Prepared for:

Client or contact name

Title or additional names

Authors:

Name

Additional names

Date:

00 Month 2004

PepsiResearch Implicationsand Themes

Prepared for: World Bank Authors:

Name: Maria Flores

Letelier

Date:

26 October 2004

Uncovering practicesIn Underserved Markets

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© Cheskin 2004

Contents

• Introduction

• CEMEX “Patrimonio Hoy” overview

• Research process steps in “Patrimonio Hoy”

• Potential Steps For Country Research, Mexico

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Why Research Low Income Communities?

• Understanding cultural practices provides competitive advantage to private business seeking to create differentiation in underserved markets.

– Understanding incentives, both tangible and intangible, and aligning them in a culturally relevant way, can produce market creating offerings.

– But, do not research people as consumers primarily. Understand how people are actively producing identity in their lives.

Patrimonio Hoy

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Patrimonio Hoy: Context

• Key insight 1998: CEMENT bags were being purchased

by customers in marginalized regions that CEMEX did not

reach directly. Estimates revealed that the end users in

these regions could make up to 40% of CEMEX’s share.

• Objective: To learn about end users in marginalized

regions and develop a program, service, or products that

would position CEMEX and it’s brands with these end

users.

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Patrimonio Hoy: Understanding The Main Barrier

• Ethnographic observation revealed lots of unused,

wasted materials in front on people’s lands, and badly

constructed, half made rooms.

• Question arose: Is this an issue of a lack of wealth, lack

of savings practices, or lack of expertise in

constructing?

– HH income ranged from $150-$400/month.

• Spoke to several people throughout community and

listened to their home building stories. Hypothesis

formed: the main barrier to building home is committed

saving for the entire set of materials required for one,

complete room.

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Patrimonio Hoy: Understanding Main Barriers

• Do-it-yourself homebuilder market defeated the best intentions of the good marketing research

• Do-it-yourselfers had difficulty transporting building supplies.

• Mi Casa: APASCO, CEMEX’s competitor, set up sales locations closer to customers’ building sites.

• Customers did not like additional pressure to build.

• CEMEX’s smaller bags

• Customers liked putting cement bags in front of sites as a matter of pride.

• Smaller bags hurt pride.

• Lesson: It’s not about convenience; it’s about dignity.

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….But Savings Practices Did Exist

• Still, deeper exploration into savings practices revealed that

people did in fact save large enough quantities.

• Only they did this through informal, yet highly visible, group

lending practices called Tandas, where participants felt they

would lose face if they did not make a weekly payment.

• The tanda system is generations old in Mexico and is

practiced across the country. Tandas means to take turns.

• Upon further probing, we learned that most people entered

tandas with the goal of saving for construction materials.

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Identifying Points of Tension For Home Savings As Values In Conflict

Cultural Values Coming Into Conflict

Historical, Status Culture Modern, Economic Transactional Culture

Personal identity and reputation based on place in social network given at birth and confirmed by patrons.

Personal identity and reputation built by responsible series of effective transactions.

Fate or God determines outcomes. Therefore, planning is arrogant, particularly for more than a year.

Planning and regular execution determine outcomes. Therefore, believing in an individual fate is foolish.

Family and community festivals put you in touch with meaning of life. Work to live. Failure to take part produces shame.

Working for the sake of working is a value in and of itself. Getting yourself and nuclear family ahead is the good life.

Patrons and authorities are important. Important relations are hierarchical. And patrons give and forgive loans.

Negotiated or contractual relationships are important. Important relations are equal.

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….Tanda as a “Bridging Practice”

• We diagnosed the tanda as a bridging practice, i.e. a

practice that people engage as an attempt to resolve

seemingly conflicting values.

– While 70% of the Tanda’s members saved, only 10% actually spent money on their homes.

