Fodder mostly eliminated the tedious practice of waiting under trees, sometimes for hours, for agents to show up on bicycle or on foot from far-flung villages. (Punctuality is not a character trait to which even many enterprising Ghanaians aspire.) The drop points made it possible to expand the agent roster dramatically without hiring legions of drivers; one employee could service the entire route.
So far, so good. But many problems shadowed growth potential. First, it was becoming clear that local disposable income was tied heavily to the seasonality of small-farm economics. When the corn and cassava were harvested and farmers had money, they could afford to pay the monthly battery fee—currently 1.70 cedis for a pair. But in lean or dry times, that much cash was simply out of reach. Unfortunately, Burro’s renewal plan was tied to inflexible calendar dates—clients could renew only on the first and fifteenth of the month. Such a plan was essential from a business standpoint—trying to manage thousands of rental policies coming due on any random day would be a logistical nightmare—but was completely at odds with customers’ financial reality.
And even when customers had cash, the monthly fee was a major stretch, especially when they could get some battery use for just half a cedi—the price of a pair of Tiger Head throwaways. It was easy enough to say that over the course of a month, the Burro offering of unlimited battery use for 1.70 cedis per pair was a far better deal than .50 cedis for a pair of throwaways. Heavy users exchanged their batteries twelve times per month, which made each renewal effectively cost .14 cedis per pair—a cost advantage of more than 350 percent over Tiger Head, assuming equivalent battery performance. Over the course of a year, a customer who used a four-battery radio would save over 100 cedis, given equivalent usage. Considering that most rural Burro customers lived on 1 or 2 cedis per day, the customer would be saving as much as a third of his total annual income.
But that’s like telling an American he could save tens of thousands of dollars over the next thirty years by paying cash for his house. The only difference is the scale of the investment. Few Americans can afford to pay cash for their homes, but many go to Sam’s Club and buy bulk packs of batteries, which represent a small fraction of disposable income even for relatively poor people. To many Ghanaians in the dry season, the bulk battery deal wasn’t like buying batteries at Sam’s Club. It was like paying cash for a house.
Furthermore, Burro’s value proposition was not immediately obvious to typical prospects because they had never experienced the advantage of “bottomless” battery use. Even heavy users of Tiger Heads probably changed them only five or six times per month; it was simply too expensive to buy more. Instead, they grew accustomed to rationing batteries and couldn’t readily picture what it would be like to leave flashlights on all night or play the radio all day long. There was a huge learning curve inherent in the business plan.
Meanwhile, intermittent battery users—those who got by just fine on changing their batteries under three or four times a month—gained no advantage from the Burro offering. That effectively eliminated the urban electrified market (where battery-powered devices were more of a convenience than a necessity), as well as users of long-life devices such as wall clocks. Explaining to prospects that they would be wasting their money by paying a monthly fee to power a wall clock was a potential source of confusion. Whit wanted to help customers, not rip them off.
None of these issues was a total surprise, of course. Back in January we had seen drop-offs in renewal rates associated with the dry season (no crops, no money), and Whit had led many discussions about alternative ways to structure the offering. But it took months in the field to really discern patterns and averages—and by May, the numbers were not looking great. For one thing, Burro’s market share was not nearly as high as Whit had expected. Data was sketchy and basically involved polling local village shops on their Tiger Head sales, but it appeared that in villages where Burro was operating, its market share ranged from as low as 5 percent to perhaps a high of 60 percent. In short, Tiger Head D batteries (and the primary AA brand, a low-power Chinese entry called Sun Watt) were still dominating the market, despite Burro’s long-term cost advantage and (in the case of Sun Watt) much better performance.
Clearly, battery customers were focused on minimizing daily out-of-pocket expenditure, not on saving over the long term.
The upshot was a constant churn in the customer base, as clients went on break when they could no longer afford the monthly fee, and agents scrambled to line up new customers. The Fodder program showed that only 45 percent of clients were renewing on any given renewal date; the majority simply went on break.
