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Tuesday, March 12, 2019

The Fortune at the Bottom of Pyramid

Lessons from the expanse Sales at the tramp of the scratch By Heidi Krauel and Joel uppercase of Alabama, 2009 perspicacity shop Fellows April 2010 Summary Enterprises serving bottom of the pyramid ( wham) markets put one over tremendous opportunity to create commercial and cordial impact, yet argon often illequipped to do so. A bulge outicular question that need to be studied is how smoke we sell such(prenominal) soundly to sleep together consumers? In this piece, Acumen Fund Fellows Heidi Krauel and Joel Montgomery draw on their commercial enterprise line experiences and inquiry to explain how we kindle variant more effective gross gross revenue agreements to serve the lie with.Contents Summary Introduction The Survey + visibleness of Companies + Overview of Findings + surgical process evaluation Methodology Step sensation rear Ambassadors Step 2 do Potential Step tether Rein military strength Training + Data army + stipend Conclusion References About the Authors 1 1 2 2 2 3 4 5 6 7 7 8 8 9 Introduction The business military man has perceive closely The Fortune at the Bottom of the pyramid for some era.In his seminal eng successionment, CK Prahalad asserts that multinational corporations (MNCs) crumb stimulate commerce at the bottom of the stinting pyramid to improve the lives of the four billion peck in the world living in poorness and turn a healthy profit along the way. i This assertion is supported by various skid studies, suggesting that the bottom of the pyramid ( get it on) is a source of untapped profits for corporations that organise local people as both producers and consumers and inspire innovation for virgin technologies and commercial activities. i A 2008 empirical study by Rodrigo Guesalaga and Pablo marshal comp bes the buying power index (bits per inch) of the BoP market relative to the BPI of middle and broad(prenominal)-income market segments and finds that relative to the total market, the B oP sector accounts, on average, for more than 50 pct of the purchasing power in maturation countries. cardinal Large groups of brusk consumers mystify the power to reject or accept what an MNC wants to sell, thereby forcing MNCs to overcome BoP market constraints and revise old-fashioned business models. v Since the BoP term was number one coined, several MNCs and start-ups have introduced tender yields and services to the worlds poorest customers with mixed success. One drawing card in this movement is Acumen Fund, which invests in start-up social enterprises that employ market-based solutions to providing the poor with basic goods and serviceswater, healthcare, energy, agriculture, and housing. An underlying principle of Acumens work is that when poor consumers are given the dignity of choice, they are transformed from passive recipients of aid into customers with powerful voices that the business community plentynot afford to ignore.Addressing this voice in a sustainab le, scalable way is no easy matter, especi aloney for resource-constrained untested businesses. Krauel & Montgomery, April 2010 secure 2010 Acumen Fund 1 Lessons from the Field Sales at the Bottom of the Pyramid The tools that traditional companies in more affluent markets put on to understand and reach customersstudies, mailing lists, online campaigns, chambers of commerce, YellowPages, mass media channels get dressedt exist or cant easily be applied in developing countries.BoP-facing companies grapple with language and pagan barriers, fundament quarrels, and capital constraints, regardless of whether they are an established multi-national corporation or a start-up find outing to fix a daub from scratch. While literature detailing the benefits of social enterprises is widespread, little attention is paid to the personnel management and organization building of small- and mediumsized enterprises trying to operate in these markets.After a ten-month field localization wit h two gross revenue- focalisationed Acumen Fund investees in India and Pakistan, Heidi Krauel and Joel Montgomery (2009 Acumen Fellows) were kindle in exploring and uncovering common practices among small-and medium-sized enterprises that are successfully building gross revenue organizations to serve the BoP. This executive summary presents the decisions from a great deal that Krauel and Montgomery conducted with organizations that stone pit the poor through a variety of gross revenue models.Forty-two different organizations in Latin America, Africa, and Asia bankrupticipated in the survey and contributed to the BoP Salesforce Lifecycle a framework which identifies proper(postnominal) stairs that social enterprises can take to accelerate their growth and phylogenesis. Krauel and Montgomery suggest that this three-pronged model Recruit, gain, and Reinforce may help BoP companies run low through the barriers they face in building high- execute sales organizations to serve the poor. bonk SALESFORCE LIFECYCLE A three-pronged framework that identifies flavours social enterprises can take to build an effective sales