Sunday, August 3, 2014

National Governance (Over) simplified

There once was a King called Governance.
He had three sons:

  1. Son one was called Capitalist
  2. Son two was called Socialist
  3. Son three was called Pluralist

The king wanted to find a successor to rule his kingdom called World after him.  So he called his three sons and posed them a riddle.

The riddle was this:

3 men are lost in a desert. They are 2 days away from the nearest oasis.  They have only one can of water. 

  • Man one is called Weak - He is so weak that even if he drinks the one can of water, 50% chances are he will die before he makes it to the oasis.
  • Man two is called Average - If he drinks the one can of water, he has a 75% chance of surviving the two day journey to the oasis.  However, a 25% chance he could still die of exhaustion and thirst.
  • Man three is called Strong. He has a 50% chance of surviving the 2 day journey and making it alive to the oasis, even if he has no water.  However, 50% chances are he will die in those two days.  On the other hand, if he consumes the can of water, there is almost a 100% chance he will complete the 2-day journey to the oasis, alive and fit. 
The wise king asked each one of his sons, "If you could choose, whom would you give the water can to?"

Son Capitalist was very logical and clever.  He was the first to answer, "Both Weak and Average could die even if they consume the can of water.  And so could Strong without any water. So I would give the water can to the Strong.  Better to save at least one life with 100% guarantee than risk all three with no certainty!"

Son Socialist was kind-hearted.  He said, "Life is a gift from God. And hope is all we have.  So I would try to keep as many people alive for as long as I can.  Who knows?  Some help could come along the next morning, and by then we would have let one person die, is that even acceptable?"

"I would give the water to the weakest man.  At least that way, we know all three will most likely remain alive till the next morning.  And with some luck, help will come in time and ensure all 3 continue to remain alive.  It is wrong to favour the strong against the weak. My duty as ruler would be to be a safety net for the weakest."

The third son, Pluralist was quiet and in thought.

When the king looked at him, he humbly began, "Obviously any choices we make will be imperfect. And will result in death.” 

“But as human beings, are we in it only to survive?  Do morality, intelligence and creativity have no play here?”

Everybody was now listening to him.

“In my view, water is a common wealth of all three citizens,” Pluralist continued, “So I would consult with all 3 men and ask them if the following would work:

Let half the can of water be given to Strong.  BUT ONLY UPON the condition that he will carry WEAK on his back on the journey to the oasis.”

“Of the balance half can, I would divide it equally among the other 2 men - Average and Weak"
"What would you achieve by that?" asked his brother Socialist.

"A number of things," continued Pluralist.

  1. Everybody gets water - it’s a common resource that everybody has a right to 
  2. With more water comes more responsibility - so I would give more to Strong with the responsibility of helping the Weak
  3. I foster a bonding and mutual responsibility for life and survival among all 3 men
"But what if they all die anyways?" asked Capitalist.

"We will all die one day brother," said Pluralist.  
"With this formula, everybody will certainly have a higher chance of surviving as a community as opposed to as individuals.  Moreover, even if they die eventually, they will die with honour and probably with happiness.” 

”Isn't that what life is all about anyways?"

Everybody was quiet.

The king was not sure whom to handover Kingdom world to.  So he divided his kingdom into three provinces.

  • His eldest son, Capitalist, he handed over America
  • His second son, Socialist, he handed over India
  • His youngest son Pluralist, he handed over Canada
(the purpose of this fictitious story is only to provoke thinking and reflection as opposed to making any judgements about any country or political systems)

Monday, March 10, 2014

Social Entrepreneurship

CHAPTER ONE: Introduction to the Village of Darsanapur

A long time ago, there was a tiny village in India called Darsanapur. 
Darsanapur had a very sad socio-economic make-up. 
There was one very rich landlord who owned all the fields in and around the village.  And the village had about one hundred-odd families of landless labourers who toiled hard in these fields from sunrise to sundown to make a pittance wage from the landlord.
Every day, the labourers toiled hard in the fields to make a minimum wage.  This wage just about allowed them to make ends meet, with no savings.  Many of them could not even eat a daily meal, since the wages they earned were so little, that any other unplanned expense such as sickness or travel left them with no alternative but to skip their mid-day meal.
Now in this village was a small temple in that was managed by a very good-hearted pujari (priest).  Every day, after completing his daily puja (prayers), the pujari walked for several hours to neighbouring villages to beg for alms and food.  Most of what he collected, he brought back and took to the fields to share with some poor farmer who was going hungry.
This routine had been going on for a few years.


