MFC Spotlight Note

14
March 2005

Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

Based on a Case Study of MDF-Kamurj, Armenia
Michal Matul, Dorota Szubert, Gagik Vardanyan, Margarita Lalayan and Katarzyna Pawlak1

1.
Introduction

Being client-focused means that institutional structure, processes, and services are driven by clients needs, preferences, and capacities in a given context. There is growing evidence that higher levels of market-orientation, for which client-focus is an integral part, lead generally to higher levels of institutional performance (Woller 2002).2 It is needless to say, that being client-focused also maximizes benefits from institutional offerings to its clients. Market intelligence is one of the elements of being a client-focused organization. It is about collecting and using client and market information. Market intelligence goes beyond understanding client needs and is extended by considering exogenous market factors affecting clients needs and preferences now and in the future (i.e. competition, regulations, etc.). It is crucial for decision-making regarding strategic and operational plans. However, an organization that does client or market research from time to time cannot be automatically defined as client-focused. If market intelligence efforts are not institutionalized they will not add much value in the move towards becoming a client-focused organization as institutions and markets are of dynamic nature. This note presents a process and key factors of market intelligence institutionalization based on action research work undertaken jointly by the Microfinance Centre for CEE and the NIS (MFC) and its Armenian partner MDF-Kamurj during 2002-2004 within the SEEP Network Practitioner Learning Program funded by USAID.3 Additionally, the Imp-Act Programme that MFC coordinated in the region during 2001-2004
1

Michal Matul, Dorota Szubert are researchers and Katarzyna Pawlak is a research manager at the MFC. Gagik Vardanyan is

executive director and Margarita Lalayan is operations manager at MDF-Kamurj.

2

Of 48 studies testing the relationship between market orientation and institutional performance, 44 found a positive relationship

between market orientation and at least one measure of institutional performance as measured by profitability, sales, market share, or innovation success. The same studies also found positive relationships between market orientation and other organizational variables, such as customer retention, customer service, esprit de corps, trust in senior management, job satisfaction, and the intent to remain at an institution. (Woller 2002)
3

MDF-Kamurj www.mdf-kamurj.am provides micro-credit to low-income micro-entrepreneurs in urban and rural areas in

Armenia. For more information, see the beginning of section 2. MFC is the leading membership-based microfinance resource centre in the CEE and the NIS region. Its mission is to contribute to poverty reduction and the development of human potential by promoting a socially oriented and sustainable microfinance sector that provides adequate financial and non-financial services to a large number of poor families and microentrepreneurs. More information about MFC research work can be found at www.mfc.org.pl/research. The SEEP Network Practitioner Learning Program Putting Client Assessment to Work www.seepnetwork.org has been a two-year action-research project with the goal of developing and promoting client-assessment best practices for microfinance worldwide.

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Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

provided many useful insights regarding market intelligence institutionalization.4 Some of the frameworks developed under Imp-Act were adapted and tested with MDF-Kamurj.

Figure 1: Institutionalizing market intelligence process and factors

As outlined in figure 1, the institutionalization of market intelligence is a process (section 3) during which one should especially take into account the following factors (section 4): setting goals, getting staff buyin, integrating and communicating, establishing a learning culture, and ensuring continual improvement. All these factors were considered by partner microfinance institutions (MFIs) of utmost importance for successful institutionalization. The process and factors discussion is enriched through some background on MDF-Kamurj market intelligence (section 2) and the evaluation of its institutionalization efforts impact on MDF-Kamurj and its clients (section 5).

2. Background on MDFKamurj and its market intelligence

MDF-Kamurj, a locally registered Armenian non-profit foundation, began operations in September 2000 after a successful merger between Save the Children/US (SC) and CRS microfinance programs. With a staff of 72, MDF-Kamurj has seven branches with microfinance operations decentralized to branch offices in Yerevan (capital city), Shirak, Lori and Tavoush marzes (northern Armenia), and Syunik marz (southern Armenia). As of November 2004, MDF-Kamurj has disbursed more than 72,000 loans totaling $21.5 million; has achieved a repayment rate of 99.2%, operational sustainability of 140% and financial sustainability of 108%. MDF-Kamurj serves around 6,300 active clients, predominantly in urban areas (over 70% women), with over $1.67 million in loans outstanding.
4

Imp-Act Programme www.imp-act.org - has been a collaboration to develop cost-effective impact assessment

systems for microfinance practitioners, which brought together 29 MFIs in 20 countries, a team of academics from three UK universities, international NGOs, policy-makers and donors. MFC has acted as regional coordinator and technical assistance provider to 7 regional MFIs: Partner, Prizma, Bos-Vita (Bosnia and Herzegovina), Inicjatywa Mikro (Poland), DEMOS (Croatia), FORA (Russia), Integra Foundation (Slovakia). For more regional documentation see MFC Spotlight Notes 1-11 at www.mfc.org.pl/research.

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During the past two years within the PLP, MDF-Kamurj has undertaken many efforts to reform its market intelligence philosophy and systems. Figure 2 provides a summary of current market intelligence tools used by MDF-Kamurj.5

Figure 2: Market intelligence at MDF-Kamurj

Source of Market Intelligence General political, economic, social and technological situation Tool Senior staff anecdotal knowledge Competition matrix Competition Staff feedback People and frequency

The information is gathered during senior staff meetings, which are conducted on a monthly basis. Data is gathered from staff on an ad-hoc basis using a matrix summarizing competitors products. The analysis is conducted internally by operations and marketing managers. Anecdotal information is gathered regularly by the managers and shared during the staff meetings. It is treated as complementary source of information. Semi-structured phone interviews are conducted with drop outs once or twice a year. Branch managers sample ex-clients and

Exit monitoring

supervise data collection. Trained loan officers interview clients of other loan officers. An MIS manager and financial analyst are responsible for the analysis.

