Project Everest

[Key Metrics] Microfinance Amisen April 2019

by
Jamie Butler
Jamie Butler | 5 months ago | in ROA **TRAINING**

State lean canvas phase: Solutions

Why are we testing this?

These metrics should indicate insights into making our channels more efficient to reach more customers and yield more revenue, improving the sustainability of our business model.  

Customer acquisition cost

Here we are testing the customer acquisition cost for 2 of our current channels as well as the projected cost for our proposed business model channel

  1. Face-to-face village or spontaneous consultations and meetings

  2. Village organised community meetings

  3. Mediating loans between the Bank of Amisen and our financial planning customers

Our initial channel of Face-to-Face village consultations in Jumtha yielded excellent conversion rates throughout our engagements however we're incredibly resource and time intensive. The process required our physical transportation to the village through Toni's Tuk-Tuk service which averaged around $20 round trip. Then the average consultation placed us in front of, on average, 2 prospective customers although with a conversion rate of 100%. Maximum upfront revenue acquired per customer is $7 with the completion of our MVP financial survey and goals spreadsheet. The CAC of this channel renders it unviable as, on average, we lose $0.60 in acquiring each individual customer.

Through a community meeting organised through the village chief, we could significantly expand our reach to community members, with the average meeting providing us an average of 15 prospective customers. Here our conversion rate varies quite significantly although it averages out at 45%. The cost of acquisition here remains constant, the return trip which costs $20. Therefore for each $1 we spend acquiring a customer, we earn $2.36 in total revenue.

Currently we are looking to improve this acquisition cost ratio through a new proposed model in development is to connect customers of our financial planning service who desire a further loan, to the Bank of Amisen who have the capacity to provide the loan but cannot accept the risk without high interest rates. As intermediaries to this loan, we provide the bank a service by qualifying potential customers of their financial risk situation and linking them to new customers. The current model is to take on some of the bank's risk in providing a loan to one of our customers and charge a 1.5% commissions rate on the total amount of the loan. We take on some of the bank's risk by upfronting 20% of the total loan which is sourced from Project Everest's capital stores.

For instance, if customer A seeks a loan of $10,000 with the Bank of Amisen after using our financial planning services, the Bank of Amisen provides 80% of that amount whilst we front the remaining 20%. Because we have fronted the risk on the tail-end 20% of the required loan, customer A need only pay the Bank of Amisen, interest upon the 80% which the Bank provided. Our commission of 1.5% of the total loan amount covers the difference between servicing the loan amount acquired from the Bank of Amisen as well as the risk from our side of the loan. In this instance, our revenue

Revenue Stream

Therefore, we have two main revenue streams, the financial planning product which we sell direct to customer and then the financial loan structure which we mediate between the bank of Amisen and our planned customer. These streams are interconnected, where the success of the planning product is prior to the selling of the loan but it is the latter which is inherently more scalable in terms of revenue. In other words, this business model will resemble that of the “hook and bait” or the “tied products model”. Where maximum revenue from the sale of a financial planning product is fixed per transaction, the commission gained from the service of our mediated loan depends upon the loan amount requested from our clients. As our customers become more affluent and seek to expand their business, they will subsequently require larger loans mediated by PEV and therefore our commission rate.

Customer retention

To measure our customer retention rate we will measure we will assess the percentage of customers who continue to purchase our financial plans for new or continuing goals. Through our current knowledge, an example of why they may continue to use our service would be that the first financial plan has proven to help them save or achieved their ideal savings for their goal eg. they were able to pay for a cow after their 12 month goal and now wish to save for fertiliser.

Through further analysis of this data, we will continue to extract valuable insights for how we may optimise this retention rate. This may involve for instance, shifting our value pitch each subsequent financial planning purchase, incentives for subsequent purchases and so on.

We will also assess the percentage of people who have purchased a financial plan and then go on to get a loan through our service. For example we will gather data on the various reasons people pursue a further loan and analyse those reasons. From that, we would be able to start filtering our customers, for instance farmers, business owners, families etc.

In regards to customers who do not stay on board, we will evaluate why customers have chosen to opt-out through feedback metrics. Our current hypothesise are that people may have lost interest or are satisfied and do not have any more goals.

Viral Reach

Currently, our viral reach may be measured in these following metrics:

  1. Customers who have been referred to our service via friends who are existing customers

  2. Customers who have been reached through initial contact with a village chief

We are currently assessing various referrals reward and incentive mechanisms via which we can achieve the first metric. Some which we have considered so far for instance include, is a discounted financial plan and consultation every 5 referrals a customer makes

The second metric can be assessed by recording the average customer-reach garnered per interaction with a village chief. Our average so far, although this varies significantly, is 15 customers per engagement with the chief. We are currently looking over options to standardise this result by improving our relations procedure with the chiefs, whether this means emphasising cultural gifts or other arrangements. This method will likely affect the customer acquisition ratio as we will need to invest more in these relations.

 

edited on 28th April 2019, 09:04 by Andrew Vild

Andrew Vild 5 months ago

This doesn't explain your key metrics clearly or well.

You have essentially put your revenue stream black label in here too.

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