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CHAPTER I INTRODUCTION Under the Organizational Traineeship Segment of the PRM Curriculum, I underwent training at Ankuram Sangamam Poram (ASP), a micro finance organization based in Hyderabad. I spent seven weeks in the organization, starting from 7th June 2004 till 31st July 2004. ASP (AnkuramSangamam-Poram) is a Cooperative federation in the making, of 108 independent and interdependent Mutually Aided Cooperative Societies (MACS) spread over twelve districts in Andhra Pradesh.

1.1 OBJECTIVES OF THE PROJECT •

Exploration of the concept of Mutual Marketing

•

Concept promotion among the members

•

Conducting a pilot test

•

Identification of issues arising out of the pilot test

•

Recommendations

1.2 SCOPE OF THE STUDY Conducting a Pilot Test was an important part of the project. This pilot test was conducted in the mandals of Chinthalapudi and Amaravati. The products tested were detergents and chilli powder.

1.3 METHODOLOGY 1.Literature review 2.Regular discussions with the personnel of livelihood department. 3.Conducting a pilot test 4.Discussions with the field staff and the members. 5.Conducting a staff conference where issues and the possible recommendations were discussed. 1

CHAPTER II THE PROJECT

2.1 MUTUAL MARKETING – THE CONCEPT Mutual marketing is an arrangement whereby one company provides service to another company that in turn benefits it. An example would be of two web sites providing mutual links. Or a job site may offer the content for the job-related news to a General portal and in return it gets publicity for providing the material. It does not necessarily involve providing a hyperlink to the job site. Mutual Marketing could be the partnering of two local small business owners with each other to grow both their businesses through joint marketing, advertising and promotional campaigns. Let us take the example of a lady who has started a massage practice. Small business owners, including the person mentioned aforesaid, have several universal needs: They need to bring people in the door, get them to buy a product or service, get them to come back and buy again, hopefully at a higher level, and refer others to the business. The person who has started the massage practice can help her Mutual Marketing Partner meet those needs, and in exchange, be given access and direct and often personal referrals to all their customers: customers whom she has identified in advance as being perfect for her practice. The massage person has to first identify her ideal clients. Then she has to identify the small businesses that service her ideal client. An ideal Mutual Marketing Partner for a person who wants to start a massaging practice would be a golf pro who specializes in teaching women golfers. One or two promotional projects with a golf pro could give her enough direct referrals to start or grow a practice full of her ideal clients. Mutual Marketing can operate on numerous levels of interdependency and joint participation. Mutual Marketing can run the entire gamut from simply acquiring the marketing partner’s mailing list and doing one’s own marketing, to doing large-scale joint ventures together.

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Depending on one’s needs, one can work together on many levels, five of which are covered here. Level One: This is the most basic level wherein the massage person just acquires her partner’s customer list and does her own marketing. She can simply ask for the list as a favor, trade a set amount of massage for it, or pay a fee for each name. From there, she can print the flyers, write the letters, knock on doors, make calls, send emails, and otherwise distribute her own material. This level offers no endorsements and no screening, but it will give fast access to the massage person’s target market. Level Two: In this second level, the massage person does the same as above, only this time uses the business as her endorser. This requires an additional level of mutual trust, but the endorsement is invaluable because it tells her potential client that he/she has someone they are familiar with vouching for her. Massage is a service that most people want a personal recommendation or referral for, and even a small endorsement can make a difference. The endorsement can be a quoted sentence or paragraph from the massage person’s partner, a letter written on her partner's business letterhead, etc., but she is still in charge of disseminating the message. Level Three: Here the massage person creates her own marketing materials: brochures, flyers, cards, etc., all with endorsements, but at this level the small business distributes them for her, directly to its customers or displays her material at its place of business. Again, she can make this arrangement as a favor, trade it for a massage for the business owner and possibly his or her employees, or pay an agreed upon fee. Level Four: At this level, joint projects become more involved, and the massage person’s work moves from mass marketing to hands-on massages. She should aim at one or more of the universal business needs, which again are: to bring in new customers, get those customers to buy, get them to come back, and refer others. If one’s partner needs new customers, they can offer a promotion of say, a free foot reflexology or chair massage for first-time buyers at the business. In exchange, they can pay us, give us their mailing list, or just give us access to their clients along with their assumed endorsement. If they want referrals, they can offer a gift certificate if the

