35399173 distribution strategy in rural marketing

8/7/2019 35399173 Distribution Strategy in Rural Marketing

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DISTRIBUTION

STRATEGY

1



INTRODUCTION

Availability determines volume and marketshareChallenge : Reaching 6 lakh villages andfeeding a retail network of over 35 lakh villageshops68% of rural markets still lies untapped due to

inaccessibility.Some successful regional brands : Gharidetergent, Anchor toothpaste, Gemini Oil

2



P roblems faced in rural distribution:Large number of small marketsDispersed population and tradeP oor road connectivity

Multiple tiers higher costsP oor availability of suitable dealersLow density of shops per village, high variation intheir concentrationInadequate bank and credit facilities for ruralretailers poor viability of retail outlets

3



Coverage Status in Rural MarketsRural any location with a population of lessthan 50,00050% of rural population resides in 1 lakh off

large villages ( 2000+ population)Account for 60% of rural wealth2.3 lakh tiny villages (<500 population) hardly any shopsDistribution becomes uneconomical towardssmaller towns

5



Channels of DistributionFive layers of distribution channels for movement of products from company depot to interior village markets:

Layer Channel Partner LocationLayer 1 Company depot/ C&FA National/State levelLayer 2 Distributor/ van operator/

super stockist/ rural distributor District level

Layer 3 Sub-distributor/ Retail stockist/Sub-stockist/ Star seller/Shakti dealer

Tehsil HQ, townsand large villages

Layer 4 Wholesaler Feeder towns,large villages,haats

Layer 5 Retailer Villages, haats6



Rural Distribution System

WholesalersRetailers

Mobile tradersVansWeekly haats

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Wholesaling7 0% of rural market beyond reach of directmarketing50% rural consumption through wholesalers

Speculative rather than distributive- insufficient product availability- urban areas most concentration onretailers - wholesale distribution less-companies neglected rural markets

8



Rural retail systemRural retail spread- Rural India - 65% retail outlets in country

- 35 lakh retail outlets spread over 6 lakh villages- High distribution cost

* geographical spread* low volumes per outlet

- Average monthly sale per shop < Rs. 5000- restricts variety and range of products stocked- 58% of villagers prefer to buy from haats rather thanshops coz of better price, quality and variety- Availability of shops in villages is poor

9



Rural premises:- infrastructural constraints

* lack of sufficient space* inadequate power supply* lack of proper storage system

- financial constraints* inadequate funds* unwillingness of banks to extend loans

- low retail space per capita <100 sq.ft area- travel and transport costs

10



Rural retail shelves

Filled with local and regional brands higher margins andlonger credit periodsLess variety of brands availableNumber of brands per product category decreases

towards smaller villagesEnsure visibility on shelvesP roduct stocking cluttered &disorganised

Slow moving products dust coveredAbsence of proper racks, display box, standStrategies: provide display & storage systems

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Vans

Salesman loads van with stocks from neareststockist or company stock point

Works around surrounding marketsThen moves to next stock point journeycycle

Used for both sales & promotionsEg.: Everyday , J.K. DiaryEffective but expensive

12



Haats/ Shandies

Oldest marketing channel in IndiaP rofile of haat visitors and purchase behaviour

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Credit facilities to customersPricing by channelReason for stocking a product / brandSeasonal pattern of stockingInformation source and influence on

retailerPurchase source for the retailerPurchasing cycle

Channel promotion

BEHAVIOUR OF CHANNEL

15



P REVALENT DISTRIBUTION MODELS

RURALMARKET

VAN/SUBSTOCKIST

FEEDER TOWNSWHOLESALEAND RETAIL

RETAIL WHOLESALE

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MARKETING

DISTRIBUTOR(URBAN)

WHOLESALER WHOLESALER

RETAILER(LOCAL)

RETAILER(SATELLITE

MKT)

RETAILER(URBAN)

RETAILER(URBAN)

RETAILER(RURAL)

COMPANY

C&FA

DISTRIBUTOR(RURAL)

