Monday, September 14, 2009

Engaging the Private Sector

I just interviewed Elisabeth Rhyne from ACCION about her new book and upcoming presentation to the Silicon Valley Microfinance Network on Engaging the Private Sector in Microfinance. While her book is geared more toward folks in the private sector, it may inspire some ideas for how MFI managers can engage with the private sector as well. If you're in the Silicon Valley, I encourage you to see her presentation in Santa Clara on September 15th.
For more information, read the interview here.

Wednesday, September 2, 2009

Does technology make your head spin?

For better or worse (I think better), technology is more frequently becoming a key part of product development in the microfinance world. However, for many of us, technology is confusing and intimidating. I grew up in the Silicon Valley, but after being away for 14 years working in microfinance abroad, I find myself sadly behind the technology curve. In an attempt to get myself up to speed on technology in emerging markets, I attended a presentation by Stephen Goodman of Sun Microsystems at the Silicon Valley Microfinance Network.

Read my interview with Stephen Goodman about "Technology and Emerging Market Models" here.

Tuesday, August 18, 2009

Elevator pitch madness!

Now that I'm thinking about elevator pitches, I keep encountering new formats. Here's one more:

1) Name
2) Name of company
3) What good I do
4) A success story

For example, "My name is Maria Montara with More Money MFI. I help small business owners increase their income through microlending. One client of mine took out a loan for $100, increased her inventory of used clothing, repaid it, took out another loan, and after one year had increased her income by 50%."

Friday, July 31, 2009

An elevator pitch format

I recently learned of an interesting format for elevator pitches. To review, elevator pitches are quick, 30 second statements about what you do - short enough for an elevator ride and interesting enough to generate more conversation. This format breaks the pitch into three pieces:
  1. I work with… [describe target clients/market];
  2. Who have the problem of/opportunity to… [describe problem your product solves or opportunity your product enables them to take advantage of];
  3. I help them…. [describe benefit clients receive from your product].

For example, "I work with women business owners whose growth is limited by lack of capital. I help them expand their businesses so they can improve the lives of their families and communities."

Note that the above elevator pitch doesn’t mention microcredit at all! But it does create curiosity by encouraging the person you’re speaking with to ask, “how?” One could, of course, add to the pitch a bit about microlending, e.g. “I help them expand their businesses with small loans, so they can improve the lives off their families and communities.” Either elevator pitch “works”.

Thursday, July 30, 2009

Product Innovations - Microfinance and Water

What does Matt Damon have to do with microfinance? Read about's innovative microcredit initiative on and find out!

Thursday, April 30, 2009

Your vision and product development

Let's face it, frequently vision statements are exercises that end up on the shelf. Nice to trot out when the auditors come by, or to post on our websites, but not things that we actually use. But should we?

I came across an interesting article today about a bank which has successfully navigated the recent subprime crisis because it stuck to its philosophy and avoided certain types of new products. It's food for thought, and can be found here.

Tuesday, April 14, 2009

Donor marketing: Your MFI and the Internet

When we think of donor marketing, one of the first things we think of is our MFI's website. And rightly so - the Internet has an international reach. But it isn't enough to have a site, one needs content, and that content needs to be regularly updated. Yes, bells and whistles and shiny graphics are nice, but really what keeps folks coming back is up-to-date information they can use.

Look at your donor or funder needs the same way you'd look at your client needs. What do they care about? What benefits can you provide them?

Next, leverage your website content through social marketing tools such as FaceBook, which enables organizations to create their own web pages with links back to the original website, updates, and to even create "fan groups" so friends can publicize you.

Want some inspiration? Check out the Bridge2Rwanda site, and see how it leverages FaceBook and other types of web media to promote its cause. Okay, it's not a microfinance site, but don't you wish it was yours?

Wednesday, March 25, 2009

Donor marketing: Just one thing

When I was managing an MFI, something I struggled with was donor marketing. Okay - let's be honest. What I struggled with was getting new donor funding. A colleague of mine operating in another country seemed to have no trouble, however. Donors funded him on a regular basis. Finally, I swallowed my pride and asked him what his secret was.

He talked to them.

Yes, it was that simple. On a quarterly or bi-annual basis he'd make an appointment, sit down with the donor, tell him or her what his MFI was doing and then ask what was happening in the donor world. Invariably, when funding came available for microfinance, they would think of him and his MFI.

Should you fear that your sales skills aren't good enough to "shmooze" a donor, let me tell you that neither were my colleague's. He's not a "shmoozer", not a smooth salesperson by any means. What he is, however, is open, honest, and in general a very nice person.

You don't need glitzy sales skills to have a successful donor meeting. What you need is a genuine passion for your MFI, understanding of your environment (donors want to hear about your challenges too), and the ability to tell your MFI's story: the facts, the figures, trials and successes.

Donors want to meet with you. Sometimes it seems that their whole job is to have meetings - trust me, they won't mind spending thirty minutes with you. They'll be happy to be able to report upward on what they learned about your MFI and the industry in your region.

Action item:
Write out a short agenda for a donor meeting. What will you tell them about your MFI? The state of the industry? Now, pick up the phone and make some appointments!

Tuesday, March 17, 2009

Marketing the informal economy

I was going to start a series of posts on donor marketing, and then I saw this article in the March 14-15th edition of the Wall St. Journal: "The Rise of the Underground," by Patrick Barta.

The article starts:

"Economists have long thought the underground economy -- the vast, unregulated market encompassing everything from street vendors to unlicensed cab drivers -- was bad news for the world economy."