One day, a rich trading merchant moved into the village of Darsanapur.  This merchant was a shrewd businessman who had earned his wealth through hard work and entrepreneurship. He built a big house close to the temple.
The pujari thought he should try his luck and went to beg for alms at the merchant’s house. 
The merchant was a good man and gave the pujari some food in alms. 
The pujari promptly took the food to some hungry farmers in the field.  Within a short while, he was back at the merchant’s house to beg for more.  The merchant was puzzled at first but did not want to offend the pujari so he gave the pujari some more food.  Sure enough, the pujari distributed this additional food to some other hungry farmers and was back at the merchant’s house in no time to ask for more.  The puzzled merchant then asked the pujari why it was that he kept asking for food.  Did he just have a large appetite?
The disheartened pujari then told the merchant all about how there was this one rich landlord in Darsanapur and how he paid only pittance as wage to the landless farmers.  The pujari also described how he walked for several hours every day to get food for them from neighbouring villages. 
The merchant carefully heard all about the pujari’s hard work to collect enough food for the helpless landless farmers of Darsanapur.
Then the merchant gave the pujari ten coins and said, “Go buy a big tiffin box.  So that when you come the next time, you can carry enough food for your friends and you don’t have to walk back and forth from the fields in this scorching sun.”  The pujari gratefully took the ten coins from the merchant. 
The next day, the pujari was back at the merchant’s house begging for alms and food for himself and for the landless farmers.  The merchant asked him for the tiffin box so that he could give him enough food for all.
However, the pujari said, “Dear merchant, forgive me but I did not buy the tiffin box.”  “The pain of seeing hungry farmers was too great for me.  So instead I spent the ten coins on buying fruit and distributed the fruit among farmers for their families.  My heart yearns for them and I could not bring myself to spend money on anything other than on fruit for the poor families.”
The merchant was quiet.  He was thinking hard but did not share his thoughts with the pujari.
He quietly gave the pujari as much food as the pujari could carry and then sent him off on his way.  In a short while, the pujari came back for more food to the merchant’s house.  But found the house locked.  The pujari was shocked and angry! How could the merchant go away?  Didn’t he know that there were so many hungry farmers who could benefit from alms?  In his heart of heart, he could not help but curse the merchant for having deserted the poor farmers.


The merchant had actually not gone away.  He had locked his house in rage that the pujari had violated his trust and not bought the tiffin box with the money.  The merchant was in a shed in his backyard.  He was packing clothes, some supplies and some material for trade for a long tour. 
Early the next morning, the merchant took off in his horse-cart and began a tour that would take him several months to complete.  This tour involved a visit to 30 towns that were close to the village of Darsanapur.
At each town that the merchant went to, he first contacted some of the wealthiest traders and either sold them some goods or purchased some merchandize from them.  This allowed him to make friends with them.  He then would describe to them the plight of the villagers of Darsanapur and asked for their help. Over the months of his travel, within each of the 30 towns the merchant visited, he established trading partners who:

  1. Agreed to trade with him regularly
  2. Agreed to put aside a share of the profits to fund one cartload of food once a month for the poor farmers of Darsanapur.

After about 3 months of this exhausting but profitable tour, the merchant returned back to Darsanapur.  By now, he had a donor committed to supplying food for each day of the month in addition some profitable trade deals.  It was late in the evening when the merchant returned back to Darsanapur.