Satisfaction surveys

Face-to-face interviews were conducted twice during the past 2 years and are planned to be done by external interviewers every 2-3 years. The data analysis is outsourced. This is a basic source of information about loan use and repayment

Served segments (current clients)

Client monitoring visits

capacity. Non-structured interviews are conducted by loan officers and their supervisors, but also by an internal auditor and branch managers who randomly select clients to visit. The data is analyzed on a regular basis. Necessary information (socio-demographic and firmographic data)

Client database (MIS) mining

is incorporated into loan application and business verification forms. Data is entered into the MIS. An analysis is conducted by MIS or financial departments whenever it is needed. Anecdotal information is gathered regularly by managers and

Staff feedback

shared during staff meetings. It is treated as a complementary source of information.

Other segments (potential clients)

Ad-hoc market research

This encompasses a wide range of research techniques and tools. The information is gathered and analyzed by MDF-Kamurj staff whenever there is a need.6

MDF-Kamurj mainly uses its staff to gather and analyze the information. Outsourcing of research is used only when staff performance evaluation is at stake and the staff can bias the results. This approach has many benefits including staff buy-in, capacity building and learning culture enhancement. Staff are also

Most of the tools were introduced during the PLP. Before the MDF-Kamurj market intelligence was based mostly on

anecdotal staff knowledge and ad-hoc studies. A more detailed tool analysis is provided in annex.
6

The example of ad-hoc market research was the investigation of rural markets that is documented in MFC Spotlight

Note 13 Entering New Markets: How Can Market Research Inform Product Development, by the authors of this note. See www.mfc.org.pl.

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Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

more familiar with the results and better understand the rationale of decisions taken. However, the staff opportunity costs have to be managed very carefully.

3. Process -oriented institutionalization

The institutionalization of market intelligence should be process-oriented due to its complexity, changing organizational needs and the fact that one cannot implement all necessary elements and manage them at once. Figure 3 summarizes the generic steps of institutionalization of any new initiative.

Figure 3: Steps in institutionalization

Steps Details Institutional assessment (strategic review, current operational problems and challenges) Staff training and team creation Preparation Information needs analysis Capacity analysis Allocation of resources Action planning, including risk analysis Development Developing concepts of tools that match the needs and capacities Testing and revision of the tools Setting up all necessary processes Implementation Integration into existing processes and structure Change management Use Data collection, analysis and reporting Use of results into decision-making processes Evaluation of the market intelligence tools in terms of responsiveness to
Revision

needs and costs Preparation to rene market intelligence tools

The institutionalization process is iterative. It never ends. Upon completion of one process cycle the next one starts. Following the process in a systematic way is very important because omitting any of the stages in the process usually results in problems in next phases and can negatively affect institutional performance and client well-being. Another important feature of the institutionalization process is that it must be done in a participatory way. Every staff member is a potential source and user of the information. This varies depending on the level and specific job responsibility. MDF-Kamurj found it very important to establish task forces composed of staff from different organizational levels and departments (figure 4).7 That way, the work of the task forces on different tools benefited from a wide variety of perspectives and competences. Involving various stakeholders helps to keep momentum and builds staff ownership of the new tools. It also facilitates change management in later stages. Lastly, when some people participate in several task forces it enhances communication across the groups. However, the right balance needs to be kept between participation and distraction from daily duties.

Staff commitment to the process is discussed in more detail in section 4.2.

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Each task force needs to have a champion who coordinates group activities, prepares necessary materials and keeps the momentum. All the market intelligence institutionalization efforts need to be coordinated by a marketing unit.

Figure 4: MDF-Kamurj market intelligence task forces

Task force Position executive director operations manager finance manager MIS manager branch managers senior loan officers rural coordinator external consultant(s) Client Monitoring System Team -+ (champion) + + ---+ Product Development Team + + + + 3 people 2 people + (champion) + Market Research Team + + (champion) --2 people 1 person + +

Planning for market intelligence systems development should be realistic in terms of time and resources. For example, MDF-Kamurj underestimated the need to provide incentives to loan officers to encourage their market intelligence-related activities (exit monitoring and market research in rural areas). The new tasks were just added to their daily work. This resulted in lowering staff satisfaction among the field staff. In contrast, middle and senior managers treated it as a promotion and opportunity for personal development. However, it distracted them from their duties and the opportunity costs seem to be higher than expected.

4. Key institutionalization factors

At different stages of the process different factors are important for successful institutionalization of market intelligence. This section presents five factors that, according to partner MFIs, seem to contribute the most to market intelligence institutionalization: setting goals (4.1) market intelligence will be cost-effective only if it responds to the critical information needs of an organization and is adapted to the current level of resources and capacities. This is why, during the preparatory phase, it is crucial that all key information users gather together to analyze the current strategic priorities and the information gaps related to them; getting staff buy-in (4.2) institutionalization cannot be done without buy-in and commitment of staff at various organizational levels. The buy-in efforts should start in the preparatory stage and continue through the entire process; integrating and communicating (4.3) integration into existing processes and structure in the implementation stage as well as use of effective communication channels throughout the entire process are key to success in institutionalizing market intelligence; establishing learning culture (4.4) setting learning as an organizational value stimulates effective use of the information and facilitates an arduous process of change management, and ensuring constant improvement (4.5) environment and organizations change very fast to make sure that market intelligence systems successfully inform critical decisions there is a need to improve the systems on a regular basis.

