market-based approach

5 things I learnt from talking toilets in rural Bihar

jitha 6 Comments

Toilet_Final

Over the past year, sanitation has hogged headlines in India like nobody’s business. And rightly so – it’s everybody’s business. Two out of three households in rural India don’t have a toilet. And many of those who do don’t use them. Against this intimidating backdrop, over two years ago, my colleagues and I at Monitor / Monitor Inclusive Markets set out to develop a market-based solution to the sanitation problem in rural Bihar. And over these two years of selling the idea of a toilet to rural consumers and working closely with people selling toilets there, I’ve learned a lot regarding consumers and how to sell to them.

 

With the Swachh Bharat Abhiyan (the new avatar of the Nirmal Bharat Abhiyan, itself a new avatar of the Total Sanitation Campaign), the government wants to make India open defecation free by 2019. In less than five years, all 1.2 billion of India’s population will use a toilet. Today, we’re at least 600 million shy of that. In fact, as people in the sanitation sector often say:

[Tweet “India has a majority of the world’s open defecators, and a majority of Indians open-defecate.”]

According to the 2011 Census of India, Bihar is a laggard in toilet coverage – only 18% of rural households have toilets. In 2012, we set out to develop a market-based business model to resolve this – could we harness market forces to drive adoption of toilets? After talking to 1000+ villagers in Bihar, meeting 150 value chain players and visiting sanitation interventions in many other areas, we developed business models that are now being implemented in parts of Bihar (see post-script for more details on the models). It has been fascinating to put together a business model and see it take shape on the ground. Along the way, I have also learned a lot about how consumers think, and how to sell to them.

1. Your value proposition needs to be concrete, tangible and real to your consumers

Customers_Final

Your product’s value proposition has to make sense to the user, which means three things:

  1. Concrete: Your product’s benefits can’t be nebulous – they need to be specific. For example, just telling consumers that using a toilet is good for health is not convincing – you need to explain step-by-step how open defecation means you’re eating your own shit.
  2. Tangible: Sanitation NGOs today are doing a good job of making the health benefit concrete. But it’s not tangible. Even after you explain the benefits, people still need to be able to see it – just logic won’t do. And health benefits are particularly hard to demonstrate because (a) they start accruing only after a majority of the village stops open defecation, and (b) even after safe disposal of faeces, people still fall ill due to unsafe drinking water and other factors. And if something so axiomatic is hard to prove statistically, try convincing your village consumer anecdotally! Instead, what we found from speaking to people is that they want toilets for safety (vs. traveling early in the day / late at night for open defecation), convenience (especially when ill / for the elderly), and privacy – all far more tangible.
  3. Real: While the benefit may be tangible, it’s important that there be a need for it – else you’re just a very good solution in search of a problem that may not exist. A hallowed business model in rural sanitation is that of a one-stop shop, and one of its main value propositions is convenience. Of course it is more convenient, but do consumers value that? What we saw was that farmers or agricultural workers finish their day’s work in the morning and have a lot of free time later – they’d rather use this time to buy all the materials, than pay someone a commission to do it for them.
[Tweet “Your value proposition needs to be concrete, tangible and, most importantly, real.”]

 

2. Even if affordability is an issue, people don’t want a ‘cheap’ solution

With toilets, as with cars, people want quality, albeit at a low price. ‘Cheap’ is not a value proposition, ‘value for money’ is. And when offered a cheap solution, people who otherwise wanted toilets did not buy. “If we have to get a toilet, it has to be a quality one”. Convincing people that your low-cost solution is also high-quality is critical.

[Tweet “‘Cheap’ is not a value proposition, ‘value for money’ is.”]

 

3. To convert customers, ability and triggers are as important as motivation

According to BJ Fogg’s Behavioral model, behavior change is driven by motivation, ability and triggers. This holds even for sanitation behavior – if you want a consumer to construct a toilet, driving ability and triggering purchase are at least as important as motivating purchase. One single step to increase ability to purchase – financing – has disproportionate impact on toilet adoption. Similarly, from a usage point of view, a household that constructs a toilet will not use it if procuring water is inconvenient – ability or ease of use is critical.

Financing also triggers purchase among households that can already afford toilets. One such household took a loan of Rs. 5,000 to construct a large toilet, with an attached bathroom, a shower, and a large septic tank – and they use it religiously (toilets vs. temples, anyone?). This cost at least Rs. 60,000 to construct – they could have, of course, constructed a toilet without financing, but that was the trigger.

 

4. Skin in the game is important, to drive usage

Over the last 10-15 years, toilets have been constructed with government subsidy for rural households across the country. But usage is markedly lower when households contribute neither materials or money, according to last year’s SQUAT report on sanitation usage – none or only a few household members use it. Financial participation keeps people’s skin in the game and drives long-term usage. Maybe it’s a good thing most people don’t understand sunk cost.

