marketing compost

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Marketing CompostA Guide for Compost Producers in Low and Middle-Income Countries

Sandec: Department of Water and Sanitation in Developing Countries

Jonathan Rouse

Silke RothenbergerChris Zurbrgg


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Marketing Compost

A Guide or Compost Producers

in Low and Middle-Income Countries

Jonathan Rouse

Silke Rothenberger

Chris Zurbrgg

With inancial support rom

the Swiss Agency or Development and Cooperation (SDC) and

the Swiss National Centre or Competence in Research (NCCR) North-South


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Impressum

Publisher: Eawag, P.O. Box 611, 8600 Dbendor, Switzerland

Phone +41 (0)44 823 52 86, Fax +41 (0)44 823 53 99

Editors: Sylvie Peter and Yvonne Vgeli, Eawag

Copyright: Published texts and igures may be reproduced reely

or non-commercial purposes only (except when reproduction

or translation rights are explicitly reserved), provided that mention is

made o the author and this publication.

Cover: Pawel Gaul (www.iStockphoto.com)

Layout: Pia Thr, Visuelle Gestaltung, Zrich

Figures: Yvonne Lehnhard, Eawag

Published: 2008

Printer: Binkert Druck AG, Lauenburg, Switzerland

Circulation: 3500 copies printed on original recycled paper

ISBN 978-3-906484-46-4

Eawag: Swiss Federal Institute o Aquatic Science and Technology


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Contents

1 Introduction 7

2 Background 11

2.1 What is marketing? 11

2.2 Why is marketing important or compost producers? 14

2.3 What is compost? 17

2.4 Basics o market research and marketing 22

3 The marketing environment 31

3.1 Competition 32

3.2 Legislation 33

3.3 Opportunities and threats 35

4 Market assessment 39

4.1 Segmenting your market 39

4.2 The customer 44

4.3 Understanding your market better 48

4.4 Quantiying market demand 49

4.5 Proiles o market segments 51

4.6 Targeting market segments 52

5 Product, positioning and location 53

5.1 Deining your product 53

5.2 Quality 57

5.3 Meeting demand through production 61

5.4 Business location 63

5.5 Distribution channels 67

6 Product pricing 71

6.1 Production costs and proit 71

6.2 Customer attitudes, needs and resources 73

6.3 Terms o payment 75


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7 Key principles o promotion 797.1 Communication: The key to promotion 80

7.2 Promotion in practice 83

7.3 Establishing alliances with composting associations 92

8 Final words 95

9 Annexes 97

Annex 1 Compost quality standards 97

Annex 2 Table to structure market segments 99Annex 3 Examples o market segment proiles 100

Annex 4 Marketing questionnaires 103

Annex 5 Map o Kathmandus compost market 105

Acknowledgements 106

Bibliography 108

- Reerences 108

- General literature on composting 111


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Key terms

Compost The product o controlled biological decomposition o organic mat-

ter into a humus-like, odourless product with soil-conditioning properties and

varying nutrient value.

Chemical ertiliser An agricultural input largely intended to provide plant

nutrients without any soil-conditioning properties such as NPK ertiliser

(nitrogen, phosphorous and potassium).

Competitive edge Something about your product/service, which is partic-ularly attractive to the customer, such as a low-price or good quality, ree

delivery and convenient location.

Humus The component o soil consisting o decomposed vegetable matter,

which gives soil its water and nutrient-retaining properties.

Manure Animal waste (e.g. cow dung, chicken droppings). Oten relatively

rich in plant nutrients. Usually matured prior to land application.

Market segment A group o consumers/customers with similar characteris-

tics and requirements.

Marketing environment External actors and orces, some o which are un-

controllable, which present both opportunities and threats to a business.

Organic waste Decomposable matter, including vegetable waste (peelings,

spoiled market produce), waste ood and garden waste (e. g. grass clippings,

dead plants).

Prospecting The process o identiying and assessing potential customers.

Soil conditioner A product which enhances the water and nutrient retaining

properties o soil.

Value/cash markets Customer groups purchasing small quantities o a prod-

uct at a higher price (e. g. householders buying 10-kg compost bags).

Volume/bulk markets Customer groups tending to buy large quantities o a

product at a lower price (e. g. armers buying truckloads o compost).

Qualitative data Relates to opinions and perceptions, e. g.: how? why?

Quantitative data Relates to countable data, e. g.: how many? how much?

how oten? where?


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1 Introduction

For many years, businesses, municipalities and NGOs around the world have

successully produced large volumes o high-quality compost. Compost o-

ers greater beneits to society and the environment than a can o sot drinkor the latest mobile phone, but unlike these it does not enjoy a ready market.

It is oten considered to be dirty, and it lacks an immediate beneit to people.

O course, compost is a valuable agricultural input which can improve the con-

dition o soil and reduce the need or chemical ertilisers. Despite these qual-

ities, selling compost remains a challenge and some producers cannot even

give it away. Lack o markets has caused many businesses to ail.

Composting can be approached in two main ways.

The solid waste management approach, wherein composting is a way o

treating organic waste within the solid waste management system. Compost

is seen as a by-product.

The marketing approach, wherein composting is a way o producing a valu-

able product that can be sold. Compost is the core o all activities.

The marketing approach ocuses on producing and selling a high-quality pro-

duct. In contrast to the solid waste management approach, it is driven more

by customer demand than material supply. However, a successul marketing

approach to composting will usually result in all solid waste management ob-

jectives being met.

This guide describes a marketing approach to composting, and is intended to

help compost producers run more viable initiatives by unlocking the value o

their product. The handbook does not cover everything there is to know about

marketing, but starts rom basics and introduces the key principles and tech-

niques. These include understanding the marketing environment, identiying

appropriate target customer groups, and developing and promoting productsto suit the market.

Marketing CompostIntroduction


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The term composting business is used throughout as an all-encompassingdescription o NGO as well as public and private sector composting initiatives.

This relects the assumption that all initiatives at least need to shit their prod-

uct rom their premises, and that most want to cover their costs or make pro-

it through the sale o compost. Thus, they have the basic character o a busi-

ness.

There is no single solution to compost marketing: every situation is dier-

ent. Thereore, the handbook presents a mix o contextual theory and hands-

on tools and ideas or your business. It ocuses on some o the problems

requently encountered in low and middle-income countries and ways to over-come them. Although this handbook is about marketing compost made rom

organic urban waste, many o the principles are universal.

Sources o inormation

Much has been written about marketing, and most literature ocuses on

high-income countries. The authors have drawn heavily on this body o litera-

ture but combined it with inormation and case studies rom low and middle-

income countries. All literature consulted is listed in the literature section.

Key messages

customer satisaction is o key importance;

there is no magic solution to compost marketing, but applying principles

can increase the chances o success;

compost is generally not a product with a ready-made market, however,

worldwide experience indicates that it is possible to develop one;

investing time in identiying and analysing your market can yield important

returns or your business;

the packaging and image o your products to target markets is vital or suc-

cess;the basis or success is a consistently high-quality product with clear speci-

ications. It will sell better and yield returns;


Studies conducted in India have revealed that because marketing

approaches are rarely applied, many composting businesses have

failed to realis e their potential . This is not at tr ibuted to a lack of

interest or business-mindedness, but simply to a lack of available

information. In India, the marketing approach is ideal for guiding

compost ventures towards sustainability and profitability. Richardson , 2002


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marketing is not a one-o task: it is crucial to invest regularly in marketing,in developing products and in reining the selected strategy;

demonstration projects proved to be one o the most successul marketing

strategies to conquer new markets.

Target audience

This handbook is o relevance to a wide range o individuals and organisations,

including:

entrepreneurs and private investors intending to und, set up or manage a

composting plant;local authorities wanting to invest in or operate organic waste composting

plants as an option or sustainable waste management;

contractors managing composting plants; and

sta o donor organisations unding and planning composting projects.

No prior understanding o marketing compost is necessary.