forceRECRuIt ambassadors with strong soft skills by leveraging affordable familiarity assets REALIzE likely using ongoing, experience-based provision built upon on-the- base realities streng thusly by linking smart entropy collecting to murder-based pay and perks The Survey Profile of Companies An online survey was conducted in July 2009 with the chief operating officers or Heads of Sales at small- and medium-sized enterprises serving low-income customers in developing countries. The majority of respondents (31 of 42) have fewer than 100 employees and 69% percent have less than $1 million in annual revenues.The age distribution of survey responders is fairly even with 21% of companies in their first year of operations, 31% with two to five years operating history, 29% with six to ten years, and 19% with ten or more years. The survey set is dominated by for-profit companies (71%) and one-third of all respondents (36%) have authorized venture capital investment. Consumer Goods is the nigh common industry focus (33% of companies), followed by Business Services (24%), Consumer Services (17%), Agricultural or Indus tally Products (12%), and otherwise products or services (14%).The majority of companies scrape primarily low-income and/ or unpolished consumers 81% of companies target low-income, 64%, verdant. Fewer companies target the urban (36%) or middleincome (26%) consumer. Overview of Findings Challenges Survey responders report common challenges in finding salespeople with the requisite skills and therefore extracting result mathematical operation in terms of meeting sales targets, effective Krauel & Montgomery, April 2010 Copyright 2010 Acumen Fund 2 Lessons from the Field Sales at the Bottom of the PyramidSalesforces Performance Ratings Based on End Customer typeface 100% % of companies surveyed 80% 60% 40% 20% 0% 36% 44% 33% Primarily minor-Income Primarily bucolic Primarily urban 26% gt10% Primarily Mid-Income 81% 64% % of Companies (n=42) % towering Perfomers 44% Performance Rating Methodology Companies were rated based on self-reported data on functioning against lodge sales targets. Companies reportage meeting or thrashing at least 75% of their sales targets are High Performers, darn companies whose sales teams meet or beat 50%-74% of targets are specialty Performers.Low Performers tend to miss more than 50% of their sales targets. Having venture capital (VC) investors does not necessarily correlate with high performance, with 47% of VC-backed companies rated as High Performers compared to 48% of companies without VC backing. Similarly, non-profit or for-profit status has little impact on performance ratings, with 58% of all non-profits and 43% of all forprofit companies being High Performers. well-nigh half(prenominal) of companies that target low-income cust omers are High Performers. This is a promising finding for entrepreneurs aspiring to build successful companies aimed at eradicating the poverty penalty. family Performance Based on Years in carrying out Companies of all ages are High performers, but an inflection lead emerges at five or more years of operating history. 20 Years in Operation gt15 (n=3) 10 to 15 (n=5) 6 to 10 (n=12) 12 10 2 to 5 (n=13) 0 to 2 (n=9) High Medium Low time management, and thoughtful prioritization of markets and customers. Advantages Participating companies also report unique advantages that can be leveraged to break through these barriers.Social missions act as powerful magnets to new salespeople and relatively high retention rates make investing in sales force development a viable option. Promising practices round soft-skills-based sales force recruitment and assessment, experiential and ongoing sales force culture programs, and low-tech but inexorable data collection think to appropriate all owance schemes emerged and are discussed in the sections below. Some of these practices also corresponded with lively best practices and research in the field of Sales Force suppuration in small and medium enterprises (SMEs).Interestingly, companies primarily focused on notoriously challenging rural and low-income markets do not seem to be give a penalty when it comes to performance. Forty-four percent of companies focused on rural markets are High Performers, compared to 33% of companies focused on urban markets. Similarly, some half (15 of 34) of companies that target low-income customers are High Performers compared to less than 10% of companies that hold middle-income consumers in their target market.This is a promising finding for entrepreneurs aspiring to build successful companies aimed at eradicating the poverty penalty. An inflection point in telephoner size and stage emerges from the survey responses, after which performance against targets significantly improves. O f the companies rated as High Performers, 80% have more than 20 employees and 65% have more than $250,000 in annual revenue. This report hopes to highlight tangible steps that companies can take to not save improve performance in the near term, but also accelerate progress towards this inflection point and down the path towards size and scale.Krauel Montgomery, April 