Having worked as a sales and marketer during the past nine years for various multinational companies in the Fast Moving Consumer Goods (FMCG) industry has brought me face to face with both formal and informal businesses. These have different models of operation depending on the cluster under which they fall, which requires one to employ different approaches and strategies when dealing with them. Most of the challenges I encountered came about when dealing with informal establishments.
The biggest challenge I faced as a sales person when dealing with informal businesses was that they insisted on procuring products on a credit basis, as opposed to most formal businesses that often paid for their products upfront. In order to get the products to be initially listed on their inventory, most of them were of the view that introducing new products to their customers was a high risk, so they preferred not to tie down their capital on goods that have a slow offtake. This required a tactful approach when it came to roping them in. A strategy that worked best was that of starting them off with fewer units of the particular product and gradually increasing the quantities they ordered during subsequent visits.
Another factor that came into play when introducing a product was its pack size. Smaller pack sizes did much better than the bigger ones. This is due to the affordability of these to their customers. Given the lower levels of income of most of their clients, the bigger pack sizes were viewed to be out of their pockets’ reach, hence their preference for the smaller units as these had a higher offtake. This form of aspirational marketing has been proven to yield positive results as most customers eventually graduated to the bigger pack sizes when their income levels improved.
Kareem Williams clearly points out that creating some semblance of customer loyalty is one of the biggest challenges salespeople face. One way to do this is with value-added services. Customer loyalty programs, discounts, free service programs, and other features can help one create return customers. While dealing with informal businesses, I found this to be cardinal. Sales turnover was higher whenever there was a promotional campaign. These ranged from offering price discounts to providing free products for every purchase made.
Going back to the point about informal businesses being high risk clients when it comes to credit, some of the situations that arise include losses accrued by companies due to the closure of some of them. Seeing as most of these businesses operate without all the legally required documentation and improper record keeping, if any, they are under no obligation to remain open in case of government crackdowns. This temporary operational mind set can lead to companies accruing huge losses. A good example is that of the crackdown on illicit brew in Kenya that led to the closure of wines and spirits outlets. Many companies suffered losses due to this closure because most of these wines and spirits businesses served as distribution points for them, especially in the rural markets. To this end, companies need to consider having risk budgets to cushion such losses.
Informal Economy Analyst