Saturday, November 29, 2008

Integrated marketing

In both the corporate and non-profit worlds, one tends to find four different mindsets about marketing:
  • The first believes marketing equals sales and advertising;
  • The second thinks marketing equals the "4 Ps": price, product, place and promotion;
  • The third believes marketing includes segmentation, targeting and positioning (i.e. the 5th “P”, people) and next the 4 Ps;
  • The fourth considers marketing to be the driver of business and the source of the institution's growth in the market.
Too many MFI managers live in the first and second mindsets. This has the affect of bottling up the power of marketing. The market research “genie” remains corked in her container, only to be unleashed for special projects, if at all. But by doing so, market intelligence is under-utilized, neither informing strategy nor enhancing day-to-day operations.

In a market-driven MFI, market intelligence drives pricing, product design, distribution methods and speed of delivery, sales, promotion, and the company’s overall strategy. Market intelligence flows throughout the MFI, and MFI staff provide feedback to the marketing department.

MFIs can improve the role of marketing within the organization, first by determining how marketing is actually seen within the MFI. What mindset do the CEO and other staff members have about marketing? Is marketing respected within the MFI, or seen as a waste of time?

Next, MFIs can properly structure the marketing department. In mid- to large-size MFIs, there should be a marketing department headed by a Chief Marketing Officer. This department manages market research, product development, and promotion (the latter includes everything from sales training to advertising). In small MFIs, a single person may be in charge of all of these functions, closely coordinating with other department heads.

Action item: To start integrating your MFI’s marketing, first review which reports upper management and loan officers receive from your marketing department, and how often. At a minimum, I’d recommend:

• Customer drop-out reports to upper managers and loan officers - quarterly;
• Customer satisfaction reports to upper managers and loan officers - quarterly;
• Market trends report to upper management - annually;
• Competitive analysis to upper management and loan officers - twice a year;
• What else would you add? Please comment and let me know!

Wednesday, November 26, 2008

Do MFIs need marketing?

As a microfinance practitioner and later, consultant, I’ve encountered my share of MFI managers who fail to utilize marketing. Some are quite happy to rely on direct sales and “word of mouth.” Others avoid marketing because it smacks of cold, calculating business practices. MFIs are social enterprises, and marketing is so... capitalist.

However, donors are drifting away from grant funding for MFIs. They've noticed that commercial MFIs tend to reach more clients than their subsidized brethren. MFIs that behave like for-profit businesses (even if they aren't registered as such) do better for their clients. And any MFI with a mission to serve the poor should care intensely about serving its clients well.

MFIs that are market-driven are more effective at extending their outreach. And to be truly market-driven, MFIs need to engage in marketing. The good news is that with a dose of common sense, a strong integrated marketing program is within reach.

The failures of most marketing programs typically have to do with lack of integration with the MFI's strategy and overall operations, and misunderstandings about the role of marketing. Marketing isn't advertising. It isn't sales. Advertising and sales are only parts of the marketing mix. Marketing actually integrates the “5 Ps”: people (think market research), pricing, products, promotion, and place (i.e. distribution).

The most important element, however, is people. People, or the customers, drive the process. By thoroughly understanding why your clients want your financial products, and what your clients want, MFI managers can make strategic decisions about pricing, product design, promotion, and distribution channels. This in turn increases client outreach and the MFI's sustainability.

But too often marketing stands outside the day-to-day operations of the MFI. Market research data sits on a shelf, unused. Loan officer understanding of clients does not flow to managers. Products are designed haphazardly, with little understanding of their strategic role within the product line.

In a market-driven MFI, all levels of the organization must be intensely aware of their clients. Marketing must be integrated. Market research findings must flow up and down the organizational chain so they can inform pricing, product design, distribution methods and timing, promotion, and the company’s overall strategy. When this happens, the power of marketing is unleashed.

Action item: I’m going to attempt to add a concrete example or a simple action item to each blog entry, which MFI managers can implement immediately. Since this is the introductory blog, today’s suggested action item is a bit theoretical, but in the future I plan to make them more “concrete.”

So for today, just think about how marketing is integrated in your MFI. How does market intelligence flow through your company, and how is it used? Does it drive strategy?