Structure

Marketing is not a clear-cut linear process and various aspects are interde-

pendent. For example:

product development is dependent on and driven by the choice o target

markets;

your location may determine the markets available to you or you may

choose your location in order to target a certain market;

target customers may aect your pricing decisions or high production costs

may require you to ocus on a wealthy market.

Although marketing is presented as a series o sequential steps in this hand-

book, it is important to apply these lexibly and to keep revisiting certain areas.

The irst two chapters o this handbook provide background inormation and

introduce the broad concepts o marketing and composting.

The book is structured around ive key areas:

The marketing environment

Market assessment

Product, positioning and location

Product pricing

Key principles o promotion



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2 Background

2.1 What is marketing?

Marketing is about identiying and targeting customers and succeeding to sell

products that satisy customers at a price and in suicient quantity to ensure

the success o a business.

The aims o marketing are to:

understand and assess the external environment that aects your busi-

ness. This includes external orces such as legislation, environment, technol-

ogy, and competition;

identiy appropriate target markets and develop good relationships;

satisy customers by oering appropriate products at the right price;

communicate the beneits o products to stimulate demand;

ensure the sale o products at a price and quantity that ensures viability and

proitability.

Customer satisaction is central to marketing and is the key to successul busi-

ness. Marketing recognises that customers are ree to make purchases rom

anywhere in the marketplace. Marketing principles can help a business max-

imise the chances o acquiring a slice o the market.

Too little effort spent on determining whether or not customers nd a

product attractive or are willing to pay for it will often result in costly

products without any market appeal.Adapted from A lexander, 2003

The ollowing diagram illustrates the components o the marketing process.

Marketing CompostBackground


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The Marketing Mix

Marketing proessionals ocus on our main parameters to attain a successul

marketing strategy: Product, Price, Place, and Promotion. These are the so-

called 4 Ps o the marketing mix. The ollowing section and Figure 2.2 pro-

vide more details on what they are and how they can be useul.

The our Ps o the marketing mix

Product: Relates to eatures, beneits, quality, packaging, presentation, but

also to service and abstract messages such as image or principles.

Example: Compost is produced from organic solid waste and is, hence, an envi-

ronmentally friendly and high-quality product. Compost is high in organic matter

and, therefore, an important soil amendment for agriculture and horticulture.

Price: Dependent on your customers inancial circumstances, on compost

demand and on the prices o competing market products. However, it is also

determined by your production costs and expected proit margin.

Example: Compost has to compete with chemical fertilisers and other natural

manures. The market price will have to reflect customers willingness to buy

compost and cover production costs.

Place: Relates to the accessibility o your product by customers, e. g. location

o your business, distribution network etc.

Example: You decide to market the compost via a retailer who has already es-

tablished a distribution network for other agricultural products. Customers canpurchase the compost locally at low transport costs.

Figure 2.1: Marketing Process ater Kotler et al. (2006): Principles o Marketing


Create value or customers and build customer relationship capture value rom customers in return

Step 1Understand themarketplaceand customerneeds andwants

Step 2Design acustomer-drivenmarketingstrategy

Step 3Construct amarketingprogramthat deliverssuperior value

Researchconsumers andmarketplaces

Managemarketinginormation andcustomer data

Selectcustomers bymarketsegmentation

Decide on avalueproposition:dierentiationand positioning

Product:Build strongbrandsPrice: Createreal valuePlace:Managedemand andsupply chainsPromotion:Communicatethe valueproposition

Build strongrelationshipwith chosencustomers

Build strongrelationshipswith marketingpartners

Harness marketing technolgiesEnsure ethical and social responsibility


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Promotion: Inorms your customers about the beneits o using compost,

building awareness and overcoming negative attitudes or perceptions to en-

sure the sale o your product.Example: Your compost has an official quality label. The customer opts for

your product as he/she trusts the label or is aware of your companys good

reputation.

Marketing and ethics

For some, selling a reezer to an Eskimo may be the ultimate in great market-

ing, but convincing people to buy a product they do not need has no place

in ethical marketing. Marketing is not always used as a orce or good, and

aggressive marketing is seen by some as a modern-day evil. Marketing ap-

proaches are sometimes used to convince customers to buy a product they

do not want - or even need - which is o little utility and has a short lie. Some

products, such as cigarettes, may even harm the consumer, while others sim-

ply waste consumers money and the worlds resources. Marketing also pro-

motes competitiveness. This can sometimes be positive, but small business-

es can be particularly vulnerable to large companies monopolising markets

and orcing them out o business. So what place do ethics have in the mar-

ketplace?

The basic marketing concept holds that success depends on knowing the

needs and wants o target markets and delivering the desired satisaction bet-

ter than competitors (Kotler et al. 2006). However, it is possible or marketing

to go beyond proit and customer sales alone, and to consider the long-term

social and environmental implications o business.

A composting business can consider consumer interests by delivering a high-

quality and sae product. It has the potential to improve and transorm waste

management in low-income countries, thus beneiting society as a whole. It

also provides an opportunity to create decent and digniied livelihood oppor-tunities. Although good quality compost can be a genuine asset to many, it is

important that peoples expectations are realistic, and that they are properly

Figure 2.2: The our Ps o the marketing mix (adaptedater Kotler et al. 2006)

Figure 2.3: Marketing and ethics: Selling rerigeratorsto Eskimos?

P

rodu

ct

Pric

e

Pla

ce

Pro

mo

tio

n

VarietyDesign

PackagingService

QualityBrand name

List price

Discounts

Channels

Credit terms

PaymentPreriod

Allowances

TransportationInventory

Locations

Assortments

Coverage

LogisticsPublic

relation

Sales

promotion

Personalselling

Advertising

Features

Targetcustomer

Intendedpositioning



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inormed about its use and limitations in order or them to make an inormed

choice.

What about ethical competition? In many countries, markets or compost areuntapped or underdeveloped. There is room or new businesses to emerge

and coexist with other producers. Moreover, competition itsel can be turned

into an opportunity: joining orces to lobby or supportive legislation, sharing

distribution inrastructure or even sharing marketing through Compost Asso-

ciations.

Finally, sound social and environmental principles at the heart o your business

can be a powerul sales asset or your product, as markets around the world

become increasingly concerned with ethical consumption.

2.2 Why is marketing important for compost producers?

Marketing is just a jargon-filled discipline and only tells you what you

already know.Gartner (no date)

Although many people are sceptical about marketing, in act it underpins most

successul businesses. It helps ensure investments are worthwhile and iden-

tiy appropriate products or achievable markets.

Improving the image o compost

Although compost is a highly eective soil conditioner, which can reduce

the need or chemical ertilisers, it does not enjoy a ready-made market. A

number o actors account or this act, including:

lack o awareness and knowledge on how, how much and when to use

compost;

misunderstanding about what compost is (e. g. expecting it to behave in thesame way as a chemical ertiliser);

Successful compost marketing in Sri Lanka

By contrast, government and NGO projects have failed to establish markets for their product. This

led to such an overwhelming stock of compost that some have had to cease production or even close

down. The government had not considered marketing, and the NGO did not have the capacity to

invest in marketing activities. Ali, 2004



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concerns about the quality o compost made rom organic urban waste

sometimes based on negative associations or past experience;

the inclination o many armers to ocus on optimising their yield within ashort time;

competition with chemical ertilisers, similar low-cost products like manure

or products perceived to be the same (e.g. raw waste);

high transport costs relative to product value, as compost is oten produced

ar rom its market;

unair regulations and policies (e. g. subsidies or chemical ertilisers) hin-

dering the composting approach.

Barriers to overcome when promoting compost in India

A report rom India illustrates some o the basic problems aced when pro-

moting compost. In contrast to chemical ertilisers, the use o compost

is not considered respectable, but instead an old-ashioned product as it

has to be used in large quantities and is relatively slow-acting. The Indian

Government promotes the use o chemical ertilisers through regular cam-

paigns and via subsidies and incentives.

Composting is not widely pursued by the ormal sector, as it is bulky,

transport over long distances is expensive and its marketability limited. In

short, it is not perceived to be as attractive or convenient a product as pel-

let chemical ertiliser.

