(iii) Employing a production-mix that yields high utilities and outputs, and maximizes the total benefit.

Under assumption of water resource fluctuation, water providers shall periodically re-evaluate their demands to meet the economic efficiency of their production (water for trade).

In a Higher Economic Conjuncture (HEC) or Above Normal Rainfall Regime (ANOR), the marginal water cost ratio is significantly below the profitability rate; an “Economic Order Quantity” (EOQ) can be achieved.

THERE ARE THREE POSSIBLE SCENARIOS:

In a Normal Economic Conjuncture (NEC) or Normal Rainfall Regime (NOR), the marginal water cost ratio being slightly below/ above or equal to the profitability rate, a Limit Average Cost (LAC) is the threshold

In a Lower Economic Conjuncture (LEC) or Below Normal Rainfall Regime (BNOR), the marginal water cost ratio is significantly above the profitability rate, and thus a “Minimum Efficient Scale” (MES) shall be observed.

Question

What do these 3 scenarios entail?

Question

What do these 3 scenarios entail?

Full Water Cost Recovery, Cont’d

Optimization of WUE, Cont’d• To achieve the EOQ under the ANOR scenario, the total water cost (TC) shall not exceed the cost of transaction (CT) with a Cost of Saving (CS): TCAN = CT + CS (Luwesi, 2010)

• To achieve the LAC under the NOR scenario, the total water cost (TC) shall not exceed the cost of transaction (CT) with an opportunity cost (OC): TCNO = CT + CS (Luwesi, 2010)

• To achieve the MES under the BNOR scenario, the Total water Cost (TC) shall not exceed the cost of transaction (CT) with a Shortage Cost (SC), that is an opportunity cost (OC) and a loss of profitability due to water shortage (LP): TCBN = CT + CSWhere CS = OC + LP (Luwesi, 2010)

Full Water Cost Recovery, Cont’d

Cost of Water Transaction

Box 3.8: Demand functions from water utilities sales data

“A frequently observable transaction concerning water is that occurring when a publicly owned or regulated water authority supplies water to numerous individual water users. The conditions for a free market are not met, because the buyer is faced with a take-it or leave-it price schedule from a single monopoly supplier. But because the buyer can usually take all the quantity desired at that price schedule, inferences on willingness to pay and demand can be derived if a sufficient number of observations on transactions are available, and the transactions exhibit variation in real price.

“Household water demand, as with all water demand, tends to be very site-specific, influenced by a range of natural and socioeconomic factors. The demand relationship is represented graphically by the familiar demand curve, or algebraically as:

Qw = Qw(Pw,Pa,P;Y;Z)

where Qw refers to the individual’s level of consumption of water in a specified time period; Pw refers to the price of water; Pa denotes the price of an alternative water source; P refers to an average price index representing all other goods and services; Y is the consumer’s income, and Z is a vector representing other factors, such as climate and consumer preferences.”

Source: Young (1996)

Box 3.8: Demand functions from water utilities sales data

“A frequently observable transaction concerning water is that occurring when a publicly owned or regulated water authority supplies water to numerous individual water users. The conditions for a free market are not met, because the buyer is faced with a take-it or leave-it price schedule from a single monopoly supplier. But because the buyer can usually take all the quantity desired at that price schedule, inferences on willingness to pay and demand can be derived if a sufficient number of observations on transactions are available, and the transactions exhibit variation in real price.

“Household water demand, as with all water demand, tends to be very site-specific, influenced by a range of natural and socioeconomic factors. The demand relationship is represented graphically by the familiar demand curve, or algebraically as:

Qw = Qw(Pw,Pa,P;Y;Z)

where Qw refers to the individual’s level of consumption of water in a specified time period; Pw refers to the price of water; Pa denotes the price of an alternative water source; P refers to an average price index representing all other goods and services; Y is the consumer’s income, and Z is a vector representing other factors, such as climate and consumer preferences.”

Source: Young (1996)

An opportunity cost occurs due to failure of not adopting the best available alternative of using water or owing to unfavourable combination of circumstances. E.g. inflation, Forex, distance, etc.

Opportunity Cost of Water

It is expressed as the “regret benefit” or the loss of projected profitability from the best next sale through the formula:

OC = r * Y (Luwesi, 2010) Where r = the water service provider opportunity loss rate

Though not usually included in the full cost recovery for fairness,

it has proven to be can be useful to guide water authorities in looking for better water allocations and prioritizing future investments in the water sector

Algebraically it is expressed as: CS = r*Y+l*∏ (Luwesi, 2010) Where ∏ is the water provider profit, computed in absolute values l is the loss of profitability under ANOR calculated as “r-1”

Cost of Saving WaterThe cost of saving water is a cost incurred by accumulation of exceeding water storage, notably for opportunity lost and amortization of operating and structural costs

This generally occurs especially in irrigation during the above normal rainfall regime, when farmers receive more than enough rainfall to water their crops

Any demand of water shortly after that period will be charged with a cost of water saving

Water Shortage Cost

Any demand of water during the period of drought is actually over-charged due to the shortage cost and the high demand expressed by the market.

