Unit I

Introduction to rural market : Rural market- profile- characteristics of a rural consumer –

Opportunities and challenges from rural markets- fake encounters in rural areas..

Rural marketing

• It is often said that markets are made, not found. This is especially true for the rural market of India

Urban and rural market

• What differentiates the two markets is not mere income, but a host of other infrastructural and socio- cultural factors.

• Thus, the rural market cannot be tapped successfully with an urban marketing mindset and would definitely require the thorough understanding

• In India rural marketing has emerged as an important in marketing discipline

Meaning of Rural

• Collin’s cobuild dictionary describes the word rural as “places for away from towns or cities”

• Sociology point of view rural is defined as a group of people who are traditionalists inout look, rooted in the land and who resist change.

• The census of India defines rural as that what is not urban and urban is – locations with in a municipality/ corporation– other location that satisfy the following criteria

• 1.minimum population of 5,000• 2. at least 75% of male workforce engaged in non-

agricultural activities• 3. a population density of over 400 person per sq.km.

• Each experts comes with different definition• Rural to Hindustan lever may not necessarily be

rural to Philips or Electrolux or somebody else in terms of marketing and marketing communications

• LG electronics defines all cities other than the seven metros or rural/ semi-urban areas.

• Therefore, it various from company to company and is also based on the calculation of market potential valve (MPV)of a particular area.

Rural marketing

• In simple words, is planning and implementation of marketing function for the rural areas.

• It is a two-way marketing process which encompasses the discharge of business activities that direct the flow of goods from urban to rural areas(for manufactured goods) and vice-versa (for agriculture produce)

• R.Marketing has also been defined as the process of developing, pricing, promoting, distributing rural specific goods and services leading to exchange between urban and rural markets, which satisfies consumer demand and also achieves organisational objectives (Iyer)

Factors differentiating rural marketing from urban marketing

• Infrastructure availability :electricity supply, finance facility, education level, roads connectivity

• Income streams : in rural areas in is seasonal and highly unreliable, consumption pattern is quite different

• Life style: daily routine of consumers is different

• Context : because of variation in infrastructure and income , an individual exists in rural areas is different

• Socio – cultural back ground :value system, goods/services and consumption in general is quite different

• Accessibility : the cost and logistics is high• Media reach and habits: different types of

promotional strategy in these two markets.

• Nature of competition : the nature and intensity of competition amongst the brands is very different in the two markets

• Consumer behaviour : the consumer’s response to marketing stimulate differs widely in two markets

Rural India : A Brief profile

• Adi Godrej, chairman, Godrej group . “ the rural consumer is discerning and the rural market is vibrant. At the current rate of growth, it will soon outstrip the urban market. The rural market is no longer sleeping but we are”

» Cont..

• Villages are the heart of India• 75% of population lives in 6,38,365 villages• 90% is concentrated in the village having

population less than 2000• Rural segment comprises 13.5 crore

households which constitute 72% of total households in India

• But the rural market is not homogeneous across the country

• The consumer willingness to accept innovation also varies among the rural market

• A brief description of rural India– Rural income distribution– Magnitude of poverty in rural India– Poverty alleviation programmes and rural

development

– Rural consumption– Relationship between agriculture, rural income

and consumption– Literacy in rural india– Electricity availability in rural india– Electricity availability in rural india– Development indicators in rural india

• A) Rural income distribution• In generating more than half of the national

income• 55.6% contribution to the national income by

74.6 crore rural population• But per capita income is low• The annual household income for rural areas

in 2002 was Rs 56,630 as compared to Rs 1,02,963 in urban area

Per capita income in rural and urban areas

• Different economic profile for different regions, districts and village

• There cannot be a single generalisation on the basis of income for the entire rural India

• The marketer has to segment this huge market according to his product profile and then select his target market.

