2. Target the ‘working poor’ customers
Identifying a realistic price point for CBS is essential for determining whether it can be offered sustainably to the customer base in mind. While costs will vary between countries, our work in Ghana suggests an indicative price range of US$8-9 per household per month for a CBS business to function effectively. If prices drop significantly below that, then gross margin similarly heads south and the model breaks down.
This raises the question of affordability, perceptions of which depend on which frame of reference you use. In any event, in practice, it appears that customers’ willingness to pay for CBS tails off rapidly above US$5 and the implications of this are two-fold. First, it means CBS won’t reach the very base of the pyramid* without some form of subsidy. To build self-sustaining private enterprises, CBS providers should therefore target the “working poor” — customers who have a steady income** but who are not wealthy enough to install their own septic tank or sewer-connected toilet, or who live in circumstances where these are impractical. Second, it means CBS providers need to be prepared to respond to low penetration in very large markets — a natural consequence of needing to find these working poor households in sufficient quantity and density.