Market Oriented Value Enhancement

For Commodities and Services

A trainers manual to promote access to markets for the poor

Market Oriented Value Enhancement

for Commodities and Services

Best Practices Foundation

Market Oriented Value Enhancement

for Commodities and Services

Published by

139, Richmond Road Bangalore560 025 India : +91-80-25580346 : +91-80-25586284 : +919448371732 : bfc@booksforchange.info : www.booksforchange.info Supported by Sir Dorabjee Tata Trust Bombay House 24 Homi Mody Street, Fort Mumbai400 001

Edition : 2012 Copyrght : Dr M S Subhas, KIMS, Karnataka University Dr Sangeetha Purushothaman, Best Practices Foundation (BPF)

Price: `160.00 ISBN: 978-81-8291-078-2

Contributing Authors: Sangeetha Purushothaman-BPF, M S Subhas-KIMS, James Brockington-BPF, Anita Basalingappa-MICA, Soumita Basu-BPF, Meera Halakatti-BPF, Rony C J-BPF, Natasha Ravindran-BPF, Simone Purohit-BPF, Shawn Sebastian-BPF. Sudha Menon-BPF
Disclaimer: The views expressed are those of the authors and may not represent the views of Sir Dorabji Tata Trust and Allied Trusts.

BfC Production Team: Shoba Ramachandran and M V Rajeevan Cover Design: Sudha Menon Illustrations: M B Suresh Kumar

CONTENTS
Introduction Module 1A : Module 1B : Module 2A : Module 2B : Module 3A : Module 3B : Module 4 Module 5 : : Goal Setting Game Tower Building Game Wedding Card Game Buying and Selling Game Format Free Market Visit Formatted Market Visit Understanding Customers Needs and Wants Eatery Game Participatory Market Appraisal: Preparation and Survey Participatory Market Appraisal: An Analysis Marketing Strategy Participatory Competency Assessment Skills Training Pilot Business and Customer Feedback Branding and Promotion Pricing Business Development Plan v 1 6 9 17 22 28 34 38 43 50 54 58 61 62 66 70 73

Module 6A : Module 6B : Module 7 :

Module 8A : Module 8B : Module 9 :

Module 10 : Module 11 : Module 12 :

INTrOduCTION
Genesis of MOVE
Over the last three decades, both the Indian Government and NGOs have invested considerable resources in micro-enterprise programmes aimed at improving the livelihoods of the asset-poor. These interventions have largely focused on enhancing the skills of participants and encouraging them to establish small scale enterprises producing commodities from locally available resources. All too often the results have proven to be disappointing.
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Skill enhancement training has tended to focus on one activity i.e., the production of a single commodity. Fixation on a particular product and sector has resulted in participants lacking the knowledge and skills to switch from one activity to another, making them vulnerable to changes in the market. Establishing production-based enterprises has often required participants to take large loans to fund the purchase of machinery and other materials. Repaying these loans depends upon the success of the new enterprise. For the poor, this represents a high level of risk; if the enterprise fails then they are saddled with debts they cannot afford, therefore threatening their future security and well-being.

In this traditional approach, markets have been woefully neglected. Important questions such as: Who will buy this product? and Is there sufficient market demand? have been routinely ignored. Thus, participants from countless projects have discovered, only once it is too late, that their products are not in demand and their enterprises are not viable. Wasted investments of time, effort, capital and hope have frequently left participants worse off than before they joined the programme.

MOVE: The Solution to Build Market Oriented Businesses

MOVE is a customer-centric approach to business. Market Orientation and Value Enhancement is a practical, sustainable, replicable, adaptable, profitable tool that has proven to be a viable alternative to improve livelihoods of the poor. This tool helps in setting up workable enterprises based on market needs, thus drastically reducing the failure rate. Market Orientation Instead of starting a small enterprise based on existing skills or locally available natural resources, participants are trained to undertake a business venture according to customer demand. Participants are trained to first ask, What does the customer want? and then, How do I deliver it? This approach increases the chance of success and sustainability of newly created enterprises.

Value Enhancement Is the process of continuously evolving new products and services to cater to customer demands. By adding value according to the customers wants, participants can move up the value chain and access specific markets that generate higher returns. They can also identify market niches that larger producers do not, or cannot, cater to. The main concept in MOVE is that a business has to be customer oriented for it to succeed. The customer has to be placed at the centre of business development right from the outset. Participants have to first understand their target customer base thoroughly. Once the customers requirements in the target market are understood, participants are then in a position to evaluate whether it makes good business sense to provide a particular product or service. Customers may have demands that are difficult to meet in which case it may not make good business sense to pursue that activity. Only if participants are satisfied that there is sufficient demand for a product or service should they devote time for other aspects of business such as developing human resources (skills), securing finance, and purchasing equipment and materials. Traditionally, development of income generating activities (enterprises) has been approached in the opposite way. Participants have been taught to build upon existing skills and available resources, take loans and purchase materials, and to begin production. Systematic thinking about markets has been neglected until the participants have had a product ready to be sold. It is at this point that most have discovered that there is an inadequate market; their products have not sold as expected and they have incurred losses. The first loss a poor participant makes is a turning point: having failed once she will rarely try again. Often participants continue an activity only because they have gone through intensive skills training and do not have the tools to shift to other products or services. This is the approach that MOVE tries to negate. Participants are trained to develop an understanding of the marketplace, and be sure they will not make a loss because they are giving customers exactly what they want. MOVE gives the trainee the ability to understand the markets even before they decide on the business. It provides the tools to not only understand customers but also to understand competitors. MOVE also inculcates a sense of flexibility which allows trainees to adapt to changeable market conditions and not get fixated with any one product or service. Marketing starts even before the business starts and ends long after a product is sold or a service rendered.

MOVE Training
Training begins by motivating participants to set goals, understand co-operation, team work, and the importance of the customer. It progresses to basic concepts on buying and selling, building customer focus, identifying profitable businesses through market visits, and providing an understanding of the larger marketplace. Trainees are taught simple methods to survey and understand the demand for a product or service in a chosen market. They are taught to understand competitor products, how to position their product or service, package it and brand it. Finally they decide on the marketing strategy and the business plan. By the end, trainees are empowered to enter the market confidently as independent players.

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Introduction

Purpose of this Manual

This manual is a practical guide for trainers to replicate the MOVE process, which begins with motivation, progresses to general business concepts, market research, and finally the formulation of a business. By the end, participants should be empowered to enter the market confidently as independent players. Market analysis is commonly perceived to be the monopoly of experts, but through innovative tools, MOVE has opened up possibilities for poor (even illiterate) individuals to understand markets. Complex business concepts are communicated through methods that have been tailored for an illiterate or semi-literate audience. In MOVE, participants learn by doing and every step forward is based on decisions that the participants themselves make. The first edition of the MOVE manual, brought out in January 2006, specifically targeted rural or peri-urban women who were landless and illiterate. It focused on the development of enterprises that produced commodities. This enhanced second edition has been broadened to include a larger target audience of women and youth (both girls and boys) in urban as well as peri-urban and rural communities. The focus has been expanded to include enterprises that provide services (such as trading and retailing) as well as those that actually produce commodities.

Structure of the Manual

This MOVE manual consists of 12 modules broadly classified into several sections motivation and management games; field visits; experiential learning; group learning; analysis; survey methods; skills training; and business plan development. The entire process requires handholding till the enterprise becomes successful. See Chart 1: The MOVE Path. Each module in this manual articulates the goals of the session, the link to the entire MOVE process, followed by step-by-step exercises, key concepts, expected outcomes, lessons learnt and case studies. The instructions provide a guide and the case studies illustrate a variety of situations, approaches and outcomes. The process will vary widely across many different contexts, and deviation from the text is entirely expected. Trainers using this manual are encouraged to adapt and modify modules to make them more relevant to their own specific contexts, and to ensure that the primary lessons are understood by the participants.

Selection of Trainers for MOVE

When implementing MOVE, it is very important to select the right trainers. MOVE trainers henceforth referred to as MOVERs should have experience in community development and training. It is also preferable that MOVERs are members of a local SHG, Federation or grassroots NGO. This is important because they must have a good understanding of the local context and be able to adapt the training for local conditions. It is also important that MOVERs have built a strong rapport with the community before the training begins. Because MOVE training is an intensive process, it is advisable that MOVERs should not be involved in any other training programmes for the duration of the project. MOVERs should ideally have experience in training in various areas such as motivation, leadership and livelihood development. They should be comfortable facilitating sessions with groups of 2030 trainees. They should also be adaptable and creative individuals who are adept at improvising solutions to unforeseen challenges and be ready to deal with the any kind of business that participants may decide on (however out of the box these ideas may be). At times, MOVERs may also have to help participants address problems in their personal lives (such as with family or other members of the community), which may otherwise hold them back from successfully becoming an entrepreneur.

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Selection of MOVE Trainees

It is equally important to select the right participants for MOVE training. All the trainees should:
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Be between 1850 years old. Be keen on running a small enterprise. Have support from other family members to start an enterprise. Be a member of a group (SHG) with savings. Be eligible for business loans. Not be involved in other livelihoods training or activities of other agencies.

Whilst MOVE training is conducted in a way that even illiterate participants can understand, better results can be expected when the trainees have achieved 10th standard education. The ideal Self Help Groups of which trainees are part of should:
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Be at least two years old. Have a good track record of savings and credit activities for at least two years, Be capable of providing loans at the time when the trainees need the money to start business during the course of MOVE training. Be eligible to receive loans from relevant agencies (banks, schemes, etc.) Have undergone capacity building training for leadership, group strengthening, gender and empowerment.

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Time frame for MOVE Training

For better results, a MOVE project should run for a period of 12 months. Modules 15 are conducted in groups and can be delivered intensively over five to ten days or, alternatively, in evening sessions over a number of weeks. Handholding of participants between modules is important to ensure that all participants remain comfortable with the content and any problems are addressed in a timely fashion. From modules 6 onwards, the training becomes increasingly tailored towards the individual needs of participants who will progress at varying speeds. Group sessions may have to be held with smaller numbers of participants who are progressing at similar speeds. Since each participant will begin to develop individual business ideas and will have different needs, MOVERs will be required to devote time to individual business planning sessions alongside delivery of formal modules. Ideally, all participants should complete all modules within six to eight months; MOVERs should then spend the remaining months of the year providing ongoing support and guidance to those participants who successfully establish enterprises. This process of business nurturing is very important to achieving positive outcomes.

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Chart 1

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MODULE 1A

GOAL SETTING GAME

To understand importance of setting goals in business.

Objective

Goals; Business; Income groups; Population size; Risk; Team building; Individual effort; Probability of success.

Key Concepts

Chalk Five coins.

All income generating activities need goals to set targets for profit and growth. This game is an introduction to the concept of setting goals.

Link to MOVE

To train 20 participants: 60 minutes to play and 30 minutes for analysis. More time to be allotted if more than 20 participants.

Time Required

Steps
1. Draw three circles one large, one medium and one small. The largest circle should be five feet away from the standing point.

5 feet

10

20

50

2. Write 10 in the big circle, 20 in the medium-sized circle and 50 in the small circle to signify the value of each circle. 3. Play the game in two parts first with individual participants and then in groups.

Exercise A: With Individuals

4. Explain how to play the game to all participants. 5. Each participant will have to throw five coins inside any of the circles. They can choose different circles or the same circle. Each participant will earn points as indicated by the value in the particular circle that the coin falls.

6. Ask each participant how much she/he aims to earn in total and make a note of it using Worksheet 1 (see below). 7. If a coin lands inside any of the circles, it is considered to be a successful throw. Make a note of successful throws and how much the individual has earned. 8. Calculate the total for each participant by adding all the points earned in each successful throw. For example, if one coin falls in the small circle of 50, one coin in the medium sized circle of 20, two coins in the big circle of 10 and one coin outside all the circles, the participant will earn a total of 90 points (50+20+10+10+0). 9. Play this game with as many participants as possible. Keep track of their targets and actual throws. If the group is large, play with at least four individuals, depending on time constraints. 10. Make a note of the points earned by each participant. 11. After this round, ask the participants, questions related to the results: a. Why did the participant aim for a particular circle? b. Did they succeed? If yes, why? If no, why? c. Could she/he have played it any other way? Record the answers in Worksheet 1.
Worksheet 1: Individual Goal Setting Exercise A Name of participant Target Actual throw Reasons to choose that target Could she have played in any other way?

A MOVER noting the results of a participants throw

Goal Setting Game

Exercise B: In Groups
1. Divide the participants into groups. There should be at least two groups with three to five participants each. Get each group to give themselves a name. 2. Ask each group to choose a representative who will throw coins on their behalf. 3. Ask each group to decide targets before they throw coins. The group should discuss and select the circles in which they want the representative to throw the five coins to achieve their target. 4. Make a note of each groups target in Worksheet 2 (see below). 5. Make a note of where the representative throws the coins. 6. Record the points earned by each group. 7. Calculate the total for each group by adding the points earned per successful throw.
Worksheet 2: Group Goal Setting Exercise B Name of group and representative Why was that player chosen? Target Actual throw Reasons to Could they have choose that played in any target other way?

QUESTIONS TO BE ASKED
After playing the game, participants might not be able to link its relevance to business goals. Hence, it is extremely important to ask questions that help the participants collectively analyse the game to link it to the goals of business. Note:

1. Why was the 10 point circle bigger than the 50 point circle? 2. Why was the 50 point circle so far? 3. Why did the group choose that particular representative? (Ability, skill, seniority, position?) 4. Why did they choose that particular target? (Realistic, ambitious, greedy, under-confident?) 5. Was there any difference between the targeted and achieved? Why? (Goal too high/low?) How could they have played better? 6. How can they apply the lessons from this game to a real life business situation? 7. Was it different choosing goals in a group? How? And why?

8. Were the goals set realistic? 9. Why did the group not choose to throw all five coins in the closest circle and have more successes? 10. Why did some throwers do better or worse in their second attempts? 11. Was the thrower confident, over confident or under confident? 12. Did the team support or not support the thrower? 13. What was the objective of this game?

CONCEPTS
Based on the answers and some skilful questioning, the following points should be brought out to show how this game is co-related to the following concepts: Goals: Start with the goal that is easier (larger and closer circle). Business: Start business on a small scale then steadily grow bigger once you gain practice and experience. Income groups: Customers can be divided into groups according to their income low, middle or high. Population size: The low income group is numerically the largest and the high income group is numerically the smallest. Risk: On starting a new business, targeting the high income group is a risky strategy. On the one hand there is potential for high profits. On the other hand the market is small and substantial investment is needed to provide products/services of high quality. Team building: Know the capabilities of team members; trust and support the team. Individual effort versus group effort: The differences between individual effort and group effort in a business can be demonstrated. Probability of success: The ground in this game is uneven coins may roll or bounce out of the circles. Similarly, trainees need to be aware that, in business, plans can be effected by uneven market conditions (e.g. fluctuating prices) that can influence the probability of success.