• B) Magnitude of poverty in rural india• Analyses the phenomenon of poverty and its

spread in rural india• Poverty is measured in terms of proportion of

population living below the poverty line• Poverty line is developed by putting a price on

the minimum required consumption level of food, clothing, shelter, fuel and health care

• ICMR 1958

• 2,100 calories for urban areas• Per capita monthly expenditure worked out to

Rs 49.09 rural and Rs 56.64 for urban (1973-74)

• As of december 2005, monthly family expenditure is Rs 1,840 for a family of five in rural areas and Rs 2,795 in urban areas

• 32.5 crore Indians lived below poverty line -1/3 of the country population

• The percentage of BPL population varies significantly from one state to other (ex) orissa 48%, Punjab 6%

• Therefore formulating strategies for the rural market cannot be developed on the basis of all India figures

• Regional variations must be taken

• C) Poverty alleviation programmes• These include “gram sadak Yojna’- providing

urban amenities in rural areas• National rural employment guarantee act• Jawahar rozgar yozra schemes preference to

SC and ST ,and 30% employment opportunities are reserved for women

• D)Rural consumption• FMCG Rs 65,000 crore• Per capita expenditure on education by urban

households was 4,5 times by rural households• Urban spend twice on health compare to rural• Urban rental house five times more that rual

area• 42 million, rural, - 27 million, urban – avail

banking services

• E) relationship between agriculture, rural income and consumption

• The agriculture sector’s average annual growth fell to 1.94%, but the FMCG growth was around 12%

• Getting less depended on agriculture income

• Literacy in rural india—• The rural literacy level has improved in the

recent past from 36% to 59%• 55%reported at least secondary education• Electricity availability----• Almost 56% had an electricity connection in

2005• 90% of rural households in punjab and goa are

electrified• 25% jharkhand, 10.3% in Bihar

• F) development indicators in rural india• Bringing down the poverty level from 55% to

36% • Ranked 138th as per the human development

report

• Number of Towns and Villages in India• Item Year Number• No. of towns 2001 5,161• No. of villages 2001 *640,000• Source: Census of India, 2001.• Note: * Approximate

Nature and characteristics of the rural market

1) large and scattered market• 75 crore rural consumers who live in

approximately – 6,38,365 villages• 23% have population less than 200• 21% have population between 200 and 500• So widely scattered- raise transportation

costs, affects the viability of the distribution system

• 2) Heterogeneous market• Not a homogeneous• 24 languages and 1642 dialects- varies every

100 km• Difficult to develop uniform message – caste,

community, tradition values (from state to state, region to region differ)

• Punjab Bihar(per capita income)• 25,048 5466• 562 332(1965)

• Variations in economic development and socio-cultural background influence

• Literacy rate in rural south India is higher than rural north

• Rural consumers in the south are more brand conscious

• So, variations in behaviour due to the consumer environment – geographical, occupational

3) Income from agriculture• 55% of rural income comes from the

agriculture sector• Hence rural prosperity is tied with agricultural

prosperity» Cont…

• Recently- gradual reduction in the sole dependence on agriculture( other sectors plays significant role in the rural economy)

4) Standard of living• Lower standard of living• 70% rural population is employed in small – scale

agricultural and related occupation• Seasonality’• As it is unreliability in income- rural consumers are

extremely conscious in their purchase behaviour• Low literacy, social backwardness, low savings

5) infrastructural facilities• Road, warehouse, communication system and

financial facilities are inadequate in rural area• Roads donot connect nearly 50% villages in

the country• Inadequate infrastructure is single most

important factor distinguishes urban and rural• Promotion and physical distribution thus

becomes very difficult

Life style of rural consumer

• Haryana that had television(53%) sets was more than the number of households that had toilets(44.5)

1) rural consumer is very religious• The promotional material built around

religious themes is not only going to last longer, but will be kept with care by the villager

• Dabur developed religious calender• Rapid success of the “ganga” brand toilet soap

(contained milk and it was made from the water of ganga)- the brand register a good response

• Govinda, a cine star – famous for rural audience

2) rural consumers prefer to work hard themselves

• Would not like to be replaced by a machine• They are less likely to spend on products

making life a bit easier

• 3) strong family ties and respect for family values

• More conservative in their approach toward the different socio, economic issues

• The loose, free flowing hair of a girl in a shampoo or hair oil advertisement may actually act as barrier in the rural market.

