1 Technical Inputs 1)Workshop on Choosing Market Growth Strategies 2) Workshop on Choosing Priority Strategies and Initiatives

2 Technical Input for the Workshop on Choosing Market Growth Strategies

Initial Market Phase I T I M E Characteristics: 1st MFI/MFIs begin lending; Use similar methodology; similar products; Few overall borrowers in the market Borrowers are very timid Market Dev. Phase II Market Expansion Phase III Market Saturation Phase IV Characteristics: No. of MFIs grows; No. of borrowers grows; Additional products begin to emerge; Clients mostly loyal or feel they have few other options Characteristics: Borrowers have more choices & exercise choice; multiple loans; delinquency becomes a problem; New & innovative products begin to emerge; Some MFIs introduce with new lending technologies Characteristics: Market offers a range of products tailored for specific MF market segments; A range of lending methodologies; More competition; clients have more choices; multiple borrowings; PAR problems may become more serious; Price competition; More wholesalers offer funds to retailers

Workshop on Market Phase 1. Participants group by branch or area of operations. 2. Based on the market phase characteristics, each group will identify the market phase the branch finds itself in. 3. With inputs from the account officers, identify all the competitors in the market. Then, narrow the competitors to the major ones that the branch competes with head-on. 4. Write group outputs in a piece of Manila paper for presentation.

Strategic Choices & Risks Factor A.Penetration 65% B. New Product Development 30% C. Market Extension 45% D.Diversification 15% Existing MARKETS New Existing PRODUCTS New Source: Peter Cheverton, Key Marketing Skills, 2 nd Edition, Kogan Page, 2004 Note: % in red refers to rate of success.

9 Ways to Build Demand –Strategic Choices 6 P R O D U C T S ExistingModifiedNew MARKETMARKET Existing Sell more of existing products to our existing types of customers (Market Penetration) Modify current products and sell more of them to our existing customers (Product Modification) Design new products that will appeal to existing customers (New Product Dev.) Geographical Enter and sell our products in other geographic areas (Geographic expansion) Offer and sell modified products to new geographical markets Design new products for prospects in new geographic areas New Sell our existing products to new types of customers (Segment Invasion) Offer and sell modified products to new types of customers Design new products to sell to new customers (Diversification) Source: Philip Kotler, International Marketing Guru & Professor, Kellog School of Mgmt, Northwestern University, Illinois

Matrix of Strategies, Conditions & Market Research Tools StrategiesRequirementsMarket Research Tools Market Penetration  There is still an un-served market  Product offering is superior to attract served market  Ability to modify and enhance product to respond to market needs  Usage, Awareness and Image (UAI) Study  Focus Group Discussion  Competitors analysis  Customer Tracking System  Customer Satisfaction Survey Market Extension  There is still an un-served market  Product offering is superior to attract served market  Capacity of the existing distribution channel/ or putting up additional distribution channel  Ability to modify product to respond to the market needs in the expansion area  Secondary Market Data Analysis and Market Survey  Focus Group Discussion  Competitors analysis New Product Development  Existing clients have a need for new financial services or solutions  Bank has the ability to design and pilot-test  Market Survey  Focus Group Discussion Diversification  A new market or customer segment that is untapped but shows growth potential when pursued by the bank  Rapid Market Appraisal  Market Survey  Focus Group Discussion

Workshop on Strategies Bank Will Pursue 8 Product ExistingModifiedNew MARKETMARKET Existing (Market Penetration)(Product Modification) (New Product Development) Geographic- ally Modified (Geographic expansion) New (Segment Invasion)(Diversification)

Group Outputs on Strategies to Pursue 9 Product ExistingModifiedNew MARKETMARKET Existing(Market Penetration) Example: Branch A, Branch C, Branch F (Product Modification) Branch A, B, C, D, F, G (New Product Development) Micro Agri loan – Branch A, D, E Educational loan – Branch B, E Geographic-ally Modified (Geographic expansion) Branch A, C, G, F New(Segment Invasion) Branch C, E, (Diversification) Pawn lending – Branch B, C, D

The Question Is:  Which of the strategies should be prioritized?  To answer the question, there are a few matters to consider.

11 Technical Inputs On Choosing the Priority Strategies and Initiatives

Three Key Questions  What should we do?  Why should we do It?  Can we do it?

What Should We Do? 13 MF Growth Strategy 2007 – 2009 Introduce a new loan products to existing clients? Exploit new distribution channels? Form alliance with other institutions or insurance co.? Introduce new loan products to new markets segments? ? ? ? Move upmarket to target bigger customers? Expand branch network to new region? 1. What’s my strategic growth objective? 2. How do I assess competing opportunities? S T R A T E G I Z I N G

Why Should We Do It? 14 Increase efficiency? Improve distribution? Improve cost-effectiveness? Expand markets? Improve income? Why This Technology? Why This Product Innovation? Respond to client needs? Increase Client Retention? Remain competitive? Fill market gap? Expand markets? Improve Income?

But Before You Get There… Key Preparation Steps 15 Planning the Product Introduction Implementing the New Product Integrating the Product Change Process Guided by Vision and Strategy Change Process Guided by Vision and Strategy Consistent Communication What should we do: choosing the right innovation Why should we do it: clarifying goals Can we do it: assessing capabilities and competitors

A Three-Step Process as You Introduce a New Product or Technology  Conduct client segmentation  Assess demand for new product among current and potential clientele  Design a product responsive to the targeted segment’s characteristics  Prepare financial forecast  Assess implications of a new product’s introduction on key institutional dimensions.  Assess the readiness of the organization 16 Change Process Guided by Vision and Strategy Change Process Guided by Vision and Strategy Planning the Product Introduction Implementing the New Product Integrating the Product Pilot test On the basis of the pilot, make relevant adjustments in product design, systems, processes and procedures Roll out Track progress Align organization Capture learning Transform culture Consistent Communication

Can We Do It? Position B with Advantage Z Position A with Advantage Y Understand Your Industry Research Your Customers Assess Your Capabilities Analyze Your Competitors Make Strategic Choice Or... Who participates in our industry? What does the industry look like now? How attractive is it? How is the industry changing? How big is our potential market, and how saturated is it? Who are our customers? What do our customers value? How well are we serving them now? What else do they need? What capabilities do we need to reach and serve our chosen customers? How do our capabilities stack up against those of other MFI’s? How do our costs stack up against those of other MFI’s? Who are our primary competitors? Which customers are they serving? How are they serving customers, and how well? Assessing internal capabilities, customer demands, competitors and the industry

Workshop on Prioritizing Strategies  From the choices shown in the last Workshop Output, discuss and agree which ones the bank should designate as Priorities, ranked as 1 st, 2 nd, 3 rd, etc.  For each of the top 3 priorities, discuss the objectives.  And assess whether the bank has the capability to do each of these 3 priorities, and what adjustments are needed in order to do so.