1. Social Marketing An Introduction to The Total Market Approach to Commodities & Services Supply in Low-income Countries Richard Pollard PSI – “Conversations on Social Marketing” -- GWU, November 6 th, 2007

2. Why seek to harness the resources of the Private/ Commercial Sector? Inadequate public sector resources Inadequate public sector resources Donor fatigue Donor fatigue Unmet needs Unmet needs Access issues Access issues Existing realities………. Existing realities……….

3. Health Expenditure Accounts (Jeff Sine, Chemonics)

4. The Equity Debate Most present “markets” are distorted, inequitable and unsustainable. Most present “markets” are distorted, inequitable and unsustainable. We want to ensure equity in provision of basic healthcare. We want to ensure equity in provision of basic healthcare. We would like to target free public sector services and donor funding to the poorest/ most in need. We would like to target free public sector services and donor funding to the poorest/ most in need. This would open up a market for the commercial sector to come in with low-priced mass-consumer goods. This would open up a market for the commercial sector to come in with low-priced mass-consumer goods. “MAKING MARKETS WORK FOR THE POOR”

5. How to make markets work for the poor? The commercial sector can supply low-cost commodities if the market is: Sufficiently large to gain volume, therefore low pricing. Sufficiently large to gain volume, therefore low pricing. They are not squeezed out by free or very low cost public or SM supply to those who can afford mass market prices and are willing to pay. They are not squeezed out by free or very low cost public or SM supply to those who can afford mass market prices and are willing to pay. A fair regulatory and policy playing field. A fair regulatory and policy playing field.

6. Level Playing Field Regulatory The injectable contraceptive market PUBLIC SECTOR – One stop shop (free or low cost) often provided by nurses or trained community-based providers. PRIVATE SECTOR Get prescription from doctor (pay fee) Get prescription from doctor (pay fee) Get injectable vial from pharmacy (cost) Get injectable vial from pharmacy (cost) Go to injectionist (pay fee) Go to injectionist (pay fee)

7. Level Playing Field Policy Turkey and Egypt FP provision Policy to concentrate on long-term methods in public sector – notably the IUD. Policy to concentrate on long-term methods in public sector – notably the IUD. Success in urban areas but less success in rural areas – training, staffing problems. Success in urban areas but less success in rural areas – training, staffing problems. Result – middle income IUD users in urban areas obtain free or v. low cost IUDs from the public sector. Poor rural consumers pay full price for commercial sector Oral Contraceptive pills. Result – middle income IUD users in urban areas obtain free or v. low cost IUDs from the public sector. Poor rural consumers pay full price for commercial sector Oral Contraceptive pills.

8. Models of Commercial Sector Distribution/ Support 1960s – India public-sector, branded “social responsibility” model for condoms & OC pills. 1960s – India public-sector, branded “social responsibility” model for condoms & OC pills. The improved India “distributors” model The improved India “distributors” model 1970s -- The PSI pioneers “NGO”model 1970s -- The PSI pioneers “NGO”model 1980s --The SOMARK “Manufacturers” model 1980s --The SOMARK “Manufacturers” model 1980s --The SOMARK “3 rd Generation” model 1980s --The SOMARK “3 rd Generation” model Franchise/ fractional franchise networks Franchise/ fractional franchise networks Issues of referral – contracting in/ contracting out Issues of referral – contracting in/ contracting out

9. SM 2005 (DKT data) 2 billion condoms 2 billion condoms 132 million cycles of OCs 132 million cycles of OCs 20 million vials injectables 20 million vials injectables ITNs ITNs ACT drugs ACT drugs ORS ORS Safe Water Safe Water

10. IMPACT! PSI – DALYs and PYPs 2006 Disability Adjusted Life Years – 12 million Disability Adjusted Life Years – 12 million Person Years of Protection – 57.6 million Person Years of Protection – 57.6 million

11. Constraints Indian and NGO Models Indian and NGO Models Heavily subsidized own brands can compete with and “squeeze out” commercial sector. Manufacturer's Model Manufacturer's Model Often launched before the market is large enough to create a sustainable and profitable mass market; can eat into higher priced more profitable brands. 3 rd Generation Model 3 rd Generation Model Commercial sector fails to adequately access rural mass markets and, therefore, gain mass market volume.

12. Sustainability Issues What does “sustainability” mean? What does “sustainability” mean? Sustaining donor inputs? Sustaining donor inputs? Raising prices and thus probably eroding donor targeting to the poor and opportunities for commercial sector market? Raising prices and thus probably eroding donor targeting to the poor and opportunities for commercial sector market? Balance between sustaining markets; sustaining the SMO; ensuring equity. Balance between sustaining markets; sustaining the SMO; ensuring equity.

