What is the right price?

Posted in — Ghana Sanitation > Finance
March 18, 2021
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Photo by Alice Lee/iDE/2019
iDE Global WASH

Finding a balance between affordability and profitability.

How much should a latrine cost? How much should you charge to remove fecal sludge? What is the right price for a household handwashing device?

In Ghana, our social enterprise Sama Sama sells sanitation by having commission-based sales agents go door-to-door, then contracts independent toilet business owners (TBOs) to fulfill those sales by constructing and installing toilets at customers’ homes. While our social goal is to ensure sanitation for all, in order to keep our enterprise going, we have to achieve a certain level of profit.

So the answer to the questions above depends on a number of factors, including how much customers are willing to pay, materials costs, and the costs to deliver the product or service, including all of the value chain actors involved along the way. Much of this depends on the business model, the operating environment, and the nature of the products and services being offered.

As of January 2021, our portfolio of products and prices looks like:

G2 1 Product Price Table

How we find the right balance

Sama Sama engaged in a Human-Centered Design assessment to learn what kind of toilet Ghanaians would be willing to pay for, how much they would be willing to pay, and what other options were available to people in the market. Participants said they wanted something more than the basic, low-cost toilet commonly constructed in northern Ghana. These potential customers felt it would be worth investing in a durable, aspirational toilet, especially if they had access to appropriate financing options. They also told us they had very limited options. If someone wanted a toilet, they would have to engage with a range of suppliers and contractors—to purchase materials, to transport product, to dig the hole, to pour the cement for the pit, to do masonry work for the walls, and to do carpentry work for the door. Most people who started to build a toilet just gave up before it was completed.

In response to customer feedback, Sama Sama designed and piloted the Sama Sama toilet, a branded sanitation solution that would both meet basic sanitation needs and provide a more desirable, aspirational experience for Ghanaian families. The toilet is relatively expensive compared to other, lower quality options on the market. However, customers did not want to spend their limited income on a low quality toilet—they wanted to invest in something they could be proud of. The Sama Sama toilet is also priced to ensure profitability for TBOs and commission potential for Sama Sama sales agents.

Ide 21X9 Sama Sama Latrine
Sama Sama latrines are brightly colored because they are a point of pride for families. Photo by Alice Lee/iDE/2019

Customer insights have also been key in designing our newly introduced fecal sludge management (FSM) service. It is still unclear what portion of the population is willing to pay for FSM services, and at what price, so our initial field work has focused on testing a pricing model that allows our operators to make a profit while generating sufficient demand for services in the community.

Pricing changes over time

Key challenges around pricing for Sama Sama remain, however. Ghana has very high annual inflation, often exceeding 10% per year. This puts the squeeze on profitability for Sama Sama, and for our TBOs. In response to this inflationary pressure, Sama Sama has adjusted prices to ensure that our TBO partners are able to remain profitable and that our own business remains on the road to sustainability. Sama Sama also tries to support its TBOs in this challenge by testing and introducing lower cost construction methods such as using hollow bricks, and looking at bulk sourcing alternatives to bring down the cost of inputs for TBOs.

Learn more

In addition to the right price, providing customers the opportunity to pay by installments may also make a difference. Learn more about how we are trying to provide this option in “Paying bit-by-bit.”

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Program undertaken with the financial support of the Government of Canada provided through Global Affairs Canada.