Burro agents, almost all of them working part-time and juggling other jobs, in theory had a relatively straightforward duty: keep their clients happy by exchanging old for new batteries, thus fulfilling the company’s promise of “Fresh, anytime you want.” Instead, agents were forced to spend most of their time chasing renewal payments from clients, or retrieving batteries from clients on break. This was not a model for large-scale success. Nor was it a great way to build the Burro brand.
It is at this point in any new business venture when genuine entrepreneurs can be separated from mere poseurs. Faced with such obstacles, lesser mortals throw in the towel and retreat to the comfort of the familiar, or panic and overreact—barking orders to underlings, grasping at quick fixes, or, as is so often the case with developing-world initiatives, finding a deep-pocketed charity to come to the rescue. (Selling your product to an NGO is a time-honored loser’s game in the developing world; since the charity is giving the product away, nobody has to worry if it fulfills a genuine need.) Another reaction is to simply ignore the evidence and hope things will get better.
Whit, on the other hand, stayed calm and logical. Without minimizing the very real challenges, he remained confident in the business and intent on finding a more compelling sales model. So in late May he convened a brainstorming session at his home in Seattle. Sitting around the living room were Jan; three members of Burro’s advisory board (Michael Connell, Cranium’s former creative director and art director for Burro’s brand identity; Jim Moore, a seasoned executive with extensive developing-world and venture-capital experience; Chris Legler, Cranium’s former finance director); Adam Tratt, another former Craniac and a guerrilla marketing professional who had studied one summer in Niger; Derek Streat, a serial entrepreneur who was then with UNITUS, a Seattle-based NGO working to accelerate the growth of microfinance organizations; and Charlie Wood, another former Microsoftee now at the Grameen Foundation, where he literally wrote the book on how to replicate Grameen’s successful village-based phone business in new countries.
Implicit in the discussion was the need for two basic changes to the business model: first, customers needed to be able to rent batteries whenever they wanted, not according to a set schedule; and second, Burro had to be the lowest-cost option for battery power today and every day. The best way to do that was to charge per use rather than per month. Find a way to make that usage fee less than the price of a Tiger Head, and you’d have a tiger by the tail.
There was just one problem. You still needed to get the dead batteries back so they could be recharged.
The obvious solution was a deposit, which is a concept that Ghanaians understand from their soda and beer bottles. But bottles are cheap, and their deposits correspondingly insignificant, whereas a rechargeable battery is inherently valuable. A deposit that covered Burro’s actual battery cost—to say nothing of its potential retail value—would be far out of reach of an average Ghanaian.
Then again, a deposit doesn’t necessarily need to cover the replacement cost of a product. You leave a credit card number at a rental car agency, but unless you have a very high credit limit, Avis won’t be charging a new car if you drive away and keep going. What makes you come back (other than honesty) is the knowledge that Avis has enough information about you (from both your credit card and driver’s license) to track you down. So long as a deposit ensures r
eturn in most cases, it doesn’t need to ensure replacement. Likewise, in states with beverage container deposit laws, some people can’t be bothered to return their cans, but the deposit is enough to ensure that someone will find it worthwhile to do so.
What if the battery deposit were one cedi? That would be less than the cost of the battery, but equal to a day’s pay to some customers, and real money to virtually every Ghanaian. Furthermore, the dead battery only had value to someone with the ability to recharge it. Since most of Burro’s customers had no electricity, much less access to a charger, why wouldn’t they return it for a cedi?
But what if they didn’t? And what about urban, electrified customers, who could presumably obtain a charger? A well-organized scam artist could clean out the business quickly by stealing expensive rechargeable batteries for less than half their wholesale cost.