• 4) likes to play cards and hangs out at choupal • Whatever promotional message is delivered

to the opinion leaders in a village, gets transmitted

• Love chatting with friends• Word of mouth stories develop around easily

and fast• ITC which has created an e-choupal- using the

internet to bring down any barrier with regard to technology

Profile of rural consumer

• 1) traditional outlook • Values old customs and tradition• 2) perception and its influence• In rural markets, colour, size and shapes are

interpreted differently• (ex) yellow colour indicate prosperity in the

rural south, but it indicate sickness and disease in s

• The lower literacy levels in the rural markets increase the importance of visual influence

• 3) less exposure to marketing stimuli• Low exposure to branded product• Advertisement• Source of information and learning• Low convenient buying• 4)conscious of value for money

• 5) realistic aspiration : he can reach out and stretch the budget but that is done with in limits only

• Dual uasge 15% of surf and 12% of ariel using families also use nirma detergent

• 18% of pantene using households also used clinc plus shampoo

• 6)concept of quality-values for long lasting “solid), low – cost maintenance

• 7)attitude towards prestige products• Yet they are interested in products adding to

his prestige but the price of a product justifies the value equation

Challenges in rural marketing

• Rural markets remain untapped because of three D’s

• 1.distance• 2.diversity• 3.dispersion

The challenges are..

• 1.distribution: the problems of physical distribution of channel mgt adversely affect the service as well as the cost aspect- it is not commensurate with the returns that the marketers expect.(poor infrastructure)

• Greatest challenges is reaching out to the remotest destinations and having a number of vendors at the retailing end.

• 2.understanding the psyche of the rural consumer

• Very distinct from one another• Campaigns have to be tailor-made for each

product category, each region, custom in region, language and dialects etc..

• 3.limited knowledge• Different research organisations are very

different from one another• Difficult to have limited knowledge

• 4. communication: comm..barrier due to language or icons used for advertising

• Different interpretation in rural market• Dubbing – not a right solution for rural

audience• The context, story line, narration, idiom,

symbols, appeal need to examined while developing an advertisement

• Explain directly and clearly• Urban –symbolism,emotional appeal

&indirect

• 5. cost per contact• Compare the rural promotional cost with the

urban - is the biggest challenge • Renting a van per day cost Rs 3500 and there

are 6 lakhs villages spending 500 dialects to cover

• One exposure may not be sufficient • By simple calculation – we can known that the

total cost will be much more to reach the entire rural market.

• 6. sale of fakes and spurious product• The retailer pushes imitation products – as

they get better margins (retailer)• A research undertake by A.C. Neilsen reported

that the sales value of the fake of P&G’s vicks brand were almost equal to the sale of the brand

• Seized products worth Rs 35 lakh• Secondly , selling face goods in not a criminal

offense in India and it is under civil law

• The only practical way to deal with fake is to improve the distribution and make the products available in as many places

• Original products imitation• 1.pond polons• 2.rin run• 3.501 bar 509 bar• 4. brooke bond paisa benson brand paisa• 5. lifebuoy lifejoy, liteboy

• 7.budgetary allocation• “Corporate sector loves the rural markets, but

when it comes to allocations, the amount of investment in rural marketing is very limited”, observes R. Gopalakrishna executive director, Tata sons Ltd.

• Allocate at least respectable amount of the budget for research and promtion

• 8.urban orientation and bias• Rural people are just like urban ones• They too have the same needs, desires and

aspirations • Most of the marketer apply minor

modifications (of the indian urban market)• But, these paradigms (patterns) fail

• 9.lack of right competence and commitment at frontline level

• Most of the frontline staff is from the urban areas

• They are not very comfortable to travel and interact with the villager

• Solution is recruiting frontline staff from the rural parts of india

Opportunities in rural markets

• As per I. Natarajan, chief economist – “ The rural marketer has tremendous opportunity and he stated clearly that, it was not the buying power but the distribution , which was the biggest hindrance in realising the potential of the rural market

• 5 lakh ruraliter have gone abroad- sending remittances

• HLL gets 50% of its sales turnover of RS 11,700 crores froms r.india

• LIC sells 50% of its policies in rural india• FMCG’s market worth Rs 64800 crore are

selling in R.india• Carbonated soft drinks worth Rs 1800 crore

are selling in R.india• Clearly states that rural market is not as poor

as it is perceived

• 1.rising rural prosperity• Monsoons were normal for 11 out of 13 years• Major drought year was 1987-88• The ratio of rural per capita income to urban per

capita income is increasing• The rural consuming class is increasing by about

3-4% per annum• The government also spends hundreds of

thousands of crores of rupees in rural area • Cont….

