Lecture 3b

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Lecture 3b

• Developing World Challenges
• Marketing and positioning (continued)

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Developing world Challenges in Guatemala

• Submissions by Sarah, Vicky and Julio
• All will be posted

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JULIO ROBERTO GARCIA MORAN RAFAEL LANDIVAR UNIVER
SITY ISSUES IN BUILDING PRODUCTS FOR THE DEVELOPI
NG WORLD INFRAESTRUCTURE. COMUNICATION. In Guat
emala a lot of roads and highways have been
destroyed. Only 5 of all roads are in good
state, the rest are either destroyed or are
unpaved. Many remote villages and towns are thus
unconnected by paved roads and this inhibits
trade in the products that they produce. This is
a problem that has not been fixed. In fact, the
few roads fixed have been destroyed by the recent
hurricanes. TRANSPORTATION. Most of the transpor
tation in Guatemala is by bus, rural people use
buses because they cannot afford to buy a car.
Only a few have cars. For shorter distances,
people use motorcycles and bicycles, for longer
distances there is only the bus.
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POWER AVAILABILITY. Many villages and towns of t
he rural area have electricity, Now this problem
is being addressed although there are towns and
villages that dont have this important service.
GOVERNMENT INTERFERENCE AND CORRUPTION.
The problem of corruption in Guatemala is sad.
Knowing that many politicians are corrupt its
very troublesome. The police are the biggest
source of corruption in Guatemala but many of the
deputies that create and approve laws in the
congress are corrupt too. In Guatemala all of the
infrastructure works are created with political
aims and this they time for the end of a
presidential cycle (to please people and
publicize their campaigns) and not with aims to
truly develop the country.
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CULTURE. POVERTY. Guatemala is a very poor count
ry. Most of the population of Guatemala are Mayan
and live in rural areas. Of this people, most
live in extreme poverty (live with less than 1
buck to the day). This problem it has always
existed and no government has been able to solve
it. There are families of 11 members that live in
poverty but even so, somehow, they find the way
to survive. EDUCATION. Education is the most imp
ortant problem in Guatemala and also no
government are solved this problem. For me, the
resolution of this problem is the solution of
many other problems in Guatemala in addition of
the development of the country. Most of the
population of Guatemala dont know how to write
and read, the minority go to school. Of these
only a few go on to high school and graduate.
Only 2 have the privilege of attending a
university.
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BIRTH RATE. The birth rate is growing up while de
ath rate is decreasing. The population of
Guatemala is therefore increasing- now Guatemala
is aprox. 13 million. This problem is actually
being addressed by family planning laws but to
date these are not effective yet.
RELIGION. Religion can be a problem if it mixes w
ith other activities that are not compatible.
There are many religions and sects in Guatemala
and all these differing mindsets make inhibit
development. This becomes a problem because we
have to find ways to do development activities
consistent with the ideologies and beliefs of the
people.
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BUSINESS SUSTAINABILITY CAPITAL Many businessman
have problems obtaining capital. Most the
business finance their activities (especially
small producers) by means of borrowing, but often
lose all at the end because of bad cash
administration. In addition, businesses go
bankrupt because of bad management in general.
This is a very common problem in Guatemala.
ORGANIZATION. In Guatemala there exists a few ki
nds of organizations for small and medium sized
businesses. The most common organizations are the
cooperatives and societies. The problem with
these organizations is that there will always be
a person with bad intentions. Consequently, if
the business doesnt have good internal controls
it is susceptible to fraud.
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PROFIT. The biggest problem in organizations is t
he distribution of profits. In many cases there
will be a person that would like take advantage
of the business. Strict internal controls are
required in order to avoid this problem. Other
problem is the lack of planning in the business.
In Guatemala most of the business dont establish
their cost and they dont make up budgets. At the
end of the season they realize that they have had
a book loss. This lack of planning has caused
many producers in Guatemala to fail.
DISTANCE BETWEEN DEVELOPER AND USERS.
All depends in the kind of business. There are
business that are near the users and they can
avoid the trading with intermediaries and their
margins increase. But business like agriculture
has the problem of distance and the producers
solve this problem by trading with
intermediaries. The exporters have this same
problem because there are only 2 ports one on
the Atlantic and one on the Pacific. Other
business that have this problem are the producers
of perishable products because they have to
invest in refrigerate in order to preserve this
product.
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Reasoning by Analogy

• Is there a new idea (not necessarily in your
  market) that penetrated a developing country?
  