These issues bothered Whit. He considered the possibility of adding a chip to the batteries that would only allow them to work in a dedicated charger. That would be expensive, and perhaps impossible: charging simply completes the same circuitry as usage, but with current flowing in reverse; a diode could simultaneously prevent charging and still pass current through to a load, but some energy would be lost, and even more daunting, how could the relatively low voltage of a single cell enable control of the diode in a handshake with Burro-authorized chargers? Tech solutions were looking pricey at best, and the seemingly intractable issue of theft and loss, and how to prevent it, went around and around during the Seattle meeting. Finally Derek said, “Whit, don’t hose your business worrying about a problem that might not happen.”
2. That’s the Way We Are
“Charlie, are you following this? You look confused.” Back in Koforidua on the third day of our return, Jan was leading a meeting of the team to discuss the new pay-per-use offering with a deposit. Charlie had driven up from Accra; also sitting around the dining room table were Kevin, Adam, and myself. (Whit was in China, meeting with manufacturers.)
“I just think the client will be suspicious,” said Charlie, shaking his head. “You know, ‘Now these batteries are cheap; why did you let me pay so much before [under the monthly plan]?’ They will be suspicious. That’s the way we are.”
By we, he meant all Ghanaians, for whom Charlie had appointed himself national apologist. Mention any Ghanaian custom that might be ascribed to some character flaw, from police corruption to gasoline meter “inaccuracies” to wife beating, and Charlie’s generic response was “That’s the way we are.” Not that he approved of this endless screed of African transgressions; on the contrary, Charlie brazenly lectured cops demanding bribes at roadside checkpoints, and his business dealings were unfailingly ethical. He was just being realistic, I suppose. But it was strange all the same, like an American explaining Charles Manson by saying, “That’s the way we are.”
“But we don’t need to convert existing clients,” countered Jan. “We can test this in a new area.”
Jan was at the whiteboard, laying out the plan. “We were thinking of three price points. You can buy an individual battery charge for 20 pesewa. A purchase of ten charges would cost GH¢ 1.50, or 15 pesewa each, and buying twenty charges would cost 2 cedis, or 10 pesewa each. Agents would get a 20 percent commission on each rental. So even the most expensive plan—pay as you go, one charge at a time—is still cheaper than Tiger Head. In fact, the first charge is free; when you pay your one-cedi deposit, you get the battery charged and ready to use. And the more charges you can afford to buy, the cheaper it gets. For the multicharge plans, the idea is to print up booklets of tickets or coupons—Adam, what’s the best word to use?”
“Coupons.”
“Coupons—which keeps us true to our promise of ‘Fresh, anytime you want.’ This should also open up the urban market. And it totally simplifies reconciliation, because once customers pay their one-cedi deposit, we don’t really need to know who they are. Charlie, you’re sitting there with your arms crossed. Your body language says ‘I’m not buying this.’”
Charlie shook his head again. “The deposit—that pokes a hole in the concept.” He paused. “That’s not to say we shouldn’t try it.”
“It’s like cell phones,” said Jan. “You can buy phone minutes on every street corner here for next to nothing, but you still need to invest in a phone initially.”
“Yes, and that’s why people steal the phones,” said Charlie, triumphant at the opportunity to catalog another Ghanaian character flaw. “It’s the way we are.”
“Are you saying we’re going to create a whole new subculture of battery thieves?” asked Jan.
“Don’t rule that out,” said Charlie gravely. “People here are desperate, they have nothing to lose.”
Kevin turned to Charlie: “At first I was thinking like you. People are gradually warming to our current plan, the agents are getting used to it, and now we are entering the harvest season. I thought, maybe we should get through the harvest and see what happens. But now I’m thinking we should try it. Nothing ventured, nothing gained.”
“Okay,” said Charlie. “But what village? Where haven’t we been? Tell me.”
