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Reaching the poor through a targeted subsidy pilot

iDE Cambodia has developed a market-based approach to household sanitation that has proven very effective in boosting rural latrine sales. By late 2015, latrine businesses supported by iDE successfully sold more than 180,000 latrines to rural Cambodians at market price.

Facilitating the sale of unsubsidized latrines helped iDE avoid many of the market-distorting effects associated with subsidy programs while selling 22% of their latrines to the poorest Cambodians. Yet iDE remains dedicated to penetrating the poorer segments even further through an innovative approach combining microfinance and smart subsidies, minimizing market distortion.

In November 2015, iDE launched its Targeted Subsidy Pilot in three districts in Kandal province. In collaboration with Amplify Markets and Causal Design, the program tests an innovative delivery mechanism for targeted subsidy through a micro-credit scheme.  Government-identified poor households are targeted through regular sales events and are able to purchase latrines at a discounted price. Instead of creating a standalone subsidy program, which can be inefficient and costly to administer, the pilot offers discounted latrines alongside market priced latrines with the option of financing for all approved purchasers.

The Targeted Subsidy Pilot leverages the existing iDE sales force, supply chain, and previously used micro-financing partner. Through this pilot, iDE hopes to build on best practices and develop a scalable strategy to serve the rural poor with smart subsidies and loans while ensuring long-term engagement of the private sector.

Driving Latrine Affordability With Access to Finance

LESSON LEARNED: Financing has significant impact on latrine uptake, but setting up sanitation financing is a hands-on effort that requires significant investments in field-level coordination and partner management.

The Sanitation Marketing Scale-Up (SMSU) project partnered with IDinsight to research Willingness-to-Pay with Financing. Sanitation financing is a promising approach for increasing latrine uptake cost effectively.

Under certain conditions, financing has the potential to increase latrine uptake fourfold at a $50 market price and decrease operating costs by 70%. However, setting up partnerships with microfinance institutions (MFIs) is a long, iterative process that requires a lot of hands-on management.

Theoretically, developing the sanitation financing model (known in the sector as Sanitation Financing, or SanFin) is a one-time upfront cost, and marginal costs will decrease when the model is scaled and replicated. However, even when working with a partner with whom iDE had previously developed an effective model for selling water filters on credit, the lessons learned from the previous experience were not immediately adopted in the SanFin pilot project. Moreover, despite demonstrating that latrine loans were profitable and showed 100% repayment rates by the end of the pilot, MFI partners still showed reluctance in integrating SanFin at scale after the pilot programs. Three reasons are likely for this reluctance.

First, MFIs are for-profit enterprises, and latrine loans are less profitable than other products because latrines are not income-generating assets. Thus, latrines loans and other social-impact loans have been restricted to a minority percentage of an MFI’s total portfolio and are not considered a core part of the business.

Second, MFIs may be waiting for more proof of SanFin’s positive business impact. The first successful partnership in Cambodia between an MFI and a WASH organization (Hydrologic) began only three years ago. Now, finding interested MFI partners is easier, with MFIs voluntarily seeking to partner with development organizations on social loans. Financing products with positive social impact are becoming a more prominent consideration for MFIs, especially as they look to attract social investment funds, improve their public image, and compete for rural market share. However, it is too early to see MFIs making large institutional changes to accommodate the scale and speed of SanFin that the WASH sector is looking for.

Third, by the end of the SanFin pilot, both MFI partners expressed interest in scaling up SanFin. However, when presented the ambitious targets of SMSU, they expressed significant reservations. In discussions with the management it seems that capital is not an issue, as they have access to affordable capital from organizations like Kiva that have a focus on WASH. Rather, it is their overall lack of capacity—insufficient human resources and limited management information systems— that makes it difficult to reach scale as quickly as SMSU required. Further support would likely be needed to help MFIs achieve scale quickly.