• Rural Haryana had more super rich than not just the urban Haryana

• Rural Haryana- 482• Urban - 340• Bangalore - 137• Hyderabad - 226 (2001-2002)

• 2. lesser dependence on agriculture and monsoon

• There is a time when market predictions were made on the basis of the state of the monsoon

• Changed over the year, large non-farming sector-which generate almost 45% of the rural wealth

• Rakesh kalra, CEO Eicher moto

• Rakesh kalra, CEO Eicher motor agreed “ as long as the rain deficiency during monsoon is not more than 20% the long – term average there is n’t a significant negative impact on the commercial vehicle sales.”

• 3. increasing rural consumption• More than urban• Sales of FMCG’s is 53%• Durable goods 59%

• FMCG’s RS 650000 crore out of a total market Rs 1,23,000 crore

• Just a 1% rise in rural incoem translates into Rs 10,000 crore of buying power

• Among the seven high consumption state – punjab is the lead position

• Low expenditure- bihar, madhy pradesh, assam

• Average-karnataka, uttar pradesh, T.N, orissa

• Tax- exemption on rural income too has been enhanced rural purchasing power

• 4. rural marketing efforts• Innovative models are being developed to take

the products to the rural retailers shelves• 5. increasing sale of branded product• Branded goods comprise 65% of sales in

villages today and share of non branded goods is shrinking dramatically

• 6. large popualtion• The population is very large and its growth

rate is also high• C.K. Prahlad,” the future lies with companies

who see the poor as their customer• There is an opportunity to make a lot of

money in rural india. But, there are obstacle too – i.e rural consumers is still evolving.

Rural products

Unit III

• Rural Buyer Behaviour: Rural buyer behaviour – Factors determining rural consumption – Rural buying process – Current trends in rural buying behaviour.

Consumer behaviour

• Dynamic – behaviour and the environment by which human beings conduct

• It can be understood, by the statistical report• Continuous study should be there• Knowledge of buyer behaviour is vital for

marketing strategic

Definition – consumer behaviour

• Schiffman and kanuck – “ the behaviour that consumers display in searching for, purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs. It is thus a study of how individuals make decisions to spend their available resources – like time, money, effort- on consumption related items.

Fundamentals of consumer behaviour

• Four types of buying behaviour, based on the following two parameter

• 1) degree of buyer involvement ( high and low)

• 2.degree of differences among brands (significance and non significance)

High involvement Low involvement

Significant differences among brands

Complex buying behaviour (expensive, may difference in brands like computer, automobile)

Variety seeking buying behaviour (less expensive and frequently purchased, experience – size,smell, sound, touch, ice crea, confection) per yr India – 6 brand, america -2 brand

Few difference among brand

Dissonance reducing behaviour(expensive,but few different like social products- furniture)

Habitual buying behaviour(low cost, frequently purchased –salt,soap,-exception in cigaretter- brand preference is more)

On basis of the amount of time spent, purchase behaviour can be

classifies• Planned purchase behaviour• Emergency purchase behaviour(to avoid

stock-out)• Impulse purchase behaviour(purchase

spontaneously, taking decision on the spot)

The consumer passes through a series of steps while purchase

• Step 1. need identification /problem awareness

• Step 2. information gathering• Step 3. evaluation of alternative solution• Step 4. selection of appropriate solution• Step 5. post purchase evaluation of decision

Postpurchase Behavior

Postpurchase Behavior

PurchasePurchase

Evaluation of AlternativesEvaluation

of Alternatives

Information SearchInformation Search

Need RecognitionNeed Recognition

Cultural, Social, Cultural, Social, Individual and Individual and Psychological Psychological

Factors Factors affect affect

all stepsall steps

Cultural, Social, Cultural, Social, Individual and Individual and Psychological Psychological

Factors Factors affect affect

all stepsall steps

Post purchase behaviour

??Cognitive DissonanceCognitive Dissonance

??Did I make a good decision?Did I make a good decision?

Did I buy the right product?Did I buy the right product?

Did I get a good value?Did I get a good value?

??

