strategies for the base of the pyramid

8/4/2019 Strategies for the Base Of the Pyramid

http://slidepdf.com/reader/full/strategies-for-the-base-of-the-pyramid 1/5

NOVEMBER 2008 EFFECTIVE EXECUTIVE74

The Total Market Approach (TMA) has evolved out of morethan 30 years of experience conducting social marketing

programs in developing countries among people nowdescribed as the BOP market. The approach has much incommon with the current BOP market analysis activities, andthe market-based approach to poverty reduction.

private sector-driven, market-basedapproach needs to focus as much onpeople as producers as well as con-

sumers, and on solutions that canmake markets more efficient, competi-tive, and inclusive. The analysis theseauthors present documents the over-whelming importance of the food sec-tor at the BOP (accounting for $2.895bn), followed by energy, housing,transportation and then health at$4158 bn. They also note that nearlyhalf of all BOP household moneyspent on health goes to pharmaceuti-cal products. In this article, we focuson the health sector and in particular,

what has been learned in the applica-tion of marketing principles, in theform of social marketing, to servingthe health needs of people at the BOP.

Meadley, Pollard and Wheeler(2003) trace the origins of social mar-keting to efforts of the Government of India to expand the availability anduse of family planning methods, andparticularly condoms, in the 1960s.Their success led to the adoption of social marketing family planning pro-grams throughout the developingworld. When the HIV epidemic

emerged, social marketing was seen asa ready-made tool for the distributionboth of behavior change messages (ab-stinence, fidelity, and safe sex) andbarrier methods to prevent diseasetransmission.

Independently, the US Agency forInternational Development, in the1970s, began searching for ways tocreate demand for a wide range of ma-ternal and child health products andservices through the use of commer-cial marketing practices (c.f., Manoff,

Lessons from Social Marketing

Strategies for

the

Baseof the Pyramid

The four billion people at thebase of the economic pyramid(BOP)óall those with incomes

below $3,000 in local purchasingpowerólive in relative poverty. Yet,together they have substantial pur-

chasing power: the BOP constitutes a$5 tn global consumer market. It tendsto be concentrated in rural areas, espe-cially in Asia. As a consequence, thesemarkets are usually very poorly

served, dominated by an informaleconomy, and, as a result, relativelyinefficient and uncompetitive.Hammond et al make the argumentthat the BOP should be the focus of businesses seeking to expand into

new markets. As opposed to more tra-ditional aid programs in developingcountries that are mediated or di-rected by governments and non-gov-ernmental organizations (NGOs), a




1985). In the US, and subsequently inEurope and Australia, social market-ing was introduced into public health

practice (Lefebvre & Flora, 1988)where it has been used extensively topromote health behaviors such as theprevention and cessation of tobaccouse, fruit and vegetable consumptionand prevention of illicit drug useamong many others.

Applying commercial marketingpractices to public health services de-veloped after these two developments.Its primary use has been to developfranchise procedures to increase theawareness of family planning; im-prove the availability and accessibility

of contraceptive supplies and ser-vices; and promote cost recovery fromretailers and fee-paying clientsthrough the application of commercialstrategies to the promotion of contra-ceptive methods (Ruster, Yamamoto &Rogo, 2003) (see Exhibit). Since theseinitial efforts, social franchising, as itis often known by in international de-velopment, has expanded to includemany different types of services andproducts.

In the prototype of family plan-

ning services, social franchising sup-ports long-term contraceptive meth-ods and broader reproductive healthcare and requires the participation of trained health providers. Networks of

providers, or franchisees, are serviceproducers in the clinic franchise sys-tem; they create standardized ser-

vices under a franchise name. The re-sult is a network of service providersoffering a uniform set of services atpredefined costs and quality of care(Stephenson et al, 2004). In theiranalysis of successful strategies forthe BOP, Hammond et al (2007) findsupport for localizing value creationthrough franchising ñ agent strategies

that involve building local ecosys-tems of vendors or suppliers ñ or bytreating the community as the cus-tomer. Successful models exist in nu-merous business sectors of the BOPmarket including health care (fran-chise and agent-based direct market-ing), information and communica-tion technologies (local phone entre-

preneurs and resellers), food (agent-based distribution systems), water(community-based treatment sys-tems), and energy (mini-hydro-powersystems).