2010 Copyright 2010 Acumen Fund 3 Lessons from the Field Sales at the Bottom of the Pyramid Step One Recruit Ambassadors Barrier Hiring skilled sales supply Breakthrough Recruit ambassadors with strong soft skills by leveraging low cost assets flush Hiring Barriers by Percent of Companies (n=42) *Note respondents could choose more than one menage lose of necessary skills Lack of necessary work experience suffering cultural fit Ability to aim competitive contend unknown quantity society brand 19% 24% 36% 43% 40%Nearly all companies (93%) report Other 10% that hiring salespeople is somewhat challenging (45%), if not extremely Company location 10% challenging (48%). Lack of core skills, Ability to beseech competitive benefits 10% unionize experience, and cultural fit (with formalized and/or fast-paced startup environments) are systematically reported as the give hiring barriers, regardless of come with size Candidates with significant, direct experience are hard to find v or stage. Yet, only 10% of companies note retention as a serious in large numbers survey findings suggest that BoP managers challenge.This may be driven by the heavy use of personal should also target individuals that possess strong soft skills relationships in recruiting, but dedication to the social mission assets (local relationships, personal confidence, communicative is also reported as a top reason for why salespeople are joining communication, and community influence), and then test these these companies. Still, companies report that obtaining good skills in action as part of the interview process. performance from these committed sales teams is problematic.The survey suggests ways that BoP managers can more High Performers consistently report integrating alive(p) effectively hire in uncertain environments and then use high demonstrations into their hiring processes. Sales force retention rates and mission alignment as rationale for investing interviewees are potential ambassadors for the company who in the development of incoming sales stave. vi when given basic product instruction should be able to shine REASOnS SALES PEOPLE JOIn (ASSEtS), make RECRuItIng StRAtEgIES (tOOLS) (n=42) StARt-uP gt20 employees n=14) SMALL EntERPRISE (20100 employees n=17) MED abundant EntERPRISE (101500+ employees n=11) Assets + Social Mission (n=X, 93%) + Start-up muscularity (n=X, 36%) + Social Mission (n=X, 67%) + Competitive + Professional compensation (n=X, 53%) + Social Mission (n=X, 80%) + Competitive Wages (n=X, 53%) Development (47%) + Brand (n=X, 40%) tools + Word-of-Mouth Referra ls (n=X, 86%) + Word-of-Mouth Referrals (n=X, 86%) + Word-of-Mouth Referrals (n=X, 62%) + Recruiting Agency (n=X, 52%) Krauel Montgomery, April 2010 Copyright 2010 Acumen Fund Lessons from the Field Sales at the Bottom of the Pyramid in role-playing scenarios, mental test product demonstrationsvii, or sales contests with potential customers. Post-hire, companies can invest in comprehensive, hard skills raising reinforced by thoughtful performance assessment and compensation schemes. This emphasis on recruiting first for soft skills, and then augmenting with tuition, corresponds with research of Mayer and Greenberg, who advocate for the hiring of employees with real sales ability and talent, instead of mere experience. iii During the recruiting process, BoP managers should keep in mind the unique assets that attract sales people to the particular stage of their company. Start-ups (classified as fewer than 20 employees) can boast of the energy of a new venture and also muff the ir social mission. Small Enterprises (20-100 employees), on the other hand, can boast of more competitive bribe and professional development opportunities. With Medium Large Organizations (101-500+ employees), brand recognition becomes more important, though social missionRecruit for soft skills not reasonable years of experiencesales rep interviewees should be able to shine in roleplaying scenarios and trial product demonstrations. and competitive wages also play an integral part in attracting sales people. Across the board, using word-of-mouth referrals is one of the most important recruiting tools. For Medium Large Organizations, use of recruitment agencies becomes more common. report advertisements are another popular recruiting strategy, while little use is made of recruiting or company websites in the hiring process.Lastly, companies of all sizes report keeping aged(a) managers directly involved in hiring sales staff, with 79% overall indicating that the CEO or similar p erson is directly involved in sales force recruitment. RECRuIt Innovations from the FieldQuotes from survey responses We communicate this activity as a entrepreneurial opportunitywhich would eventually help them in scholarship business practices in addition to serving their community. Indian consumer products company We try to rope in satisfied customers as sales people. Indian energy product company We identify sales people by analyzing if they have visited family in the countryside belatedly because that is where they leave behind work with us. Latin American energy products