Reflections on the mFarmer initiative: pricing Agri VAS services for a low income market

This is the fifth in a series of blog posts reflecting on the mFarmer initiative. Access the rest of the series here. Learn more about the individual services we worked with by reading our mFarmer case studies.

mFarmer first blog post: Who uses Agri VAS services?
mFarmer second blog post: Delivering agronomy information through mobile
mFarmer third blog post: Choosing your delivery channels
mFarmer fourth blog post: Delivering market price information through mobile

Although Agri VAS subscribers are less likely to be below the national poverty line than the wider population, qualitative data across services suggests the costs charged of services are too high for most information seekers.

Bottlenecks
• Concerns related to costs affect user behaviour and uptake of services
• Some users are unaware of the pricing models of each service

Among mKisan users, only a small percentage (8%) was willing to pay the package prices to access Agri VAS, and even some customers who found value in the service found the prices too high. An mKisan customer revealed that the service was “ok but not worth RS 30/month”. A study of users and non-users in Mali found that the cost of market price SMS was too high for a vast majority (95%) of participants. Before text channels were offered free of charge, 90% of Tigo Kilimo users said the same. Charges of KSh 3 ($ 0.03 USD) per SMS were a hindrance to the uptake of Airtel Kilimo by a majority (~75%) of participants, most of whom preferred to pay Ksh1-1.5. As one user expressed:

“Ksh 3 per SMS is quite expensive; more so when two messages are sent in one day. This may make farmers opt for other service providers such as Safaricom.”

A lack of clear understanding of pricing models also hindered repeat usage across the services. Some Tigo Kilimo users expressed fears that once they registered they would continue to be charged for the service without an option to cancel at a later date. Airtel Kilimo users reportedly avoided topping up their Airtel balance due to concerns that it would be consumed by the costs of Airtel Kilimo messages.

“Because of using [the IVR] number, Rs. 30 was deducted from my balance. I didn’t know that it was a paid service… My family is facing monetary problems, that’s why I discontinued the paid service. “ Farmer, Uttar Pradesh, Chambal District, mKisan midline

Recommendations
• Offer a free period or freemium content for users interested in service trial
• Offering both package subscriptions and PAYG options can cater to the needs of various users
• Convey clear price points for each service in marketing campaigns
• Offer a clear mechanism for un- and resubscription to the service

To alleviate cost-related concerns, one option is to provide a limited ‘freemium’ service whereby users can access certain content without charge, or access the whole package with no charge for a limited period. This can allow customers to time to understand the benefits of the service. The exponential growth of Tigo Kilimo’s customer base after offering a free USSD option indicates that users like the ‘try before you buy’ approach.

Offering both package subscriptions and PAYG options can cater to the preferences of various users. Users seeking to resolve an immediate problem on their farm may prefer a PAYG model. On the other hand, subscriptions may be a feasible alternative for those who seek to learn new farming and marketing techniques and improve their practices on a more regular basis. These potential repeat users may be more inclined to pay for packages which provide better value for money than a PAYG option. However, service providers must tread carefully here: multiple pricing options could become a bottleneck in accessing the service if placed as an obstacle to reaching the information. During Tigo Kilimo user testing it was found that the pricing screen was likely to cause confusion and led to customers hanging up without accessing information.

Agricultural income is typically high around harvest time, and low during the season, potentially leaving farmers vulnerable during this period; services which understand farmers might offer flexibility to reflect this.

An analysis of Tigo Kilimo customers reveals noteworthy characteristics of users who are more willing to pay for Agri VAS:

Regular vs. one-time users: A phone survey revealed that most regular users of Tigo Kilimo are willing to pay more than trial users who have only accessed the service once.

Land size: Regular users of Tigo Kilimo with < 2 acres of land were willing to pay on average 1,878 TZS per month; those who owned 2-5 acres were only willing to pay only 169 TZS on average. Rural farmers with less land have less recourse to other information and may be more willing to invest in services that will help maximize their incomes. Among respondents with <2 acres of land, 61% had access to no other channels of information and 42% of these users responded to having seen benefits from using Tigo Kilimo information. Smaller farmers were also more likely to sign up to learn about new business opportunities (44%) than any other segment. Some are customers with small farms reside closer to urban centres, earning most of their living in semi-skilled urban labour or office work and treating a small plot of land as an entrepreneurial activity.

Education level: Users educated to secondary or higher primary level are willing to pay on average more for the service. Low literacy users are less willing to pay – this is likely because they cannot interact with the more popular text based service as well as resource constraints. Users with tertiary education are also less willing to pay, being more likely to have alternative sources of information available such as the internet and extension officers.
Gender: Women are willing to pay slightly more than men across both trial and repeat segments.

Age: Users seemed to generally be willing to pay less with greater age.

Given generally low willingness to pay for new, unproven products, Agri VAS is unlikely to contribute to direct revenue from end users for at least the first few years after release, so this should not be your primary goal when delivering the service – exploring alternate business models is advised.

Is this your experience of user willingness to pay, or do you have a different story? Please leave any comments below, or contact us by email: [email protected]. Stay tuned for more insights from the mFarmer initiative over the coming weeks.

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