Franchisers in the health sector, of-ten supported by international donorsand NGOs, establish protocols; pro-

vide training for health workers; cer-tify those who qualify; monitor theperformance of franchisees; and pro-vide bulk procurement and brandmarketing.

Similarly, Stephenson and col-leagues (2004) found that reproduc-tive health service providers may bemotivated to join a franchise network

for their perceived operating advan-tages of increasing their revenue; pro-viding staff training opportunities; ex-panding their service capabilities; andimproving the ability to reach moreand poorer people with their services.Their data also support the notion thatfranchises can result in increased cli-ent volumes and range of family plan-

ning brands, and perhaps achievegreater efficiencies as demonstratedby the lower staff: client rations infranchise clinics in comparison withprivate ones.

Several health franchising opera-tions (Greenstar in Pakistan, KirsunuMedical Education Trust in Kenya,and Well_family Midwife Clinic Net-work in the Philippines) have demon-strated that they can rapidly expandbasic health services to poor people,capture economies of scale, and re-duce the information asymmetries

that often adversely affect the qualityof care. Whether these programs canbe financially sustained in the longerterm is still an open question. WhatStephenson et al suggest, and one thatis actively pursued by a number of NGOs, is to expand service offerings toinclude the treatment of malaria, tu-berculosis, provision of point-of-usewater products, and other essentialproducts and medicines. As these sys-tems expand both their product andservice portfolio, and their number of

Successful models exist in numerous business sectors of theBOP market including health care information and communication

technologies, food (agent-based distribution systems),water (community-based treatment systems), and energy

(mini-hydro-power systems)

Dr R Craig Lefebvre is an architect and designer of public health

and social change programs. He is an Adjunct Professor of

Prevention and Community Health at The George Washington

University School of Public Health and Health Services. Most

recently he was the Chief Technical Officer at Population Services

International (PSI) where he led PSI’s technical teams in capacity

building, HIV, malaria, child survival and clean water programs,

reproductive health, and social marketing as well as its researchand metrics functions.

An internationally recognized expert in social marketing and health communication, Craig’s work has

addressed a multitude of health risks, aimed at various diverse audiences, and often featuring local

implementation strategies. He is the author of over 60 peer reviewed articles and chapters in the areas

of community health promotion, social marketing and behavioral medicine and has made over 175

presentations at professional meetings and invited venues.

Craig has held faculty appointments at the University of Virginia, Brown University, Johns Hopkins

University and the University of South Florida. He was elected a member of the American Academy of

Health Behavior in 2003. He received his PhD in Clinical Psychology from Nor th Texas State University

and completed post-doctoral fellowships in Behavioral Medicine at the University of Virginia and the

University of Pittsburgh.

Strategies for the Base of the Pyramid




Exhibit

The Benefits and Limitations of Franchising Health Services Identified by Ruster, Yamamoto & Rogo (2003)

Benefits Limitations

Quality control Asymmetry of information between services providers

and consumers

Bulk supply (economies of scale) Difficulty and cost of monitoring provider performance

of supplies and services

Opportunities to develop professional Ability to standardize protocols for care provision

networks and referral streams

Large scale marketing and promotion Training and education of owners – requires technical

(rather than micro-marketing in only and business skills to be successful

local markets)

Built-in incentives for providers/owners

The TMA model embraces the policy objectives of the public health or

sector approach that markets for socially beneficial goods and services

do exist in some form in all settings, and the realities that poor and

vulnerable populations (BOP) must be protected from market failures

outlets, developing cost-effective re-porting and monitoring systems andimplementing and supply chain man-agement systems, perhaps through theuse of wireless technologies, becomesa critical need.