– Most of the money is spent on short term emergencies, loans to friends, fiestas, or savings for big items

like quinceaneras

• Conclusion: positioning with this market is not soley a

product improvement issue. A new service must be

designed that is culturally appropiate, based on existing

and emerging values, and based on the tanda bridging

practice.

Tandas bridge the

values of community

status with that of

getting ahead one’s

family ahead.

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Bridging Theme: Patrimonio Hoy

• Garden: First 50 set of customers.

• In depth interviews that sought to reveal the word of mouth or

stories regarding participants experience uncovered: First set of

50 leading edge customers spoke about the experience of

“patrimony”, and the experience of doing something “today”.

The team chose Patrimonio Hoy as the bridging theme.

• Patrimony refers to something of value passed down to future

generations. Hoy means today. The new experience: you can

make the future happen today.

• “Grow Your Home, Grow Your Patrimony, Today”.

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Key Elements of PH offering

1. Redesign tanda.

• Recruit local leaders in the community and train them on offering, make local people central point

of contact.

• Recruit social workers to work with local points of contact.

• Piloting revealed that groups of 3 vs. 10 were more effective for producing group bonds. Today,

for every $1.00 peso contributed, $4,00 of credit.

• Most Tanda’s in Mexico last for only 10 weeks, but the team designed a program for 70 weeks-86

weeks, the approximate time it takes for a complete room (approx. 110 square feet)

2. Shift relationship with local intermediaries to increase their wealth.

CEMEX purchases from them vs. other way.

3. Provide services such as warehousing, technical advice to give

people a complete picture of room, frozen materials prices during

time of constructing.

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Patrimonio Hoy: Results

• Customers build at 1/3 regular cost.

• Accelerate construction four-fold.

• 99.6% payment rate.

• Approx. 100,000 families have built homes with

program.

• Excess of USD$38M in “savings/loan”

• Over 50 locations in 30 cities throughout

Mexico.

• CEMEX local brands in regions w/ PH

achieve a brand index differential of more

than twice that of closest competitor.

Before After

Role Of Research

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But….Needed To Constantly Learn From Research

• Some people understood the offering right away. Others

did not.

• Some people gave PH positive word of mouth; others

accused PH members of not being charitable.

• At the beginning, some people constructed several rooms

at a time, very quickly, others would drop out.

• Who was target? What would penetration strategy be?

• Needed to align social values to demographic, identifiable

barriers and create a segmented word of mouth strategy.

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Planning and aspiration creep

• Success comes when dignity is clearly enhanced; achievements in dignity

must drive aspiration for more achievements.

• We asked do-it-yourself builders how many more rooms they sought to

build.

• Findings:

• No matter how much building experience, the vast majority of builders

plan 1, 2, or 3 rooms more.

• Most people who have between 0 and 2 rooms plan to move into the

3 to 5 room category.

• Most people 3 to 5 room category also plan to add 1, 2, or 3 rooms

and move into the 6 - 7 room category.

• Most people with 6 to 7 rooms aspire to more rooms or to help other

family members build more rooms..

• Hence, as people increase their number of rooms, they also increase their

aspirations.

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• 31% of members have more than 4 rooms.

• 54% of members have between 0 and 2 rooms.

Key Variable: Number of Whole Rooms People Already Have Constructed.

TOTAL 17 - 25 26 - 35 36 - 45 46 - 55 56 +

300 44 97 106 33 20

% % % % % %

PROMEDIO 3.28 3.50 2.78 3.31 4.48 3.06

NADA

1

2

3

4

5

6 +

24

15

17

12

12

9

11

54

6

11

9

939

27

24

13

13

11

66

17

14

19

15

13

9

12

15

7

11

7

15

22

23

6

44

13

19

13

6

Age

Rooms*

* CUARTOS: RECÁMARA, COCINA, BAÑO, SALA Y COMEDOR.