• Sour Grapes– • a story of • cognitive dissonance …after being unable to

reach the grapes the fox said, “these grapes are probably sour, and if I had them I would not eat them.”

• --Aesop

Factors which influence rural consumers during purchase of a

product• Acceptance of washing machines and

rejection of dish washers• Acceptance of maggi noodle and rejection of

kellogg’s cornflake• Can only understood in terms of consumer

behaviour with regard to the positioning and marketing mix of the organisation

• 1.social – cultural factors• Influenced by social customs, traditions and

beliefs• Caste influences are direct and strong• Conservative in their outlook, take a longer

time to be influenced• Discuss the issue of purchase- important and

knowledgeable• Rural youth are more open

• 2.group• Consumers are part of a group to which they

belong• Opinion leader- a teacher, bank manager,

vDO, etc• The acceptability of an idea by the group and

by the leader is critical in rural areas.• 3.family• Family size and the role played by family

members (joint family)

• 4. Role and status• Role refers to the behaviour expected of an

individual• Status refers to the respect given to the

individual by the society• Head master – demonstration- opinion

leaders can be useful in transforming the opinion of others

• 5. sociability• In rural areas, individual are know and

identified better• Accepted by the group makes them agreeable • 6.economic factors• More than 70% of the people are in small-

scale agricultural occupation• These factors affect the purchase decision

• 7. political factors• Programmes for self-employment like the

prime minister’s Rojgar Yojana (RMRY)of the cental govt.

• CMEY- chief minister employment yojana program in Andhra pradesh – increase the potential of the rural market

• The IT, telecom and infrastructure policy, which is bringing connectivity to village is empowering the consumer

• 8. factors which influence the final choice• Attitude of other• Advice of the retailer• Experience at the retail outlet• Demonstration of product• Unanticipated situational factors• Mood swing• Perceived risk

examples

• Creating Rural-specifi c Messages• Not all commercials are accepted by rural folk. Social workers• recount stories of advertisements that confuse or scandalise rural• viewers. For instance, members of some rural communities in• Rajasthan were offended by the Halo shampoo spot, featuring female• models with beautiful, bouncy hair. The reason was that here it is• considered indecent for women to let down their hair in public.• The same villagers were bemused by the Strepsils ‘Bahut Mazaa aya’• advertisement. In their dialect, the word mazaa has a strong sexual• connotation and they could not understand how anyone could get• corporeal pleasure from a cough lozenge (Ghosh, 1994).

Rural consumer’s increasing trend towards consumption

• Until 1980-81, per capita of india was just under RS 2000 but even then household saving rate was 18-20%

• A dramatic change is in progress- charcoal- cleaned teeth are a rare sight- use of twigs of neem and babool tree

• Household are upgrading from indigenous teeth cleaning ingredients to toothpowder and tooth paste

• Shifting from low priced brands to premium brands• Today, the bright shine of colgate or some other

international brand of tooth paste holds more appeal than the traditional methods of cleaning teeth

• At a seminar on rural marketing, organised in New Delhi , by the international development enterprise, “ the Indian rural tastes are changing fast, thereby reflecting a marked improvement in the purchasing power of village household”

• In 1990-1992 lowest end of rural market earned around Rs 14000 per year, today – segment’s annual earning Rs 24,000

• Rural buyer’s disenchantment with second – hand item , thank to competition –increasingly purchasing new product.

Conclusion

• The size of the rural market is quantitative and qualitative

Mr. kartik raina of dalmia consumer care- tobacco free beedi called “vardaan”

“ the rural market in not for all, but for those with the guts, the skin of an elephant and the mind of an evangelist .”

• Most successful brand Hero Honda is no more

• by khalid on 18/12/2010 in Bazaar Talk,Intresting News

• Hero Honda is the most successful brand name in India. It is the largest player in the market in two wheeler segment

Saluting the spirit of women empowerment

Fair & Lovely Foundation offers honoured.

• Saluting the spirit of women empowerment• Fair & Lovely Foundation offers scholarships

to 212 meritorious girls. Five women achievers honoured.

Unilever Sustainable Living Plan UnveiledWe meet everyday needs for nutrition, hygiene and personal

care with brands that help people feel good, look good and get more out of life.

