This study of microenterprise marketing trends, lessons learned, and challenges was commissioned by The Small Enterprise Education and Promotions (SEEP) Network, an association of U.S.-based nonprofit organizations that support microenterprise development in developing countries. It was funded by CARE International. The author is grateful for the contributions of SEEP members Gail Carter and Tom Carr (ACDI/VOCA), Frank Lusby (AFE), Mark Dripchak (CARE\Egypt), and Anuj Jain (CARE\India) who brought to the study Pradeep Kashyap (the designer of the Gram Shree Mela and now with MART in India). The study has been deeply enriched by the recent availability of numerous case studies and analytical papers arising from the Committee of Donor Agencies for Small Enterprise Development’s recent conferences in Zimbabwe (September-October 1998) and Brazil (March 1999). The author also appreciates the logistical, intellectual, and moral support of Calvin Miller of CARE International, Dana de Kanter of SEEP, and Gail Carter of ACDI/VOCA.

The case studies used in this study, which was commissioned by SEEP and funded by CARE International, include marketing programs volunteered by four SEEP members: Action for Enterprise, ACDI/VOCA, MART (a CARE\India partner), and CARE\Egypt. Other cases were drawn from papers presented at recent conferences in Zimbabwe (1998) and Brazil (1999), sponsored by the Committee of Donor Agencies for Small Enterprise Development. The study compiles trends, lessons learned, and challenges facing BDS practitioners who help microenterprises and smallholder farmers gain access to markets for their products and services.

The programs, all of which share the common goal of helping microentrepreneurs (or small- and medium-sized businesses) gain access to markets, represent three models: (1) brokers, who purchase products from microenterprises and sell them at a markup and who often also offer market research, product development, training, input supply, and access to technology to the producers; (2) ancillary service providers, who help microenterprises reach markets through services such as providing information, training, and links to buyers, without brokering the products for them; and (3) market infrastructure developers, who develop institutions in the market aimed at helping microenterprises access markets permanently.

The study assessed program performance using an evolving performance measurement framework structured into three goal areas: (1) program outreach, which assesses the development of a BDS market; (2) program sustainability and cost-effectiveness, which assess the performance of the BDS supplier institutions; and (3) program impact, which assesses microenterprise customers. The cases vary widely in their performance on these three sets of indicators. Regarding scale/outreach and market development, few programs in the study promoted the development of competitive BDS markets and no programs measured it; their focus rather was on reaching large numbers of entrepreneurs and the poor. In the area of sustainability and cost-effectiveness, most programs focused on sustainability, but did not assess overall program cost-effectiveness; most are financially sustainable at current levels of operation, and their sustainability does not depend number of years in operation. Program impact was reflected in increased sales for microenterprise customers, although few programs tracked customer satisfaction or ultimate impact on clients.

Data from the case studies enabled this study to tentatively draw the following conclusions regarding the performance of these marketing services programs: (1) performance measurement is a challenge; (2) programs focusing on market infrastructure development reach larger scale; (3) many sustainable programs work with the poor, while some programs working with medium-sized enterprises are not sustainable; (4) larger programs may have less intense impact on clients; (5) cost-effectiveness is not related to scale or program model; (6) brokers reach sustainability more easily than other marketing service providers, but these other providers also are developing strategies for financial viability; and (7) smaller programs reach sustainability more easily and quickly than larger programs.

Moving beyond methodology, program descriptions, and performance results, the study explores the trends, lessons learned, and challenges of four basic marketing issues: (1) program design and management, (2) market research and positioning, (3) product development and production, and (4) sales.

Program Design and Management. Focusing on issues that surround the design and management of not-for-profit marketing programs, this section shows that most programs strongly recommended designing and managing these programs as closely as possible to private-sector companies.

Two key trends suggest that (1) most programs focus on one product sector, but new, multisector services are emerging, and (2) although most programs still receive grants, private-sector financing mechanisms such as loans and equity are becoming more important.

Three key lessons learned are (1) successful organizations work with visionary leaders, have staff with technical and marketing skills, and provide financial incentives for good performance; (2) microenterprises are willing to pay for focused, effective services; and (3) effective institutional arrangements mimic private sector institutions.

Several challenges concerning program design and management include the following: (1) embedding costs of ancillary services into product markup may erode market signals around ancillary services; (2) organizations offering ancillary services had a more difficult time finding sustainable institutional structures; (3) the marketing brokers have an interest in protecting their market from competitors, rather than promoting competitive markets for BDS services; (4) individuals or companies investing in not-for-profit marketing ventures that receive public funds face issues of integrity that arise when these companies begin turning a profit and the individual investors benefit; (5) some marketing activities, such as training, group organization, and advocacy, do not show signs of being financially sustainable the way brokering does.

Market Research and Positioning. Little information emerged from these case studies regarding their market research and positioning, which suggests that the field still has much to learn in this area.

Market research and positioning trends suggest that the programs relied on a wide array of sources of information to track market information including national surveys, trade journals, and the Internet.

Lessons learn include the following: (1) the not-for-profit programs succeeded at a wide range of market research strategies; (2) some focused on high-value specialty markets, others on low-value mass markets; (3) every program showed that personal networking was a key element in gathering information and developing an effective market niche.

The major challenge in market research and positioning facing programs in this study was whether to conduct substantial, expansive market research, or whether to use more minimalist approaches, particularly those that involve the mciroentrepreneur directly with final customers of their products.

Product Development and Production. With significant experience to offer in product development and production, the not-for-profit marketers seemed to start with increasing and improving production of their microenterprise clients and then to search for markets.

Two key trends were that (1) many programs used a wide variety of strategies to help microentrepreneurs with input supply, and (2) they linked entrepreneurs to outside sources of finance rather than directly offer financial services.

Several key lessons learned about product development and production include the following: (1) the strategies used for delivering training and product development services varied according to program model; (2) brokers, mimicking the private sector, succeeded by applying strict quality control; and (3) successful brokers, like the private sector, priced products according to market demand, not according to the costs of microenterprise suppliers.

Two challenges in this area included (1) how much marketers could help entrepreneurs develop their businesses to market standards while being financially sustainable themselves and (2) how not-for-profit brokers could give a fair price to entrepreneurs while remaining competitive in the private-sector market.

Sales Strategies. As with market research and positioning, the programs had amassed little information about their sales strategies, which indicates that the field needs to develop better skills in this area.

The study showed that few organizations are taking advantage of a recent trend in selling: Internet commerce, while lessons learned show that (1) most organizations in the study marketed by connecting with existing private-sector markets, rather than by creating "alternative" markets; (2) they subcontracted to wholesalers, rather than selling directly to consumers; and (3) a few programs used advocacy to open markets, a strategy that required significant personal networking and developing public recognition for the organization.

Organizations faced two major challenges in selling: (1) working with large buyers and (2) selling their nonbrokering services to entrepreneurs themselves. Few organizations faced the challenge of understanding and confronting ethnic and class barriers to marketing; rather, they selected markets in which such barriers were absent.

Concluding Note: Future Research Strategies. This study was conducted largely using the Internet. Participating organizations e-mailed program documents and responses to questionnaires and specific questions to a U.S.-based researcher. The researcher also accessed cases posted on the ILO Web site (www.ilo.org), the result of a call by the Donor Committee for cases to be presented at two conferences. Other, equally low-cost research strategies could generate additional rich analytical information, including the following: (1) a virtual conference in which participants share their strategies for developing particular services, (2) joint action research, (3) e-mail lists (an Internet and e-mail combination), (4) a combination of virtual and personal interaction, and (5) virtual research supplemented with hands-on research by external researchers.

