Is lean data, not big data, the answer to the last-mile distribution challenge?

Authors

Jessie Coates

EY Global Impact Entrepreneurship Leader

Passionate about using business as a force for good. Long-suffering Arsenal football fan. Activist. Feminist. Dreamer.

Dan Gray

EY Global Corporate Responsibility Knowledge Leader

Purpose-driven strategist. Sustainability and social entrepreneurship advocate. Integrative thinker. Author. Storyteller. Rugby fanatic. Amateur chef. Giant.

7 minute read 29 Mar 2018

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Impact entrepreneurs are using lean data to extend access to vital goods and services and drive inclusive growth. Here’s how.

Of the 1.1 billion people around the world who still lack access to electricity,[1] almost a quarter live in India.[2] That’s 244 million people living life off the grid, more than 90% of whom are in rural communities and typically reliant on kerosene (jet fuel by another name) to light their homes.[3]

Better solutions certainly exist for these people and the many more who are connected to the grid, but who continue to use kerosene as cover for intermittent or unreliable supply. But lack of alternatives isn’t the problem. The real problem is people’s disconnection from digital as well as physical infrastructure.

As expensive and dangerous as kerosene is, people can’t and won’t switch to cleaner options such as off-grid solar if they don’t know about these products, or if they lack the information to tell the good ones from the bad. With lighting costs accounting for up to 20% of household expenditure,[4] it’s a risk that low-income households simply cannot afford to take.

Frontier Markets customers at home with torch

Add in the difficulties of actually getting products into the hands of people in isolated communities and you have the essence of the “last-mile distribution challenge” — possibly the single most common barrier to the growth of impact entrepreneurs building businesses that serve the more than 4 billion low-income people living at the base of the pyramid (BoP).

Finding ways to reliably connect with end customers — and capture and make use of their insights — is vital to overcoming that challenge, which is where “lean data” comes in.

Woman carrying goods through remote landscape

Lean data rather than big data

While big data and predictive analytics may be the talk of multinational corporations around the world, for impact entrepreneurs it’s lean data that matters. Lean data methodologies, pioneered by impact investor Acumen, emphasize experimentation with low-cost technologies, such as SMS and Interactive Voice Response (IVR) to quickly and inexpensively gather meaningful data directly from end customers. Lean data helps customers communicate what impact means to them and empowers impact entrepreneurs to focus their businesses on what will achieve the greatest social change for the people they serve.

One entrepreneur keen to unlock the full potential of lean data is Ajaita Shah, founder and CEO of Frontier Markets (FM) — a business dedicated to bringing a more energy-equitable future to 3 million households across India by 2020 by redefining last-mile access to clean energy.

With help from EY Enterprise Growth Services and impact investor Acumen’s Lean Data team, FM is working to crack the last-mile distribution challenge by finding innovative ways to give BoP customers a voice — to connect directly with them, to develop deeper insights into their needs and motivations, and to use those insights to find better ways of serving them. Here are some of the lessons learned along the way.  

1. Technology can help, but don’t rely on it

Where manual systems often rule, even the most basic customer details (e.g., name, contact details, products bought and place of purchase) can prove hard to capture accurately, let alone more insightful information such as how and how often they use a product, and whether they would recommend it to others.

Thankfully, the ubiquity of cell phones and technologies like interactive voice response (IVR) means it’s now much easier for impact enterprises to quickly and inexpensively gather meaningful data directly from end customers. Used with rigor and creativity it can be extremely effective, but it has its limitations.

While IVR is great for sending and receiving messages that don’t require complicated responses, where more complex concepts and information are concerned, there’s often no substitute for speaking with a real person. The question is how do you make it worth people’s while to take time out of their day to engage with you?

In FM’s case, the answer lay in giving customers a toll-free number to activate their product’s warranty — a genuinely distinguishing feature in a market saturated with low quality products. Almost entirely responsible for a 40% increase in customer data held by FM, it shows the value of looking beyond obvious technical approaches and thinking creatively about other ways to connect that can also help accentuate key points of brand differentiation.

2. Value customers for more than their custom

In largely informal economies, where word of mouth is king, customers aren’t just customers. They’re also potentially your sales force, your design team and your corporate strategy department — your best source of market intelligence on what works and what doesn’t out there in the real world.

