8.4 Youth-Inclusive Product Development can Challenge an Institution to Balance Customer Needs with its Bottom Line
As YFS projects progress along the product development cycle, one common challenge is the translation of market research findings into a product that balances customer needs with an institution’s bottom line or minimum standards for sustainability/profitability. Plan Indonesia, Freedom from Hunger, MEDA, CHF-ACSI an Iraqi MFI, and YouthSave present their product development experiences in this section.
- Apply the 8 “Ps” to assess an organization’s needs and preferences and translate market research findings into product attributes.
In order to breach the gap between market research findings and product design, an organization must not only understand the needs and preferences of the target youth population, but also incorporate its own institutional needs and preferences into the youth product. Applying the 8 “Ps” to product design can be a helpful framework in doing so. The 8 “Ps,” or sometimes simplified to 5 “Ps,” is a common business technique used by companies to analyze market research findings and apply corresponding product features.64 Below are some specific suggestions for applying youth market research findings to the 8 “P’s” of product development:
- Product: The specific features of a product or service, including terms and conditions, eligibility requirements, guarantees, etc.
- Account terms must fit youth needs: First and foremost, the terms and conditions of a youth product must serve young people’s needs and preferences, which often differ from those of adults. Freedom from Hunger’s market research showed high rates of migration in its target demographic in Mali, where youth migrate due to work opportunities and marriage. However, there were no clear migration patterns. In response, the bank created a mechanism for youth to easily drop out or join a group without being penalized or hurting the group.
- Account opening requirements must balance youth capacity and institutional requirements: Many FSPs face challenges with contract and identification when serving the youth population. To overcome the bank’s identification requirements and to reduce the entry barrier to youth clients, Kondo Jigima, one of Freedom from Hunger’s FSP partners in Mali agreed to accept identification forms instead of formal IDs and maps instead of utility bills as proof of residence. Nyèsigiso, another Malian MFI, developed a youth account that allows groups with a majority of participants under the age of 18 to have a tutor act as their official representative. Those groups with a majority of participants over the age of 18 do not require an additional guarantor.
- Price: All costs to the client, including interest rates, fees, penalties, or transaction costs.
It is important to balance affordability to youth with financial sustainability. When developing a youth-friendly financial product or service it is especially important to ensure that the product pricing is affordable to youth, who often have less cash than adults, while not being overly burdensome to the financial institution. For example, Freedom from Hunger found that the majority of their youth clients in Mali had irregular access to money and, while they did have the ability to save, it tended to be in small amounts (approximately US$0.10- US$2.00 per week). On the other hand, their partner bank had a minimum opening balance requirement of approximately US$4.44. In order to balance the youth and institutional needs, Freedom from Hunger suggested a collective savings account for groups of five to 15 youth members so that the group could save collectively to meet the minimum opening balance requirement. The FSP also gave the group a two month grace period to save this minimum amount. Finally, the youth were given a three month savings requirement in order to earn interest (annual interest rate of six percent, capitalized every three months). In this way the FSP was able to cover its own costs without deterring potential youth clients.
8.4.1 Hot Topic: Just How Sustainable Does YFS Need to Be?
|As with any development programming, donors and practitioners strive to create sustainable solutions for reducing poverty. Many in the YFS sector agree, however, that the financial services offered to youth will rarely achieve sustainability or profitability as stand-alone products due to their small size, their need for accompanying non-financial services, and resulting high cost. As such, donors and practitioners need to create practical solutions to furthering product experimentation while continuously working to reduce costs. Some ways may include building partnerships between FSPs and local communitybased organizations (CBO). For example, as part of the Safe and Smart Savings Products for Vulnerable Adolescent Girls project, the Population Council’s FSP partners (K-Rep Bank and Faulu in Kenya, FINCA and Finance Trust in Uganda) partnered with local CBOs to provide safe spaces for girl savers. These banks have decided to offer YFS at a loss or subsidized through grant funding in the beginning, as they anticipate a larger pay-off in the long term. These banks expect that the young clients will access more profitable products when they reach adulthood and also see the benefits of cross-selling to family and neighbors in the girls’ communities. Another practical solution may be the involvement of more government-level entities such as the Ministry of Health or Education, as we saw in the ESAF example in box 9.2.1, to provide low-cost||
financial or health education through schools or other community structures. Governments should see this as an integral part of their public school curricula, providing young people with the financial and health skills they need to actively contribute to the nation’s economy. Subsidies, as we saw in the 2010 State of the Field publication with the Kenya Youth Enterprise Development Fund, can also play an important role in helping banks to offset their costs in offering YFS. Increasing youth access to quality financial services requires support from multiple actors in a community. Future YFS projects should reflect this by looking at sustainability through the use of innovative partnerships, government incentives such as subsidies, as well as macro-level education programming that builds the next generation of financial citizens.1
What do you think? Does YFS need to be sustainable? If so, what are some suggested ways to reach this target?