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customer brings in a friend who makes a purchase. If they want customer loyalty, they can put out an ad that says for every additional purchase, the customer builds credit toward a massage, whether it is free, discounted, 2-for-1, etc. In the case of the golf pro, one could run a promotion that was mailed to all his students saying that if they bought five lessons, they would get a free massage from us. Even if they don’t buy the lessons, they still see our name associated to a trusted person, and they can contact us on their own. In Level Four, one now has the very proactive endorsement and support of one’s partner because he or she can take more advantage of the widespread popularity and universal appeal of massage to increase sales and customer loyalty. If one wants to build one’s practice quickly and cheaply, free gift certificates get people under one’s hands almost immediately, with the barriers of mistrust removed and the decision to buy eliminated. Most people won't truly value a massage until they've had one, and since doing a free massage costs one little more than one’s time, one can prove once value and then rebook for hopefully many years to come. Level Five: Here our Mutual Marketing Partner and we team up again, but this time, instead of giving massage as the bonus, the reward is one’s partner's product or service when the customer buys a set number of massages. For example, we could send a letter to our golf pro’s mailing list saying that if they bought five massages from us by a certain date, they would get a free golf lesson. By giving a free lesson, the golf pro gets to bring his missing customers back, and once they see how bad their golf swing has gotten, the odds are good he can sell them a series of lessons. By using massage as a way to get his customers’ attention, he gets an edge over other golf pros’ advertising, and with a deadline on the incentive, makes them take rapid action. Our promotional piece to our partner’s list will remind customers of our partner's business and simultaneously introduce and endorse us right to our ideal client. Under Mutual Marketing, one company provides to its alliance partner access to its customers, prospects, and sales channels, including its field sales force. It helps its partner to capitalize on the growing market in an area where it has exposure. Partners can participate with each other in lead generation programs, industry trade shows and conferences, web seminars, awareness campaigns, and Web links. The partners in the Mutual

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Marketing arrangement, may participate in a number of national, regional, and vertical-industry trade shows and conferences. They may co-sponsor such events to help build awareness and credibility for joint offerings. The leads generated by such events are tracked, and disseminated to field representatives and appropriate Alliance Partners. The following is an example of two companies that entered into a Mutual Marketing Agreement. The 2 group companies of the Sumitomo group, Sumitomo Marine and Fire Insurance Co. Ltd. And Sumitomo Life Insurance Company had acquired licenses to market each other’s products. The main features of this alliance were as follows: 1. Sumitomo Marine Group and Sumitomo Life Group to jointly market life and non-life insurance products 2. Joint development of combined life and non-life insurance products that suit the needs of the new age. The two companies jointly developed combined life and non-life insurance products, including "third sector" insurance products, and offered customers the best products and services by utilizing both companies' powerful marketing networks. 3. Joint development and marketing of Internet-based products and services 4. Mutual

investment

in

Group

life

and

non-life

companies.

The two companies were considering strengthening their capital relationships with Group companies through mutual investments in The Sumisei General Insurance Co., Ltd. and The Sumitomo Marine Yu-Yu Life Insurance Co., Ltd. Specific

details

of

the

Alliance:

(1) The mutual marketing of life and non-life insurance products by the Sumitomo Life Group and the Sumitomo Marine Group (i) Non-life insurance business •

Sumitomo Marine and Sumisei General had been jointly marketing non-life insurance products since April 2000, but Sumitomo Life's acquisition of a license to sell the other company's products as an agent had created Japan's largest insurance agency with 50,000 sales personnel. 5

•

Sumitomo Life became an agent of Sumitomo Marine and Sumisei General, and the sales personnel under their control sold non-life insurance products.