• HUL brands top India's Most Trusted Brand Survey

• 30-08-2010: Once again this year HUL brands have topped the ‘India’s Most Trusted Brands Survey’ rankings. Six HUL brands (Lux, Lifebuoy, Clinic Plus, Pond's, Fair & Lovely and Pepsodent) feature in the top 10 and eight in the top 20.

case• Market Development Strategy of HLL• In 1999, the soaps, detergents, and personal product segments• of HLL owed their growth strategy to a strong rural thrust. HLL• launched its ‘Operation Bharat’, a 20 million household national• sampling exercise for its personal products portfolio. As part of the• campaign, low priced sample packets of toothpastes, fairness creams,• shampoos (Clinic Plus) and talcum powder (Ponds) were handed• out to 20 million households.• According to Dalip Sehgal, Head of Marketing (Personal Products)• in HLL, ‘The size of the pie will increase from the rural segment, not• the urban segment. So the focus should be more on market development• rather than market share at the moment’ (Zaheer, 1999).

WALL PAINTING – An Economical and best Media in Rural

Marketing

MOBILE VAN – An Effective way of Communication

examples

Behaviour Variations of Watch Buyers• The demand for watches is high in rural areas and it increases• during the marriage season. This is true throughout the country. The• variation is, however, in the type of watch and brand that is preferred• by the consumers. In the villages of the north, ‘winding’ watches are• preferred which are bought from large feeder villages nearby. They• fi nd it convenient to get it serviced at a nearby place. The awareness• of quartz brand of watch is limited. The awareness of a brand is usually• from newspapers in addition to word of mouth.• In the south, the preference is for a quartz watch and is purchased• from a showroom in the town. In some of the villages, television has• created a high degree of product awareness. As the purchase of quartz• watches is expensive, the villager prefers to buy it from the town and• is willing to take it back to the showroom in town in the event there• is a problem with the watch.• Occupation

examples

• Strategy to Refl ect the Social-Cultural Infl uences on Behaviour• In rural areas the houses are painted during festival season. The• demand for distemper paints is therefore very large. This demand is• met by local brands, which are of low quality. Asian Paints developed a• product with bright colour shades (preferred by the rural consumers)• for rural markets and which had greater durability than the local• brands. It launched the product in a pouch form and with the brand• name Utsav (meaning festival). Utsav was promoted as a good quality• economy brand. It used wall paintings and point-of-purchase displays• to create awareness. It identifi ed dealers and sub-dealers who had the• potential to stock and sell Utsav. To demonstrate the quality of Utsav,• the company painted the headman’s house or post offi ce. The brand• was well accepted by the rural consumer.• The social-cultural infl uences on behaviour need understanding• for developing an effective marketing strategy

Unit IV

• Product and pricing for rural market:marketing mix for rural markets- developing a new product for rural market- product life cycle- innovations in product design rural market- branding products for rural markets price determination for rural market- pricing methods for rural market.

Rural marketing mix

• Introduction• Indepth understanding- rural life style,

identify needs of rural consumers• The success of a product like shampoo in the

rural market – acting upon the consumer insight- made cavinkare’s chik sampoo(market leader in a market which was not using shampoo at all”)

Marketing mix

• A series of interconnected and interdependent marketing issues that need to be considered together

• First developed by “Neil Borden” in 1950• 1960s jerome Mccarthy (Harvard) elaborated the

concept of the four P’s• Marketing mix refers to the set of actions, tactics

tools or variables that a company uses to promote and sell its brand or product in a market

• 4P’s of marketing• Decisions about the controlled marketing

variables • 4P’s : product, price, promotion, and place

(distribution)• Several other Ps: Packaging, positioning,

people, pace, passion, publics and even politics as well

• Decisions be taken after assigning a value to each variable some variables could be

• 1.price- price level, credit terms, price changes and discounts

• 2. product – features, packaging, quality and range

• 3. promotion: advertising, publicity, sales promotion and personal selling

• 4. place – inventory, distribution channels and number of intermediats

• By choosing the appropriate level , the right marketing mix can be developed

• The marketing tools and the possible variations are top end luxury model, medium range product and value for money low end product.