EXPECTED OUTCOME: Understand the concept of setting goals

LESSONS LEARNT
The trainer should summarize the lessons learnt which are largely based on what the participants come up with in their analysis such as: 3 3 In business, be very clear about setting goals. Markets comprise of different customer segments. Each segment, like the circles in the game, has its own challenges and benefits.

Goal Setting Game

3 3 3 3 3

When starting a business, be clear about which customer segment is the target low, middle or high income customers. When choosing a segment to target, decisions should be based upon the strengths of the entrepreneur. Goals help keep track of progress over time. Goals often work as a driving force. Meeting goals provides a sense of achievement, a reason to celebrate and stay motivated. Aim to grow step by step. Start small, gain experience, then move up the ladder; add on products or services based on an understanding of what customers need and want.

I appreciate a woman who sets her goals clearly and achieves it. I also appreciate it when someone plans to start small and grow big.

ACHIEVABLE TARGETS
During the game, Anasuya aimed three times for the circle marked 50 points, once for the 20 point circle and once for the 10 point circle but failed to get any of her coins into any circle. Jayathumbi, however, played after watching a few other participants. She aimed at the 10 point circle the first two times and successfully threw her coins into that circle. She then aimed twice for the 20 point circle and got one coin in. However, she was not able to get her last coin into the 50 point circle. During the analysis Jayathumbi said that she wanted to start small with the 10 point circle as it was very easy to get to and then gradually aim for the higher value ones. She said she did not want to take big risks. Anasuya on the other hand said that she targeted the higher value circles as she wanted to get as much as she could per throw since she was poor and needed money. Later, I realized that maybe I would have earned some points if I had targeted the largest circle which was closer to me, instead of getting nothing by missing the circles which had a higher value but were further away from me.

MODULE 1B

TOWER BUILDING GAME

Objective
To demonstrate the challenges and benefits of working in teams. 7 stones of varying shapes and sizes Stop watch.

Key Concepts
Team work; Varied roles.

To effectively run a business or complete a task, members of a team will have to work together, delegate responsibilities, and learn to cooperate.

Link to Move

For 20 participants:

Time Required

20 minutes to play the game and 20 minutes for analysis. More time to be allotted for more than 20 participants.

Steps
1. Divide participants into groups of four. 2. Give each group seven stones of varying shapes and sizes. 3. Ask each group to place the stones one on top of the other (not side by side) and make a tower (gopuram) within a minute. 4. Note the time taken by each group in Worksheet 3: Group Exercise. The group that builds the tower that stands is the group that wins.

Cooperation in a team can reap huge benefits in Business

Tower Building Game

Worksheet 3: Group Exercise Group Name Group Members Time Taken

QUESTIONS TO BE ASKED
1. Was it easy to build the tower? 2. Why did one group build their tower faster than others? 3. Did everyone contribute when building the tower? If yes, how? If no, why? 4. How does the game relate to building a business? 5. Why did each group decide to play the way they did? 6. Could the groups have completed the task any faster if they had played in other ways? 7. What various roles did team members play? 8. How did the teams allocate these roles?

CONCEPTS
Team work: Having members with different abilities in a team can bring benefits, as long as there is unity and cooperation. Varied roles: In a business organisation, different members play different roles according to their abilities and resposibilities. EXPECTED OUTCOME: The trainees understand that building a business enterprise needs the skills of all team members.

LESSONS LEARNT
3 People have different abilities. Each member of the team should contribute according to their specific abilities. Team members should support each other. Unity and commitment are required to make a business strong. 3 Cooperation amongst members of a team is very important in building a successful business. 3 3 3

There is danger that the women will play the game and not understand why it is relevant to a business. It is extremely important to make this link while analysing the game

TOWER BUILDING
Aswini is a 19-year-old girl from Kalakeri, a village near Dharwad city, in the state of Karnataka. She used to attend school but her parents forced her to discontinue her studies. This ended her dreams of higher studies. She had undergone tailoring classes with a lady from the village for four months, but did not know how to put this skill to use. She spent her days sitting at home idle, but knowing very well that she wanted to start a tailoring business. Then she joined the MOVE training. From the MOVE training she learned different business concepts, e.g., that it is important to fix goals to enable gradual growth. With the tower building game she realised that she could not do a business on her own and that it was important to have a team supporting her. According to Aswini, her team includes her mother, the kasuti teacher, some students and the people from whom she buys raw materials. She has been doing kasuti work for three months now. Her mother gave her `3000 to buy a tailoring machine and she also accompanies her to the market for her purchases. Her mother says that she is supportive of her daughter, So that she can learn new things. According to Aswini, all this is done for her mother to ensure Aswinis financial independence, even after marriage. According to Aswini, after the MOVE training, her being able to leave the house and do kasuti work is one of the many changes that have taken place in her life. She says that she can now be self-sufficient and in case her husband doesnt provide for her, she can work and be self reliant. In the future, she wants to open a shop from where she plans to run a tailoring and a kasuti business. Five years from now, she wants to have a big shop in the city.

MODULE 2A

WEDDING CARD GAME

Objectives
To understand various roles in a business organisation. To understand the importance of customers for the success of a business venture. 15 coloured chart paper sheets (3 sheets of 5 colours) 12 transparent sheets (3 sheets of 4 colours) 3 brown sheets 3 glue sticks (gum tubes) 3 scissors (or blades) 3 rulers or scales 3 sets of markers/ colored pencils/ sketch pens Currency (photocopied money).

Roles and responsibilities; Wholesaler; Retailer; Prospective customer; Customer; Customer needs and wants; Customers perception of products; Customer is king; Maximum utility of raw material; Costing.

Key Concepts

This game will simulate a decision-making environment where participants have to buy raw materials, make a product, delegate specific responsibilities, ensure timely delivery, set reasonable prices, negotiate, and estimate profit margins. This exercise introduces the idea of customer orientation, which is the central focus of MOVE.

Link to Move

For 20 participants:

Time Required

80 minutes to play. 60 minutes for analysis. More time to be allotted if more than 20 participants.

Steps
Set Up the Companies 1. Divide the participants into groups of at least four to five members representing companies. 2. Explain the roles and responsibilities of General Manager, Production Manager, Sales Manager and Finance Manager of a company. 3. Ask each group to form a company, name the company and chose team members who will play the role of General Manager, Production Manager, Sales Manager and Finance Manager of their company.

Purchase of Raw Materials 4. Give each company some money (photocopied currency notes) to buy materials based on their requirements. 5. Trainers set up a wholesale shop where participants can buy the materials necessary to make the cards. At the shop ensure that all materials are displayed with price tags. 6. Ask the companies to buy raw materials from this wholesale shop to make sample cards. There can be cards of many designs. (Note that this game can also be played with other cards like greeting cards, birthday cards, etc.) Sample Production 7. Give the groups 20 minutes to make sample cards to sell. Order Procurement 8. A second trainer must act like a genuine prospective customer specify her/ his requirement, bargain and place orders with the companies based on the sample cards they make. For this: Each company should introduce themselves and give reasons for the name they have choosen. Each company should present its sample cards to the trainers, explaining the features and giving the prices of their product(s). This should take no more than five minutes a company. The trainer then places orders with the companies only if the sample cards satisfy her/ his requirements in terms of design and quality. The price should be negotiated before any order is placed. More than one type of card and different quantities can be ordered.

Mass Manufacturing 9. Companies have 60 minutes to deliver their final mass produced cards. Keep the wholesale shop open for this period so raw materials are available. 10. Each company must record the details of material purchased in Worksheet 4.

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Wedding Card Game

Worksheet 4: Materials Purchased and Name of Company Items purchased Quantity bought Quantity used Cost price Total cost price

Final Sales 11. Trainer to check the products carefully. If it is seen that the final product is not of the same quality as the sample, then: Feel free to reject the product and cancel the order or Buy less number of cards or Negotiate a lower price. This helps the companies to understand that the Customer is KING.

12. Each company records details of their sales in Worksheet 5.

Worksheet 5: Sales of ............................. company Card type Items needed and the quantity Total amount spent on raw material Number of cards made Number of cards sold Total sales for each type of card required Reasons for cards not being sold?

Total Cost:

Total Sales:

Profit* Made: ` _____________ * Profit = Total Sales Total Cost Total Cost = Sum total of cost of all raw materials used for cards of all types. Total Sales = Sum total of sales of all the cards of each type

Analysis and Review 13. Demonstrate with one company how to calculate the cost of producing their cards. Ask other companies to do the same. 14. Calculate an approximate profit for each company. 15. Discuss ways by which their profits could have increased. Ensure that hidden cost factors, like scissors and glue, are considered. These costs per card can be calculated by first estimating how many cards these materials can be used for. Then, their price can be divided across the number of cards, e.g., if a bottle of glue costs `20 and if it can stick 40 cards, the cost of glue is `0.50 per card (`20/40 cards). Note:

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QUESTIONS TO BE ASKED
Analyse the game by asking the following questions: 1. Which company actually asked the potential customer what was wanted? 2. Would the companies have been more successful if they had asked the customer what kind of card is needed and then produced exactly according to the needs? 3. How many cards did the companies accept as an order? Was it realistic in the given time? 4. What amount and variety of raw materials were purchased and how was it used? 5. Could the companies deliver on time? 6. Price: How much is the customer willing to pay? 7. Quality: What features did the customer want in the product? 8. Product: What type of card did the customer want? 9. What was similar and what was different about the approaches taken by each company? 10. How do the profits made by the different companies compare? 11. Why did they choose the particular team members for the position of General Manager, Production Manager, Sales Manager and Finance Manager? 12. Did they actually function in those positions?

CONCEPTS
General Manager is a person who supervises all the functions of the business. She is involved in all major decisions taken in the business and is responsible for the overall growth of the business. She is responsible for solving any problem the business may be facing. She should help all other managers in their work.

Production Manager supervises the production section of the business. She is responsible for the quality of the products and its timely delivery.

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Wedding Card Game

Sales Manager is responsible for selling the products and increasing the number of customers. She should see that more and more potential customers become real customers and increase the number of products sold. She is responsible for the total sales of the business.

Finance Manager is responsible for tracking the cost incurred at every stage of the business and the profits earned from the sales. She should be able to find means of cutting costs and increasing the profits. Also, she is responsible for determining the selling price of a product/service and making maximum profits.

Wholesaler is someone who buys the product from the producer and sells it to the retailer. The wholesaler does not sell directly to the customer.

Retailer is someone who buys the product from the producer or the wholesaler and sells it directly to the customer. In a small enterprise, usually the producer plays the role of a retailer as well and sells the products directly to the customers.

Potential customer is someone who can be a customer, but has not yet bought any product/service from the business. Potential customers can be identified based on the needs and wants of that person.

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Customer is someone who has actually purchased at least one product/service from the business.

Customers needs and wants: The trainee understands the importance of meeting the customers to know their needs and wants. Customers perception of products: The trainee understands that the producer should make the product according to the customers choice. Costing: The trainee learns how to account for all costs to produce an item. Maximum utility of raw material: The trainee understands the advantage of buying raw materials in the right quantity and using it to the maximum. Profits are calculated by subtracting the total costs (of production or delivery of services) from the total revenue generated through sales. The remaining amount is the profit. If the costs are greater than the revenue generated, then there is no profit and the business is making a loss. Competition: The trainee understands that markets are always competitive; there will be other businesses offering the same product or service at different prices and/or qualities. EXPECTED OUTCOME: Trainees understand that the Customer is King! Understanding the customers needs is required before business operations begin

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Wedding Card Game

LESSONS LEARNT
3 3 The customers perspective is most important, and cannot be ignored. Small enterprises who produce without knowing the customers choice may face losses. The entrepreneur should know the market and the price of competitive products.

3 For any business it is important to ask, Why should the customer buy this? What do I have to offer that competitors are not offering? 3 Like in the tower building game, the wedding card game trains the trainee to work in a team. Even in real life business situations, skills of each member in a team must be used to the maximum for the business.

While probing I make sure I dont give them answers, but only help them to think more carefully so that they can give the answers themselves.

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IN OUR EXPERIENCE... THE WEDDING CARD GAME

The wedding card game in all villages illustrated that the customer is all important. In Channapur, three groups experienced three different challenges which were also faced in many other villages. Group A presented the trainer two sample cards, but he thought that neither of them was of good quality. He said, Do you expect me to buy these pieces of garbage just because you made them? The participants were forced to sit out for the rest of the session with nothing to do because they had failed to make a sample that met the standards of the customer. Group B created the nicest, most ornate cards of all groups. It took women approximately 15 minutes to draw the intricate design work on each card. Unfortunately the groups representative set the price at 80 paisa, which was actually below the production costs. The trainer readily agreed to this price and ordered 15 cards. The group slaved away making the cards and despite their hard work and the outstanding quality of their product, they suffered a deep loss. These women learned a lesson they would not forget: No matter how high the quality, if the pricing is not fixed correctly, they will make a loss. Only one of the four women in Group C was working. This woman complained, These three arent working. I am the only one doing anything. Unfortunately, she was not able to delegate responsibility efficiently and give the other women tasks to do, such as cutting and gluing. The group fell well short of the target order and thus made only minimal profits. It was also found that the impact of the game was dependent on simplifying the rules so participants could easily understand the results. In Kottur village, the women were given `200 to buy items such as glue, markers, and scissors. Because these items could be used over and over again, it was difficult to calculate the actual cost per card and profits. The trainers attempted to cost these materials by estimating that one tube of glue could last for approximately 200 cards, so they divided the cost of glue by 200. They made similar calculations for markers and scissors. The final figure was given to the women when the profits were calculated. However, with such complicated calculations (which the participants were not involved in), the participants could not understand the actual cost per card. As a result, the companies set their prices based on random estimates and each group spent about `100 regardless of how much material they actually needed. In short, they bought materials and sold products with no clear idea of what they had actually spent and how much profit they had actually made on each card. In contrast, in Mugad village, women were given glue, scissors, and markers for free. Despite having plenty of initial capital, they bought only the amount necessary to make their samples. The participants in Mugad were more aware of the expenditure on raw materials so they estimated the cost of production per card and set prices above that cost. This was a simpler process, easily understandable by participants

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MODULE 2B

BUYING AND SELLING GAME

To understand techniques of buying and selling from wholesale to retail.

Objective

Wholesale price and Retail price; Profit margin; Cost implications of buying; Sunk costs; Distress selling.

Key Concepts

Most people start income generating activities with the assumption that production is necessary to make a profit. This exercise shows participants that retailing is a legitimate business in itself, that offers the potential for substantial profit. They learn the techniques of buying and selling.

Link to Move

Soaps, groceries, vegetables, stationery, biscuits, milk and other products of daily use Photocopies of currency notes of different values.

To train 20 participants: Two hours to play, two hours for analysis. More time to be allotted if more than 20 participants.