The Total Market ApproachShortcomings of the classic socialmarketing approach of providingsubsidized products and servicesómost notably the possible impact onprivate sector development and the

lack of clear exit strategies (indepen-dence from donor subsidies)óhaveled to the exploration of new modelsthat bridge, and even coalesce, thegaps among the public, NGO and pri-vate sectors. These newer approachesexamine how the public provision of free goods and services, the classicsocial marketing or NGO model of modest costs for commodities passedon the users (with no cost recoveryfor distribution and promotion), andthe private sector model that recoversall associated costs plus a profit mar-

gin can be expanded to meet thelarger public policy goals of sustain-able universal access (ability to gener-ate and operate on local fundingstreams independently of interna-tional donors). One of these models,the Total Market Approach (TMA),has a number of offerings and in-sights that will benefit companieslooking to engage the BOP.

The TMA to the delivery of com-modities and services within low-in-come countries sets out to establish

equitable, efficient, sustainable and af-fordable markets for health commodi-ties and services across all popula-tions. Its objectives are to ensure sub-sidies are targeted to those who aremost in need of them, that the verypoor are equitably served, and thatsustainable commercial markets arecreated. It establishes clearly definedmarket segmentation strategies withinwhich each player in the supply chain

works to enhance demand and effec-tively target supply across the totalmarketóthe public sector, the NGO/ community sector and the commer-cial sector, and across all donors (Pol-lard, 2006).

A paper by Hanson et el (2001)captured many of the tensions and dy-namics in seeking to expand the mar-ket for contraceptives that will alsoface other social entrepreneurs and or-ganizations working at the BOP. Basedon their analysis, we understand thatuniversal and sustained access to con-traceptives and other health productsis usually a national and internationalpolicy priority. However, there is a de-bate among proponents of the so-called ëpublic health approachí and

those who favor ëmarket-based solu-tionsí as to whether market-based ap-proaches will have negative impacts

on achieving the goals of universalityand long-term sustainability (i.e., theywill favor those people with the re-sources to pay for goods and services).Conversely, there is also the concernthat by continuing the provision of es-sential goods and services onlythrough the public sector, the privatesector is crowded outóresulting in anunsustainable marketplace as well.

The TMA model embraces thepolicy objectives of the public healthor sector approach that markets for so-cially beneficial goods and services do

exist in some form in all settings, andthe realities that poor and vulnerablepopulations (BOP) must be protectedfrom market failures. Hanson et al in-clude five likely sources of market fail-ures which are:1. Externalities where added social

benefits may favor some goods andservices over others ñ for instance,barrier methods for family plan-ning also protect against the trans-

mission of sexually transmitteddiseases (STIs) and HIV, whichmay lead in some contexts wherethere is high prevalence of STIsand HIV/AIDS to favor the use of these methods over pills and

injectables.2. Poverty whereby the willingness

and ability to pay any of the costsassociated with products and ser-vices may not exist.

3. The merit goods should be avail-able to all people. Here, there maybe national targets for use of fam-ily planning products and ser-vices that are believed to be opti-mal for health and are indepen-dent of the externalities and levelof poverty.





TMA approach aims to influence health and health-related behav-

iors equitably and efficiently by financing and coordinating interven-

tions that may work across one or more sources of supply

4. The availability of informationabout the need and benefits forproducts and services will also be

a determinant of whether there issufficient demand for them. Publicsector approaches view this as anespecially important issue for indi-vidual decision-making, while pri-vate sector usually views this asconfined to the promotion of theirown brands.

5. Gender equity recognizes thatthere are household disparities inaccess to information and re-sources and constraints on deci-sion making that disproportion-ately affect women. Public goods

and services also need to addressthese issues and their impact onthe nature of the total marketónotjust the extant one.In practice, TMA is an approach

that aims to influence health andhealth-related behaviors equitablyand efficiently by financing and coor-dinating interventions that may workacross one or more sources of supply(public, NGO or private sector). Italso uses communications/regula-tory/financing or other strategies that

can influence behavior directly or in-directly via changes in product andservice delivery and/or opportunitiesto engage in healthier behaviors. It isa process that includes populationand service delivery monitoring; per-formance evaluation of public, non-governmental and commercial actorsin delivering products and services todifferent market segments; and ef-forts to shift consumers with suffi-cient purchasing power away fromwholly or partially subsidized supplysources using segmentation strategies

based on their willingness to pay.Collecting and analyzing these dataare one of the many challenges formaking TMA work.