The next morning, the merchant went to the fields. The landless farmers were quite surprised to see this well-dressed man in the scorching sun. 
The merchant told them of his plans.  “I will ensure that all of you have enough food for lunch every day.  However, I need to have 3 men every-day who will ride to the town I tell you in my horse-cart.  They will then ride back with 2 carts of goods for me and one cart full of food for the village.”
The farmers readily agreed.  Giving up one day of labour was a small price to pay for 3 men to get lunch for all hundred farmers.  The merchant was happy too that he was getting free help to transport his goods – which meant more profit. 
And so it came to pass.  Every day, 3 labourers would ride the merchant’s horse-cart to one of the towns and carry back two carts of goods and one cart of food to Darsanapur.  And the farmers feasted on a hearty lunch every day in the fields.
Everybody was happy!  The farmers for the food, the traders from the neighbouring villages for the business and profits, the merchant for being able to get free labour and a profitable business.  In fact, the landlord was happy too!  The merchant had started buying the produce from the farm and using his newly created transport organization was able to sell farm produce from Darsanapur to the 30 neighbouring towns for higher profits.  This allowed the landlord to make a little more money than he used to in the past. Well, almost everybody was happy – not the pujari.
The pujari was very angry at the merchant.  In the pujari’s view, the merchant was exploiting the poor farmers for personal profit. 
“How dare the merchant ask the farmers to transport his goods for free despite being so wealthy?” thought the pujari to himself.  “And how dare the merchant exploit the charity of his trading partners for personal benefit.  This was so immoral!  Surely the merchant would rot in hell,” he thought to himself.
The pujari remembered the long hard days where he slept on an empty stomach just to make sure that at least some farmers did not go hungry.  However, now the pujari realized that he needed to beg for alms for only himself.  The farmers did not really need any lunch because now they had a cartful of food every day.  They could also save a little money from their wages and use it for emergencies.  So while he was happy that the farmers were not in trouble, he was very angry that the immoral merchant who had denied him food for the farmers on the second day of his visit and who was personally benefiting from all the charity being done by his trading partners, was so popular – not only with the farmers, but also with the wicked landlord. 
But the nice man that he was, the pujari prayed for the merchant every day in the temple, requesting God to forgive the merchant for his immoral and selfish behaviour.

CHAPTER FIVE: Moral of the Story

The Sanskrit word for philosophy or direct vision is Darsana.  This short story is seeking to provoke thoughts around the vision or philosophy of social entrepreneurship. 

5 Key inferences that could be drawn from this story are:

1. Innovation and Entrepreneurship is crucial to impact change in Social Sector

While the pujari had a good heart and worked very hard to help his fellow farmers, he could but make only limited impact on their lives.  It was only the innovation and entrepreneurship demonstrated by the merchant that actually created a sustainable change in the socio-economic landscape of Darsanapur.

2. Critical to engage stake-holders as part of the change management process

Many leading change leaders agree that sustainable change needs the involvement of the stakeholders for whose benefit you are attempting the change.  The merchant ensured that the farmers were in some ways contributing to the process that would help make their lives better.  Pure welfare assistance or hand-outs rarely leads to sustainable change.  It may be wiser to invest resources in teaching people to fish and then motivating them to fish for themselves as opposed to giving out fish as alms!
3. Unity is Strength
An important extension of the engagement of stakeholders is the notion of community assets.  When you have a community own an asset or process of improvement, each individual looks out for the other and can divide the risks and responsibilities so that no one person is overwhelmed.  This principle is used widely by the Government of India when extending subsidies to self-governed self-help-groups (SHG) as opposed to individuals.

4. Sustainability

Sustainability is an important principle of social entrepreneurship.  The pujari although well-meaning deflected resources away from a tiffin box (that could have been a sustainable solution enabler) to food (that was a short term gain).  Planning for sustainability is cardinal in social enterprise.

5. Generating Surplus is Crucial for Stability
Many individuals view the notion of generating a surplus or a profit as being in contradiction with trying to help people.  Somehow, making profits while trying to impact quality of life is viewed as immoral.  The fact is, that profits or surplus allow you to attract strong talent and build organizational strength that brings growth and sustainability to a social enterprise.  As Dan Pallota warns us, “Don’t confuse morality with frugality!”