Objectives

Steps
1. Explain the basic premise of the game; two groups will set up retail shops and two groups will act as customers and buy from the shops. The groups who start shops will buy their stock from a wholesale outlet managed by the trainer. 2. Divide trainees into four groups two customer and two retailer groups. 3. The trainer sets up the wholesale shop and displays all products with price tags on them. Prices should be slightly higher than what she paid to indicate wholesale margins. 4. Provide each group with equal amount of money (photocopied currency notes of all values). Also, the amount given to each retailer group should be more than half spent by the trainer to buy materials. Hence, if the trainer spent `200, each retailer group should be given `120. 5. Retail groups give their shops a name and display their products with price tags. 6. Ask the retailer group to estimate in advance total sales, estimated profits and enter this information in Worksheet 6. 7. Give 30 minutes for retailer groups to buy their stock from wholesale shops.

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8. Provide each customer group with same amount of money (photocopied currency notes of all values). The customers should bargain for the best prices possible. 9. Give 30 minutes for customer groups to buy from retailer groups. The retailer groups should make the most of the selling time.
Worksheet 6: Estimated vs Actual Sales and Profits Retail group Expected sale Expected profit Actual sale Actual profit Difference between actual and expected Reasons for difference

10. Instruct retailer groups that the trainer would buy back unsold products at half the price but will not buy back perishable products like milk or vegetables from them. 11. Each group should note the items bought and sold by each retailer group in Worksheet 7. Also note the cost price and selling price of items sold.
Worksheet 7: Details of products sold Item Quantity purchased Quantity sold Cost price Selling price Profit Turnover Profit margin (%) Reasons for not being able to sell

QUESTIONS TO BE ASKED
Analyse the game asking the following questions: 1. What are the items left with the retailer groups? Can these items be sold the next day? 2. What are perishable items and what kind of care should be taken while buying and selling them? 3. What is sunk cost (an expenditure that cannot be recovered) and to what products does it apply? 4. Why did the retailer groups buy the selected items? Why did they not buy other items? Why did the customer groups buy the selected items over others?

18

Buying and Selling Game

5. Which retail group was most successful and why? 6. Which products were most successful and why? 7. Which of the products yielded highest profits? 8. Which of the products incurred highest losses? 9. Which products sold the most in volume? 10. Which products sold the least in volume? Using Worksheets 6 and 7, compare the actual results with targets the retail groups had set at the beginning of the game.

CONCEPTS

Retailers buying from wholesalers

Wholesale price is set by a producer for the sale of goods to the retail sector. Wholesale prices are based on volume sales and are set low enough to allow for a profit margin for the retailer. Retail price is the price at which goods or services are sold directly to the customer. Retailing is to sell in smaller quantities at slightly higher prices. Profit margin is a ratio calculated by finding the net profit as a percentage of the total revenue. Cost implications of buying; Sunk costs: Trainees learn buying strategies and what to keep in mind while buying. Sunk cost is a cost that has been incurred and cannot be recoverd. High volumes of perishable items can result in losses in the form of sunk cost, e.g., milk cannot be sold once spoilt. Distress selling is a rapid sale of products, often at a loss. An example of distress sale is selling vegetables/flowers at a lower cost at the end of the day, because they lose their freshness and the retailer may not be able to sell them later at all.

Customers buying from retailers

EXPECTED OUTCOME: Trainees understand buying and selling techniques and the relationship between various players (wholesalers, retailers, etc.) in the distribution chain and how each works.

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LESSONS LEARNT
3 3 3 The game establishes that there is a distribution chain in any business venture. In business, keep the target segment in mind when stocking items. Higher volumes sold at lower margins will be more profitable. Keeping a profit target can help us understand how much capital investment should be made and what should be the minimum selling price to meet the target. Note: Retail and wholesale businesses do not necessarily have to be linked to ones own production unit. It can be a completely independent activity. There is a lot of profit in trading alone.

I realised the high profits associated in simple trading business.

20

Buying and Selling Game

IN OUR EXPERIENCE THE BUYING AND SELLING GAME

In all villages, participants realised the importance and profits associated with retailing. In Mandihal, two groups sold based on two very different philosophies. Group A said, We should make 25% profit on each item. They attempted to accomplish this by any means necessary, and even resorted to cheating. Group A charged customers the price for a 4kg packet of soap while in fact the packet contained only 2kg. The customers were furious, shouting at Group A and threatening to go to Group B. Group A apologised profusely, and after a lot of sweet talking, managed to get the customers to sit down again. But they did not learn their lesson. Next they attempted to sell undergarments for almost double the price, saying there were four pieces in a packet which only contained two. 15 minutes of name-calling, accusations, and threats followed. Customers did not trust Group A to make fair transactions, so they refused to buy from their shop. As a result, Group A made heavy losses. Group A cheated because they were too set on achieving a 25% profit margin, which blinded them to the fact that this margin did not match market prices. Group B, on the other hand, set their prices at one rupee above the wholesale price, and said, Take it or leave it. They conducted business without any quarrelling, but their profit margins were tiny. Group B did not take market prices into consideration. Instead of setting the price based on market factors such as, What are the prices of comparable products? How much is the customer willing to spend? and What are the prices of the competitors? they set a very simple price formula based on the wholesale price. This strategy prevented them from making larger profits. However, most villages noticed a sharp increase in the profits made in just one hour of retailing compared to the previous session of an entire afternoon spent producing wedding cards. Every group used different methods to buy materials wholesale. In Mugad, groups bought the cheapest items first to minimise risk. In Channapur, groups bought items such as vegetables because they were consumed daily. Certain products such as food, had moderate, but almost guaranteed profits, while clothing items generated the most profit when sold (in Kottur) and the highest losses when they went unsold (in Channapur). These products were analysed later as high risk with high gain (clothes), and low risk with low gain (vegetables).
Wholesale Retail

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MODULE 3A

FORMAT FREE MARKET VISIT

To shift the participants perspective from that of a customer to that of an entrepreneur. To identify profitable businesses in the market.

Objectives

The 7Ps: Product, Price, Promotion, Place, Physical evidence, People and Process.

Key Concepts

Notebooks Chart paper for analysis Marker pens for analysis.

This is a milestone session because it is here that the initial market orientation takes place. What participants learned in previous simulated sessions can now be observed in reality. Participants will observe transactions not only from the customers point of view, but also from the sellers point of view. They observe market dynamics. This session is also essential because participants begin collecting the basic information needed to explore possible business opportunities and construct business strategies.

Link to Move

To train 20 participants:

Time Required

30 minutes for instructions. Three hours for the market visit. Three hours for analysis. More time to be allotted if more than 20 participants.

Two market visits are needed. In the first market visit, the trainees are not given any special directions or questionnaire. This is called the Format Free Market Visit (FFMV), since trainees are free to do whatever they want. They are told to go to the market and find products or services that they think are profitable and possible for them to do. The trainees are encouraged to ask any question they want to shopkeepers or customers in the market place. They also identify possible business they could carry out. The second time they go to the market for the Formatted Market Visit (FMV). After the analysis of all the information they got from their format free market visit, the women (with the trainers help) list out all the information they need for their business. The trainees visit the market with a prepared list of questions for the formatted market visit.

Steps

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Format Free Market Visit

A: Types of Products and Services 1. Explain the objectives of the market visit. Participants need to understand the various kinds of products and services that are available and successful in the market. This exposure visit helps the trainees identify existing opportunities and determine the kind of business they can take up. 2. Tell the trainees that they should see the market place from a trainees point of view and gather information by observing or asking questions to anyone in the market. 3. Divide the trainees into groups of two or three. 4. After discussions with the trainees, decide on which market will be most beneficial for them to visit. The number of groups that can visit the same market depends on the size of the market. If the market place is very small, then only one group should go there. 5. Finalise with them a time for the visit. Give the groups a common meeting point from where they can be picked up and later dropped off. 6. Each group will visit the chosen market to explore and observe important features of business. 7. Give each group a notebook and pen to write down the information they collect during the market visit. If there is no one in the team who can write, they should remember all the details and, with some help, write it all down as soon as they come back from the market. This will ensure that the information is not lost. B: Identification of possible business activities 1. Trainees identify at least 10 different business which they may want to start. 2. Instruct the trainees to look for whatever they want, ask whoever they want, see all that you can and encourage them to explore as much as possible. 3. Visit each group during the market visits to see if they are comfortable. 4. After they return, trainees should fill in the activity of the shops in Worksheet 8 along with any other information they have collected. 5. Question the trainees to ensure that they have shared all the information they have collected. Visiting the markets earlier will help the trainer in asking these questions.
Worksheet 8: Possible Business Activities Activity Location Name of shop/business Capital Profits Turnover

6. When the group returns from the visit, ask them to draw a map of the market and mark and number the shops they visited.

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7. Keep motivating and encouraging the trainees to express their observations after the format free market visit. Explain that the formatted market visit is planned only so that they can get the answers to all their unanswered questions.

QUESTIONS TO BE ASKED
Choose 5 of the 10 business identified by each group for the analysis. Analyse the visit the same day or the very next day, on the following points: 1. Why did they go to those specific shops? 2. Why did they not go to the other shops? 3. What was the business activity? 4. Where was the business located? Describe the location. 5. How many people were involved in the business (owners and staff)? 6. How much was the investment? 7. What is the total sales of the business? 8. What is the total cost for the business? 9. What is the profit made by the business? 10. What is a good business or a successful business according to the trainees? 11. Why do they think it is a good business or a successful business? What is the criteria? 12. Did they see any product in the market which did not sell well during the Buying and Selling game? How was that product doing in the market? Who are the customers for that product? 13. Analyse all the business based on the 7Ps.

CONCEPTS
Any business can be analysed keeping in mind the 7Ps: Product Product is the commodity or service that has to be sold.

Price Price is the amount at which the product is sold. It is what the customer agrees to pay for and the seller agrees to sell for. If both parties negotiate well, then this can be a win-win situation.

24

Format Free Market Visit

Place Place is where the shop or service is located. It is also the distribution chain that reaches products to end consumers.

Promotion Promotion is the method(s) through which the trainee attracts the customers.

People People are the individuals involved in the business. It is important that they know their strengths and weaknesses for the business and maximise on their potential.

Process Process is the system of steps followed to produce and market the product or services.

Physical Evidence Physical evidence is the proof of the products attributes which the person is trying to sell. It is something which is tangible for the customer to see, smell, hear or feel and immediately have proof of the attributes. This is a way to attract customers.

EXPECTED OUTCOMES: The trainees start seeing the markets from an entrepreneurs perspective rather than from a consumer point of view. Selling is an important part of any business. Service-oriented business is profitable.

25

LESSONS LEARNT
3 The trainees start thinking more about marketing and service oriented work instead of thinking only about production. Trading is also a respectable business. Like in the buying and selling game, the market visits also show that only selling or trading (retailing/wholesaling) can be an independent profit making business. It is not only production related business that is profitable. In fact, at times only trading can be more profitable than production. A trainee does not always have to sell a product. He can choose to sell only a service, without any product. With the help of the 7Ps the trainees can plan their business. By analysing their enterprises based on the 7Ps from time to time, this will help them in making little changes in their business so that they can be more efficient and more profitable. Note:

3 The trainees learn how to analyse any enterprise based on the 7Ps. 3

The trainees usually have some wrong ideas about a few business. They think it involves huge investment or that they dont have the ability to do that business. I help them get over such wrong ideas.

26

Format Free Market Visit

A: SEEING MARKETS AS CONSUMERS

The participants gathered very little information other than wholesale and retail prices. Most participants did not ask questions about shelf-life, stock, distribution, customer relations, market segments and other such information. They took the session as a chance to do some shopping and shared with other participants the asking price of retailers and (proudly) compared it with the price they were able to bargain. During the analysis of the game, participants were asked about their observations on other aspects of the business they had seen and they said, Oh, I didnt think about that.

B: SABERA BEGUM PICKS THE RIGHT BUSINESS

Sabera is an illiterate woman from a poor family. She used to sell bangles earlier but lost her business when both she and her husband fell ill and spent all their savings on treatment. During the MOVE training, the group chose to go to the main market for their free format market visit. It was here that she was exposed to a range of business and their unique points. She decided to make a start with a sari business by tapping her old bangle customers. Within a month, with a capital of `500 Sabera bought three saris with which she started her new business. Having learnt about the importance of reaching out to customers in the MOVE training she attended, she began visiting houses in her village to inform people about her new business and to invite them to see the saris. Soon people started coming to her house to purchase saris. Within 10 days she sold all three sarees and made a 15% profit of `80. The second time, she bought a consignment worth `800. Her husband supported her by investing `250 in her third consignment of saris. She sold these in 22 days making a margin of 1020% depending on the price of the sari. Today her customers are asking her to stock other kinds of garments, especially accessories for saris like petticoats and blouses. Sabera successfully runs her sari business, making a 1015% profit margin in each business cycle. Her exposure during the format free market visit made her realise that if she put her mind to it, there were many business possibilities for her to explore. She chose to sell saris and is doing so successfully.

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MODULE 3B

FORMATTED MARKET VISIT

To observe market dynamics in detail from an entrepreneurs perspective. To identify profitable business in the market. Notebooks and pens Chart/brown paper and marker pens.

Objective

Target segments; Types of retail outlets; Types of products; Distribution chain; Investment and cost decisions; Customer needs and wants.

Key Concepts

This session helps participants build the skills to understand the market. It fills gaps in knowledge with primary research. The information they gather in this session will be the basis for future decisions on how to enter business.

Link to Move

To train 20 participants:

Time Required

60 minutes for instructions. Three hours for market visit. Three hours for analysis of each business activity. More time to be allotted if more than 20 participants.

Steps
1. Analyse the information collected from the format free market visit with the groups and help them identify the missing information. 2. Ask the trainees to choose five business activities which they want to take up. 3. Explain to them clearly that the information they collect during the market visits should help them make decisions about the business they are going to start. 4. Ask trainees what information they would need to know for their business activity. 5. Help trainees evolve a format to collect information on the chosen business. 6. Each group should carry a notebook and pen to write down all the information. Any member of the team can write for all the activities. If there is no one in the team who can write, they should remember the information in detail to record once they return. 7. Finalise a time for the visit. Give groups a common meeting point from where they can be picked up and later dropped off. 8. Visit each group during the market visits to see if they are comfortable.

28

Formatted Market Visit

QUESTIONS TO BE ASKED
Analyse the market visit the same day or the very next day and get the trainees to answer the following questions: 1. What was the location of the business? Describe the location. 2. How many people were involved in the business (i.e., owner and staff)? Describe the different types of customers who visit the shop. 3. From where did the shopkeeper purchase the products? 4. How much was the investment? 5. What is the total sales of the business? 6. What is the total cost of the business? 7. How much profit does the business make? 8. Analyse all the information the group collected based on the 7Ps. 9. Ask the trainees to define the business activity and write it in the core of the flower diagram. 10. Put each attribute associated with the activity in one petal around the core. 11. Put each attribute that trainees think can be added to enhance the value of the business but is not presently being offered in one dotted petal in a second row (see floral worksheet).

