Lending an Ear to Loan Beneficiaries

(Image by Ky Olsen)

As we looked to expand our microfinance fund, we realized that one of our biggest challenges would be attracting customers. Our competitors have branches in most every low-income neighborhood in the United States (predatory payday lenders have more locations in many states than McDonalds does), and they boast significant marketing budgets. To put them (and like-minded auto-title, rent-to-own, refund anticipation, and other predatory lenders) out of business, we knew that we needed an effective—and cost-effective—marketing strategy.

So we reached out to Joe Stasio, a marketing professor at Merrimack College. He told us something we thought we already knew: listen to our clients. The concept is an established one; the New York Times just ran a great piece about it. But here’s the thing: We hadn’t ever really processed the fact that when it comes to customer research, there’s often a big gap between understanding the intent and implementing the practice effectively.

In fact, we thought the kind of customer research we could afford wasn’t the kind that could help us. We had, in the past, tried hard to put ourselves in the shoes of those we serve—when we were struggling to design marketing campaigns, launch new products, and build community partnerships—with mixed results at best. No matter how hard we tried, we were far more biased toward our own perspectives than those of our clients. 

So we started working with Stasio. We also took a lesson from Google Ventures. When Google Ventures representatives meet with the CEOs of start-ups, they constantly ask the CEOs about prioritizing research. As Michael Margolis, a research partner at Google Ventures, wrote in an article titled “How to Prioritize Customer Research When Everything Is a Priority”:

“[The question] often sounds something like this: We have a small design team and a long list of projects in different stages. On top of that, our bosses just asked us to work on [personas, customer journeys, experience maps, fill in the blank with other large research deliverable]. We want to incorporate more customer research, but we can’t do it all. What should we do? What should we test?”

Their answer: Prioritize the areas you’d like to know more about. Research resources at most start-ups—social enterprises or otherwise—are limited. So Google Ventures recommends trying to “assess the potential impact, urgency, and effort of each [research] request.” The organization also notes that: “It’s best to test ideas early and often.” In other words, think about what kind of knowledge will help you most, invest what you can in acquiring that knowledge, learn something, and then apply it right away on a limited scale. Use the results of your trial to hone your ideas.

Strapped as we are for research money at the Capital Good Fund, we knew we had to pick a research topic we could explore that would lead to results we could act on immediately. We decided that if we did a focus group with borrowers about our improving our policies and perception in the community, we could quickly make changes based on their feedback. The risk of not listening to our constituents—and losing them to predatory lenders—was greater than the cost of setting up and running a focus group. 

So two weeks ago we held our first focus group. We included seven borrowers, and their input was insightful. For example, we were surprised to hear that most participants love that we hold them doubly accountable to their loan repayment, which we do by requiring that they provide proof of loan purpose (such as a disconnection notice from their utility) and by checking in to ensure that they spend the funds in accordance with their plan. (This finding was in stark contrast to beliefs we’d long held—namely that that an accountability requirement was patronizing and that our clients would consider it “overkill” for a loan of less than $2,000.)

We were also surprised to find that, when asked to write down one word to describe Capital Good Fund, participants came up with things like “honest,” “non-judgmental,” “fair,” and “affordable.” One of their biggest concerns, in fact, was that we were a “hidden gem,” (one person even bemoaned that she hadn’t heard about us sooner). And despite the payday industry’s claims of a 90 percent satisfaction rates, every single person in our focus group had tremendously negative things to say about payday lenders—things like: “[Payday lenders] are doing a number on poor people,” and “the way they get you is that you have nowhere else to go, but then you are trapped.”

We learned that not feeling judged and feeling comfortable is as important to our customers as our rates and turnaround times. And we learned that offering applicants a loan amount less than what they’ve applied for isn’t necessarily a put-off. Prospective borrowers are actually likely to appreciate our assessment and our guidance.

Now that we’ve gone through this exercise, we are making immediate changes. Yes, it took time and energy from our staff to do this customer research. But we could ill afford to attempt to scale without first listening to our customers. In the next few months, we plan to implement a continuous feedback loop into our processes—ensuring that we are always learning from those we serve so that we can serve them better.

Read more stories by Mollie West & Andy Posner.