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?

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