SUB-DISTRIBUTOR

DISTRIBUTION MODEL 1

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CHARATERISTICS

Rural distribution separated from urban distributionCompany appoint a sub distributor(SD)under ruraldistributor(RD)Owing to poor road networks & low volume per outlet,

RD covers a large areaDM1 model focuses more on RDÑs & SDÑs rather thanthe wholesale channel and has large no. of pointsappointed in the rural areas as locations arescattered. This ensures that companies productsreach maximum no. of areasAdvantages include better monitoring, pricediscipline and control over the sale and distributionof products

Companies prepare PJPÑs (Permanent Journey Plan) ± six working days. Outlets are covered only18




WHOLESALER

RETAILER(LOCAL)

COMPANY

C&FA / DEP OT

DISTRIBUTOR

RETAILER


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CHARATERISTICS

There is no separate channel for rural distributionMinimises distribution costs, allowing companies tooffer better margins to distributors and otherchannel partners (fewer)

Companies with limited no. of SKUs and high salesvolume adopt this modelIt is also preferred by new entrants who lackinfrastructure required to have wide distributionnetworkExample: Priyagold biscuit, Nirma (Shakti detergent,Nirma soaps, Camay & other toiletries)

Issues:Coverage, No SD to cover interior parts

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NIRMA DISTRIBUTION SYSTEM

SUB DISTRIBUTOR/BIG WHOLESALER

WHOLESALER

NIRMA

DEP OT

DIRECT DISTRIBUTOR

RETAILER WHOLESALER RETAILER


Ahmedabad

Hyderabad, Kolkata, Kanpur

At district level

At Tehsil level Covers 300-400

outlets directly

21



NEW RURAL DISTRICT OFFICE

LG

DEP OT

MULTIP LE DEALERSEXCLUSIVE DEALERS

CONSUMER

DURABLE GOODS COM P ANIES DISTRIBUTION SYSTEM - 1

C&F AGENTS WAREHOUSE

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MARKETING

CONSUMER

RETAILER(RURAL)

RETAILER(URBAN)

P HILIP S

DEP OT

DISTRIBUTOR(URBAN)

DURABLE GOODS COM P ANIES DISTRIBUTION SYSTEM - 2

STOCKIST(RURAL)

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Retail outlets are not able to sell more durablesbecause:

They lack varietyTransport costs increase the prices (The net landedcost of a 21 inch Color TV is Rs. 1000 more comparedto the price offered by a dealer in the city)

Rural buyers prefer to buy from city stores because:More choices are availableIt is possible to get competitive prices throughbargainingRural buyer can see many options, visit several shopsand check different prices

Problem:To generate volumes, companies give huge discountsto the big city dealers, which results in price

differences and put the rural retailer atdisadvantage24




HAATRETAILER

MANUFACTURER

WHOLESALER IN BIGCITY

WHOLESALER INSMALL TOWN/KASBA

VILLAGERETAILER

MOBILETRADER

DISTRIBUTION OF FAKE P RODUCTS

CUSTOMER

25



Channels of distribution:Channel 1: Manufacturers to wholesaler/retailer in big

city or small town, or directly to customerChannel 2: Wholesaler in big city to wholesaler in small

town/kasba

Channel 3: Wholesaler in small town /kasba to villageretailer/mobile trader/haat

Fakes reach consumers through the following channels:Small kirana shops located within the villageBig shops generally located on the main roadDoor to door visits by salesmen who pose as companyrepresentativesSalesmen in local trains and busesMobile traders

Haats 26



EMERGING DISTRIBUTION

MODELS.

Marketers are innovating new cost effective

approaches to reach markets.Objectives:

Maximize existing infrastructure.

Ensuring participation and economicsustainability of all stakeholders

27



CORP ORATE- SHG LINKAGE(self

help group) 10-15 women organized by govt bodies.To boost the self worth among women.Loan assistance from rural banks for setting upof income generating enterprises.

Rapid Growth provided an opportunity toestablish a path breaking distribution modelthrough the linkage of the groups formarketers.

