Free giveaways

On the subject of bed nets (see previous post) I just came across Esther Duflo’s 2010 TED talk: ttp://www.ted.com/talks/.

Duflo is one of the leading proponents of using experimentation to determine what works best in aid. In the TED talk she looks at several issues one being whether it’s better to have people pay for a bed net or give nets for free. The argument of those who have opposed free nets is that people don’t value them, don’t use them for the intended purpose and won’t replace them.

Duflo quotes evidence from one of a number of experiments that shows very low take up of nets if people have to pay, but significant replacement of nets by people who have been given a free one. Once someone has experienced the benefits of a bed net they are likely to pay for a new one the data suggests.

So for energy access should we be giving away improved stoves and solar lanterns? Evidence from programmes distributing stoves for free has been disappointing. But giving customers a chance to experience the product before purchase might be an effective approach.

Impact Carbon carried out trials in Uganda in which customers were allowed to try an improved stove with the option to give it back if they didn’t like it. Few took that option and sales were much higher than in a control group where no ‘right to return’ was offered.

On Mafia Island, Tanzania , Solar Aid found that providing school students with discount vouchers for lanterns stimulated wider sales within the community. Households experiencing solar lights as a result of the purchases made with the vouchers became ambassadors for the product in the community.

Give aways and badly applied subsidies can undermine the efforts of those trying to build market based approaches, but an intelligent use of discounts and ‘free product trials’  ought to be part of the promotional techniques being used in the energy sector.

The only way to find out what works best in any particular context  is to experiment and see – as any marketing professional (and Esther Duflo) will tell you.

Duflo is co-author with Abhijit Banerjee of Poor Economics which one the 2011 Financial Times and Goldman Sachs Business Book of the Year Award.

Tags: marketing, subsidies