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Rural Marketing Comprehensive Project
Submitted To: - Submitted by:-
Ms.Kavita Sukla Dileep Singh Kansana
Praveer Saini
Shyam Modi
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TABLE OF CONTENT
PARTICULAR PAGE NO.
An Executive Summary
Statement of Purpose for the Plan 3
Objectives and Academic Rationale 4
Organization Structure 4
The Market 5
Competition and Competitive Edges 11
Strengths and Weaknesses of the Programme 13
Marketing Mechanisms 14
Selling and Pricing 18
Resources 19
Timescales 20
Costing and Cash Flow 21
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EXECUTIVE SUMMARY
The main goal of our company is to provide, in a sustainable manner, lighting for
the poor rural communities that are currently off the grid. We are going to set a
company near the villages in the towns and for the raw material we will deal with
the local suppliers so we can get the raw material easily and at economical rate.
In India, there are lots of villages still facing an electricity problem. Jharkhand,
Bihar, Uttar Pradesh, Orissa, Uttaranchal, Madhya Pradesh etc are some of the
states where significant number (more than 10%) of villages are yet to be
electrified.
The opportunity lies in providing an LED light product to non-electrified
households. Rural non-electrified households have a variety of lighting needs that
our LED lamps will fulfill.
STATEMENT OF PURPOSE FOR THE PLAN
To establish business of LED lamps and distribution of these lamps in the rural
areas those are still un-electrified like villages of Uttar Pradesh, Orissa,
Uttaranchal, and Madhya Pradesh and provide a better option and substitutes to
augment candles and kerosene lamps for lighting the home
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OBJECTIVES AND ACADEMIC RATIONALE
1. More energy-efficient lighting for use outside the home.2. More indoors lighting.3. Safety and health concerns: fumes from burning candles or kerosene.4. More quality light for social activities inside and outside the home.5. Make a store between 10-15 villages which are about 50-60 KM from the
town.
6. To spread awareness about the benefits of using LED lamps among thevillagers.
ORGANIZATION STRUCTURE
Our company will be incorporated as a for-profit company that operates out invillages and in urban areas also. It will be a free standing manufacturing and
sales organization whose job it is to find the means to market and distribute
the goods and light up the World Global design, create, and produce. The main
goal of the organization is to figure out how to create a sustainable company
that can provide lighting for the poor. In order to do this the company needs
to:
Understand the target customers, their needs, and desires. Successfully market the product to end users. Build a brand users recognize and can trust.
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Sell the products in urban markets to create pull from rural users. Build relationships with rural shop owners. Sell the product to local distributors who can place the product in a large
network of stores.
THE MARKET
Our main end-user is a household that is off the main electricity grid and is using
candles, flashlights, or kerosene (or a combination) to light up their house at
night. However, the value proposition of a more energy efficient flashlight will
make the LED product attractive to urban consumers. Taking advantage of this
will target urban consumers to improve financial results.
The following table outlines the key needs of the end-user in a low-light setting
and how these are met by the offering:
Need Result from Usage Scenario
More light Enable the end-user to better conduct
household activities in the
early morning and at night
More time for household
activities
Enables end-user to extend the
workday if desired and also to
continue or begin educational activities
for household adults and/or
children
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Safety and health No more fumes from biomass, candles,
or kerosene and no more
potential for fire or injuries due to
contact with flame
Social activities Enables end-user to participate in social
activities inside or outside
the house where darkness had
previously prevented it from
happening
State wise un-electrified villages (as on 12.12.2008)
Sl.
No.