Unclear commitment and limited capacity of MFIs to do SanFin at scale begs the question of whether efforts to engage them are worth the cost-savings of SanFin that the Willingness-to-Pay research demonstrated. It is worth exploring what other models are appropriate for providing financing to rural households that may avoid the need for external institutional partnerships. More learning and experimentation is necessary to better understand how to integrate financing in sanitation market development.

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Managing Innovation While Focusing on Scale

LESSON LEARNED: Align incentives and have clear, harmonized objectives to manage innovation and scale simultaneously.

The Going Deep sub-component was an innovation-focused project within the larger Sanitation Marketing Scale-Up (SMSU) project that focused on at-scale implementation of core project activities. The different natures of innovation and scaling between the sub-component and the main project created tension at times, with the former operating within an environment of flexibility and uncertainty and the latter focused on optimizing efficiency.

This tension, when coupled with rapid growth, led to growing pains. The project experienced tension in having to share resources, especially staff time, across Going Deep and Scale-Up, which had the same goals but different focuses. The challenge arose because the same staff members were assigned to specific tasks in both SMSU and Going Deep, the former whose focus was to optimize efficiency of proven models and the latter to iterate on innovations.

While the focus of scale-up is to recruit and train as many successful businesses as possible, those successful businesses could only optimize their potential to sell if Going Deep identified effective market penetration strategies. Going Deep strategies would only be relevant if there are competent, well-trained businesses to take the ideas to scale. To ensure that project activities reflected the harmonized nature of SMSU, the project aligned incentives such that staff were evaluated on how well they coordinated with and supported the other aspects of SMSU outside their immediate responsibilities.

Incentives can be used to leverage the productive tension between innovation and scale and optimize the benefits of each. Managing innovation within a project focused on scale will be the key to continued growth and impact.

The Art of Adaptive Program Management

LESSON LEARNED: The project approach should be adapted over time to find the most effective way to reach objectives based on project experience.

Market development for sanitation (Sanitation Marketing) in Cambodia usually takes the form of market facilitation—development partners build capacity of private enterprises to stimulate demand and provide supply to satisfy demand without becoming directly involved in market transactions. However, despite being independent, sustainable businesses in their own right, concrete businesses showed inconsistent capacity and enthusiasm for conducting their own active sales management. 

Project experience shows that pure market facilitation is not necessarily the best model for reaching the public health goal of rapid and widespread latrine uptake.

Given the public health goal of rapidly improving latrine uptake rates, the project adjusted accordingly and explored alternative approaches of market engagement, such as a Direct Sales Model (DSM). DSM experiments in Kandal and Koh Kong showed that a dedicated sales force managed by the project stimulated high levels of demand. As such, the project shifted the focal point of intervention from Latrine Business Owner to sales agents, building up a full-time sales force to reduce turnover, with dedicated management by project staff. As market conditions continuously evolve, project intervention methods should reflect ongoing learnings about market capacity and maturity, and adjust interventions accordingly.

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Evolution of the SMSU Program

LESSON LEARNED: The enterprise engagement model needs to evolve over time.

While the pilot project focused on developing a scalable and sustainable model, a key hypothesis going into the Sanitation Marketing Scale-Up (SMSU) project was that improving business capacity would develop sustainable capacity and motivation for the market to continue driving uptake. SMSU experienced several iterations of enterprise engagement.

Iteration 1: Three months of holistic training (start of program)

As part of the project’s effort to improve the LBOs’ capacity, the training program was revised to be more holistic and intensive. When businesses signed up to receive training, they selected “a la carte” according to their needs and interests:

  • Latrine Manufacturing and Quality Control
  • Sanitation Knowledge 
  • Latrine Installation and Maintenance
  • Order Management
  • Sales and Sales Agent Management
  • Business Planning
  • How to work with government and NGOs
  • MFI Credit Test Program – 9-12 months for select Latrine Business Owners (LBOs)