 

5. Choice is helpful. But don’t make a user choose between a Nano and a Mercedes

Giving customers choices (but not too many) is definitely more helpful than one-size-fits-all. This is not a new insight. But when you offer three toilets at prices of Rs. 10,000, Rs. 15,000 and Rs. 25,000 respectively, consumers buy none of them – this was an unexpected response during our business model pilots (easily explained in retrospect of course – hindsight is 20:20). The reason is that over 90% of people in most villages in Bihar cannot afford a Rs. 25K toilet – it’s the rural toilet equivalent of a Mercedes. And when you offer a middle-class prospective buyer a Nano and a Mercedes in the same choice, you cause decision paralysis. He may have come in considering a Nano, but he changes his mind on seeing the Mercedes – “Maybe I can save up over the next few years to get a Merc.” He may come back 5 years later or he may not, but he’s no longer a prospective customer today.

[Tweet “Choice is helpful. But don’t make a user choose between a Nano and a Mercedes.”]

Choices need to be from the same cohort – Nano vs. Alto vs. Indica is an easier decision to make, and even easier is a choice between A/C and non-A/C variants of a Nano.

 

As I’ve been setting up my own business, I’ve remembered each of these learnings multiple times –  initially as rationalizations for observed user behavior, but later more and more to predict user reactions. But my most important learning of all – reinforced by every piece of user feedback I receive on my app and every user grievance I address every day – is that users are who they are, and they want what they want. Take that as a given, and try to deliver that value through your product. If you’re trying to tell a consumer what to want, well, good luck to you!

PS. You can read more about our Bihar work and the business models we developed here.

PPS. I must thank Monitor (now Monitor Deloitte) and Monitor Inclusive Markets (now FSG India) for the opportunity to work in sanitation for so long. Of course, this post doesn’t necessarily represent the views of these two companies, and the people I worked with.

How to destroy poaching and save our wildlife – a market-based approach

jitha 6 Comments

Two weeks ago, newspapers proclaimed that India may be winning the battle with tiger poachers. But, clichéd as it may sound, the war is far from over. Governments today have taken a ‘supply-side approach’ – making it more difficult to poach. But what if we took a demand-side approach? Could we do something to depress the market, i.e., the demand itself, for poached animal products?

Why would anyone want to kill this?

(copyright Bharat Ram)

On Jan 20, newspapers in India (and indeed in many other parts of the world) proclaimed that India’s tiger population is now over 2000. It has risen 30% over the last count – the conservation efforts seem to be working (apart from the fact that the previous count didn’t cover some tiger populations). This is undoubtedly great news for lovers of tigers and the wild, but the war has far from taken a decisive turn. We’re still on course for the Sixth Great Extinction, and the first man-made one.

  1. There are only FIVE northern white rhinos left in the world. Barring a miracle, they will be extinct soon
  2. Wildlife of all kinds – sharks (for shark fin soup), elephants, tigers, leopards, etc. – are still being poached all over the world in great numbers
  3. Of course, elephants, rhinos, and tigers are the poster-boys of anti-poaching drives. But even the unassuming and reserved pangolin is being hunted to extinction.

Now, governments have been making efforts to curb poaching. And the efforts have started bearing results. But these efforts have primarily been ‘supply-side’ – making poaching more difficult. Whether it’s better monitoring, tighter security or reducing overlap of forest land with human settlements, these measures constrain the ability of poachers to hunt. This is a battle of attrition (yes, one more war metaphor) – we cannot relax our efforts. The day the funding runs out, poachers WILL return. This is not a sustainable victory – for how long, and for how many animals, can you keep funding the effort?

[Tweet “Can we bolster supply-side protection tactics with market-side efforts that dampen poaching demand?”]

Market-side approaches offer two key benefits: (a) they give you leverage over the upstream value chain – a change here would reverberate all the way up to the first step of supply; and (b) they are more sustainable – reducing the motivation of poachers means that tomorrow, even if supply-side monitoring relaxes slightly, poachers may not return. Many industries have been created with such market-side approaches – think toothpastes (the tingling sensation makes you want to brush, but it has no role in cleaning your teeth), diamond rings (making wives and fiancées demand diamonds, rather than just selling them), etc. The question is, can you use a similar approach to destroy a market?

Now, I’m no conservation expert, and poaching is a far more complex issue than it seems at first sight, but it would be interesting to try and answer this question, purely as a thought experiment. The first approach that comes to mind is to:

 

Change the market dynamics

With a purely supply-side approach, we gradually make poaching harder. This raises end-prices for smuggled animal products, in turn raising poachers’ motivations to grind on. Could we change the structure of the market in such a way as to reduce the attraction towards poached animal products?