• What did they do right? What did they do wrong?
• Interview principal?
• How do you transform someone elses success to
  your market?
  
• Transformation in time
• Transformation in product
• Transformation in market segment

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Creating Effective Marketing Visions
Reactive

• Customer Specification
• Voice of the Current Customer
• Competitive Benchmarking
• Tire-kicking
• Voice of Lead Users
• Empathetic Design
• Market intuition
• Scenarios of the future

Pro-active
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Consider scenario

• In order to understand how product is used,
  consider scenario
  
• A vision
• A story
• Describes a future state where the product is
  being used by a real person
  
• Captures imagination of stakeholders

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Example of hypothesis

• Statement summarizing the benefit of the product
  or service to the consumer
  
• Then by the end of your research, you will have
  proven or disproved and changed your hypothesis.
  
• Hypothesis examples??

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More thoughts on Why do we do marketing?

• Determines customer
• Is there a customer?
• How important a market?
• How fast is it growing?
• Alternative solutions?
• Segments!
• Is it worth pursuing?

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Why we do marketing?Marketing Specs
translationaka House of Quality
Marketing Specs 1. 2. 3. 4. 5.
Enginring Specs 1. 2. 3. 4. 5.
Mfg Specs 1. 2. 3. 4. 5.
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Why we do marketing

• Drives Design for Cost (DFC)
• Allocate Cost amongst different parts of system.
• Budget
• Over run in one component puts stress on other
  components
  
• Based on market ability to pay?

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Why we do marketing

• Determines features
• Drives Market acceptance
• Drives Cost
• Drives Complexity
• Drives Maintenance
• Drives Test and Testability

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Use www/Library Data Base Sources to Determine

• Major trends in technology, standards,
  regulations
  
• Drivers and barriers to growth- consider rate of
  market adoption
  
• Business model options and key players
  (competitors/ partners) at each layer of the
  food chain
  
• Size of segment, major sub-segments/rough
  distribution of market revenues/units
  
• Forecasts or prognostications of rate of segment
  growth
  
• Value chain, ecosystem and customer players

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Product

• What is your product? Describe in terms of
  benefit to the customer.
  
• Product packaging (is this relevant?)
• Discuss form-factor, pricing, look, strategy
• Summarize Cost of Goods and high-level Bill of
  Materials
  
• Shipping issues
• Customs issues (of components)
• Instructions and support

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Promotion

• Direct marketing
• Overview of strategy, vehicles timing
• Overview of response targets, goals budget
• Third-party marketing
• Co-marketing arrangements with other companies
• Agents
• Marketing programs
• Other promotional programs
• Freebies and demos

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Pricing

• Pricing
• Summarize specific pricing or pricing strategies
• Compare to similar products or compare to doing
  nothing
  
• What is my return on investment if I buy your
  product
  
• Strategy
• Summarize strategy relevant to understanding key
  pricing issues

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Placement (Distribution)

• Distribution strategy (required even at village
  level)
  
• Channels of distribution
• Summarize channels of distribution
• Distribution by channel
• Show plan of what percent share of distribution
  will be contributed by each channel -- a pie
  chart might be helpful
  
• Discuss fulfillment issues

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Vertical Markets/Segments

• Vertical market opportunities
• Discuss specific market segment opportunities
  e.g., sell a uv water purifier device to a
  full-service water treatment service
  
• Address distribution strategies for those markets
  or segments
  
• Address use of third-party partner role in
  distribution to vertical markets

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Placement (International)

• International distribution- beyond Guatemala
• Is your product so focused that it has only
  Guatemala applications?
  
• Address international distribution strategies
• Discuss issues specific to international
  distribution
  
• International pricing strategy
• Localization issues
• Highlight requirements for local product
  variations

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Success Metrics

• First year goals
• Additional year goals
• Measures of success/failure
• Requirements for success

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Schedule

• 18-month schedule highlights
• Timing
• Isolate timing dependencies critical to success

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Dont freak out

• What I have suggested here is necessary for the
  Final but not right away.
  