The only mandatory courses were sanitation and latrine installation and order management. All businesses were welcomed to sign up for training, but those who chose to receive the complete training package were prioritized as it was most likely those businesses would be well-equipped to succeed. After the core training was finished (typically three weeks), the LBO and Sanitation Teacher (sales agent) would continue to receive coaching from project staff. Regional Managers provided weekly one-on-one coaching to the project staff, observing them on the job and giving feedback and advice. The Regional Managers in turn also received coaching from the sales consultant from Whitten & Roy Partnership (WRP), and the Deputy Program Director, both of whom observed their coaching and training and gave feedback. Although the coaching was very intensive and hands-on, it proved to be key to improving the sales skills of latrine businesses and sales agents.

Iteration 2: Extended support with ongoing coaching (late 2012)

As time went on, it became clear that LBOs were not becoming fully independent and sustaining high sales after only three months of support. Therefore, the project shifted to an “extended support” model, continuing to offer support beyond three months and monitoring the LBO’s progress towards independence along four categories: Production, Delivery, Administration, and Sales Development. With this strategy, the project continued to encourage and train LBOs to adopt all aspects of training, including sales management. LBOs interested in managing their own sales received the training and coaching to do so as originally envisioned. These LBOs were phased out of training and coaching once the project had determined that they were capable of continuing on their own. For those LBOs who were not motivated or capable of managing their own sales team, but did well in at least two of the other areas, project staff continued to provide support in sales management.

Iteration 3: Project-managed sales (early 2013)

While some LBOs showed capacity and commitment to managing their own sales force, the majority preferred to only focus on production and delivery. As such, the project shifted focus from training and coaching LBOs to training and coaching sales agents directly. This shift saw positive results in terms of sales and a greater optimization of resource allocations. Because the project staff managed sales agents, sales agents were no longer beholden to a unique LBO. Rather, project staff were able to better align demand and supply; stronger sales agents could be matched up with stronger LBOs who could meet the high demand that the strong sales agents were creating. LBOs were able to focus on their core competencies of production and delivery. The increased management support for sales agents also improved commitment and reduced turnover. Of course, the evolution of the market facilitation model challenges initial notions of sustainability and scalability. While there is not yet an answer for the best model, it is important to recognize the constraints of focusing on SMEs to sustain active promotion activities.

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Capturing Latrine Sales Data

LESSON LEARNED: Improving sales tracking takes time

Latrine businesses maintain a record book to track customer data and sales details. The project collected sales data from each project-connected latrine business every two weeks. Research assistants recorded summary data on deliveries based on the record book and took a digital photo for verification purposes. In order to track 6-month installation rate and usage, the project also verified randomly selected sales 6-12 months after the transaction date.

Early in the project, data in the latrine business record book was often incomplete, since record keeping was a new process for businesses. In order to tighten the verification process, management clarified that staff would not receive sales incentives for sales that lacked proper client identification.

Tying sales incentives to data completion, along with increased latrine business familiarity with the record book, contributed to an improvement in data collection.

CHALLENGE: Capturing granular sales data

As part of their training, sales agents are trained to record what are known as the “special numbers.” These numbers help the sales agent, the Latrine Business Owner, and the project analyze why sales are strong or weak.

For door-to-door sales, these include:

  • Number of households who experienced the Family Sanitation Book (the site seller sales tool)
  • Number of sales made from doing direct visits
  • Number of referrals gotten from each direct visit

For group presentations, these include:

  • Number of households in the village without latrines (obtained from the village chief)
  • Number of non-latrine households attending the group presentation
  • Number of sales made at the group presentation

As important as these numbers are, sales agents have a hard time seeing the longer-term benefits of documenting and analyzing their efforts. This means project staff spend more time doing hands-on observing and coaching, rather than analyzing precise data to identify areas for improvement. The ability to better manage sales agents has improved significantly since project staff have shifted focus from Latrine Business Owners to sales agents. However, getting granular data like the special numbers is still difficult since sales agents are not directly employed by the project.