Monday, September 17, 2012

Database Scoring using RFV simplified

Database scoring involves selecting the most important customers of your total customer list.
Typically, database scoring is done so that a limited marketing budget can deliver maximum benefits.
A very common technique is using the RFV to score databases.
This is a short story to show how it works:

There was once a very successful businessman who owned a number of sari shops.  He had 3 sons called, Master R, Master F and Master V.  Very bright youngsters too!
One day, the sons approached the father asking to be taught the business of sari shops.  The business man was wise and knew that the only way to learn was by doing.  And that the most important lesson to be learned was customer relationships.
So he asked his sons to come the next morning to one particular store.  There he gave each of them a present.  And he asked them to give it to any one customer from this shop who they felt was most deserving to be given a present.  He gave them a month to do the job and said that they would all meet again in one month in that very store at the same time.

1)    Master R was in a hurry.  Why do tomorrow what you can do today?  He saw a lady paying for a sari at counter and immediately gave her a gift. “Thank you ma’am,” he said.  “We’re so happy you visited us today – please come again soon.  Here is a small gift to keep us in your thoughts and come back soon.”

2)    Master F was more patient.  He had spent some time at this same store before and knew of a college teacher who visited every Saturday.  Every Saturday, she bought a sari and gave it to her best student of the week (she taught at a girl’s college) the following Monday.  The saris she bought were not expensive since they were for students and the college teacher wasn’t particularly rich.  But the customer was a frequent shopper so Master F waited for Saturday and gave her the gift.  “Thanks for being our regular customer.  Please do keep coming.  Here’s a little something for you”.

3)    Master V was a little more like his father.  He waited for an entire month.  Then he pulled up the details of the customer who had the highest bill.  He realized that she had bought 4 saris at one go!  He drove to her house – a mansion quite a distance away from the shop.  Upon entering the mansion he learned that she was a rich industrialist’s wife with three teen-age daughters.  She had bought them all saris for Durga Puja.  So he gave her gift, thanking her for the business.

The three sons met their father at the end of the month.  He asked about their gifting experiences.
Master R, with his usual impatience jumped in.  “I realized that the sooner I gave the present to a recent customer, the higher the chances of that person coming again.  So I gave the gift to the first customer I saw buying a sari, hoping she could come again soon out of gratitude.  In fact, she did, only yesterday!  So I believe I’ve invested the present most profitably.”

Master F laughed at R’s simplicity – he explained how he waited for a week for the teacher who came in regularly and gave her the gift to keep her loyalty and frequency of visits.  And in fact, she did come again on all the following Saturdays too!

Master V found this all absurd.  He explained how he had identified the most valuable customer of the entire month and had given her the gift only yesterday.  If she comes again, she would indeed be profitable.  He showed every one the value of her bill to prove his point.

All 3 began arguing.  F and V felt that R was being impulsive.  Why the rush?  R argued that time is money.  And old customer does not even think of us as much as a recent customer does.  So the sooner he got the gift to work for him, the better. 
R and V felt that F was wasting money.  The teacher would have come anyway.  Why bother with a gift?  F argued that keeping a loyal customer was far more cost efficient than trying to create a loyal customer.
R and F scoffed at V.  “You really think that woman will want more saris after buying so many the last time?  She also lives so far away!” they said.  V argued back, “She likes our stuff.  She has spent so much with us.  One more visit and she’ll give us far more value than either of your customers.”

Their father intervened, “Let me get this straight.  R: You think the most recent customer is the most likely to buy again if you give her a gift.  F: You think the most frequent customer is likely to buy again if you give her a gift.  And V: You think a customer with highest historical value is most likely to buy again if you give her a gift.  What if I say you’re all right?”

The boys look puzzled. 

The father then pulled out a long list in which he had meticulously recorded actions of every one of his customer with their dates of visits and purchase details for the last 3 years.  He then gave the boys 10 presents again and said, “Why don’t you take a day more and try again? Tell me whom you would give these 10 presents to.  We’ll meet tomorrow on this.”

This time, the boys knew they were on to something.  Otherwise their father wouldn’t have parted with this list, which he updated every night and kept locked up in safe.  After some fighting and quibbling, the boys prioritized all customers and agreed on 6, who were:
Very Frequent (came in at least once a week) + Very Recent (all of them had come to one of their sari shops the previous day) + High Value (all of them had purchased over ten saris each in the last one year)
There was no dispute there – these 6 customers needed to be given presents.  But there was some trouble deciding on the last 4 gifts.  They had to decide between:
  • High Value customers (those that had purchased 20 saris last year but not come even once this year? 
  • Highly Frequent customers (those coming every day but buying very cheap, low margin saris)?
  • Very Recent customers (all that came in this morning – hoping that they will come in soon again if they receive the presents)?
The next morning, they went to their father with this dilemma and apologized for not being able to decide on the balance 4 gifts.  “Great!” said the father.  “You’re now ready for database scoring”.  The first six customers basically have full scores on parameters of Recency, Frequency and Value.  The balance, you’ll now give less than perfect scores since not all of them score as well on all three parameters.