• Iterate assumptions
• I need a plan for a plan
• Biggest issues
• Your own inhibitions
• Schedule engineering
• Yours
• Theirs

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What follows is an example of a previous student
submission
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Mission 1 The 4Ps 1. Product Our aim is designi
ng an inexpensive handheld corn sheller. Our
primary target market is subsistence farmers in
Guatemala who grow and shell their own corn. The
secondary market is small commercial farms, as
well as those who wish to start their own
business growing and selling corn. The customers
for our product are the end users.
Currently, shelling equipment at any automation
level rarely exists, which means the competition
in this field is low. However, an important
constraint exists, since rural farmers use corn
shelling time as social time with family and
friends. Without proper considerations, corn
shellers will infringe on this and be
unsuccessful in the targeted market. We will
need to design a compact and portable corn
sheller which still allows people to socialize
while improving shelling efficiencies.
Subsistence farmers are used to stripping corn
kernels off the cob with their hands, a low
efficiency method. Currently, about one full
hour is needed to shell a bushel (35 L) of corn.
Corn harvesting season is from November to March,
during which 2-3 family members spend 4-5 hours
per day stripping corn. A mere doubling of
efficiency will reduce the daily working time by
2-2.5 hours. Over a single harvesting season,
this amounts to a conservative estimate of about
600 man-hours saved per family. A hand-held corn
sheller can easily achieve even higher
efficiencies and hours saved. The time saved
from this one simple task can be reallocated to
specialized tasks, aiding the development of the
family as well as the country as a whole.
Another direction we can take is to develop a
larger, centralized automated corn sheller. This
sheller would be located in a village center,
where rural farmers can bring their corn and pay
a small fee to use it. This model has already
been adopted by corn grinding machines, and is
therefore less likely to be socially
unacceptable. If further research reveals that a
handheld corn sheller is untenable, this
alternative plan can be used.
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2. Promotion The best way of promoting the corn
sheller is through personal demonstrations in
Guatemalan villages. For example, during the
harvesting season, we can visit 10 villages over
a week, comparing the corn sheller with hand
shelling. It would be beneficial to give free
trials to some local farmers, in hopes that they
would adopt it and promote our product among
their community. Other possible ways include
demos at farmers trade shows and local markets.
Most forms of media advertising, including TV,
Internet, and newspaper, are not practical due to
the low level of existence in rural areas.
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3. Place A distribution partnership may be needed
. This includes local mechanical stores, grocery
markets, and other businesses that farmers visit
frequently to buy needed living products. Direct
marketing is not feasible since people in rural
areas may not have access to internet shopping or
TV shopping. If we opt for the large-scale corn s
tripper, then we will possibly seek
co-distribution with the automated corn mill
which already exists in Guatemalan villages.
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4. Pricing Manufacturing cost 1.00 2.00 USD
Distribution cost (dealers mark-up, storage and
transportation) 0.50 1.00 USD
Pricing strategy While alternative sheller
machines do not exist, the purchasing power of
farming families is very low. We aim at small
profit in the short term but a dominating share
of the market in the long run. The relationship
between end users required quantity vs. the
final unit price needs to be evaluated through
the questionnaires and surveys.
The population of Guatemala is about 14 million,
and the number of households is around 4-5
million. About 1.8 million families actually
grow their own corn, as subsistence or as a
commercial product. Average income varies from
about 90 USD per month to less than 30 USD for
poorer farmers.
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Mission 2 Questionnaire (target 25 minutes)
1. How many people are there in your family?
_____ How many people work on the field? _____
2. How much corn do you grow each season? _____
How many people work on shelling corn kernels?
_____ How much corn does each person shell in an
hour? _____ How much time is spent per day shel
ling corn? _____ 3. Does your family shell corn
by hand? _____ What are some advantages of hand s
helling over other ways of shelling corn?
__________________________________________________
__________________________________________________
__________________________________________________
What are some disadvantages of hand shelling? __
__________________________________________________
__________________________________________________
________________________________________________
4. Do you think corn shelling is one of the most
time-consuming parts in the corn growing process?
If not, please list some other things that need
development. ____________________________________
__________________________________________________
__________________________________________________
______________ 5. What is your total family inco
me per month? _____ Would your family be interes
ted in purchasing a hand sheller tool that can at
least double the speed of corn shelling? _____
Would your family be interested in this tool if
it is 4 USD? _____ If not, what do you think is
