XelaTeco conundrum: How do you compete with free?

A few weeks ago, I wrote about XelaTeco potentially piloting a customer credit program to allow the women’s group at San Alfonso to buy stoves. After discovering that the women couldn’t pay full-price up front and that there weren’t microfinance options that would let them buy XT’s stoves at a satisfactory interest rate, XT offered them a deal. Buy in bulk (8-10), pay 50% up front and pay the other 50% over time, get the stoves after the final payment. A bit like layaway at K-Mart.

Here are excerpts from Katie Bliss’ report on negotiations.

The women liked the idea of the credit system to be managed from within the community and are going to go off and elect their encargada… They are also going to speak with XT today when they finally have an absolute number of women and stove order (although at this stage it all depends on what we can offer them in terms of the payment system).

Unfortunately the women felt that they could not afford to pay 50% of the price upfront. There were various concerns voiced about this. Namely that it would take time to save up the money, in the meantime they would not be making the savings from the stove. For example one woman stood up and said “What you need to understand is that our husbands will not pay for something that they do not have, if we do not have the stove they will not let us pay for it, we live in a machismo society”. Another woman stood up and said, “We are poor, we cannot pay so much at once, this is a lot of money for us”.

Fair enough. It means XT has to go back to the drawing board and find that sweet spot in the deal that would allow the customers to pay and them not to go broke in the meantime. The lay-away part probably won’t work; personally I’m not a big fan that set-up either.

This next comment/complaint that arose from the women is a TOUGH one to deal with and an issue that comes up frequently for them.

“Other projects donate stoves. I don’t understand why we have to pay. We are poor people…. “

So in the domain of stoves, XelaTeco is competing with free. Eeek!

Katie continues:

The community have known form the start that we are only selling the stoves, and have heard the explanation of XT from us and the girls a number of times. The girls and I explained again, that it is a business, and you buy your technology the same as you buy anything else…

Ultimately those explanations are just not going to cut it as they don’t illustrate why XT’s customers should go through all the trouble of buying from them rather than just waiting for some NGO to come around. The current explanation does not include the benefits to the customer. Rather it revolves around the limitations of XT which are not the communities concern. Sigh.

Ironically in this situation, we’re in a similar position as the music industry when they complain about piracy. A huge chunk of their customer base has grown used to the idea that their main product isn’t something that you pay for anymore. Some critics of the RIAA (Recording Industry Artist Association) feel that the body should spend LESS time suing customers and developing onerous digital rights management (DRM) strategies and MORE time figuring out how to compete with free. This ultimately means figuring out a value add for customers.

So what could some of XT’s value adds be. Here are a few that we’ve come up with:

  • Future customer discounts. XT have products that those stove giving NGOs don’t. Being a customer now means they could be eligible for great customer discounts in the future.
  • Immediacy. Because of the budgets that the other local NGOs have available to them, they could be waiting a long time to get a new stove, or they could get one now. They can start saving money now; less exposure to harmful kitchen smoke that is hurting them and their children.
  • Maintenance. After their purchase, they would have access to maintenance for a specified period.
  • Different product selection. For now we have one stove that local NGOs are not offering, the Rocket Box Stove which is based on design by… It has a feature set that the more commonly available masonry stoves don’t have.

If you folks have other suggestions that we could present to XT send them along.