Water shortage cost is incurred by accumulation of acute insufficient storages, eventually due to deficient rainfall regimes.

It is generally computed as an opportunity cost and the loss of actual profitability due to shortage: SC = r*Y+l*∏ (Luwesi, 2010)Where, ∏ is the water provider profit, computed in absolute values l is the loss of profitability under BNOR calculated as “1-r”

The shortage cost is generally referred to as an “arbitrary fee” and results in rationing when the government intervenes.

Rainfall Regime Total Cost of Water Optimum

(First Order Conditions)

Cost of water demand External Costs

Normal (NOR) Cost of

Transaction Opportunity

Cost

Limit Average Cost (LAC)

Above Normal (ANOR) Cost of

Transaction Opportunity

Cost Cost of Saving

Economic Order Quantity (EOQ)

)2/(2q qQ=anr

Below Normal (BNOR) Cost of

Transaction Opportunity

Cost Shortage

Cost

Minimum Efficient Scale (MES)

Source: Luwesi (2010)

Q=nor /2q

q)(=anr 2Q/2q

2=bnr

The Optimal Water Provison

Water Market Negociations

LOW

W

I

L

L

I

N

G

N

E

S

S

T

O

P

A

Y

BARGAINING POWER/ INFLUENCE ON PEOPLE

WATER PRICE = DUMPING FEE PRICE = COST OF TRANSACTION

LOW HIGH

WATER PRICE = COST OF TRANSACTION + OPPORTUNITY COST

WATER PRICE = COST OF TRANSACTION + SHORTAGE COST

(OR ARBITRARY FEE)HIGH

NOTE:NOTE:In the water sector, fees are generally leveled based on In the water sector, fees are generally leveled based on political motivations and the service provider’s bargaining political motivations and the service provider’s bargaining power may not prevail to allow income meet expenditure. power may not prevail to allow income meet expenditure. Thus, an agreement with the government is needed to Thus, an agreement with the government is needed to subsidize the cost difference for the development of subsidize the cost difference for the development of water services or the watershed. Nevertheless, the Water water services or the watershed. Nevertheless, the Water Services Regulatory Board shall take into consideration all Services Regulatory Board shall take into consideration all the running costs of the service provider prior to setting the running costs of the service provider prior to setting tariffs. This will enable the latter to justify its price.tariffs. This will enable the latter to justify its price.

NOTE:NOTE:In the water sector, fees are generally leveled based on In the water sector, fees are generally leveled based on political motivations and the service provider’s bargaining political motivations and the service provider’s bargaining power may not prevail to allow income meet expenditure. power may not prevail to allow income meet expenditure. Thus, an agreement with the government is needed to Thus, an agreement with the government is needed to subsidize the cost difference for the development of subsidize the cost difference for the development of water services or the watershed. Nevertheless, the Water water services or the watershed. Nevertheless, the Water Services Regulatory Board shall take into consideration all Services Regulatory Board shall take into consideration all the running costs of the service provider prior to setting the running costs of the service provider prior to setting tariffs. This will enable the latter to justify its price.tariffs. This will enable the latter to justify its price.

Awareness on suspicions and criticisms about their services shall clearly be stated through mass-media advertising, physical availability and personal interaction between civil servants and taxpayers, and other promotional efforts.

The Role of Marketing Management in IWRM Modern frameworks on water services supply and management promote

a fair price to tackle the unpredictable environmental trends

Any suspicion and criticism on the service accessibility and performance, charges and fees, taxes and tariffs shall be systematically examined prior to any communication or information to the public

In most rural communities, water users still believe that they are orphans of public governance and development since they have no easy access to clean water and safe sanitation.

A SWOT Analysis reveals customers' needs and requirements, fears and expectations as well as the firm’s position in the market for a Marketing-Mix that will enable water users’ behaviour change and accrue revenues

QuestionWhat is: (i) SWOT; (ii) marketing-mix What role do they play in your business?

QuestionWhat is: (i) SWOT; (ii) marketing-mix What role do they play in your business?

The SWOT Matrix

EXOGENOUS Factors

ENDOGENOUS Factors

OPPORTUNITIES (O)

O1 O2 O3 O4 O5 O6 O7

O8 O9 O10 O11 O12

THREATS (T)

T1 T2 T3 T4 T5 T6 T7 T8

T9 T10 T11 T12 T13 T14 T15

STRENGTHS (S)

S1 S2 S3 S4 S5 S6

S7 S8 S9 S10 S11

Maximize your water supply management strengths (S8, S9, S10,

S11) to exploit opportunities from environment to manage well water supply infrastructures for high levels of access of potable water (O3 O4 O5 O8 O10 O11)

Maximize organisational competences (S2 S3 S4 S6 S7) to adapt the water supply management to environmental threats (T10 T11 T12 T13 T15).