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Using Deposits and Commissions to Boost Latrine Sales

LESSON LEARNED: Deposits are beneficial in securing sales and closing the orders vs. deliveries gap.

In the beginning of the project, customers would often place an order, but request sales agents come back several months later after harvest for delivery and final payment. This made it very difficult for the business to manage production and commission for sales agents. To solve this problem, the project encouraged all Latrine Business Owners (LBOs) to request deposits of $2.50-$10 from customers. This has helped close the order to delivery gap.

Deposits both solidify a sale (making it more likely that the customer will pay upon delivery) and motivate sales agents to hold more meetings (since collecting deposits means they get paid their commission immediately).

Most sales agents use a basic deposit system:

  • Following a sales presentation, the village chief writes down the names of customers who want to buy a latrine, using a group order form instead of individual order forms.
  • The village chief signs everyone up and also informs customers that they need to pay a nonrefundable $2.50 USD (minimum) deposit on the spot. It seems to be working very well to have the village chief introduce this deposit payment to villagers.
  • Villagers then go home to get their down payment, which the village chief collects and gives to the sales agent.
  • Sales agents are generally paid $2.50 USD per latrine delivered by the LBOs, although some LBOs have increased the commission to further motivate sales agents.

Deposits keep sales agents motivated because they allow for instant payment of their commission immediately following a meeting. If the customer cancels the order, the sales agent still keeps the deposit money (the village chief explains this when customers order). This motivates sales agents to keep selling–they do not have to wait for delayed deliveries or payments. Sales agents, of their own volition, also pay the village chief a portion of the deposit after the latrine has been delivered. The village chief and LBOs remain motivated to deliver the latrine to the end user, because neither of them get paid until the latrine is actually delivered and the customer has paid in full.

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A Strategy for Selling Latrines in Villages

LESSON LEARNED: Direct sales: integrating group and door-to-door presentations yields more sales

In the pilot project, sales agents exclusively sold to groups. Sales agents saw this as more efficient—getting more customers for less effort. However, an exclusive practice of group sales leads to “burning turf”—sales agents would hold one to two group meetings per village, and then never go back because it became much harder to sell to villagers after already holding two meetings. Burning turf meant that it was much harder to ensure that the maximum number of villagers were reached.

In order to penetrate more deeply into each village, sales agents were trained to closely coordinate their group and door-to-door sales presentations.

  • Before presentations, Sanitation Teachers (sales agents/STs) are encouraged to map the village with the help of the village chief to identify all households without a toilet. The ST divides the village into sections of about 30 households to ensure that there is a good-sized but manageable attendance. The ST may ask the village chief to encourage people to attend the meeting. Sometimes the sales agents pay a commission to the village chief for help mobilizing participants.
  • Then the ST will go door-to-door to hand out invitations to households inviting them to join the group presentation, using this first impression to pique their interest about sanitation and latrines.
  • The next day, the ST hosts the first group meeting and continues to host group presentations until he or she has exhausted all the sections. All the while, the ST is keeping track on the map of households who have attended and bought. These names are recorded to use later as referrals and testimonials.
  • The ST is encouraged to make door-to-door visits to households who did not attend or buy, giving a one-on-one presentation to the family. During these visits, the ST refers to all the neighbors who have already bought to trigger villagers’ desire to emulate their neighbors.

Initially, the sales agents who were used to only doing group sales were reluctant to do door-to-door selling as they saw this as inefficient. However, many soon learned that door-to-door visits could yield more sales as it is easier to speak one-on-one with households than in a large group, which can be hijacked by one vocal skeptic. Despite the fact that sales agents tend to outsource the mapping and door-to-door invitation process to the village chief, coordinating group and door-to-door sales has led to greater impact.