Finally, the report suggests that the chemical ertiliser industry may be try-

ing to deame compost, or example by inorming armers that it causes

pest damage and spreads disease. Adapted rom Mehta in Hart and Pluimers, 1996

Consequently, compost beneits are little known or appreciated, and when

compost is made rom organic waste, it is oten stigmatised. Marketing can

help a business overcome these attitudes and barriers, as well as identiy anddevelop markets or compost, as illustrated by the ollowing case rom Sri

Lanka.

Photograph:JonathanRouse

Marketing CompostBackground 5


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Successul compost marketing in Sri LankaIn Sri Lanka three composting ventures (a business, a university and a

community project) have succeeded in securing good markets or com-

post or dierent reasons:

the business invested heavily in a skilled marketing team, which worked

over many years to develop the market;

the university has come to an arrangement with an agricultural company,

which buys, handles, markets and transports all the compost.

communities ound a local market, and generated demand by word o

mouth and demonstration projects.

An essential part o business planning

It is essential that any prospective investor (public or private-sector) considers

marketing as part o the easibility assessment. Market research can help you

understand your position in the marketplace, your potential customers and

your competitors. A market analysis may reveal that you have a market ready

or your product as it is. It may identiy that you need to make changes to your

strategy and production in order to secure a market. Sometimes, however, it

will reveal that there is no market or your product. Knowing this beore invest-

ing can save you the losses o a ailed business.

Marketing should not be seen as a one-o activity or something just or new

businesses. Markets can change over time, and your business will need to

use marketing to keep abreast o (or better still, ahead o) changes and ensure

you are targeting the right people with the right product and promotion, at the

right price.

A particular need in low and middle-income countries

Revenue rom sales o compost is particularly important in low and middle-in-

come countries where subsidy and tipping ees are much less readily availa-

ble than in Europe or the United States. In Europe, composting plants charge

a ee to all commercial enterprises dumping waste (e. g. tree surgeons and

gardeners), which is slightly lower than the cost o dumping waste in landills.

This is backed up by legislation, which encourages (or makes compulsory) the

recycling o green waste. Thereore, in some cases compost can be given

away ree because tipping ees cover all costs. Nevertheless, these compost-ing plants are increasingly selling their products, as the market or eco com-

post develops. Few such situations exist in low and middle-income countries,

so costs need to be covered by sales, generated through marketing.

6 Marketing CompostBackground


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2.3 What is compost?

Anyone concerned with marketing compost must have a good basic under-

standing o the product, its uses and methods o production. This chapter

briely sets down some deinitions, and outlines some o the ways compost

can be made rom urban organic waste.

Why make compost rom waste?

Urban waste consists o many elements including inert material (sand and

soil rom street sweepings), recyclable material (such as metal, plastic, paper,and glass), hazardous substances (toxic chemicals and healthcare waste) and

in rare instances human waste. However, in many low-income countries as

much as 6070 per cent o household waste is biodegradable, including vege-

table peelings, waste ood and garden waste. Vegetable markets and the ood

processing industry also produce large quantities o organic waste. Compost-

ing is an important element o sustainable solid waste management as it o-

ers a way o processing the biodegradable waste raction. Composting reduc-

es the amount o waste to be transported and disposed o, thus also reducing

negative eects to the environment.

What is compost and how is it used?

Compost is the product o a controlled aerobic decomposition o organic mat-

ter. It is a stable, dark brown, soil-like material. Contrary to popular belie,

mature compost does not smell bad; it can smell as resh as a orest loor.

Sometimes the process o making compost may, however, result in smells o

rotting-waste, although careul management will minimise these.

Compost contains important plant nutrients (e. g. nitrogen, potassium and

phosphorus), though usually not as much as animal manure or chemical er-

tilisers. It can also contain a range o beneicial minerals and is rich in humus

and microorganisms beneicial to plant growth.

Mistaken identity o compost

Compost is sometimes mistakenly reerred to as manure or ertiliser,

though it has completely dierent characteristics.

Manure is generally understood to be animal waste such as chicken drop-

pings or cow manure. It contains nutrients and some organic matter. It is astrong ertiliser that can damage young plants.



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Chemical ertilisers usually consist o concentrated plant nutrients. For ex-ample urea is a nitrogen ertiliser and DAP is a phosphorus ertiliser. Nei-

ther has any soil conditioning properties.

Compost is a soil-like substance with a moderate nutrient content slowly

released over the cropping period. Thus, it is most useul or its soil condition-

ing properties.

Depleted soils have too much inert material (sand) and too little humus (de-

composed vegetable matter). Humus acts as a sponge, holding water and nu-

trients. Amending soil with compost replaces humus, thus increasing the ca-pacity o soil to absorb and retain nutrients and water, and reducing the need

or chemical ertilisers. Indeed, where land is careully managed, with soil

structure maintained by compost and a range o nutrients supplied through

the application o manure, chemical ertilisers are rendered unnecessary. This

is one o the underlying principles o organic arming, as increasingly practised

by armers around the world.

Key beneits o using compost

Improves soil structure, creating a better plant root environment

Supplies signiicant quantities o organic matter

Improves drainage o soil and reduces erosion

Improves moisture holding capacity o soils

Improves and stabilises soil pH

Supplies a variety o nutrients

Supplies the soil with beneicial micro-organismsAlexander, 2003

Quality

Customers expect the compost they buy to be o high quality, eective and

sae to use. Producing consistently high-quality compost is the key to better

prices and marketing success. Quality is determined by a number o actors,

but most o all by input materials. It is essential to ensure that raw materials are

not contaminated (e. g. with chemicals or heavy metals) and that the inal prod-

uct does not contain dangerous or unsightly products, such as needles, shards

o glass or pieces o plastic. This topic is urther discussed in Section 5.2.



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How is compost produced?Compost is produced through controlled aerobic decomposition o organic

matter by microorganisms. Microorganisms thrive in a moist, warm environ-

ment with an abundance o organic matter and air. I conditions are too hot,

cold, wet or dry, the composting process will be compromised. Through their

activity, the microorganisms generate heat, which can kill pathogens and de-

nature weed seeds. Turning compost, though not always necessary, can help

ensure that all organic matter has been exposed to high temperatures during

production.

Composting can be undertaken at a very small or very large scale. Some pro-ducers have a series o decentralised production units, while others have a

single centralised acility. The composting process can take as little as two

months, though compost is ideally matured prior to use, which takes up to

three or our months. In cold weather, high altitudes or very dry conditions,

the composting process may slow down or even stop.

There are many dierent methods o making compost. They range rom a

simple pile or windrow to complex ully automated plants. The ollowing box

briely presents some examples. Some issues relating to compost production

and quality are discussed in Sections 5.2 and 5.3. For urther inormation on

methods o making compost, reer to the General Composting Literature sec-

tion in Chapter 10.

It is assumed that selection o appropriate o technology, availability o organic

waste, climatic considerations, and water supply will have been considered in

your easibility assessment. Understanding your market is a complementary

aspect o the easibility assessment.

Further inormation on composting technologies and how to set up a com-

posting scheme is provided in the book Rothenberger et al. (2006) Decentral-

ised Composting for Cities of Low and Middle-Income Countries. This book

can be downloaded or ree at www.sandec.ch.



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Barrel composting (Dhaka, Bangladesh)

This barrel is installed in a low-income area in

Dhaka, Bangladesh. It receives organic waste

rom our amilies. The compost produced is o

high quality as the waste is uncontaminated. Itis sold to a local NGO.

Vermi composting (Bais City, Philippines)

Vermi composting predominantly uses worms

rather than microorganisms to digest the waste.

Raw materials are spread daily in thin layers andcannot be piled very high, so the technique re-

quires much more space than other methods.

Worms are also more sensitive to temperature

and contamination than microorganisms. The ad-

vantage o vermi-composting is the high nutrient

content and public acceptance o the product.

Pit composting (Pune, India)

Biodegradable waste is placed in shallow pits

and let to decompose or several months.