“But how should we decide which customer is more important?” asked the boys sheepishly.  “An infrequent customer with high value or a very frequent customer with low value or a very recent, high value 1st time customer?” he continued.

“You test!” said the father.  “You test by giving presents to those coming in once a week, and to those buying 5 saris at one go and to first-time customers.”  See who comes back to buy more.  Then you you’ll know what works for you and which parameter to value more after scoring.”
The boys were mixed with exhilaration and confusion.  They now realized the value scoring the list (database) their father had given them testing to refine their marketing strategy.  They were excited about building their own learning and experiences into scoring.

Learning:  All other things being equal
  1. A Recent customer is more likely to respond to a marketing stimulus than a less recent customer
  2. A more Frequent customer is more likely to respond to a marketing stimulus than a less frequent customer
  3. A customer having given historically higher Value of business is more likely to respond to marketing stimulus than a customer having given less value to the business
Database scoring using RFV involves scoring a customer record on each of these 3 parameters (say classifying a customer as "High", "Medium" or "Low" on each) and then experimenting with various combinations to learn which of these segments offer highest opportunity for ROI on marketing stimulus.

Thursday, April 12, 2012

Understanding Coalition Loyalty Marketing

Chapter One:

There once was a week-end market place called Mata Empower.
This market had 50 shops that served 50 customers.
Customers had a strange visiting pattern to this market.  On one weekend, you had all 50 customers visit, but on the following weekend, no customers came to this market.
The shop-keepers at Mata Empower were puzzled and wondered who these customers were and if they could be drawn into coming every weekend, as opposed to every alternate weekend.
So the shop-keepers went to a wise old lady called Ms. Beth Carrots, and asked for help.  Beth Carrots found out through her investigations that the 50 customers went to another market called Competition Bazar on alternate weekends.  So one weekend they spent at Mata Empower and the other they went to Competition Bazar.
As smart as she was, Beth Carrots designed a very interesting scheme. 
She asked the shop-keepers if they would each be willing to give her 1 new car in a year, if she could make customers come to them every weekend, as opposed to every alternate weekend. 
“Yes!” they all shouted.  These were very good customers and if they came every weekend, the shop-keepers could make enough profit to gift 1 car a year.

Chapter Two:

So Beth Carrots prepared flyers and posters and announced, “One free car to every customer who visits Mata Empower 50 times in a year!”  To track the customer visits, she designed a loyalty card that gave 1 point per visit to every customer that came to the market.  And when 50 points were accumulated on the card, they could be redeemed for a new car!
Customers were delighted!  In the next one year, 40 of the 50 customers started coming every weekend to Mata Empower.  In fact, some new customers from Competition Bazar also switched and started regularly patronizing Mata Empower after they heard about this new scheme.
Sales were rocking! 
But Beth Carrots was not happy.  She realized that 10 customers still refused to switch.  And they kept visiting Competition Bazar every alternate weekend.  She wondered why.  She also realized that she was sitting on 10 cars that she did not need to give out (because these cars were left over from customers who only came in half the time and so lost their points at end of year).  She was wondering if she could put these to good use.
As smart as she was, she came up with another scheme to enhance the Mata Empower offering.
She spoke to the town money-lender called Mr. Skate Banks.  Skate Banks basically made profits by loaning people money. 
So she convinced Skate Banks to give credit to customers of Mata Empower.  And he could use the unused reward cars as his security.  However, to avail of this offer, he would need to share details of all customer credit purchases (at Mata Empower and at Competition Bazar), with her.  Skate Banks readily agreed.  He would get ready-customers and also the security of cars if they defaulted.  Information was a small price to pay for this.
So Beth Carrots made another announcement.  Members of Mata Empower could now write, “Skate Banks” on their card and shop-keepers at Mata Empower would now sell them goods on credit.
Customers loved the credit line - They not only came regularly but also bought more from Mata Empower.  Skate Banks loved lending money to them – they were good and diligent in paying back on time.  When the occasional customer lapsed, he recovered his dues from a car that Beth Carrots promptly gave to him to make good his losses.
Shop-keepers loved this too.  They made diligent notes on the customers who bought on credit and recovered their money from Skate Banks, who in turn recovered his monies from the members.  All was going well.