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Effective Sanitation Sales Tools

LESSON LEARNED: Develop professional sales tools

As part of the effort to professionalize sales, the project engaged 17Triggers, a social marketing agency, to work collaboratively with Whitten & Roy Partnership (WRP) to develop effective sales tools. The sales tools and sales agent training materials incorporated many elements from the national Stop the Diarrhea campaign, maintaining the same tone and style in an effort to maintain consistency. The national Stop the Diarrhea campaign is an open-source social marketing campaign that was developed under the guidance of the Cambodian Ministry of Rural Development by the WaterSHED and Lien Aid WASH Marketing Program with 17 Triggers.

The messaging used in the sales materials was informed by the insights of the market segmentation research and follows the “CLEAR” sales framework described below. While testing the sales tools, villagers began calling the sales agents “Sanitation Teachers,” which is the title the project began using for sales agents. The sales tools included:

  • Sales training video and manual that covers the sales process from beginning (setting up territory) to end (moving on to a new village)
    • How to do a group presentation
    • How to do individual sales
  • Goal setting and review of results
  • Training completion certificate
  • Sales record book to help Latrine Business Owners and sales agents keep track of orders and deliveries
  • Sales support tools:
    • Village maps that can be used to draw and map the village so that Sanitation Teachers can keep track of whom they’ve spoken to
    • Group meeting invitations that can be passed out by the Sanitation Teachers to help bring people to the group meetings
    • Sales order forms that also include referrals and testimonials to leverage the power of peer influence
    • Site seller – the site seller is a flip chart visual tool that helps the sales agent stay on track with the sales pitch. It follows the CLEAR sales methodology that WRP has developed:
      • Connect with the customer,
      • Learn from the customer about their problems,
      • Educate the customer about the solution,
      • Ask the customer for the sale, and
      • Resolve any buying problems.

The site seller is designed to “sell to the problem”—to get the listener to recognize their problems associated with not having a latrine (embarrassment, inconvenience, fear) and realize that purchasing a latrine would help solve those problems. This differs from the way sales agents often sell—speaking about the product specifications without relating to the experience of the customer.


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Recruiting a Sanitation Sales Team

LESSON LEARNED: Recruit a dedicated sales force

At the end of the pilot project, the sales strategy focused on recruiting village leaders to serve as sales agents, since they were natural leaders with influence. While some village leaders were indeed effective sales agents, there was a lack of consistency, and often they were less motivated to sell outside their village, posing challenges to scale such a model. In the Sanitation Marketing Scale-Up project, the team focused on recruiting against a specific profile–those who demonstrate persuasive public speaking skills, the ability to work at least half time and travel beyond their own village, empathetic ways of relating to customers, and the ability to remain motivated despite the fluctuating nature of sales. The revised recruitment strategy did not preclude village leaders from becoming sales agents, but recruitment no longer targeted them. 

Experience throughout the Sanitation Marketing Scale-Up project showed that often the most successful and dedicated sales agents were young, university-aged women who have dropped out of school.

Their young age means that they often have more energy than older village leaders, some even staying overnight in a village to capture higher sales on the weekends. As women they can easily relate to the females of the households. To recruit more similar-minded sales agents, the project recruited at universities and through the social networks of existing sales agents.

CHALLENGES: High sales agent turnover

Sales, regardless of industry and market, generally sees high turnover because it requires initiative, persistence, and an ability to deal with unstable incomes. For much of the project, high sales agent turnover was a challenge given the low-commission rates and the lack of interest from Latrine Business Owners to manage sales. In an effort to reduce turnover, the project tried a number of strategies:

  • Increasing coaching and management support for the sales agents from project staff
  • Increasing the commission paid to sales agents
  • Reducing the waiting time for sales agents to receive their pay by requiring customers to make a deposit, which the sales agents’ keep as their commission
  • Increasing work hour flexibility so that sales agents could work from half-time to full-time at times that were convenient to them

The project found that all of these changes helped in recruiting new sales agents but the most effective factor in reducing turn-over was increased management support. Sales agents that meet with their managers more frequently (ideally daily) to receive coaching and encouragement are more likely to stay with the job longer.

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