 

This study was commissioned by The Small Enterprise Education and Promotion (SEEP) Network’s Business Development Services (BDS) Working Group and funded by Cooperative Assistance and Relief Everywhere (CARE) International. Four SEEP members–Action for Enterprise (AFE), ACDI/VOCA (Agricultural Cooperative Development International/ Volunteers in Overseas Cooperative Assistance), Marketing Action Research Team (MART, a CARE\India partner), and CARE\Egypt–volunteered their marketing programs as case studies. The information provided by these SEEP members was complemented by case studies made available by the Committee of Donor Agencies for Small Enterprise Development (Donor Committee) from its recent conferences in Zimbabwe (September-October 1998) and Brazil (May 1999). 1

The study is a compilation of trends, lessons learned, and challenges facing BDS practitioners who are helping microenterprises (or small businesses) and smallholder farmers gain access to markets for their products and services. The programs in the study share this common goal of helping microentrepreneurs gain market access.

 

A. Purpose and Methodology

Next to finance, marketing is the key problem facing microenterprises, and it is a high research priority for BDS practitioners. The focus of this study emerged from questions the SEEP BDS Working Group had about designing and implementing good microenterprise marketing programs. The group organized its questions into the following four main categories, which reflect the basic structure of marketing assistance programs:

1. Program Design and Management
2. Market Research and Market Positioning
3. Product Development and Production
4. Sales Strategy

As the categories reflect, the study used a broad definition of marketing; that is, "profitably meeting the customer’s needs and desires"; while the definition of marketing services includes "any service provided to microenterprises that helps them access markets." Because there is much to learn from agricultural marketing and many SEEP members target both on- and off-farm enterprises, the study includes cases that concentrate on smallholder farmers.

The study highlights the trends, lessons learned, and challenges facing the microenterprise marketing field; it is not a "best practices" study. Because the performance measurement systems of BDS programs vary so significantly, it is difficult to say definitively that the programs described here represent stronger marketing programs. Those programs that the study documents, however, tend to be the ones that practitioners believe are most successful. The study’s conclusions, presented here, represent the latest practices in a quickly evolving field. The trends represent observations that could not be tied to strong performance, but which were seen as patterns in many cases or as interesting, emerging trends in other cases. The lessons learned present conclusions based on program performance. And, perhaps most important in a rapidly changing field, the challenges describe areas in which the study could draw no conclusions, but in which the field would benefit from more innovation and research.

B. Program Descriptions: Three Models

The programs documented in this study fall into the following three general categories:

1. Brokers. Broker programs purchase products from microenterprises and sell them at a markup. Brokers often offer their clients market research, product development, training, input supply, and access to technology. Examples of brokers include the following:

• INDEPCO, a garment producers’ association in Haiti that subcontracts government uniform production to its members. INDEPCO also provides inputs, such as raw materials, and training to member subcontractors.
• PROARTE, a for-profit marketing and craft exporting company in Nicaragua founded by the Mennonite Economic Development Agency (MEDA). While PROARTE also provides some inputs and product development to producers, it focuses primarily on marketing traditional Nicaraguan hammocks and pottery.
• PCS, a nonprofit marketing organization in Colombia that markets large volumes of everyday items domestically. PCS provides services at almost every stage of the market and production cycles for at least four product sectors.
• PROEXSAL, a cooperative in El Salvador that markets organic vegetables to specialty grocery stores domestically. PROEXSAL works in partnership with the Cooperative League of the USA (CLUSA), which supports production while PROEXSAL focuses on marketing. Services include providing refrigerated storage and transportation, as well as training buyers on how to handle organic produce.
• ZIWA, a marketing enterprise that grew out of a nongovernmental organization (NGO) in Western Kenya that provides product development and training primarily for metalworkers. ZIWA works in partnership with an NGO that provides significant product development and training support.

2. Ancillary Service Providers. Ancillary services programs offer services that help microenterprises reach markets, but they do not broker products for them. Their wide range of services including information provision, training, and linking producers to buyers.

• AgReform: A CARE\Egypt program that helps smallholder farmers locate the information they need to increase productivity and identify market opportunities. AgReform helps smallholder farmers visit experts, suppliers, and potential buyers so they can develop long-term relationships and eventually access the information on their own.
• AMKA: An export development program in Tanzania.
• FIT: The Farm Implements and Tools program is an International Labor Organization (ILO) action-research effort that develops and test new services for supporting or replicating private-sector initiatives so those initiatives can become financially sustainable. Specific services include enterprise tours, user-led innovations, and advertising papers. FIT is evolving into a market-infrastructure developer.
• MicroNet: A cutting-edge project in Jamaica in which private-sector investors are initiating a BDS company.
• UNIDO: The United National Industrial Development Organization; subcontracting partnerships and the Manikaland Subcontracting Exchange (MSE) in Zimbabwe, which link large-scale manufacturers with small-scale suppliers.
• UNIDO Clusters and Networks: UNIDO facilitates the development of groups of entrepreneurs in the same product sector and supports joint projects that help get product to market.

3. Market Infrastructure Developers. These market infrastructure programs develop market institutions aimed at helping microenterprises access markets on a permanent basis.

• GSM: In India, Gram Shree Mela, occasional market expositions, feature handmade rural products sold by NGOs and producer groups that receive government grants to assist the poor in income-generation activities. The Mela, which take place in urban areas throughout India, also offer workshops on product development, pricing, and marketing. NGOs, supported by the Indian government, also participate in the market; they work with rural craftspeople to produce and market their products. Although the GSM program focuses narrowly on providing market festivals, its function is linked to the broader infrastructure of NGOs that assist rural producers.
• SADP/NASFAM: The Smallholder Agribusiness Development Project (SADP) and the National Smallholder Farmers’ Association of Malawi (NASFAM), together provide organizational development, technical assistance, advocacy, and information services to smallholder farmers through a network of 17 associations and 2,500 farmers’ clubs that SADP helped establish. The project started working in the tobacco sector and is now helping smallholder farmers diversify to chilies, cotton, and other cash crops.

Annex A presents detailed case studies of the original SEEP cases: SADP/NASFAM, INDEPCO, GSM, and AgReform. Annex B includes summaries of the Donor Committee cases. Annex C contains a table of performance data from all the cases, which is analyzed in the following section.

C. Performance Results and Conclusions

The study assessed program performance using an evolving Performance Measurement Framework that attempts to use a common set of indicators to assess the performance of Business Development Services programs. 2 Using the framework provides an opportunity to objectively compare program performance across a range of common goals and indicators. Nevertheless, limitations to the use of such a newly developed framework exist at this time. During this study, after data was collected, the framework was significantly revised. In addition, the non-SEEP case studies were developed before any common BDS framework existed. Finally, the framework calls for assessing some cutting-edge goals and indicators that are not yet commonly used in BDS programs. Thus, the study does not always present data in comparable form across programs, and data for many indicators is unknown. Nevertheless, the act of simply organizing existing data into a common structure reveals many interesting and valid conclusions.

The framework is structured around the concept that business development services are a commodity and that the overall goal of any BDS program should be to develop a sustainable, competitive, well-functioning market for the particular BDS service on offer. The framework outlines the following three sub-goals and indicator categories for this overall vision:

1. Program outreach, measured by assessing the development of a BDS market;
2. Program sustainability and cost-effectiveness, measured by assessing the performance of the BDS supplier institutions; and
3. Program impact on microenterprise customers.