28



TTKP RESTIGEP RESSURE COOKER CASE

Stagnating Sales and declining returns.Company saw SHG women as an opportunityto enter to the rural market.Meetings were organized with the group .Interested women were chosen as dealers anddemo cookers were given to present at the

SHG meetings.Women dealers also visited other potentialbuyers and booked orders.

29



Satellite Distribution Model.(HUB & SP OKE SYSTEM).

Stockists are appointed in major towns and feedertowns.

Retailers in feeder towns get attached to thesestockists.Manufacturer supplies goods to stockists.Functions performed by stockists includeFinancing, Ware housing, Sub distribution.Volume done by retailers varies due to location,capacity etc.Over a period of time some retailers will be elevated

to stockists points. 30



P ioneers in Satellite Distribution model

COKE & PEPSI

31



SYNDICATED DISTRIBUTION

Distribution is posing a major problem for anew company to penetrate to Rural market.

Two or more companies come together toform a syndicated trading organization tojointly distribute a collective group of

household products by sharing costs.Small company should not deal in the sameproducts that the big company deals

32



JK Diary Case

JK diary launched a WHITENER D IARY TOP in50 gm. sachets priced at 6.50 Rs targeting atRural customers.To cover the interiors a van was hired(125 Km*25 Days) @6Rs P er Km.Since JK diary has only a single product theyshared the travelling expense with three othercompanies targeting at rural customers.

33



P roblems with syndicated Distribution.

Markets for the coverage of two companiesare different.

Terms of P

ayment are different.(Cash by onecompany & credit by other company).Salesman of only one company accompaniesthe van: ( P ushes his companies products &does not make serious efforts to collect thepayments of other companies).

34



ITC s DISTRIBUTION MODEL.

Reached Rural Consumers through its e-Choupal model for backward and forwardlinkages for its agri related business

35



P ROJECT DISHA- CASE.

MART selected500 ex volunteers to promotecompany Brands(COLGATE).

Volunteers will be provided with all facilities(bicycles, umbrellas, storage boxes, T-shirts,etc).Volunteers buy stock from nearby sub stockists andsells at near by Haats and village Shops on the way.Average sales of 1000Rs Per day.Result is that Company got benefited from this .

37



AGRICULTURE INP UT DEALERS.

2,62,000 fertilizer dealers in country.Fertilizer companies have retail outlets within

a range of 5 Km.Marketers found the possibility of selling theirproducts through these outlets.

38



P ETROLP UMP S & EXTENSIONCOUNTERS.

60% of 12000 P etrol pumps in INDIA is locatedon Highways close to villages.

Selling of foodP

roducts & toiletries throughthese outlets.Exploring possibility of selling agri inputs &LP G cylinders from these outlets.

39



OTHER CHANNELS.

HERO HONDA Company reported emergence of Unofficial channel of distribution.

(Village Mechanics, Real Estate Agents &Shopkeepers).Take the Bikes in 2 s or 3 s from company Dealers.

Display them outside dealer s P remises and willclose the sale.P aper work left to the Dealer to complete.

40



IDEAL DISTRIBUTION FOR RURAL.Per Capita Sales=Annual Sales/Market Population..

Rural Markets are GOLD Mines which forced marketers to come up with innovative ideas to ensure the reach of their Products in these areas

Name of the Model Best situation

P roject Shakti.(Corporate SHG) Low P CS, Low P opulation Density

Segment consumers.

NSV ModelP DS, Cooperatives& Fertilizer Dealers.

Low P CS High P opulation DensitySegment.

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Communication Strategy

42



Introduction

Advertising goes hand in hand with economic growth.Scenario has changed since economic liberalization.

Influence of Electronic media is contributing to the growth of

rural aspirations.Communicating properly to the rural customers was the mainchallenge for corporate marketers.Reaching out to the rural consumers also presented a greatchallenge.Rural Communication is not a peripheral activity .

