PRODUCT STRATEGY

Objectives

• Marketing mix challenges.

• Product concept and classification.

• New product development with adoption process of consumers.

• Lifecycle of a product and Strategies in rural packaging and after sales service.

Marketing mix challenges.

• Product – Acceptability

• Price- Affordability

• Place- Availability

• Promotion- Awareness

Availability

• First challenge- To ensure the availability of product or services.

• 638000 villages spread over 3.3 million sq km ; 742 million Indians may live in rural areas but finding them is not easy.

• Poor state of roads – a greater challenge to send products to far flung villages on a regular basis.

• Solution strong distribution system.

• Example• HLL’s strong distribution

system- uses auto-rickshaws , bullock carts and even boats in the backwaters of Kerala.

• Coca-cola uses hub and spoke model.

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/-.

Acceptability

• Need to provide product that suit the rural market.

• L.G.Electronics- Customized television and christened it Sampoorna.

• Coca cola – low cost iceboxes, tin box for new outlets and thrmocol box for seasonal outlets because of lack of electricity and absence of refrigerators.

Awareness

• Large parts inaccessible to conventional media. 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.

Products concepts and classification

• Market mix planning begins with offering.

• Rural consumers judges offering on the basis of three elements

1) Product features and quality.

2) Service mix and quality.

3) Appropriateness of offering’s price.

• Companies should not dump the goods for urban consumers into rural market.

• Understand the cultural dynamics and specific needs.

• Cadbury launched Chocolate flavored biscuit- mothers opt for affordable rather than expensive.

• Eveready found plastic torches for urban consumers have got no demand in rural area they prefer heavy brass torches – Importance of product feature.

Five levels of product

• Each level adds more customer value and constitute a scale of customer value hierarchy.

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

• First two levels remains the same in both urban and rural market. Difference from the third level only.

• Third level- marketer prepares an expected 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 to operate set. Urban consumer goes for digital sound, flat screen etc.

• Fourth level – marketer prepares an augmented 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.

• Fifth level – encompasses all augmentations and transformations that the product may ultimately undergo in future. New ways to satisfy their customers.

• Example electric bulbs that sustain high voltage fluctuations.

Rural Product Categories

•FMCG’s

•Consumer Durables

•Agri Goods

•Services

FMCG Main Players

FMCG Market

• According to NCAER survey, the rural market accounted for 53% of the total consumption in the country in 1998-99

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

FMCG Growth

• Rural market has grown consistently in the 1990’s• A spatial distribution of the FMCG rural market

shows that four states namely Uttar Pradesh, Andhra Pradesh, Maharashtra and West Bengal account for 50% share of this market

• High income households spends 3.6 times more than the lower income households on FMCG’s.

FMCG Products

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

Market Growth

• The average annual per capita spend on FMCGs in rural is Rs. 9400 as compared to Rs. 13000 for urban among rich households.

• 70% of the population accounts for only 50% of even relatively well-penetrated categories such as soaps and detergents.

Consumer Durables

• Durable goods include products like home appliances, automobiles, watches, funrniture.etc

Main Players

• NCAER has classified durables into 3 categories:– Low priced(<Rs. 1000)– Medium priced(Rs. 1000- 6000)– High priced(>Rs. 6000)

Consumer Durables Market

• As per NCAER Indian Market Demographics Report 2002, rural India accounted for over 60% share of durables in 1998-99.

• The estimated annual size of the rural market is Rs. 130 billion

Rural Share

• The rural share of durables has risen from 54% in 1989-90 to over 60% in 1998-99.

• Number of durables with over 75% share has increased from one to four products.

• For several high priced products, the rural share continues to below 50%

Durable Products

• The rural penetration of most products is very low compared to urban except for bicycles, radios and mechanical wrist watches.

• The rural-urban disparity is highest in case of electrical goods.

Market Growth

• The mid 1990’s witnessed impressive growth rates

• It increased from 8.8% in the mid 1990’s to 11.5% from 2000 onwards.

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, Chambal Fertilizers, IFFCO, Mahindra & Mahindra, Eicher and Escorts

Services

• Major services in rural include telecommunication, transport, health care, banking, insurance and education, ITES like the internet, DTP and mobile phone services.