CONCEPTS
Target segments are groups of customers most likely to buy product or services based on attributes such as price or function. Types of retail outlets; Types of products: The trainees get an understanding of the different types of shops and products that exist in the market. Distribution chain is the chain of business through which goods or services pass until they reach the end customer. It can include wholesalers, distributors and retailers. Investment and cost decisions: Starting a business requires investments in materials and equipment. Investment decisions need to be taken carefully based on knowledge of the market, so that this expenditure is not wasted. Good investments are those which will generate income or appreciate in value over time. Customer needs and wants: The trainees already start thinking of customer needs and wants as they identify attributes that are not currently present in businesses. They use their knowledge from the Wedding Card game to analyse customer needs and wants.
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EXPECTED OUTCOME: Trainees select possible business activities

LESSONS LEARNT
3 3 3 Participants get information about the different products and the dynamics of the market place, thereby building their capacity for lateral mobility (switching business ventures). Participants can choose where they want to position their business in the distribution chain. Participants develop a better understanding of the 7Ps to later run a business.

I will see that the trainees collect the information necessary to understand the chosen business on their own.

A: RAI SGSY GROUP

In Amta, West Bengal the Rai group chose vegetable vending as an activity. As shown in the diagram below, the core of the flower was vegetable vending and each petal indicated: 1. 2. 3. 4. 5. 6. Attractively displayed vegetables. Fresh vegetables. Proper weight of vegetables. Moderate price of vegetables. Cleanliness of the vegetables. Good customer relationship.
Provide off-season vegetables Reward loyal customers

Displayed attractively

Clean Give carry bags

Vegetable Vending Handle customers well

Fresh Stock milk

Prices moderate

Properly weighed

The Trainer asked the Rai SGSY group if there were any Stock attributes that was not offered by shopkeepers that they fish separately might want to provide to add value to their business. The trainees drew another layer of petals with dotted lines and members suggested additional features presently not offered such as: 1. 2. 3. Stock milk along with vegetables. Stock fish but keep it separate from the vegetables. Give extra benefits to loyal customers.

Option of exchanging vegetables

30

Formatted Market Visit

4. 5. 6.

Give option for changing the vegetables if it is not good after purchase. Off-season vegetables to be made available. Give customers a carry bag.

B: URBASHI SHG
In Amta, the Urbashi SHG chose a grocery store as an activity. As shown in the diagram below, the core of the flower was the Grocery Store and the petals represented attributes as below: 1 2. 3. 4. 5. 6. Good quality products to be made available. Variety of goods to be stocked. Carry bags to be provided. Credit facilities to be extended. Good customer relationship. Proper weight/measurement of the goods.
Keep News papers Add mobile recharge Add STD Booth

Proper measure ment

Good quality Large Variety Grocery Store Good Customer rela ons Gives carry bags
Provide fan for customers Home Delivery

Gives Credit

The Trainer asked the Urbashi SGSY group to list attributes not offered by shopkeepers that they felt they might like to provide in their shop. The trainees drew another layer of petals with dotted lines and added attributes which are presently not offered: 1. 2. 3. 4. 5. 6. Have a STD phone booth within the shop. Deliver items to homes if needed. Keep newspapers for customers. Provide a fan for the comfort of the customers. Give discounts on bulk purchases. Keep mobile recharge cards.

Give bulk discounts

The Urbashi group also said that they would keep their selling price down by taking less profits and selling larger volumes.

C: HIGHER PROFIT ACTIVITIES

Jayashri Goravanakolla is a 30-year-old woman who lives with her husband and has no children. Before participating in the MOVE training she had a tailoring business, with an average monthly profit of `700 to `800. As this income was not sufficient, her husband forced her to work for a daily wage. The MOVE training taught her new things and gave her the knowledge and self confidence to start a small business. She says, Now after the training I have courage and am confident that I can do business and earn money She also learned skills on how to attract customers and how to behave with them. In the formatted market visit to Dharwad she saw that there was a huge variety of business possibilities to choose from other than tailoring. She also learned where to buy materials at

31

wholesale rates. She also realised there was a demand for ready made clothes in her village and even her tailoring customers were asking for ready to wear items they could purchase. Doing parallel business was an option as both could be done from her home. Therefore she decided to sell ready made clothes as well. To begin her business Jayasri took a loan of `2,000 from her SHG and is presently earning a monthly profit of `1400 to `1500 which allows her to repay this loan. Because of the money she is bringing in, her husband has started going with her to various retailers to buy clothes and has even offered money in case she needed it. She now feels that her husband can join the clothes business, especially since he is unemployed and works for a daily wage. She says, We can start doing business in a big way. Her final message to women like her is that if they are willing to do something she can encourage them! She is also of the opinion that to convince people to attend MOVE training all it would take was to tell them the benefits of the training, the profits that MOVE graduates are earning and how they are doing after the training.

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Worksheet 9: Formatted Market Visit 1 2 Business activity Investment Land Machinery Working capital Total Turnover Sales: Per month Per year Human resources: People: Male Female Skills required: Individual (what you have irrespective of what you have been taught) Technical Wholesale price Retail price Who are the customers? How much are different kinds of people buying? Period of sales (Daily/Weekly/etc.) Where is it sold? Record geographic location, and types of stores that sell the product (i.e., roadside vendors, shanties, fancy shops). Who are the competitors? (How many and where are they?) Profitability? per month per year What qualities of the product are the customers looking for? Any other relevant information

5 6. 7 8 9

10 11

12 13

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MODULE 4

UNDERSTANDING CUSTOMERS NEEDS AND WANTS

Objectives
To understand customers demands based on their needs and wants. Chart paper Marker pens.

Needs; Wants; Market Segmentation.

Key Concepts Link to Move

In the previous module, the participants observed how products are bought and sold and shortlisted a few products. This session asks the participants to link what they observed in the market to the customers needs and wants for the products selected.

Time Required
Three hours.

Steps
1. Clearly explain the concept of needs and wants. 2. Make a list of at least three products and three services that the trainees have seen during their visits to the market. 3. For each of the products and services listed, collectively discuss the needs and wants that different customer segments might require. Complete Worksheet 10 on a sheet of chart paper that everyone can see. 4. Ask participants to tick off the customer wants that they can satisfy. 5. Clearly explain the concept of customer segmentation. Then ask participants to identify the customer segments for each product or service.
Worksheet 10: Needs and Wants Product/service: Customer needs Customer wants Can we satisfy these wants? Customer segment

34

Understanding Customers Needs and Wants

CONCEPTS
Needs: The minimum attribute(s) that a customer would require from a given product or service. Wants: The extra attributes that are not essential but which a customer may look for in a given product or service. It is based on these extra attributes that customers will select a particular brand of product or particular service provider over the alternatives available in the market. It is rarely possible to satisfy all wants of all customers. For instance, satisfying the want for high quality packaging may rule out the possibility of meeting the want for a low price. Therefore entrepreneurs need to consider which wants are most important to satisfy based on an understanding of their customers priorities.
Product: Detergent Customer Needs To clean clothes Customer wants Lathers well Gentle on hands Pleasant scent Low price Service: Restaurant Customer Needs To serve food Customer wants Tastes good Variety of foods Hygienic practices Comfort Friendly staff Fast service Low price Can we satisfy these wants? 3 8 3 8 3 8 3 Customer segment Everyone Middle / Upper income Middle / Upper income Middle / Upper income Everyone Everyone Lower income Can we satisfy these wants? 3 8 3 8 Customer segment Everyone Everyone Middle / Upper income Lower income

Customer Segmentation: Customers needs and wants relating to a given product or service are likely to depend upon specific characteristics such as age, gender, religion, level of income, lifestyle choices (e.g., food habits), etc. By categorising customers based on such characteristics, we can refer to different market segments. Since it is very difficult to cater to the wants of customers in all market segments, it is good practice to target one or two specific segments only. Doing this helps entrepreneurs to have clearer business goals and to serve their target customer base more effectively. EXPECTED OUTCOME: Trainees understand that they need to focus on satisfying those wants which are most important for the customer.

35

LESSONS LEARNT
3 3 Trainees should understand that the commodity they produce or the service they provide should always satisfy the minimum needs of their target customer base. Trainees should understand that different customer segments want different attributes from a product or service and it is not possible to satisfy everyone. Therefore they should identify the most important wants of their target customer base and find ways to satisfy them. Trainees should understand that the costs of providing extra attributes in order to satisfy customer wants must not exceed the extra profits this will generate. For example, it does not make good business sense to provide good quality packaging if the costs are high and customers will only pay a little extra for this feature. Better to focus instead on satisfying other wants which give higher returns.

I dont give any clues to the women. They decide on their own what questions they should ask the customers to understand their wants from the product. If I help them with clues, they will not learn properly. I correct them later during analysis.

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Understanding Customers Needs and Wants

MY CUSTOMERS WILL COME BACK TO ME NOW

Sandhya is from a poor family from Sreerampore. After her husband died three years ago, she got involved in her father-in-laws grocery store business. She lives in a joint family with her son and she supports her family with the profits from her store. While visiting markets during module 3 of the MOVE training, Sandhya learnt about different ways to attract customers. In the beginning I took this training lightly as any other training! But it was from Module 3 onwards that I really got interested and started paying attention. It was Module 4 (needs and wants) that she found most helpful and when applied, it made a big difference to her business. Also, the analysis of a service oriented business with the help of a flower diagram helped me a lot. Sandhyas grocery shop is located on the main road near a bus stand and one of her main competitors is positioned right in front of her store. Her competitors business was doing much better than her own. She began applying what she had learnt in the MOVE training especially on service quality, and within three months, her profits doubled. After training on MOVE I started studying my competitor his behaviour, what kind of products he stocked, what kind of services he provided. I also learnt how to target customers, how to sell better, and about the value of time. She has started adding value to her service in little ways like keeping sufficient change. My competitor never has change, so customers are forced to buy what they do not really want. I even sell small quantities since I know that my customers will come back to me when they want large quantities as well. When there is a complaint, she exchanges the item without hesitation,. This has built trust amongst her clientele. She now believes above all in courteous behaviour. I might lose out on some immediate profits but in the long term, I am a gainer as I never lose a customer. Clients come back to me now. She opens her shop on time. She makes sure that she is punctual, unlike others. Customers know that her shop can be relied on to be open. She even keeps her shop open on festivals when other shops remain closed. The wholesalers also know that my business is consistent and doing well which has helped me a lot. As a result, I have started getting credit from them, which was not the case earlier. I make it a point to pay them back on time. Sandhya has begun to focus on what customers want which other shops do not provide. I can give you an example the shop opposite did not have a ready light for cigarettes. I started keeping a lighter tied to a rope in the corner of my shop so that people could just light their cigarettes without having to buy matches. Today she is doing far better than her competitor. She has not only retained her customer base but has also been able to attract new customers. Her business is more market oriented and client sensitive. Her capacity to access credit has increased. With an expanded clientele her profits have doubled from `2,500 to 5,000.

37

MODULE 5

EATERY GAME
Objectives
To help participants understand the concept of service as distinct from a product. Chart paper or brown paper Marker pens.

Key Concepts
Services vs Products

Link to Move
Through this live experience of running a business, participants understand several business concepts related to service provision.

Time Required
One day for the game. Three hours for the analysis.

Steps
1. Divide the number of participants into groups of six or eight. 2. Instruct the group that they have to set up eatery shops for a day. They should decide where to set up the eatery and when to open it. They should plan and buy materials to prepare items to sell in the eatery from the market. 3. Participants have to form an eatery and name it. 4. They have to choose a General Manager; Finance Manager; Production Manager; Sales Manager from their group. 5. They have to create a plan on Where will they set up the shop? What time will they open the shop? What will they sell? Where will they buy the raw materials from? What will their specialty of products be, if any? What are the different services they want to provide in the eatery (ambience, cleanliness, seating, music)?

6. Ask the groups the time and place for their eatery shops so that it can be visited.

38

Eatery Game

7. Tell the group that the analysis of the game will be done the day after the game and they should be prepared with data as per Worksheets 11 and 12. List in the Worksheets preparations for selling, quantity to be sold, cost price and selling price of each item individually and estimate profit 8. Visit the shop at the time given by the group to check if the shop was set on time since, punctuality is an important aspect. 9. Write down all your observations so that it can be shared with the trainees during analysis. The observation points should also include: What items are they selling? Why did they choose to sell that item? Why did they choose to sell in that particular place? What promotional activities did they do to attract customers? What was the process that participants underwent to reach the selling point? How clean is the eatery? Check for physical evidence of cleanliness. For example, if there are trash-bins in place or whether left-overs are strewn all over the floor and/or other surfaces. How was the work divided among the group members? How was the eatery managed? Which members were involved in the eatery and what were their roles? How were customers served?

Worksheet 11: Total Costs Name of the company: Raw materials Quantity brought Cost price Quantity used Final item: Closing stock Processing cost Amount made

39

Worksheet 12: Total Sales and Profit Items Total cost Selling prices Total Amount sold Stock left Total sales Overheads Profit

QUESTIONS TO BE ASKED
Analyse all the eateries set up by different groups. 1. Discuss all the aspects of the eateries based on notes of trainers. 2. Relate the different features of the shop with the 7Ps showing them the following: Product Mix Product Place Price Promotion Service Mix Addition Physical Evidence People Process (evaluation happens at every stage of a process). 3. Discuss the competitors around them. 4. How did each consumer behave in front of the eatery stall? What questions were asked, what was bought, how much? 5. Did customers give feedback on the service? (quality of food, price, warm/cold, etc.) 6. What service strategy was used to sell? How were customers attracted? How were objections handled?

CONCEPTS
Understanding the difference between products and services: 1. Products are tangible and services are intangible. 2. Products are standardised, while services are heterogeneous. Link variation to price (flower stringing compared to bouquet). 3. For products, production and consumption occur in different places while for services they typically occur in the same place.

40

Eatery Game

4. Products are normally non-perishable. In contrast, services are time-bound and tend to dissipate as soon as they are delivered. 5. Customer feedback is immediate for services. 6. The scope for value addition within services tends to be higher than with products. 7. You cant keep stocks of services like you can products. EXPECTED OUTCOME: The participants understand the basics of running a business

LESSONS LEARNT
3 3 3 3 Participants understand the concept of a service and how it differs from products They understand how to keep a variety of items in different quantities They understand how to calculate profits on multiple products They learn the importance of choosing appropriate, quality raw materials.

I dont give them any advice on where to set the eatery or what to sell. This way their ownership over the eatery increases.

When the trainees make a profit from the eatery shop, their confidence gets a BOOST. This is also because they do everything on their own, without any help or advice from the Trainer.