•

Utilizing this opportunity, the Sumitomo Life's sales force were able to use the expertise of Sumitomo Marine to expand business with approximately 300,000 small and midsize companies in the customer base of Sumitomo Life, compared with previous joint efforts focused on cultivating business mainly with large companies.

(ii) Life insurance business •

Sumitomo Marine obtained a license to sell the life insurance policies of Sumitomo Life. Taking advantage of this opportunity, Sumitomo Marine received life insurance sales know-how from Sumitomo Life, engaged in the joint development of life insurance products, and marketed Sumitomo Life's sophisticated life insurance products.

•

Through the mutual sale of insurance policies as agents, Sumitomo Life and Sumitomo Marine created a powerful comprehensive insurance network based on the Sumitomo brand. Selling each other's insurance products enabled "cross-selling in the new age," and by making effective use of corporate resources (such as call centers, customer consultation systems, and customer service points at branches), which it was previously not possible to use for cross-selling, it was possible to sell and maintain life and non-life insurance products in an integrated way.

(2) Joint development of combined life and non-life insurance products: The two companies concentrated their capabilities in product development, consulting, financial technology, and system development, and their expertise in such areas as customer service, as well as their marketing strength based on the effectiveness of the ability to sell each other's products. This enabled the joint development of products and services and the proposal of optimal products and services (3)

Joint

to marketing

of

products

customers. and

services

using

the

Internet:

The companies marketed insurance products for the new age and services to customers who were internet users, mainly young people, female office workers, and housewives, through the joint

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development of a web channel that made effective use of information technology. The two companies also planned to construct a joint portal site.

(4)

Mutual

investment

in

Group

life

and

non-life

insurance

companies:

To strengthen capital relations with Group companies and establish a solid relationship with them, Sumitomo Life considered investing capital in Sumitomo Marine Yu-Yu Life while Sumitomo Marine was considering the same in the case of Sumisei General.

(5) Combining the two companies' marketing know-how on the business front line The two companies were already engaged in joint insurance marketing, but they also aimed at combining both companies' marketing know-how not only among the top executives at nationwide marketing bases, but also at the level where sales were actually made. The following arrangement between a university and Pepsi is also a case of mutual Marketing. UW, an American University, provides access to Pepsi’s products on campus in exchange for marketing dollars to be redirected to support UW Athletic promotion and the general university promotion. Another example of Mutual Marketing of products: TMA Resources, a leading supplier of member-centric software, and the Kellen Company, the second largest professional association management firm in the world, announced their decision to work together in promoting an array of products and services to trade associations, professional societies and other member-centric organizations. The partnership defines the Kellen Company role in promoting the sale of TMA Resources’ TIMSS 6 association management software systems to clients nationwide. TMA Resources in turn will promote the Kellen Company’s association management services, web site development and hosting services, public relations and other professional services. In addition to full-service association management, the Kellen Company provides meetings and exhibitions management, public relations, crisis management, internet services, government affairs, publishing, strategic planning and other professional services for associations as well as individual companies.

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Another version of Mutual Marketing: A unique concept that gives mutual advantage to all participants. Shoppers win with great products and exciting shopper rewards. Suppliers win with loyal customers. Individuals win as Business Owners who use their spare time to create an ongoing stream of income and achieve financial freedom. Mutual Marketing in the context of ASP: Mutual Marketing in the context of ASP would mean that the goods produced by the members of MACS A would be marketed to the members of MAC B and in turn the goods produced by the members of MACS B would be marketed to the members of MAC A. The following are the benefits envisaged to the members of ASP through the Mutual Marketing Mechanism: 1. A member is bound to buy goods from other members through the Mutual Marketing Mechanism only when those goods are available at prices less than the market prices (due to the elimination of middlemen) or when the goods are of a superior quality than the goods available in the market or under both the conditions. This reduces the consumption expenditure of the members and improves the quality of goods that they consume. 2. The co-members from other MACSs could be an excellent source of demand for the goods manufactured by the members. This could create a sustainable marketing channel for the members. 3. Mutual Marketing basically acts as a livelihoods enhancement mechanism.