As part of post-sales service calls, FM found that 80% of its customers were talking positively about their products after a month of use — an extremely valuable source of potential new business that FM is now encouraging with incentives such as free gifts and credit for referrals that result in new sales.

Another revelation uncovered by better data capture was that 70% of FM’s customers are women. That insight has led FM to tap into the existing network of self-help groups that provide funds and technical assistance for women in local villages to start their own businesses. Paid for educating potential users, signing up customers and providing a first point of contact for follow up and repairs, the resulting network of “Saral Jeevan Sahelis” (Easy Life Friends) have been responsible for 30% of all sales over the past 18 months.

But increasing sales is just the tip of the iceberg. With deeper insight into customers’ buying habits — especially the effects of seasonality — FM has been able to radically refine its product portfolio and improve its forecasting and stock management. And with reliable data on how customers use its products, it’s been able to establish that these have helped families save approximately US$5.4 million in energy-related expenditure and provided them with an estimated 65% more hours of quality light to live, work and study.

Naturally, this kind of data not only empowers the business to operate much more efficiently and effectively, but also attract potential investment and encourage thousands more women to join the ranks of its “Saral Jeevan Sahelis.”

3. Treat distributors as extensions of the business

In last-mile distribution networks, local distributors assume particular importance. These people and organizations aren’t just a company’s vendors — they’re the everyday face of the business and custodians of the brand experience.

Are they willing to give local product demonstrations? Would they let a potential customer take a product home and test it before they buy? Would they be prepared to offer customers credit when making a purchase? And are they willing and able to provide efficient aftersales service and repair?

Local distributor in his shop

All these things (and more) can have a profound effect on customers’ trust and the ability to build new and repeat business. That’s why it pays for impact entrepreneurs to think of distributors as extensions of the business, applying the same rigor to their selection as they would to setting up their own retail operations.

When working with FM, EY helped develop a set of criteria and a balanced scorecard to help FM become more strategic in their dealer selection, to evaluate ongoing performance and to build the foundations for a win-win approach to building capacity.

Coupled with a new VIP dealer program that rewards top dealers with margin incentives, better credit terms and enhanced marketing support — and FM’s sales teams recast as “dealer managers,” tasked with supporting their dealers to reach “Platinum” status — this has seen FM’s dealer network grow substantially from around 800 retail outlets to more than 2,000.

4. The last-mile distribution challenge is complex but conquerable

Last-mile distribution is undoubtedly difficult and complex, but the challenges are not insurmountable. It starts with the ability to collate accurate data on customers and their purchases, which is certainly possible if impact entrepreneurs are smart about their use of technology, as well as creating other incentives to establish direct contact with customers.

Together with strategic engagement with the local networks and dealers that form an essential part of so many BoP value chains, those insights — used wisely — can empower them to substantially improve their enterprises’ capacity for sustainable growth.

These businesses are already at the forefront of accelerating progress toward the UN Sustainable Development goals, changing the lives of millions by providing better access to vital goods and services. If others can follow FM’s example in finding ways through and around the last-mile distribution challenge, there’s no telling what more they might achieve in their quest to drive more sustainable and inclusive economic growth.

[1]  “Sustainable Development Goal 7,” Sustainable Development Knowledge Platform, https://sustainabledevelopment.un.org/sdg7, accessed 4 May 2017.

[2] Electricity access in Developing Asia, WEO 2016 Electricity access database, International Energy Agency, 2016. (accessed via www. worldenergyoutlook.org, 4 May 2017)

[3] Power for all, World Bank Group, 2015.

[4] “Solar offers poor Africans alternative to dirty kerosene,” Financial Times, 17 January 2014.

Summary

Businesses need to use lean data to capture information about their customers to help overcome the last-mile distribution challenge.

About this article

Authors

Jessie Coates

EY Global Impact Entrepreneurship Leader

Passionate about using business as a force for good. Long-suffering Arsenal football fan. Activist. Feminist. Dreamer.

Dan Gray

EY Global Corporate Responsibility Knowledge Leader

Purpose-driven strategist. Sustainability and social entrepreneurship advocate. Integrative thinker. Author. Storyteller. Rugby fanatic. Amateur chef. Giant.