Note:

41

A DAY THAT CHANGED JAHURA BEGUMS LIFE FOREVER

After the death of her husband, Jahura was unable to make ends meet as he had been the sole earning member. Though her husband was a business man, Jahura was not involved in his work so she was clueless about how to run a business. Therefore, the MOVE training was an opportunity not to be missed. The eatery game made a huge impact on her she felt she had the ability to run a business and was confident about making a profit. She learned how to buy materials, how to attract customers and how to satisfy them better. The real-life experience of the eatery game made her determined to run a successful business. That day she decided to start her own retail rice business and it changed her life forever. The customers purchase the rice from my house. I sell it by weighing the rice in front of them. This gives them more satisfaction. The customers are also happy with the quality of rice I give. The eatery game gave me the self-belief to start a business on my own, she explained and added, I will apply for a bigger loan to expand my existing business. MOVE training has given me the confidence to run a business. Now I make a profit of `800 per month. I will be able to earn more profit if I can expand the business, and there is ample scope for that as the demand for rice in this area is very high.

42

MODULE 6A

PARTICIPATORY MARKET APPRAISAL: PREPARATION AND SURVEY

To learn a method for estimating: (1) customer demand, and (2) existing supply, of a given product or service in the market.

Objectives

PMA; Customers; Competitors; Piloting; Segmentation; Sampling; Framing questions

Key Concepts

Chart paper Marker pens Calculator Notebooks.

Participatory Market Appraisal (PMA) is an innovative form of market research created especially for illiterate or semi-literate participants. The trainees design and conduct their own surveys through face-to-face interaction with both customers and competitors. The exercise helps them to understand both (1) the demand for, and (2) the existing supply of their selected product or service in the local market where they will be operating.

Link to Move

Three hours to explain concepts of Participatory Market Appraisal (PMA). Four hours to design a PMA survey according to the business activity. Two days to pilot the survey for a business activity. Four hours to finalise the PMA survey questionnaire based on the pilot. One week for the trainee to conduct the survey for PMA. One day for the trainee to get competitor data.

Time Required

Steps
Introduction 1. Individually assist the trainees to decide on the particular business they want to start. 2. Clearly explain the concept of the PMA exercise to the group. Customer Survey Design 3. Trainees list the information needed from customers regarding their buying habits for the particular product or service. Relevant information would include: quantity used per unit of time; price paid per unit of measurement; location where the product/service is purchased; key attributes that customers want. Participants must state the unit of measurement used in the survey (e.g., kilograms, litres, bundles, boxes, etc.). They must also use the same unit of time (e.g., quantity of product/service used daily, weekly, monthly, etc). The key is to ensure that the units of measurement are uniform and the data collected is comparable across the sample. Note:

43

4. Assist the trainees to design a simple survey questionnaire for use with customers based on the list created in step 3. If the trainees are literate then the survey form can be designed in a written script. However, if the trainees are illiterate then the forms will need to use symbols that the trainees design themselves. See diagram below for an example customer survey for soap powder, designed by illiterate participants using symbols only.

Customer Survey Pilot 5. Ensure that the trainees understand the correct way to ask questions; open questions are better than closed questions since they do not lead respondents to give particular answers which may not be true (see diagram on p.45). 6. Explain to trainees that if, during the questionnaire, a customer comes up with many wants from a product at the same time, then they should ask the person to rank these wants in order of priority. 7. Each trainee should pilot-test their questionnaires to familiarise themselves with the process of asking the questions and recording the answers. Ideally the questionnaires should be piloted on three to five real customers in the market. If this is not possible then divide the participants into groups of two and ask each one to pilot test the survey on his or her partner; rotate the participants so each one has the opportunity to pilot their survey a number of times. 8. Analyse pilot survey results with trainees. Identify any weaknesses in the design and help them to reframe questions where necessary. 9. Repeat the process of piloting until the questionnaire is fully satisfactory.

44

Participatory Market Appraisal: Preparation and Survey

want Do you rice uffed p risp? to be c

Clean? Cheap? Tasty?

Yes Yes Yes

Wrong

Useless

do you Where e ffed ric buy pu from?

Right

cle

ity in the c I buy it use it is beca per d chea aner an

Good

Customer Sampling and Surveying 10. Trainees should be assisted in segmenting their sample using a characteristic appropriate for the particular product or service. For example, a trainee interested in setting up as a vegetable vendor may choose to segment the population based on food habits (vegetarian and non vegetarian) and/or income (low, medium and high income); an incense seller may choose to segment according to religion (Hindu, Muslim, Christian). 11. Trainees should attempt to survey a sample of between 30 to 50 customers in the market where they intend to set-up their business (i.e., in the village or local town/city). The sample should be representative of customers so each chosen segment (as defined in step 11) should be approximately proportionate to the overall population who use the market. For example, if the overall population using the market is 50% Hindu, 40% Muslim and 10% Christian, then from 50 interviews, 25 should be with Hindus, 20 with Muslims and 5 with Christians. 12. Send the trainees to conduct the PMA customer survey on the sample selected. 13. Trainees should then consolidate all the data gathered in a format (see Worksheet 13 for an example).

45

14. Trainers should assist trainees to analyse the consolidated data to understand if the proposed business activity is profitable. The same worksheet can be used to design a business strategy. Competitor Surveying 15. Trainees list the information needed about existing competitors. Relevant information would likely include: number of competitors operating in the market; location of each competitors operations; price charged (per unit of product/service) by each competitor; volume of sales (per unit of time) for each competitor; specific attributes of the product or service offered by each competitor; specific customer segment(s) served by each competitor; promotional strategies used by each competitor. 16. Not all of this information needs to be gathered through direct questioning of competitors. Some information can be gathered through careful observation in the marketplace (e.g., which customer segments are buying a given product or using a particular service). 17. Assist the trainees to design a simple survey questionnaire for use with competitors based on the list created in step 15. If the trainees are literate then the survey form can be designed in a written script. However, if the trainees are illiterate then the forms will need to use symbols that the trainees design themselves. 18. Send the trainees to conduct the PMA competitor survey. Depending upon the particular product or service and the size of the market, the number of existing competitors will vary. Trainees need not survey every competitor but should aim to get information from at least five. 19. Encourage the trainees to draw a simple map to show where each of the competitors operations are based. This is a useful tool to help them visualise how competitive the marketplace is and where best to locate their business.

CONCEPTS
PMA: Participatory Market Appraisal (PMA) is conducted to estimate the demand for the chosen products/services in the target market. It helps participants to understand the specific needs and wants for the product or service in the market they intend to operate in. It also helps participants to develop an understanding of the existing competitors and how they perform in the target market. Piloting: Doing work on a small scale as a trial before doing it on a large scale. If, when piloting a questionnaire, the respondents dont seem to understand the questions and dont provide satisfactory answers, then something is wrong. The questionnaire will have to be reworked and piloted again until respondents understand all questions and provide satisfactory responses. Segmentation: The process of dividing the potential market into different categories or segments. Segmentation is based on a number of variables. These could be variables like monthly household income; number of members in the household; educational qualifications of the customer; gender, food habits and other lifestyle related factors. The chosen variable should be such that the customer behaviour would be similar in their respective segments and different across different segments. This helps us understand the potential sales and product/service preferences in the selected segment. It helps us get insights into the varied needs and wants of different customers. Sampling: A method by which a small portion of the total population is selected such that it represents the total population. Sampling is done to get the information of a large population

46

Participatory Market Appraisal: Preparation and Survey

by just surveying a small sample (say 10% of the total population is surveyed as a sample). For example, if in an area there are 500 households, then the sample for the PMA survey should have at least 50 households. Again if in the total population of 500 households there are 40% vegetarian households and 60% non vegetarian households, the sample households of 50 should have 20 (40% of 50) vegetarian households and 30 (60% of 50) non vegetarian households. Framing questions: The way in which a particular question is asked is called framing the question. The same questions can be asked in different ways and will often generate different responses. It is important to understand how to frame a question so that we get the right and true response. If we ask closed questions that demand a yes or a no response such as do you look for cheap vegetables? then respondents will usually answer yes (even if this is not true). However, if we ask open questions such as what features or qualities do you look for while buying vegetables? then respondents cannot give a yes or no answer and instead will have to give more detailed responses. In our example, the potential customer might say: I look for cheap vegetables, and then we will know that a low price for vegetables is a true want of that potential customer. EXPECTED OUTCOME: The trainee knows the exact demand for the chosen product/service.

LESSONS LEARNT
3 3 3 Trainees understand the needs and wants of customers for their selected product or service. Trainees will be able to estimate the potential sales for their selected product or service. Trainees understand the existing competitors and their strengths and weakness (e.g., the specific attributes of their product or service, their pricing, their volume of sales, their promotional strategies, etc.)

I encourage the trainee to make the questionnaire in such a way that the trainee can simply tick off the answer rather than write everything during the survey.

47

I KNOW WHAT SELLS AND HOW MUCH, Sumitra Adhikary

Sumitras husband being old was not working and they needed an income to survive. Sumitras ready-made garment business was running at a loss and did not meet the needs of her family. She was thinking of shutting down her business and was looking for other options. At this time, she attended the MOVE training. It was during the PMA survey that she realised the full potential of her business. Because of the PMA survey I now know about demand, and what kind of products customers want. During the survey, I bought three different pieces of each item from the wholesaler to show the potential customers. This gave me an idea of what they wanted. I took this opportunity to sell a few pieces, she explained. Now the demand for her garments is so high that she can barely meet it. Earlier, she would lose money as a lot of her stock went unsold and the wholesaler would only take back defective products. She also had to pay for unsold products. Sumitra says, I know what to buy and how much to buy after the PMA. Fewer items are left unsold now. She has minimised her losses and tries to keep a profit of at least `1020 per piece. If the customer pays in cash without taking credit she gives them a small discount. Earlier, I used to send someone to purchase materials but he could not get me what sells as he did not know the market. But I could not go myself, she said. Today, Sumitra fully understands what her customers want. Her customers are very satisfied with her service and have started asking for other products like imitation earrings and bangles. My sales have increased and profits have grown to `2,000 a month, she explained.

48

Worksheet 13: Sample PMA Survey Sheet (data is collected according to customer segments)
Name Amount Per month/ week Price Paid Buying from Big market Small nearby market Good quality Why do you buy? Easily available Is cheaper Other attribute 1 Other attribute 2

Segment 1

Segment 2

Segment 3

49

MODULE 6B

PARTICIPATORY MARKET APPRAISAL: AN ANALYSIS

To understand the size of market of different segments for a given product or service To understand the broad needs and wants of customers of different segments for the chosen product or service To determine if starting a business with the chosen product or service would be feasible and profitable.

Objectives

Chart paper Sketch pens Data sheets from PMA survey.

Key Concepts
Target segment needs and wants; Sales; Costs; Profits; Business feasibility; Market strategy.

The analysis of the data from the PMA exercise will give participants a good understanding of their customer base. This will reveal the true market potential for their chosen product/service as well as the attributes that customers want most. Based on the survey data, participants will design a market strategy.

Link to Move

Time Required
Six hours for one business activity.

Steps
1. Prepare master-coding sheets to capture all the data collected during the PMA survey. Data from each survey form should be entered individually on to the master-coding sheet. Ensure that the survey data is not repeated or missed out. 2. Design the master-coding-sheet such that the data can be entered by ticking off (like in the survey questionnaire) requiring little or no writing. 3. All the data related to different segments should be entered in different colours on the mastersheet to make it easier for analysis. Facilitate the trainee to collate and analyse the data (see sample Worksheet 14). 4. Estimate the size of respective market segments in terms of quantity and rupee value (see Note 3 in Worksheet 14). 5. Select the segment to target for the proposed business activity. 6. Identify specific needs and wants of the selected segment and establish whether the business will be practical and profitable. 7. Facilitate the trainee to assess the profitability of the proposed business. If it is not profitable, the trainee should be encouraged to think of other activities and do the PMA. This should continue until a profitable business is found.

50

Participatory Market Appraisal: An Analysis

Worksheet 14: Sample Master-Coding Sheet Name of product or service: Rice Household High No. 1 2 100 Total*
Note*

Income Middle

Low

Where to buy City Local market shop 3 3 3

Price Cheap Expensive 3 3 3

Why buy Amount p/month Low Tasty Closer price to home 500 100 200 3 3 3

3 3 3 10 40 50

1. Add up the number of ticks to give totals of each category. 2. To get average expenses per household, divide the total amount by the number of households. 3. To get total demand for the product or service, multiply average expenses per household into total number of households in that locality.

QUESTIONS TO BE ASKED
Analyse the PMA data for the following information: 1. What is the quantity of the product/service used per week/month? Calculate the total quantity (Q) of the product/service used by all potential customers surveyed. Since the sample size is only 10% of the total population, multiply the quantity (Q) by10 to know the average consumption of the whole population. Example MOVE trainee wants to sell rice in a certain area. There are 200 households in that area. There are three shops presently selling rice. Hence 20 respondents (10% of the total population. 200 x 10/100 = 20) were surveyed. It was found that they spent `1000 per week on rice. The total area spends `10,000 on rice per week (1000x10 = `10,000). The estimated total profit in the area is `1000 per week (10% of `10,000). Assume that the entrepreneur gets one-fourth the share in our estimate of total profit. Therefore estimated profit for the MOVE trainee is `250 per week or `1000 per month.

2. How much money is spent on the product/ service? Calculate the total money spent on the product/service by all potential customers surveyed (expressed as rupees spent per day/week/month/year). Since the sample size is 10% of the total population, multiply rupee value of purchases by 10 to arrive at the average spending of the total population on that product/service. 3. What is the estimated profit? Once we know the total amount spent by all customers in the area, we can estimate a target market share and sales value. One can then estimate projected sales and profit of the proposed business enterprise. These figures will need to be moderated by taking the number of competitors present in the area.

51

4. Which features of the product/service are most important? The PMA survey gives us details of features wanted by a majority of customers, based on which a product/service will be bought. Such features may include price, location, quality, amongst others. It is important to focus on those features which are most demanded.

CONCEPTS
Needs and wants of the target segment: It is important for the trainee to know the needs and wants of customers from different segments so that she can decide both the need and the segment that she can serve. Profit and Costs: The trainee can estimate the projected profit (total sales less total costs) based on data collected. Having spoken to competitors during PMA, trainees will know the average price charged for the chosen product/service. This will help in estimating profit. Business feasibility: Based on an understanding of the strengths and weaknesses, the opportunities and threats and, ultimately, the prospects for success, the trainee can determine the feasibility of the proposed enterprise. EXPECTED OUTCOME: The trainee is able to decide whether the business is feasible or not.

LESSONS LEARNT
3 By comparing the specific wants of the various customer segments with the strengths and weaknesses of the existing competitors, trainees can decide how best to position their product or service in the market. Decisions about whether to start a business and which customer segment(s) to serve should be based entirely upon calculations of feasibility and profitability. If the existing competition is too fierce, or there is insufficient customer demand for this product or service, then it would not be wise to start this particular business. In this case, alternative ideas should be pursued.

After the PMA analysis, often trainees change their activities based on the profitability of the business. I encourage them to do the PMA again for the next chosen activity.

