Hugo De Groote, Kwaw Andam, Stephen Mugo, Mike Hall, Obadiah Ngigi, Benjamin Gathigi Munyua and David J. Spielman
Market segmentation, while popular in the pharmaceutical industry to reach the poor in developing-countries markets, have so far not been successful in delivering agricultural technology to poor farmers. In this paper, their potential use in Kenya is analyzed, based on information gathered through an extensive stakeholder consultation. Results show that some market segmentation methods are used. Seed companies, some non-governmental and public extension organizations sell smaller seed packages and starter kits, and provide discounts for low-income clients. Stakeholders expressed a strong interest in larger-scale market segmentation mechanisms for maize seed and fertilizers, in areas where levels of maize production and densities of the rural populace are high. Several challenges remain: direct price discounts to low-income clients were not appreciated, stakeholders preferred mechanisms that allow farmers’ to choose their preferred inputs such as maize varieties, and segmentation based on geography or technology were considered impractical since the poor and non-poor live in the same areas and use similar technology. A voucher-based approach was generally preferred, with a discount of about 50% on quantities of about 8 kg per farmer, with beneficiary targeting through direct identification or tiered pricing. A pilot study was proposed to study costs and benefits of the two market segmentation approaches in distributing maize seed, and to determine optimal discount values and quantities.
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