Year founded: 2009
Geographic reach: Global; headquarters in Cambridge (USA)
Annual revenues: $3 million (2016)
Number of employees: 27 (2016)
Sproxil is a for-profit company dedicated to using mobile technology to enable consumers to verify product authenticity at the point of purchase. Sproxil’s initial offering was tailored to the pharmaceutical industry, as counterfeit tuberculosis and malarial drugs alone are estimated to cause more than 700,000 deaths annually.1 With the unique number affixed to packaging and a simple text message, consumers can instantly verify that the medicine they are purchasing is legitimate. Sproxil’s technology was initially developed and used in Nigeria, which has one of the world’s largest counterfeit drug markets. The company has since expanded to other African countries, including Ghana, Kenya, Mali and Tanzania, as well as to India and Pakistan. Sproxil has also expanded its services beyond pharmaceuticals, signing on clients in the agrochemical, consumer products, and oil and gas industries. Since its inception, Sproxil has affixed its barcodes to 1 billion consumer products and fielded more than 50 million verification requests from 17 million unique consumers.
The World Economic Forum Global Agenda Council on Illicit Trade estimated the world’s shadow economy to be worth $650 billion, of which over one-third can be attributed to counterfeiting. The cost to the global economy of counterfeiting alone was $1.77 trillion in 2015.2 Not only does counterfeiting pose numerous risks to consumers, but it also contributes significantly to the criminal and terrorist networks engaged in illicit trade.
In 2009, Ashifi Gogo founded Sproxil to commercialize an anti-counterfeit technology he had co-developed with colleagues while at Dartmouth College (USA). The concept is simple: a serialization system is used to assign unique numbers to individual products; the numbers are affixed to packaging with a scratch-off label, similar to the labels used for buying prepaid mobile phone credit in many emerging markets, and these numbers are then tracked in a central server. Consumers are encouraged at the point of sale to send a free text message to a phone number that would be identical across all cellular networks in a country. Thee consumers then receive an instant message in return, verifying whether the drug is real or counterfeit.
Sproxil landed its first major engagement with Nigeria’s National Agency for Food and Drug Administration and Control (NAFDAC) to launch the Mobile Authentication Service (MAS), which positioned the Sproxil technology as a national standard across the country. It was the world’s first government-led roll-out of a mobile verification technology, and resulted in significant commercial interest from multinational pharmaceutical companies. Today, Sproxil applies its technology to numerous industries and has developed marketing features alongside its anti-counterfeit technology, incentivizing consumers to verify their purchases in exchange for special offers and prizes; Sproxil has distributed over $2.5 million worth of offers, including a Mercedes-Benz car. Sproxil also promotes a track-and-trace product that allows companies and law enforcement agencies to quickly identify counterfeit hotspots, aiding investigations and prevention efforts.
How Sproxil works
Sproxil positions itself as a trust builder, emphasizing consumer engagement as the theme across its product lines (Figure 4):
- Sproxil Defender: A point-of-sale product verification solution that empowers consumers to use their mobile phone to instantly identify genuine products in the marketplace and grow their trust in their favourite brands
- Sproxil Champion: A flexible point-of-sale consumer rewards solution with built-in protection against fraud that empowers brands to offer consumers convenient opportunities to earn and redeem rewards from their desired brands; also available as a bespoke solution for distributors to help brands ensure their distributors receive genuine products and earn rewards for their trust
- Sproxil Informer: A robust track-and-trace system that helps brands secure and monitor their global supply chains, from manufacturer to warehouse to retailer and all points in-between, with optional consumer engagement to provide true end-to-end security
Figure 4: Sproxil Product Line Solutions
Sproxil’s technology provides information directly to consumers, who can then make informed choices and avoid counterfeit purchases. Prior to mobile verification technology, the most widely used anti-counterfeiting technologies were holograms, which are difficult for resellers and consumers to recognize, and covert systems used by law enforcement agencies that require special scanners to read invisible markings. These technologies do not directly engage consumers, who have the most to lose in purchasing a counterfeit product. Sproxil therefore exploits a key leverage point, namely information flows, to disrupt the counterfeit goods market.
As a for-profit enterprise, Sproxil markets its solutions to consumer products makers, who affix the unique codes to their products during manufacturing. To scale its solution, Sproxil is required to forge relationships with private-sector companies, educating potential clients about the risks of counterfeiting to their product offering. However, not all companies are convinced of the risks, particularly since prevalence is very difficult to quantify precisely in emerging markets. Without being convinced of a significant impact on sales margins and profitability, companies can be reluctant to shoulder the cost of fighting counterfeiting.
Due to substantial risks to consumers from pharmaceutical counterfeits, Sproxil has successfully gained support from regulatory bodies. Governments in some countries have mandated the use of mobile verification technology (most notably in Nigeria). However, in other countries and industries, Sproxil has had to rely on other strategies to encourage companies to use product verification technology. In 2013, the company decided to develop its Champion point-of-sale consumer rewards platform for firms reluctant to implement anti-counterfeit technology. This platform still verifies product authenticity, but also incentivizes consumers to verify their products by enrolling them in contests and offering prizes. Sproxil is therefore able to market its portfolio of solutions as a sales product, rather than solely as a counterfeiting solution.
Consumer-facing information technologies can create systemic change.
Technology that puts information into customers’ hands can change individual behaviours that lead to widespread transformation. Technology can also aggregate information generated by consumers to pinpoint issues or opportunities. Through its platform, Sproxil allows customers to access previously unavailable information, helping them to make healthy and prudent purchasing decisions. Furthermore, when many customers identify fake products in a specific location, its track-and-trace platform can use the information to track the source of counterfeiting.
For-profit companies face distinct opportunities and challenges in creating systemic change.
Sproxil’s founder, Ashifi Gogo, believes that operating as a for-profit entity has helped the company win contracts in industries that are not accustomed to purchasing from non-profits. However, he does not believe that all social enterprises should pursue for-profit models, but rather that the choice of entity should follow the dynamics of the market where they operate. As a for-profit company, Sproxil has a smaller field of choice when applying for grant funding, as grant proposals are typically set up to fund non-profits. Nevertheless, whichever entity type is chosen, compromises will need to be made.
Social entrepreneurs can use innovative incentives to overcome powerful barriers to change.
In industries where counterfeiting is prevalent, companies do not always have clear incentives to take anti-counterfeiting measures, and governments are not always eager to step in with regulatory requirements. Sproxil has therefore expanded its business model and product offering to include marketing solutions that provide a carrot to companies and industries not convinced of the threat counterfeiting poses to their profit margins.
Questions for social entrepreneurs
- Can your organization provide information and feedback loops in the system you are trying to change? Does information technology play a role?
- What incentives and disincentives exist to provide information in your system?
- Would a for-profit, non-profit or hybrid legal organization deliver the information channels you envision?
“Would Sproxil have been able to develop marketing automation products to create revenue and additional interest if we had been a non-profit organization? Probably not. It is possible that investors and customers are more forgiving of for-profit companies that change strategic focus than non-profit organizations. For for-profit companies, the strategic shift is seen as market expansion versus ‘mission creep’. By leaning on established principles for growing young companies rapidly, the for-profit market for anti-counterfeit technology has created a resilient network of participants that may not have been present if the market had evolved based solely on non-profit technology providers.”
Ashifi Gogo, Founder and Chief Executive Officer, Sproxil