Chapman, Rabary andRharinjatovo (2008) have shown howa method of segmentation and perfor-mance monitoring based on TMAprinciples can be successfully ap-plied to health marketing activities.Their segmentations scheme is basedon measures of vulnerability, currentconsumption, equity-based mea-

sures, source of supply preference,physical access to goods and servicesand psychosocial determinants of

consumption, including willingnessto pay.Based on these segmentation cri-

teria, the authors identify five TMAperformance measures. The firstmeasure, effectiveness, is defined asan increase in healthier behaviors orin the consumption of health prod-ucts and services as a result of socialmarketing or other interventions.They note that when a specific be-havior, product or service is the focusof the program ñ and other alterna-tives also exist for people to chose

from (e.g., other brands of condoms

or different types of service provid-ers), then ëhaloí and ësubstitutioní ef-fects should also be measured. ëHalo

effectsí would be seen, for example,when it is not just the sales of the pro-moted condom that show an increase,but the category of condom sales alsorecord an increase; this would meanthat other brands also have a rise insales. Substitution effects are espe-cially important in the health arenawhere the adoption of new behaviorsor products might lead to an increasein risky behaviors, such as the use of condoms leading to more risky sexualencounters based on the belief thatone is now completely safe from con-

tracting STDs and HIV.The second performance mea-

sure, cost-effectiveness, can be esti-mated from resources dedicated tothe project from all sources dividedby the actual or estimated impact of the project on behavior change,health status or disease morbidityand mortality. Cost-effectiveness canbe compared across different projectsthat employ similar methodologies todevelop their estimates. There is alsoa movement to employ Disability Ad-

justed Life Years (or DALYs) as a com-mon way to assess program impactsand from there develop standards for

what constitutes a minimum thresh-old for ëcost-effectivenessí for inter-ventions aimed at specific diseases(see Eberwine-Villagr n, 2007 for ex-amples).

Equity is defined as the absence of a difference in health behaviors,product availability and use, or ser-vice accessibility and use across so-cioeconomic strata. For working onBOP, equity is a major policy interestand one that may be incumbent onbusinesses to demonstrate or at leastbe cognizant of as they develop and

expand their offerings. Other social

inequities that can be of interest, de-pending on the nature of the problembeing addressed and those who may

suffer disproportionately from it orlack access to solutions, include gen-der, age or education.

The fourth measure, efficiency, isdefined in terms of trends in marketshare between commercial and subsi-dized sources of supply. An increasein commercial market share as the re-sult of a social marketing or other in-terventions is evidence that the com-mercial market is being ìcrowded in.îAlternatively, a decrease means thecommercial sector is being ìcrowdedout.î How this balance of market

supply is achieved, and what theright mix of markets is for particularsocial and health issues, is a matter of local context and judgment.

The fifth performance measure,access, is defined in terms of apopulationís proximity to the meritgood or service and the presence of psychosocial determinants of con-sumption and purchase. Here the useof geographic mapping systems havemuch to offer in spatially plotting outchanges in access as a result of pro-





Reference # 03M-2008-11-11-01

The active entry of the private sector into providing goods and

services to the poor needs to be supported, but their work needs to

be assessed and evaluated in the larger context of the marketplace

©2008, Dr R Craig Lefebvre. All Rights

Reserved.

gram initiatives, though user percep-tions of whether physical locationtranslates to easier and more conve-

nient access should also be consid-ered.The authors used TMA to analyze

the hormone contraceptive market inMadagascar where social marketingof injectable and oral contraceptivesbegan in 1998 by Population ServicesInternational (PSI), a non-govern-mental organization. By 2004, twoPSI branded products were available(through pharmacies, drug stores,private medical offices, workplacesand community-based non-govern-mental organizations). Public sector

injectable and oral contraceptiveswere distributed through governmentfacilities at a cost of approximately$0.66 per year. Commercially avail-able oral contraceptives were avail-able primarily through pharmacies atabout $30.00 for a one yearís supply.