States/UT Total No. of Inhabited
Villages as per 2001
census
Total No.
of Villages
Electrified
No. of un-
electrified
villages
1 Andhra Pradesh 26613 26565 48
2. Arunachal
Pradesh
3863 2335 1528
3. Assam 25124 19081 6043
4. Bihar 39015 19251 19764
5. Jharkhand 29354 7641 21713
6. Goa 347 347 Nil
7. Gujarat 18066 17940 126
8. Haryana 6764 6759 5
9. Himachal 17495 16891 604
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Pradesh
10. J&K 6417 6301 116
11. Karnataka 27481 26771 710
12. Kerala 1364 1384 Nil
13. Madhya Pradesh 52117 50474 1643
14. Chhatisgarh 19744 18532 1212
15. Maharashtra 41095 40351 744
16. Manipur 2315 2043 272
17. Meghalaya 5782 3016 2766
18. Mizoram 707 691 16
19. Nagaland 1278 1216 62
20. Orissa 47529 37663 9866
21. Punjab 12278 12228 Nil
22. Rajasthan 39753 37276 2477
23. Sikkim 450 405 4524. Tamil Nadu 15400 15400 Nil
25. Tripura 858 818 40
26. Uttar Pradesh 97942 57042 40900
27. Uttaranchal 15761 13131 2630
28. West Bengal 37945 31705 6240
Total (States) 592857 473287 119570
Total (UTs) 875 875 Nil
Total (All India) 593732 4745162 119570
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The following table is a breakdown of all customer segments:
Characteristics Rural Non-
Electrified
households
Rural Vendors Lower-Income
Urban
Electrified
Households
Other
Urban
Electrified
Households
Ability to Pay Low Medium Low/Medium High
Demographics Mainly
indigenous,
agricultural
Permanent
stores
in towns;
weekly
markets
Shanty-towns
bordering
large
urban areas
All other
electrified
households
Ease of
Distribution
Low Very Low Medium Medium/High
Mission
Alignment
High Medium Medium Low
Promotion Medium High Medium Medium
Customer
Need
High Medium Medium Medium
Previous Light Flashlights,
Biomass,
Candles,PV systems
Gasoline
generators
Grid,
flashlights
Grid,
flashlights
Overall
Attractiveness
High Medium Low/Medium Medium/High
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The following table lists current end-user options for lighting up a household in
India:
Light Source Regional use Advantages Drawbacks
Candles Rural; off-grid Familiar
technology
Safety hazard
Short life
Incandescent
Flashlight
Rural/ Urban;
on and off-grid
Portable Widely used
and accepted
Replacingbatteries
expensive
Battery charge-8 hrs
Incandescent
Bulb 40-W
Urban/Rural;
grid
Highest lumensoutput
Long life
Unit is fragile Inefficient use
of energy
Need gridaccess
CFL 5-W Urban; grid Better lightoutput per cost
Long life
Difficult tomake unit small
Unit is fragileKerosene
lamp
Rural; off-grid Portable Produces fumes Safety hazard Kerosene
expensive
Short life
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Target End-User Segments
LED lamps have chosen to target rural non-electrified households as well as more
affluent urban households as its main customer segments.
1) Rural Non-Electrified Households: The highest concentrations of non-
electrified households are located in rural areas. These end-users do not have
access to the electricity grid and rely mainly on candles and flashlights to provide
lighting for household activities. They are the end-users most likely to benefit
from the savings in batteries and the improved and more useful light.
2) Other Electrified Urban Households: This customer segment, while not directly
aligned with the Foundations main mission to bring light to those that dont have
it, is an important source of revenues that will help subsidize losses incurred with
the LED product rollout on an ongoing basis. Large retail stores are located in all
the states in which we are rolling out the LED lamp.
Other potential customer segments:
Although we initially considered two more segments, rural vendors and lower-
income electrified urban households, we discarded them for the following
reasons:
Lower-Income Electrified Urban Households: This end-user segment is not
attractive mainly because lower-income urban households often connect
themselves to the grid illegally and dont generally need flashlights to venture
outside their homes. Even homes that are connected legally to the grid do not
spend a substantial amount of money in electricity.
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Rural Vendors: Many lower-income segments go once a week or more to shops
located at a short or medium distance from their communities. These shops stock
basic goods and other household item such as batteries. Although this segment
provides fast marketing of our product, we did not choose them as a main target
segment because most of these shops are already electrified through either solar
home systems or generators.
COMPETITION AND COMPETITIVE EDGES
There is not much competition for us in the market because the existing players
are in same business but they are not concentrating in rural areas, in which we
will distribute the LED lamps.
But if we look at overall distribution of LED lamps in the city then our main
competitor are as follows.