43



Challenges in Rural Communication

Heterogeneity andSpread

National

Languages

16 ScheduledLanguages

Languages withwidespread Use : 47

languages used for primaryeducation ,98 used in print media,71 used on radio, 13 used in films

Local Vernaculars :

Over 114 recognized varieties,216 mother tongues with more than 10000

speakers were recorded in 1991

44



Key characteristics of heterogeneous ruralmarkets

Widespread geographical dispersion (6,38,000 villages) manyof them are still beyond the reach of media.

Vast variations in levels of literacy.

Literacy (Kerala 90%, Bihar 44%).

Variations in reach of electronic media (Kerala 63%, Bihar17 %) and print media (Kerala 65%, Bihar 9%)

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Therefore, the requirement is threefold

To identify the most suitable medium to ensure maximumspatial research.

To develop region-specific consumer profiles to understandthe characteristics of the target market and

To design the most effective and persuasive communicationand promotional strategies to induce the target audience tobuy the product.

46



Understanding the Rural Audience

There are two distinct sets of audiences in rural India:A growing number of educated, upwardly mobile, middle classpeople with aspirations and high exposure to mass media andwith considerable purchasing power, in many ways similar totheir urban counterparts.The illiterate masses, who are poor and cannot be easilyreached through the mass media.

In terms of economic progress, rural India is divided into:Developed states ( P unjab, Haryana, Kerala, Tamil Nadu,Andhra P radesh, Karnataka and Maharashtra)Underdeveloped or developing states (all other states)

47



A View of the Communication P rocess

The Communication P rocess Model

SENDER ENCODINGMESSAGE

-----------------------MEDIA

DECODING RECEIVER

FEEDBACK RESPONSE

NOISE

48



The receiver may not receive the intended message due to anyone of the following reasons:Selective attention: where the consumer may not notice thestimulus provided.

Selective distortion: where the message is deliberatelytwisted so that the consumer hears what he/she wants tohear and

Selective recall: where the consumer retains only a smallfraction of the message that reaches him/her.

49



Developing Effective Communication

Developing effective communication involves five steps:

1. P rofiling the target audience

2. Determining the communication objectives3. Designing the message and ensuring the effectiveness of

the message4. Selecting the communication channels

5. Designing the promotion strategy and integrating thecommunication process

50



1. P rofiling the target audience

The steps involved in designing an effective message for ruralconsumers are probing a nd profiling the target audience. Forprobing, the following questions should be asked:Who uses the brand?

Who buys the brand, and why?

Who decides which brand is to be bought?

51



P robing and profiling of rural consumers is done by examiningthe following:Social classes and intentionsConsumer receptivityGrowing Brand ConsciousnessLifestylesBuying rolesChildrenP urchase needsCommunity and the personal-value propositionValue-for-money proposition

52



2. Determining Communication Objectives

Once the target market has been identified, the marketer andthe communicator must decide on the desired audienceresponse.

The ultimate response is purchase and satisfaction.

Communicators try to put ideas into the consumer s mind, tochange his attitude, and to get the consumer to act.

The response-hierarchy AICDA model best summarizes thiscommunication strategy.

53



AICDA Model of Communication

.

Awareness Interest Conviction Desire

Action

54



Thus a marketer may seek one or more of the followingobjectives:To bring about awareness among a certain percentage of the

target audience.

To improve knowledge to generate interest.

To strengthen the liking or preference for the product.

To persuade the consumer to buy the product.

55



Message Design

Formulating the message require solving fiveproblems:Message content (what to say)Message structure (how to say it logically)Message format (how to say it symbolically)

Context association (in what context)Message source( who should say it)

56



Message content

Three types of appeal:Rational appeals: appeal to the audience s self interest.