1. Results. The cases vary widely in their performance on these three sets of indicators, as described in the following sections:

a. Scale/Outreach and Market Development. Although recent thinking in the BDS field suggests promoting the development of competitive BDS markets, few programs in this study have that goal, and no programs measured it. The main interest for the brokers is in developing their market share, at the expense of competitors, not in developing a diverse, competitive market. In fact, most programs in this study do not directly charge fees for services. Rather, costs are recovered through product markups, which ranged from 11 to 50 percent. For brokers, success in developing the market is measured by overall sales, which ranged from annual sales of $100,000 to $3,400,000. Ancillary service providers and market infrastructure developers focused on reaching large numbers of entrepreneurs and, in many cases, reaching the poor. The programs served between 5,000 and 100,000 enterprises, more notable than the brokers who served between 70 and 1,000 entrepreneurs. In terms of how programs helped disadvantaged groups gain access to services, most programs focused on microenterprises and smallholder farmers, with only one targeting medium-sized exporters. In these cases, between 20 and 50 percent of the target groups were women. Only one program attempted to support more than one BDS supplier, and these were aligned in one association, so they were not competitors in the same market.

b. Sustainability and Cost-Effectiveness. The vast majority of programs focus on sustainability. Most programs exhibit some level of financial sustainability and use subsidies mainly to expand markets or offer new services. Brokers, in particular, focus on sustainability. All brokers in the study earn an annual profit that covers basic operating expenses, although they all used subsidies to get started. Sustainability in these programs does not depend exclusively on the number of years in operation, as many older programs are not very sustainable while a few younger ones are. Ancillary services providers struggle more with sustainability than brokers do, because they must charge entrepreneurs for services, rather than cover costs through product markups. One such supplier in the study recovers no staff costs, although farmers pay for the material costs of the service. Another program covers only 5 percent of costs from entrepreneur customers. Finally, the market infrastructure providers raised long-term funding from public-sector sources.

Although no program calculated a cost-to-benefit ratio, other cost-effectiveness indicators are tracked and varied widely. Total program costs range from $65,000 to $4,000,000. The cost per client served ranges from $12.50 per year to $10,000 cumulative (three years to date). The cost per $1 in sales generated ranges from 11 cents to 49 cents. One program estimates that for every $1 in program investment, customers generate $2-3 in income. Because of lack of data in this area, it is difficult to draw firm conclusions.

c. Impact. The main measure used to assess client impact in marketing programs is increasing sales, and many programs help microenterprise customers do this. Total annual program sales range from $131,000 to $27,000,000 per year. Sales per entrepreneur served range from $4 to $10,000 per year. A few programs track customer satisfaction or ultimate impact on clients. For example, the Gram Shree Mela program surveyed customers and found the following:

• 98 percent said the markets were a "good marketing outlet."
• 78 percent were satisfied overall.
• 60 percent were satisfies with the training workshops.
• 60 percent were repeat customers.
• 63 percent of final customers attending the market made a purchase.

During a three-year project, the SADP/NASFAM program showed the following signs of affecting clients:

• In 1998, membership showed a growth of 80 percent in one year.
• Customers saved a total of $400,000 in transportation costs,
• Input cost per customer was reduced by 9 percent.
• Revenue of member farmers was 13 percent higher than revenue of nonmember farmers.

Although these indicators are informative about program performance, the most common and powerful indicator for marketing programs was increasing sales for entrepreneurs.

2. Conclusions. Despite the limitations of comparing nonstandard performance data, several key conclusions can be drawn about the performance of marketing programs. Many are patterns that would be expected. Others are quite surprising.

 

a. Performance measurement is a challenge. Monitoring and evaluation activities are expensive and challenging for most programs. In addition, the programs in the study collect and report nonstandard performance data, which makes comparison among programs difficult. The most common performance indicators include number of clients served, income level, gender, sales generated, program costs, and profitability of brokerage services. As programs focus increasingly on financial sustainability and involve greater numbers of private-sector players, tracking profitability is receiving significantly more attention than other measures such as scale, outreach, and impact. For example, after three years in business, PROARTE is only now beginning to develop a system for tracking the income its clients receive from sales of their products to the company, but it has tracked profits since its inception.

b. Programs focusing on market infrastructure development reach larger scale. In the cases reviewed, dissimilar program models perform differently with regard to scale. The two cases that strengthen the marketing infrastructure serve large numbers: GSM serves one million clients annually, and SADP/NASFAM serves 40,000. In contrast, AgReform and PCS (ancillary service providers) serve a few thousand, while the others (mostly brokers) –INDEPCO, ZIWA, AMKA, PROARTE, MSE, and UNIDO Clusters–serve fewer than 1,000 per year. Although brokers and ancillary service providers can be found in the smaller programs, it may be possible for them to reach larger scale. Jamaica MicroNET, an ancillary service provider, plans to reach a larger scale. Its strategy is to replicate, through branches, a standard set of marketing assistance services, such as basic business and marketing training, as well as access to telecommunications, marketing advice, and desktop publishing for marketing materials.

c. Reaching the poor is a matter of choice, not sustainability. Many analysts suggest that for business development services suppliers to be financially sustainable, they must serve middle- or upper-income clients. The cases reviewed here, however, suggest that no correlation exists between the ability to serve the poor and financial sustainability. All cases profiled in this study, with the exception of two studies on export services, target either low-income microenterprises or smallholder farmers (according to the programs’ varied definitions). At least 20 percent of most organizations’ clients are women, and several programs serve a clientele of primarily women: INDEPCO, GSM, and PROARTE. Of these, INDEPCO and PROARTE are financially sustainable brokers, and GSM, although dependent on the government for subsidies, has been active for a decade. Similarly, the programs that performed best in terms of financial sustainability–PSC, INDEPCO, and PROARTE–all target low-income microenterprises, and a significant proportion of their clients are women.

 

d. Larger programs seem to have less-intense impact on clients. Impact is difficult to compare because programs track significantly different data. The most common indicator, however, is program sales data. A proxy indicator for income earned per client is sales generated per person served, although it is recognized that this does not take into account the percentage of these sales that actually reach a client. The two largest programs, in terms of people served, SADP/NASFAM and GSM, generate significantly lower sales per person–$675 and $4–compared to smaller programs. PCS, on the other hand, served 1,000 entrepreneurs and generated annual sales of $3.4 million, or $3,400 per person served. It is possible that these differences are due to geographic factors, since the larger programs are in Africa and India and the smaller in Latin America. It is also possible that the income difference depends on the income level of clients at the start, probably a reflection of market value and the volume of products that clients typically produce. It may also be that larger programs simply spread their program efforts over larger numbers of people. Whatever the cause, the pattern seems to be that smaller programs have a more intense impact on clients.

e. Cost-effectiveness is not related to scale or program model. Cost-effectiveness is equally difficult to compare. The only two ratios calculated with existing data are a cost-per-client ratio and the cost per $1 of sales generated. There were no observable patterns of performance across program type, size, or target population. INDEPCO, SADP/NASFAM, and GSM all have a low cost-per-client ratio of under $30. AgReform’s ratio is higher at $446, and PROARTE’s $10,000 per client is even higher, but this ratio was from its first year of operation. INDEPCO’s ratio is now quite low, but the company plans to increase its cost per client to around $55 as it begins providing new services. Costs per $1 of sales varied similarly. The conclusion here is that cost-effectiveness can be correlated neither with the program models described here, nor with scale.

f. Brokers reach sustainability more easily, but other strategies are evolving. Most projects profiled in the study show signs of financial sustainability and some level of profitability, but the brokers appear to be more focused on financial sustainability and are achieving it more quickly. INDEPCO is able to survive as a broker without subsidies, though on a small scale. PCS has been profitable since 1994, and PROARTE covers its operating costs. The ancillary service providers demonstrate that entrepreneurs are willing to pay for their services, and they show signs of cost-recovery: smallholder farmers and entrepreneurs in the AgReform and FIT programs pay for information obtained through visits to other businesses and experts.

