NGOs Applying Lessons of Market Dynamics

By Chris Wolff, Consultant, PPP & Shared Value Strategies and Founder, Shared Value Agents

NGOs Applying Lessons of Market Dynamics

I’ve encouraged all types of mission-driven organizations to explore applying any business principles toward social goals, and NGOs can benefit from a number of lessons from Shared Value, Lean Startups, Behavioral Economics, or Social Enterprises. However, my point in focusing on market dynamics crowd sourcing insights on needs and value is to zero in on their “active ingredient” for non-profits to translate without sacrificing the best of what NGOs offer (as noted in Jim Collins’ Good to Great and the Social Sectors). Here are a couple ideas NGOs can try to adapt to glean similar insights noted before based on what beneficiaries demonstrate they value most.

A) Charge something nominal in order to learn priorities.

It’s long seemed counterintuitive, unrealistic or even morally reprehensible to charge anything to people with fewer resources. However, development practitioners have come to experience how even impoverished people have resources, and giving away tools for free (although sometime necessary) can diminish the item’s value in the eyes of the recipient, while charging even a nominal, subsidized amount can increase its use because beneficiaries value it more. Once a NGO has entered this practice, then you’ve begun a pricing dialogue with all the people you want to help.

So if people aren’t participating in your plans, utilizing your resources or adopting your lessons, then, we’re forced to also contend with the possibility what we’re offering isn’t relatively as valuable to them. Or rather, what else could be more valuable? How does our offering fit within their hierarchy of needs and different solutions they could choose? Entering this discipline starts to push organizations on increasing the value they offer, or the way it’s offered, based on seeking greater intelligence on what matters most to consumers (yes, even of development initiatives). In principle, you could think of this as asking clients (as you might yourself) something like, “Would you rather get a product/service for free that might somewhat meet one of your needs or would you rather pay something for what really helps you with what you most need?”

B) Start incorporating the value of opportunity costs (even outside your sector).

While most don’t like to think about charging money to the very poor, in reality all social programs do charge in terms of some kind of opportunity cost. NGOs can benefit from acknowledging other costs beneficiaries pay to participate such as time, mental bandwidth, risk, discomfort of change from familiarity or cultural significance, flexibility, pursuing alternate endeavors, or attending to other commitments. What’s that worth to users?

Even eschewing monetary transactions, as a comparable translation NGOs could ask beneficiaries, “What did you forgo doing/benefitting by participating in our program today? How much could that have earned/saved you?” (or use proxy values). Ask control, non-participants Gelobter’s question (p.89), “How much attention, effort, or money are targets putting into existing [alternative] solutions?” Impact surveys could start to capture client-centered perspective according to their self-defined context of needs that might be broader than the organization’s focused intervention. This might lend itself to more client satisfaction inquiries leading to increasingly effective engagement.

Ignoring opportunity costs means we’re plugging our ears and neglecting lessons on what’s really most important to clients. When NGOs find people not joining their programs, not coming to trainings or noncompliant behavior subverting project objectives, we can’t just think about throwing more mandatory trainings at participants or even listening better, but rather how can our work tap into the exchanges and tradeoffs taking place (including crossing sectors) to more systematically inform what makes our efforts more or less valuable to users.

This is not to overstretch the claim that markets will solve everything, to pretend there’s never abuse of power, or to ignore market failures. With too many to list here, a mere example of gender imbalances, often exacerbated by who holds the money, necessitate a social perspective for businesses to target niche market of women and intentionally deliver products/services in ways that meet their unique needs.

Beyond practicality, what’s more inspiring is the embedded principle of dignity that market dynamics inherently recognize how the greatest power for change centers in the hands of people in poverty. Its very process relies on (if also disproportionally rewards) people having assets, skills and intelligence to drive how to handle their own mix of challenges. No matter what influence (or tricks) someone might employ, eventually that fact becomes unavoidable whenever a model is based on the poor parting with their money to pay for something, no matter what strengths outsiders might miss or how blinding our paradigms might be.

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