Yes, and donors have thought so too. How many times have you, as an MFI manager, heard a donor asking how many of your borrowers had moved into the formal economy after taking out a loan? Or government officials demanding that formal licensing be a condition of a loan?

In my opinion, the "problem" with the underground economy is that it doesn't pay taxes (formally) at least to the state. That isn't the fault of the business people within it, however. In my opinion it points to a failure on the part of the state -- to provide clear and understandable ways to formalize one's business, and to make a case that the benefits to registration outweight the advantages of going "informal."

So how should MFIs address this issue when a donor or government official laments about our informal borrowers? This article makes a good case for the informal economy, but I'm curious to hear your thoughts. Let me know in the comments section!

Wednesday, March 11, 2009

Internal and external marketing

Before I talk about marketing to donors, I'd like to back up a bit and organize our thoughts on marketing. There are two sets of folks an MFI should be marketing to - no, not donors and clients - internal and external customers.
External customers are those outside your MFI who benefit from or should hear about your services. This group includes your borrowers, donors, investors, and opinion leaders (such as government officials). If you're lucky, you've got an MFI association or umbrella agency which handles "industry marketing" to the latter. If you're not - well, their opinions can affect your business so it's helpful to communicate with them.
Internal customers are the folks inside your MFI who you should be communicating with.
"Huh? But my employees know about my MFI!"
Do they? Most people know their jobs, but unless management makes an effort to circulate information within a company (or MFI), it usually doesn't happen. Finance doesn't know why Credit wants to change a policy and resists. Loan officers don't understand the benefits of a change to the clients, and so they can't sell as effectively. Branch managers don't hear about the latest satisfaction research findings, so they can't apply them.
Action item:
Analyze the information flow between departments. Is it formal, or does it rely upon personal relationships (e.g. the Finance manager is friends with the Credit manager, so they understand each other's needs well, but Credit doesn't know audit so...)? What systems can be implemented to ensure regular flow of data between departments?

Saturday, March 7, 2009

Study exchange

Okay, this has nothing to do with marketing, but I need help!

I'm trying to set up a study tour for an MFI in Palestine to visit an MFI in Eastern Europe. Like Eastern Europe, Palestine's West Bank has a highly educated populace, larger loan sizes, and relatively high wage costs.

If you know of any MFIs in East or Central Europe which might be willing to host them (not pay for them - just let 2-3 of their managers spend time with their operations), please let me know!


Monday, March 2, 2009

The Five Touch System

While working on a business plan for my new financial planning business, I came across a concept called the "Five Touch System." The idea is that for someone to put their faith (and finances) in your hands, they usually need to have five contacts with the financial planner before committing. In financial planning, like microfinance, direct sales is a key component. However, the "five touches" or contacts don't have to be face-to-face, they can include advertising, newspaper articles, or other promotional activities that get one's name in front of the public.

It reminded me of marketing for microfinance.

In microfinance, the customer is taking a risk when they take out a loan. Most of us don't want to become over-indebted, we want to be able to pay our loans on time, and the idea that we might not be able to handle the interest and principal payments is a source of stress. This is just one of the reasons why loan officers have to spend so much time with clients before they take out the loan - to make the clients comfortable with the MFI and with the borrowing concept. (Other reasons of course include underwriting, ensuring the client understands her obligations, etc., but part of it is, yes, sales and hand holding.)

A good campaign which puts your MFI's brand or products in front of the public can shorten the time it takes for a loan officer to sell the product - to make the client comfortable with your MFI. With advertising, promotion, and branding, you can reduce the number of contacts your loan officers have to make to sell the product. This makes them more efficient, can drive down costs, and increase sustainability.

Sunday, March 1, 2009

Customer service and Ghandi?

Found at Andy Sernovitz's blog, "Damn, I wish I'd Thought of That!" It stands in the lobby of the Chicago Tribune newspaper -- something we should all remember about customer service.

Commercialization: the "final" stage in product development?

The pilot test is a success! We roll out the product and we're done - right?


Not really.

First, remember that product development is a cycle - once the new loan product is "out there" the smart MFI will continue to gather client feedback on it, for example through exit surveys and regular client satisfaction research. If the MFI has an integrated marketing program, then that data can be used to further refine the product or get ideas for new financial products and services.

Next, remember that new products effect more than just the credit department. Their administration will impact MIS, human resources, finance, and perhaps even general office management. Staff in all departments may need training in how to cope with the new product. Generally, the sooner you can bring other departments into the product development process, the better (i.e. during the pilot test phase), but typically product roll-out will require an extra "push".

On a final note, the commercialization phase is also the time to implement a promotional program for the new product. I can hear the chorus of shrieks from microfinance managers already -- we don't need advertising, we use word of mouth, or direct sales. Direct sales has proven to be effective in microfinance, and word of mouth is great (if you cultivate it -- it doesn't just happen), but both direct sales and word of mouth can be more effective (i.e. you can increase your clients per loan officer) when backed by a promotional program and a strong brand name.

Thursday, February 26, 2009

The pilot test stage

The next “stage” in the product development cycle, and perhaps the most discussed, is the pilot test. At this point you’ve fleshed out your new product idea and concept, and done some basic financial analysis to ensure you can actually deliver the product sustainably. Now it’s time to stick your toe in the water and test that product idea.

The first step in the pilot test is developing a pilot test plan. The MFI must decide which criteria or targets it will use to determine if the test was a success or failure. The criteria or targets chosen will depend on the product. They may include volume of loans in clients or portfolio value, profitability, productivity and efficiency of loan officers, portfolio at risk, time to disburse the loan, etc.