13. Total Market Approach 2003 – USAID and DFID begin to define. 2003 – USAID and DFID begin to define. Integrate all sectors within one market segmented by willingness to pay. Integrate all sectors within one market segmented by willingness to pay. Open up the market to the commercial sector through better targeting of public and SM subsidies. Open up the market to the commercial sector through better targeting of public and SM subsidies. Overriding issue – to ensure total market growth and rural/ low-income access to gain more users and, therefore, volume through rural wholesalers and community-based distribution. Overriding issue – to ensure total market growth and rural/ low-income access to gain more users and, therefore, volume through rural wholesalers and community-based distribution.

14. Case Study Indonesia FP commodities 1990s observation: FP provision as a free public sector mandate; needs to be changed. FP provision as a free public sector mandate; needs to be changed. Market size, large enough – over 50 % CPR; 200 million population; GDP/ person: $1,000 + Market size, large enough – over 50 % CPR; 200 million population; GDP/ person: $1,000 + Public-sector resources cannot sustain. Public-sector resources cannot sustain. Commercial sector complaint -- squeezed out of the market by free public and SM supply. Commercial sector complaint -- squeezed out of the market by free public and SM supply. The total market is distorted and unsustainable. The total market is distorted and unsustainable. 80% of families are profitably served by the commercial sector for mass consumer goods. 80% of families are profitably served by the commercial sector for mass consumer goods.

15. The Approach The existing market -- large enough to attract the commercials sector. If they could enter it their prices will fall, market share increase. The existing market -- large enough to attract the commercials sector. If they could enter it their prices will fall, market share increase. Consumers must be willing to pay, according to capacity -- Create “self-reliant” consumers. Consumers must be willing to pay, according to capacity -- Create “self-reliant” consumers. Must wean consumers from free public sector - Give every family a socio-economic profile and charge for public services on a sliding scale. Must wean consumers from free public sector - Give every family a socio-economic profile and charge for public services on a sliding scale. Access – commercial sector needs help to access rural markets and services. Access – commercial sector needs help to access rural markets and services.

16. The Ingredients Create a significant growth market for commercial sector – Public sector takes responsibility of ensuring demand, willingness to pay and segmentation strategies. Create a significant growth market for commercial sector – Public sector takes responsibility of ensuring demand, willingness to pay and segmentation strategies. Help commercial sector gain access to rural markets -- Public-sector “privatized” 50,000 midwives and opened up existing community- based distributors, linked to wholesalers. Help commercial sector gain access to rural markets -- Public-sector “privatized” 50,000 midwives and opened up existing community- based distributors, linked to wholesalers. Other incentive -- Link procurement of public sector commodities to manufacturers willing to introduce discounted “social marketing” brands. Other incentive -- Link procurement of public sector commodities to manufacturers willing to introduce discounted “social marketing” brands.

17. Manufacturers response Manufacturers saw a new, growth market and competed to enter it. Manufacturers saw a new, growth market and competed to enter it. They restructured and re-priced brands They restructured and re-priced brands OC pills ex-factory pricing example: To bulk public sector supply: $0.16 per cycle To distributors for up-market sales: $1.82 per cycle Added: Social Marketing mid-priced brands: $0.51per cycle. Note: There was no direct public sector subsidy to manufacturers.

18. Wide variety of SM/ mid-priced brands Five OC pills Five OC pills Three injectables Three injectables Two condoms Two condoms Two implants Two implants One IUD One IUD

19. Result – 1994/95 to 2002/03 Unsubsidized, private sector contribution jumped from 28% to 63%. Unsubsidized, private sector contribution jumped from 28% to 63%. Privatized midwives supplied 46% of all commodities. Privatized midwives supplied 46% of all commodities. Midwives increased popularity of the injectable contraceptive (one-stop-shop); most preferred method, and they supplied 46% of all injectables given. Midwives increased popularity of the injectable contraceptive (one-stop-shop); most preferred method, and they supplied 46% of all injectables given. Difficult environment owing to economic downturn and many consumers asking to have their socio-economic profile adjusted. Difficult environment owing to economic downturn and many consumers asking to have their socio-economic profile adjusted.

20. Equity in provision maintained CPR increased from 51% to 57%. CPR increased from 51% to 57%. Public sector supply dropped by 30% but no inequities in market were noted; poorest sector continued to be served. Public sector supply dropped by 30% but no inequities in market were noted; poorest sector continued to be served. Public sector better targeted the poor, and saved substantial budgets. Public sector better targeted the poor, and saved substantial budgets. Commercial sector found reduced sales of very low margin commodities to public sector plus the launch of new mid-priced social market brands, lead to increased profit margins. Competition kept prices low without a need for intervention. Commercial sector found reduced sales of very low margin commodities to public sector plus the launch of new mid-priced social market brands, lead to increased profit margins. Competition kept prices low without a need for intervention.

21. Indonesia’s Unique attributes Available and credible management. Available and credible management. Existing, strong demand. Existing, strong demand. Willingness to invest in substantial BCC / social change approaches. Willingness to invest in substantial BCC / social change approaches. Capabilities to “segment” market by capacities to pay and to move consumers from free public supply. Capabilities to “segment” market by capacities to pay and to move consumers from free public supply. A vibrant, competitive commercial market. A vibrant, competitive commercial market. Capacities to open up rural markets at low cost for commercial sector. Capacities to open up rural markets at low cost for commercial sector.