The GSM and SADP/NASFAM market infrastructure programs take a different approach. GSM festivals generate significantly more sales than costs (sales-to-cost ratio is 4:1). If fees were charged, the markets could be sustainable. The government and people of India have decided, however, that these festivals are a public good that serves the poor, and taxpayers are willing to fund the markets so that the rural poor may keep a larger percentage of their sales. In contrast, SADP/NASFAM has never provided financial support to the associations that form part of the program. The associations receive technical assistance and advice and then engage in businesses that serve smallholder farmers. They are all financially sustainable, and together they make a modest profit of $15,000 per year. In addition, because of successful advocacy efforts, NASFAM now receives a percentage of the tobacco levy to support smallholder farmers. Thus, even these large infrastructure programs have developed permanent funding bases, and we can conclude that, for marketing service programs, sustainability seems to be a goal within reach, particularly for the brokers.

g. Smaller programs reach sustainability more easily. The other recognizable pattern with sustainability is that smaller programs seem to reach sustainability faster than larger programs, which is completely opposite the experience of microfinance programs that strive for large scale to reach sustainability. Why? One reason is that the brokers, which tend to be more sustainable, also tend to be smaller. The other is that the largest programs are the market infrastructure programs. These programs are significantly more expensive and complex to manage, and many of their services are considered a public good for which it is difficult to capture costs. These patterns are also connected to the tailored services provided by sector-specific BDS programs. It is harder to tailor services for large numbers of people. The Jamaica MicroNet program may break this pattern, however, as it attempts to deliver ancillary services on a large scale. In contrast to the other programs profiled here, Jamaica MicroNet is not sector specific, which may enable it to reach scale and sustainability.

Once again, the above observations must be seen in light of weak, nonstandard performance data. In addition, the models described above are constantly evolving as new strategies emerge. To understand more about which strategies enhance program performance, the following sections examine program design and management, market research and positioning, product development and production, and sales strategies.

 

This section focuses on issues surrounding the design and management of not-for-profit marketing programs, which represent a wide range of program designs, institutions, and product sectors. Most of the cases in this program had strong recommendations for program design and management. The main theme is to design and manage a nonprofit marketing program as closely as possible to a private-sector company.

Given that each program has achieved some measure of success, and in the absence of clear performance data, this suggests that many different approaches to the provision of marketing services are viable. Some general observations on program design can nevertheless be made. 5

A. Trends

Two key trends in program design and management stand out. First, most programs focus on one product sector, but new, multisector services are emerging. Second, although most programs are still grant funded, private-sector financing mechanisms, such as loans and equity, are becoming more important.

1. Most Programs Focus on One Product Sector, but New, Multisector Services Are Emerging. Most marketing services are provided in the context of a specific sub-sector. Exceptions, such as AMKA and MicroNet exist, but by and large, this is the case. In a few cases the programs offer services in a few sectors, but entrepreneurs and smallholder farmers are still grouped within sectors for specific activities (FIT, AgReform, UNIDO, MSE). The sectors selected vary from large, mass commodity, and mass market goods (SADP/NASFAM, PCS, INDEPCO), to specialty niche markets (PROARTE, PROEXSAL, GSM), to industrial goods (MSE). The sectors were selected primarily because the target populations were active in these sectors, and secondarily, because the market potential was strong. The Jamaica MicroNET program design, based on the office services model that is successful in Western countries, is an early attempt at mass distribution of a marketing service across sectors.

2. Most Programs Are Still Grant Funded, but Loan and Equity Financing Is Emerging. Traditionally, marketing service programs are financed by grants, which is the case for most programs profiled here. Costs range from several programs that required less than $100,000 in funding to several programs that required between $2 million and $4 million over two to ten years. Recent trends in financing marketing services, however, reflect the increased potential for financial sustainability. Equity and loan financing are becoming more common, particularly to fund brokers. Although donors still supply the majority of funds, a change in the financing mechanism may portend a change in the way money for programs is procured.

 

 

B. Lessons Learned

The programs highlighted three key lessons learned. First, regarding human resource management, successful programs work with visionary leaders, hire (or train) staff with both technical and marketing skills, and provide financial incentives for good performance. Second, it is clear from these cases that microenterprises are willing to pay for focused, effective services. Third, effective institutional arrangements mimic private-sector institutions. The not-for-profits that were structured like private companies performed well.

1. Successful Programs Work with Visionary Leaders, Have Staff with Technical and Marketing Skills, Pay for Services, and Mimic the Private Sector. The profiled programs have staffing levels and expertise that range from no full-time staff (INDEPCO) to almost 100 technically trained staff and volunteers (SADP/NASFAM). A common element of success in these pioneering programs seems to be visionary, skilled leadership that feels strong ownership of the program and cultivates this feeling in its staff. A number of brokering companies are either employee-owned or pay incentives for profitable performance, resulting in a strong sense of ownership and high performance. The most common issue is that most staff members are technically strong, but weak on the marketing side, which explains in part the supply-side focus of many programs. SADP/NASFAM, however, has found ways to overcome this barrier.

SADP/NASFAM cross-trains staff and works in inter-disciplinary teams. Staff members receive two weeks of training when hired and two weeks of in-service training each year. The organization also has on board a well-balanced mix of staff whose technical and management skills complement each other.

2. Microenterprises Are Willing To Pay for Focused, Effective Services. Many programs in this study demonstrate the willingness of entrepreneurs to pay for ancillary marketing services. Smallholder farmers participating in AgReform pay consulting fees to experts who provide production and market information. In the FIT program, entrepreneurs pay for visits to other businesses to learn specific technical skills. They also purchase information about new product designs while private-sector trainers pay for training of trainer courses. The MicroNet program plans to sell communications, advertising, and technology access services to business owners. SADP/NASFAM-associated farmers pay a fee to access bulk input purchasing and transportation services and the technical assistance they need to establish these services. In all these cases, service identification involved assessing the producers’ needs and their capacity to pay. Programs developed services that were specific and affordable and that had direct value for the entrepreneur or smallholder farmer.

3. Effective Institutional Arrangements Mimic the Private Sector. Several types of institutions–associations, cooperatives, nonprofit organizations (international and local), government agencies, and private-sector companies–implement these programs. What they all have in common is their attempt to create marketing services that imitate or link with the private sector to create sustainable service delivery mechanisms. Brokers, however, tend to play the role of a private-sector business, whereas ancillary service providers tend to link entrepreneurs with other private-sector players.

On the one hand, the brokering organizations hope to become financially sustainable and even profitable. Cooperative, NGO, and private company structures are being used to achieve this end. They endeavor to operate as companies, but they need to provide ancillary services to access good quality supplies, and a sufficient quantity of those supplies, from small-scale producers. In general, these companies embed the cost of these services into their margin. 3 This approach is similar to a large company, such as Toyota, which supplies technology and specific training to its subcontractors. The cost of such mentoring is born by the buyers.