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Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

4.1. Goals responsive to needs and adapted to capacities

Clear and realistic goals for information generation aligned with organizational needs and capacities are a key success factor in market intelligence institutionalization. The key aspect in setting goals is to decide which information is the most useful for the organization at the moment taking into account the long-term perspective. No one has capacities to track all the information. The information needs should be driven by current challenges and opportunities related to operationalization of current strategy. Setting goals for market intelligence generation consists of two main stages: mapping of the information needs and appraising institutional capacities.

4.1.1. Mapping of information needs

Mapping of information needs is about analyzing the current availability of different types of information and their usefulness for the organization. The example of output from MDF-Kamurj information mapping is presented in figure 5.

Figure 5: Information mapping at MDF-Kamurj

Type of information Availability8 Usefulness9 Comments Lots of information is gathered but it is not structured and does not reach all interested users. Target indicators allowing you to identify your target segments average average As no strict targeting procedures are in place, the target information is not perceived as very useful at the moment. On the other hand, it is starting to become more important nowadays as more detailed segmentation is needed on a saturated market. Impact indicators allowing you to verify your social performance Delinquency very available very useful average useful The information is gathered but not regularly consolidated and disseminated internally. It tells you if you are fullling your mission and have potential to inform improvements in organizational structure and services. The current level shall be maintained as it is one of the pillars of successful micro credit activities. Regular studies, triangulated with anecdotal staff Client satisfaction knowledge, were thoroughly consolidated and available useful circulated internally. It helps to monitor changes in market preferences and facilitates ongoing product adaptations. The exit monitoring system provides lots of interesting insights about magnitude and reasons for dropouts. However, there is a feeling that the system should be Client exit available average revised to improve objectiveness of the information. The information is not so useful as one could expect because there are no guidelines to turn the results into client retention strategies and actions.

The availability refers to high-quality, complete information of given type. This means that the user have information that

is ready to act on (collected, analyzed, reported). Usually, it means that the user has both figures to describe the issue and understanding of it.
9

The usefulness relates to current challenges and opportunities regarding operationalization of strategy and how a given type

of market intelligence can support it.

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Some information is gathered but not in a very Client loyalty not so available systematic way. It is rarely analyzed and used. very useful Knowledge on client loyalty is now more important than ever to ensure organizational growth on a saturated market. Demand in current markets for other products Demand in other markets for current products Demand in other markets for other products not so available not available average useful Some understanding is available but data on market segmentation and size is lacking to take good decisions. Introducing new products to current clients is perceived to be a strategic quick win. It is needed at the moment as it helps to design very useful expansion strategies and build competitive edge in non saturated markets. not useful This is beyond current strategy. Only some anecdotal information is available about competitor services and plans. The information on the Competition average very useful use of other services by MDF-Kamurj clients is not very reliable. This becomes a high priority in a saturated market.

The information needs can be grouped into four action categories as in the map presented in figure 6. DEVELOP these are needs to be satised in a priority mode. This information is not available to respective users and is considered to be very important in the short and medium-term to realize institutional goals. CONSOLIDATE this information is currently collected and used in a satisfactory way. DO NOT TOUCH NOW! even if not available this information is perceived to be not very useful. It does not make sense to invest at

Figure 6: Map for information needs

USEFULNESS

ve De

p lo
4

Co ns ol id a

te
AVAILABILITY

4 2

no no t t w ou ! ch

er id ing ns on Co nd a ab

this stage in its development as it will not yield any signicant returns in the near future. CONSIDER ABANDONING this information is available to users but at the same time is perceived as not so useful. One might consider abandoning the collection of this information for the sake of efciency if a thorough analysis shows that it will not be useful in the future. As a result of information mapping, an organization obtains guidelines regarding which market intelligence tools should be developed. The priorities for action are those needs that are not available but promise to be very useful in the short and medium term. Usually, these are needs grouped in the development or consolidation areas. These market intelligence quick wins promise to improve institutional performance to the highest extent. The other elements with some potential to develop should be put on the waiting lists. They might come up as priorities during the next needs analysis while internal or external conditions change.

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Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

Based on MDF-Kamurjs experience it is recommended to do the information mapping in the form of a workshop gathering staff from various levels and departments. This builds staff buy-in and ensures a variety of perspectives.10 There are three important things that have to be done prior to the information mapping workshop: Basic institutional assessment to give all participants some background about the organizational strategy and development. This makes the staff think about what is crucial for the organization as compared to personal needs. Consolidation of all market intelligence data currently available to give all participants an idea what market information is collected now and how it is used. This makes it possible for all participants to evaluate the availability of the information at an organizational level. Usually they are not users of all the information so they cannot evaluate it from their work experience. Training in market intelligence tools and use to give all participants necessary knowledge how various types of market intelligence might be useful for an MFI and provide basic information on tools to generate market intelligence. This helps staff to analyze the usefulness of different market intelligence types by linking them to the organizational strategic and operational needs. This activity is important as sometimes staff underestimates or overestimates the need for the given market intelligence type due to their ignorance. The scope of the training depends on current knowledge and the skills of the staff involved in information mapping.11

