Lecture 3b
Developing World Challenges
Marketing and positioning
(continued)
Developing world Challenges in
Guatemala
• Submissions by Sarah, Vicky and Julio
• All will be posted
JULIO ROBERTO GARCIA MORAN
RAFAEL LANDIVAR UNIVERSITY
ISSUES IN BUILDING PRODUCTS FOR THE DEVELOPING WORLD
INFRAESTRUCTURE.
COMUNICATION.
In Guatemala a lot of roads and highways have been destroyed.
Only 5% of all roads are in good state, the rest are either destroyed
or are unpaved. Many remote villages and towns are thus
unconnected by paved roads and this inhibits trade in the
products that they produce. This is a problem that has not been
fixed. In fact, the few roads fixed have been destroyed by the
recent hurricanes.
TRANSPORTATION.
Most of the transportation in Guatemala is by bus, rural people use
buses because they cannot afford to buy a car. Only a few have
cars. For shorter distances, people use motorcycles and bicycles,
for longer distances there is only the bus.
POWER AVAILABILITY.
Many villages and towns of the rural area have electricity,
Now this problem is being addressed although there are
towns and villages that don’t have this important service.
GOVERNMENT INTERFERENCE AND CORRUPTION.
The problem of corruption in Guatemala is sad. Knowing
that many politicians are corrupt its very troublesome. The
police are the biggest source of corruption in Guatemala
but many of the deputies that create and approve laws in
the congress are corrupt too. In Guatemala all of the
infrastructure works are created with political aims and this
they time for the end of a presidential cycle (to please
people and publicize their campaigns) and not with aims to
truly develop the country.
CULTURE.
POVERTY.
Guatemala is a very poor country. Most of the population of
Guatemala are Mayan and live in rural areas. Of this people, most live
in extreme poverty (live with less than 1 buck to the day). This
problem it has always existed and no government has been able to
solve it. There are families of 11 members that live in poverty but
even so, somehow, they find the way to survive.
EDUCATION.
Education is the most important problem in Guatemala and also no
government are solved this problem. For me, the resolution of this
problem is the solution of many other problems in Guatemala in
addition of the development of the country. Most of the population of
Guatemala don’t know how to write and read, the minority go to
school. Of these only a few go on to high school and graduate. Only
2% have the privilege of attending a university.
BIRTH RATE.
The birth rate is growing up while death rate is
decreasing. The population of Guatemala is
therefore increasing- now Guatemala is aprox. 13
million. This problem is actually being addressed
by family planning laws but to date these are not
effective yet.
RELIGION.
Religion can be a problem if it mixes with other
activities that are not compatible. There are many
religions and sects in Guatemala and all these
differing mindsets make inhibit development. This
becomes a problem because we have to find
ways to do development activities consistent with
the ideologies and beliefs of the people.
BUSINESS SUSTAINABILITY
CAPITAL
Many businessman have problems obtaining capital. Most the
business finance their activities (especially small producers)
by means of borrowing, but often lose all at the end because
of bad cash administration. In addition, businesses go
bankrupt because of bad management in general. This is a
very common problem in Guatemala.
ORGANIZATION.
In Guatemala there exists a few kinds of organizations for
small and medium sized businesses. The most common
organizations are the cooperatives and societies. The problem
with these organizations is that there will always be a person
with bad intentions. Consequently, if the business doesn’t
have good internal controls it is susceptible to fraud.
PROFIT.
The biggest problem in organizations is the distribution of profits.
In many cases there will be a person that would like take advantage
of the business. Strict internal controls are required in order to
avoid this problem. Other problem is the lack of planning in the
business. In Guatemala most of the business don’t establish their
cost and they don’t make up budgets. At the end of the season they
realize that they have had a book loss. This lack of planning has
caused many producers in Guatemala to fail.
DISTANCE BETWEEN DEVELOPER AND USERS.
All depends in the kind of business. There are business that are
near the users and they can avoid the trading with intermediaries
and their margins increase. But business like agriculture has the
problem of distance and the producers solve this problem by
trading with intermediaries. The exporters have this same problem
because there are only 2 ports: one on the Atlantic and one on the
Pacific. Other business that have this problem are the producers of
perishable products because they have to invest in refrigerate in
order to preserve this product.