The test plan also delegates responsibilities for actions among members of the pilot test team, which usually includes people from different departments. An illustrative example can be seen in Figure 7. The new product (or product redesign) will affect multiple departments – from audit to finance to credit to human resources.

The plan also describes in writing how the test will be run – i.e., the test protocols. There may be two sets of protocols – pre-test and pilot test. Pre-test protocols may include:

  • Where the test will occur
  • Deadlines for key steps before the test takes place
  • Who is responsible
  • Objectives

Pilot-test protocols may include:

  • Dates of assessments of how the test is running
  • Dates of monitoring checks and evaluation meetings, where criteria projections/targets are measured against actual results
  • Reporting (when and to whom)
  • Dates of go/no-go decision points

One commonly asked question is how long should a pilot test last? In microfinance, defaults tend to come towards the end of the loan term, so ideally a pilot test would last the length of a loan term. Of course, if the MFI is proposing a 5-year housing loan, that isn’t feasible, and a compromise must be made – perhaps a one year test.

Friday, February 20, 2009

The product development cycle: part 2

The next two stages in the product development cycle are concept development and financial analysis.

Concept development: During this stage, concept development fleshes out the ideas that pass the “screen test.” Concept development asks and answers the following questions:

  • Who is the "buying" decision maker? E.g. one product being talked about a lot these days are microloans for youth. How much influence will the parents have on the youth's "purchase" of the loan product? Who is the real decision maker -- the young borrower or his mother or father?
  • What features must the product include?
  • What are the benefits to the target market?
  • How will clients react?
  • What will it cost to deliver?
  • How will the product be delivered most cost-effectively?

The concept is then tested in focus groups of clients or potential clients. Focus groups might answer questions such as:

  • Do they need this product?
  • How could they use it?
  • When do they need it?
  • How quickly do they need it?
  • Is it structured appropriately?
  • What other questions could you ask?

Financial analysis: Once the product idea has passed the concept test phase, the MFI enters the financial analysis phase. Here, interest and fees are estimated based on competition and an understanding of what the client will pay.

Then sales volumes are estimated, alongside profitability and how many loans must be disbursed (at what size) to break-even. The cost analysis should take into account the costs of new staff (hiring and training), MIS, marketing/promotion, and anything else which will affect fixed and variable costs. In short, here MFIs estimate if this new product idea makes financial sense. Too often, MFIs skip this stage!

Wednesday, February 18, 2009

The product development cycle: part 1

Market research drives product development, which can also be thought of as a cycle or loop (as illustrated in Figure above). This is because even after a product has been successfully commercialized, the MFI should regularly assess customer satisfaction with the product to determine if possible improvements are needed. Remember, product development is not only about new products - product redesign can be a much more effective route.

The circles between each stage represent “Go” or “No Go” decision points. If any one of these stages tells you to stop, that’s the end of that product’s development. But lest you think it was all a waste of time, lessons learned from aborted processes should inform the MFI about future product ideas.

Idea development: The "first" stage in the process (remember, it's a cycle so there really is no first stage) is idea development. Ideas can come from anywhere, including your loan officers, but formal market research is also a good source. For example:
  • SWOT Analysis: The MFI’s internal strengths and weaknesses and external opportunities and threats
  • PEST Analysis: Trends analysis/research evaluating the Political, Economic, Social and Technological environment.
  • Client feedback/drop out research can be a rich source of ideas.

Ideas are initially screened to determine if the MFI should take them to the next step, and some rudimentary profitability calculations may take place at this time based on estimates of market size. Idea screening asks the following questions:
  • Who is the target market?
  • What are the size and growth forecasts of the target market?
  • Are we introducing this because of competitive pressures?
  • What trends are the ideas based upon?

Sunday, February 15, 2009

Product development and SPM

The market research an MFI conducts for product development provides another potential integration point with Social Performance Management (SPM). This occurs because market research for product development and for social performance should answer the same questions:
  1. What do the clients need the product/service for?
  2. What do the clients actually use the product/service for?
  3. What benefits do the clients get or perceive they get from the product/service?

In the case of marketing, the MFI would use the answers to the above questions to develop a product which appeals to a broad base, and to properly sell and market the product. Social performance management systems use the same information to ensure there is a "match" between uses, needs, and benefits and the MFI's social mission.

In an integrated marketing program, the above information will flow through throughout the company - downward to loan officers so they can sell the benefits of the product and upward to management to market the products properly. In a social performance management system the same data will also flow up and down the MFI's hierarchy, but it will be used to ensure the product serves the MFI's mission. I.e., management will take that information to check that the uses, needs and benefits fulfilled by the new product are having the desired impact. Similarly, loan officers will report back their observations in the field - are the clients really benefiting as the research says they are? Is the new product being used for the purposes the research describes?

One set of data - two different uses. With such synergies, it seems foolish for MFIs with social performance management systems not to get "double use" out of their data through integrated marketing, and vice versa.

Thursday, February 12, 2009

Market research for pro-poor product development

MFIs can research just about anything, but to ensure products offered match client needs, most frequently they will research clients, competition, market trends, and gather data for special projects driven by management request e.g. projects to research new product ideas. Unfortunately, too often MFIs rely upon the latter - research for special projects - and neglect the former. Market research really should be ongoing, especially since new pro-poor product ideas can come out of research on the competition, market trends, client satisfaction, etc.
However, once you've got a new product concept, the MFI really needs to "drill down" to determine the product's "fit" with its current or expected client base. In other words, understanding your client is critical for pro-poor product development.