  1. Flood the market with fakes:

Bringing in fake animal products could make the market a lemon market, like second-hand cars – prices will naturally depress if the buyer is unsure whether what he’s buying is the real thing. This would, over time, reduce the reward for poaching, which, in tandem with tighter supply-side monitoring, could inhibit poaching. Let the bad drive out the good from the market.

This approach would be sustainable in itself – as long as even a tiny sliver of a market exists for poached products, entrepreneurs selling such fake products would have an incentive to remain in the market.

However, one important precondition is that supply constraints – monitoring and enforcement – need to make poaching hard and expensive. As long as poaching is relatively easy, this may only increase the demand and price of true animal parts. This is already happening.

  1. Bring in farmed substitutes:

Another alternative is to try and bring in farmed substitutes. E.g., try and convince consumers who believe in the medicinal properties of tiger genitals (did you know the name Viagra comes from the Sanskrit vyaaghra for tiger?) that bulls’ private parts are just as good. I once went to a restaurant called Carnivore in Nairobi, where they served ‘ox balls’. Unsure whether I heard it right, I asked the waiter again. And he replied, in a dubious Caribbean accent – “Yes maan, they is ox balls … they increase your productivity”.

Of course, this is much easier said than done. It would need sustained marketing to cement this belief. Could we instead take a more direct approach?

  1. Grow animals in captivity for such uses:

A natural extension of introducing farmed substitutes like cattle is to farm the endangered animals themselves. Abhorrent though the idea seems at first, it is only slightly different from farming cattle for food. The only reason this is not done traditionally for, say, tigers, is that rearing carnivores is very expensive – one would need to spend at least ten times as much to feed them vis-a-vis cattle (they’ll have to be fed the cattle).

But simultaneously with a supply side crackdown making poaching more expensive, this could become a viable option, in turn reducing the demand for poaching even more.

There are tiger farms in China already, doing exactly this. However, hunting animals in the wild is still cheaper than rearing them, so this has paradoxically just increased prices for wild animal parts (the poaching equivalent of free-range chicken).

Thus, each of these methods can have some unintended consequences unless all efforts work perfectly and in tandem with the supply-side. And as anyone who’s worked on a project of the smallest duration knows, nothing works perfectly, especially if heavy coordination is involved. And in any case, in a world where a single rhino horn can sell at tens of thousands of dollars, poaching will always seem worth the risk. In other words, one would need to:

 

Strike directly at demand for animal products

Strong social campaigns to reduce the demand for animal products and make it socially unacceptable would be harder but would have more lasting impact. Appealing to people’s altruistic tendencies is evidently working for sharks – total import of shark fins to China reduced by 70% in 2012.

However, this appeal to people’s better senses would not work in every instance. It would be far more effective to directly attack the reasons why buy animal products:

  1. Prestige: Make showcasing / displaying animal trophies a signal of bad taste. This worked for minks in the US – sustained social activism reduced domestic demand for mink coats. Of course, the market is now skyrocketing, due to huge demand from China. Some things don’t change, I guess.
  2. Medical benefits: Debunk myths regarding the curative properties of endangered animal parts. This will not be easy, especially in countries where people use rhino horns to even treat hangovers! But it would strike at the heart of the reason why poaching is such a profitable enterprise.

While this approach definitely seems to have potential, one can also attack the most upstream motivation – that of the poachers themselves.

 

Offer alternatives to poachers

Poachers today in many places have few alternative occupations. And even when they do, poaching remains far more lucrative. When supply side constraints are making poaching harder and more risky (shoot at sight?), poachers may be more amenable to steady jobs with decent pay. Creating jobs that locals aspire to or offering vocational training and incentives for migration may be a sustainable approach to reduce poachers’ motivations.

Another approach would be to educate communities on biodiversity being a form of wealth, and helping them take pride in their natural heritage. Educating communities thus and involving them in protection can be quite fruitful – this, among other interventions, helped Nepal achieve zero rhino deaths in 2011.

 

Will these work? Hard to say – obviously this is just a thought experiment in market-based approaches, without much understanding of the dynamics at play. But what is clear is that we need an alternative approach that attacks demand in some form, localized to the geography and the specific animal; in addition to the current policing model.

Coopting Anna Kournikova’s immortal wisdom, may only eggs be poached!

Would love your feedback on the ramifications of the above actions – comment here / email me at [email protected] / tweet at @jithamithra. Please also subscribe for updates from me roughly once a week, on consumers and markets, startups, books, etc.