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Other Key Variable: How Long It Took To Construct Existing Structure

21 23 19

11

3

1012

9

15

15

15

178

26

29 30 28

7

1 a 3 YEARS

MORE THAN 10 YEARS

4 - 6 YEARS

7 - 9 YEARSPURCHASED, INHERITED, OR O

Average # of years.

TOTAL

300

%

WITH MASON

IN FAMILY

135

%

NO MASON

165

%

5.6 5.7 5.5

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0 - 2Rooms

3 - 5Rooms

0**- 6 Years 7 + Years

34% 21%

19% 15%

**O años: Purchased or Inherited. 7% if total.

“ORGANIZED”

“SLOW STARTERS” “RESIGNED”

“LIFE IMPROVERS”

Patrimonio Hoy SegmentsLength of Time To Construct What Exists

This segment is starting to construct little by little. They perceive PH as a relief, as a resolution to getting their homes built faster, but they lack practices for mobilizing.

66% of people ages 17-25 are in this segment.

Aprox: 70-150 weeks/ room

This is the segment that has taken very long to construct anything. Although they some see the possibility of the impossible, sales cycle is longer, and more handholding is required. 84% are older than 26 years.Aprox: 200-500 weeks / room

This segments has shown that they are worthy of receiving help from families and friends. They construct one families home at a time, and they best understand the importance of social reputation, and recurrent savings practices. They also are the one’s that give PH the best word of mouth..63% are in or have been in “caja populares” Aprox: 30-100 weeks / room

This segment sees PH as the impulse to achieving their dream/”illusion” of a bigger and nicer home for all family members. They also see the opportunity of helping other family members.

76% of people are over 36 years old

Aprox: 150-200+ weeks / room

Aditional Segment, “Established”: 6 or more rooms = 11%.Magnanimous, Generous, Exemplars of Community

# of Rooms

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0 - 2Rooms

3 - 5Rooms

0**- 6 Years 7 + Years

34% 21%

19% 15%

**O años: Purchased or Inherited. 7% if total.

“ORGANIZED”

“SLOW STARTERS”0-1 room in7+ years

Aprox. 30% Of segment

or 6% of total

“RESIGNED”

“LIFE IMPROVERS”

Patrimonio Hoy Segments

Negative Word of MouthThis segment is starting to

construct little by little. They perceive PH as a relief, as a resolution to getting their homes built faster.

66% of people ages 17-25 are in this segment.

Aprox: 70-150 weeks/ room

This is the segment that has taken very long to construct anything. Although they some see the possibility of the impossible, sales cycle is longer, and more handholding is required. 84% are older than 26 years.Aprox: 200-500 weeks / room

This segments has shown that they are worthy of receiving help from families and friends. They construct one families home at a time, and they best understand the importance of social reputation, and recurrent savings practices. They also are the one’s that give PH the best word of mouth..63% are in or have been in “caja populares” Aprox: 30-100 weeks / room

This segment sees PH as the impulse to achieving their dream/”illusion” of a bigger and nicer home for all family members. They also see the opportunity of helping other family members.

76% of people are over 36 years old

Aprox: 150-200+ weeks / room

Community Focused-Positive Word of Mouth

Trendy,Word of Mouth

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Research Focused Patrimonio Hoy’s Offering (pictures coming)

1. Solidarity Word of Mouth Strategy

• Target “organized” as word of mouth ambassadors, to recruit others in community.

• Create a brand that represents social values.

• Spend marketing dollars on community involvement.

2. Highlight “contractual” practices within groups, ask participants to

take “test” in front of each other.

3. Create a club experience that motivates productive behavior and

gives access to special services, ongoing support/motivation in local

offices, a la weight watchers.

• Give importance to local, physical offices.

• Play a role in strengthening weak ties through events and local community recognition/rewards.

• Include celebration budget every time room is completed.

4. Create laddered offerings for developing customers, allowing

customers to become productive: “Te Impulsa”.