It's easy to believe we know our clients well, but do you know them well enough to write a biography for them? One of the most important outcomes of client research is the development of client profiles for each market segment. A profile answers the question, “who are your clients?” In addition to the more obvious characteristics, such as gender, age, and type of business, profiles should also address:

Needs and preferences: What do your clients want? Remember the core, actual, and augmented product? Your clients will have needs regarding features, regarding augmented issues such as speed and customer service. You need to know what your clients needs are in order to design the best product. This is important from an impact and a sales perspective.

Benefits: What benefits are the clients looking for? Ability to send their children to school? Ability to cover expenses during difficult periods? Ability to expand the business? If you don’t know what CORE product they want, what benefits they want, you’ll have to be very lucky in your product development to create the right product. Again, understanding the benefits the client receives is important both for social performance management and product marketing.

Attitudes: What do they believe about loans? How do they feel about savings? What attitudes do they have toward borrowing? Toward banks? MFIs?

Not everyone wants a loan from your MFI, so it’s important to understand who wants your financial products and services. Then you can tailor your pricing, products, distribution channels (place) and promotion to these client types, or segments.
Action item:
If you can't write a profile or biography for your typical client, you probably don't know them well enough! Make profile writing a regular part of your product development exercise, and use it as a red flag - if you can't write one, it's time to go back and do more research.

Monday, February 9, 2009

Product design and integrated marketing

Product development is part of the marketing process and MFIs are most effective at product design when they integrate it into their marketing program. This is because commercial product design is driven by clients – not MFI managers.

In marketing parlance, we talk of the “5 Ps”: People, Price, Product, Place (distribution), and Promotion. People – or the clients – are at the heart at the process, or the top of the pyramid. Everything else flows from an understanding of the clients, i.e. from what we learn from market research, as illustrated in the figure above.

If the goal is to provide the best possible, most beneficial products to poor and low-income people, then MFIs need to figure out exactly who those people are and what they need. However, MFIs often skip this step – they’re given product “templates” from donors or other international MFIs and simply begin selling the product in the market. Sure, they may sell a lot of loans, but are the products benefiting their clients? Are they really providing what their poor and low-income clients want or need?
So MFIs conduct market research and hopefully this research, such as client drop out and satisfaction, is done continuously. But is it fully utilized in the product development process? If product development is a separate special project, it's unlikely that prior research will be maximized, or special research will be cross-checked against what we've learned elsewhere.
For this reason, I like to see the market research and product development functions sit together within a single marketing department. When this happens, there's a greater likelihood of our client knowledge driving the product development process. But integrated marketing doesn't stop there. An integrated marketing program ensures MFIs maximize what they learn, by flowing market research data in a loop through the institution.
Ideally, research findings should flow up to management and down to loan officers, and loan officers and managers should provide feedback to the researchers. Do they agree or disagree with the findings? Would they like research to explore other issues or to explore certain findings more deeply?

Wednesday, February 4, 2009

Product (re)design

In yesterday's post, I mentioned that a product redesign might be more effective than creating a new product out of whole cloth. Although developing completely new products is always an option, MFIs are frequently better off exploring changes to existing products before developing new ones (see Figure above).

This reflects back upon the pitfalls of having too many products. Why waste resources on multiple products that don’t go anywhere, when you can have one or two great products that reach scale? It can be more efficient and effective to develop one strong, simple product which can be slightly changed to expand the market, rather than create a host of completely new products. The former option better enables MFIs to achieve scale when serving poor and low income markets, but this can only be achieved if the MFI knows its customers well – what the benefits are, how they use the products, and what the care about. For example...

The MFI can change the core product. In this case, the product is changed or marketed to serve different needs or highlight new benefits. For example, an MFI might discover that borrowers are using its short-term inventory loans to pay for medical emergencies, and decides that this usage fits with the MFI’s social mission. The MFI then introduces and markets a medical emergency loan, which has the same terms and conditions as its short-term inventory loan.

The MFI may change its augmented product. Here the product retains the same features (i.e. terms and conditions), but the delivery speed, customer service, forms, etc. are changed. One example of this is the “speed loan”. At one microfinance bank, the Speed Loan carries the same terms and conditions as its standard microfinance loan, but the bank is able to disburse it in three hours. Though this is a relatively simple change, it must be carefully implemented to mitigate risk.

Repositioning the product is another option. Again, terms and conditions remain the same; however, the product is repositioned with a new marketing campaign targeting a different segment. For example, a “women’s empowerment loan” might now be marketed to men – it’s the same product, but the name and promotional materials are changed to a “business power loan” in order to appeal to the male market.

MFIs can extend the product line. For example, in some countries the demand for inventory purchasing power increases around key holidays. The MFI might add a seasonal loan with similar terms to its core product meet this demand.

Tuesday, February 3, 2009

What part of the product are you (re)designing?

In marketing, we think of a product having three distinct components: the core, actual, and augmented products.

The core product isn’t always obvious, but it’s what clients are really buying. It’s the benefit the client gets from the product. For example, when people take out a loan, they’re not buying money, they’re buying the ability to increase their income, expand their business and send their children to school.
Understanding why different market segments take out a loan – what benefits they get and what needs the loan fulfills – is important as a basis for conducting market research, when selling the product, and when promoting the product. Analyzing what benefits the clients receive from a loan is the key to designing pro-poor products. Access to finance isn’t beneficial if it puts the borrower into a situation of burdensome debt for consumer products they could live without. Benefits analysis, therefore, has a two-fold purpose: designing products the customers want and achieving the MFI’s social goals.

The “actual” product in terms of a loan would be its terms and conditions. E.g. what’s the interest? How frequent are repayments? How big is the loan?