This method is very simple and oten practised

in public parks or domestic gardens. In rainy

conditions, it is susceptible to water logging.

Pile composting (Jordan, Palestinian

Territories)

In Arab countries, various types o waste, such

as animal manure, saw dust, straw, and agri-

cultural waste are piled in layers and covered

with soil and plastic. The pile, which remains

untouched or about ten months, undergoes

slow decomposition under anaerobic condi-tions. The decomposed material is applied to

the ield prior to planting.

Composting methods


Photograph:Jo

hannesPaul

Photograph:SilkeRothenberg

er

Photograph:SilkeRothenberger


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Manual windrow composting (Dhaka,

Bangladesh)

A windrow with a triangular cross-section is a

convenient way o piling in long rows organic

matter or composting. Windrows can makeairly eicient use o space and make compost

turning relatively easy. In the case illustrated,

windrows are turned manually to allow sui-

cient air supply. The aerobic condition allows

the compost to mature within three months.

Mechanical windrow composting (Luxor,

Egypt)

This system is comparable to manual windrowcomposting but is operated at a larger scale as

mechanical equipment is used. Mixed waste

is screened prior to composting. The organic

waste, piled onto long windrows, is turned re-

quently by a machine.

Compost chute (Sri Lanka)

In this compost chute in Sri Lanka, waste is ed

at the top. As more waste is added over a peri-

od o a ew months, mature compost emerges

at the bottom. Other techniques require rotat-

ing drums or several conveyor belts.

High-tech aerated static pile composting

(Bali, Indonesia)

Instead o manual or mechanical turning o

the compost, in this case the pile remains un-

turned. Air is orced through the material by

pipes using a mechanical ventilator. In Europe,

the piles are additional covered by a geo-textile

to reduce moisture losses.


Photograph:JonathanRou

se


Photograph:DavidKuper


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2.4 Basics of market research and marketing

Marketing requires research on customers, opportunities, competitors, and

products. High-quality market research will take time and cost your business

money, however, it is an investment that pays dividends in the long run. This

section presents an overview o important aspects o market research, some

o which are more comprehensively covered urther on.

Who should undertake market research?

Internal sta or marketing specialists can conduct market research. Internalsta should have a thorough knowledge o the product and business, but may

lack speciic marketing expertise. However, one clear beneit o using existing

sta is that they are already on the payroll. Marketing specialists, on the oth-

er hand, will have to be contracted, but they can oer specialised marketing

knowledge as well as impartiality. I they are not compost specialists, they are

best suited to providing support to the internal sta in market research. Many

composting companies employ an agronomist or agricultural engineer with

marketing training.

Linking the business with the market

A composting plant in Mysore, India, employs several agricultural engi-

neers who advise armers in rural areas. This direct contact allows the em-

ployees to assess armers demand patterns, their needs, and experience

in compost use.

Grschow Entsorgungs- und Umwelttechnik, a German company, also

employs an agricultural expert who is in direct contact with the armers

and eeds back inormation to the production manager. Furthermore, the

company has signed a consulting contract with a regional research insti-

tute to support the development o new products which comply with lo-

cal legislation.

You will need to decide who undertakes market research based on your busi-

ness resources. Some o the tools described in this section require consider-

able skills. As an alternative to hiring a marketing specialist, your organisationmay choose to seek training, or enter into partnership with another organisa-

tion experienced in market research.



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Marketing requires careul planning

Most market rese archers dont need more information, they need

better information. Alexander 2003

Market research requires careul planning. It is vital to ensure that only relevant

data are collected, rom relevant people, in an ecient manner. Beore embar-

king on any research, careully consider what you need to nd out. What ques-

tions will you ask and o whom? What is your budget, and how can expenditure

on marketing be kept low? Collecting irrelevant or unnecessary data will wastetime and money, and make analysis much more dicult.

Particularly or small businesses, cost saving is a high priority. There are many

ways o keeping costs low, particularly by:

making use o existing data and research; and

careully planning your own research to avoid wastage.

There are various strategies or collecting inormation on potential compost

markets. The most common sources are secondary data (existing reports, sta-

tistics, articles etc.) and primary data (that collected rom scratch). Both meth-

ods can generate two types o data: qualitative or quantitative. Both types o

data are important to understand the market or your products.

Secondary data collection

Since it is possible that some market research has already been conducted, it is

well worth consulting it beore embarking on your own. This can be an impor-

tant way o saving time and money. Secondary data should be relevant or your

local condition: data rom other cities or even countries may have limited value

because o the diversity o conditions. Secondary sources o data include:

maps;

population data (e. g. income levels, interests, spending on gardening);

statistics on chemical ertiliser use;

price lists or ertilisers or manure;

data on nurseries and arms in the area;

studies assessing the use o manure or compost on arms;

magazines, newspapers and newsletters associated with nurseries, agricul-

ture and even home-gardening;brochures o ertiliser companies and other composting businesses; and

relevant publications by local universities.



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Quantitative Data

Quantitative data relect inormation

that can be counted. Questions seek

to quantiy issues.

Typical questions include:

How many armers are located

within a radius o 20 km rom my

location?

How many nurseries exist in this

city along the main roads?

How much ertiliser do they

apply?

How much compost could they

apply?

How often do they apply?

Where (at what distance) areother potential customers located?

Qualitative Data

Qualitative data relect opinions and

perceptions. This inormation pro-

vides insight into customer preer-

ences and behaviour. It helps you

design your product and marketing

strategies.

Typical questions include:

Whydo armers choose this prod-

uct?

What do armers consider to be

the most appropriate product or

their purpose?

For whatis compost used?

What are the advantages/disad-

vantages?

What eatures must compost/er-

tiliser have?

How and when do armers usecompost/ertiliser?

Table 2.1: How to assess quantitative and qualitative data

Data can also be collected directly rom NGOs, trade and agricultural organi-

sations, local and regional research institutes or municipal departments.

Secondary data sources can provide a preliminary overview o the market en-

vironment. However, they will not be perectly tailored to your inormation

needs, and their accuracy may be dicult to guarantee. Also, inormation willnot be unique: one o your competitors may have already beneted rom the

insights so you will not have the knowledge advantage.

Data collection in the Palestinian Territories: The NGO Palestinian Wastewater Engineers Group (PWEG),

wanted to conduct a survey among farmers. As they were not familiar with the sector, they looked for a

suitable way of accessing farmers. Agricultural supply shops where farmers frequently came to buy

pesticides, fertilisers, seeds or mechanical equipment turned out to be an ideal location. PWEG conducted

some interviews in partnership with the shopkeepers who were then asked to continue the interviews

themselves. This strategy saved the small marketing team a lot of time.

PWEG developed two different questionnaires one for compost users and one for compost producers.Annex 4 contains one of these questionnaires.



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Primary data collection

There is no substitute for face-to-face contact for really understanding theattitudes, perceptions and needs of a customer.

I you want to generate unique data, suited exactly to your needs, you will

have to undertake primary data collection. This is well suited to gauging the in-

terest in your speciic product, assessing willingness and ability to pay and un-

derstanding attitudes towards compost in general.

Researchers may use various tools, including:

Inormal discussions. These can take the orm o visits to individuals and

businesses to discuss compost and its use. Such discussions need not ollow

a list o questions, but researchers should keep in mind key areas or discus-

sion (e. g. level o knowledge about the use o compost, quantities required

etc.). This is a resource-intensive option but allows direct contact with exist-

ing or potential customers. Observation can be a useul way o corroborating

indings rom discussions.

Questionnaires. These can be administered by post, e-mail, the Internet,

in person or even by telephone. Questionnaires are a relatively expensive op-

tion and can require considerable human resources, skills and time or anal-

ysis. This method can also be less eective due to low response rates, and

may be inappropriate or certain groups (e. g. illiterate respondents).

Focus group discussions. These can be a highly eective method o col-

lecting inormation rom a group o individuals. A ocus group usually involves a

acilitator and about ten participants. Discussions may be quite ree but centred

on particular topics by the acilitator. For example, a group o nursery owners or

a group o armers could be invited to a discussion.