Figure 7: Information mapping at MDF-Kamurj

usefulness
Demand in other markets f or other products Satisf action Competition Exit Loy alty Demand in current markets f or other products 4 Delinquency

Demand in current markets f or current products

Demand in other markets f or current products

availability

2 Impact

Target

USEFULNESS scale: 1- not useful; 2 not so useful; 3 potentially useful; 4 useful; 5 extremely useful AVAILABILITY scale: 1- not available at all; 2 not so available; 3 some available; 4 available; 5- extremely available

10

At MDF-Kamurj the following people were present at the meeting: executive director, all senior managers (departments),

branch managers, and at least one loan officer from each branch. The workshop was externally facilitated, which proved to be a good solution as voices of different staff members were balanced. Additionally, the group was divided into two teams that shared the results and reached the consensus. This made the exercise more enjoyable for participants.
11

MDF-Kamurj staff was exposed to 3-day MFC training Introduction to Client Assessment for MFIs, which is based on AIMS

and MicroSave toolkits.

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MFC Spotlight Note #14

The information mapping workshop should be repeated periodically as the information needs are subject to change when the institutions grow and market conditions change. Figure 7 shows how the information needs of MDF-Kamurj have changed during a two-year period.12

4.1.2. Appraising institutional capacities

Based on information mapping, the preliminary list of market intelligence enhancements is ready. The internal capacities analysis helps to analyze the short list and further narrow it based on current institutional capacities and level of resources. This results in few but high-quality solutions.

The following main items must be considered in an internal capacity appraisal: Financial resources money to cover direct costs for development and maintenance. Human resources and qualities availability of staff with sufcient knowledge and skills to undertake the demanded tasks. Physical and technological resources any new equipment and technological solutions needed, i.e. computers, MIS, cars, IT solutions, etc. Internal or external resources should be considered in order to develop and maintain market intelligence tools. This needs a general institutional analysis in order to map existing and potential resources. No matter the level of resources, one of the golden rules of institutionalization is to start small. This reduces the risk of overburdening your staff and losing their commitment to introduced changes.

4.2. Buy-in among staff and other stakeholders

To develop tools, collect high-quality data and make use of it, all the key people have to be on board, otherwise market intelligence will not be generated and used effectively. If one manages to build the buy-in early and to maintain it during the process, half of the success is already achieved. The first question one needs to ask is: achieving buy-in among whom? It is costly to secure the interest of every stakeholder and staff member. Evidently, the senior management commitment is crucial for successful institutionalization. It not only motivates other people to work hard but also ensures effective planning as managers have decision power to allocate resources. The buy-in at the branch and field level is also very important as it improves significantly the quality of the data collected, lowers the risk of decreased efficiency when additional tasks are added and makes it easier to manage necessary changes based on market intelligence. Some market intelligence developments will also seek guidance of the board of directors and external stakeholders. In the case of MDF-Kamurj it occurred that it was much more difficult to get buy-in among field staff than among managers. Managers treated additional activities as a new challenge and a way of promotion. Additionally, they were able to see the bigger institutional picture and how market intelligence fits in it. Among the field staff (and especially among those not participating in the task forces and general meetings) some of the tools were considered as useless and unnecessary burdens. The most important

12

The circles show the original position of the given type of information in 2002; the arrows show where it has been placed

in 2004. For example, through extensive market research in rural market MDF-Kamurj satisfied its previous information gap. The rural market change category for current market, therefore demand for other products in other markets became less important. Additionally, when trying to satisfy the previously identified need for better exit information, MDF-Kamurj encountered significant problems with reliability and interpretation of exit monitoring results. The usefulness of this source is now evaluated much lower, even if it is available now. This information is planned to be replaced by focusing more on investigating client loyalty.

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Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

lesson learned is that in order to get the buy-in of field staff they need to see practical application of market intelligence at their level, and not only at the institutional level.13 Figure 8 outlines some of the strategies one can consider in building and maintaining buy-in among staff and other stakeholders in the process of institutionalizing market intelligence.

Figure 8: Strategies to build and maintain staff buy-in

Giving staff the necessary background on institutional environment and current Common goals strategy in order to ensure that all staff members understand the bigger picture and share the main goal. Inter-disciplinary task forces. Team work Participatory meetings. Staff training to provide people with enough conceptual background to set the goals and work towards their achievement. Motivating through nancial and non-nancial incentives for those directly involved. Differentiating incentives for staff at different levels.14 Incentives Emphasizing non-nancial incentive participation in the task-force as promotion, training to build personal capacity, participation in decision making, etc. Explaining to staff how participation in market intelligence activities affects their compensation and how the market intelligence can facilitate their work. Communication on a regular basis. Communication Start simple and show fast the rst (practical) results. Being open about successes and lessons learned. Manage changes carefully.

Integration into existing processes and structure as well as use of effective communication channels are the key to success in institutionalizing market intelligence. It is because generation and usage of the market information is a multi-step process in which different staff members and departments are involved.

4.3. Integration and communication making it work

Information flow within an organization needs involvement of all the departments. As it is outlined in figure 9, depending on the tools used each department can contribute to data collection. For example, the operations department can facilitate data collection using loan officers; the marketing department can monitor changes on the market; finance tracks profitability of different segments, etc. All the departments can take an active part in designing market intelligence tools as they all have different information needs. All departments can also dispose of anecdotal information about clients and the market that may be useful in the consolidation and analysis phases. It is usually a task for the marketing and/or information systems departments to consolidate the data from different market intelligence tools, analyze it and create a report. As each department has its own information needs it can benefit from market intelligence in its own way and can further use it in decision-making, delegation, communication and implementation.