a more reasonable price? _____
6. What are some reasons why you would like to
have such a tool for your family?
__________________________________________________
__________________________________________________
__________________________________________________
What are some reasons why you wouldnt feel like
owning such a corn sheller? _____________________
__________________________________________________
__________________________________________________
_____________________________
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7. If a large, automated, high-efficiency corn
sheller was in your village (like the corn
grinder), would you rather buy a cheap hand tool
or use the larger, faster sheller for a fee?
__________________________________________________
__________________________________________________
__________________________________________________
8. What do you think are the most important qua
lities and features of a corn sheller
desirable but unnecessary would be
nice absolutely essential _____ Cheap __
___ Durable _____ Safe and easy to operate ___
__ Easy to fix _____ Portable and light _____
High efficiency _____ Comfortable _____ Ad
ditional factor, please explain
____________________________________
_____ Additional factor, please explain
____________________________________
9. If this hand tool is on the market and you
are interested in it, what places do you think
this product should be promoted and sold?
__________________________________________________
__________________________________________________
__________________________________________________
10. If you are interested in participating in a
market interview on the subject of corn shellers,
please provide your contact information
__________________________________________________
__________________________________________________
________________
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Primary Research Targets Primary research aims at
subsistence farmers and small-scale commercial
farmers in Guatemala. It should focused on
farmers in rural area but should also cover
potential users in urban areas, including
restaurants and urban families.
Communication means Universidad Francisco Marroq
uin Jennyffer Zepeda jennyfferzepeda_at_ufm.edu.g
t Carla Hess hess_at_ufm.edu.gt Jennyffer and Ca
rla can provide details and guidance on the
project, as well as be a conduit to distribute
surveys and collect market research data.
AmigoLatino Gabriel Biguria gabriel_at_amigolati
no.com Gabriel is able to provide contacts with G
uatemalans in the LA area. Through AmigoLatino,
he is also able to provide videoconferencing and
communication with farmers in Guatemala.
Erick Solares erick_solares_at_dot.ca.gov
Erick is in the process of arranging for a
shipment of Guatemalan dried corn to LA. This is
important for the engineering aspects of the
project, to make sure that the sheller will
function properly when used on local corn.
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Mission 4 one page script Our project is to des
ign an inexpensive device for stripping corn
kernels from the cob and subsequently selling
this device in Guatemala. Corn is among the
popular crops in Guatemala and is used as a
primary food source. However, at the current
stage, shelling corn kernels is still a very
time-consuming and low-efficiency task. One full
hour of hard work is needed in order to shell a
bushel (35 L) of corn, not to mention scraped and
exhausted hands. Therefore, a highly efficient
hand sheller can benefit the farmers directly by
saving a huge fraction (60-80) of their time.
Local farmers can use the saved time on
specialization and development. The resulting
surplus of corn kernels or ground corn can also
be sold for profit. Due to the fact that 75
of Guatemalans are living under poverty line
(1300 USD per year) and most rural farmers earn
less than 30 USD monthly, it makes little sense
to make an expensive tool that local farmers can
not afford. Our corn sheller is targeted at a
sale price of less than 5 and ideally below 2.
It will have a relatively simple design and
compact size. It should also be produced by
making use of cheaply available local resources
such as aluminum cans, nails, etc. It will be
very easy to operate so that users can learn from
a simple demonstration by a salesperson or
another user. It needs to be highly durable so
that it can maintain working condition for many
years without frequent fixing.
The market targets, from most to less important,
are subsistence farmers, small-scale commercial
farmers, urban households, and large-scale corn
farmers. Subsistence farmers and small scale
commercial farmers can make more profit by
producing more corn products per unit time.
Households in urban area do not produce corn, but
often buy a large amount of corn from the market
to make their meals. A hand sheller will save
their time spent on shelling corn, and is a very
small investment for relatively affluent urban
households. There is still a lack of highly
automated electric corn shelling machinery in
large-scale Guatemala corn farms, due to the
extremely high price (10,000 USD), large farms
may also be interested in hand shellers for their
employees so that they can increase their
efficiency and increase profit. This
segmentation of markets may provide incentive to
design corn shellers at different automation and
price levels. Selling our product through interne
t or television is highly unlikely in rural area
so distribution partnership is the more feasible
avenue. Corn shellers can be conveniently
promoted and sold at local markets that farmers
frequent. Local demonstrations at rural farms
are also planned.
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• Another product