Focus groups are particularly useul or in-depth investigations on attitudesand perceptions. They are not so useul or collecting quantitative data. It is

important to bear in mind that opinions expressed by a ocus group may not

Photograph:PWEG

Marketing CompostBackground 5


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represent those o the population at large. Conducting and analysing ocusgroup discussions require skills and experience.

Who should you consult?

Just as one carefully chosen spoon of food will let you know how a dish

tastes, a carefully selected sample will tell you about your market.Adapted from Ko tler et al. 200 6

Beore embarking on any market research, you need to categorise your sub-jects into segments (c. Section 4.1) and then select a representative sample.

For instance, i your household market consists o middle and high-income

households, your sample should relect this.

Selecting a group o people to interview requires some thought, as it is easy

to bias data by choosing a non-representative group. I you want to ind out

about willingness and ability to pay or compost among nurseries, you will not

only ask wealthy nursery owners, as it is likely that their response will not be

representative o all nurseries. Smaller, poorer nurseries should also be con-

sulted, as their inancial status may be very dierent and they could also be a

viable market or your business.

The number o people consulted is termed sample size. By making your sam-

ple size too large, you will waste time and money collecting and analysing un-

necessary data. On the other hand, i you consult too ew people, your indings

may not be representative. Deining the adequate sample size is a science o

its own. However, the ollowing table provides a rough guide to the number o

individuals or companies to be interviewed to draw a reliable conclusion.



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Total number o Low Medium Still acceptabletarget group sampling sampling sampling

(market segment) error error error

100 50 50 49

250 152 110 70

500 217 141 81

750 254 165 85

100 278 164 88

2500 333 182 93

5000 357 189 94

10 000 370 192 95

50 000 381 195 96

Table 2.2: Overview o representative sample sizes or surveys (adapted rom Barlett etal. (2001) and Rothenberger et al. (2006)

Data collection examples

Household survey

From statistics you know that about 500 households are located in your neigh-

bourhood and you would like to asses their need or compost in home garden-

ing. You choose to interview 40 to 50 households, including wealthy and mid-

dle-income households. This provides you with airly representative data o all

households.

Market sector survey

According to the register o companies, there are 50 nurseries in town. You re-

alise there is no need to visit all o them, so you randomly select 10 nurseries

o varying size and location, which you visit to conduct interviews. You contact

the manager to arrange your visit, and to ensure that the person responsible

or purchasing compost will be present during discussions. The inormation

provided allows urther evaluation o the overall market size.

Farmers attitudes

You want to learn more about armers perceptions and needs. You visit a vil-

lage and ask armers to meet as a group to discuss their arming practices

with respect to ertiliser use and seasonal patterns. They give you one hour

o their time and a lot o useul inormation. In return, you oer them a 50 per

cent reduction on their irst compost purchase.

Once you select a representative sample, you will need to careully determineexactly whom you wish to interview. The ollowing example illustrates the im-

portance o this step.



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Remember that participants in any research have a right to conidentiality. Be

sure to explain the purpose o the research and ask permission to use and

record their responses. Participation in any research should be voluntary.

Asking questions

It is important to phrase questions in such a way that they do not inluence the

response. Questions can be posed in dierent ways to reveal dierent inor-

mation as illustrated in the ollowing examples:

Open questions reveal general inormation and indicate how much the

person knows about the issue. Example: Can you tell me about the difference

between compost and manure?

Closed questions are more restrictive and allow mainly yes or no or

one clear answer ocusing on a topic. They can be useul when you need to

generate quantitative data, (i.e. numbers to analyse: 70 per cent say yes, 30

per cent say no). Example: Do you think compost is more beneficial to plants

than manure? These closed questions are often followed by an open question

asking Why or How.

Leading questions can inluence the answer o the person asked. They

should be avoided except when used in gentle provocation, as individuals will

oppose a leading question only in case o strong objections. Example: Com-

post is much better than manure, isnt it?

Alternative questions give a choice o answers and preerences. Ex-

ample: For your seedlings do you prefer a soil mixture with compost orwith manure?

Choosing appropriate respondentsA small composting business wishes to conduct market research among

local householders to assess their interest in the product. They pay visits

to homes in the evenings and briely interview the head o each house-

hold. Although they had careully developed the questionnaire and spent

time analysing the data, they realise that they had interviewed the wrong

people. In these households, the head o the household generally has no

interest in gardening and simply pays the gardener a monthly salary or his

work. They should have interviewed the gardener to understand his atti-

tude and views on compost, the products he currently uses and his budg-et. This mistake costs the business time and money.



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Open questions invite people to express their considered opinions in theirown words. People tend to respond more honestly to open questions than to

closed or leading questions. It is also more diicult to answer an open-ended

question i it has not been properly understood, whereas answering a closed

question only requires a simple yes or no.

Designing questionnaires

Questionnaires will be designed dierently depending on whether you

are collecting quantitative or qualitative data. However, all questionnaires

need to be pilot tested, and the ollowing actors must be considered intheir design:

Does the low o the questions work (i. e. are they in a logical order)?

Are the words understood? Are they too diicult, too simple or ambigu-

ous (e. g. conusion between compost and chemical ertiliser)?

Do the response categories in quantitative surveys capture all options?

Is there any cultural sensitivity in relation to speciic questions? Could

any questions be oensive?

Are the questions interpreted in the same way by dierent respond-

ents? (This is reerred to as reliability).

Do they measure what they are supposed to measure? (This is reerred

to as validity).

Are the questions answered in the same way i repeated with the same

respondent? (This is reerred to as reproducibility).Adapted rom WHO, 2008

The time at which questions are asked can make a dierence to the data you

collect. Just as the supply o raw materials to your composting plants is sea-

sonal, so are some markets. I you ask a householder how much compost he

uses in summer, he may give a dierent igure than i you ask him the same

question in winter.

Data analysis and reporting

There are many sophisticated pieces o sotware on the market to help with

analysis, but it is probably unnecessary or most composting businesses to

invest in these. By keeping your research simple and relevant, your analysis

should remain airly simple. A calculator or common spreadsheet programme(e. g. Excel) will oten be suicient or analysing quantitative data.



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Present your indings in a way you and your colleagues can understand nowand in the uture. Prepare a ull report containing tables, igures and com-

ments and prepare graphs and charts to summarise data. Graphs and charts

can be particularly useul or making impressive presentations to investors or

your business. The report will be an important tool or monitoring and evaluat-

ing your business and marketing eorts.



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3 The marketing environment

So far, we have introduced the concept of marketing, considered why it is

important for compost businesses and described some of the main research

methods. This section is concerned with the first marketing step, i.e. under-

standing the marketing environment.

Composting businesses operate within a highly complex and dynamic envi-

ronment, which is largely impossible to control and oten diicult to predict. It

is important or a business to understand the marketing environment, as it can

present a multitude o opportunities and threats. The ollowing table summa-

rises the external actors and orces o the marketing environment.

Figure 3.1: Factors infuencing a business environment. These actors are hardly everstatic but constantly changing. They may aect your business directly or indirectly

Understanding the marketing environment should not be viewed as a one-o

activity. Since the environment may be constantly changing, it is imperative

or a business to keep abreast o changes.

Some elements o the marketing environment are discussed hereater inmore detail. Others, such as peoples attitudes, perceptions and awareness,

are discussed in Chapter 4: Market assessment.

Economic Political/Legal Environmental Technical

Competitors

Alternative

products

Income of

customers

Economic

cycle

Subsidies for

relevant

sectors

Cultural behaviour

Values, taboos

Attitude towards

waste or compost

Demographic

trends

Education, skillsEnvironmental

awareness

Sympathetic

waste

management

policies

Subsidies for

agriculture

Import/export

regulations

Land reforms

Technological

innovations

Change of

agricultural

techniques

Improved

transport

infrastructure

Climate

Soil

conditions

Water

availability

Agricultural

activities

Land use

planning

Social

Marketing CompostThe marketing environment


33/114

3.1 Competition

Competitors are the other businesses oering compost or other products

used in a similar way, such as topsoil, manure or ertiliser. Businesses must al-

ways consider their competitors as a potential source o inormation, threats

or alliance.