2.2 PILOT TEST We conducted a pilot test where a particular product manufactured by the members of a certain MACS A were sold to the members of MACS B and in turn the members of MACS B manufactured and sold another product to the members of MACS A. The following were the objectives of the pilot test: 1. To find out the issues that need to be focused on when Mutual Marketing is taken up on a large scale. 8

2. To promote the concept of Mutual Marketing among the members. The criteria for the selection of the products was: 1. The members engaged in the production of a particular product should have considerable expertise in the production of that product. 2. The product should be something that is consumed frequently. 3. The product should be capable of being easily stored. 4. There should be a significant conversion process or value addition process for the members to be involved. 5. The manufacturing or the conversion process should benefit as many members as possible and provide as many members as possible with employment opportunities. After discussion with some of the ASP personnel we narrowed down to Chinthalapudi MACS in West Godavari and Amaravati MACS in Guntur. The members of the Chinthalapudi MACS had undergone training in the preparation of detergents a few years back and quite a few of them were conversant with the production process. Guntur is known all over Andhra Pradesh, for the production of Chillies. Amaravati, being a part of Guntur, the members had easy access to goodquality chilli. So we planned to market the detergents manufactured by the members of Chinthalapudi MACS to the members of the Amaravati MACS and, in turn, market the Chilli powder produced by the members of Amaravati MACS to the members of the Chinthalapudi MACS. 2.2.1 Preparation at Chinthalapudi The members of Chinthalapudi MACS were conversant with the making of three kinds of detergents: 1. A detergent for washing clothes of the quality of the premium brands Like Surf Excel and Ariel. This product was referred to by the members as Surf. 2. A detergent for washing clothes of the quality of relatively low-priced brands in the market like Rin, Nirma, Wheel etc. Our members refer to this product as Nirma. 3. A detergent for washing utensils, which was referred to by our members as Vim.

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We had to price all the three products keeping in mind the prices at which competitors were offering their products. Surf Excel and Ariel, both of which are the premium products were being sold at a price of Rs.1.50 for 20 grams. We initially thought of offering our product at Rs.1 for 25 grams. Table 1 The cost of manufacture of 5 kgs of Surf Ingredients Slurry Soda STPP TSP

Weight 1 kg 2 and ½ kgs 400 grams 500 grams 100 grams

Price (Rs.) 58 37.5 20 17 6

GS Colour Tinopal Scent Subtotal Tin Total cost

750 grams 1 bottle 1 bottle 10 ml

7.50 5 2 3 156 6 162

The cost per 25 grams worked to 86 paise, including the cost of packaging which amounted to 5 paise per pack. Hence the total cost came to 86 paise. This did not include the costs of transportation and other overheads, both of which we were ignoring for the first time. Then we calculated the cost implications of pricing 20 grams for Rs.1. The cost came to 70 paise including the cost of packaging, which amounted to 5 paise. Thus we would be getting a net profit of 30 paise per pack of 20 grams. So we decided to offer 20 grams of Surf for Rs.1. The other detergent that we wanted to offer had the following competitors in the market: Rin, Wheel, Tide. Rin was priced at Rs.1 per 25 grams. Wheel was priced at Rs.1 per 30 grams and Tide was priced at Rs.1 per 20 grams. We wanted our product to compete against all these brands. Hence we decided to offer Nirma at Rs.1 per 40 grams, which beat the best price proposition offered by Wheel. The cost of production of10 kgs of Nirma was as follows:

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Table 2 Cost of production of10 kgs of Nirma Ingredient Soda Salt Slurry Caustic soda Soap oil Colour Scent SCS Subtotal Tin Total cost