Reasoning by Analogy
• Is there a new idea (not necessarily in your
market) that penetrated a developing country?
• What did they do right? What did they do wrong?
– Interview principal?
• How do you transform someone else’s success
to your market?
• Transformation in time
• Transformation in product
• Transformation in market segment
Creating Effective Marketing
Visions
•
•
•
•
•
•
•
•
Customer Specification
Voice of the Current Customer
Competitive Benchmarking
Tire-kicking
Voice of Lead Users
Empathetic Design
Market intuition
Scenarios of the future
Reactive
Pro-active
Consider scenario
• In order to understand how product is
used, consider scenario
– A vision
– A story
– Describes a future state where the product is
being used by a “real” person
– Captures imagination of stakeholders
Example of hypothesis
• Statement summarizing the benefit of the
product or service to the consumer
• Then by the end of your research, you will
have proven or disproved and changed
your hypothesis.
• Hypothesis examples??
More thoughts on
Why do we do marketing?
• Determines customer
–Is there a customer?
–How important a market?
–How fast is it growing?
–Alternative solutions?
–Segments!
–Is it worth pursuing?
Why we do marketing?
Marketing Specs translation
aka “House of Quality”
Marketing
Specs
1.
2.
3.
4.
5.
Engin’ring
Specs
1.
2.
3.
4.
5.
Mfg
Specs
1.
2.
3.
4.
5.
Why we do marketing
• Drives “Design for Cost (DFC)”
– Allocate Cost amongst different parts of
system.
– Budget
– Over run in one component puts stress on
other components
– Based on market ability to pay?
Why we do marketing
• Determines features
– Drives Market acceptance
– Drives Cost
– Drives Complexity
– Drives Maintenance
– Drives Test and Testability
Use www/Library Data Base
Sources to Determine:
• Major trends in technology, standards,
regulations
• Drivers and barriers to growth- consider rate of
market adoption
• Business model options and key players
(competitors/ partners) at each layer of the
food chain
• Size of segment, major sub-segments/rough
distribution of market revenues/units
• Forecasts or prognostications of rate of
segment growth
• Value chain, ecosystem and customer players
Product
• What is your product? Describe in terms of
benefit to the customer.
• Product packaging (is this relevant?)
– Discuss form-factor, pricing, look, strategy
– Summarize Cost of Goods and high-level Bill
of Materials
– Shipping issues
– Customs issues (of components)
– Instructions and support
Promotion
• Direct marketing
– Overview of strategy, vehicles & timing
– Overview of response targets, goals & budget
• Third-party marketing
– Co-marketing arrangements with other companies
– Agents
• Marketing programs
– Other promotional programs
• Freebies and demos
Pricing
• Pricing
– Summarize specific pricing or pricing
strategies
– Compare to similar products or compare to
doing nothing
– What is my return on investment if I buy your
product
• Strategy
– Summarize strategy relevant to understanding
key pricing issues
Placement (Distribution)
• Distribution strategy (required even at
village level)
• Channels of distribution
– Summarize channels of distribution
• Distribution by channel
– Show plan of what percent share of
distribution will be contributed by each
channel -- a pie chart might be helpful
• Discuss fulfillment issues
Vertical Markets/Segments
• Vertical market opportunities
– Discuss specific market segment
opportunities e.g., sell a uv water purifier
device to a full-service water treatment
service
– Address distribution strategies for those
markets or segments
– Address use of third-party partner role in
distribution to vertical markets
Placement (International)
• International distribution- beyond Guatemala
– Is your product so focused that it has only Guatemala
applications?
– Address international distribution strategies
– Discuss issues specific to international distribution
• International pricing strategy
• Localization issues
– Highlight requirements for local product variations
Success Metrics
•
•
•
•
First year goals
Additional year goals
Measures of success/failure
Requirements for success
Schedule
• 18-month schedule highlights
• Timing
– Isolate timing dependencies critical to
success
Task 1
Task 2
Milestone
Task 3
Task 4
Jan
Feb
Mar
Apr
May
Jun
July
Aug
Sep
Oct
Nov
Dec
Don’t freak out
•
•
•
•
What I have suggested here is necessary for
the Final but not right away.