On the other hand, market facilitators link low-income producers with existing market channels and services. These programs generally begin by conducting participatory appraisals or demand assessments. FIT and AgReform facilitate visits among entrepreneurs themselves and also between them and sources of technical and market information. The business owners pay for this service. SADP/NASFAM helps smallholder farmers form associations and engage in collective action; it then encourages the associations to contract private-sector service providers, such as transporters and fertilizer suppliers, rather than to engage in operating these businesses themselves. At GSM organized market events, producer groups interact directly with customers. The USAID study of export promotion programs concludes that successful programs facilitate long-term marketing linkages among private-sector players and allow entrepreneurs to choose from a wide range of service providers, rather than have a specific program provide services directly. In these cases, the approach is to facilitate the market, rather than replace market mechanisms.

 

C. Challenges

The study posed many challenges related to program design and management. First, embedding costs of ancillary services into product markup, rather than charging explicitly for services such as training, may erode market signals around ancillary services. Second, while brokers could easily be structured as private-sector companies, organizations offering ancillary services had a more difficult time finding sustainable institutional structures. Third, while the recent trend in BDS is to promote competitive markets for BDS services, the marketing brokers profiled here have an interest in protecting their markets from competitors, rather than in stimulating a wide range of market brokers in their product sector. Fourth, when individuals or companies invest in not-for-profit marketing ventures that receive public funds, issues of integrity arise when these companies begin turning a profit and the individual investors benefit. Fifth, some marketing activities, such as training, group organization, and advocacy, do not show signs of being financially sustainable the way brokering does. What will be acceptable performance standards for these essential activities?

1. Embedding the Cost of Ancillary Services into Product Markup. In general, programs providing only ancillary services charge fees for these services, while brokers embed the cost of services into their product markup. Embedding the cost provides an excellent means for financing training and product development, activities few entrepreneurs can afford. This practice, however, takes away the demand signals that fees supply. How can a broker determine if its organization is the best one to provide training?

To meet customers’ needs and to make a profit, marketing companies are interested in keeping ancillary services effective and low in cost. For nonprofits and cooperatives, the pressure to turn a profit is not as great, and the interest in providing services, whether they are cost-effective or not, is often greater. Recent analysis suggests that, since producers are willing and able to pay for marketing services, brokers should also charge for ancillary services in order to receive clear signals from producers regarding their value. In spite of these findings, many practitioners still see embedding the cost of such services into product markup as a viable financing strategy.

Other researchers and practitioners suggest that, to be financially viable, marketing companies may stop providing the ancillary services that, while valuable, are not financially sustainable. Such a move may lead some companies to serve only higher-income entrepreneurs. One area of action research would be to cost and price ancillary services separately while monitoring the impact on (a) the ability of service providers to develop effective and affordable services and (b) the trend toward serving higher-income clients as a means to maintain profitability.

2. Institutional Arrangements for Sustainable Ancillary Services. Despite the significant progress that has been made in identifying services for which entrepreneurs and smallholder farmers will pay, the next challenge that looms is how to structure and finance the on-going delivery of the services. For example, the subcontracting partnerships facilitated by MSE in Zimbabwe are sustainable, but who is going to sustain the linking service itself? ILO’s FIT program is just beginning to experiment with turning over services such as enterprise tourism, user-led interventions, and advertising papers to private-sector suppliers such as travel agents, publishers, and trainers. UNIDO’s Clusters and Networks program has trained consultants to organize groups to engage in collaborative marketing activities, and the program plans for the consultants to continue to facilitate these groups. Although the groups may have paid for specific projects, they have yet to pay for the original consultant facilitation. The study suggests that action research into testing different institutional mechanisms for sustainable delivery of these ancillary services is needed.

3. Developing a Sustainable Market for Marketing Services. Recently, the BDS field has focused on developing a viable commercial market for business development services. In working toward that end, the programs profiled in this study have, for the most part, developed services that entrepreneurs are willing and able to pay for. Some programs also are identifying sustainable institutions to delivery these services regularly. The next stage is to help develop the market by supporting several sustainable BDS suppliers and by offering a variety of services to a wide range of customers. For many BDS organizations, this vision is highly theoretical, and none of the programs in this study are addressing this issue. Yet, many practitioners and donors believe that, in the long run, microenterprises and smallholder farmers might be served better by having access to a competitive, varied market for services. 4 Identifying strategies and assessing their effectiveness to address the need for marketing services are key areas for future action research.

4. Who Benefits? Recent program designs raise the question, "Who benefits from the increasingly sustainable and profitable provision of marketing services?" Brokers come in many institutional forms: NGOs whose staff participate in profit-sharing incentive programs, cooperatives owned by small-scale producers, and private businesses that often are owned by both the nonprofit organizations that founded them and private investors. When these institutions receive public funding, opportunities open up for private investors to benefit substantially. Few programs address the issue of equity when inviting these individual investors to be partners in publicly funded businesses.

Similarly, programs that link large, private-sector businesses with small-scale producers actually help both. Yet, it is the small-scale producers that usually are the focus of payment. Innovative programs are experimenting with collecting fees from large companies to subsidize the program services to smaller ones.

 

5. Identifying Sustainable Activities and Those That Require On-going Subsidies. While increasing progress is being made in charging fees for services, many services are still subsidized or government funded. One challenge for the field is to continue to identify those services for which microenterprises can and will pay, as well as those that represent public goods, for which it is difficult to capture costs and for which the public is willing to pay regularly. Although these definitions, or categorization of "sustainable" vs. "nonsustainable" activities, will always vary according to the target population, the will of the state, and the wealth of the nation, some general guidelines are emerging. SADP/NASFAM has reached large scale and helped many farmers groups become financially sustainable by clearly delineating sustainable and nonsustainable services.

Action research is needed to identify other such clearly delineated roles so that expectations around sustainability can be clarified. Such clarification will help mobilize private-sector lending and equity investment for providing BDS similar to what the MicroNet program in Jamaica has done by mobilizing $3.4 million in private-sector loans and equity.

The cases profiled here offer few specific tips on accessing market information, developing a market position, and responding to volatile market conditions. These topics remain a challenge for most programs, which generally begin by focusing on supply issues. In spite of the challenges, these cases identify emerging patterns that demonstrate how these programs handle market research and positioning. In addition, tracking market information for microentrepreneurs and smallholder farmers is not significantly different from that for any business, and nonprofit marketers could read books, magazines, and research on marketing to learn more about how to gather and analyze market information.

 

A. Trends

In this study, the programs relied on a wide array of sources, including national surveys, trade journals, and the Internet, to track market information. Most programs use these sources to learn about the sub-sectors in which they are working and to stay abreast of the latest developments in their field. Many rely on the traditional national economic surveys and sector studies for basic market information. In the United States, "access to markets" programs manage email list-serves in which entrepreneurs and programs share information about trade shows and search for potential subcontractors. One group is even creating a Web page to sell specialty food products over the Internet. Such services provide information and networking opportunities, while microenterprise support programs provide hands-on technical assistance to help the business owners use the information and contacts. ILO’s FIT program is experimenting with advertising papers to help large enterprises market their services to small companies and help small firms find needed goods and services. These types of publications are an excellent source of information on particular local markets.

B. Lessons Learned

The not-for-profit programs profiled in this report were successful at a wide range of marketing strategies. Some focused on high-value specialty markets, while others focused on low-value mass markets. In every program, personal networking was a key element in gathering information and developing an effective market niche.