Weight 5 Kgs 4 Kgs 200 grams 100 grams 1 Kg 10 grams 25 ml 25 grams

Price (Rs.) 75 16 12 4 6.50 5 7 6 131.50 5 136.50

The cost per 40 grams came to 60 paise including the cost of packaging, which came to 5 paise. Thus profit per pack of Nirma was equal to 40 paise. The third detergent which we were offering was Vim. A significant advantage with this product was that there was no product in the market being offered at Rs.1. The cost per 10 Kgs of Vim was as follows:

Table 3 Cost per 10 Kgs of Vim Ingredient Slurry Soda TSP Chalk powder Subtotal Tin Total cost

Weight ½ Kg 2 kg 200 grams 8 Kg

Price (Rs.) 30 30 8 16 84 4 88

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The issue, which we had with Vim, is that it is considered as a low price product. Also we were not sure as to what extent our members were using powder to wash utensils because people in rural India have traditionally used sand and ash for the said purpose. Also we were apprehensive about the extent to which our members were conversant with the idea of using the powder for other stated purposes like washing sinks etc. Hence keeping with the low price perception of Vim we offered it at Rs.1 per 75 grams. The lower price would also encourage members to use the product for the other above stated purposes. The cost per 75 grams came to 71 paise including 5 paise for the cost of packaging. Hence the net profit came to 29 paise per 75 gram pack. One thing to note with regard to the pricing of detergents was that the cost of transportation, labour and other overheads were not been included in the price because the entire transportation and other overheads cannot be allocated to this small quantity of goods. 2.2.2 Preparation at Amaravati At Amaravati, before engaging in the production of chilli powder, we had to decide as to how the pilot test would be funded. We had two options here: 1. The investment needed for the pilot test would be treated as a loan given to one of the members and any profit from the test would accrue to her. 2. The investment would be treated as an expense in the books of the MACS and all the returns from the pilot test would accrue to the MACS. We rejected the first option as treating the investment as a loan given to one of the members would bar her from accessing any loan from ASP in the near future. So we decided on the second option. A similar funding mechanism was employed even at Chinthalapudi. The following were the costs of producing 15 kgs of chilli powder. Table 4 Cost of raw material for producing 15 kgs of chilli powder Raw material Chilli Onions Salt Spices Castor oil Total cost

Price (Rs.) 200 33 4.5 126 30 393.5

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Table 5 Total cost of producing 15 kgs of chilli powder Costs Raw material Milling charges Packing Labour charges Total cost

Rs. 393.5 150 36 100 680

The cost per 50 grams came to Rs2.27. We decided to price our product at Rs.3 per 50 grams at which rate we would be making a profit of 73 paise per 50 grams. We also planned to sell a few 100-gram packets to test the demand for large quantities. Accordingly we decided to price a 100gram packet at Rs.6. In all we made 285 packets of 50 grams each and 20 packets of 100 grams each. We found out the cost of chilli powder as available in the Chinthalapudi market. Two brands of Chilli powder were available at Rs.10 and Rs.8 per 100 grams respectively. The second brand of chilli powder was also available in a 50 gram packet and was priced at Rs.3.50 per pack. Since Guntur was famous all over Andhra pradesh for chilli, we were confident that the right mix of price and quality would make the sale of Chilli from Guntur a good success. For this the quality that we planned to offer had to be better than the quality available in the market. Also if we offered good quality we could garner a reasonable market share as the consumers were not satisfied with the available brands in the market. 2.2.3

Learnings from the Pilot Test

There were some important lessons that we learnt from the Pilot test: 1.Falsification of assumption that price is more important than quality: During the pilot test we thought that more emphasis should be laid on offering a product at a low price rather than offering a product of a high quality. We thought that the members would be more keen on a lower price than a product of better quality. But the members’ response to the sale of the products proved that our assumption was wrong. It was clear that though the members belonged to lower income groups, they wanted products of good quality and did not mind even if they had to pay a premium for it.