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Testimonials After Redesign

• “Now I believe that PH is to trust, because they have made a physical commitment to our

communities. I see people go there and make their payments all the time. And they are

always kind in the offices, everyone seems to be working so hard.” (Senora Benita, El Coli,

Jalisco, 2001)

• “I see it as a club, but not a charitable one. It is our money. It is like a financial group, but

made for this type of community. It is difficult to explain, it is the closest thing to a bank here.

And they are human, they treat us well.” (Leonal Lucas Hipolito, San Gaspar, Jalisco, 2001)

• “You all gave me an opportunity no one else had given me. I want to conserve my credit

history with you. You have opened my eyes” ( Jose Angel Herrera, El Coli, Jalisco, 2001)

• “They allow me to stay as a customer because I am responsible. I am distinguished as

responsible in my community because I pay.” (Rosa Maria Sepulveda, El Coli, Jalisco 2001)

• “My entire family, 8 of us, were living in one room. With Patrimonio Hoy, we now have 7

rooms, and we are building more. More importantly, we are unified. All of us are working

towards a common goal, we work more hours, take on extra jobs. We are brining my mom

to live with us.” (Senora Emilia, Queretaro, 2004)

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CEMEX Overview: Degrees of Dignity

• Research analysis needed to be directed at question: what would stimulate further aspirations for dignity increase?

• In these communities, dignity comes from:

• Size of home

• Speed of Construction

• Degree of Activity in the Community

• Good Attitude Regarding Sacrifice of Work (Echarle ganas)

• Capacity to help other members of family primarily, and neighbors in community

• Being seen as someone worthy of being helped by others in community.

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Based on Pilot, CEMEX Has A Data Gathering Process Today Based On Themes of “Aspiration Creep” and “Solidarity Building”

1. Review of Mexican census data for marginalized communities.

2. Identify # of rooms

3. Identify type of materials room made of.

4. Identify whether folks have “services” (electricity, water)

5. Identify the community leaders.

6. Speak to community leaders first to gain buy in, and for their recommendations on initial recruits.

7. Recruit from “organized” segment, learn from them about community, prepare them to be intermediaries.

8. Interview local distributors/retailers and identify those that serve as best intermediaries.

9. Train local field staff to conduct ongoing basic “Tell Me About Your Dream Home” survey that includes questions regarding # of years to construct existing structure, # of rooms they already have, # of families that will live in home today and future, aspirations for constructing.

Implications for Mexico Country Study

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Implications For Designing Mexico Survey on Access to Finance/ Existing Financial Practices

ReviewCensus or

Housing Data

Locate Regions w/Large

Differences

ReviewLabor Data,

SmallBusiness Data

Hypothesize:Salaried Workers

Entrepreneurs w/receipts (e.g. Taxi Drivers)

Entrepreneur w/o receipts

“Social exposure” of labor type.

(INEGI)

Select mix of semi-urban and semi-rural, marginalized areas

Distinguish driving historical influences in selecting # of regions.

Speak to community leaders, local chambers, mayors and identify types of formalfinancial services available for whom (E.g. “caja populares”, loans from work)

Identify Financial

“Services” Available.

Determine # of rooms/home, services available, materials build out of(IAGEB, SEDESOL,INFONAVIT, FOVISTE)

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Implications For Designing Mexico Survey on Access to Finance/ Existing Financial Practices

TrainSame Field

TeamOn Language,Trust building

Identifycommunity

leaders,exemplars.

Conduct 10-15 “focal groups”

Per region

Interview a wide range of people in various sub-groups.

Identify main forms of employment and social exposure.

Determine language,social value, existing bridging practices for savings and loans, views of future.

Train in practices forProducing credibility,Trust, and local Language.

Train to probe, direct questions.

Design Survey Based On Inputs From All Stages

Obtain basic language, orienting values.

Determine role of local, informal leaders in financial intermediation,.

IdentifyThemes For

Design &Analysis

Analyze ethnographic and qualitative data for social value change, what is becoming important, what is starting to matter.