13

For example, the client exit data they collect does not help them much in their daily work. It would help if there was a

manual explaining how to act on consolidated data in order to improve retention rates of their personal portfolios.
14

At MDF-Kamurj field staff seemed more sensitive to financial incentives, compared to non-financial incentives for

management.

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MFC Spotlight Note #14

Figure 9: Information flow and involvement of different departments

Step Information collection Information consolidation, analysis and reporting Decision-making, delegation, communication and implementation + + + + + + + + +
Operations Marketing Human resources Internal audit Finance Infor. systems Administration

To ensure cost-effectiveness of market intelligence it is necessary to map existing processes within and across departments and evaluate how market intelligence can be integrated with them. For example, at MDF-Kamurj an internal auditor goes to visit randomly selected clients twice a week. MDF-Kamurj uses this opportunity to formalize collection of anecdotal data about client satisfaction. Or, the fact that the operations manager meets with branch managers once a month is used to discuss recent market intelligence reports and facilitate decision-making and delegation at the branch level. The role of the human resource department in integrating new tasks is crucial. Besides incentive schemes discussed in the previous section, the human resource department should consider: Recruitment looking for employees whose skills match requirements of market intelligence generation and use. Positions and responsibilities making sure that market intelligence tasks are included in job descriptions of current employees. If there is a need for new positions, specications need to be drafted and recruitment process should be launched. Outsourcing deciding which tasks should be done internally and which of them are better to outsource. Training and staff development making sure that new staff gets initial training on market intelligence and that current employees have a possibility to upgrade their capacities when necessary. The feedback loop methodology15 helps to analyze strengths and weaknesses of current market intelligence flow. The analysis for MDF-Kamurj is presented in figure 10. Figure 10: Strengths and weaknesses of market intelligence flows at MDF-Kamurj.
Collection, consolidation, analysis and reporting Well prioritized goals for data collection that Strengths reect good organization needs Different positions involved in the process and good contact with clients Not fully analyzed and too many people involved in the analysis concerning one issue Weaknesses Not enough statistical skills Not formalized reports customized to needs of different users Deadlines for reporting not kept
15

Decision making, delegation, communication, implementation Good delegation to branches Good electronic communication Management meetings help in communication Exchange of ideas across branches Need improvement in decision making (what level, what decision) Final decision takes too long Some head ofce discussions do not involve branches as much as they could Inertia during implementation

The feedback loop methodology was developed by MicroSave within Imp-Act programme. For more information see

www.microsave.org and www.imp-act.org.

11

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Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

Having observed various MFIs it is evident that the biggest bottleneck in the market intelligence loop is at the consolidation, analysis and reporting phases. The qualitative and quantitative information from various sources need to be consolidated; analyzed with regard to specific organizational needs; triangulated and finally reported in a customized manner to different information users. To correctly connect the dots and present it to others in a user-friendly format, specific analytical skills are needed. It does not make sense to start any market intelligence generation when there is not a highly skilled person available to sift the right information from the raw data. Apart from the integration good internal and external communication is a necessary condition supporting market intelligence institutionalization. The following aspects need to be clarified: What are the information needs of various departments, clients and other external stakeholders? What are the most effective channels to communicate the information to feed market-intelligence generation and to benet from market intelligence reports? What communication blockages can be expected?

Figure 11: Communication map for market intelligence at MDF-Kamurj

ED

Side processes related to Client Assessment

OM FD MIS MD CM CM DEO LP

accountant

IA IA

Lawyer?

cashier

Core processes related to Client Assessment

clients

Blockagesin communication

LP loan promoter, CM credit manager, IA internal auditor, MD marketing manager, E0 data entry officer, MIS MIS manager, OM operations manager, FD finance department, ED executive director.

MDF-Kamurj found during a feedback loop analysis workshop that most of the departments have the same information needs. Notably, all of them want to know everything (figure 11). Evidently this makes reporting easier as one standardized report can be sent to all departments. However, it is hard to imagine that departments will have enough time and motivation to weed out the information that is needed to improve their performance. This is why MDF-Kamurj decided to define in more detail the needs of different departments and link them with general organizational needs. During the workshop MDF-Kamurj staff mapped communication processes and identified main inefficiencies and blockages. They resulted mainly from the following factors: Lack of precise communication of information needs. Subjective information that always has to be triangulated.

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12

MFC Spotlight Note #14

Delayed written reports Too general information in some written reports that needs to be completed by more discussions. One big lesson learned by MDF-Kamurj was that more formal communication channels needed to be used internally. When the institution grows it is hard to rely on oral communication only. On the other hand, a good balance has to be find to avoid too much bureaucracy. Another important issue identified at MDF-Kamurj was a need for decentralization of decision-making to make the best use of collected information. This involved empowering middle management to take action at the branch level. Each branch usually operates in slightly different environment and its staff possess the local knowledge crucial to make an effective use of the context-specific information. The decentralized approach combined with cross-branch sharing experience should yield the most successful solutions based on market intelligence. Last but not least, an important part of communication is the information flow to clients. MDF-Kamurj realized that most of its staff members were 100% sure that clients know everything about offerings and respective changes in them. It has occurred that it is not completely true, and information needs of various client groups (current, exits, potential) were not fully satisfied. To that end, the big issue is not only how to design a more effective marketing campaign, but also how to persuade staff that it is needed.