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

New product development

1.Idea generation2.Concept testing

3.Product development4.Test marketing

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 north india

• Kishan credit card

Max gas cylinder

• Auto cut regulator

• Double-seated cylinder

• Special steel-braided hose pipe

• Wide base of cylinder

• Top ring open one side

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

Product Life Cycle (PLC)

PLC of a product in the rural market is often longer than in the urban market due to challenges involved in distribution, communication and adoption

• 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 brand building and should innovate constantly to sustain in rural market

• Pioneers in rural markets having high penetration with products at the maturity stage now extends their brands

Product Mix

• Simple- mostly only one product of a particular company registers its availability on 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

Rural Packaging

• Plays significant role as it is associated with– Affordability, – ability to recognize, – convenience of usage – product appeal

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

• Marketers have to consider following factors in packaging– Packaging material– Pack size and convenience– Packaging aesthetics

Packaging Material

• Most commonly used- plastics since they are waterproof, provides barriers to vapours, sunlight resistant, lightweight

Pack Size and Covenience

• Sachet revolution pioneered by Velvet Shampoo at 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 to use a product

• Eg: Colgate tooth powder in small sachet with cap, closeup toothpaste, Fair& Lovely, Parachute coconut oil in Re.1 plastic bottles easy to use anytime

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 convey product’s benefits influence consumer perception about the brand

Branding in Rural India

• Popular brands show an unusual trend

• Brand association with colours, numbers and visuals and not necessarily with the name of the brand

• Retailers play a major role in rural brand promotion

BRAND BUILDING IN RURAL INDIA

• 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 toothpaste

Sansar sewing machine

• CREATING A BRAND IDENTITY• Challenge: need to relate the brand

with the rural lifestyle• Brands are introduced to urban

markets and then move to rural• Tata Steel – Tata Shaktee sheets

(qualities of strength, durability and toughness)

• 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

• 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 tested

brands : 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:

• 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

FAKE BRANDS

• Bond’s for pond’s talc• ‘Fair & lonely’ for ‘Fair & Lovely’• ‘Likeboy’ for ‘Lifebouy’

• The main problem of rural market is the low penetration and the poor availability of branded products.

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

• THE FAKES MARKET – Categories1. Lookalikes

• The colour scheme on packaging material closely 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

Pome’s for Pond’s

3. Duplicates• Exact replicas of original brands

FEATURES DUPLICATES SPELL-ALIKES LOOKALIKES

Brand Name Original Misspelt Different

Pack appearance Replica Identical Similar

Manufacturer’s address

Original 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

STRATEGY TO COUNTER FAKES

• Upgraded packaging– Eg: Dabur

• Ensure deeper penetration and continuous and regular availability of products

• Forge strong relationships with local retailers.

STRUCTURE OF COMPETITION IN 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.

CONCLUSION

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

rural conditions.• The shift of rural consumers from product

generalisation to product specialisation promises better growth for urban centric products.

• The first mover in new product categories will benefit.

PRICING STRATEGY

Pricing Strategy

Affordability is, in determined by two factors-

1.Income of consumer

2.Price of the Product & Services

Factors influencing the price

Internal Factors

• Cost

• Pricing Objective

External Factors

• Customers

• Suppliers

• Competitors

Cost Factor (Contd.)

• Promotion as a cost factor

• Credit-based transactions increase cost

.

• ITC E-chaupal: A distribution channel to control costs

Buy crop directly from the farmers. The farmer is then paid for the crop and is also given a transport fee. Bonus points are given to those crops with high quality.

Pricing Objective (Contd..)

• Profit maximization in the long run eg.sell shampoos in sachets

• Minimum returns on sales turnover• Deeper penetration of the market

Here objective is market expansion so the company launches its product at a lower price

• Keeping with competition

Videcon :Pricing Strategy

Videcon was one of the first companies to enter the rural market with a plethora of products in the home appliances. It attacked market leader Phillips by launching a radio set for Rs.180(the Phillips radio set cost Rs.250) and grabbed a major chunk of the market.

Low Priced shampoo

Cavinkare realized that for a family of five members at rs.2 per sachet and minimum of four hair washes per person per month would mean a Rs. 40 spend fro a shampoo . Many rural families cannot afford this expense. hence 50 p sachet shampoo were introduced.

External influences

• Customers the 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 lately competition is on non price factors. eg-anchor whites vegetarian toothpaste

• Legal environment

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

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

THANK YOU…