- Promotion: Marketing and sales of a product, including marketing and advertising, public relations, and communication with the public.
Many practitioners agree that while promotion is at the core of any new product or service, it can often be more important to the success of a youth-friendly product than the product itself. A few key suggestions include:
- Merchandise should target youth through simple, youth-friendly colors and logos: Creating brands with colors and images that young people find attractive is imperative. Plan uses calendars, umbrellas, t-shirts, and other merchandise to expand its outreach to youth in Indonesia. This is also substantiated with findings from Women’s World Banking’s (WWB) youth savings product development at XacBank in Mongolia and Banco Adopem in the Dominican Republic.2
- Market to distinct segments: Branding and marketing materials should be tailored to distinct youth market segments. For example, XacBank, Banco Adopem, and PEACE MFI Ethiopia –all WWB network members –offer their youth products to young boys as well as to girls, and they have differentiated the products through marketing and promotion rather than through product attributes.
- Use communication mediums familiar to youth: In Mali, Freedom from Hunger and its microfinance partners are using flyers and radio announcements to market their youth products. In Indonesia, Plan has begun to sponsor community activities to ensure the visibility of the program in the villages where it operates. In partnership with a mobile phone company, Plan Indonesia holds a lottery for the top youth savers in a community as a means to incentivize strong savings habits.
- Involve parents: While it is important to draw young people’s attention to a product or service, they frequently must receive a “go-ahead” or support from their family and community in order to feel empowered to use the product or to access it in the first place. Freedom from Hunger’s market research in Mali affirmed that young people were more likely to open an account if their parent(s) went with them and encouraged them to do so. In response, Freedom from Hunger involved parents in outreach efforts and provided them with an opportunity to provide their feedback to the product features. They are also exploring the possibility of increasing parents’ participation in financial education training so that they can better understand the benefits to youth of opening a savings account.
- Physical evidence: Presentation to the client, including passbooks, promissory notes, etc.
Physical evidence, when presented using youth-friendly language and design, can help to incentivize young people to open a savings account and begin saving. The physical memorabilia used should target youth. Market research conducted by YouthSave showed that young people were not inclined to use the passbooks that their parents and other adult clients use. Instead, one YouthSave partner developed a savings diary that collects the same financial information, but in a more youth-friendly manner. They also developed money bags and ATM/ debit cards that used colors and designs that the young people found appealing.
- Place: Distribution and delivery channels for products and services, including branches, outreach workers or agents, and mobile units.
When working with youth it is especially important to define an outreach strategy or point of entry based on places where youth can be reached and where the product will be most accessible for them.
- Go to where the youth are: One challenge that many FSPs face is locating youth. FSPs must go to where the youth are, be it in schools or elsewhere. To market its new products, Freedom from Hunger NGO partners Conseils et Appui pour l’Education à la Base (CAEB) and Le Tonus, both of Mali, reached out to existing youth groups and set up special times and places where youth were already meeting, such as school fairs, to market the product. In Ecuador, Freedom from Hunger partners Cooperativa de Ahorro y Crédito San José and Cooperativa de Ahorro y Crédito Santa Ana targeted youth directly at schools. In Iraq, CHF ACSI targeted youth at coffee shops and community centers offering them flexible start-up business loans. Additionally, CHF ACSI meets with influential community leaders who are able to effectively reach out to young people to help in promoting the product and generate interest and trust in ACSI’s services. This outreach strategy is particularly relevant to Iraq, given the continued conflict, where youth feel disempowered and vulnerable and seek to emigrate rather than create opportunities at home.