The “augmented” product encompasses the other intangibles associated with product delivery, e.g. how quickly the loan is disbursed, the quality of customer service, whether the loan is repaid at an MFI’s branch or at the client’s home, or how many forms the client must fill out.
These points are not theoretical; they are essential elements to consider when it comes to achieving scale with pro-poor products, because a completely new product may not be the best way to expand outreach.
Understanding the difference between the core, actual, and augmented products opens up ways to create “newly designed” products without incurring the costs and stresses of developing products out of whole cloth, and which enable MFIs to expand within the poor and low-income markets on a sustainable basis.
Action item:
Review your existing products and break them down into core, actual, and augmented components. How do these components serve the needs of your existing markets? Can one of these components be changed to expand your market?

Sunday, February 1, 2009

Is your MFI ready for a new product?

Typically, new product development is driven by increased competition, client dissatisfaction with current products, (which is expressed via high drop-outs), and client demand for new or different products. In spite of these pressures, the MFI must first assess if it’s ready and/or has the capacity for product development.

Does the product fit the MFI’s strategic vision? For example, a consulting team I worked on provided technical assistance to an urban microfinance bank that with was interested in developing agricultural loan products. The bank was fairly new and still working through some arrears issues with its core urban product. We discovered that introducing an agricultural product would require developing an entirely new rural infrastructure and diverting resources from their urban operations. Consequently, the bank decided this product was not a strategic fit and now was not the time to introduce rural or agricultural lending since they primarily identified themselves as an urban bank.

One of the biggest traps MFIs fall into is having too many products. This can become a problem because resources are finite and product development requires resources. Too many products can cause confusion among staff and can limit the growth of core products, as the abovementioned microfinance bank feared if it developed new agricultural lending products. Creating and managing new products can starve products with the potential to reach scale from the resources needed to do so.

The ability to reach scale is a key issue when designing products for poor and low-income people. Worldwide estimates put the unbanked population of microentrepreneurs at 500 million[1]. Statistics such as these strongly indicate that MFIs should seek the widest outreach possible by offering a manageable number of financial products so they can serve the most poor/low-income people while achieving sustainability.

Is management committed to a client-driven approach? New product development cannot be successful unless it is driven by client needs. Management’s primary responsibility is to serve the needs of its customers.

Does the MFI have the management and systems capacity to develop and manage the new product? If management or systems are stretched thin and can’t monitor and control the new product, the MFI faces reputational, operating, and credit risks – i.e. arrears. Long before implementation of a new product, an assessment of management and systems capacity must be made in order to fully understand the ramifications of introducing a new product. Is the MFI large enough to warrant an additional product? The size of the MFI also has an impact on the number of products that can be effectively sold and managed. The larger and more mature an organization, the greater the ability to manage multiple products and multiple segments.

[1] Weiss, Kirsten. “Interview on Microfinance Commercialization with Mariama Ashcroft.” January, 2009.

Friday, January 30, 2009

Lending to women

Issue #8 of UpSides magazine focuses on women's entrepreneurship, and how MFIs and banks can focus on the women's market. To download a copy, click here.

Thursday, January 29, 2009

"Pro-poor product development"

A good question which came up at the Nigerian Microfinance Conference was, “How do we ensure our new products are pro-poor?” This is exactly where the nexus between integrated marketing and social performance management systems occur.

Market research for product development and research for social performance should answer the following questions:

1. What do the clients need the product/service for?
2. What do the clients actually use the product/service for?
3. What benefits do the clients get or perceive they get from the product/service?

In an integrated marketing program, that data will flow throughout the company – downward to loan officers so they can sell the benefits of the product and upward to management to market the products properly. In a social performance management system the same data will also flow up and down the MFI’s hierarchy, but it will be used to ensure that the product serves the MFI’s mission. I.e., management will take that data to check that the uses, needs and benefits fulfilled by the new product are having the desired impact and loan officers will report back on their observations in the field.

One set of data – two different uses. With such synergies, it would be foolish for MFIs with social performance management systems not to get “double use” out of their data through integrated marketing, and vice versa.

Tuesday, January 27, 2009

The brand promise and client savings

Branding for MFIs: interesting in theory but not so necessary in practice? On the contrary! For commercial microfinance institutions that mobilize savings, branding is critical.

I just returned from a microfinance conference in Nigeria, where Mariama Ashcroft of Women’s World Banking discussed microfinance commercialization. An important point she raised was about trust. When an MFI makes a loan, it must trust the borrower. But when a microfinance bank (MFB) solicits savings, the clients must trust the MFB; this is why savings mobilization is a struggle for many commercial MFIs.

Building trust can be a challenge, and here lies the importance of the brand promise. Your savers must believe that your MFB (and their savings) is here to stay – that your bank is strong and reliable. This belief is created through your brand, which must promise to provide a secure place to keep savings and to pay interest on that savings.

How can an MFI build that brand promise?
  1. Consistency. This includes consistency in promotional messages, customer service, and in every interaction your MFI/MFB has with the public. Is your mission and vision communicated to clients and employees? Do your promotional materials look and “feel” alike, communicating the same message? Can clients expect the same type of service every time they interact with your employees?
  2. Keeping your promises. “But of course we keep our promises! After all, we have contracts, don’t we?” Of course you honor your contracts, but do your loan officers show up at meetings on time? When they say they’ll call a client back, do they? Are your policies communicated clearly, simply, and consistently in order to avoid misunderstandings? If your staff members don’t follow through on the “little” promises, clients will find it difficult to trust you to follow through on the big ones.
  3. Delivering excellence. Good customer service is to be expected. “Good” is a satisfactory grade – a bare minimum, if you will. However, an MFI with a brand promise that stands out from the crowd goes beyond “good” to “fabulous.” How can you delight your customers? How can your loan officers go above and beyond the call of duty to demonstrate that your MFB is worthy of holding the client’s savings?
If these steps sound simple, it’s because they are! However, it’s easy to start a brand campaign with high enthusiasm and good intentions, and then gradually forget about it over time, returning to old habits. MFBs need a marketing department (preferably an integrated one) that can ensure these practices continue over time. After all, in branding consistency is the key.

