Show or Tell? Improving Inventory Support for Agent-Based Businesses at the Base of the Pyramid

Abstract

Problem definition: Firms providing products and services to low income Base of the Pyramid (BOP) customers are increasingly utilizing independent contractor agents rather than employees in their distribution models. We empirically investigate the best way to help agents perform better.

Academic/Practical Relevance: BOP customers represent one-third of the world's economy, but make 5 USD or less daily. Providing goods and services to these customers is difficult for traditional firms because most retail activity occurs at small-scale independent outlets. Improving agent performance can help firms reach customers in this environment. We enhance the literature on agent-based models in BOP settings, decision making, technology in developing economies, and field experiments.

Methodology: In partnership with a Tanzanian mobile money operator, we perform a randomized controlled trial with 4,771 agents to examine how differing types of guidance, and whether in-person training is offered, impact agents' inventory management. Mobile money is a platform whereby firms in developing economies provide financial services to customers via cell phones. Mobile money agents service customer withdrawals and deposits as branchless banking outlets. Every day, they decide how much money to stock to service customers' transactions, from which they earn commissions.

Results: We find that those agents given only explicit recommendations (as opposed to summary statistics or both) who were invited to in-person training (as opposed to simply received an automated notification) improve their performance. Agents in other treatments showed no statistically significant change. The effect is concentrated in agents who never replenished their money at a bank, and whose money inventory levels were low in the pre-treatment period.

Managerial Implications: We show empirically how firms can better manage agents, thereby improving the value proposition of serving BOP customers. We show the utility of segmentation based on agent heterogeneity. This can improve firm performance, agent profits, and customer service.

Note: A previous version of this paper was titled: Show or Tell? Improving Agent Decision Making in a Tanzanian Mobile Money Field Experiment.

Keywords: Field experiment, Base of the Pyramid, service operations, inventory management, OM practice