52

Participatory Market Appraisal: An Analysis

VANI FINDS PROFIT IN BEAUTY

Vani Kalal joined the MOVE training to ensure a steady income for her family as her husband did not have a regular job. Vanis dream was to see both her daughters educated and independent. Initially, she and her husband thought she should start a tailoring business for which she had already undergone training but after the PMA she changed her mind. During the PMA for tailoring, she found many competitors in her area and realized that it may be difficult to make profits. Knowing that there was no beauty parlour in her village, it struck her that opening one may be quite profitable so she did another PMA and found that there was a huge demand for this. Women and girls went to the city to get a facial or a haircut. Women said it will be great to have a beauty parlour in the area as they would not have to travel to the city for this service. I can run the parlour from my home. This idea excited me, Vani said. Today Vani earns `2,000 a month from her beauty parlour. I am trying my best to run it efficiently, keep it clean and treat my customers well. Till now, I have got a very good response from my customers. Presently, my charges are less than the services available in the city. This woos people to come to my parlour. I will increase my charges when I have built my clientele and also during weddings or festivals.

53

MODULE 7

MARKETING STRATEGY

To understand various marketing strategies and their application at different stages of business.

Objectives

Targeting; Positioning; Unique Selling Point (USP); Product Strategy; Pricing Strategy; Promotion Strategy; Distribution Strategy.

Key Concepts

Chart paper Pens Master-Coding sheet Market map.

Products/services are examined from the perspective of how to serve potential customers. Market segments are defined and each segments specific needs and wants are identified. Furthermore, the best way to deliver these needs and wants are detailed through product, pricing, distribution, and promotion strategies.

Link to Move

Time Required
30 minutes for Summarising PMA. 30 minutes for Targeting and Positioning. 30 minutes for all strategies.

Steps
1. Review the PMA results and explain advantages of segmenting markets. Help trainees to select specific customer segments to sell their products/services. 2. Analyse the needs and wants of customer segments according to the PMA. 3. Help trainees understand the need to position their own products/services. 4. One by one, discuss the cost involved in meeting all the needs and wants. 5. Help each trainee to list the features or attributes that she/he can offer in the product/service; and list the needs and wants these features satisfy. 6. Depending on this list, help trainees target a customer segment for the business. 7. Once again match the needs and wants of the targeted segment with the list of features that she/he can offer. 8. Help the trainee choose one or two of the features/benefits of the product/service that she/he can use for positioning it in the market. 9. Help the trainee make a final decision on the marketing strategy by choosing one of the following: Faster delivery of product or service Better product or service Cheaper product or service.

54

Marketing Strategy

10. Help the trainee understand the business implication for the chosen positioning strategy and compare it with other possible positioning strategies for that product/service. 11. Help the trainee to understand the need for having a Unique Selling Point (USP) for the product/service and help them evolve their own USP (if any). 12. Help trainees design a complete marketing strategy by specifying the following: Product Strategy (as in step 8). Pricing Strategy (as in step 9) Promotion Strategy (in terms of advertisement, hoardings, hand bills, promotion in terms of offers like price offs, gifts, etc.) Distribution Strategy (in terms of directly selling to end users, or through middlemen such as agents and retailers).
Worksheet 15: Marketing Strategy Format No. Strategy 1 Product: Unit size 2 3 4 5 6 7 Price Promotion Distribution Physical evidence People Process Technical skills Soft skills 8 Market strategy Segment Target Position 9 Generic strategy Cheaper Better Faster

Product/service 1 amount/unit

Product/service 2 amount/unit

Product/service 3 amount/unit

55

QUESTIONS TO BE ASKED
1. What level of sales would you need to make your business viable? 2. Where are your sales going to come from? Existing customers? Or new customers from the same village? Or new customers from neighbouring villages? 3. Why should the customers buy your product or service? 4. What will the reaction of competitors be to your product/service? 5. Will you sell your product/service directly to customers, or will you need the services of middleman?

CONCEPTS
Targeting is a step after segmentation. Segmentation is a process by which the entire market is divided into groups or segments in which customers have similar consumer behaviour, usage preferences and taste. Trainees are expected to focus all their marketing activities at a particular segment rather than at all segments. This is known as targeting. Positioning is the process of identifying a market niche based on the 7Ps. Trainees are required to position their product/service so that it is more desirable when compared against competing products/services. Unique Selling Proposition (USP) is an attribute of the product/service which is unique when compared to other competitors. It is also an attribute which is highly desirable to the target customer segment. Product Strategy: Based on the various attributes that customers want, trainees should develop a strategy to target and position their product/service in order to best satisfy the needs of their chosen segment. Pricing Strategy: Based on an assessment of the market (i.e., customers and competitors), trainees should decide to adopt a low, medium or premium pricing strategy. Prices need to be set carefully so that customers will buy the product/service and the business will be profitable. Promotion Strategy: Promotion is one of the most important Ps which can make a huge difference to sales. Trainees should design an appropriate strategy which may include hand bills to be distributed, hoardings to be placed in highly visible locations, eye-catching packaging, etc. Distribution Strategy: It is necessary to have a detailed strategy for a product/service to successfully reach customers. Trainees should decide on the best channels to use; either through middlemen like distributors (who sell to retailers) and/or retailers (who sell to end users), or through direct marketing (sales directly to the customer).

56

Marketing Strategy

EXPECTED OUTCOME: The trainee knows how to match the needs and wants of the targeted segment with their own capability to satisfy them.

LESSONS LEARNT
3 3 Trainees understand the basic concepts of marketing like segmentation, targeting and positioning. Trainees are able to design a complete marketing strategy for their product/service and revise it as and when required or when forced by market changes.

I help them to choose the most relevant features/benefits of the product/service to be used for positioning that activity in the market.

EXAMPLE OF A MARKETING STRATEGY FOR A SAREE BUSINESS

Promotion Place Physical evidence Segmentation Target Positioning Selling Strategy Display of saree in front of the bicycle; Posters in front of the house Door-to-door selling Keeping the products on the bicycle By income groups (low, middle and high income groups) Middle and low income groups Cheaper sarees, readily available Door-to-door direct selling

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MODULE 8A

PARTICIPATORY COMPETENCY ASSESSMENT

Objectives
To understand if the trainee has adequate skills to manage her business. Chart paper Pens.

Technical Skills; Soft Skills; Skill Assessment; Participatory Competency Assessment (PCA)

Key Concepts

For any trainee to successfully run a business, they need a certain set of skills. When assessment of competency is done using a participatory method, the trainee understands their current level of skills and the skills they need to acquire.

Link to Move

Trainees planning similar businesses work in groups of five or six to assess their skills for two to three hours. The exercise is divided into: 30 minutes for the facilitator to explain the entire process 90 minutes for small group work: Each group draws one master process chart for any one business which maps the process, and identifies skills needed at each stage. During this time, all six business groups draw process charts and identify skills that they have and those that they require. 60 minutes for group presentation and collective analysis of PCA for all groups.

Time Required

Steps
1. Take a business activity with which the trainee is familiar. 2. Draw a Process Chart (see case study of Kamrunesa) for the business, from procurement of materials, marketing, selling of the product/service and so on. 3. Define the types of skills normally required for each of these processes. Distinguish between technical and soft skills. 4. Help trainees identify the skills they have and the skills they lack. 5. Help the group of trainees to do a peer review of each others skills (current and required). List these skills in Worksheet 16. 6. Finally, help each trainee individually to do a PCA for their own chosen business activity. What skills do they already have? What will they need training in?

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Participatory Competency Assesment

Worksheet 16: Skills Assessment Name of trainee Steps Technical skill Business Training required Soft skill Training required

It can be difficult for trainees or even the trainer to draw the process map for some business. They should take help from experts or others in the family, neighbourhood or in nearby markets, who are already in the same business.

Note:

QUESTIONS TO BE ASKED
1. What is the complete process for: (a) manufacturing your product or (b) delivering your service? 2. Is there any part of the process which is unique to your business? 3. What skills do you possess (including any unique skill) which can make you more successful than your competitors? 4. What additional skills do you require to improve your business?

CONCEPTS
The skills needed for a business have to be clearly understood. Any business activity has several steps, starting from buying materials to selling the product/service. Many of these require certain specialised skills. Skill: Skills are the learnt capacity to carry out a specific process. Technical Skills: Skills which are essential to produce a product or deliver a service are called technical skills (e.g., how to repair a mobile phone or how to stitch a blouse). Soft Skills: The ability to negotiate or communicate effectively would be considered as soft skills. For instance, bargaining skills to procure good quality materials at the lowest price would help in increasing profits. EXPECTED OUTCOME: Each trainee identifies the technical and soft skills required to run their chosen business.

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LESSONS LEARNT
3 3 Trainees have a clear understanding of the process involved in their business. Trainees identify skills associated with the process that they have and need.

I help them appreciate their newly acquired marketing skills and encourage them to acquire other necessary skills for their business.

Kamrunesa Begum identifies the skills for her business. Like most women in a village, Kamrunesa also knew how to husk paddy. However, while doing the PCA with the trainer, she identified a few more skills which could be useful for her paddy-husking business. After listing the skills required at each step, it became clear to her that she lacks knowledge on stocking paddy, especially during the monsoons and packing and storing rice. The PCA done by her is illustrated below, with the technical skills above the arrow and soft skills below the arrow between each process.
Buy Paddy Knowledge on Paddy Quality Bargaining Skills Stock It Knowledge of Stocking Methods Soak It Knowledge of Soaking Methods Boil It

Selling Rice

Good Selling Skills

Knowledge of Pack & Husking Methods Store Rice

Husk to Rice

Knowledge of Drying Methods

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Knowledge of Boiling Methods Drying It

MODULE 8B

SKILLS TRAINING

Objectives
To give the trainee the technical skills required for her future business. Depends on the activity and may also be provided by the training institute.

The trainee undergoes training in skills identified through the PCA.

Link to Move

Depends on the required training.

Time Required

Steps
1. Make a list of all the trainees who want to be trained in the same activity. 2. Approach institutes which provide the required training and collect information on the relevant courses. Talk with the course director in order to find out more details. 3. Compare the different institutes according to their course content, fees, number of teachers, number of students, etc. 4. Help trainees to decide and finalise an institute that is most suitable. It is ideal if all trainees seeking a particular skill use the same training institute. 5. Arrange for training at the training institute. 6. If training is not available at an institution then identify successful entrepreneurs willing to provide an internship to help the trainees develop the required skills. 7. Visit the trainees regularly during the skills training period to check their progress and keep them motivated.

QUESTIONS TO BE ASKED
1. Which skills are most essential for the success of the business? For instance, carving designs on wood may be crucial in producing furniture that sells well. 2. What kind of ongoing training is required to stay up-to-date and competitive in this business? EXPECTED OUTCOME: Trainees successfully complete the necessary skills training within the stipulated period

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MODULE 9

PILOT BUSINESS AND CUSTOMER FEEDBACK

To guide the trainees to start production or provision of service on a pilot basis. To help the trainees refine the product/service based on customer feedback for up-scaling the business. . Business piloting; Customer feedback.

Objectives

Key Concepts Link to Move

Notebook for feedback Chart paper for analysis Pens for analysis.

After identifying a viable business opportunity and receiving skills training (if necessary), participants begin pilot operations. They start manufacturing products or delivering services on a small scale, targeting a customer base identified through earlier market research. After a few trials of selling, participants will recognise the central role that customer feedback plays in managing a successful business. By formally introducing customer feedback sessions early in the process, this should become an established practice for trainees as they continue. Customers will suggest several ideas on how the business can expand and improve in the future. Based on this feedback, trainees should design business strategies for up-scaling their operations.

One day for sample production or service delivery. One day for customer feedback. Two hours for analysis of customer feedback for a given activity.

Time Required

Steps
1. Explain the concepts of sample production/service delivery and customer feedback to the trainees. 2. Ask the trainees to buy, in small amounts, the materials required for production or service delivery. 3. Help each trainee to make a small questionnaire, which will help them to get customer feedback.
Worksheet 17: Customer Feedback Format Product/service What did you like the most? Which attribute did you not like? Any other suggestions

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Sample Production and Customer Feedback

4. Send each trainee to sell the product/service to a few customers in the location where she intends to operate. Customer feedback can be taken at the time of sale or a day later. It will depend on the nature of the activity and the willingness of the customers. For example, for services like an eatery, it is better to take customer feedback at the point of sale. 5. Ideally help the trainees to record the feedback immediately; alternatively this can be done later based on what they remember. 6. Help each trainee to analyse customer feedback. There should be feedback from at least 50% of the customers to whom the sample product/service was sold.

QUESTIONS TO BE ASKED
Analyse the customer feedback on the following points: 1. Which attributes were liked by the maximum number of customers? 2. Which attributes were customers dissatisfied with? 3. How can the attributes be improved, especially those that the customers are dissatisfied with? 4. Which of the customer recommendations should definitely be incorporated in order to make better profits? 5. Which customer recommendations would not give enough profits, i.e. the cost of incorporating them will be more than the extra profits that they may bring?

CONCEPTS
Sample production: The process of producing small amounts of the final product with all the features that the trainee wants to offer. Similarly, sample service delivery means to offer the service with all the attributes to a few customers. This is done in order to know customers opinions on the final product/service the trainee is offering. Customer feedback: The response the trainee gets from the customer on a product/service. In the feedback, the customers talk about the features they like and also about the features they do not like. They give suggestions to make the product/ service better. The trainee should be attentive while taking the feedback and be open to all criticisms without being discouraged by them. Meeting customers needs: In MOVE, production/service provision is a constant learning process, which tailors the product/service to the customers. It follows a cycle of production or service provision, sample sales, customer feedback, learning new methods, and then starting the next round of provision. It may require that the product/service itself is changed based on what sells. Only when they are able to meet customer needs satisfactorily should trainees start full scale production/service provision.

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EXPECTED OUTCOME: The trainees begin the initial stages of production/provision of service and selling. They are able to collect and analyse customer feedback and adapt to the market and customer as necessary.

LESSONS LEARNT
3 Trainees get feedback from the customers on their product/service based on the pilot. 3 Feedback helps trainees understand those features of their product/service which are most important to the customers. 3 Using this feedback, trainees know which features of their product/ service should be improved and what new features should be added.

If the sample production/service delivery involves huge costs, such as machinery or cattle, I try and arrange for an internship or rent a small place in a factory for a few days.