Iterate assumptions
I need a plan for a plan
Biggest issues
1. Your own inhibitions
2. Schedule engineering
•
•
Yours
Theirs
What follows is an example of
a previous student submission
Mission 1: The 4Ps
1. Product
Our aim is designing an inexpensive handheld corn sheller. Our primary target
market is subsistence farmers in Guatemala who grow and shell their own corn.
The secondary market is small commercial farms, as well as those who wish to
start their own business growing and selling corn. The customers for our
product are the end users.
Currently, shelling equipment at any automation level rarely exists, which
means the competition in this field is low. However, an important constraint
exists, since rural farmers use corn shelling time as social time with family and
friends. Without proper considerations, corn shellers will infringe on this and
be unsuccessful in the targeted market. We will need to design a compact and
portable corn sheller which still allows people to socialize while improving
shelling efficiencies.
Subsistence farmers are used to stripping corn kernels off the cob with their
hands, a low efficiency method. Currently, about one full hour is needed to
shell a bushel (35 L) of corn. Corn harvesting season is from November to
March, during which 2-3 family members spend 4-5 hours per day stripping
corn. A mere doubling of efficiency will reduce the daily working time by 2-2.5
hours. Over a single harvesting season, this amounts to a conservative
estimate of about 600 man-hours saved per family. A hand-held corn sheller
can easily achieve even higher efficiencies and hours saved. The time saved
from this one simple task can be reallocated to specialized tasks, aiding the
development of the family as well as the country as a whole.
Another direction we can take is to develop a larger, centralized automated corn
sheller. This sheller would be located in a village center, where rural farmers
can bring their corn and pay a small fee to use it. This model has already been
adopted by corn grinding machines, and is therefore less likely to be socially
unacceptable. If further research reveals that a handheld corn sheller is
untenable, this alternative plan can be used.
2. Promotion
The best way of promoting the corn sheller is
through personal demonstrations in Guatemalan
villages. For example, during the harvesting
season, we can visit 10 villages over a week,
comparing the corn sheller with hand shelling. It
would be beneficial to give free trials to some
local farmers, in hopes that they would adopt it
and promote our product among their
community. Other possible ways include demos
at farmer’s trade shows and local markets. Most
forms of media advertising, including TV,
Internet, and newspaper, are not practical due to
the low level of existence in rural areas.
3. Place
A distribution partnership may be needed. This
includes local mechanical stores, grocery
markets, and other businesses that farmers visit
frequently to buy needed living products. Direct
marketing is not feasible since people in rural
areas may not have access to internet shopping
or TV shopping.
If we opt for the large-scale corn stripper, then we
will possibly seek co-distribution with the
automated corn mill which already exists in
Guatemalan villages.
4. Pricing
Manufacturing cost: $1.00 – 2.00 USD
Distribution cost (dealer’s mark-up, storage and
transportation): $0.50 – 1.00 USD
Pricing strategy: While alternative sheller machines do
not exist, the purchasing power of farming families is
very low. We aim at small profit in the short term but a
dominating share of the market in the long run. The
relationship between end users’ required quantity vs.
the final unit price needs to be evaluated through the
questionnaires and surveys.
The population of Guatemala is about 14 million, and
the number of households is around 4-5 million. About
1.8 million families actually grow their own corn, as
subsistence or as a commercial product. Average
income varies from about $90 USD per month to less
than $30 USD for poorer farmers.
Mission 2: Questionnaire (target: 25 minutes)
1. How many people are there in your family? _____
How many people work on the field? _____
2. How much corn do you grow each season? _____
How many people work on shelling corn kernels? _____
How much corn does each person shell in an hour? _____
How much time is spent per day shelling corn? _____
3. Does your family shell corn by hand? _____
What are some advantages of hand shelling over other ways of shelling corn?
__________________________________________________________________________________
____________________________________________________________________
What are some disadvantages of hand shelling?
__________________________________________________________________________________
____________________________________________________________________
4. Do you think corn shelling is one of the most time-consuming parts in the corn growing
process? If not, please list some other things that need development.