Sunmax Energy Systemss Private Limited Petece Enviro Engineers Indosol Energy Private Limited Gem Optical Instruments Industries FIEM Industries Limited
The key strategic advantages of the LED product are higher energy efficiency,
simplicity of operation, durability, varied functionality, cost, and safety.
Energy efficiency: LEDs consume 6 to 10 times less energy thanincandescent bulbs.
http://www.indiamart.com/sunmaxenergy/solar-energy-product.htmlhttp://www.indiamart.com/peteceenviroengineers/http://www.indiamart.com/indosolenergy/http://www.gemopticals.com/http://www.indiamart.com/fiemindustries/automotive-lamps-components.htmlhttp://www.indiamart.com/fiemindustries/automotive-lamps-components.htmlhttp://www.gemopticals.com/http://www.indiamart.com/indosolenergy/http://www.indiamart.com/peteceenviroengineers/http://www.indiamart.com/sunmaxenergy/solar-energy-product.html -
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More light: Incandescent flashlights have a lumens output of 16-20, whilethe LED of our lamp has an output of 40.
Simplicity of operation: The LED product is very similar in design toproducts already used by our target customer segments. If they are
convinced by our value proposition, they do not have to deal with the
uncertainty in adopting and using an unfamiliar, new technology.
Durability: LEDs are ideally suited to the harsh conditions that can exist inthe developing world. With no delicate glass or filaments, LEDs can
withstand severe shock and vibration, - a common cause of premature
failure with traditional light sources such as incandescent bulbs and CFLs.
Varied functionality: Given its design, the LED product can be placed on thewall, be hanging from the ceiling and used as a regular flashlight. This gives
the end-user a variety of task/ambient light functionalities that fit the
various user scenarios of our customer segments.
Cost: The LED lamp will cost $9.95, and we believe that the consumer willbe able to recover this investment in 2 months, thanks to savings in battery
consumption.
Safety: LED technology produces no fumes and has no hazardouscomponents. It is solid-state technology and is nearly indestructible.
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STRENGTHS AND WEAKNESSES OF THE PROGRAMME
Strengths:
LED technology: LED technology is solid state, very durable, and runs onlow voltage (2.5- 3V). It has a long life in comparison to an incandescent
bulb (more than 50,000 hours), and uses 5% 4 of the energy of a regular
incandescent bulb.
Flashlight functionality: Enables to end-user to utilize the product as both aflashlight and as a light fixture to be hung from the ceiling/wall or be placed
in any part of the room as a source of light. In rural areas it is often
necessary to go outside for household/social activities.
Adjustable stand: An adjustable stand allows the product to be oriented asa task or ambient lighting system and gives it the flexibility to be placed on
a variety of household surfaces.
Lightweight/portable: Portability is important as it allows the end-user totake it outside the household and also the flexibility to change from
task/ambient capability.
Uses commonly available batteries: Our end-users, even if accepting ofnew technologies, are more likely to accept the LED product if several
aspects of its design and use are familiar to them. In addition, most rural
households in Mexico have small flashlights and purchase batteries on a
weekly or bi-weekly basis.
Ambient light: Even though it can be used as a flashlight, its main intendeduse is as a source of ambient light.
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Weaknesses:
Given the low cost of candles and kerosene relative to flashlights, it is notpossible to derive savings from using our lamp as a substitute of these
lighting tools.
To Fear that existing manufacturer in led lamps would be also looking toenter in rural market.
Availability and continuity of electricity for charging Batteries in rural areas. Initially costly Repairing problems in rural areas.
MARKETING MECHANISMS
Our business model consists of selling a lamp that works with two D batteries and
one LED (Light Emitting Diode). It can be used as a flashlight for outdoors work as
well as an indoors light for ambient purposes. Our lamp will initially have the
following purposes:
It replaces current flashlights It replaces candles and kerosene lamps used indoors It is an additional light to the existing ones
Our main value proposition is the fact that our lamp is a money saver.
MARKETING PLAN
Overall Marketing Strategy
Our companys product will have to be priced a little lower than its competition.