• 1)product – anything that is capable of or can be offered to satisfy a need or want- include tangible and intangible service

• However, a product must deliver a minimum level of performance, otherwise even the best work on the other elements of marketing mix won’t do any good in the long run

• 2)Price – “refers to the amount the customer has to pay inorder to acquire a product or service”

• Cont…

• Depended factors are:– Cost of production– Segment targeted– Ability of the market to pay– Demand and supply of competing products and

substitutes– Pricing objective of the firm – Other direct and indirect factors

4 C’s of pricing

• (a)costumer value- value the customer perceives that the product delivers

• (b) competitor’s prices• (c) cost to the company- combination of fixed

and variable cost• (d) strategic and pricing objectives of the

company- the financial, marketing and strategic objectives that the organization has decided to achieve from a product.

Pricing objectives

• To maximise long run profit• To maximise short run profit• To increase market share• To match competitors prices• To survive in the short run

case• Typical Strategy in Rural Markets: Crane Supari• Crane betel nut powder is a leading brand of betel nut powder in• South India. It is known for its quality and has a very strong consumer• loyalty. The packs are sold in convenient price slots of 50 paise, Re 1,• Rs 2 and Rs 5. The pack sizes include, apart from very small packs,• packs of 25 gms, 50 gms, 100 gms, 250 gms and half kg. There are six• varieties of arecanut and brand building is through maintaining the• taste. The product range includes both spicy and sweet supari.

• The channel includes distributors, sub-distributors, wholesalers• and retailers. The distributors are reached through company vehicles• within three days of the receipt of requisition along with a draft for• advance payment. In the case of rural markets, the distribution is• once a month through trucks that follow an itinerary. In the case of• smaller and interior areas, transporters are used. In addition to this,• the company provides van support to distributors for delivering to• rural markets. The company makes available to the rural distributors• small vans with the condition that they carry only the Crane brand.• The day’s expenditure for the van is borne by the distributor who• uses it.

• The media used in rural markets include cable television, stickers• and danglers, painting the sides of buses, wall paintings and shop• paintings. Mimicry and dance drama were used in the early Nineties,• but no longer. Vans were used to create awareness and to provide• brand knowledge in between songs that attracted attention. The• vans were also painted with the brand message. This kind of promotion• is no longer used as the company does not fi nd them effective.• A large part of the promotion to rural areas today is through stalls• in fairs followed by wall paintings. Other media are used but to a• limited extent.

• The brand has a good image in the rural market but the presence• of a large number of local and small brands competing on price• restrict the market share. The rural market is large but because of• price competition its major share is from the urban market. It is• the leader in South India but its leadership is because of the urban• market.

Pricing process

• Step 1- developing the marketing strategy: performing the segmentation, targeting and positioning functions

• Step 2- making the marketing mix decision-determining the other 3 Ps:product, place and promotion

• Step 3 – estimating the demand curve – analysing how the demand is likely to vary with the price

• Step 4- calculating the cost – determining the fixed and the variable cost likely to be associated

• Step 5 developing an understanding of the environmental factors- the competitive as well as the legal environment scenario

• Step 6 – finalising the pricing objectives – maximise long run profit, short run profit

• Step 7 – determining the price – selecting the price method, determine the margins and discounts

Pricing methods

• A) cost plus pricing- organisations add certain profit margin over the cost of the product

• B) target – return pricing – targeted return on its investment

• C) value – based pricing – based on customer’s perception of value

• D) psychological pricing- already existing reference or psychological prices in the mind of customer

• Pricing through the product or service life cycle

Place• Refers to the point of sale• The main aim of distribution or place strategy-

“catching the eye of the consumer and making it easy for to buy a product”

• “ ideal balance between the cost to the organisation and consequent convenience to the customer”

• In fact, the mantra of a successful retail business is ‘location’

Distribution• Means ensuring the spread of the product

throughout the market place in a manner ,so that a large number of people can buy it.

Distribution channels• Flow of products from the site of manufacture

to the point of sale• Conventional channel : factory- c&f-

distributors- retailers(most common channel for the most goods)

• Unconventional channels like- Internet portals or a network of salespersons

Promotion• to make the product or service known to and

preferred amongst the user and trade.• Advertising, word of mouth, press, incentives ,

commission, awards to the traders, consumer schemes, direct marketing, contest and prize mass media

• IMC –integrated marketing communication – promoting the company’s goal to its target audiences

• Clearing and Forwarding Agent (C&F)• The clearing and forwarding agent is the

representative of the manufacturer. The C&F manages the company's warehouse and handles distribution on behalf of the company.