4.4. Learning culture ensuring effective use

Having established a learning culture inside an organization means that there is an institutionalized set of values promoting learning at all organizational levels. Being a learning organization is a necessary condition in order to institutionalize market intelligence at all the stages but especially in facilitating effective use of the information.

The main question is how the learning processes can be stimulated. Figure 12 outlines some basic tips to stimulate learning processes based on the example of MDF-Kamurj and other PLP partners.

Figure 12: Tips for establishing learning culture. Establishing effective channels of articulation, communication, transfer and reinforcement of organizational values.
Strengthening of learning as organizational value

Internalizing the organizational mission and understanding of current strategy. Promoting internal transparency in performance evaluation. Aligning all human resource systems (recruitment, induction, training, motivation, performance evaluation, promotion) with the values and put stress on learning. Rewarding innovation. Creating staff development procedures. Organizing useful training and workshops to sit back and reect. Learning from both positive and negative experience. Showing examples of positive impacts of learning. Allowing staff to reect on the important issues, generalize and apply them in work Promoting regularity in market intelligence consolidation and use.

Upgrading skills

Learning styles and processes

13

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Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

Allowing staff to commit errors, talk freely about them and prepare a plan to improve on their own. Being open to suggestions. Decentralizing decision-making and delegating responsibilities. Facilitating ongoing access to necessary resources by all interested parties (e.g. might be in the form of Intranet).
Daily work

Strengthening senior staff commitment to their own and their subordinates learning. Emphasising necessity to learn as compared to obligation to learn. Showing the value of learning for daily work.16 Promoting initiatives to take some (at least small) actions based on market intelligence and facilitate learning that occurs in the practice. Preparing how to manuals providing basic tips on how market intelligence can be used by different staff members.

Building a learning culture is a long process and small incremental changes matter. The big issue is how to change the existing culture and what are the underlying risks and long-term costs of it. That is why, before doing a revolution it is wise to identify potential risks and come up with a strategy to mitigate them. One cannot forget that learning requires resources. Close monitoring is needed about what is the cost-benefit ratio of the learning in the current form. It might be that not everybody should be learning and few agents of change can be sufficient. As a rule of thumb one needs to analyze the state of the current fundamentals of the learning culture and balance standardization and innovation. No matter what the costs are, it is hard to challenge the fact that learning culture elements are necessary for market intelligence institutionalization.

4.5. Constant improvement to adapt to market evolution

Markets are in constant evolution: clients grow and their needs are more sophisticated, their preferences change due to better education, new services, fashions, competition does not sleep, the macro situation is never as stable as we would want it to be. Hopefully, our organization grows as well and our strategic goals are changing. All these factors influence needs and capacities for market intelligence. If an organization fails to adapt the market intelligence systems to a changing environment and evolution of the organization it will affect negatively its institutional performance. The only way to ensure constant improvement of the market intelligence systems is to conduct a regular audit of them. The simplest way to check if the current market intelligence systems meet an organizations evolving needs is to repeat regularly information-needs mapping presented in section 4.1. Figure 6 proves that in the case of MDF-Kamurj repeated information mapping was necessary. Additionally, in order to verify effectiveness of current market intelligence one would need to evaluate all the institutionalization factors presented in previous sections: buy-in, integration and communication (see figures 10 and 11) and learning culture following general questions and methods presented in figure 13.

16

At MDF-Kamurj loan officers do not see value of learning from exits as the data is rarely consolidated for them and weeds

out the info that can be useful for them in daily work for retention management.

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MFC Spotlight Note #14

Figure 13: Market intelligence institutionalization audit

Institutionalization factor Sample audit questions Do you think your present post gives you an opportunity to improve and Staff buy-in expand your qualications and abilities? How do you feel your work contributes to the realization of the organizations mission? How do you evaluate the effectiveness of the ow of information from the management to the employees? Integration and communication To what extent does market intelligence facilitate and to what extent does it complicate your work? What are main obstacles in communication? How are new ideas and innovations Learning culture generated? What is your contribution to generating new ideas? In-depth interviews with randomly selected staff Human resources, attitude, satisfaction and motivation survey Information mapping Feedback loop exercise Human resources, attitude, satisfaction and motivation survey In-depth interviews with randomly selected staff Methods In-depth interviews with randomly selected staff involved in market intelligence generation and use Human resources, attitude, satisfaction and motivation survey

Last but not least, improvement of market intelligence is a change that should be managed with caution. As with any change, a market intelligence champion will need to carefully handle staff resistance to it. This requires a lot of preparatory work, including identifying all potential risks (staff concerns) and develop strategies to cope with them. One should not forget that change is a gradual and incremental process small things matter and the effects are not always immediately visible. Moreover, phasing out the changes is very important as too many changes introduced at once will not benefit the organization.

5. Evaluation of market -intelligence institutionalization impact on MDF-Kamurj and its clients

5.1. Organizational development and growth

This section attempts to evaluate market-intelligence institutionalization impact on the institution and its clients using the example of MDF-Kamurj in the following areas17: Organizational development and growth Changes in product offerings Client satisfaction and loyalty Staff satisfaction

New market intelligence helped MDF-Kamurj to successfully expand to new market segments: both women and men in rural areas and men in urban areas. The outstanding loan portfolio and the number of active borrowers have increased (figure 14). The desertion rate declined, which is a big success considering the increasing saturation of the market. On the other hand, there are relatively more dropouts among poorer clients18. This might be an alarming sign for the missions fulfillment.