22. Replications Issues Existing markets, in other countries, may be undeveloped and demand too low to attract commercial sector. Existing markets, in other countries, may be undeveloped and demand too low to attract commercial sector. Commercial sector continues to be constrained by free public-sector and low-cost SM brands. Commercial sector continues to be constrained by free public-sector and low-cost SM brands. Inadequate management to implement better targeting of public sector services. Inadequate management to implement better targeting of public sector services. Collaboration between the public sector and all other sectors poor. Collaboration between the public sector and all other sectors poor. SMOs can play a major role in policy and management of a TMA. SMOs can play a major role in policy and management of a TMA.

23. The problem with high priced commodities TMA approaches are feasible for most products whether ethical or OTC without subsidizing ex- factory prices. TMA approaches are feasible for most products whether ethical or OTC without subsidizing ex- factory prices. Problematical for intrinsically high-priced items such as LLINs and ACT drugs. Volume markets will reduce prices but not sufficiently to make them affordable. Problematical for intrinsically high-priced items such as LLINs and ACT drugs. Volume markets will reduce prices but not sufficiently to make them affordable. Innovations are needed to reduce ex-factory pricing – generics, patent issues, new technology innovations, competition, and possibly global subsidies. Innovations are needed to reduce ex-factory pricing – generics, patent issues, new technology innovations, competition, and possibly global subsidies.

24. The Role of the SMOs Assist all sectors to move to a TMA over time. 1. Assist better public sector targeting of subsidies, and cost recovery as appropriate. 2. Regard “own brands” as a strategy to open up markets for future commercial sector. 3. Support, national, integrated demand generation activities (BCC) across all sectors. 4. Help motive commercial sector to re-price brands. Manage product price subsidies where required at the ex-factory level (LLINs or ACT).

25. Analysis – NGO Model Positioning & Sustainability The SM NGO model squeezes out the commercial sector, although does help that sector sell to upper- income groups through promotional spin-off. The SM NGO model squeezes out the commercial sector, although does help that sector sell to upper- income groups through promotional spin-off. However the SM NGO model is an important tool to help open up markets where demand is low. However the SM NGO model is an important tool to help open up markets where demand is low. More emphasis needed on innovative rural market development to gain volume – links to community-based distribution and rural wholesalers/ retailers. More emphasis needed on innovative rural market development to gain volume – links to community-based distribution and rural wholesalers/ retailers. Donors must appreciate that developing markets takes time and consistent effort. Donors must appreciate that developing markets takes time and consistent effort.

26. Analysis -- Manufacturers/ 3 rd Generation Models Positioning Often implemented in markets where demand is inadequate to generate adequate commercial sector response. Often implemented in markets where demand is inadequate to generate adequate commercial sector response. Donors need to appreciate that these models will only work where market growth is guaranteed, and this takes time. Donors need to appreciate that these models will only work where market growth is guaranteed, and this takes time. Extensive long-term BCC and community-based rural distribution essential ingredients – both elements that the commercial sector itself cannot afford to invest in – issue of needs and wants. They can do it with soap, batteries and analgesics! Extensive long-term BCC and community-based rural distribution essential ingredients – both elements that the commercial sector itself cannot afford to invest in – issue of needs and wants. They can do it with soap, batteries and analgesics!

27. Analysis of TMA Markets only work well when driven by consumer demand and choice. Markets only work well when driven by consumer demand and choice. Consumers are more than willing to pay whatever they can afford. A payment adds value! Consumers are more than willing to pay whatever they can afford. A payment adds value! One low cost brand cannot make a market. Multiple brands and pricing, coupled with strong demand makes a market. One low cost brand cannot make a market. Multiple brands and pricing, coupled with strong demand makes a market. An equitable market is one where all sectors of society have access to a range of brands they can afford and market subsidies/ distortions are carefully targeted. An equitable market is one where all sectors of society have access to a range of brands they can afford and market subsidies/ distortions are carefully targeted.

28. Getting there! Most markets are unique – are at different levels of maturity. Most markets are unique – are at different levels of maturity. Notably, public sector policies/ capacities are different; existing demand levels are different. Notably, public sector policies/ capacities are different; existing demand levels are different. The role of an SMO is to identify strategies to move towards a TMA over a realistic time-frame and establish its own strategies; market positioning of their own brands and policies within that framework for each country. The role of an SMO is to identify strategies to move towards a TMA over a realistic time-frame and establish its own strategies; market positioning of their own brands and policies within that framework for each country. Role of donors is to work within long-term market development scenarios. Role of donors is to work within long-term market development scenarios.

29. Recent References HLSP -- Market Development Approaches Scoping Report HLSP -- Market Development Approaches Scoping Report (2006) (2006) PSP1 – Moving Towards Sustainability: Transition Strategies For Social Marketing Programs (2007) PSP1 – Moving Towards Sustainability: Transition Strategies For Social Marketing Programs (2007)