This means company needs to clearly articulate its benefits to consumers in order
to attract purchase intent although companys primary target market will be rural
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households that do not have electricity, company plans to sell its products in both
rural and urban areas. This is being done for three reasons:
Rural families perceive products that are sold exclusively in rural areas aslower quality goods- goods that were not high quality enough to be sold in
the city, and so companies have no choice but to offload them in rural
areas. Conversely they perceive goods that are popular in urban areas,
especially if they are found in large chains like Wal-Mart, to be of high
quality. As company wants its brand to be perceived as high quality we
believe it is imperative that we distribute our product in urban areas in
order to get that association.
As most rural people travel to urban areas at least once every quarter,there is a good chance our target consumer will either learn about a
product or purchase a product while in an urban area. By placing its
products in urban centers company not only increase its ability to sell
products to rural customers, but it may also create pull for the product,
whereby rural customers are asking their local Shopkeeper if they have our
product. This pull can help expand our distribution network.
Companys target market is small and dispersed. It would be very difficultand costly to create a distribution network that reaches only our target
market and still reach enough economies of scale to make the company
sustainable. In order to be sustainable, company needs to thus create a
product that is accessible to the entire population, and allow urban sales to
help subsidize company growth.
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Product Differentiation
In order to differentiate companys product from others in the marketplace,
company will focus on innovation. Packaging and other marketing
communications need to stress the state of the art technology this light of the
future uses. As consumers have indicated that other company products represent
both high quality and technologically innovative products, companys products
should make it clear that the product was designed or developed after lot of R&D.
Brand Management
Company will position itself as a company that cares. Although few rural
consumers may make in store purchase decisions based upon the fact that
companys goal is to provide sufficient lighting to homes that do not have
electricity, this goal provides a wonderful publicity vehicle for the brand that can
create great buzz and free marketing. The end goal oflighting up the world can
lead to media coverage, nonprofit, government, or socially minded (i.e. The Body
Shop) corporations seeking out the product in large quantities, as well as general
consumer brand recognition. Also as rural consumers currently have somewhat
negative associations with corporate rural, clearly articulating our goal of lighting
up the world will not only differentiates our corporation, but it also may help win
the trust and minds of consumers.
Geographical Location of Manufacturing
Company plans to manufacture its product in towns (NCR regions) those are near
to villages. Manufacturing and assembly capabilities in towns are very high and it
is believed that due to both the small lot sizes and the expenses that shipping the
product nationally would incur, that manufacturing would be cheaper in towns.
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Manufacturing
Company will partner with a low cost, high quality manufacturer of LED in towns
or from cities to create its lamps. In India manufacturing is amongst the highest
quality most affordable manufacturing in the world and it is believed that few
cost benefits and economies of scale would be realized by manufacturing the
product outside of villages. Company will contact with the manufacturer of the
light casing and circuit board. We will assemble the light and be responsible for
the packaging as well as any literature that will accompany the light. After
assembling the light the company will ship the light initially to distributors or even
retailer but as quantities sold and production runs increase we will cut the
intermarries between the distributions or can take the orders directly from
households.
Company
We will maintain a warehouse/storage facility where it will stockpile its inventory
of lights. Company will also be able to negotiate with its manufacturers to hold
inventory on their premises. As sales and production numbers become more
settled, it will be easier to time and manage production runs and inventory-
carrying costs can be reduced. We will ship inventory to distributors, retailers, and
nonprofit partnerships.
Distribution
Distributors will receive shipments directly from the company. If the distributor
times the order around production runs, it can get a cheaper price for the product
and direct shipment. If the distributors order does not line up with the
production runs, then it will receive its shipment from companys warehouse. The
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distributor will order lights in lots of 400 and will responsible for its own inventory
management.
Rural Retailers
The origin of shipment will depend upon both the timing of the order and the
relationship that has been established. For example, non-profit or government
entities may develop a relationship with company where they can time their
orders and order them in large enough lots that for them it makes sense to get
the product sourced directly from the manufacturer. Smaller rural retailers would
receive the product through their relationship with their distributor.
