Friday, 8 March 2013

Malawian entrepreneur Chikondi increases her profits six times in six months with marketing advice from Grow Movement

Chikondi with Grow Movement Malawi Manager Sophie Kumwanje
Chikondi has a beautiful three-room guest house in Blantyre, Malawi with a stunning view of the surrounding mountains. But she was only filling one to two rooms one night a week.  
In an efficient market participants have access to information about a product, which makes its price a balance of the product’s supply and demand. But what if a market participant is in the dark about a product’s supply and demand? This was the challenge Chikondi faced when Sophie Kumwanje, our Malawi manager, matched her with remote Grow Movement consultant Henry Abraham from London Business School.

First Chikondi wondered whether her prices were too high. Henry advised her to research what her competitors were charging and she found that actually her prices were a third lower than other guesthouses.

So it wasn’t her prices- maybe people just weren’t aware of her guesthouse’s existence? Chikondi told Henry she was relying only on word of mouth through her friends and a facebook page to promote the rooms- they needed a way to make more potential customers know about the business.  So Henry suggested offering taxi drivers commission to encourage them to bring her guests. The taxi drivers were keen for extra cash and the results were dramatic: Chikondi’s occupancy rapidly increased to all three rooms filled five nights a week.

Now they knew Chikondi’s low occupancy was not caused by high prices, but lack of awareness, which gave Chikondi a second opportunity: She increased her prices 50% on Henry’s advice to the market rate! Occupancy did not fall.

As Chikondi’s cost base did not increase substantially from increased occupancy and prices, their impact on her profitability was astonishing: She thinks her monthly profits increased six times in six months! This has had a wonderful impact on the quality of life and livelihood security for Chikondi, her five other employees and their families. And now that Chikondi is confident of her marketing abilities, she is investing the profits in building a second, larger, guest house which she hopes to complete in December 2013 and employ ten more people to run it.
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