Action item:

Hold a roundtable with key loan officers and members of every department that interacts with the public (including tellers). Ask participants the above questions and develop a one-page, three point plan to deliver consistency, keep your promises, and deliver excellence. Integrate it into your marketing plan, and ensure someone is responsible for it.

Sunday, January 18, 2009

Nigerian Microfinance Conference

I'll be taking a week off from this blog to attend a microfinance conference in Nigeria, where I'll be presenting on commercial product development. After January 26th, I'll report back.
In the meantime, please feel free to comment on any of the below posts -- we'd like to hear about your marketing experiences!

Saturday, January 17, 2009

Brand loyalty and client satisfaction

Brand loyalty is the level of a client's committment to repurchase the brand. For MFIs, profitability tends to come in later loan cycles, so committment to take another loan is critical. I've talked a bit about client satisfaction, but frequently clients who claim to be satisfied with the loan product switch to another MFI. Making clients feel "satisfied" isn't enough to retain clients, and it isn't enough to generate positive word of mouth, either.

Loyalty is created when MFIs go the "extra mile," for example with spectacular service. What do your loan officers do to make clients rave about your MFI? Comment below and let us know!

Action item:
Spend a day observing your top loan officers - the ones who produce the most loyal clientele. How do they create that "wow" factor that delights clients? Can their techniques be replicated?

Thursday, January 15, 2009

The elevator pitch

When your staff is introduced to someone new, one of the first questions they’re usually asked is, “So what do you do?” A career in microfinance is unusual, which should make for an interesting conversation. However, many people have no idea what microfinance is, and frequently this question is followed by a long, awkward explanation. Instead of wanting to learn more, the questioner wants to run in the other direction.

Your staff members are the face of your MFI – wouldn’t it be nice if they could answer this simple question in a way that was understandable and interesting? In a way that boosted your MFI’s brand image and made them feel good about their jobs?

Your staff are capable of shining when asked about their jobs, but this sort of "artful bragging" doesn't come naturally to everyone. The good news is that it can be learned, by practicing an "elevator pitch."

So called because it's short enough to be used when riding between floors, an elevator pitch is a 30 second answer to the question, “What do you do?” A well-crafted elevator pitch interests others because it allows the speaker to show what they feel passionate about. It's an authentic statement, rather than a shallow boast. Developing a pitch is easy... once you've figured out what excites you about your work!

Action item: Elevator pitch exercise

Time: 15-20 minutes

Purpose: Enable staff to verbally promote your MFI’s brand image and themselves.

Materials required: Paper and pens. White board or poster paper.

Step 1: Invite participants to individually write down the answers to the following questions:

1) What do you like/love about your current job?
2) How does your job use your skills and talents, and what projects are you working on right now that showcase them?
3) What successes are you most proud of from your current work?
4) What new skills have you learned in the past year?

Notice, these questions are about the staff member. Answering them will allow your staff members to speak authentically about what excites them about working for your MFI.

Step 2: Review with staff your MFI’s long tag line – a sentence or two which describes your MFI in 25 words or less (see prior post). Ask participants to list the key words/phrases from the tag line, and list on a white board or sheet of poster paper.

Step 3: Based upon the above, invite participants to write out their personal answers to these two questions:

1. What excites you about what do you do?
2. What excites you about what your MFI does?

Note that I’ve rephrased the questions. Though your new friend in the elevator might just ask you what you do, you should answer what excites you about what you do. This gives you a chance to shine (and to make the MFI look good too)!

Step 4: Ask a few volunteers to read their answers out loud and discuss them. Are the answers short? Interesting? Authentic? Do their answers about the MFI fit with its brand image?

Step 5: Invite staff to practice with each other, asking and answering the questions, “What do you do?” and, “What does your MFI do?” Make sure they keep the answers under 30 seconds each!
So, please join me in discussion -- what's your elevator pitch?

Tuesday, January 13, 2009

The brand promise: tag lines

In my last post, I wrote rather generically about branding. In this post I’d like to talk about a specific element of branding: tag lines. A tag line is a short, memorable phrase that summarizes the essence of your MFI – its brand promise. Tags communicate a positive feeling about the MFI through a simple slogan that is easily repeated (repetition is critical to successful branding).

FINCA International, for example, uses the tag, “Small loans — big changes.” It’s a brilliant tag line, explaining in four words what FINCA does (makes small loans) and what benefit the loans provide (big changes). What’s particularly effective about this tag is that the brand promise – big changes – can apply to all FINCA’s clients, regardless of country or target market.

Typically, an MFI has a short tag, which is five words or less, as well as a longer tag – up to 25 words. The short tags can go just about anywhere – from business cards to letterhead to ad copy. Longer tags are frequently used in addition to the short tags, in brochures and other marketing materials where space isn’t as limited.

Action item – develop a short tag line:

To prepare, collect tag lines from other companies. Notice how they catch your attention. Are they easy to remember? Why? What do they communicate?