- Make access easy: Plan Indonesia created its youth product so that collection would be held in villages, rather than requiring youth to go to the bank to make deposits. Doing so increased security for the youth and decreased the cost. However, it presented challenges around operational efficiency, including transportation costs for Plan Indonesia. As a result, Plan Indonesia opened five new branch offices located near the target group in Grobogan, Central Java.
- Agent and mobile banking: Many FSPs, including Plan Indonesia, are exploring the use of agent and mobile banking as a way to increase access and reduce operating costs when working with young people. Not only are young people more technically savvy than adults, but they also use mobile technology to conduct financial transactions in place of traveling to a bank.
- Positioning: Competitive advantage or niche as perceived by the customer (including non-financial benefits).
It is critical for FSPs to be client-oriented. FSPs must distinguish themselves in the market, all the more so in competitive environments. In marketing its youth product, Plan Indonesia positions itself as selling a high quality and flexible savings account that specifically meets the needs of young people. It highlights security and customer service as well as non-financial services tailored specifically to young people’s needs.
- People: Staff and customer service, including hiring, training and performance monitoring.
Staff prejudice against young people or an inability to communicate effectively with them can limit the uptake of a youth product. When developing youth-inclusive financial services, it is especially important to consider the appropriate staff profile for those involved with the youth product.
- Youth appreciate a personable reception from the banking staff: During its product testing process, MEDA found that its young clients appreciated a personable reception on the part of the banking staff. The study showed that in the cases where youth did not feel well received, they immediately discontinued their services.
- Determine the appropriate personnel profile for YFS and identify gaps in current staff: Prior to implementing YFS, a FSP must determine the knowledge, skills and attitudes (KSA) related to working with youth. If there are organizational gaps in these areas, the FSP will need to fill them either by building the capacity of existing staff or by hiring new staff with the desired KSAs. For example, Freedom from Hunger trained its field staff on youth learning principles and outreach strategies so that they could better understand youth needs. YouthSave advocates training all branch staff on working with youth, from branch managers to security guards. Plan Indonesia hired new staff to work with its new youth clients. CHF ACSI at first opted to use existing staff to serve its youth clients with an adapted incentive program that places greater weight on each youth start-up loan disbursed as compared to other products. Experience showed however that these loan officers were frustrated with the excess time it took to market and monitor youth clients. As a result, CHF ACSI is planning to hire or designate loan officers specifically for the youth loan product. The profile will include strong communication skills with youth, as well as a lifestyle and background that youth can relate to and build trust bonds. This will likely mean the loan officers will be youth themselves; however, it is not a requirement.
- Process: Operational aspects of a transaction, including systems, manuals, operating procedures, and forms.
- Management Information Systems (MIS) should collect data on age: Many FSPs face limitations in their management information system’s ability to capture the age of their clients. Early on in the product development process, FSPs should make the necessary adaptations to their MIS in order to adequately track client age.
8.4.2 New Tool: A Youth-Inclusive Product Design Framework
The framework below was developed by Freedom
As a key step in the design of the financial products
products and education providing a venue for youth
The framework below has been populated with
Summary of Key Lessons Learned on Youth-Inclusive Product Development
Developing a financial product for a young target market presents several challenges to a FSP. Age restrictions, identification requirements, and relatively low profitability of small deposit accounts or loans can pose challenges to creating a product that truly meets the needs of young people. The examples presented in this section provide some helpful ideas to institutions facing similar challenges in their own product design process. With time, through the annual Global Youth Economic Opportunities Conference and State of the Field publications, Making Cents International hopes to populate the 8 “Ps” with even more innovative approaches to achieving a balance between youth client and FSP demands.
- 1. For additional discussion on how the Kenya Youth Enterprise Development Fund used subsidies, please visit Making Cents International’s 2010 State of the Field in Youth Enterprise, Employment and Livelihoods Development publication on page 71.
- 2. For more information on WWB’s youth savings initiatives, please consult www.swwb.org/expertise/savings-girls. For additional discussion on the use of youth-friendly branding, please visit Making Cents International’s 2010 State of the Field in Youth Enterprise, Employment and Livelihoods Development publication on pages 63-64.