The Price of Free

Photo Credit: Will Hutchinson

To reach the greatest number of users in the shortest amount of time, organizations sometimes resort to giving the product away for free. It makes sense in certain situations; when an earthquake has hit a fragile population, or when the target groups are simply unable to earn any income or livelihood (e.g. sustained drought). But oftentimes, it can be detrimental to the marketplace when products are not sold and instead are distributed as charity.

Until recently, improved cookstove programs were more likely to fail than to succeed, when judged by usage rates of the targeted stove after 5 years. A typical project failure ended with stoves that were not in use, or not used correctly. Projects failed for different reasons, but literature, and industry experience suggest that failure was most common when stoves were not adequately valued by stove users.  Many failed programs are characterized by attempts to circumvent local markets through direct stove distribution programs, or working with local artisans to provide stoves free of cost.

These failed programs are harmful because they waste resources on products that are not valued, not used, and thus do not achieve their intended effect. In addition, these programs taint consumer perceptions of the usefulness of improved stoves. “My mother was given such a stove, but she never used it, so I think I do not want one” is a typical comment heard after such a program.

Additionally, give-away programs create an expectation that such stoves should be free, undermining local industry that might distribute the stoves sustainably over many years. Negative effects from programs like these last until many years after the projects end. Consumers can have good memories.

The following are excerpts from papers written by the most knowledgeable experts in the improved cookstove field. These papers contain a wealth of information that can help future stove programs avoid making mistakes that have already been made.

Barnes, D., Smith, K., et al., “What Makes People Cook with Improved Biomass Stoves?: A Comparative International Review of Stove Programs.” World Bank Technical Paper Number 242, May 1994.

“The real problem with subsidies is perhaps not so much their magnitude as that in so many cases they seem to “sour” stove projects. In almost every case, for example, programs initially offering stoves at no cost have found that use and maintenance rates were unacceptably low. This accounts for the global survey result that shows less than 10 percent of programs now offer full subsidies. People just do not value things that are given to them…

“In the most successful stove programs, the stove itself is not heavily subsidized. This ensures that the program can be self-sustaining without extensive government support and that people are willing to pay for the benefits of the improved stove compared with the traditional stove.”

Krugman, H. “Improved Cookstove Programs: Boon or Boondoggle?” IRDC Reports, January 1998.

“Initial subsidies may be justified but a stove program must eventually stand on its own.  Extended subsidies can stifle the development of competitive local manufacturing enterprises and may also make stove recipients careless about maintenance because their personal stake is small…

The challenge is to ensure that such subsidies do not destroy nascent markets and are targeted as effectively as possible to the very poorest. Other cases—for example, mosquito nets to prevent malaria—have demonstrated that subsidies can be effective in encouraging widespread uptake of a product when motivation exists. On the other hand, various studies have shown that subsidized stoves turn into little more than scrap if target customers do not value the product to begin with.”

End Notes

Barnes, D., Smith, K., et al., “What Makes People Cook with Improved Biomass Stoves?: A Comparative International Review of Stove Programs.” World Bank Technical Paper Number 242, May 1994.

Krugman, H. “Improved Cookstove Programs: Boon or Boondoggle?” IRDC Reports, January 1998. Available at: http://idrinfo.idrc.ca/archive/ReportsINTRA/pdfs/v17n1e/111362.pdf