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2.Though we offered both Surf and Nirma in low price packs the competitive edge was already usurped by the established players because they already had low-price packs in the market. Whereas we had a significant advantage in the case of Vim, where we offered low price packs, because none of the market players were operating at these low price points. Hence low price packs would work well in the case of products where competitors are not offering the products at the same prices. Thus when selling products having branded products as competitors in the market, we should definitely try to introduce packs of low quanitity and low price if the competitors are not offering products at low prices. 3. From interactions that I had with the staff at both Chinthalapudi and Amaravati MACSs it was very clear that MACS staff had an important role to play in promoting the concept of Mutual Marketing among the members and in motivating them to actively participate in Mutual Marketing.

2.3 CONCEPT PROMOTION AMONG THE MEMBERS We had a meeting each at both Amaravathi MACs and Chinthalapudi MACS where are all the members of the respective Mandals were invited and the concept of Mutual Marketing was discussed thoroughly. The following were the important points, which were conveyed at both the meeting: 1. Members were stated clearly how the concept of Mutual Marketing would help them both as producers and consumers. As producers, it helps them to gain access to the muchneeded markets. As consumers, the mutual marketing mechanism may bring about a reduction in their expenditure and improves the quality of goods. 2. The members were stated in no uncertain terms that they had a clear advantage when compared to any new players in the market because they had a potential market in the 100000 members of ASP. Thus their main strength was their numbers. 3. It was also impressed upon the members as to how quality was pivotal in the smooth functioning of the mutual marketing agreement. It was because there was an unwritten agreement of quality maintenance between any two MACSs that entered into a mutual marketing mechanism. Once the quality of goods offered by one party decreases it might have the following repercussions: the other party might not purchase the goods in future

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from them and/or there might be a reduction in the quality of goods offered by the second party.

2.4 ISSUES THAT NEED TO BE FOCUSSED ON AND RECOMMENDATIONS The following are some of the issues that the Pilot test has thrown light on: 1.Whether the product should be sold through retailers. 2.Whether the responsibility of production should be given to a single individual or to a group of members. 3. Whether the members can be allowed to resell the products at a higher price in the open market. 4.Whether branding should be taken up and to what extent. 5.The issue of logistics. 6.Whether credit should be given to the members. We should decide whether the product should be sold only through the members or should be also sold through the retailers. In the latter case the product can be sold only when there is margin for the retailer. With regard to the products that we tested out, we have to increase the price if the product has to be offered to the retailers. Thus there have to be 2 prices, the lower one at which the product would be sold to the members and a higher price at which the product would be sold to the retailers. But it would be better to sell the products only through the members as it would be difficult to manage two prices when the number of products increases. Another issue is whether the production of a particular product in a particular Mandal would be allotted to an individual member or carried out by a team of members. In the first case the investment, risk and the profit/loss will accrue to a single member. She would be employing other members on wage basis. In the second instance, the investment, the risks and the profit/loss would be shared by all the members of the group. The second method should be preferred over the first method as the benefits would be accruing to more number of members and would help in their capacity building. But as we saw in the case of the pilot test some of the members were

