from choice, a world of possibilities market development approaches making 2nd tier markets work...
TRANSCRIPT
From choice, a world of possibilities
Market Development Approaches Making 2nd Tier Markets Work
Bonn, October 2006
Definition of a Market Development Approach ( MDA) Efficiency – interventions will seek to move
people away up from heavily subsidized products to wholly commercial and non-subsidized products, if conditions are right.
Effectiveness – interventions should result in overall market growth and increase in use
Equity – the success of interventions results in better targeting of subsidised products
Interventions are only worthwhile, if theultimate result/money saved benefits the poorest
Market Development Approaches Working Group
The Market Development Approach Working Group focuses onexpanding markets to serve the needs of lower andmoderate income clients who may be able to pay for their RHproducts.
The goal of the group is: to improve access to and choice of RH supplies for lower and moderate income consumers through public, private, and commercial sectors
Members of the MDA group, jointly and independently have carried out a number of important interrelated activities in pursuit of this goal, which have included:
1. A Market Development Approaches scoping exercise – HLSP2. Extensive review of generic manufacturers –
UNFPA/ICON/Concept/PPD3. Development of country criteria for MDAs – PSI4. Total Market/2nd Tier Initiative, research and feasibility - ICON
Total Market/2nd Tier Initiative
The ICON Total Market/2nd Tier Initiative draws upon a concept paper developed in 2004:
1. Adopting a total market approach to country initiatives
2. Developing a low-price 2nd commercial market segment for contraceptives in appropriate countries, where possible simultaneously supplying the public sector with lower cost product for free distribution –serving two segments
3. Based upon developing partnerships with emerging generic manufacturers in developing countries, for supply to both market segments
4. Contains core and limited MDA elements
Market Development Approaches Outcomes
Limited MDAe.g. public sector or NGO
introducingcharging for some segments or
reducing cost of existingsupply
Core MDAe.g. introducing new commercial project to
attract users frompublic sector
Not MDAe.g. public sector expanding
scope of free distributionprogram
Limited MDAe.g. introducing new commercial player to
add to method mix
ApproachesNon-Commercial Commercial
Improved RH efficiency
Improved RH effectiveness
•Initiatives to grow supply or demand in the commercial market (I.e. full cost recovery, use of commercial channels)
•Initiatives to grow supply or demand in the non-commercial market (I.e. little or no cost-recovery)
•Lowering cost/ increasing sustainability of a RH outcome
•Achieving a better RH outcome
2nd tierPublic sector
Research and Feasibility phase
The results from the 2005 research and feasibility phase indicate:
1. In five out of seven countries, the Total Market/2nd Tier approach is feasible and could add value to national contraceptive security efforts
2. In four of the markets, the possibility exists for developing the 2nd tier and supplying the public sector with interest from government
3. It is established beyond reasonable doubt that high quality developing country generic manufacturers who could supply product do exist, albeit currently in limited numbers
Total Market/2nd Tier Initiative as an MDA
Within any given MDA approach, it is possible to develop multiple variables to suit specific market conditions and country circumstances
There are many separate components within the Total Market/2nd Tier approach, which can be effectively used to add value to contraceptive supply related programmes
as concluded by the HSLP scoping study The HLSP scoping study concluded that, the
Total Market/2nd Tier approach is one example of an MDA, among many others
Progress – from theory to practice
The broad philosophy – using a total market approach, is being adopted by organisations/programs
Market segments assessments routinely carried out during the planning stage for new initiatives
Developing a low price 2nd commercial tier is specifically embedded into proposed new programs
Social marketing programs are increasingly sourcing products from emerging generic suppliers
Challenges
The ICON model and research activities has focused primarily on lower middle income countries, does it apply to low income countries?
To what extent can we identify appropriate country markets in advance?
What criteria do we apply in determining the correct approach and elements from the MDA mix?
High CPR and/or favorable High CPR and/or favorable competitive environmentcompetitive environment
Little ATP and/or WTP and/or Little ATP and/or WTP and/or unfavorable business unfavorable business environmentenvironment
EG: NigeriaEG: Nigeria
Characterizing country environment
Market Market
PotentialPotential
Sustainability Sustainability
PotentialPotential
LowLow
HighHigh
LowLow HighHigh
Low CPR and/or competitive Low CPR and/or competitive environment unfavorableenvironment unfavorable
No ATP and/or WTP and/or No ATP and/or WTP and/or unfavorable business unfavorable business environmentenvironment
EG: Benin, CongoEG: Benin, Congo
High CPR and/or favorable High CPR and/or favorable competitive environmentcompetitive environment
High ability to pay and/or High ability to pay and/or WTP and/or favorable WTP and/or favorable business environmentbusiness environment
EG: Morocco, VenezuelaEG: Morocco, Venezuela
Low CPR and/or competitive Low CPR and/or competitive environment unfavorableenvironment unfavorable
High ability to pay and/or High ability to pay and/or WTP and/or favorable WTP and/or favorable business environmentbusiness environment
EG: UkraineEG: Ukraine
High CPR and/or favorable High CPR and/or favorable competitive environmentcompetitive environment
Little ATP and/or WTP and/or Little ATP and/or WTP and/or unfavorable business unfavorable business environmentenvironment
EG: NigeriaEG: Nigeria
Yemen environment?Market Market
PotentialPotential
Sustainability Sustainability
PotentialPotential
LowLow
HighHigh
LowLow HighHigh
Low CPR and/or competitive Low CPR and/or competitive environment unfavorableenvironment unfavorable
No ATP and/or WTP and/or No ATP and/or WTP and/or unfavorable business unfavorable business environmentenvironment
EG: Benin, CongoEG: Benin, Congo
High CPR and/or favorable High CPR and/or favorable competitive environmentcompetitive environment
High ability to pay and/or High ability to pay and/or WTP? and/or favorable WTP? and/or favorable business environment?business environment?
