07 September 2020

Small Steps towards the Big Picture

WHAT IF... You created access to sustainable services through solutions that allow for gradual acquisition?

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Especially when dealing with bottom of the pyramid customers, entrepreneurs are often faced with low purchasing power, little willingness or ability to invest, and even less inclination to give a new solution a try over those that have proven efficient (but often not particularly eco-friendly) in the past. Yet, with a business model that allows for a “toned-down”, gradual version of acquisition, innovators have been able to unlock a previously underserved market segment for their solutions. By developing purchase plans that fit slimmer wallets, WaSH and ecologically friendly solutions are able to penetrate markets where it matters: At the less privileged, but most in-need customer groups, often in rural areas, that are particularly vulnerable to the consequences of bad water, sanitation and hygiene management.  

Turning challenges into opportunities

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A large part of the global population is regularly faced with the same challenge: The status quo is bad, pollution is rampant, disease rates are going up and the future does not exactly look bright. Yet, knowledge about potential existing solutions does not penetrate into most segments of society, and even if it did, most people, especially those with low purchasing power, are hesitant or simply unable to put down a large up-front investment into a technology that may only start showing impact in the mid- to long-term. In addition, practices within these communities often go back decades and have been passed on from generations – while some of those practices are inherently more sustainable, many of them originate from times when resource scarcity was not as much of an issue as it is nowadays. This applies, for example, to wasteful irrigation methods in agriculture, or sanitation facilities that are not able to keep up with rapid population growth.  

Recognising these challenges, innovators, in turn, are reluctant to invest resources into trying to reach out to bottom of the pyramid customers. Successfully designing marketing campaigns targeting these customer segments is often particularly challenging due to lack of access to commonly used platforms and emphasis on word-to-mouth. As a result, market penetration is low and potential customers are left to fend off the consequences of dismal ecological management on their own.  

This leaves a large segment of the population practically untapped as customers for sustainable, eco-friendly solutions that are more cost intensive at the outset but could help saving money and resources in the long run. To open this market segment up for WaSH businesses, purchase plans need to be developed that make accommodating lower purchasing power a priority and design an entire model around a step-by-step acquisition of a solution. The various steps towards the final product, of course, should be convincing enough on their own to make the purchaser see the value in going all the way. 

Moving towards a strategy

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Trying to sell a large item to a lower bottom-of-the-pyramid client, such as an eco-house or advanced sanitation facility, is often a futile undertaking as they would hardly be able to afford it. However, while a large upfront investment may not be feasible for them, to a certain degree, those potential clients are creditworthy and able to repay micro credits – in fact, in many regions of the world there are now tailored credit institutions or cooperatives that give small loans of a couple of hundred or thousand dollars, for example to fix up items in the house or construct a new kitchen. With the Small Steps towards the Bigger Picture Strategy, you partner with a credit institution that gives micro credits to your client which follow a superior level developmental logic so you can turn that money into more than punctual repairs or occasional fixes. In order to ensure that these small investments accumulate over time and lead to a high-value, coherent final product, each step of the upgrade needs to have a logic within itself and the way it follows and precedes the other steps. As for your business’ impact: With the final product, you may be able to offer a life-changing service to a client group that otherwise may never have been able to afford it.  

In order to be able to successfully implement this strategy, you should scout for a financing partner that gives micro credits or impact investments, and that accommodates and understands this step-by-step small investment scheme. You should also ensure that you have the technical expertise on-site in the form of specialists or advisors that are adequately skilled to make the project happen following a sequential logic. That way, you can avoid aspects of the project turning out faulty and incapable of supporting the intended subsequent steps. 

When it comes to managing this strategy, you need to be equipped to handle a cluster of small commissions at the same time, rather than few larger ones. Ideally, your financing partner will handle the contracts and pay you as you move through the project. You also need to make sure that you have a constant pool of projects large enough to sustain your operations. Here, again, it makes sense to partner with a cooperative or institution that is well-connected in the bottom of the pyramid-market and can deploy intelligent systems to recruit clients.   

Case Study 1

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CASSA is a Guatemalan company that provides affordable eco-housing following a step-by-step system to bottom of the pyramid-clients, including private homes but also schools, businesses and the like. At the time of writing in May 2020, the company has completed over 40 of such gradual construction projects. 

When implementing projects, CASSA prioritises the needs of the owners as well as the use of eco-friendly, sustainable materials and building techniques, thus crafting buildings that last and do not harm the environment. Often, CASSA’s buildings take a dual role, such as family home combined with restaurant or small business. Building materials include concrete and cinder blocks but also bamboo, providing a degree of flexibility that can later be expanded upon, in correspondence with the family’s needs and means.  Every CASSA home integrates all elements of sustainability which are added as the project progresses: rainwater capture, water cistern for storage, pump for redistribution inside the house, LED lighting, grey water separation and reutilisation in a family garden, and an underground black water treatment system. All these provisions mean that the owners save money on the long run by not having to rely on public services – which often offer subpar quality at best.  

In order to allow access to financing for a broad range of future customers, CASSA partners with a local micro financing institution that provides the necessary credits to clients.