__________________________________________________________________________________
____________________________________________________________________
5. What is your total family income per month? _____
Would your family be interested in purchasing a hand sheller tool that can at least double the
speed of corn shelling? _____
Would your family be interested in this tool if it is 4 USD? _____
If not, what do you think is a more reasonable price? _____
6. What are some reasons why you would like to have such a tool for your family?
__________________________________________________________________________________
____________________________________________________________________
What are some reasons why you wouldn’t feel like owning such a corn sheller?
__________________________________________________________________________________
____________________________________________________________________
7.
If a large, automated, high-efficiency corn sheller was in your village (like the corn
grinder), would you rather buy a cheap hand tool or use the larger, faster sheller for a fee?
________________________________________________________________________________
______________________________________________________________________
8.
What do you think are the most important qualities and features of a corn sheller
* desirable but unnecessary
**would be nice
***absolutely essential
_____ Cheap
_____ Durable
_____ Safe and easy to operate
_____ Easy to fix
_____ Portable and light
_____ High efficiency
_____ Comfortable
_____ Additional factor, please explain ____________________________________
_____ Additional factor, please explain ____________________________________
9.
If this hand tool is on the market and you are interested in it, what places do you
think this product should be promoted and sold?
________________________________________________________________________________
______________________________________________________________________
10.
If you are interested in participating in a market interview on the subject of corn
shellers, please provide your contact information:
________________________________________________________________________________
____________________________________
Primary Research Targets
Primary research aims at subsistence farmers and small-scale
commercial farmers in Guatemala. It should focused on farmers in
rural area but should also cover potential users in urban areas,
including restaurants and urban families.
Communication means:
Universidad Francisco Marroquin:
Jennyffer Zepeda:
jennyfferzepeda@ufm.edu.gt
Carla Hess:
hess@ufm.edu.gt
Jennyffer and Carla can provide details and guidance on the
project, as well as be a conduit to distribute surveys and collect
market research data.
AmigoLatino
Gabriel Biguria gabriel@amigolatino.com
Gabriel is able to provide contacts with Guatemalans in the LA
area. Through AmigoLatino, he is also able to provide
videoconferencing and communication with farmers in Guatemala.
Erick Solares
erick_solares@dot.ca.gov
Erick is in the process of arranging for a shipment of Guatemalan
dried corn to LA. This is important for the engineering aspects of
the project, to make sure that the sheller will function properly
when used on local corn.
Mission 4: one page script:
Our project is to design an inexpensive device for stripping corn kernels from the cob and
subsequently selling this device in Guatemala. Corn is among the popular crops in Guatemala
and is used as a primary food source. However, at the current stage, shelling corn kernels is
still a very time-consuming and low-efficiency task. One full hour of hard work is needed in
order to shell a bushel (35 L) of corn, not to mention scraped and exhausted hands. Therefore,
a highly efficient hand sheller can benefit the farmers directly by saving a huge fraction (60-80%)
of their time. Local farmers can use the saved time on specialization and development. The
resulting surplus of corn kernels or ground corn can also be sold for profit.
Due to the fact that 75% of Guatemalans are living under poverty line ($1300 USD per year) and
most rural farmers earn less than $30 USD monthly, it makes little sense to make an expensive
tool that local farmers can not afford. Our corn sheller is targeted at a sale price of less than $5
and ideally below $2. It will have a relatively simple design and compact size. It should also be
produced by making use of cheaply available local resources such as aluminum cans, nails, etc.
It will be very easy to operate so that users can learn from a simple demonstration by a
salesperson or another user. It needs to be highly durable so that it can maintain working
condition for many years without frequent fixing.
The market targets, from most to less important, are subsistence farmers, small-scale
commercial farmers, urban households, and large-scale corn farmers. Subsistence farmers and
small scale commercial farmers can make more profit by producing more corn products per unit
time. Households in urban area do not produce corn, but often buy a large amount of corn from
the market to make their meals. A hand sheller will save their time spent on shelling corn, and
is a very small investment for relatively affluent urban households. There is still a lack of highly
automated electric corn shelling machinery in large-scale Guatemala corn farms, due to the
extremely high price (>$10,000 USD), large farms may also be interested in hand shellers for
their employees so that they can increase their efficiency and increase profit. This
segmentation of markets may provide incentive to design corn shellers at different automation
and price levels.