Typical competing products or compost are:

ertile topsoils mined and transported to the end user (peat, red soil etc.);

chemical ertilisers;

animal waste (chicken manure, cow dung etc.);raw municipal reuse;

human aecal sludge (rom pit latrines and septic tanks) and wastewater

sludge;

nutrient-rich waste rom industrial processing (neem cake, brewery and

distillery waste); and

mined decomposed landill material.

Competitors can be seen as a source o inormation on what works and what

does not. They can guide you towards (or away rom) certain choices about

products and customers. They can even present you with an opportunity to

collaborate, or example, sharing distribution networks.

You need to assess what products and businesses will compete with you.

Consider i there is room in the market (i. e. a suicient number o custom-

ers) or you to sell compost to the same market segment as your competi-

tors. Could your business oer something unique, such as better value, higher

quality or convenience to customers? I not, you may consider oering a di-

erent product or simply targeting dierent market segments.

A historical and prospective view on the environment can also be illuminating.

For example:

Have any other businesses tried composting locally beore? Did they suc-

ceed or ail, and why? What is dierent about your business?

Are any businesses planning to set up in the uture and, thus, become

competitors?

Is any legislation emerging which could support or threaten your venture?

Are your neighbours likely to copy your idea and become your competitors?



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3.2 Legislation

Policies, regulations and laws can aect decisions about your composting

plant location, method o production, target markets and so on. Some legis-

lation restricts composting: or example, EU laws addressing prevention o

diseases dictate that ood waste rom canteens or restaurants must be heat-

treated prior to composting or composted in enclosed areas, with no vector

pathway to transmit disease (EC-Ordinance No. 1774/2002). This means that

many composting plants only accept garden waste. Other orms o legislation

support composting. For instance, local authorities in India are bound by theMunicipal Solid Waste (MSW) Rules 2000 to prevent organic raction rom be-

ing landilled. Composting is one o several oicial treatment options or or-

ganic waste. This has a supporting unction or new composting ventures, and

municipal authorities may provide land or support new businesses in market

development.

EU policy driving commercial composting in the United Kingdom

There are currently two driving orces behind composting in the UK. The

irst is obviously to compost or environmental reasons to reduce the use

o chemical ertilisers and to slow the rate at which landills are being

illed.

The second driving orce is the European Union Landill Directive. I the

UK (or any other EU Member Country) ails to achieve the targets to re-

duce the total quantity o landilled organic material, they are subject to

ines.Enviros Consulting, 2006

Regulations and legislation relating to composting vary rom country to

country. Prior to starting a composting project, the laws and regulations like-

ly to inluence the project need to be examined thoroughly to avoid delays

or even cancellation o the project. I necessary, seek advice rom a lawyer,

NGOs, agricultural or business associations, agricultural research institutes

or the municipal authorities.

The ollowing are a selection o laws and regulations which can aect com-

posting businesses:Environmental laws may include legislation supporting or limiting waste

recycling and reuse.



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Solid waste management rules and regulations may support waste recycling

and reuse.

Land use regulations and urban planning strategies may include regulationsregarding the construction and operation o waste treatment plants. In some

cases, the setting up o such plants in residential areas is prohibited.

Agricultural laws may regulate how agricultural waste is reused (e. g. quality

certiicates, reuse limitations, pollution control). Check the policy related to sub-

sidies or chemical ertiliser use.

Trade laws and regulations you may have to register the product i you

want to market compost.

Regulations governing organic arming particularly important i you want

to ocus on export-oriented ruit and vegetable cultivation.

How NGO activity can inluence legislation

Waste Concern, an NGO based in Bangladesh, began composting a

number o years beore any solid waste management legislation was in

place. Thanks to their practical activities, the NGO gained considerable ex-

perience in solid waste management. Since it always maintained close

contact with municipal and environmental authorities, its eorts, research

and practical experience actually helped shape the policy now in place.

Impact o international standards at local level

International standards can also impact the market. One business in Sri

Lanka was producing high-quality compost but was unable to sell it to or-

ganic tea plantations one o the largest compost users. The various in-

ternational organisations issuing organic certiicates to plantations do not

allow application o urban waste-derived compost or quality reasons. The

standards o such compost are considered too diicult to ensure becauseo the possibility o contamination.

Enforced environmental laws as an opportunity in Jordan: In the past, farmers in the Jordan Valley

used untreated chicken and cow manure as organic fertiliser. The hot and humid conditions favour y

breeding, thus causing unbearable conditions for neighbouring residents. Particularly tourists visiting the

Dead Sea area an important source of income for Jordan complained about the nuisance. In 2007, the

Ministry of Environment introduced a bylaw prohibiting the use of untreated manure and forcing farmers

to look for alternative fertilisers. Compost, which was not competitive in the past, has become a viable

alternative. The market potential is est imated at about 400 000 tonnes per year. Existing compost

producers are trying to develop this large new market before new competitors catch up.



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The role o subsidies

Subsidies are oten linked to national policies rom which compost business-

es can derive beneits or disadvantages. In India, since chemical ertilisers aresubsidised, they are ar cheaper (at least in the short run) than compost and,

thus, reduce the competitiveness o compost producers, as these are exclud-

ed rom the subsidies. However, subsidies can support compost producers

i, or example, local authorities allot compost producers some o the savings

achieved rom reduced landilling costs as a result o composting activities. In

Sri Lanka, many compost producers eel that the introduction o such a subsi-

dy would revolutionise the business and make them proitable.

3.3 Opportunities and threats

Analysing opportunities and threats is an aid to understanding the marketing

environment. It involves taking each element o the market environmental in

turn and considering the direct and indirect opportunities and threats. These

can then be ranked according to:

the signiicance o their potential eect;

their imminence how soon they will have an impact; and

the degree to which it is possible to react, either to maximise beneits rom

an opportunity or minimise the eects o a threat.

Revisit Figure 3.1: Factors inluencing a business environment. The diagram

can be used to help structure your opportunities and threats analysis. Consi-

der the ollowing questions:

How have each o these actors aected you in the past? How have they

aected your decisions? Which have led to success, and which have caused

you problems?How could you transorm threats into opportunities? For example, peo-

ples preerence or cheap manure may be a threat. However, this indicates


Marketing CompostThe marketing environment 5


37/114

an awareness o the need or organic matter, which could be turned into anopportunity or your business.

How can you react to other threats, such as responding to changing legis-

lation?

How can you capitalise on opportunities?

You may ind it helpul to express your historical and uture opportunities and

threats assessment in a matrix similar to the one below. The let-hand side is

concerned with the past, the right-hand side with the uture. Writing down

your thoughts will enable you to consult them in the uture.

Figure 3.2: Matrix to evaluate success, opportunities, ailures or threats or your businessor project. List all the actors infuencing your current project in the matrix

Examples o opportunities and threats

Technological innovations: These can strongly inluence your project. Tech-

nical development can create new opportunities. Sound and appropriate tech-

nology can help ensure a high-quality product and long-term success o your

initiative.

Climate: The climate may already have caused your composting project to

ail (e.g. heavy rainall saturating the composting windrows). Although you can-

not change the prevailing climatic conditions, you can adjust your technology,

or example by rooing your composting site or providing a drainage system.

Competing products: Cow dung or poultry manure may compete with com-post, especially i they are abundantly available at a low price. Such competing

products pose a considerable threat. In such instances it may be diicult to in-

Today

external

factors

external

factors

OpportunitiesSuccesses

ThreatsFailures

Past

developments Future trends

internal

factors

internal

factors

6 Marketing CompostThe marketing environment


38/114

luence the market unless you are able to provide compost at a lower price orconvince customers o its higher quality.

Import regulations: These cannot be controlled but can oer an opportuni-

ty. Where ertiliser or compost imports are restricted or diicult, locally pro-

duced products have a better chance on the market.