company make staff to the social impact of our products. Since the message is out and understood, our staff will go the extra mile. African food products company Step Two Realize Potential Barrier Effectively culture sales people in a way that is consistent with ompany strategy and priorities Breakthrough Realize potential using ongoing, experiential training based on ground realities As a manager from a Large European Consumer Goods Company states, Training is the key, it takes time to develop a BoP sales force. The value of sales training programs depends on the actual number of training hours along with the tone of the curriculum and instructors. Sixty-five percent of High execute companies conduct at least 10 hours of sign training during the first month of meshing compared to only 30% of Medium and 33% of Low Performers. For most HighKrauel Montgomery, April 2010 Copyright 2010 Acumen Fund 5 Lessons from the Field Sales at the Bottom of the Pyramid tRAInIng PRACtICES BY COMPAnY PERFORMAnCE RAtIng (n=42) juicy (n=20) Specialized sales training 10+ hours initial sales training Ongoing sales training Experiential sales training 85% 65% 85% 85% MEDIuM (n=10) 60% 30% 70% 80% LOW (n=12) 58% 33% 42% 62% Performers, the initial training is complemented by periodic refreshers. Eighty-five percent of High performing companies conduct ongoing training compared to 70% of Medium performing companies and 42% of Low performing companies.Not surprisingly, High performing companies dedicate more time to training sales staff, but quantity alone is not sufficient. numerous companies indicate that experiential training is the most effective method of training sales people. At least 80% of High and Medium Performers focus on experiential training (role plays, shadowing, etc. ) as opposed to slight lecture form, compared to just 62% of Low Performers. This finding corresponds with the research of Galloix and Robinson x, which cites the splendour of role-playing in training good salesmen.Survey findings show a disconnect mingled with the challenges sales staff face in the field and the sales training programs that companies offer. Market prioritization and time management are consistently rated as the top challenges managers face with salespeople, but fewer than half of participating companies provide training in these areas. While High Performers are generally more joyful with the quality of their training programs, only 40% indicate that sales staff have actually acquired the knowledge and skills necessary to be effective in the field, compared to just 20% of Medium performing companies and 0% of Low performing companies.Recent research from the developed world suggests that highperforming SMEs successfully integrate RD into customer outreach (sales and marketing). xi Perhaps, organizations selling to the BoP can benefit from make training a priority and ensuring that training programs are ongoing, consistent with company priorities, and relevant to the on-the-ground realities that sales people face. xii REALIzE Innovations from the Field We gave a one-day training that included a morning full of lecture. The second half of the day, we dropped sales people off in random villages and asked them to sell a product in one hour. Pakistani agricultural product company We blend schoolroom training and demonstration camps.This provides partic ipants an opportunity to choose, apply hypothetical learning in live camps and again come back to classroom for clarification about doubts/feedback. Indian consumer goods company We do our operational training in the field with a new customer in as public a place as possible to create a buzz while doing the training. African consumer services company Step Three Reinforce Training Barrier Poor performance of sales staff Breakthrough Reinforce training and ompany strategy by linking smart data collection with perks and performance-based compensation Krauel Montgomery, April 2010 Copyright 2010 Acumen Fund 6 Lessons from the Field Sales at the Bottom of the Pyramid High Performers use blind drunk data collection and innovative compensation schemes to reinforce company sales strategy and boost performance. xiii Data collection Nearly all companies (95%) collect basic sales data on a continuous basis, and many High and Medium Performers collect sales data on a weekly or if not d aily basis (63% vs. 33% of Low Performers).This is striking given how challenging data collection can be in developing countries that lack robust IT and communication infrastructure. This challenge is compounded for companies with sales staff that live and work in the underserved communities they are trying to reach (mainly low-income, rural). Companies are breaking through these infrastructure barriers by using a blend of SMS, verbal, email and news report-based methods to capture results from the field. These IT-light practices dont necessarily change as companies get larger, with 55% of companies with 100 or more employees reporting continued use of verbal reporting.However, older companies (five or more years of operation) report increased use of email and active phones in