Contract Sales

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Overview

Essentially, this method of distribution involves the sale of products or services on a contract basis to other companies or organizations. Most contract sales are made to institutions serving poor customers such as schools, slaughterhouses, city governments, dairy processors, health clinics, and others. Other contracts deal with commodity-production enterprises such as growers of biofuels or even large consumers such as railways and industry. This model is correlated to the Project-based model of scaling and the Institutional Sales model of affordability.

Pros

Enterprises can either sell large products that make the most sense for large business to business sales, or sell commodity-type products that must be sold in bulk quantities. These Enterprise sell products that create public goods, therefore and governments or large private companies are the most logical buyers. In some cases, the enterprise needs to have guaranteed sales volumes over time to justify initial investment, such as with biodiesel plantations, which ensures that there will be some long term continuation of operations.

Cons

Without strong government connections, large-scale sales to government can involve political risk and bureaucracy. Sometimes commodity producers are caught in a “chicken and egg” situation where it is hard to find investment to start plantations without large contracts for sale of crops, but buyers won’t commit until the plantation is established.

Case Studies

Act-If Electropower sells solar powered street lamps which bring community light to small towns without grid access in Mexico.

Act-if has a lobbying arm, EnviroProcess, which negotiates with the Federal government to subsdize the purchase of their systems by city governments.City governments contract with Act-If to purchase their lights for an entire town, park, or central neighborhood.

Enterprises