17

Sources of information: market intelligence audit including in-depth interviews with the randomly chosen staff, human

resources survey and clients satisfaction and loyalty survey.

18

Source: exit monitoring.

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Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

Figure 14: Portfolio growth, quality and performance indicators for MDF-Kamurj (2000-2004)19
Indicator: Value of outstanding loan portfolio (in USD) Number of active borrowers Women borrowers (%) Rural borrowers (%) Desertion rate20 Portfolio at Risk > 30 days Ration (%) Operational Self-Sufciency Dec 2000 468,925 4,229 100% --0.59% 85.93% Dec 2001 1,141,041 5,895 100% -44% 0.73% 156.56% Dec 2002 1,003,935 5,559 100% -66% 2.75% 161.06% Dec 2003 1,411,258 5,691 81% -54% 1.11% 138.69% Dec 2004 2,074,825 6,536 69% 30% 43% 1.53% 150.00%

Lastly, a new strategy aimed at current product expansion and further product diversification was developed based on market intelligence. Responding to the needs of clients, MDF-Kamurj decided to focus not only on enterprise lending, but on the implementation of consumer loans for urban clients. Desirably, the consumer loans will enrich risk management strategies used by the urban poor families. The new strategy also encompasses the entering of rural areas with business development services in order to enhance rural supply chains.

5.2. Changes in product offerings

Changes introduced in product offerings are the easiest outcomes to observe.21 New market intelligence prompted MDF-Kamurj to introduce the following changes in its urban loan offerings: Accepting men as group members; Lowering interest rates; Eliminating the loan option when the total interest is paid upfront; Implementing monthly repayment schedule; Introducing loan terms of 3 and 9 months; Redesigning the scheme of incentives for repeat clients (incentives introduced after the 5th and 9th cycle, previously after the 7th cycle only); Increasing loan size. A satisfaction and loyalty survey was conducted to evaluate clients opinions on the changes introduced. The decrease of interest rates and the presence of men in the group were the changes evaluated most highly as many as 74% of clients think they were definitely good.22 However, effective change means that clients who are aware of it are more satisfied with the aspect changed than those who were not aware23. Figure 15 provides evidence that only the change of incentives for repeat borrowers and repayment frequency enhanced satisfaction with the given aspects while the change of interest rate and repayment period brought no direct effect on the client satisfaction. Additionally, the awareness of the changes positively influenced loyalty indicators (willingness to recommend and intent to repurchase). Moreover, the change of interest rate made a positive impact on the motivation of field staff, who considered a decreasing interest rate as the most needed change.24

19 20 21 22 23

Source: MFC Mapping study 2005 and Mixmarket data (http://www.mixmarket.org) Calculated according to ACCION formula However, these outcomes not necessarily directly lead to positive impacts being institutional and client benefits. Clients aware of changes were asked to rate their satisfaction with them. In the charts presented in this chapter statistically significant statistically significant differences between these two groups

are marked with the asterisk.

24

To learn more about the satisfaction and loyalty results see the report Client Satisfaction and Loyalty. Quantitative Research

Methodology and Findings available at www.mfc.org.pl.

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MFC Spotlight Note #14

Figure 15: Effectiveness of changes introduced to product offerings at MDF-Kamurj.

definitely good rather good neither good nor bad rather bad definitely bad

definitely good rather good neither good nor bad rather bad definitely bad

definitely good rather good neither good nor bad rather bad definitely bad

definitely good rather good neither good nor bad rather bad definitely bad

5.3. Client satisfaction and loyalty

A comparison of the overall satisfaction and loyalty level of MDF-Kamurj clients during the period when MDF-Kamurj gained new market intelligence (2002-2004) seems to confirm that the client satisfaction level remained unchanged, while the secondary loyalty level increased (figure 16). Having increased loyalty, the institution may expect improved retention rates, thus lowering significantly the costs of serving clients.25 Additionally, not only product changes contributed to an increase of loyalty. According to anecdotal knowledge of MDF-Kamurj staff, market intelligence efforts added value to the institutions image. Clients began to perceive the institution as client-oriented and needs-responsive so brand emotional values increased.

Figure 16: Comparison of satisfaction and intent to repurchase levels.

100%

OVERALL SATISFACTION
100%
definitely good

INTENT TO REPURCHASE
5%

80%

45%

har d to s ay
80%
38%

48%
rather good

55%

60%

60%
neither bad nor good

definitely yes

r ather yes
40%
47%

40%

45%
20%

41%

rather bad

27%

r ather no

20%
definitely bad
10%
11%
1%

8%
8%

8%
5%

definitely no

0%

1%
2002

1%
2004

0%

2002

2004

25

To learn more how to analyze the loyalty and satisfaction indicators refer to Pawlak K, Szubert D. (2003): Counting (On)

Your Prospective Clients: Guiding Principles in Measuring Microfinance Client Satisfaction and Loyalty, MFC Spotlight Note 8.