1. Small Specialty Markets or Large Commodity Markets: Both Are Viable. Many of the cases documented in this report began as supply-driven efforts to market goods and services produced by microentrepreneurs and smallholder farmers. Initially, the programs developed marketing strategies to sell existing products, but they soon began helping producers respond to the demands and trends of the marketplace. All the programs developed a common element: a strong market strategy that conformed to the capacities of the target population and local market trends. Some programs developed small specialty markets for high-value products of excellent quality, and others focused on mass markets, large markets of basic commodities. Both strategies have worked well.

2. Networking Is Key. Strategies Vary. Fundamentally, marketing requires building relationships that can lead to sales. All the programs perform some networking functions, which usually emerge during the market research phase. The brokers do networking themselves, whereas programs offering ancillary services help entrepreneurs and smallholder farmers network, initially with each other and then with suppliers and customers. Networking activities vary significantly depending on the target market. Exporters attend international trade shows or get to know the managers and leaders in local wholesale auctions. The SADP/NASFAM project networks with national agricultural associations and experts, donors’ groups concerned with agriculture and tobacco, and government initiatives to improve the product sector. PROEXSAL brings the grocery store buyers to the organic produce packaging centers not only to inspect facilities and learn handling techniques, but also to interact directly with processors. Whatever the method, networking is the cornerstone of good market research that will ultimately help a program develop a strong marketing strategy.

C. Challenges

For programs in this study, the major challenge in market research and positioning was whether to conduct substantial, expansive market research, or whether to use more minimalist approaches, particularly ones that get the microentrepreneur directly into contact with final customers of their products.

1. Databases vs. Minimalist Approaches. A debate continues in the field about the usefulness of keeping large databases of market information. The SADP/NASFAM program keeps a large database on tobacco that it uses to publish monthly Market Bulletins and track small-scale production and sales. UNIDO subcontracting exchanges keep large databases of potential buyers and suppliers. No other projects profiled here rely heavily on databases of market information. Instead, they find the information they need in trade journals, in reports and databases published by governments and universities, or on the Internet. The creation and upkeep of market information databases is expensive, so it seems preferable for development programs to access existing sources. There is, however, a question of the relevance of information in existing market surveys for microenterprises and smallholder farmers.

2. Market Research vs. Putting Microentrepreneurs in Touch with Customers. Most programs implement some form of market assessment to determine whether a product sector is worth investing in. After they make the decision to invest, they use further analysis to help identify an appropriate market niche and strategies for accessing it. Several programs also focus on helping entrepreneurs contact customers directly so they can understand first hand what they want and need in the way of products. Such feedback from customers helps inspire producers to improve or modify their products to meet the demands of the marketplace.

 

One of the most significant challenges facing microenterprises and smallholder farmers in accessing markets is the ability to produce a sufficient quantity of product, on time and of the appropriate quality. This challenge explains why the vast majority of marketing service programs involves more than just buying and selling products. The programs profiled in this report took different approaches to helping entrepreneurs access supplies, develop products, improve technical skills, provide finance, monitor quality, and establish appropriate pricing mechanisms.

 

A. Trends

In this study, two key trends were apparent. First, many programs helped microentrepreneurs with input supply, but they used a wide variety of strategies to accomplish that. Second, none of the programs profiled in this report directly offered financial services. Rather, they linked entrepreneurs to outside sources of finance. How often entrepreneurs were actually able to access finance is not clear.

1. Four Strategies for Input Supply. The projects in this study use the following four basic strategies to help producers access supplies:

a. Procure and Supply Raw Materials. INDEPCO and PCS (and PROARTE to some extent) procure and supply raw materials.

b. Partner with Support Organizations. GSM and PROEXSAL partner with support organizations that provide input supply and production assistance, which frees them to focus primarily on marketing.

c. Help Producers Identify Private Sector Sources. FIT, AgReform, and SADP/NASFAM help producers identify private-sector sources of inputs, or raw materials.

d. Help Negotiate Fair Terms. SADP/NASFAM takes the extra step of helping farmers’ clubs and associations negotiate fair terms and use standard contracts with input and services providers.

In all of these programs, only brokers supply inputs, although not all of them do. The decision about whether to get involved with input supplies depends on market demand and circumstances; that is, is input supply a problem? It also depends on available resources and the overall program strategy.

 

2. No Direct Financial Services–Link to Sources of Finance Instead. Few marketing service providers are involved in direct lending operations. Many providers, however, do help producers access credit or other sources of finance for their operations. Some brokers (PCS) pay a down payment of 50 percent for products. Others (INDEPCO) provide supplies for free. SAPD/NASFAM and PROARTE are linked to credit organizations, and it is clear that these institutions actively provide credit to the clients. Others (FIT, AgReform) treat credit like any other service; they help entrepreneurs and smallholder farmers identify sources. It is not clear in these cases, however, if financial services are actually available.

B. Lessons Learned

In this study, several key lessons learned stand out. First, the strategies used for delivering training and product development services varied according to program model. Second, a key element of success with brokers is that they applied strict quality control. Third, the successful brokers priced products according to market demand, rather than basing the prices on the costs of microenterprise suppliers. The last two lessons provide further evidence of how successful practices mimic the private sector.

1. Strategies for Training and Product Development Depend on the Program Model. As with input supply, different approaches to product and skill development exist, depending on the program model. Within a general product range, brokers place orders that specify particular attributes and then provide an orientation or training to help producers meet the specifications. PCS’s training is generally more intensive than that of other brokers, such as PROARTE. PROEXSAL actually initiates packaging and transportation businesses that, once developed, are turned over to members who are trained in how to manage them. INDEPCO offers minimal training, but makes the job easy by supplying clients with precut pieces of cloth to sew. Although strategies vary, all brokers profiled in this report provide some level of product development and training service.

In contrast, ancillary service providers generally link microenterprises with private-sector suppliers of training and product development rather than supplying them directly. FIT, AgReform, MSE, and the UNIDO cluster programs all rely on the market links that they help establish to assist entrepreneurs and smallholder farmers with product development. The programs offer some training in problem identification and solutions, as well as in interviewing customers to get good market information. AgReform also follows up with technical advice on applying the information clients gather during trips that link them to that information.

Within the market infrastructure programs, entrepreneurs receive training and product development assistance, though they may not get it directly from the market services provider. GSM provides producers with links to customers and arranges workshops in product development for NGOs and producer groups, who then train the producers. In many cases, however, the craft producers receive training from an NGO on a regular basis, and the NGO sells to customers through the GSM. SADP/NASFAM, which connects smallholder farmers to private-sector service providers in most areas, uses its staff of technical and management specialists to provide direct, intensive technical training in crop production and club and association management. SADP/NASFAM offers both standard training packages and open-ended, follow-up services to the clubs and associations so that they can provide farmers with technical training and service links. Training and product development are integral to these market infrastructure programs.

2. Brokers Implement Strict Quality Control. The need for quality standards depends on a program’s market niche, and the appropriateness of engaging in quality control activities depends on the role of the program. Some marketing programs target a low- to moderate-income market that is willing to compromise quality for price, while others focus on high-value, high-quality markets. Obviously, controlling quality is more important when serving the latter.

Regardless of the niche they serve, all brokers sell directly to customers and must offer products of consistent quality to ensure that their customers remain satisfied. Quality control strategies have evolved over time. Brokers in business for many years usually accept all items and absorb the loss of items they cannot sell. This practice is rarely the case anymore. Most brokers today specify quality standards up front and reject products that do not meet those standards. Managing quality control is key to any brokerage program.