3. The Bead Makers
The road from Koforidua northeast toward Lake Volta bisects a striking landscape of verdant mountains fronted by rolling hills planted in rows of corn and cassava. I had not been on this road before, and it reminded me of parts of Appalachia or central France. Nor had Burro developed an agent network up this way, so it was a perfect area to test the new offering. Unfortunately for Burro, most of the villages along the main road appeared to have power; maybe not every hut was electrified (it’s expensive to get wired), but clearly “light,” as the Ghanaians call power, was available somewhere in most towns. We took a left at a small junction town called Akatawia and decided to try our chances up a road that had once been paved but was now potholed into a post-nuclear landscape.
“Pick up this woman,” said Charlie from the front passenger seat as we bounced along at little more than walking speed. “Maybe she can tell us what we will find up here.” Jan pulled over, and Kevin and I made room in the back for the young woman, who explained in Twi that she was headed to the Wednesday market in Sekesua, a village some eight kilometers up the road, to buy fish. She and Charlie spoke for several minutes. “She says most of the towns around here have light, even down this road, but Bomase does not.”
Four kilometers and twenty minutes later we hit Bomase, which looked more like a hamlet than a village, situated at a T junction where a wide dirt track led down to a bridge over a stream. Several young men and older boys were sitting under a blooming acacia tree, playing cards, oblivious to the explosion of yellow flowers in the branches above them.
Charlie greeted them in Twi, but the response stopped him short. “What language do you speak?” he asked in English.
The citizens of Bomase were Krobo, which is also the name of their native tongue—one that even Charlie didn’t understand, although they were able to converse with us in a mixture of broken Twi and English. “Why aren’t you in school?” Charlie asked one boy.
“We are on break,” the boy said defensively.
“Then why aren’t you helping your father farm? Are you lazy?” Charlie was capable of maintaining a straight face through this kind of wise-guy routine for a long time. It seemed an odd way to engage potential customers in an important new test market, but who was I to question Ghanaian business manners? Often, late at night sitting on our veranda, I would hear Ghanaian men down on the street, quarreling strenuously. As they invariably discoursed in Twi, I could not understand the specifics of their briefs, but the tone always suggested violence was imminent. Yet every time—just as I braced for the dull clang of machetes, followed by the police siren, the wails of the wounded, and the collection of stray body parts in the street—the tone changed to laughter.
“We do not farm here,” said the boy in a tone that mixed pride and apprehension over speaking so forthrightly to an adult. “We
make gari and beads,” and he pointed across the road to an open-sided bamboo shelter that housed a diesel-powered cassava mill. Gari (not to be confused with the pickled Japanese sushi ginger of the same name) is a popular Ghanaian instant porridge made by toasting ground cassava root in metal bowls over fires. The bowls are set in a round form made of dried mud, under which a wood fire is lit. As the cassava heats, the worker uses a piece of hard, dried gourd skin like a scoop to turn and mix the meal, preventing it from burning. Gari is the Ghanaian version of convenience food because it only requires adding hot water. “Students eat it,” said Kevin. “It’s not what you would expect to be served at home, but it’s actually quite good for breakfast with sugar.”
The other local Krobo industry was making the colorful glass beads sold every Thursday at the bead market on the soccer field in Koforidua. Ghanaian beads are justifiably famous and a signature craft, with collectors around the world, and the Krobo are skilled practitioners. The process begins with ground glass—old bottles and jars, laboriously hand-crushed with mallets—which is sifted into ceramic molds and then fired in mud kilns. The hole in the center of the bead is formed with a tiny cassava stalk, which burns away during firing. Some beads are made with layers of tinted glass for multicolored effects; others are hand-painted after being fired.
So we had unwittingly stumbled upon an unusual place: a busy craft village with no electricity in an electrified farming region, and a populace who spoke a language that even our polyglot Ghanaian colleagues could not speak. (We soon learned that the place had no cell phone reception, also unusual in Ghana.) Part of me wondered if it made more sense to find a more “average” location for our first market test, but Charlie had already established his street cred with the local youth group (whom he was now loudly beating at cards), and Kevin was already taking out the batteries. Bomase, here we come.
Max Alexander Page 10