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Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

5.4. Staff commitment and satisfaction

After institutionalization of the new market intelligence systems staff believe strongly that MDFKamurj better meets clients needs. Currently 81% of the staff thinks that MDF-Kamurj satisfies their clients needs (compared to 53% at the beginning of the project). Moreover, MDF-Kamurj staff became more sensitive to their clients needs. First of all, more staff than in the beginning of the project believe that responding to clients needs is one of MDF-Kamurjs main goals (42% in 2002, 62% in 2004). This is probably due to the fact that the staff is more aware now how clients satisfaction and loyalty impacts MDF-Kamurjs performance. Regarding staff satisfaction level, the institutionalization of market intelligence brought a compound impact and its analysis enabled management to identify areas for further adaptation of the system (figure 17). In general, people participating in the project are moral loyal towards MDF-Kamurj and their satisfaction level is higher (also with their relationships with managers).26 On the other hand, the staff feels overworked and there is resistance to taking on new responsibilities. This weakness may be partially related to the fact that staff generally poorly evaluates opportunities to improve qualifications. Managers are the only exception and are more satisfied as a result. This highlights the fact that a training curriculum for middle managers and field staff should be better adapted. Additionally, a lack of eagerness to take on new responsibilities may be also related to the fact that employees became more critical of managers skills in motivating the staff to work efficiently and their openness to innovations. Figure 17: Detailed staff satisfaction.

2002
4

2004

3,00 2,73

3,36 3,16

2,952,89

3,38 3,17

3,00 2,97

3,083,14

3,03 2,86

2,51
2,22
Adjustment threshold=3,03 (2002 and 2004)

Relations with:

the range of reponsibility

opportunity to improve queslifications

direct supervisor

the management

co-workers

other branches

clients

conditions of work

That said, one could not forget that change-management processes are usually painful for all staff. The awareness is built gradually and the resistance should be handled carefully. This is where MDFKamurj is now and the real evaluation of changes on staff satisfaction will be evident in a longer perspective.

6. Conclusions

The institutionalization of market intelligence is an iterative process. It will be cost-effective only if it responds to the critical information needs of an organization and is adapted to the current level of resources and capacities. That is why before rushing into doing any market research or designing client monitoring systems, it is crucial that all key information users gather together to analyze what the current strategic priorities are and the information gaps related to them. The basic rule is to start

26

On the one hand, it may be result of pre-screening (i.e. more satisfied and loyal employees wanted to take part in the

project).

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MFC Spotlight Note #14

small and improve your market intelligence systems along the way. The institutionalization cannot be done without buy-in and commitment of staff at various organizational levels. This is the most important success factor throughout the institutionalization process. There is growing evidence that setting learning as an organizational value stimulates effective use of the information and facilitates an arduous process of change management. And it never ends environment and organizations change very fast to make sure that your market intelligence successfully informs your decisions you need to improve your systems on a regular basis. The institutionalization of market intelligence is an investment. The upfront costs are not negligible because it involves changes in organizational culture, investment in new competencies and streamlining some of the processes. However, the long-term benefits seem to outweigh the investment costs significantly. Market intelligence is a must to realize your goals, survive the competition and ensure long-term organizational existence. The fact that it is institutionalized helps managers in a way that they get timely information to back their decisions and do not have to check all the time if the information source is reliable or not. It also ensures that clients get the best services you can afford to provide at the moment.

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Institutionalizing Market Intelligence: An Important Step to Becoming a Client-Focused MFI

ANNEX Details on market intelligence tools used by MDF-Kamurj

Exit monitoring

Satisfaction survey
To understand what

Client monitoring visits

To have information about loan use and repayment capacity and to have fresh feedback from active clients about the products and services. Information for loan staff and management.

Client data base (MIS) mining

To understand dropout reasons, have insights for Why and for whom? product improvement and points of competitors. This is the information that supports managerial decisions.

clients value most, what are satisfaction/ dissatisfaction factors, Useful for managers in decision taking and for other staff to see the broader picture of the clientele.

To have sociodemographic and rmographic information about clients. Information is used by the management staff.

diversication, identify strong what is the loyalty level.

Information incorporated Semi-structured How? questionnaire-based phone interview Face-to-face structured interview, relatively big sample (around 300 interviews). in loan application/ Unstructured interviews, working forms and checklists. business verication forms completed during group meetings and client visits, passport data. Branch managers sample clients and disseminate them among interviewers. By whom? Interviews are conducted by loan ofcers. by a specialist who underwent SPSS training. How often? Once or twice a year. First-hand, objective information. Cost-effective (little time is spent as the interview is conducted by phone). A good opportunity for ex-clients. Strengths Conducted some time after dropping out thus people have some opportunity to reect on the reasons for leaving MDF Kamurj and to identify the real one. Conducted by loan ofcer not serving clients thus a respondent is not pushed to get desirable information. It has to be combined with qualitative results to obtain full understanding. When it is done by phone it is Weaknesses hard to identify respondents. It may inuence the representativeness of results. There is a high risk that loan ofcers perceptions bias the information collected. It has to be completed with other sources of information. As it is done by external interviewers, it is hard for them to nd the client so it is time-consuming. It is not very cheap, because a lot of people are involved (admin, interviewers, loan ofcers). High costs of managers eld visits. You cannot get any understanding through it thus it is impossible to take any managerial decisions based on that. It helps to identify information needs. Representative results or deny the previous assumptions. More objective information as it is conducted by external interviewers. relationship continuation with that either conrm At the same time you obtain different types of information. Daily contact with a client for credit managers and eld staff. First-hand information. Opportunity to stay in touch with clients for people not involved in the eldwork. Cost-effective information (its gathering and analysis do not take much time). Once every two to three years Ongoing Ongoing External interviewers conduct interviews. Training of interviewers should be conducted to Kamurj services. Loan promoters, their supervisors, auditor, operations manager conduct these visits Information is gathered - by loan ofcers and analyzed by managers.

Analysis should be conducted explain in detail MDF-

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