Next, determine your brand’s promise. Brainstorm the answers to these two questions:

  1. What need to we satisfy in our customers better than our competition?
  2. What benefit to we provide to our clients?

List the top 8 or 10 most important things you want to say about your MFI’s brand promise. Next eliminate repetition as well as items that don’t really communicate the benefits of your MFI or what makes you special. Whittle your list down to 3 or 4 central elements.

Based on the above, develop a five word or less tag line for your MFI, to be used in all your print materials (possibly beneath your MFI’s logo) – from letterhead to business cards to website to ads. Use simple, everyday language.

Finally, test your tag line. Is it short? Is it memorable? Is it distinctive? Does it communicate a positive feeling about your MFI? Does it communicate your brand promise?

Monday, January 12, 2009

Branding for MFIs

After years of abuse, my much-loved digital camera died. I needed a new one – something that was reliable and would enable me to take high-quality photos. As I am not a professional photographer, I hesitated for weeks, baffled by the wide selection of available camera functions and features. I haunted camera stores, poured over web reviews, and asked friends for recommendations.

Then I saw a new Kodak camera promoted on a television shopping channel and in 60 seconds, without ever handling the camera, I called the shopping channel and bought it, spending more than I’d planned. Why? I knew the Kodak name. One of the best cameras I’d ever owned was a Kodak, and I trusted this new camera would be just as good.

In short, I bought the Kodak brand (and so far am happy with my choice).

So what is branding? Philip Kotler, Professor of International Marketing at Kellogg University, describes it as “a seller’s promise to deliver a specific set of features, benefits and services consistently to the buyers.”

Companies make this promise through a consistent message delivered by their employees, in their promotions, and through their products and/or services. Consistency is critical to developing a memorable brand. We remember things through repetition. For this reason, it’s a bad idea to change your MFI’s colors or slogan on a regular basis. A changeable brand image is a forgettable or confusing one.

But what exactly is your brand remembered for? Kotler’s idea of a promise – of trust—is key to successful branding. Therefore, your MFI’s brand should stand for something real and true, rather than being another clever motto or tag line. (Your motto can be clever, but it should be REAL). This authenticity builds trust.

Is trust important to the clients of an MFI? You bet! MFIs are financial institutions and let’s face it – the interest rates aren’t cheap. Taking out a loan is a big decision, and though we MFI managers tend to focus on our risk as lenders, you’d better believe your borrowers are thinking about the risk to them as well. Is it worth taking on debt from an MFI, or should I just borrow from my Aunt Sally? What if business is bad and I don’t make a profit on this loan?

Clients need a certain comfort level to borrow. Your loan officers should provide this by making sure clients aren’t taking on more debt than they can afford. However, your MFI’s brand image stands behind your loan officers, helping or hurting their message.

What’s your brand saying?

Action item:

Review your promotional materials, including company letterhead, business cards, brochures, and any other advertisements. Is the message consistent? What sort of “personality” does your brand have? Are the colors, fonts, and graphics consistent across your materials? How frequently are your slogan and brand graphics repeated (and can you use them more)?

Saturday, January 10, 2009

Sales techniques for loan officers

Marketing studies have shown that while a product’s attributes are important to borrowers, what people really buy are the benefits of a product. However, too often loan officers focus on attributes – e.g. the interest rate, loan terms, etc. – when they’re selling the loan product.

These attributes are, of course, important and loan officers need to be clear and upfront about them for the benefit of the client and of the MFI. After all, these loans need to be repaid. But a strong loan officer informs the client of the product attribute while selling the benefits, (also known as the core product -- see slide 6 for more information on the core vs. actual vs. augmented product).

So what are the benefits of your microfinance product? Does it enable the borrower to build assets? Increase income? Send her children to school?

It might do all of these things and more, but discussing these benefits will only have an impact on sales if they actually matter to your client. Someone who doesn’t have children probably won’t care much about being able to send kids to school. At an individual level, loan officers should be aware of product benefits and should pay attention to what the potential client responds to. In short, the loan officer should ask open questions to get a feel for what benefits the potential client actually cares about.

At an institutional level, the MFI should segment its borrowers, developing client profiles which address which benefits matter to the client.

Action item: Conduct the below sales training with your loan officers.

Training: Selling the benefits

Time: 20 - 30 minutes

Purpose: Enable loan officers to understand the difference between a product’s benefits and attributes, and how to sell the benefits of the MFI’s products.

Materials Required: White board/large paper and markers.

Notes to Trainer: Make sure the benefits listed are benefits to the CLIENT, not to the MFI!
One key benefit of a microloan should be an increase in the client’s income, however, loan officers should consider how this increase will positively change the client’s life – what the client really wants to do with the extra income. For example, some clients may think of the increased income in terms of better education for their children, the ability to improve their home, better healthcare, or the ability to expand their business.

Training Step 1: Explain: Over and over, marketing studies have shown that while attributes are important, what clients really respond to in marketing are benefits. Ask: What are benefits and attributes? Attributes are the physical features of the product, e.g. a laptop computer might weight 2 kilos. But the benefits are how those features make the client’s life better. E.g., the computer is light enough to easily carry to meetings.

Step 2: Display an object (e.g. a calculator) to participants. Ask what are its attributes? Its benefits?

Step 3: Ask: What are the attributes of our loan products (Note: discuss by type of loan product – loan products will offer different benefits!)

Draw a line down the middle of the board or large white paper. List responses down one side of the board or large white paper.

Step 4: Explain: Clients want to hear how our loan products will benefit THEM, how the loans will make their lives easier or better. Ask: How can we describe these attributes as benefits? List answers next to the attributes listed earlier, e.g. Delivery of the loan to the client’s business saves the borrower time.

