The Evolving Filipino Microentrepreneur (Part 2 of 3)

MABS Luzon Regional Manager Jove Tapiador shares lessons learned during the RBAP-MABS Regional Roundtable Conference 2010.

In the RBAP-MABS Regional Roundtable Conference last November 23 and 26 held in Manila and Davao City respectively, participants were treated to an overview of what to expect in the microenterprise market over the next five years. The roundtable opened the participants’ eyes on what to consider as they expand their microfinance operations in the Philippine countryside.

The challenge for rural banks is how to create and deepen customer loyalty especially when market preferences shift as competition heats up and clients have more choices. The marketing experience should therefore revolve around how to convince microenterprise clients that your rural bank is the first and best choice.

Fortunately, rural bank branches and often the owners themselves are rooted in the same community where the client resides. This allows the bank and its officers an opportunity to view their target market and the local culture in an advantageous position over outsiders. The key therefore is how to influence the decision making process of existing and new clients so that they choose to bank with your rural bank rather than other financial providers.

Using a framework applied by Mr. Ricardo de Vera, a management consultant and regular contributor to the Philippine Daily Inquirer, we can look at different perspectives and approaches to making sure potential clients place your rural bank on top of the many choices that are available.

1. The Personal Process

RRT 2010 - Marketing 2of3_Micro-franchise operator_compMicroentrepreneurs are highly aware of market trends and what they perceive to be winning businesses with high market demand. Cellphone accessory shops, small franchised food kiosks, low-priced clothing stores (ukay-ukay), and even small internet cafes/photocopy shops are just some of the new businesses that have begun to dominate the local retail market over the past few years and are expected to continue to expand in the next five years. These same enterprising entrepreneurs are also demanding access to banking services that are tailored to meet their needs such as longer and more flexible operating hours, ability to transact with the bank remotely whether making a deposit, withdrawing funds, or obtaining a short-term 30-day loan. Banks that are able to provide tailored financial products and services to meet the needs of these emerging or dominant businesses will have the opportunity to shape and capture this market.

2. The Interpersonal Influence

But as we move outside the microentrepreneur’s personal space, his decision-making is strongly shaped by the influence of family, society, and cultural norms. The Filipino microentrepreneur is very much family-oriented and this is expressed by how they consult with their spouses and children with regards to business decisions. They see the business as truly a family enterprise wherein every member of the household is expected to pitch in time, effort, or ideas. Cultural factors such as the family’s image or status in the community also play a significant role in allocating scarce resources. Social obligations especially during town fiestas, important birthdays, weddings, or funerals often trump regular bills and financial obligations. Thus, a rural bank that incorporates members of the household into the loan agreement or deposit service arrangement creates a stronger family commitment to meet their financial obligations. In addition, a rural bank’s high profile support for town events creates a favorable impression in the community.

3. The Non-Personal Influence

Gradually, as the microentrepreneur assesses his personal interest and family needs, more objective factors step in to affect his decision-making. Issues of how much time to allocate for the business, where to locate the business, and the physical environment, all affect the choice of business, its operations, and the type of business relationships that are formed. That is why, as much as possible, a microentrepreneur locates his business at or near his home, generates his first clients within the family and neighborhood circle, and connects with suppliers that would directly come to the business rather than vice-versa. This reduces transaction costs in terms of time, effort, and money. This is especially true for variety stores, merchandise stores, and small-scale manufacturers.

In contrast, more savvy merchants usually assess the general market and position their business in high-traffic areas or commercial districts even if it is farther from home. Therefore a bank that understands this should be able to provide products and services that not only touch the microentrepreneur and his family, but also provides him convenience, speed, and value that reduce transaction costs without losing that “personal touch.”  Today, technology is actually making this easier than ever before since clients and banks can connect via the cellphone almost anytime and anywhere.

4. The Purchase Decision – Deciding Where to Bank

After considering personal, family, and environmental factors, the microentrepreneur usually focuses on affordability, ease of use, and practicality in deciding where to bank. Are the services being offered by the bank helpful to the client and his/her family? Does the bank offer other services such as insurance? Can the client easily relate to the benefits and value propositions that the bank is offering? Is the bank making it easy to simplify the final decision-making process? A rural bank will therefore need to creatively communicate its position as being supportive and helpful not only to the client but also to his/her family.  It must show the unique value proposition that both meets the client’s business and family financial requirements. It should be able to position itself as uniquely different from other financial providers because it provides better benefits that are easier to understand and even reduces transaction costs in terms of travel time and effort with the bank.

5. The Post-Purchase Decision

Finally, the test of customer loyalty begins and ends if the microentrepreneur makes it a habit to patronize the bank’s financial services and products. In this case, the client’s experience is measured against expectations and peer feedback, which become critical factors in reinforcing the bank’s value proposition. The bank must therefore consistently deliver the same level of high expectation experienced by one client to all clients. This demands highly trained and motivated bank personnel that thoroughly understand the bank’s products and services. In addition, they should be able to perform their duties at the highest standards from the minute a client is approached, to how quickly the bank opens up a deposit account or processes a loan, to how questions are handled or issues addressed, and to the manner in which the bank’s public image is displayed. This also includes the behavior of bank personnel both within and outside the bank and even after banking hours. These daily occurrences reinforce the message of how the bank treats its current and potential customers and how it takes care of their financial needs.