Chapter Three

But Beth Carrots was carefully studying the purchase patterns of the 10 customers she could not win-back.  They had taken credit lines from Skate Banks and through this information, she learned something very interesting.  Each of the ten customers was a regular patron of a barber shop in Competition Bazar.  This barber, Mr. New Partner was very good with his skill and his talk.  He charmed and entertained while he groomed his customers.  They were very loyal to him.
So Beth Carrots went to visit New Partner.  She told New Partner of what she had done with Mata Empower and how she had learned that 10 of her customers were also good patrons of New Partner.  Then she made him an offer. 
“If you agree to move your barber shop from Competition Bazar to Mata Empower, I am sure that at least 10 of your customers will be very happy.  This is because they can now all earn a new car every year!  Moreover, I can share with you information about them that you will find very helpful to talk to them even more – I’m sure with your charms and this information, you can build an even better relationship with them.  Moreover, all our other customers at Mata Empower can now visit you as well when they come in every week.”
“Most importantly, as a joining bonus, I will give you a new car right away if you open shop at Mata Empower!”
New Partner couldn’t refuse.  The next weekend, New Partner moved his barber shop to Mata Empower and wrote to all his customers about the move.  They were delighted!  They had all heard of the shiny new cars being given out by Mata Empower and were so happy to join the program.
Other shop-keepers at Mata Empower were delighted too!  New Partner was valuable and he helped them bring in new customers.  In addition, New Partner received the patronage of existing customers of Mata Empower leading to his delight as well.

Chapter Four

But best of all, everybody loved Beth Carrots!  She kept whispering useful information in their ears every now and then that could be used to create even more delight.
As an example, Beth Carrots told Mr. Apparel that Mrs. Smith had just bought a lot of baby food from Mr. Grocer.  And Apparel was able to offer a special deal in baby clothes.  And when Beth Carrots offered the special deal to Mrs. Smith on the baby clothes, Mrs. Smith hugged her in joy… how timely!
And Skate Banks did his part too – he kept alerting Beth Carrots when he saw customers of Mata Empower spending a lot of time and money somewhere else – some other market or shop or service.  And Beth Carrots promptly reached out and convinced the new business to be part of Mata Empower to add even more value to customers and the partners and to Skate Banks. 
One evening, Beth Carrots, smiling to herself wondered aloud, “Have I just set up a coalition marketing initiative?”

Five Key Takeaways:
  1.   Coalition Loyalty initiatives are basically cooperative marketing efforts and can emerge from commitment from a variety of like-minded stakeholders with a common purpose - these could be tenants of a mall, various businesses participating in a common card-based points initiative or business owners on a high-street.
  2.  Before one can see the benefits, stakeholders need to commit to value – new cars as in this story, or more commonly, points, central CRM software and other such infrastructure as is necessary.  This commitment of value is a crucial prerequisite to design and communicate a compelling proposition to customers for inducing profitable behavior change.
  3.   Information is the life-blood in coalitions.  Beth Carrots in this story used a card that could be tracked to know more about her customers and then used that information to create value.  Without a strong and committed process to gather and leverage information, the coalition can fall flat. 
  4.  Marketing framework, Financial management of points, Communication, Technology infrastructure and Partner management are 5 critical functions, typically best served by a neutral centralized entity.  This entity can collect fees for points dispensed, pay out funds for points redeemed and use the breakage in points to fund program management and member communication.
  5.  Credit becomes a useful tool to deliver a bump in sales and to access information, otherwise not necessarily accessible.  A bank-issued credit card, debit card, prepaid card or other such device is normally a great tool to make this happen.