Eg. Messages showing product quality (RamcoAsbestos Sheets)Emotional appeals: stir up positive or negative

emotions to motivate purchaseMoral appeals: appeal to the audience s senseof what is right and proper

57



E g: There should be a difference of at leastthree years between two childrenWith rural consumers, functional elementshave stronger influence than emotionalappeal.E g: In the case of Lux, they look for pure andmild( functional elements) and not onglamour (Aspirational element)

58



Language: should be simple, direct, designedin the local language. It should considertraditional and cultural aspects

59



Message Structure

Simple , short and self explanatoryP ictorial presentation: Muscleman logo of MRF Tyres, P lus symbol of Clinic P lusshampooDisadvantage is that duplicate products willcheat customers

60



Message Format

P ictures, attractive expressions, short stories,strong colors have more influence on ruralconsumersEg: Minto fresh ad

61



Context Association

Marketers need to pay attention to the ruralenvironment dress styles, food habits andcultural preferencesIt should draw a close identification with ruralaudiences.

62



Message Source

Messages can be categorized in to three groupsLikeable source: Amir Khan in Thanda MatlabCoca-cola ad.Trustworthy source: word of mouth, includesfriends relatives, neighbors.

Eg (Markfed pesticides and insecticides)Expert source: Opinion leaders are accordingto the product category

63



E g: Mistri( mason) for construction relatedproducts like cementVillagers from an upper class will not acceptthe views of Sarpanch belongs to lower casteWomen P radhans lack mass appeal or support

Opinion leaders are rural youth, postman,school headmaster etc

64



Communication Channels

P ersonal channels are divided into threeAdvocate channels: Consist of company salespeople. Eg: Dalmia Consumer Care has RuralSales P romoters to promote non tobacco bidiVardaanExpert channels: MasonsSocial channels : friends, family,neighbors

65



Non personal channels carry messageswithout personal contact. Includes massmedia, atmosphere, events, haats, jatras,melas, folk media and mandis.An atmosphere is a packaged environmentthat creates the buyer s leanings towards the

product purchase.( Chokhi Dhani), Shakti day

66



P romotional Tools

AdvertisingSales P romotion: Three characteristics.

Communication, Incentive, InvitationE g. Discount coupon on P urchase of one TataShaktee GC sheet.

Sampling: Lifebuoy Value propositionDirect Marketing : Direct mailers are the mostused tool in rural.

67



E g: Videocon After Sales service-1800mechanics and engineers visit villages twice aweek to assure after sales service.P ersonal Selling : Most cost effective tool.

E g: P roject Bharat- covered 2.2crore homes.

In 2002 HLL launched a direct contactprogramme Lifebuoy Swasthya Chetna-covered 15,000 villages in 10 states

68



Factors in setting the P romotion Mix

P ull strategy: Use sales force and tradepromotion to push the product through thechannels. Established players like HLL,Britannia rely on P ull strategyP ush strategy: Regional players like anchorprefer P ush strategyP roduct Life cycle stage : promotional toolsvary at different stages of product life cycle

69



Creating Advertisements for

Rural Audiences

70



Understand The Mindset of P otentialCustomers.Tricky, Clever ,Gimmicky Advertising doesn t

work with Rural Audience.Combining Education with Entertainment is agood method of targeting Rural Audience.

Quickies do not register well with RuralAudience.Employing Slice Of Life Approach.

71



Scheme of Rural AdvertisingP roduction

Area-Specific Adaptation( e.g. P unjabi for P unjab)

Regional Adaptation: Four Regions of India

Global P ositioning: English

Last-Destination Adaptation: Rural dialect, Color, and Motif

72



Rural Media

Conventional Non-Conventional

P ersonalizedMedia

73



Conventional Media

Radio

TelevisionCinemaP rint

74



Non-Conventional Media

Wall P aintingFolk Media- Folk Theatre

Folk SongsFolk Dances

Magic ShowsP uppet showsVideo Van

75



Melas

Important feature of Indian rural lifeTo commemorate important events and tohonour a deity.25,000 melas held annuallyThey have a strong commercial aspect

76



Rural Marketers Rule

Target top 100 commercial melas

Focus should be on melas that last longer

77



Mandis

Seen in states like P unjab and Haryana

Large network of over 7 600 mandis

7 8



P ersonalized Media

P OP Dispalys(point of purchase)

Direct Mail

7 9



Rural Media

80

35399173 distribution strategy in rural marketing

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