Selling our product through internet or television is highly unlikely in rural area so distribution
partnership is the more feasible avenue. Corn shellers can be conveniently promoted and sold
at local markets that farmers frequent. Local demonstrations at rural farms are also planned.
Another product
What is our product?
• Miniature power generator that converts
kinetic energy to electricity
What problem do we solve?
• Portable power is needed in many
applications where battery replacement is
not feasible
Where will we sell this product?
• Primary application:
power source for pacemakers
• Secondary application:
power source for Portable Data Assistants
Who is our competition?
• Wilson Greatbatch
(they supply 90% of pacemaker batteries)
• Energizer, Duracell, Radio Shack, and other
producers of small batteries, fuel cells
2. Internet market research
on target markets
Pacemaker Market Research
• 600,000 pacemakers implanted annually
• 84% of users over 64 years
• Number of patients receiving pacemakers
growing at 8%/year.
• Current market 3.36 billion/year
• 40% of implantations in 2000 were
replacements
“Future Trends in Industry Economics”, Brown Univ. 2000
Secondary Market:
Power Source for PDA
• Customers: Handspring, Palm, Toshiba…
• About 35 million PDAs sold by 2005
• At present: Li-ion battery,Lithium Polymer
battery, Advanced Lithium, Fuel cell
• Fuel cell info:
– 50,000 units in 2002
– Expected increase to 2 million in 2007
3. Market Research
Questionnaires
Pacemaker Implant Patients
1.Is this you first pacemaker? Y / N
1b.How many have you had? ______
1c.How would you rate the procedure to replace the battery?
1(very traumatic) to 10 (walk in the park) ________
2.How many years do you expect your pacemaker to last? ______years
2b.What is the average life of your past pacemakers? ______years
3.Do you expect to outlive your current pacemaker? Y / N
4.On a scale of 1 to 10, how important is the battery life of your pacemaker to you?___
5.Do you know the brand and or model of your current pacemaker? N / _________
6.Did you pick out your pacemaker? Y / N
6b.What did you base your choice on?
___________________________________________________________________
___________________________________________________________________
7.Do you like your pacemaker? Y / N
(any elaboration)_____________________________________________________
___________________________________________________________________
8.What would most like to change about your pacemaker?
(Hints: does it stick out?, is battery life to short, does it need extra features?)
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
9.Does your pacemaker function properly all of the time? Y / N
9b.What specific problems have you had with your pacemaker?
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
10.Does your pacemaker cause you any discomfort? Y / N
11.Would you feel safer if you pacemaker was implanted closer to your heart? Y / N
12.On a scale of 1 to 10, what criteria will decide the choice of your next pacemaker?
1 (Doctor decides) 10 (I gather information and tell my doctor what I want) ______
Pacemaker Implant Doctors
1. How many NEW (patient’s first) pacemaker implant surgeries do you perform per
week? __________
2. How many REPLACEMENT pacemaker surgeries do you perform per week?
__________
3. Do you view pacemaker replacement/battery replacement as (circle one):
a nuisance
acceptable
important revenue
4. When recommending a pacemaker, on a scale of 1 to 10 how important is:
_____ your familiarity with brand
_____ brand history and reliability
_____ battery life
_____ component life (full unit replacement)
_____ patient restrictions (no exposure to microwaves etc.)
_____ physical size
_____ ease of surgery
_____ utilizing new technology
_____ patient’s preference
_____ additional factors, please explain ___________________________
___________________________________________________________
5. In your view, is the location of pacemakers under the collarbone driven by
___ size
___ safety
___ necessity
Explain___________________________________________________________
______________________________________________________________________
______________________________________________________________________
6. Would you feel more of less comfortable with a pacemaker small enough to implant
within the ribcage? Assume battery replacement is not necessary.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
7. If you would like to participate in a market interview (one-on-one) on the subject of new
pacemaker technology, please provide contact information:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
HW for next Tuesday, Oct 10
• Marketing Plan
– 1 page ‘What is it?”
– Initial Strategy for the 4 Ps
– Begin Secondary Research
– First draft questionnaire
– Strategy to get to Primary Research Targets
• Who are they?
• Communication means, e.g., Amigo, e-mail,
telephone, etc.