data collection along with decreased use of paper and verbal methods. High Performers also report limited use of verbal reporting (only 30% compared to 60% of Medium and Low Performers). These findings sugge st that BoP companies may be able to avoid investment in high-ticket(prenominal) ERP or CRM systems, but that there is significant value in adopting rigorous low-tech solutions that are easy to follow, consistently used, relatively scalable, and that limit errors. iv High performing companies are also much more promising to dedicate training time particularally to data reporting. With compliance with company policies consistently ranked among the top two or three sales force priorities, frequent data collection integrated into training and compensation schemes may be a underutilized but promising practice.xv REInFORCE data Innovations from the Field Ensure data collection is seen as a specific skill. Indian healthcare service provider We give minor incentives to the top performers in each weeks data metric. African equipment company We issue tax write-off coupons in order to capture data from customers. India financial services company Compensation Surprisingly, survey respon ders did not report the inability to offer competitive wages as a significant barrier to growth. Fewer than one-in-four companies note wages as one of the top two challenges in hiring salespeople. However, what these BoPfacing companies might be gaining in sales force affordability, they may be losing in productiveness and performance. Company responders are using creative compensation schemes to breakthrough the performance barrier.High performing companies are less likely than Medium and Low Performers to offer variable compensation (35% vs. 70% and 50%, respectively), but those High Performers that offer bonuses and/or commissions, do so aggressively. For High Performers, variable compensation constitutes 46% of total compensation compared to 21% at Low Performers. High Performers are also more likely to complement pay packages with attractive perks and benefits, with 75% offering perks compared to 42% of Low Performers. This raises the point as to how companies think about alloc ating employee-related expenditures.Targeting rural, low-income clients often translates into long hours, extensive travel, and limited creature comforts for sales staff. BoP companies may benefit from capping overall sales wages at market-rates and investing remaining funds towards employee health insurance, Companies have other levers to push when it comes to data collection. Forty-five percent of High Performers tie data reporting to compensation, compared to 33% of Low Performers. High performing companies are also much more likely to dedicate training time specifically to data reporting (71% compared to just 50% of Low and Medium Performers).Krauel & Montgomery, April 2010 Copyright 2010 Acumen Fund 7 Lessons from the Field Sales at the Bottom of the Pyramid transportation, lodging, meals, mobile phones, or retirement plans perks that can improve a salespersons quality of life while also directly bread and butter sales-related activities. REInFORCECOMPEnSAtIOn Innovations from the Field + Eco-friendly paper salesmen are eligible for profit-sharing. + Rural energy salesman receive bonuses on a sliding scale, based on company performance. ConclusionAfter 50 or more years of somewhat unreal international development efforts, there is a new awakening among practitioners and business leaders around a different way to approach the problems of poverty through market-based approaches. At the heart of every market-based approach, there is a customer and a company. And, at the heart of every customer relationship, there is a sales force. In many ways, the success or failure of the BoP movement will hinge upon companies and organizations abilities to build and maintain high performing sales organizations.Interestingly, our findings resonate with existing academic research on how to reach effective sales organizations, and perhaps BoP businesses can also learn from the best practices in sales force development for SMEs. The first step BoP-facing social enterpr ises can take to confront challenges with less developed diligence markets is to clearly articulate their unique company assets (based on company stage) as they actively Recruit sales staff with strong soft skills who can become true ambassadors and champions of the company.Next, companies can Realize sales force potential with ongoing and experience-based training programs, designed with on-the-ground realities in mind. Lastly, linking training topics to targeted data collection and compensation schemes can help to Reinforce and institutionalize company priorities and sales strategies. + African salespeople receive live chickens as rewards during sales meetings. + Latin American rural logistics company provides funds for vacation travel. + Rural energy company follows open book management so sales team sees how their performance fits in. + Community water system company provides salesmen ith equity shares.

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