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more interested and took the initiative. Thus not much time should be wasted the first time in waiting for a pool of volunteers. Rather if one or two women are interested in producing and benefiting from the pilot test, they should be allowed to do so. But if the pilot test is successful and production of the particular product is given a go-ahead, the news of the success should be disseminated properly among all the members to encourage them also to take up the activity. More than asking whether members should or should not be allowed to resell the products to outsiders we should ask whether we can regulate the sale. This is not possible. Thus as long as the producer member gets the price at which she planned to sell, one should not be concerned about the resale of the product. Also the non-members would come to know about the mechanism being tried out and approach the members for the sale of the product to them at the same price, thus raising the demand for the product. Branding should be taken up to the extent that it gives the required information to the buyers. In this case it means displaying the district and the MACS where the product is being manufactured, the group, if any manufacturing the product and the net weight of the product. Thus the branding should be minimal. The next issue is that of logistics. The main issues under this are as to how the demand would be aggregated and how the product will be delivered. Aggregation of demand: The demand for each product that is to be ordered from a certain MACS is first aggregated at the group level, then at the village level and finally at the Mandal level and a collective order is placed. Delivery: We envision three scenarios for the delivery of the product: 1. The product, which has been ordered by a certain Mandal from the other Mandals, would be kept for delivery once every week near every MACS and would be picked up by the members of that MACS. 2. The second situation is something on the lines of the rice credit line. Rice credit line has shown that the women members are very much capable of handling the transportation and delivery of the product on their own. Such capabilities could be gainfully employed in the case of Mutual Marketing Mechanism. A few members would take up the

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responsibility of delivery of products to a Mandal and pick up their own requirements from that Mandal. The members would accompany the truck on which their goods are to be delivered to a certain Mandal and return with the goods that they have picked up from that Mandal. The transportation costs could be shared by the members of both the Mandals in an agreed manner. 3. The third option is something which could be tried in the long run, when the transactions reach a critical mass. Members could even think of opening a Super-bazaar in each of the Mandals where members from the other MACSs would regularly put up their products for sale. But this could be difficult to implement because of the overheads involved and the kind of resources that are required. The next issue is whether any credit support should be provided to the members in order to fund their consumption. Credit is important because it would encourage the members to buy our goods. Also maintaining a credit account with a local merchant is a habit with many of the members. The amount of credit that needs to be given is not too exhorbitant. We are looking at ultimately meeting 25 percent of the consumption needs through our MACSs. The average consumption expenditure of a typical member’s family per month amounts to Rs.1200. Thus we are looking at funding Rs.300 of this expenditure. If we assume that the mutual Marketing mechanism is implemented in 100 MACSs and from each MACS 400 members buy goods under this mechanism, the total amount of credit that needs to be provided, per month, comes to Rs.(100*400*300) i.e. Rupees One crore twenty lakhs. This comes to Rs1.2 lakhs per MAC per month which is well-within the financial capabilities of ASP. ASP could follow a similar interest pattern as it does for all its operations. Each month the members would be given credit for the purchase of their requirements which they need to pay back at the end of the month, to make them eligible for the next month’s quota of consumer credit. Also this mechanism of lending through the MACSs would add to the efforts of making the MACSs become financially self-sustainable over a period of time.

2.5 FACTORS CRITICAL TO THE SUCCESS OF MUTUAL MARKETING Three factors would be critical to the success of the Mutual Marketing in the case of ASP:

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1. Information dissemination: One of the most important factors, critical to the smooth operation of this marketing network, is the dissemination of information. There should be information available with the members about the group that can supply a particular good that they want to procure and also they should know about the demand for a particular product that they need to cater to. In other words, a mechanism should be put in place whereby a member can know whom she can procure a particular product from and to whom a particular product, that she manufactures, can be sold. The following is the setup that I suggest: There would be a nodal point that would be setup in each of the Mandals. This Nodal point would be overlooked by a person specially in-charge for the information receipt and dissemination about the products being manufactured by different groups in the Mandal and also the products being manufactured in the other 107 Mandals. There would also be an apex nodal center at the state level that would coordinate between the various Nodal centers at the mandal level. The following figure shows the proposed setup and the flow of information. Figure 1 The proposed setup of nodal centers at the mandal and state level M1