Programs offering ancillary and market infrastructure services are generally less involved with quality control. They do, however, help producers capture, interpret, and respond to signals and information from customers and the market. GSM and PROEXSAL also rely on partner support organizations to help producers improve quality. SAPD/NASFAM analyzed the cause of poor-quality tobacco (poor transportation and storage) and helped associations procure services to solve the problem. PROEXSAL is also involved in the supply chain, developing packaging businesses that they turn over to members. They also provide training to the buyers to help them maintain quality up to the customer purchase point. Depending on circumstances and strategy, these programs use a variety of different approaches to address quality issues, but they are not directly involved with quality control.

3. Brokers Price According to Market Demand. One major justification for investing public funds in marketing companies that serve the poor is that these companies offer producers fair prices for their goods, which often-exploitative, private-sector middlemen do not always do. In an effort to price products fairly, nonprofit brokers at one time added a small markup to the cost of producing the article. But the combination of this cost-plus pricing practice and the lack of quality control made it difficult for brokers to cover their costs and compete in the market. Fortunately, pricing strategies in marketing services have evolved over the years. Brokers now operate more like private-sector businesses; indeed, some are. They now set prices with margins based on their costs and the ability to negotiate a lower price with the producer. Margins vary from 10 to 40 percent and can be used to cover the cost of ancillary services. Some brokers, INSOTEC for example, still calculate the percentage of sales that go to clients; but others, such as PROARTE, have yet to develop a good monitoring system for this practice. In general, the focus is now less on fair pricing and more on pricing according to market demand. In this system, microentrepreneurs may receive a bit less for their products, but brokers are able to offer them long-term access to markets.

C. Challenges

Marketers in this study face many challenges, one of which is how much they should intervene. Programs face a dilemma of wanting to help as many entrepreneurs as possible to develop their businesses to market standards, while at the same time wanting to be financially sustainable themselves. A second, and related, challenge is that not-for-profit marketers want to give a fair price to entrepreneurs, but at the same time they must compete in the private-sector market. If their final prices are too high, they will go out of business.

1. How Much To Intervene? Product development and technical training vary significantly in intensity and strategy, depending on market conditions, the skill level of the target population, and the project strategy. Brokers, ancillary service providers, and market infrastructure developers are equally likely to provide either intensive or somewhat marginal services in these areas. An important question for research is, "When is it necessary to invest in significant product development and training, and if entrepreneurs are shown how to interpret the signals they receive, when is it reasonable to assume that they can meet market demand on their own?" Does it depend on the target population, proximity to markets, or sophistication of the market compared to capacity of the enterprise?

2. Fair Pricing. As the focus shifts from covering producer costs to covering broker costs, there comes the challenge of ensuring that the producers, the target population, earn sufficient income. INDEPCO calculates that 50 percent of its sales goes to producers, but as brokers begin focusing more on sustainability, they are monitoring the impact on producers less. GSM offers participants training in pricing. SADP/NASFAM addresses quality issues, which help producers obtain a higher price; but they are unable to protect producers against commodity price fluctuations. Pricing remains a challenging area for market service providers and is an excellent topic for more action research.

 

Strategies for gathering market information often overlap with sales strategies. In the process of researching markets and networking, sales strategies evolve and customer contacts are initiated. Still, a difference exists between market research and the actual promotion of products and negotiation of deals. As with market analysis and research, a combination of broadcasting information and establishing personal relationships is usually required. The programs in this study offer few specific tips and are still working on developing their own best strategies. Thus, market service providers would do well to look to private-sector journals, magazines and training opportunities to build their capacity further. 6 Nevertheless, some interesting observations can be made about the promotion and selling strategies of the cases profiled here.

A. Trends

Few organizations in the study were taking advantage of a recent trend in selling: Internet commerce, or E-commerce. E-commerce is being explored and exploited by enterprises all over the world. The World Wide Web provides a way to access a huge, global market; but because it is so large and diverse, it is exceedingly difficult for most microenterprises to use effectively. When using the Web, one still needs to define a market niche and identify the best means to find and contact potential buyers. 7 Options include identifying the following:

• Wholesalers who sell on the Web and who are potential customers. Organizations can locate them by searching the Web for a particular product.
• Web pages appropriate to specific industries that offer advertising space. Organizations can search the Web for a type of product.
• Companies that might become customers. Large companies often have Web sites that explain their business, and some companies advertise procurement opportunities.
• Exhibitions, trade shows, and other events that advertise on industry association Web pages.
• Auctions for procuring supplies. Although the majority of these auctions focus on computer and vehicle sales, new sites are being created at a rapid rate. Contacting auctioneers is another possibility because they may also be buyers.
• Web-based classified listings that sell used equipment, such as cars, computers, and exercise equipment, may be appropriate for a range of other products and services.
• Business classified or advertising Web pages. Some advertisers are large-scale international businesses, but smaller businesses often use local providers.

B. Lessons Learned

Most of the organizations in the study marketed by connecting with existing private-sector markets, rather than by creating "alternative" markets. Marketing in this way generally involved subcontracting to wholesalers, rather than selling directly to consumers. A few programs used advocacy to open markets. These strategies required using significant personal networking and developing public recognition for the organization.

1. Link with Private-sector Marketing Channels. Most of the programs in this study, regardless of the model used, link producers with private-sector customers, rather than create alternative marketing channels. PROARTE found that alternative trade organizations have limited buying potential because of their narrow product base; so they now focus more on large-scale, private-sector buyers. SADP/NASFAM links tobacco producers to the national tobacco auction and concentrates on negotiating fair access to the auction. PCS and PROEXSAL connect producers to existing grocery stores and retail outlets; PCS connects them to mass market stores and PROEXSAL to elite stores. AgReform and FIT help producers identify appropriate market opportunities for their businesses and then facilitate contacts with the potential buyers. INDEPCO links producers to government procurement opportunities and plans to approach the private sector as soon as its capacity is increased.

Gram Shree Melas are the exception. These government-sponsored markets are advertised through government radio and television, newspapers, and banners as an opportunity to find rural products and support poor rural producers. Over a ten-year period, GSM has become a recognized brand name, and people look forward to the annual event in their area. Alternative or fair trade organizations have achieved similar market niches internationally, but the more recent trend is to integrate producers into mainstream market channels.

2. Subcontracting Is the Key Sales Strategy. Most programs in this study, regardless of model, help clients access markets through some type of subcontracting arrangement. The UNIDO Global Subcontracting Exchange and the MSE in Zimbabwe focus explicitly on linking small-scale enterprises with large companies. Even without that focus, most of the programs target larger businesses: PROARTE sells to wholesalers in the arts and crafts industry, PROEXSAL and PCS sell to grocery stores, INDEPCO markets to the government, and SADP/NASFAM helps smallholder farmers access national and international wholesale commodity markets. Programs such as AgReform, UNIDO’s clustering program, and ILO’s FIT link entrepreneurs with whatever market they choose. Only GSM has a retail function, although it is rural NGOs, not producers themselves, who access the market. Some type of subcontracting is involved in all programs profiled in this report, and it is rare for marketing assistance programs to help entrepreneurs access customers directly. What this implies for practice is that a good marketing program needs to understand not only the wants and needs of final customers, but also the market channels through which they usually procure products.