Two cross-sectional surveys wereconducted in October/November of 2004 and 2006 among a representa-tion of the national population of women aged between 15 and 49years to assess the TMA performance

measures (how well the hormonalcontraceptive marketplace met thecriteria of effectiveness, cost-effec-tiveness, equity, efficiency and ac-cess). From 2004 to 2006, overall con-traceptive use increased by 5% tonearly 24%, with almost all thegrowth stemming from increases ininjectable and oral contraceptive use(as opposed to other methods avail-able in the market). The increase ininjectable contraceptive use was sig-nificant over the two years, but theincrease in the socially marketed in-

jectable brand (PSI) contraceptivewas not. Total oral contraceptive usedid not increase significantly; the useof the socially marketed oral contra-ceptive did.

There was increased inequity inrates of use across socioeconomicstrata, yet inequity in use amongwomen using social marketingbrands decreased significantly overthe two years. Market shares for so-cial marketing (approximately 45%)and public sector brands (10%) did

not change over the period, butnearly half of respondents could notrecall the contraceptive brand being

used. Perceived availability of contra-ceptives did not increase over the pe-riod, but perceptions of social sup-port, favorable attitudes towards con-traceptive use, improved beliefsabout contraceptive use and risk per-ceptions that lead to an increase per-ceived need to use contraception did.Willingness to pay for injectable andoral contraceptives declined signifi-cantly, by more than 50%. Exposureto family planning campaigns re-sulted in significant increases in ratesof contraceptive use and was greater

among wealthier quintiles thanpoorer ones.

The authors conclude that signifi-cant increases in hormonal contra-

ceptive use from 2004 to 2006 and ex-posure to social marketing familyplanning campaigns and activitiesevidence that the overall social mar-keting intervention has been effec-tive. The results also demonstrate thepresence of a halo effect; that is, thesocial marketing campaigns in-creased the use of all hormonal con-traceptives significantly, but therewas no specific impact on the use of social marketing products. More im-portantly, from a public health per-spective, the social marketing inter-

ventions significantly reduced ineq-uities in the profile of its own users.

ConclusionThe TMA approach has evolved outof more than 30 years of experienceconducting social marketing pro-grams in developing countriesamong people now described as theBOP market. The approach hasmuch in common with the currentBOP market analysis activities, andthe market-based approach to pov-

erty reduction. Both the TMA andBOP approaches reinforce an ap-proach to poverty reduction that is

framed in terms of enabling opportu-nity and less in terms of aid. A suc-cessful market-based approachwould bring significant new privatesector resources into play, allowingdevelopment assistance to be moretargeted to the segments and sectorsfor which no viable market solutionscan presently be found. As the TMAapproach says, the active entry of the private sector into providinggoods and services to the poor needsto be supported, but their workneeds to be assessed and evaluated

in the larger context of the market-place. This assessment needs to befocused on how the public, NGOand private sectors contribute by

their unique and complimentarystrengths to attain equitable, effi-cient, sustainable and affordablehealth and health care across thepopulation.

In their analysis of the global in-come pyramid and who will profitwhere in the years to come, Reid andBlock (2008) state that technologicalchanges are allowing companies topursue the profitable marketing of goods and services in the BOP. Cor-porate restructuring will play a sig-nificant role as companies adapt to

and profit from these shifts in globalincome and consumption patterns.When this restructuring takes place,companies should look at the les-sons already learnt from social mar-keting and the guidance of the TotalMarket Approach as they weightheir options.


strategies for the base of the pyramid

Documents