Step 5: Ask: How can you find out what benefits matter to the client? I.e., how do you know what the client cares about? Discuss, listing answers on the white board.

Step 6: Emphasize to the credit staff that next time they are meeting with potential clients, they need to sell these benefits!

Customer service and the dissatisfied client

Here’s a short training for loan officers on how to deliver good customer service to unhappy clients. Consider it an action item.

Time: 15 - 20 minutes

Purpose: Enable loan officers to deal with dissatisfied clients in a positive manner.

Materials: White board/paper, pens

Trainer’s Note: Role-play the complaints in Step 3 with angry facial expressions and tones of voice. Also, be sure a response isn’t to just quote policy back to the client. That will only make them angrier!

Training Step 1:

Ask: What should you do when a client complains about the service she’s received?

Explain: We should Apologize, Acknowledge, and Correct!
Explain: When we complain about something, we need to feel that the person we’re complaining to takes us seriously. Otherwise, we'll just become more upset. That means as loan officers on the receiving end of a complaint, we need to do more than just say we’re sorry. We also need to acknowledge that the person has a valid reason for feeling unhappy. We need to empathize with our clients – i.e. let them know that we understand how they feel.
Finally, we need to let them know how we’ll correct the mistake. Remember, we're human so mistakes do happen. What’s important is that we deal with them correctly, by apologizing, acknowledging how the client is feeling, and correcting the error.

Step 2:

Ask: But what if the client is actually wrong? How do we handle it then?

Explain: if the client is in the wrong, we still need to show empathy and respect, even while we’re being firm about policy.

Step 3:

Review each complaint below and ask: How should a loan officer respond to this complaint?

Well, I just assumed I could use your loan for myself, and not just for my business. Nobody told me that I couldn’t.
Possible response: I can tell that you’re upset, Mrs. Ghaffar.

Your interest rates are too high for me! I have a limited income.
Possible response: I can appreciate your need to save money.

Your report said my group had a B rating, but it actually has a AA rating!
Possible response: Oh no! I’m sorry for the mistake!

We’ve been waiting four weeks to get this loan and now you want to delay it again!
Possible response: I’m sorry for the delay. I know it must be frustrating for you.

Step 4:

Ask: What complaints have you received from clients?
List answers on board. Go through each complaint and ask, “how can a loan officer best respond to this?” Discuss.

Friday, January 9, 2009

Customer service

In my last post I mentioned the importance of having excellent customer service in order to drive positive word of mouth marketing. Customer service is a big topic, and is based upon fair, open and honest dealing with clients – something your MFI’s policies and procedures should aspire to.

However, though your MFI’s policies may be strong, and your loan officers might have the best intentions towards their customers, creating a friendly and open relationship with clients is a skill. The good news is that it is a skill that can be taught. Loan officers can and should be trained to:

· Smile;
· Greet the customer;
· Use the client’s name;
· Use positive body language;
· Make eye contact; and
· Thank the customer.

Just remember: SGUUMT!

(I’m joking. It’s a ridiculous acronym.)

But do remember that roughly 55% of our communication is non-verbal, i.e. through our gestures, facial expressions, and posture. So it’s important that our body language is positive and in sync what we say.

“Positive” body language is open, e.g. the head is up, arms are uncrossed, eye contact is being made, and the loan officer has a friendly, genuine expression on his or her face (see photos of closed body language on the left, and open on the right).

Thirty eight percent of our communication is through tone of voice. Yes, it’s not just what you say – it’s how you say it! That leaves a tiny 7% of communication flowing through our words. Only 7%! So while it's helpful to drill loan officers on what to say to clients, don’t forget to work with them on their body language and tone of voice as well.

Action item:

Hire students to pose as potential clients of your MFI and report back on the service they receive (this is called being a “mystery shopper”). Sometimes we think our customer service is better than it actually is. Are your loan officers hitting the bullet points above? If not, it may be time for more training.

Thursday, January 8, 2009

Word of mouth: Is it all MFIs need?

“We don’t need to do marketing – we use word of mouth.”

I hear this all the time from MFI managers. Word of mouth (or referrals) is a great way to get clients. However, too often managers simply assume word of mouth is happening, and that it’s positive. “Word of mouth” then becomes an excuse not to do anything.

But did you know that you can actually generate positive word of mouth? Here’s how:

Step 1: Make sure you’ve got a great product and are delivering good service! Unfortunately, bad experiences tend to get more “word of mouth” than good service, so you need to make sure that your products and customer service is as good as you think it is.

Step 2: Identify and cultivate influential people in your markets. Who do your clients listen to? Who do they get their information from? These could be village leaders, well-respected businesswomen, or even local celebrities. Spend time telling them about the benefits of your product, and give them your brochures, business cards, or other materials to help them get the word out.

Step 3: When a new client comes to you, ask how they heard about you and record their answer. Again, this is where an integrated marketing program can be of help. This sort of information is most useful when it’s spread around – enabling the branch manager and loan officers to understand exactly where the referrals are coming from, and enabling upper management and marketing to understand just how effective the word of mouth campaign really is.

Step 4: The group solidarity lending methodology lends itself to referrals – it’s up to the clients to find others to join the group. However, once a group is active the referrals may stop unless loan officers get in the habit of asking existing clients to keep spreading the word. A good time to do this is when they receive a compliment about your MFI’s product or service. Loan officers should be trained to follow up with a “Thank you! Who can you tell about our…?” to prompt good word of mouth marketing.

Action item:

Ask your branch managers to identify opinion leaders in their communities. Work with the branch managers to develop a plan to reach out to these opinion leaders.