3. Effective Advocacy Requires Networking and Recognition. With one exception, none of the programs has been significantly involved in advocacy. Rather, most have tended to select product sectors in which no significant policy or trade barriers exist, or to focus on domestic markets in which trade barriers are less evident. The SADP/NASFAM project, however, has helped facilitate significant structural changes in Malawi. Deregulation and privatization were processes in the works, and SADP played a major role in ensuring that smallholder farmers benefited from this process. Program staff represented smallholder farmers at government, donor, academic, and farmers meetings where decisions were being made. Based on relationships built in those environments, project staff negotiated fair terms at the national auction and developed credibility, which gave them government and donor support when they needed it.

When SADP confronted the existing government and farmers organizations that were mandated to provide services to smallholder farmers, but were not doing so, its reputation and this high-level support provided staff with the connections needed to circumvent these groups. The project began negotiating supply and transportation agreements with private-sector suppliers that eliminated bribes and held former service providers accountable to farmers. When SADP registered the National Smallholder Farmers’ Association of Malawi, this increased its standing even more because both groups now officially and democratically represented more than 40,000 smallholder farmers in 17 associations and 2,500 farmers’ clubs. As a local, Malawian organization, NASFAM was in a position to build on SADP’s advocacy work and request that a portion of the tobacco levy be allocated to it in support of smallholder farmers. The allocation, granted in mid-1999, gives NASFAM a sustainable source of funding for its marketing support work, which is carried out by SADP under NASFAM board supervision. This successful advocacy campaign took place in a relatively democratic environment, a time of economic and political change. It was the result, in part, of years of building legitimacy among smallholder farmers and key players in Malawi, and it has enabled NASFAM’s influence to become stronger than that of the vested interests in the sector who work primarily to protect their market positions.

C. Challenges

Despite the pattern of working with wholesalers, organizations found it challenging to work with large buyers. Few organizations took on the challenge of understanding and confronting ethnic and class barriers to marketing. Rather, they selected markets in which these barriers were not significant. Finally, most organizations found it challenging to sell their nonbrokering services to entrepreneurs themselves.

1. Working with Large Buyers. Two programs in the study have benefited from building the capacity of the large-scale buyer, since this has also helped microenterprise and farmer clients. MSE begins by educating buyers about how subcontracting arrangements can help their businesses prosper, and PROEXSAL trains grocery stores in the proper handling of organic produce. This element of market facilitation is not widely recognized. Often buyers are interested in the benefits (low cost, social recognition, specialized products, market positioning as a socially conscious business, etc.) of working with microenterprises and smallholder farmers, but they do not know good practices for working with this group of suppliers. Brokers need not be concerned, because they themselves are the wholesalers; but research into the benefits of building buyer capacity could benefit ancillary service providers and market infrastructure developers.

2. Understanding Ethnic, Cultural, and Class Barriers to Marketing. One issue not addressed directly by the programs in this study is overcoming cultural and class barriers in marketing, an issue raised by SEEP members at the beginning of the study. Marketing fundamentally involves building relationships, and when small-scale producers attempt to market to larger businesses or high-income customers, a major barrier is their lack of contacts. Generally, this situation exists because of class, and sometimes cultural or ethnic, differences. How do linkage programs help entrepreneurs and customers overcome these differences and develop a trusting relationship that allows for business transactions? Usually, educated individuals manage the brokering programs, and they may be in a position to overcome these obstacles; but even they encounter some type of social barrier. While few explicit strategies seem to be in use, something is working in many of these programs; and it would be useful to identify what is working in order to enhance its effectiveness, particularly for use in circumstances in which ethnic and class control of markets is pervasive.

3. Selling the Marketing Service. Sometimes insufficient attention is given to how programs market to the small-scale producers themselves. One element of SADP/NASFAM’s success is their ability to select the strongest farmers’ clubs from a large pool. They advertise their project through regular radio spots, which talk about the successes they have achieved. While the original intent of the program may have been to educate farmers who lacked access to services, it has become a strong advertisement for itself. More research into effective ways to markets services to microenterprises and smallholder farmers would be useful.

 

The author, based in the United States, conducted this study largely using the Internet. She received program documents via e-mail from participating organizations and received responses to her questionnaires and specific questions. The author also accessed numerous cases posted on the ILO Web site: www.ilo.org. These studies are in response to Donor Committee requests over the past two years for cases to be presented at two conferences. The conclusions regarding trends, lessons learned, and challenges result from the capacity of this technology to help us share information rapidly.

Similarly productive studies could possibly be conducted for other BDS topics such as training, technology access, and business service centers. At the same time, the limitations of accessing information in this way are evident from the many questions left unanswered and the lack of standard performance information, both of which inhibit an in-depth analysis of successful practices. Certainly the on-going development of standard performance measures, supported by the Donor Committee and USAID’s Microenterprise Best Practices Project in conjunction with SEEP, should help in this regard. In addition, other research strategies may be available that would be equally low cost, but may be able to generate rich analytical information. Examples include the following:

 

A. Virtual Conferences

In virtual conferences, participants share strategies for developing particular services. If participants gain immediate value from conversations, they may have more time for contributing their own observations. This benefit became evident in the recent virtual conference on performance measurement (April-May 1999).

 

B. Joint Action Research

Questions remain unanswered because practitioners have not yet figured them out. Perhaps a group of organizations involved in providing similar services could jointly implement a program to test different models or practices and agree to share results regularly as they go along. This effort could be a matter of funding the research and would also involve coordinating a pilot effort.

C. E-Mail Lists

A global e-mail list exists for microfinance, but not for business development services. Such a virtual venue would contribute greatly to the on-going debate and analysis of important issues, focus practitioners and technical advisors on cutting-edge issues, and help researchers concentrate on key issues.

D. Complementing Virtual Interaction with One-on-One Communication

Beyond cyberspace, one-on-one communication at gatherings such as Donor Committee conferences, the SEEP annual general meeting, and the New Hampshire College training course provide excellent opportunity for learning and networking.

 

E. Supplementing Virtual Research with Hands-on Inquiry

Many of the studies facilitated by the Donor Committee supplemented virtual research with hands-on inquiry by external researchers.

[1] These papers are available on the ILO Web site, www.ilo.org/public/english/65entrep/isep/bds/donor/index.htm

[2] Developed by USAID’s Microenterprise Best Practices Project in collaboration with ILO’s International Small Enterprise Programme (ISEP) and the Committee of Donor Agencies for Small Enterprise Development. A Performance Measurement Framework Guideline for the use of this framework can be found on www.mip.org, authored by Mary McVay.

[3] For more information about the debate surrounding the issue of embedding the cost of services into selling costs, see “Good Practices in Marketing Micro and Small Enterprise Products: Cases from Latin America,” Lene Mikkelsen, Inter-American Development Bank, 1999. Available on www.ilo.com.
 

[4] This finding emerged from a virtual conference on performance measurement sponsored by the Donors Committee, ILO, and USAID; available at www.bellanet.org\sed\performance.

[5] Guerilla Marketing, by Jay Conrad Levinson (Houghton Mifflin Company, 1998) is an example of such a source. In addition, www.fintrac.com is an example of a Web page that displays market trend information and serves as a market research service.

[6] Guerilla Marketing by Jay Conrad Levinson (Houghton Mifflin Company, 1998) is a good example.

[7] A useful book on the subject is Cyber Rules, Strategies For Excellence at E-Business by Thomas M. Siebel and Pat House (Currency Doubleday, 1999).
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