Lessons learned in building markets for sanitation
Reaching 1 million people with improved sanitation in Cambodia
From 2011 to 2016, iDE facilitated the sale of 228,151 latrines in Cambodia, with sales continuing at the rate of over 5,000 per month. This represents unprecedented success for toilet sales to poor, rural households, and shows the potential of iDE’s approach in building markets for sanitation. To achieve these results, iDE takes a flexible approach to program management, balancing program resources between developing new innovations and scaling up the ones that work.
Getting a toilet to every household in Cambodia is no easy task. It not only takes the right product at the right price, but an understanding of what motivates a Cambodian family to make that behavior change and what motivates an entrepreneur to run a latrine business. iDE’s Sanitation Marketing Scale-Up (SMSU) project began in 2011, with funding from the Bill & Melinda Gates Foundation, the Stone Family Foundation, and the World Bank. The second and current phase of SMSU is funded by the Australian Government and the Stone Family Foundation, and is focused on innovations in product and approach to achieve greater scale and efficiency.
Building a market for sanitation
iDE’s unique approach is to build the capacity of private enterprises to stimulate and satisfy demand without iDE becoming directly involved in market transactions. As iDE developed the market for latrines in Cambodia, we were surprised to notice that concrete businesses were uninterested in the hands-on process of selling toilets in rural villages.
Given the public health goal of rapidly increasing latrine uptake, the project team explored a direct form of market engagement called the Direct Sales Model (DSM). DSM experiments in Kandal and Koh Kong showed that a dedicated sales force managed by the project stimulated high levels of demand. Based on these results, the project shifted the focal point of intervention from latrine business owners to sales agents, building up a full-time sales force to reduce turnover, with dedicated management by project staff.
Bundling installation with sales
At first, we sold and priced latrines without including installation because we thought households would install the latrines themselves. However, we discovered that 37% of latrines remained uninstalled nine months after delivery. Some customers delayed installation until they could also afford a shelter. Proper installation of the underground component requires rudimentary masonry skills, which some users perceived as a need for expert services.
To address the time gap between delivery and installation, iDE now bundles installation services with the purchase of the latrine. Potential customers may choose to opt-out from installation service, which represents a cost of about $10. To date, more than 99% of the latrines sold in SMSU 2.0 have been purchased with the installation included.
Using a Management Information System to optimize production and delivery
Analyzing our sales data, iDE noticed a high number of cancelled orders, mostly due to customers tired of waiting for their latrine to be delivered. Delays were caused by some concrete masons being overwhelmed with orders or too busy with other demands. Other masons, however, didn’t seem to be getting enough orders to keep them busy and, thus, would drop out of the program. These things negatively affected our sales agents, who relied on sales commissions for their own livelihood and would quit if they couldn’t make sufficient sales, further reducing orders sent to the masons.
Our solution was to move the entire supply chain tracking process into the digital age. Working with our partner, TaroWorks, we built a Salesforce custom app that tracks every sale from the day it is ordered by the customer, to the day it is assigned to an available mason, to the day it is delivered.
Learn more about our partnership with TaroWorks and Salesforce.
Passing with Flying Colors
By being adaptable and responsive to market conditions, iDE has expanded latrine production and sales on a national level, across seven Cambodian provinces, reaching over one million people who now have access to a latrine.
Business Performance Metrics:
- Average Profit Ratio: $0.26 (A latrine business operator earns 26 cents of profit for every dollar of sale.)
- Average Selling Price of Latrine Unit: $55 (installation included)
- Average Production Cost of Latrine Unit: $36
Average Monthly Net Profit for Latrine Business Owners:
- Highest Tier: $1,323
- Middle Tier: $157
- Lowest Tier: $22
- The return-on-investment of the project is $17:$1 based on a three-year rolling average.