Customer Relationship Management at the Base of the Pyramid
By Katie Hill and Biju Mohandas
The Acumen Fund India team is spending the day with three of our healthcare investees LifeSpring, 1298 and VisionSpring thinking critically about how to better understand and serve their customers through customer relationship management (CRM) strategies. In this case, the customers we are talking about are diverse — an expectant mother earning daily wages in Hyderabad; an accident victim on the streets of Mumbai who urgently needs medical care; a tailor in rural Andhra Pradesh who can no longer see her thread and, therefore, no longer earn her livelihood. For these social enterprises, understanding and delivering value to their customers is vital not only to achieving profitability, but also to ensuring social impact.
This two-day workshop is being led by Dr. Dipankar Chakravarti, the Ortloff Professor of Business at Leeds School of Business, University of Colorado, Boulder. He has generously dedicated his time and expertise to introducing frameworks for understanding various aspects of customer relationship management to these companies. Today, he led the group in real-time exercises that should result in a more strategic incorporation of CRM into their activities be they maternity & child healthcare, emergency ambulance services and the provision of quality eyecare products for low-income communities. Meanwhile, the Acumen Fund India team is fervently absorbing lessons that may be applicable to our other portfolio companies.
We will have much more to share in a few days, once we have seen the outputs of these CRM exercises. First, let me share a few initial insights:
Dr. Chakravarti began with the provocative notion that, left to themselves, most firms priorities and processes tend to deteriorate toward treating their customers badly. Without even trying, firms put their priorities first and, in return, erect customer acquisition barriers, lower customer exit barriers, and dehumanize relationships. If this is indeed a trend, then our social enterprises need to be aware of this as they scale.
How is CRM different for social enterprises?
Traditional CRM strategy looks to measuring the lifetime economic value of a customer (through the net present value of the profits you will earn from that individual) and prioritize the highest value customers. Dr. Chakravarti challenged us to think about whether this is applicable to social enterprises that may have other priorities beyond profit maximization.
Anant Kumar, the CEO of LifeSpring, emphasized that we need to apply this same level of rigor to social enterprises, but evolve the analysis to think differently about the traditionally unprofitable customer. An expectant mother who cannot afford even the significantly reduced cost of childbirth in LifeSpring may be unprofitable by this analysis, but, has to be cared for by Life Spring and she may even lead to many profitable customers.
Are BoP customers different? Yes and no.
The CRM exercise rests entirely on understanding your customer. At Acumen Fund, we often emphasize that, in many ways, a base of the pyramid (BoP) customer is no different than you and me, in terms of what they value. They are aspirational. They value quality, status, and aesthetics. But, how is consumer psychology different when we are targeting the poor?
A few examples emerged today. First, BoP customers’ time-oriented thinking can be completely different, and he may not be able or willing to pay more today in order to save tomorrow (e.g., buy higher-quality, durable VisionSpring glasses and avoid paying for replacements in the future). Second, in BoP markets, the customer can be different from the person paying for the good/service. For LifeSpring or 1298, payment is often rendered by a husband or the collective family unit, which changes the dynamic of how the company targets its customers. These are two of many examples that should keep us thinking about what is universal to all consumers and what is a result of socio-economic and cultural factors.
In the next 36 hours, as LifeSpring, 1298 and VisionSpring go through rigorous exercises designed to understand and satisfy their customers better, we at Acumen also hope to learn and share some exciting insights. Watch this space for more.