EG: Morocco, VenezuelaEG: Morocco, Venezuela
Low CPR and/or competitive Low CPR and/or competitive environment unfavorableenvironment unfavorable
High ability to pay and/or High ability to pay and/or WTP and/or favorable WTP and/or favorable business environmentbusiness environment
EG: UkraineEG: Ukraine
Creating 2nd tier segments -assisted or free market interventions?
1. Free market intervention - generic manufacturers as commercial entities, will invest in capability/quality
improvements and product marketing as necessary in pursuit of their corporate objectives, providing competitive price
advantages for the public sector and establishing their niche in commercial market segments based upon market forces?
2. Assisted intervention – generic manufacturers should be assisted to market with the support of the Reproductive
Health community on a partnership basis, determined through mutually acceptable goals and objectives, which
commercially satisfy manufacturers and provide a demonstrable commodity security benefit for Reproductive
Health?
Key issues
How to avoid inadvertently supporting the development of a new monopoly for contraceptive supplies, able to eventually dictate prices using their business position/s
Ensuring the availability of low cost commercial products and creating an enabling environment for the development of 2nd tier market segments
Ensuring manufacturers are able to generate decent profits through guaranteed ongoing business and steady production volumes
Creating 2nd tier segments - free market interventions
1. Will generic manufacturers invest in significant product promotion and education to make a
difference to markets?2. Will they price branded products within the reach
of 2nd tier target clients and look to maximize volumes or profit?
3. If successful, and competition is relatively limited what can we expect five years from now in terms
of benefits to contraceptive security?
Total market segmentation – free market intervention
1st Tier
2nd Tier
Free Distribution Tier
High-price commercial sector products
Affordable commercial products created through the PPP
Donor subsidized branded products – Social Marketing
Government/donor products, supplied free of charge or at minimum cost recovery
LIMITED
POSITIVES
The case for assisted market interventions (short term subsidy)
1. Real alternative for moving clients up the value chain2. The long term cost of public provision can be reduced at
the national level3. Demonstrate to manufacturers that volume sales in the 2nd
tier + sales to public sector can generate acceptable profits4. Proper segmentation does not prohibit manufacturers from
competing in high end/1st tier 5. At subsidy end, cost savings can outweigh investment and
are sustainable6. Effective, mutually beneficial public private partnerships
7. Agreed pricing and combined purchasing by public sector donors/agencies
Lower price public sector Lower price public sector availabilityavailability
More competitive high end More competitive high end marketmarket
Improved social marketing Improved social marketing cost recoverycost recovery
Funding environment
AssistedAssisted
MinMin
MaxMax
Free marketFree market
Minimum product choice & Minimum product choice & limited saleslimited sales
Reluctance to brand changeReluctance to brand change
Uncoordinated market Uncoordinated market developmentdevelopment
Tangible increase in no of Tangible increase in no of clients servedclients served
Established 2Established 2ndnd commercial commercial tier/reduced demand on tier/reduced demand on public financespublic finances
Lower price public sector Lower price public sector availabilityavailabilitySignificant product choiceSignificant product choice
High brand awareness acrossHigh brand awareness across
Improved client trust for Improved client trust for generic contraceptivesgeneric contraceptives
Commercial product in reach Commercial product in reach of target clientsof target clients
Ben
efi
t
Next Steps
To identify sufficient funding and undertake a limited number pilot of pilot Total Market programs, with comprehensive monitoring and evaluation mechanisms in place
To continue with and enhance the Market Scoping exercise carried out by PSI on behalf of the MDA Group
To develop an appropriate impact driven monitoring and evaluation mechanism, including comparative analysis to relevant similar interventions [1]
To appropriately assist in the development of additional generic manufacturers of supplies for sustainable contraceptive supply security to ensure competition?
[1] To compare pilot programs with concurrent similar initiatives, working with OECD manufacturers, and market performance of generic suppliers “own label” efforts
Assessing 2nd tier interventions1 2 3 4
TYPEDedicated 2nd tier
Dedicated 2nd tier
Dedicated 2nd tier
Free market
EXECUTORSocial Enterprise
NGOs Pharma OECD,Social Enterprise,NGO
Pharma Generic
SCOPE5 countries 10 countries 1 country 2 countries
SUPPLY SOURCE
Generic supplyGeneric supply OECD supply Generic supply
FUNDINGAssisted Unassisted Assisted Unassisted
Action points