M2

M3

M2

M4

M3

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Mi, M2, M3, M4 – Mandals -

The nodal center at the state level

-

Nodal center at the mandal level

- Village The person in charge of the Nodal center at the state level would receive regular orders as to the goods needed from different MACS nodal points and would in turn pass on the information to the groups willing to manufacture the same. Thus the persons in-charge of the different nodal points at the mandal level and the person in charge of the state-level nodal point would liaison between various members. 2. Stock receipt and distribution: The nodal points at the mandal level would act as the storage or the retail point for the goods received from the other mandals and also for the goods to be supplied from that particular mandal. This could be a low-cost operation. Since ASP also plans to provide credit to its members for meeting their consumption needs, sufficient margins can be generated at each of the MACSs to meet the expenses of maintaining the nodal center and to meet the expenses of the person in charge. ASP would follow the same interest structure as it does in the case of its micro finance activity. ASP would get the funds at an average interest rate of 12.5 percent per annum. ASP would lend the same to the MACS at an interest rate of 18 percent per annum. MACS would in turn lend the funds to the SHGs at a rate of 22 percent per annum. Finally the SHGs would lend money to the members at an interest rate of 24 percent per annum. Thus the margins generated at the MACS level can be used to meet the operational expenses incurred by each MACS on its nodal centre. 3. Sale of the products to non-members: Over a period of time, in order to obtain the critical mass, it may also be necessary to sell the members’ products to the non-members. The nodal centers set up in each of the mandals could act as a retailing point to the nonmembers as well.

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One may feel that there should be some additional benefit that a member consumer derives over a non-member consumer. This added advantage could be in the form of a lower price. But it would create discontent among the non-member consumers if the goods are sold at a higher price to them when compared to the member consumers. This could be overcome by fixing an MRP for each product. The product would be sold at the MRP to the non-members. But for the members a discount should be given. For example, the MRP for a 20-gram pack of Surf could be fixed at Rs.1.25. The product would be sold to the non-members at the MRP. But the same pack could be sold to members at a discount of 20 percent on the MRP or, in other words, at a price of Rs.1. But this system of giving discounts to members would become very complex as the number of products increases. There would be constant monitoring a price formulation strategies required. Thus this system of providing discounts to members over non-members would be difficult to sustain over a period of time. Thus there should be a uniform price charged to both the members as well as the non-members. One should also remember, that the priority in the case of the Mutual Marketing mechanism is to provide increased benefits to the members on the production side, in the form of a wider market, rather than on the consumption side. 2.6 IMPLIED BENEFITS TO ASP FROM THE MUTUAL MARKETING PROJECT The implied benefits to ASP from the project are: 1. There is an opportunity for increased cohesiveness to be developed among the people through the Mutual Marketing Mechanism. The very fact that a member is going to look at the 100000 membership of ASP as her potential clientele and also as a source from which she can meet her consumption requirements, increases her identity with the organization. Also from the experience we had from the pilot test, there is bound to be increased interaction between members of different Mandals once they start negotiating with each other and keep in touch with one another for their needs. 2. The competitive spirit is bound to increase between the members of different Mandals to increase their respective sales. This kind of healthy competition bodes well for the organization. 3. In this era of outsourcing it is better to have the capacities and capabilities of members developed. The production and business skills of the members, well developed, could be

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useful to take up any outsourcing work in the future. This became evident after our pilot test itself. After we promoted the concept of Mutual Marketing among the members at Amaravati MACS and informed them that we were test marketing the chilli powder produced by some of their members, a Super Bazaar situated at Amaravati approached the MACS to ask whether they could deliver prepare similar packs to be sold through the Super Bazaar. 4. This could also be a mechanism to increase the membership base of the organization.

REFERENCES Serchak, Bridget (2004) TMA Resources and the Kellen Company Sign Mutual Marketing Agreement. http://www.tmaresources.com/print/newsroom_release_04122004_print.htm Discover Mutual Marketing. http://www.ecosway.com/ecosway/en_US/index.jsp (2000) Sumitomo Marine and Sumitomo Life Begin Mutual Sales Based on Extensive Alliance. http://www.ms-ins.com/english/news/sumitomo/2000/1102.html Monica Roseberry. Build Your Dream Practice with Mutual Marketing! http://www.biotone.com/Page.bok?file=art_art0203_1.html

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