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Sample Production and Customer Feedback

DEALING WITH CUSTOMERS

Basira Ghatwale is 19 years old and lives in Mugad village near Dharwad, in Karnataka. She used to work in the fields four to five days a week as a daily wage labourer earning `20 to `30 a day. She describes her life before joining MOVE as a Dogs life! because she had to hunt for food. After joining MOVE training, she learned many things including how shopkeepers attracted customers, and how they conversed with them. They would ask them to sit down, give them water to drink and then politely ask, What do you want? We learned to use different techniques for different businesses, and also how to behave with the customers, how to attract them and how to get their feedback about the business. She gave an example of how she applied this knowledge, One day, an angry neighbour came to my house asking whether I was going to stitch their clothes or not? She recalled what she learned in the MOVE training about dealing with the customers. So, she asked her to sit down. She spoke gently with the customer and told her that she would have the clothes ready in two days. Slowly, the customer started to calm down and eventually went home happy. In this way she was able to handle the situation very well. She also gained knowledge on how to speak and behave with people and on how to build relationships. This helped in her daily dealings with customers. Besides this, she learned that punctuality was a very important trait both to get new clients as well as to keep old ones. When Basira first started, she would stitch her neighbours clothes for free. In the initial periods, some clothes were badly stitched and she lost clients. In the MOVE training she learned the importance of neat, good quality work. As she gained experience, people started appreciating her work, giving her more orders and she began making a profit. Basira decided to attend fashion design and embroidery classes because her customers were asking for new neck designs and embroidery on their clothes. This value addition allowed her to improve her business; e.g., after the fashion design training she increased her earnings to `2,500 a month. With the profits, she was able to open a bank account with a deposit of `5,000. She also purchased a sewing machine with embroidery features for `3,000. Because of MOVE, she is now self sufficient, confident, and is well on her way to fulfilling her dreams.

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MODULE 10

BRANDING AND PROMOTION

To understand branding and promotion and their importance in a competitive market. To design a branding and promotion strategy for the business.

Objectives

Branding; Brand name; Logo; Tagline or Punchline; Promotion; Pull Strategy; Push Strategy; Advertisement; Sales Promotion; Direct Selling; Word of Mouth.

Key Concepts

Knowledge of branding and the various methods of promotion help trainees to distinguish their product/service from competitors and, thus, fare better in the market.

Link to Move

1020 packets of different brands of items of daily use like toilet soaps, incense sticks, detergent powder Empty wrappers of these items Chart paper Coloured pens.

Two hours for branding.

Time Required

Two hours for promotion of one activity in the general session.

1. Display packaged products such as spices, detergent, incense sticks, etc., for the trainees to examine and compare. There should be more than one brand of any kind of product so that a thorough comparison is possible. 2. Discuss the brand name, logo and tagline on the packets of these various products. 3. Ask the participants if they can think of an improved brand name, logo or tagline of those products, focusing on a target customer segment. 4. Ask them to collectively design a logo for a product/service and give a brand name along with a tagline. 5. Discuss the benefits and problems of the brand name, logo, and tagline designed by the trainees in Worksheet 18.
Worksheet 18 : Branding Product/service Brand name Logo Tagline Benefits/problems

Steps

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Branding and Promotion

6. Investigate the costs involved in branding, e.g., printing labels or signs can be expensive. It is important for the trainees to make an informed decision on whether branding is required for the type and scale of business they are in. If trainees decide that branding is required, help them to finalise a brand name, tagline, and logo for their product/service. 7. Discuss with them the various methods of promotion. Also discuss the costing associated with the various methods. 8. Ask trainees to decide on a promotional strategy for their collective business. Assist them to select a promotional strategy that is best for their business in the early stages. 9. Once the group session is over, trainers will need to spend additional time with each trainee to design branding and promotional strategies for their individual businesses.

QUESTIONS TO BE ASKED
1. What is your product? 2. Why did you choose that particular brand name for your product? 3. Why is it required to have a logo and tagline? 4. Which attribute is mentioned in the tagline and why? 5. Do you need to advertise? Why? 6. How do you get customers to know about your product? 7. How much do you wish to invest in promotion and why?

CONCEPTS
Branding: A method by which a product or service is positioned in the market, so that the customers can recognise and distinguish the product from other similar products. Branding should be able to establish the product in the customers mind and make a lasting impression. Branding helps in attracting the customers and has three main components: brand name, logo and punchline/tagline. Brand name: The name given to one item, a family of items, or all items of a particular business. This helps the customer in distinguishing the product(s) or service(s) from others in the market. For it to be effective, a brand name has to be easy to remember and pronounce. It may or may not represent any attribute of the product. Brand logo: A visual design that is easily recognisable. It is most helpful in attracting customers and distinguishing the product/service. A strong logo will help customers to remember the product/service easily. Tagline or punchline: A short sentence written along with the brand name and logo, on the packet, or in any place the product is advertised. The product/services most important attribute (which the target segment wants the most) should be mentioned in the tagline.

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Promotion: There are four ways in which you can promote your product/service. These are: 1) advertisement; 2) wholesaler or retailer level promotion; 3) consumer level promotion; and 4) direct selling. Advertising: Any form of communication with the potential customer is advertising. Advertisements can be in the form of brochures, billboards, wall paintings, television, radio, etc. The impact of advertising may not be immediate but can be realised over a period of time. Pull Strategy: Advertising attracts customers to a product/service. After viewing an advertisement that they like, customers may go and buy the product. This is a pull strategy. Push Strategy: Sales promotions are a form of push strategy. Customers may be attracted to a product/service if it is pushed upon them with offers of discounts, free gifts, etc. Sales Promotion: Unlike advertisements, the impact of sales promotions tends to be direct and immediate. A free gift, sample or discounted price can be used as ways to increase sales, either directly to customers or to retailers. Direct Selling: The process of selling a product/service directly to the end user. Examples of this include door-to-door selling, setting up a small roadside stall, etc. Word of Mouth: Consumers will talk about their experiences with a specific product/service. If they are happy, then they will speak well of it. Equally, if they are unhappy, then they will speak badly of it. Either way, this can influence potential customers and impact upon future sales (positively or negatively). EXPECTED OUTCOME: Trainees understand that branding and promotion help increase sales. The amount to be invested on these strategies should be based on the possible increase in sales.

LESSONS LEARNT
3 3 3 Different kinds of branding are required for different business activities. Different methods for promotion are needed at different stages of the business. There is cost associated with branding and promotion.

I will make the trainees understand there is a cost involved in branding. It is important for them to make an informed decision of whether branding is required for the scale and kind of business they are in.

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Branding and Promotion

CHAPALA BORI PURE AND TASTY HOME-MADE

Chapala Parui and her husband have dreams of a good future for their two school-going sons. Her elder son wants to pursue higher studies in computers. She wanted to contribute to the family income and make these dreams a reality. From the PMA she learnt that there was a huge demand for home-made Bori (a Bengali delicacy made of dried lentils mixed in different spices). So she decided to start selling bori and soya beans. Chapala makes the bori at home and also delivers to some of her customers. She contacted all the schools as she realised that she would be able to sell to them in bulk as they gave mid-days meals to students. Even though many shops in the locality sold bori, Chapala successfully created a demand for her bori, as it was home-made. Her family is very supportive of her venture and her husband buys soya beans and lentils from the main wholesale market in Kolkata on his way back from work. Her sons help her in keeping accounts and delivering the soya beans and Bori to customers. Now she makes an average profit of `2,000 per month. After the training session on branding, she decided to capitalise further by using labels. I know that being home-made is the main selling point of my Bori and to market it, I am now labeling the packets. The label reads Chapala Bori Pure and Tasty Home-Made. Actually, people like my bori since it is homemade and the lentils and spices are ground by hand. It tastes better than the large scale machine-made bori. I will have to buy a machine in the near future since demand is very high and I will not be able to hand-make anymore. But before that I will have to learn how to use a machine in such a way that I dont lose the taste of hand-made, home-made bori. However, I will not produce on a large scale like the big manufacturers.

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MODULE 11

PRICING

To understand the importance of pricing in the success of any business. To understand the components of price of any product or service. To understand the process of pricing. To fix a price of the product/service for the business to be viable/profitable. Chart paper Coloured pens Process chart for reference.

Objectives

Price; Pricing; Variable cost; Fixed cost.

Key Concepts Link to Move

Fixing the correct price for a product/service is crucial for a trainee to succeed in business. Setting prices too high will drive away customers, whilst setting prices too low will reduce profits or even cause losses.

30 minutes to explain the various concepts. 30 minutes to take a live example and explain the actual values of various components. One hour for group exercise to calculate the various costs of their business and fix their prices. One hour for the groups to present their pricing strategy and justification.

Time Required

Steps
1. Explain the different types of costs and pricing methods to the trainees. 2. Take a sample Process Chart and ask the groups to indicate all the costs associated at different stages of the business. 3. Help the trainees to calculate fixed cost, overhead cost and variable cost for the selected business. 4. Ask the trainees to find out the competitors selling price for a similar product/ service. 5. Help the trainees draw up different business scenarios for different prices of the product/service. 6. Help the trainees understand the implications of different prices. 7. Help them fix a price such that it covers the complete cost for running the business. 8. Give each of the groups one hour to work on the proposed price for their chosen product/service. 9. After individual groups have fixed prices for their selected product/service, make them present their pricing to the entire group and explain the basis/rationale for the price and the chosen pricing method. 10. Help each group appreciate the pricing strategy followed by the other groups.

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Pricing

QUESTIONS TO BE ASKED
1. Does the profit increase or decrease if the product/service is priced differently? 2. Does demand rise or fall if the product/service is priced differently? What would be the profit at these prices? 3. What will you do if your competitors reduce or increase their prices? 4. What will you do if the cost of raw materials increases or decreases? How will it affect your business? 5. How does the interest on your loan affect your profit? 6. What will you do to reduce the cost of production and thereby reduce your price? 7. Why should a customer pay higher prices for your product if a similar product/ service is available at a lower price? 8. What are the different ways of increasing the price of your product/service so that your profit increases (like value enhancement, more customer wants met, etc.)?

CONCEPTS
Price: What the buyer and seller settles at for a given product or service. It is important for any business. It is the only way by which sales revenue is generated. It determines the success or failure of any business. Pricing: Is about determining the price of a product/service. It could be based on cost, demand, or competitors selling price for a similar product or service. For small business, prices should be determined such that the trainee does not make a loss. The price always depends on the customers willingness to pay and the value they see in the product or service offered. The price is based on the value additions made to the product or service. It is perceived as a win-win situation for both the buyer and the seller. Variable cost: The cost of all materials and labour that directly goes into the manufacture of products/delivery of service is called variable cost. As the quantity of product increases, the total variable cost goes down and vice versa. Fixed cost: The cost of all permanent assets used in the production and delivery of products and services is called fixed cost. It also includes overheads, which are incurred by the trainee at all levels of production. This cost does not vary on the quantity of products manufactured. EXPECTED OUTCOME: The trainee is able to fix the price for her product/service.

LESSONS LEARNT
3 3 3 Proper pricing of a particular product/service is extremely important. The trainee develops the capability to understand price sensitivity. The trainee knows how to determine the price of a given product/service at any given stage of the business.

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I make sure I tell them at every step that the calculations are only estimates. In the market place, all players do not get an equal share of the profits. It depends on how well the trainee runs the business, and how many customers she can attract.

REHANA WINS CUSTOMERS WITH COMPETITIVE PRICES

25-year-old Rehana Koti and her husband found it difficult to run their grocery shop. After she joined MOVE, she not only started applying MOVE strategies to her business but also shared the MOVE lessons with her husband. She observed that all her competitors kept at least a 20% profit margin. After learning about pricing strategies, she decided to keep only a 10% profit margin in order to increase her sales. Rehana says, In Dharwad town, people get the goods and vegetables at a lower price. I knew that if I sold vegetables and goods at the same rate as it is sold in Dharwad, more people will come to my shop. Initially, I made less profit but my customers are increasing by the day. Earlier, she would sell goods worth `400500 per day but now her sales have increased to `8001,000 and she makes a profit of `80100 a day. Today Rehana is a successful entrepreneur in Mugad village and her husband is very supportive. She has also started a tailoring business and sells jewellery and cosmetic products after realising that there is a large demand for these items in the area. I am able to run a successful business, with good profit, thanks to the MOVE training. Every day, I keep aside some money from my profit, to repay my loan. I am also able to fulfill the small wishes of my children and feed them nutritious food like eggs or meat on a daily basis, says a happy Rehana.

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MODULE 12

BUSINESS DEVELOPMENT PLAN

To understand different elements of a Business Plan. To demonstrate how to plan for the business. To help the trainee prepare a business plan based on information available. PMA Charts and results of the given business Chart paper Sketch pens.

Objectives

Business Development Plan (BDP); Depreciation; Interest cost; Cost of stocking.

Key Concepts

After altering their strategies according to customer feedback, further analysis of past successes and failures will dictate future plans for the trainees. The BDP helps the trainee to understand how to plan a business and how to improve it over time.

Link to Move

One hour to explain concepts. Two hours for demonstration of developing a business plan for one activity in the general session. Two hours each for individual sets of activities.

Time Required

Steps
1. Explain the concept of a business plan, its components and objectives to the trainees. 2. Illustrate the concepts in a business plan using a variety of business involving products and services (this makes it easier for the trainees to grasp the concepts and think more creatively for their own business). 3. Ask the trainee to draw the complete business process from the stage of procurement of raw materials to marketing of products/service. Instruct the trainee to make a list of all the expenses incurred at each step of the process involved in the business. These costs can be differentiated into fixed costs, overhead costs and variable costs. 4. Then make a draft business plan in the format specified at the end of this Module. Mention the market segment targeted, positioning of the product/service (including attributes corresponding to the 7Ps or 4Ps) to this target segment, the required competency to meet the needs of the target segment and the various costs incurred. From this the trainee can estimate the profits for the chosen activity.

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 . Calculate the Gross Profit by deducting all the costs 5 incurred from the total sales made. GP: Gross Profit TS: Total Sales TC: Total Costs (include raw materials, transport, labour, electricity, etc). GP = TS TC.

Loan Payment Profit Raw Material

Labour
or nsp Tra

6. Calculate the Net Profit by deducting the interest paid on loan from the Gross Profit. NP (Net Profit) = GP Interest Cost. If the interest paid is almost equal to gross profit, then the business is not feasible.

Total Sales: Cost Components and Profits

7. Ask the trainee to describe the target segment, explain why it was chosen and how they intend to reach out to them? (Ensure that the trainee makes the business plan according to the information available to her and not based on information provided by others.) 8. Discuss the sensitivity of the profits made by the enterprise and explore ways by which she can increase the profits. (For instance, just by shifting the loan from SHG to a nationalised bank, the trainee can reduce the interest to be paid. This can make a less profitable business into a profitable business). 9. Discuss various ways in which the business can grow and how she plans to do it. (For instance she can target the same customer segment from different villages and increase sales revenue, thus improving capacity utilisation of the machines employed.)

QUESTIONS TO BE ASKED
1. What are the different products/services you want to provide and sell? 2. What are their prices and what would be the maximum and minimum quantity (sales volume) of the products and services that you would sell? 3. What would be the minimum cost that you would incur on making the product/ service? 4. What would be the interest component on the total loan? What would happen if you shift your loan from SHG to Bank?

