product strategy in rural marketing 2

7/31/2019 Product Strategy in Rural Marketing 2

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PRODUCT STRATEGY


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Objectives

Marketing mix challenges. Product concept and classification.

New product development with adoptionprocess of consumers. Lifecycle of a product and Strategies in

rural packaging and after sales service.


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Marketing mix challenges.

Product Acceptability Price- Affordability

Place- Availability Promotion- Awareness


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Availability

First challenge- To ensure the availabilityof product or services.

638000 villages spread over 3.3 million sqkm ; 742 million Indians may live in ruralareas but finding them is not easy.

Poor state of roads a greater challenge

to send products to far flung villages on aregular basis. Solution strong distribution system.


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Example HLLs strong distribution

system- uses auto-rickshaws ,

bullock carts and even boats inthe backwaters of Kerala.

Coca-cola uses hub and spokemodel.


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Affordability With low disposable incomes products need to

affordable to rural consumers. Most of them are daily wage earners. Some companies addressed the problem by

introducing small unit parks. Example includes Godrej 3 brands of cinthol, fairglow and godrej

in 50gms pack prices rupees 4-5. HLL lifebuoy at Rs 2 for 50 gm. Coca cola Returnable 200 ml glass bottle at

Rs.5/-.


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Acceptability

Need to provide product that suit the ruralmarket.

L.G.Electronics- Customized televisionand christened it Sampoorna.

Coca cola low cost iceboxes, tin box for new outlets and thrmocol box for seasonaloutlets because of lack of electricity andabsence of refrigerators.


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Awareness

Large parts inaccessible to conventionalmedia. Only 41 percent got access.

Outing confined to local fairs and festivals Television viewing to state owned

channel- Doordarshan. HLL relies on its own company

organised media. Godrej uses radio to reach people in

their own language.


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Products concepts andclassification

Market mix planning begins with offering. Rural consumers judges offering on the

basis of three elements1) Product features and quality.2) Service mix and quality.

3) Appropriateness of offerings price.


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Companies should not dump the

goods for urban consumers intorural market. Understand the cultural

dynamics and specific needs.

Cadbury launched Chocolateflavored biscuit- mothers opt for affordable rather than expensive.

Eveready found plastic torchesfor urban consumers have got nodemand in rural area they prefer heavy brass torches

Importance of product feature.


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Five levels of product

Each level adds more customer value andconstitute a scale of customer valuehierarchy.

Five levels are core benefit, basic product,expected product, augmented product,and potential product.

First two levels remains the same in bothurban and rural market. Difference fromthe third level only.


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Third level- marketer prepares anexpected product and defines a set of

attributes and conditions that a consumer normally expects .

Rural television buyer expects good

picture quality, clear sound and easy tooperate set. Urban consumer goes for digital sound, flat screen etc.


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Fourth level marketer prepares anaugmented product that meets the

customers desires beyond expectations. This could be a television which runs on

batteries and better picture quality in weak

signal conditions also local languages etc. Where as for urban consumers this could

be an inbuilt DVD player with a television

etc.


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Fifth level encompasses allaugmentations and transformations that

the product may ultimately undergo infuture. New ways to satisfy their customers.

Example electric bulbs that sustain highvoltage fluctuations.


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Rural ProductCategories

FMCGs Consumer Durables

Agri GoodsServices


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FMCG Main Players


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FMCG Market

According to NCAER survey, the ruralmarket accounted for 53% of the totalconsumption in the country in 1998-99

The estimated size was around Rs. 484 billion in 1998-99 Rs. 650 billion in 2002


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FMCG Growth

Rural market has grown consistently in the1990s

A spatial distribution of the FMCG ruralmarket shows that four states namely Uttar Pradesh, Andhra Pradesh, Maharashtra andWest Bengal account for 50% share of this

market High income households spends 3.6 times

more than the lower income households onFMCGs.


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FMCG Products

About 50% of sale of soaps, detergentsand beverages, 37% of personal products(shampoo, toothpaste and skin cream)and 12% of food products comes from therural market.


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Market Growth

The average annual per capita spend onFMCGs in rural is Rs. 9400 as comparedto Rs. 13000 for urban among richhouseholds.

70% of the population accounts for only50% of even relatively well-penetratedcategories such as soaps and detergents.


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Consumer Durables

Durable goods include products like homeappliances, automobiles, watches,funrniture.etc


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Main Players


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NCAER has classified durables into 3categories: Low priced(Rs. 6000)


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Consumer Durables Market

As per NCAER Indian MarketDemographics Report 2002, rural Indiaaccounted for over 60% share of durablesin 1998-99.

The estimated annual size of the ruralmarket is Rs. 130 billion


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Rural Share

The rural share of durables has risen from54% in 1989-90 to over 60% in 1998-99.