Maintenance and repair
Shop owners will be responsible for maintenance or repair of the lights. Shop
owners will have a 90 day warranty on the product from the date of a shipments
arrival at a shopkeepers store. If the product is defective or breaks within these
90 days, company will replace the light at no cost. Company will also provide
information to shopkeepers and local electricians on how to repair LED lights so
that people feel more comfort in repairing to lights.
SELLING AND PRICING
Selling:
The company will need to sell to a variety of different distributors and retailers at
the same time. The initial goal for the pilot program is to get 4 rural
distributors/retailers signed for a 1-month test run of the product. The initial
strategy is to target large rural distributors. The company sales team would pitch
them the product leveraging our products quality as well as innovation and if
appropriate our companys social mission. If this test run proves successful, the
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idea is to expand to a greater number of retailers by either increasing the number
of distributors or increasing our reach within those distributor networks. After the
pilot test, company will make a greater push to sell its product in urban stores
also.
Pricing:
It is estimated that the product will cost around 80 Rs to make. Given a 25%
distributor margin, transportation costs, taxes, and a retailer mark-up, the end
price rises to 100 Rs. In order for the product to be affordable it needs to be less
than 200, so we will do whatever we can to keep the product under the 200 Rs
level.
Although company foresees itself moving forward with a single pricing schema, it
is worth noting that as the target customer and distribution channels are different
in rural and urban areas, there lies potential to perform some price discrimination
and charge urban customers a higher price. Urban customers have in general
more disposable income and would see a price over 200 as less of a barrier. That
being said, more research needs to be done to understand the effects of a dual
pricing strategy before one could be implemented.
RESOURCESBasic resources for production-
We will purchase LED, circuits board and light cases from the local orremote suppliers.
Agreements with the distributers and the retailers. To provide the batteries in villages at low cost by agreements with the local
suppliers.
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Financial resources-
Our initial capital 3 lakh will be utilized in following functions:
To set up a small manufacturing unit in towns. To hire employees. To purchase equipment for assembling the LED, cases and circuits. To set up a small store (Room) in villages. Logistics cost for the transportation
TIMESCALES
The initial 1-year strategy will be a four-phase process:
Phase 1 Phase 2 Phase 3 Phase 4
Development Pilot Program Initial Rollout Southern
Expansion
Manufacturingagreements
Request for quotes Design, marketing
agreements
Distributoragreements
Small roll-out
Location:Villages of
Uttar
Pradesh
Potentialrural
market
Jharkhand,
Bihar, Uttar
Pradesh,
Uttaranchal,
Madhya
Pradesh
Potentialrural
Orissa
Tamil nadu
A.P.
Kerala
Duration: 1 months Duration: 3 months Duration: 4 months Duration: 4 months
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COSTING AND CASH FLOW
A-Purchasing the raw material
-We will purchase LED, circuits board and light cases from the local or remote
suppliers = 50000 per month initially
B-Salary of employees
-2 persons (experts) for giving information to electrician about repairing the LED
lamps in village = 12 thousand per month
-2 person for creating awareness about the LED lamps benefits = 10 thousand per
month
-5 person for operating the whole process like, manufacturing, procurement,
distribution, warehousing, sales and marketing = 10 thousand each = 50000
-1 person for store in town = 6 thousand
-1 person for store in near village = 5 thousand
-labors on daily wage basis = 50000 per month
C-cost involved in making hub.
-Rent of room (store) in village = 1000 per month
-Rent of space in town = 10000 per month
-Cost in purchasing equipment = 40 thousand
D-cost involved in outsourcing logistics
Depends upon the frequency of transportation of material and size and weight of
baskets but approximately = 50000 per month
Net expenditure- 2, 84, 000 Rs
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Profit-
The market price of the LED lamps would be of 150/160 around.
Profit margin per 1 piece 50 to 60 Rs
Target for selling numbers of Lamps 10,000 or more in initial period Phase 2
Operating cost of Battery:
For our LED lamp, we considered batteries as our power source.
Power
Generation
Startup
Cost
Ongoing
Cost
Advantages Drawbacks
Batteries-
2 D-cell
Low(20 30
RS)
Low Widelyavailable
Relativelycheap
Need
constant
replacing