39/114


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4 Market assessment

So far, you have studied the marketing environment and should have acquired

a better understanding of how competition, legislation, standards, and sub-

sidies influence your business. Now we turn attention to target customers.

What do you need to know about them?

Since customers make or break any business, satisying them is central to

marketing. This section deals with developing a detailed understanding o

markets and customers in order to target them and win them in the long-term

or your business. It describes what makes a customer; how to categorise

them; and how customer attitudes, perceptions and willingness and ability to

pay aect your business.

Market assessment demands gathering inormation rom current and poten-

tial customers on a range o topics.

4.1 Segmenting your market

The market or compost is diverse, ranging rom armers with seasonal bulk

requirements to domestic gardeners wishing to purchase a small but steady

supply o compost year-round. Segmenting provides a way to categorise your

customers into groups with similar characteristics and requirements. Markets

can be segmented according to:

occupation (armers, nurseries, estate developers, gardeners etc.);

location (rural / urban);

purchasing power / ability to pay (large cash crop arms vs poor rural armers);

crop type (ood, non-ood);

requency o compost purchase (requent, perennial, seasonal);

scale o demand:

bulk or volume markets demanding large quantities but not willing topay high prices; and

cash or value markets paying higher prices but requiring less compost.

Marketing CompostMarket assessment


41/114

Scale o demand can be a useul irst step in categorising the market seg-ments. Some examples relating to each market are given in Table 4.1 below.

This list is not exhaustive and your research may reveal many more.

Bulk/Volume market Cash/Value market

urban and peri-urban agriculture

nurseries rural agriculture

viticulture (wine)

green space management

(parks, zoos, sport arenas)

orestry

landill rehabilitation, mining

rehabilitation

ertilisers/distribution company

municipalities

horticulture (lowers and trees)

home gardening

vegetable gardening

hotels and company premises

landscaping, land development

ertiliser companies (retailers)

industrial use (bioilters)

Beware o treating segments as homogenous when they are actually diverse.

For example, the segment o armers may need to be urther divided into:

large-scale cash crop armers;

smallholders; and

organic armers.

Each may have very dierent characteristics, needs, attitudes, knowledge,

and inancial status.

Table 4.1: Typical bulk and cash markets or compost or products containing compost

0 Marketing CompostMarket assessment

Market segments in Karachi, Pakistan

Over the years, Waste Busters have developed a niche in three market

segments.

50 per cent o the compost market goes to high-value crop growers,

such as vegetable and ruit armers, horticulturists, lower growers, and

landscapers. Compost is considered more environmentally riendly than

raw cow dung or other manure.

30 per cent o the compost market is home gardens where the com-

post is sold through nurseries in small bags.


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Present market

It is usually less expensive to make cur rent cus tomers happ y than it isto find new ones. Ale xan der, 200 3

Market segments are usually dealt with in two groups: current and potential. I

you are still planning your composting business, you will not have any current

customers, so you will ocus on potential customers rom the outset. I your

composting business is already established, you will hopeully already have

some customers.

List your current market segments in a table and describe and quantiy your cus-

tomers. This will provide a irst comprehensive overview o your current market.

Table 4.2 below contains some examples and basic inormation. A blank version

o the table is included in Annex 2.

Your current customers will only remain loyal i they continue to eel satisied

with your product. Asking your customers the ollowing questions will help

assess their level o satisaction, as well as build your relationship with them.

Your response will hopeully result in increased customer satisaction.

Key questions with regard to current customers:

Are your customers generally satisied or dissatisied with the compost?

What do customers think o the quality o the compost?

What problems have customers had with the compost?

What improvements would your customers like to see in your product?

Potential or expansion:

Is each o your present market segments saturated (i.e. are you selling to

everyone in the segment as much as they want/need)?

Which segments o your present market could be expanded?


20 per cent o the compost market is landowners with problem soils(e. g. salinity). Compost is used to improve the soil.

Compost is sold in bulk (1500 Rs/ton) or in small bags (15 Rs/kg) or home

gardens.Adapted rom Ali, 2004


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Segm

ent

Descriptionand

geographiclocation

Volume

Frequency

of

demand

Numberof

customersin

thissegment

Com

ments

(e.g.

location,income,reliability,

paym

enttermsetc.)

Farme

rs

Ruralagriculture,armers

hesitatetoapplycompo

st

High

Seasonal/an-

nualdeman

d

600

Cons

iderabledistancestransport

implications.Lowabilitytopay,

reliab

ledemand.Lowvaluebuthigh-

volum

esegment.

Cashcrop

farmers

Severalarms(tea,bana

na)

intheurbanvicinity.Hig

h

demandbutalsohighquality

requirements

High

Seasonal-

twiceayea

r

5

High

abilitytopay,expecthighqual-

ityan

ddeliveryintime.

Nurseries

Mostlyurbanorperi-urb

an

fowerorplantgrowers

Medium

Frequentde-

mand

60

Otenalocalmarket.Mediumability

topay,reliablemarketbutconsider-

ablecompetition,includingrom

home

madecompost.

Real

estate

de-

velope

rs

Urbancustomersrequire

compostassoilsubstitu

teor

landscapingindierent

areas

High

Irregularbu

t

highdemandat

onetime

5

Requ

iredeliveryondemand;check

estatedevelopmentannouncements

toide

ntiynewprojects.

Middle/

high-

incom

e

house

-

holds

Privategardenersinurb

an

vicinityusingcompost

or

vegetablesorfowers

Low

Notstrongly

seasonal,

thoughpea

ks

duringspring

1000

Localmarket,highabilitytopayand

repea

tcustom/simpledistribution

viare

tailersorpickup.Highprice

segm

ent.

Table4.2:Describingthepresentmarketbysegment-somehypotheticalexamplesromTownX



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Potential marketThe potential market is the market o tomorrow, comprising:

those who want or need compost but do not know about it or are not

convinced o its beneits;

those who are buying compost rom a competitor; and

those who still use competing products such as cow manure or artiicial

ertiliser.

Identiying your potential market segments (known as prospecting) begins

with brainstorming. The ollowing questions may ocus your ideas:What conventional customers could you reach which you have not already?

What new/uture uses o compost can you oresee, and who would be

the users?

Which groups are most willing to try new ideas? Which can aord to take

risks and which are risk-averse1?

New-customer prospecting in Germany

A compost producer wanted to assess the market in housing development

areas. He knew a amily that moved into the new area. When the amily de-

cided to develop its garden, the producer provided them with a ree truck-

load o compost-amended top soil (delivered on a Saturday aternoon when

all new house owners were in their gardens). Neighbours, who saw the

truck with the logo o the company, became interested. The irst orders or

compost-amended top soil were placed with the company even beore the

truck returned to the plant.Grschow, 2006

The marketing principles presented in this handbook apply as much to current

customers as to new customers. Make a list o potential customers similar to

that or current customers in Table 4.2.

1 This issue is described by the adoption curve. C. Kotler et al. (2006), p 160 or moredetails. It suggests that Innovators and Early adopters are those taking the risk o pio-neering the use o a new product.



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Scenario Need Want Able$$$

Willing$$$

Market?

1. A rural armer needs and wants tobuy compost to improve the very poorsoil quality o his elds. However,although he thinks the price is reason-able, he is simply not able to pay orthe product, as he is too poor.

x x

2. A wealthy householder uses com-post or growing fowers in his garden.He wants compost but has no great

need or it: his plants can grow withoutit and he can aord chemical ertilisers.He nevertheless purchases compost.

x

3. A nursery owner needs compost orhealthy plant growth and wants to buysome on a monthly basis. He is asuccessul businessman and is ableto pay the price, but considers it tooexpensive compared to cow manure.He is thereore not willing to buy it.

x x

4. A tea grower is not convinced o the

useulness o compost but has beenadvised that since his soils are degrad-ing, he needs to add organic matter assoil conditioner. He is able and willingto pay or compost.

x

5. The government wishes to expandorganic arming and subsidises com-post use. Farmers are hesitant to usecompost but are able to buy it as thegovernment provides loans.

x

4.2 The customer

What makes a customer?