Number of durables with over 75% sharehas increased from one to four products.

For several high priced products, the ruralshare continues to below 50%


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Durable Products

The rural penetration of most products isvery low compared to urban except for bicycles, radios and mechanical wristwatches.

The rural-urban disparity is highest in caseof electrical goods.


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Market Growth

The mid 1990s witnessed impressivegrowth rates

It increased from 8.8% in the mid 1990s to11.5% from 2000 onwards.


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Agricultural Goods

Agri products are goods that are used for farm activities.

The agri inputs market accounts for Rs.450 billion annually.

The major players are Rallis India,Monsanto, DCM Shriram, ChambalFertilizers, IFFCO, Mahindra & Mahindra,Eicher and Escorts


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Services

Major services in rural includetelecommunication, transport, health care,banking, insurance and education, ITESlike the internet, DTP and mobile phoneservices.

This category is led my LIC, SBI, BSNL,Reliance infocomm, ITCs e -Choupal,ICICI Prudential Life Insurance,etc.


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New product development

1.Idea generation2.Concept testing3.Product development4.Test marketing


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e.g

5 k.g cooking gas cylinder by HPCL Jolly battery operated colour television

Free power radio Jugad the rural public trans port in northindia

Kishan credit card


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Max gas cylinder

Auto cut regulator Double-seated cylinder

Special steel-braided hose pipe Wide base of cylinder Top ring open one side


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EXAMPLE

Mahindra maxx Hpcl,5-kg cylinder

Vardhanm free bidi by Dalmia consumer care Water purifier-jalshodhak

Value added product: an aborted idea Phillips mahasangram


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Product Life Cycle (PLC)

PLC of a product in the rural market is oftenlonger than in the urban market due tochallenges involved in distribution,communication and adoption


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Products that enter rural markets without

serious planning die out either soon after the introduction or during the growth stage

Companies have to focus on brandbuilding and should innovate constantly tosustain in rural market


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Pioneers in rural markets having highpenetration with products at the maturitystage now extends their brands


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Product Mix

Simple- mostly only one product of aparticular company registers its availabilityon rural shelves due to limitations of investments in stocks, slow movement and replenishment of stocks, dominance of retailer in the rural market

Exceptions- HUL, Dabur


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Rural Packaging

Plays significant role as it is associatedwith Affordability,

ability to recognize, convenience of usage product appeal

Needs special focus because of Poor transport system Difficulties of safe storage Poor facilities


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Packaging Material

Most commonly used- plastics since they

are waterproof, provides barriers tovapours, sunlight resistant, lightweight


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Pack Size and Covenience

Sachet revolution pioneered by Velvet Shampooat Re. 1 in later 1970s later followed by HLL,Godrej, Dabur etc

Sachet packaging replicated in many product

categories- Tiger biscuits, Close-up toothpaste,Parachute hair oil, Ponds cold cream, Fair &Lovely, Chota Pepsi etc

Convenience- factor that affects the decision touse a product

Eg: Colgate tooth powder in small sachet with cap,closeup toothpaste, Fair& Lovely, Parachutecoconut oil in Re.1 plastic bottles easy to useanytime


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Packaging Aesthetics

Lower literacy levels in rural market Consumers appreciate bright colours

Eg: Lifebuoy identified as red soap

Distict lettering, use of local languages on

the pack, images or symbols that conveyproducts benefits influence consumer perception about the brand


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Branding in Rural India

Popular brands show an unusual trend Brand association with colours, numbers

and visuals and not necessarily with thename of the brand

Retailers play a major role in rural brandpromotion


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BRAND BUILDING IN RURALINDIA

BRAND NAME DEVELOPMENT- Facilitates easy brand recall- some brands are known by their names.- Colours (Lal dant manjan, lal sabun

lifebouy, Red battery eveready),- Numbers and Visuals- Eg:

Sampoorna rural television brand of LG. Ajanta toothpasteSansar sewing machine

CREATING A BRAND IDENTITY


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CREATING A BRAND IDENTITY Challenge: need to relate the brand

with the rural lifestyle

Brands are introduced to urbanmarkets and then move to rural Tata Steel Tata Shaktee sheets

(qualities of strength, durability andtoughness)

Britannia Tiger Biscuits ( smart,active and sharp child)

BUILDING A BRAND IMAGE Brand has a personality of its own Helps in brand connect Mahindra & Mahindra Bhumiputra

series of tractors and Sarpanch

series


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BRAND LOYALTY vs STICKINESS Rural people are less likely to switch brands

as they do not have the required information Comfortable in purchasing tried and testedbrands : brand sticky than brand loyal

What should a Brand do to establish itself Educate rural customers Develop their interest through interactive

communication Encourage their desire to own Deepen confidence through live demonstrations Build a long term relationship Eg:


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Reasons for Brand Stickiness Many rural customers are still discovering the

benefits of the products Early Mover Advantage of the dominating brand Entry of new brands very difficult


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FAKE BRANDS

Bonds for ponds talc Fair & lonely for Fair & Lovely Likeboy for Lifebouy

The main problem of rural market is the lowpenetration and the poor availability of brandedproducts.