CONCEPTS
Business Development Plan (BDP) is a template on which the trainee can fill in the details of the proposed business in terms of sales revenue, cost of raw materials, cost of labour, interest costs, production costs, fixed costs, overheads and gross profit. Through the BDP, she can predict the growth of her business, and its profitability. Through a business plan, the trainee can also project the development of the business in phases. She can detail the business projections for the coming months and the following year to have an action plan ready according to the

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Business Development Plan

demands of the business activity. The business development plan would need three inputs. These are: 1. Sales forecast from the Participatory Market Appraisal. 2. Sales revenue from different products and services. 3. Expenditure in terms of cost of production, cost of sales, and interest cost of loan. Depreciation: An important component used to calculate the cost of production. An allowance made for a loss or decrease in the value of an asset (machinery, equipment, furniture) is known as depreciation. The percentage of loss is based on the life of that category of asset. If it is assumed that an asset lasts a fixed period (say 10 years), then the total cost of replacement of this asset is distributed over its estimated life of 10 years. This cost of replacement is deducted from the gross profit to estimate the net profit. The deprecation amounts are accumulated over the years to replace the asset. Interest Cost: Almost all business in rural areas depend on loans either from banks or SHGs. This money comes at a cost. For the success of any business, it is essential to estimate the cost of such money and also ascertain if it can be serviced by the gross profit one earns from these small business. All small business should ensure that the rate of interest is kept as low as possible. Also, paying back loaned capital as quickly as possible will reduce the total amount of interest to be paid; however, doing this means accepting smaller net profit in the short-term. Cost of Stocking: The trainees often forego higher profits by paying interest on investment in excess raw materials. Stocking excess quantities of raw materials is not good practice since this locks up money which cannot be used for other purposes. Better to keep stocks low, sell fast and then restock to an appropriate level (according to the level of demand at that point e.g., higher in some seasons, during festivals, etc.). EXPECTED OUTCOME: The trainees know how to prepare a Business Plan and keep working on it to ensure that they make better profits.

LESSONS LEARNT
3 3 The trainees understand the sensitivity of profits to various components of business plan. They also learn to prepare a Profit and Loss Statement. The trainees learn how to set goals or targets for the business and design action plans accordingly.

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While it is a good idea to make the draft business plan at the beginning, it is better to refine the business plan after the trainee goes through at least two cycles of business (i.e., research, planning, production/service delivery, sales, customer feedback and so on).

ANJANA HEMANTHA MAYAPPANAVAR DRESSING THE DREAMS ...

Anjana Hemantha Mayappanavar has seen hardships since her childhood. She had witnessed her father working on a construction site and now, her husband labouring in a quarry. She elaborates on her husbands ambitions, saying, Life in the quarry is tough. He doesnt want to work there as he wants to be independent or be a linesman in the Karnatak Electricity Board. The biggest barrier for him was the financial instability the family would have to face if he left his job at the quarry without any other regular source of income. Anjana has now solved that problem for him. Anjana found direction when she joined the MOVE training conducted by Best Practices Foundation. I have always wanted to do something. I just didnt know how or what to do, Anjana tells us. With MOVE, she learnt the many different skills required to run a business. After the market visits, she realised that retailing saris and selling in her village was a lucrative business. With the earnings from her sari business, they are able to support their family without much worry. Her business is now in its fifth month and she has completed three cycles of her business. For her, the business plan was most important. She would refer to her business plan and then decide on what to buy and how much to buy from the wholesalers. While planning the business cycles, she understood that the most important thing was not to stock too much as it would block her money. Instead, she would make the business cycles smaller to ensure more profits. It took me three months to complete the first cycle. However, I was more competent after that and completed the cycles in less time. I started with a working capital of `2,000. My husband was a little hesitant initially. Now, he too invests in the business. On an average, I make a profit of `3,500 per month, she explains. Ask her how MOVE has changed her life and she says very thoughtfully, I am independent now. Independence for her is much more than financial independence, I am much more confident today. I never went out of the village on my own and in the beginning I was frightened to even go out to buy stock for my business. But when my business started to become successful, it boosted my confidence. With some more encouragement from the MOVE trainer, I went on my own one day to the wholesalers. I now go to Dharwad or even Hubli which is three hours from here on my own.

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Worksheet 19: Business Plan Format Category SWOT Strengths Weaknesses Opportunities Threats Marketing Mix Product Details Amount

Price Promotion Place Physical evidence Process Skills: Competency Technical skill Soft skills Marketing Strategy Segmentation Target Generic positioning Profit and Loss Statement Fixed capital

Faster/ Better / Cheaper Machinery 1 Equipment 1 Storage Other Assets Own funds Loan Other (Interest Rate @) Raw Material Transport Rent, utilities, etc. Total Variable Cost + Any Other Costs (Total Sales Total Cost) (Less Depreciation and Capital Repayment) (Gross Profit Interest) 77

Depreciation per month Sources

Interest per month Variable cost Other costs Total Cost Total Sales Gross Profit Gross Profit Net Profit

Case Study: Chilly Pounding Category SWOT Strengths Weaknesses Opportunities Details 1. Strong desire 2. Family support 1. Financial problem 2. Demand for chilly pounding is more as the number of consumers is high. 3. Scope for initialising flour milling 4. Turmeric pounding can also be started 5. Can include hotels and hostels into their customers circle. 6. Chance of getting customers from Dharwad because of less price and easily available for quick service. 7. Scope of getting orders as a joint venture with other players in the market especially from Dharwad. 2. Investing capital is high 3. Inability to repay loan Amount

Threats Marketing Mix Product/service Price Promotion Place Physical evidence

Chilly pounding `10 per kilo Word of mouth, sign posts to the house, name board Own house in Mandihal Village New machine, clean ventilated front room, seating space, nicely ground powder Competency (from Process Chart) Know how to run the machine and maintain it. Technical skill Soft skills Communicates well Marketing Strategy Segmentation All levels of customers Target 50% of households in Mandihal and surrounding village Generic positioning Faster/Better 3/Cheaper Profit and Loss Statement Fixed capital Machinery 1 Pounding machine Equipment 1 Accessories Start up costs (Wiring, floor, platform for machine) Other assets Building Depreciation 10% on machinery + accessories (3740/12) Own funds Sources Loan Bank Loan SHG Subsidy from Govt Interest @ 13.5% p.a. for bank loan (5 years) @ 2% p.m. for SHG loan (10 years) Total interest repayment per month (2700/12 + 1000/10) Variable costs Raw material Transport Others Electricity Others Lubricants, etc. Others Promotion Total Cost Total Variable Cost + Any other costs Total Sales Gross Profit Total Sales Total Cost (2500285) Less depreciation (312) and capital repayment to Gross Profit bank (20000/60=333) and to SHG (5000/10=500) Net Profit Gross Profit Interest (1070325) 78

34,000 3,400 4,400 2,400 312 4,000 20,000 5,000 15,500 2,700 100 325 Per month 0 0 200 45 40 285 2,500 2,215 1070 745

Case Study: Bangle Business Category SWOT Strengths Weaknesses Opportunities Threats Marketing Mix Product Promotion Details Determination of the trainee. Family support, especially from mother-in-law for the trainee. Lacking in maintenance of accounts. It is somewhat a problem to travel & carry materials. Scope to cover surrounding villages. Open a shop which would attract more customers. Competitors from outside the village. Different types of bangles Brand name Handbill Banner Wall writing Amount

100 200 100

Place House to house direct Selling Physical evidence Picture of a beautiful hand with bangles Competency Technical skill Help the customer wear the bangles without breaking Soft skills Good salesmanship, get along well with people Marketing Strategy Segmentation Low and middle income group 40% of households Target Generic positioning Cheaper Profit and Loss Statement Boxes for bangles Fixed capital Depreciation per month 1% on boxes Source Loan from SHG Interest 2% p.m. for SHG loan (10 months) Product sales 25 dozen (`14 per dozen) 15 dozen (`10 per dozen) 10 dozen (`20 per dozen) 20 dozen (`12 per dozen) Total Sales Variable costs Raw material Transport Other costs Total Cost Gross Profit Total sales Total costs (940 640) Gross Profit Less depreciation (15) and capital repayment to SHG (2000/10 = 200) Net Profit Gross profit Interest (9540)

1500 15 2000 40 350 150 200 240 940 450 100 90 640 300 95 55

For this bangle business to make more profits it was suggested that one can make the business cycle shorter. It was also suggested to have it as a side business. 79

Three lives that MOVE has transformed

Meet Mahanthesh Badiger (Muthu) Muthu was working as a carpenter for the last 1012 years. Yet, 29-year-old Muthu was far from being satisfied. He knew something was missing and his career needed a boost. He tells us more about his ambitions and career plans. Why did you join MOVE? I joined MOVE to understand business better. Business knowledge for me was scattered. The moment MOVE came in here, I grabbed it. There was no such opportunity for me to learn business before. Has the knowledge of business skills changed anything for him? Not just me, it has changed things for all of us in the family. My father is also a carpenter. He has also benefitted from the lessons I have got from MOVE. In fact, I have also shared the learning with my mother who runs a grocery store. She has also improved her business. What was the most prominent change you saw in your work due to MOVE? Oh, a lot! I am now taking full contracts for carpentry work. MOVE taught me to estimate cost, profit, time, etc. I can plan better now for any assignment and earn better. Honestly, I feel I just worked like a labourer before I joined MOVE. The maximum that I earned before MOVE was `3500 per month, though the average was only around `2000. On an average, my profits are now `8000 per month. I also have a screen printing business. MOVE made an impact on our business. Our family makes idols during Ganesh puja festival. This year, I made most profit from selling idols as I knew how to find a market for them. Earlier, we would just sit near the bus stand but I realised there are many competitors there and we will not be able to sell as much. My father went closer to the city and set up a shop there. Also, we mostly tried to sell it to the retailers in the city, instead of selling it directly. This way, we could sell more. I also took a few orders in advance by showing a few samples. Those were big orders! I could think of these ideas only because of modules like customer feedback, branding and promotion. Since when have you felt this change? I wouldnt even want to say that I had a business before. I would say, I have only started my business four months ago after experiencing MOVE. I was just a mere carpenter before that. Not a businessman. What has been the most useful learning from MOVE? It has taught me marketing. It taught me how to deal with customers. Now I use whatever opportunity I get to promote my service. Earlier, I wouldnt even think about it. Like for instance, if there is a fair or any programme for which I screen-print posters, I make sure I use that opportunity to place an ad for myself too. At a corner of that poster I write, Made by: Muthu Priya Screenprinting and Carpentry work 9449996493.

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Three Lives that MOVE have Transformed ...

Any other major changes you have made in terms of marketing? Well, a rather simple thing but which proved to be very useful. Earlier I never had any proper contact point for my customers. MOVE training made me realise how important it is to be available to the customers. Now, I have given two addresses one at a bus stand where I am every morning and the other is at a hotel, where I am available every evening. What are your future plans? Well, I would like to know more about carpentry. I had gone to Hubli Handicap Hospital training centre for a course in carpentry but found that I already knew what they were teaching. There is a very nice residential course in Bidadi, near Bangalore. However, the training is for eighteen months. I have a customer base here. If I leave this place for that long, I will lose those customers. I have already picked up a lot by merely watching the carpenters in Bidadi. What kind of training are you looking for? Well, I am a good carpenter but I am yet to excel in wood carving. Using the PMA tools of MOVE, I recognised a huge demand for wood carving. Not only that, there is nobody here who does wood carving. What happens after the training? I want to have a huge factory for carpentry and wood carving work. I want to employ more people. I have already purchased machines worth `3000 and employed four people for the contracts I have got now. The labourers are not very sincere always. I dont like that. If I am not around, they dont work properly. What has been your dream? As a child, I wanted to get into a government job. Now, I want my own business, or a big factory where I can give jobs to others. This is better than a government job. There is more freedom and satisfaction in a business. It was a wonderful meeting with Muthu. Carpentry is not just a means of livelihood for him. It is his passion. Even in his off time, he goes to meet other carpenters, sees and learns from their work, and reads books on carpentry. Determined to get better training, he has approached many professionals in Dharwad but only one has responded positively. Others, as he says, are afraid of competition. Seeing his passion, determination and skills, one is not surprised that they are! We dont say no , Umesh Gargad and Mahilar Kittur For twenty-year-old Umesh Gargad and nineteen-year-old Mahilar Kittur, their new mobile shop is an answer to many of their dreams. Both of them attended the same MOVE session and then decided it will be best to open shop in partnership with each other. According to Umesh, It is difficult to handle customers alone, so it was better to have a partner. They divide the profit equally between them and in the first month itself they had earned `1000 each, while in the second month they pocketed `1500 each. This money came in at the right time for Umesh, who could pay his college fee. Not just the money, they also share the responsibility equally. After going through the lessons in the eatery game, they decided to use the strengths of each other in the business. Mahilar deals with the customers, while Umesh handles the more technical work.

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Umesh was especially inspired by his mother, also a MOVE trainee. His mother, Murgava started her own business and ever since, the family felt a marked change in their lives. He has seen his mothers hardships since childhood. This urged him to start working while in college itself, at LIC ADM office as a scanning operator and later at Nokias Customer Care division. Though he got a salary of `3000 at LIC, the work hours clashed with his college schedule and he had to change to a lower paid job at Nokia. At Nokia, he was earning only `1500 and his urge to start his own business became stronger. Umesh describes the time he joined MOVE, I came to know that BPF is giving training on marketing through my mother and my friends. Even though, I was working and earning money, my childhood desire to start my own business enterprise made me join MOVE training. Like Umesh, Mahilar also always wanted his own business. However, he didnt have any clear direction on how and where to start. He was undecided about which business he wanted to start and was thinking about various options like computer hardware, mobiles or even an electrician or motor mechanic. He had undergone a hardware training course as well but he couldnt start any business. MOVE helped me to start the mobile business. I got better training on how to do the business. Earlier, I was too shy to speak with anyone but now can build a good rapport with the customers, he says and shares some of his strategies, If any customer asks for something which we dont have or which we are unable to repair, we never say no to them. I tell them that there is no stock and ask them to come the next day. In the meantime, I go and get it from another shop. This helps me in keeping my customers; otherwise, I might lose them, It was after working in Nokia Centre that Umesh wanted to start a mobile-servicing business. His father and mother encouraged him to do the business. He said ,From the PMA, I learnt what problems customers face with mobiles and also came to know of the types of customers I can expect in my shop. He said that most customers are school- and college-going boys who want to download songs on their mobiles. He also understood that city people ask for original spare parts and demand better quality service. They dont mind paying more money for the service, he explains. Their friends also see the change in them. A common friend points out, MOVE helped them develop their personalities. Mahilar used to be so shy and now he can handle so many customers. Umesh is also doing well and now he also helps me whenever I am in need of money. Umesh and Mahilar both strongly recommend other youth to: Start your own business. So you will not be obliged to anyone and can work as you wish.

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Best Practices Foundation 1 Palmgrove Road Victoria Layout Bangalore560 047 Karnataka. India Phone: +91-80-25301861 e-mail: bpfound@gmail.com www.bestpracticesfoundation.com

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