A customer is someone who wants or needs your product and is willing and

able to pay or it. The ollowing table presents a range o scenarios, indicating

whether the customer needs or wants your product, and whether he is will-

ing and able to pay or it. The last column indicates whether or not the scenario

comprises a market.1

Table 4.3: Matrix or customer assessment (Adapted rom Ali, 2004)1 O course, customers must also know about your product, be convinced o its benetsand be able to access it. These important issues are dealt with later in this handbook.



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Willingness and ability to payA compost producer in South-East Asia said customers are willing to pay for

our compost because of our proven performance, quality assurance, reliabil-

ity, and transparent pricing policy.

Table 4.3 reveals that customers must always want or need your product and be

both willing and able to pay or it.

Ability to pay is related to peoples inancial situation, including their income and

access to credit. It may also be related to seasonal low o inance, or even de-

cision-making power. Ability to pay is a relatively ixed igure, although providingcredit or lexible terms o payment can increase it.

Willingness to pay is a more lexible concept, as it is partly dependent on priori-

ties and perceptions. It relects the appreciation or a product rather than a real

market price. Willingness to pay can increase through education, but can also

be damaged by bad reputation. In Section 2.2 we deal with a list o reasons why

marketing is o particular importance to composting businesses. Many reasons

relate to quality concerns, competition with other products and stigmatisation

o waste-derived compost. Since these actors aect peoples willingness to

purchase compost, they need to be well understood and tackled through mar-

keting. These issues are also vital or pricing decisions discussed in detail in

Section 6.2.

The ollowing diagram illustrates the willingness and ability to pay relative to

production costs or our scenarios, described below.

Figure 4.1: Evaluation o willingness and ability to pay

Marketing CompostMarket assessment 5

ATP

WTP

PC

Case 1

ATP

WTP

PC

Case 2

LossATP

WTP

PC

Case 3

ViabilityProblem

ATP

WTP

PC

Case 4

Misunder-standing

Price

Abilityto Pay

Willingnessto Pay

Productionto Costs


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Case 1: I willingness to pay is higher than production costs and compost ispriced accordingly, the business is likely to make proits.

Case 2: Willingness to pay is lower than production costs but the ability to pay

is high. This indicates a lack o appreciation or the product. Find the reasons

and improve willingness to pay by promotional activities and education.

Case 3: Ability to pay must be higher than production costs; otherwise it will

be impossible or your business to ever cover costs through sales alone. I cus-

tomer ability to pay is below production costs, either reduce the costs or look

or new customers and other income opportunities (e. g. subsidies).

Case 4: Data suggesting that willingness to pay exceeds ability to pay shouldbe viewed with caution. In such a case, respondents have either not under-

stood the question or have accounted or some other actors in their answer

(e. g. subsidies).

Key considerations or willingness and ability to pay

Are customers willing to pay the present price o compost?

Why/why not? Understanding the reasons can help you understand how

to increase customer willingness to pay, i. e. education, promotion etc.

What would make them more willing to pay or compost or willing to pay

a higher price?

How easily are the customers able to pay the present price o compost?

Knowing what customers are able to pay can help you develop products

or product units (quantities) aordable to speciic segments.

Are customers able to purchase as much compost as they want at this

price?

I customers are limiting the amount they purchase because they are un-

able to pay the price, your business could beneit by lowering the price

and, thus, increase sales.

6 Marketing CompostMarket assessment


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Farmers willingness but inability to pay in BangladeshA market assessment in Bangladesh revealed that organic armers, who

require regular compost supplies or their land, are one o the largest po-

tential markets or compost. Many armers are keen to switch to organic

methods because o the premium prices etched by organically grown pro-

duce. They also ace health problems associated with the use o chemical

ertilisers and spiralling costs, as the quality o their land deteriorates and

requires more chemical inputs year ater year.

During the irst year, a armer switches to organic arming and requiresa very large quantity o compost to improve soil quality. However, this

irst year can prove more expensive than buying chemical ertilisers or a

whole year. Despite savings or subsequent years when less compost is

required as the condition o the soil improves, this irst year can prove too

great a barrier or many armers. It is a major disincentive to the adoption

o organic practices in Bangladesh.Ali, 2004

Farmers willingness and ability to pay in Nepal

The NGO ENPHO conducted a market survey among armers to evaluate

their willingness to pay or compost. During a group discussion, the arm-

ers expressed their willingness to pay up to 45 NRs/ kg or compost. A

comparison with a previous study (2004) revealed contradicting results at

irst glance. Here, armers were willing to pay 0.5 NRs/kg or compost

a price ar below the current production costs. However, these armers

also stated that they buy raw material or their own compost production

at 1.2 NRs/kg. Accounting or a 60 % volume loss during composting and

production costs, these armers pay up to 4 NRs/kg or their own compost.

Consequently, eective promotion could turn this ability to pay into will-

ingness to pay.Frmelt, 2007



49/114 Marketing CompostMarket assessment

4.3 Understanding your market better

It is necessary or you to acquire a detailed understanding o your market.

Some inormation can be obtained rom secondary sources, but you really

need to spend time talking directly to customers; these hold the answers to

the key questions you should be asking.

This section introduces some o the key questions you need to ask in order to

develop proiles o your market segments. The list o questions below is only a

guide; questions need to be adapted or your own customers and compiled into

a coherent questionnaire. Annex 4 oers two examples o such questionnaires.Geographical

Where are your customers located?

Do they have means o transport (i. e. can they collect compost them-

selves)?

How can they access your compost?

Uses

What do customers want or need rom compost?

How will they use it?

Why do they want compost?

Quantity

How much compost will they use and how oten?

Is the market limited by the number o customers, cost or supply o compost?

(i. e. do people buy as much as they can aord or as much as is available?)

I compost is limited by supply, how much would the customer like to buy?

Quality

What quality do customers require?

Why? (e. g. aesthetics or saety or ood crops)

What types o input materials are acceptable? (e. g. agricultural waste, ur-

ban waste, sewerage sludge, human waste)

Attitudes and perceptions

When assessing a market segment, consider customer attitudes toward com-

post.

Do customers know about compost? Do they want it or eel they need it?

What are customers expectations and perceptions o compost?

Do customers consider it a worthwhile orm o recycling organic waste or a

dirty waste product?These topics are revisited in more detail when we consider product, pricing

and promotion.


50/114Marketing CompostMarket assessment

4.4 Quantifying market demand

We are now beginning to understand the range o market segments. We now

need to quantiy how much compost is required by each segment, and con-

sider the business ability to provide it. Demand is measured in terms o inan-

cial value based on volume per year. Data can be collected rom representa-

tive groups in each market segment. The ollowing two examples illustrate

calculations o current and potential demand or two hypothetical market

segments.

1. Market segment: Farms around Lucknow

How many armers buy compost? 5 armers

How much compost is required per acre per year? 5 tonnes

What is the size o the arms? 20 acres

Compost price/tonne? 2 $/tonne

[Total current market or this segment] = 1000 $/y

[Number o customers] x [tonnage purchased per year]

x [tonnage price]

This indicates the market value o this market segment in $/year.

2. Market segment: Nurseries in Banani District, Dhaka

This example illustrates different ways of assessing demand.

How many nurseries are in this area? 15 nurseries

How much compost is required per nursery per year? 30 tonnes/y

How much compost are nurseries willing and

able to buy each year? 10 tonnes/y

Compost price/tonne 1.5 $/tonne

[Total potential market or this segment] =

either:[Number o nurseries] x [tonnage required per year]

x [tonnage price] 675 $/y

or:[Number o nurseries] x [tonnage nurseries willing and

able to buy each year] x [tonnage price] 225 $/y

The irst igure is the size o your potential market i you can convince all

nurseries to purchase as much compost as they require. The second lowerigure indicates the existing market.


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When demand has been calculated or each o the current and potential mar-ket segments, they can be added to obtain an indication o the overall market

demand.

Three other important con

marketing compost

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