WEAKNESSES (W)

W1 W2 W3 W4 W5 W6

W7 W8 W9 W10

Minimize existing weaknesses (W1, W2, W3, W4, W5 , W6 W7) to

seize environmental opportunities (O1, O2, O3, O4, O5)

Foster strategic actions for effective management of water supply infrastructures so as to minimize weaknesses and mitigate threats carried by different environments of naturals resources.

The Marketing-Mix: McCarthy “4Ps”

PRODUCT PRODUCT BRAND PACKAGELINE SRVICES

PUBLIC BASICRELATIONS PRICE

SPECIAL PRICEPROMO ALTER-TIONS ATIONS

PERSONAL CREDIT

PROMO- TERMS

TIONS

TRANSPORTADVERTISE- AND

MENTS HANDLINGTERMS

CHANNEL STORAGE INVENTORY SHIPPINGNET- FACI- CON- FACI-

WORK LITIES TROL LITIES

P

=

P

R

O

M

O

T

I

O

N

(

COMMUNICATION

)

P

=

P

R

I

C

E

(

TERMS OF SALES

)

P = PLACE (DISTRIBUTION Component)

P = PRODUCT (GOODS & SERVICES QUALITY)

SEGMENTING

TARGETING

POSITIONING

Source: Adapted after Baker (1992)

QuestionWhat are the so-called “4 Ps” ?

QuestionWhat are the so-called “4 Ps” ?

Message format

Goal Scheduling Media & Vehicle Mix Target

1. Dogmatic

Conversion or Increase of adopters

Concentrated

Direct ad., TV, Radio Magazines, Newspaper Internet, SMS Forums,

campaigns

Customers

2. Emotional Attraction Continuous TV, Radio Internet,

SMS Forums, campaigns

Gatekeepers

3. Reason-giving User image Maintenance

Intermittent

Direct ad., TV, Radio Magazines,

Newspaper, Internet, SMS, Forums,

campaigns

opinion leaders & others

4. Factual/ pragmatic

Reinforcement of loyalty or Attraction

of new users Intermittent

In situ demo , Internet, SMS, Forums,

campaigns Any client

Source: Adapted after Baker (1992)

Communication and Promotion Strategy

QuestionAt what stage of business development can you convey messages 1, 2, 3 and 4?

QuestionAt what stage of business development can you convey messages 1, 2, 3 and 4?

Total Water Services Provision Management (TWSQM) Water services providers shall always provide advices free of charge to their customers. These shall include their responsibility vis-à-vis the state and private water services

These activities are likely to increase the strength of the bond between the Government, private water services providers and the water resource users’ associations.

These advices and support services should result from a “Total water service quality management” that addresses the following concerns: (i) What do our customers want? (ii) What service do we provide? (iii) To what extent customers satisfied? (iv) How can we improve what we offer? (v) What will this cost us and what benefits can we anticipate?

QuestionHow often do you conduct TWSQM in your firm? And why?

QuestionHow often do you conduct TWSQM in your firm? And why?

Advocating for a Societal Marketing Culture in IWRM

Public services are required to develop a Taxpayer-driven administrative culture to enable behaviour change toward implementation of IWRM

Service delivery should be based on actual needs expressed by the public during participatory watershed planning, monitoring and evaluation Strategic organisational change shall follow what people want and are determined to make it happen rather than creating barriers and obstacles to the people's will

Effective marketing and communication shall avail easy, quick and accurate information on IWRM policies, procedures and practices

Shall civil servants listen and implement what people express during opinion polls, this will help stakeholders keep a good image of public watershed services in their mind.

All “stake-holders” in the watershed have competitive powers; the government can only get better at doing things that matter the majority

QuestionHow do you use SWOT Analysis and 4Ps in public watershed management?

QuestionHow do you use SWOT Analysis and 4Ps in public watershed management?

Innovative Market schemes for WRMKenya’s ecological and human systems are highly vulnerable to the negative impacts of climate change The rehabilitation of a watershed ecosystem is likely to improve water quality and provide sufficient water for a variety of uses and to different users. The implementation of novel schemes such as Payment for Watershed Services (PWS), Green Water Credits (GWC), Clean Development Mechanisms (CDM), and Reducing Emissions from Deforestation and Degradation (REDD) have recently been developed based on the premise that there are cause-effect relationships between land use and watershed functions

These schemes actually results in benefits that would not otherwise have been provided without payment of local stakeholders’ environmental services made in cash or kind.

These schemes enable water services providers and development partners to pay for watershed services that are provided by local stakeholders, in a well-defined and voluntary transaction, to secure the sustainability of their services, if and only if the stakeholders continue to supply these services (conditionality)

QuestionWhat innovative scheme do you know and have applied?

QuestionWhat innovative scheme do you know and have applied?

THANK YOU ALL! THANK YOU ALL! FOR PAYING FOR PAYING ATTENTIONATTENTION

ASANTENI ASANTENI SANA!SANA!