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• What is our product?
• Miniature power generator that converts kinetic
  energy to electricity
  
• What problem do we solve?
• Portable power is needed in many applications
  where battery replacement is not feasible
  

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• Where will we sell this product?
• Primary applicationpower source for pacemakers
  
  
• Secondary application power source for Portable
  Data Assistants
  
• Who is our competition?
• Wilson Greatbatch(they supply 90 of pacemaker
  batteries)
  
• Energizer, Duracell, Radio Shack, and other
  producers of small batteries, fuel cells

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2. Internet market research on target markets
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Pacemaker Market Research

• 600,000 pacemakers implanted annually
• 84 of users over 64 years
• Number of patients receiving pacemakers growing
  at 8/year.
  
• Current market 3.36 billion/year
• 40 of implantations in 2000 were replacements

Future Trends in Industry Economics, Brown
Univ. 2000
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Secondary Market Power Source for PDA

• Customers Handspring, Palm, Toshiba
• About 35 million PDAs sold by 2005
• At present Li-ion battery,Lithium Polymer
  battery, Advanced Lithium, Fuel cell
  
• Fuel cell info
• 50,000 units in 2002
• Expected increase to 2 million in 2007

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3. Market Research Questionnaires
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Pacemaker Implant Patients

• 1.Is this you first pacemaker? Y / N
• 1b.How many have you had? ______1c.How would
  you rate the procedure to replace the
  battery? 1(very traumatic) to 10 (walk in the
  park) ________
• 2.How many years do you expect your pacemaker to
  last? ______years
  
• 2b.What is the average life of your past
  pacemakers? ______years
  
• 3.Do you expect to outlive your current
  pacemaker? Y / N
  
• 4.On a scale of 1 to 10, how important is the
  battery life of your pacemaker to you?___
  
• 5.Do you know the brand and or model of your
  current pacemaker? N / _________
  
• 6.Did you pick out your pacemaker? Y / N
• 6b.What did you base your choice on?
  __________________________________________________
  __________________________________________________
  __________________________________
• 7.Do you like your pacemaker? Y / N
• (any elaboration)________________________________
  _________________________________________________
  _______________________________________
  

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• 8.What would most like to change about your
  pacemaker?
  
• (Hints does it stick out?, is battery life to
  short, does it need extra features?)
  __________________________________________________
  __________________________________________________
  __________________________________________________
  __________________________________________________
  _
• 9.Does your pacemaker function properly all of
  the time? Y / N
  
• 9b.What specific problems have you had with your
  pacemaker? _______________________________________
  __________________________________________________
  __________________________________________________
  __________________________________________________
  __________________________________________________
  _____________________________
• 10.Does your pacemaker cause you any discomfort?
  Y / N
  
• 11.Would you feel safer if you pacemaker was
  implanted closer to your heart? Y / N
  
• 12.On a scale of 1 to 10, what criteria will
  decide the choice of your next pacemaker? 1
  (Doctor decides) 10 (I gather information and
  tell my doctor what I want) ______

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Pacemaker Implant Doctors

• 1. How many NEW (patients first) pacemaker
  implant surgeries do you perform per week?
  __________
  
• 2. How many REPLACEMENT pacemaker surgeries do
  you perform per week? __________
  
• 3. Do you view pacemaker replacement/battery
  replacement as (circle one)
  
• a nuisance acceptable important revenue
• 4. When recommending a pacemaker, on a scale of 1
  to 10 how important is
  
• _____ your familiarity with brand
• _____ brand history and reliability
• _____ battery life
• _____ component life (full unit replacement)
• _____ patient restrictions (no exposure to
  microwaves etc.)
  
• _____ physical size
• _____ ease of surgery
• _____ utilizing new technology
• _____ patients preference
• _____ additional factors, please explain
  ___________________________
  
• ________________________________________________
  ___________

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• 5. In your view, is the location of pacemakers
  under the collarbone driven by
  
• ___ size
• ___ safety
• ___ necessity
• Explain_________________________________________
  __________________________________________________
  __________________________________________________
  __________________________________________________
  ________
• 6. Would you feel more of less comfortable with a
  pacemaker small enough to implant within the
  ribcage? Assume battery replacement is not
  necessary.
• _________________________________________________
  __________________________________________________
  __________________________________________________
  __________________________________________________
  ___________
• 7. If you would like to participate in a market
  interview (one-on-one) on the subject of new
  pacemaker technology, please provide contact
  information
• _________________________________________________
  __________________________________________________
  __________________________________________________
  __________________________________________________
  __________________________________________________
  _______________________________

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HW for next Tuesday, Oct 10

• Marketing Plan
• 1 page What is it?
• Initial Strategy for the 4 Ps
• Begin Secondary Research
• First draft questionnaire
• Strategy to get to Primary Research Targets
• Who are they?
• Communication means, e.g., Amigo, e-mail,
  telephone, etc.