No distribution channel to reach the customer.Led to the growth of spurious brands to fill thegap in the demand.


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THE FAKES MARKET Categories1. Lookalikes

The colour scheme on packaging materialclosely resembles that of a popular brand. Eg: Shagun for Lifebouy(150 mg)

Lalita Amla for Dabur Amla

2. Spell-alikes Names are subtly and cleverly misspelt Eg: Paracute for Parachute

Pomes for Ponds 3. Duplicates

Exact replicas of original brands


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FEATURES DUPLICATES SPELL-ALIKES LOOKALIKES

Brand Name Original Misspelt Different

Pack appearance Replica Identical Similar

Manufacturers

addressOriginal Incomplete Own Nam

Price M.R.P 40% low 10-15% low

Margins 200-300% 100-150% 60-70%

Quality Very poor poor Reasonable

Intention of retailer To cheat To mislead To freeload

Consumers unaware unaware Want cheaper products

Identity none Only literate Majority

Other none discounts schemes


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STRATEGY TO COUNTER FAKES

Upgraded packaging Eg: Dabur

Ensure deeper penetration and continuousand regular availability of products

Forge strong relationships with localretailers.


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STRUCTURE OF COMPETITIONIN RURAL INDIA

Competition from other urban national products

branded tea and detergent powder

Regional urban branded products - brands of the

unorganised sector, like soaps, talc.

Local urban brands ribbons, bangles

Local village brands ropes, bread, food items

Substitutable products or indirect competition neem

twigs.


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CONCLUSION

Product at the heart of marketing Products must achieve the best fit with

rural conditions.

The shift of rural consumers from productgeneralisation to product specialisationpromises better growth for urban centricproducts.

The first mover in new product categorieswill benefit.


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PRICING STRATEGY


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Pricing Strategy

Affordability is, in determined by two factors-1.Income of consumer 2.Price of the Product & Services


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Factors influencing the price

Internal Factors

Cost Pricing Objective

External Factors

Customers

Suppliers Competitors


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Cost Factor (Contd.)

Promotion as a cost factor

Credit-based transactions increase cost.


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ITC E-chaupal: A distribution channel tocontrol costs

Buy crop directly from the farmers. Thefarmer is then paid for the crop and is alsogiven a transport fee. Bonus points aregiven to those crops with high quality.


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Pricing Objective (Contd..)

Profit maximization in the long runeg.sell shampoos in sach ets

Minimum returns on sales turnover Deeper penetration of the marketHere objective is market expansion sothe company launches its product at alower pr ice

Keeping with competition
http://www.thehindubusinessline.com/catalyst/2004/07/08/images/2004070800160402.jpghttp://www.imagesfood.com/Images/newsimage/Britannia_tiger.jpghttp://www.thehindubusinessline.com/catalyst/2004/07/08/images/2004070800160402.jpghttp://www.imagesfood.com/Images/newsimage/Britannia_tiger.jpg


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Videcon :Pricing Strategy

Videcon was one of the first companies to enter therural market with a plethora of products in the homeappliances. It attacked market leader Phillips by

launching a radio set for Rs.180(the Phillips radio setcost Rs.250) and grabbed a major chunk of themarket.Low Priced shampoo

Cavinkare realized that for a family of five membersat rs.2 per sachet and minimum of four hair washesper person per month would mean a Rs. 40 spend froa shampoo . Many rural families cannot afford thisexpense. hence 50 p sachet shampoo wereintroduced.

E t l i fl
http://kingsrk.files.wordpress.com/2009/07/videocon.jpg


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External influences

Customersthe price sensitivity of customers depends on personal, social, economic,

geographical factors.eg.chic shampoo introduced 50 p targeting daily and weekly labourers,

sampoorna CTV from LG

Suppliers

Retailers give credit to regular customers. Competitors

Initially competition in the rural market was on basis of price. But latelycompetition is on non price factors. eg-anchor whites vegetarian toothpaste

Legal environment


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Pricing Strategies

Optional-product pricing Captive-product pricing

Low price points Avoid sophisticated packaging Refil packs/ reusable packs Highlight value, not price Product sharing services


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Market-Entry strategy

Penetration pricing Economy pricing Value pricing Coinage pricing Psychological pricing Price adjustments Discounts and allowances

Free gift Schemes for retailers Discriminatory pricing


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THANK YOU

product strategy in rural marketing 2

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