Module 1, Session 2

Designing a Rural Finance Product:Overview of the Product Development

Process

MICRO AGRI PRODUCT

Session ObjectivesBy the end of the session, the trainees are expected to:

• Define market research

• Identify and list the steps involved in market research

• Conduct market research

What is Market Research?

“It is the systematic design, collection, analysis and reporting of data and findings relevant to a specific marketing situation facing the company.”

-Philip Kotler

What is Market Research

• Define the objective or research problem

• Design – determine how you will go about the market research, and what tools to use.

• Collect and process

• Analyze

• Report

Steps Involved

Why do Market Research?

• PRODUCT-DRIVEN – produce something and try to sell it without much regard to market demand.

• MARKET-DRIVEN –identify and meet clients’ needs on a profitable basis.

Product vs. Market-Driven Approaches

Market Research Process

Product Development Product Test

Product Review and Modification

Secondary data

FGD Area mapping

Satisfaction FGDs

Exit survey

Survey

Product Development: Market Research

FrameworkMarket Size and Risks

Research Problems:

Is there sufficient market for the bank’s microfinance operation?

What are the risks?

If GO, proceed to Market Survey

If NO GO, look for other sites

and repeat the same process

Gathering

Assessment

Market

by Competitors

Secondary Data

Competitor

Market Size

Size of Market Served

Size of “Unserved” Market

Decision Point:

Market Risks

Go/No Go

Product Development: Market Research

FrameworkProduct Development and Business Planning

Research Problems: What product (s) would be suitable? What is the potential market share of the bank?

Market Survey

Area Mapping

Assessment of Demand & Supply Characteristics

Estimation of Bank’s Target Market Share

Product Concept Design

Financial Projections

Secondary Data

“What do clients want?”Focus Group Discussions (FGD)

OUTPUTS

PRODUCT DEVELOPMENT CYCLE

Market Research

Product Rollout

Product Design Product Test

Product Review

Guidelines in Conducting Market Research for Micro-Agri Product

Use Hand-out and Survey Tables

and Questionnaire

Secondary Data(Handout 1, MR Tables 1 - 2)

Data Element Source

• Population NSO• # of households NSO• # of Farming Households Mun.Agri. Office

Barangay Office

• # of HH w/ at least 1 ME MPDO/ Brgy. Office

activity• Major sources of income MPDO, interviews

Data on Competition(Handout 1, MR Tables 3 – 4)

Information

• Loans: Types, terms & conditions Table 3- Formal and informal sources

• Savings: Types, terms Table 4- Rural banks- Commercial/thrift banks- Credit unions- Paluwagan

Data on Target Market(Survey Questionnaire)

Profile of Target Market

1. Agricultural Activities2. Non-Agricultural Activities (Micro-

enterprises)3. Credit Practices4. Savings Habits

Thank you

LINKS

MARKET RESEARCH

What is Market Research?

• Market research is a scientific technique of identifying the possible opportunities available to microfinance institutions (MFIs), and the risks involved.

• There are different tools the bank can use to identify the nature of the demand for microfinance services (microenterprise & micro agri), the size of the market, competition, and the demographics of the target clients.

PRODUCT DESIGN

Product Design involves:• Designing and developing a product

• Developing a product manual (containing loan policies and procedures)

• Determining any adjustment to MIS requirements (MIS gap analysis)

• Preparing financial projections

PRODUCT TEST

Product Test involves:

Hiring and Training of Account Officers

Orientation of Bank Officers and Staff

Product Testing

Product Monitoring

PRODUCT REVIEW

Product Review is conducted 6 months after the Product Pilot Test or Bank has already 100 clients. The review is conducted to assess whether:

– Projected # of borrowers, portfolio quality and revenues are met? If not, why?

– Staff and clients like or dislike the product? If it’s the latter, what are the ways by which the product can be improved?

PRODUCT ROLLOUT

Product Launching involves: Orientation of officers and staff of expansion

branches

Market survey of areas of expansion the branches

MIS enhancement/installation

Hiring and Training of Account Officers

Lending