The goods that the C&F deals in is the property of the company he is representing. The C&F gets a small commission for his services. The C&F deals with the wholesalers - including the super-stockist, stockists and distributors.

examples

• Complex Communication as Barriers to Reception• It is relevant to share our recent experience on a market survey on• pesticides. Here we have a serious communication problem. Though• there are local names of pests, but all the material released by all the• pesticides companies mostly identify the pests by their English and• academic nomenclature. There are generic names used for pesticides• which again are in English. Some of these names are diffi cult• to pronounce. For example, Monocrotophos, the brand name such• as Nuvacron. The choice for the consumers increases in complexity• because of additional dimensions. Additional dimensions are the• manufacturers, formulation strength, product form and varying percentages• of technical material content. Cont…

• The entire exercise is so complicated that the marketing organisations• are not able to effectively communicate with the farmer on• the brand name of the pesticide for a given pest. The result is not• only an improper and wrong selection of pesticide but also that the• recommended dosages are not being used, and the farmer blames• the pesticide and the manufacturer for the ineffective treatment. The• fertiliser manufacturers have introduced simple symbols and brands• like Star brand, Crescent brand, etc. Such sign language needs to be• developed in case of pesticides also ( Jain, 1983).

• Signs and Symbols in Rural Markets• A number of successful brands in rural markets have brand names or• symbols with numbers or animals. These include 555 soap, Monkey• brand toothpowder, Gemini Tea (with an elephant), Cheetah fi ght• matches or ‘Sheru’ (tiger) beedi and Tiger cigarettes. The association• of symbols with these brands helps recollection. The 3-Roses brand• of tea makes the rural consumer ‘think and feel fresh’. The symbol• helps associate the product features with the brand of tea. The• symbols that make the consumer feel and think about features that• are relevant for the product are critical for brand building in the• rural market (Krishnamurthy, 1999).

Case• Usha International Ltd.• Usha International Limited (UIL) of the Siddharth Shriram group• proposes to increase its focus on the rural market, which contributes• 50 per cent of its total income. It plans to increase the penetration• level of its fans in rural areas from the current 5 per cent by introducing• fans (both ceiling and table) designed to function under• severe conditions of voltage fl uctuations. They will be priced 30 per• cent less than normal. It also plans to increase the penetration level• of its sewing machines in rural areas from the current 11 per cent• by introducing low cost models. UIL intends to route its products• for the rural market through its diesel engine dealers, completing• its strtategy to make use of product design and pricing decision to

• deliver value to the rural consumer

Rural marketing mix

• Marketing mix conceptually remains valid for the rural market

• Every product and promotion, which is a hit in cities, might not work in rural areas

• It doesn’t mean, Indian villages belongs to restricted zone

• They are different as consumers and hence, market differently

Product• Modified to suit the lifestyle and needs of the

rural consumers• Rural consumers like to buy products for need

based consumption• Recycling and putting a product to all possible

practical uses before discarding• While designing a product- consider reuse and

recycle• The product to be useful and easy to use

• Appear tough and rugged- outlook• As less educated – new technology

acceptance is also less• Cellular phone-washing machines –not

accepting• Acceptance- solve their problems ,suits their

culture and their pocket and worth the price

Branding • Making them change their product or brand is

very difficult • Higher brand loyalty among the villager• Once a brand is accept(vill, state, region) very

difficult to replace• According to Harish Manawani ,the vice president

HLL, “ international brands need to be relevant interms of perceived image, performance value if they are t succeed in the Indian market”

Packaging• The decision of packaging is influenced by the

characteristics of consumers – i.e affordability, cultural preferences, usage conditions and ability to read

• Minimum quantity of the product for weaker section(financially poor)

• The problem of dust, heat or bumpy roads – special stress on packaging

• Packaging size – store- another problem for customer or retailer

• Colgate put a cap on the sachet for convenience of storage

• Attractive, decorative and synchronisation with local culture- should not be costly

• Writing products name in the local language- consumer awareness

• Colour and convenience of package are very important

• Illiterate – not able to ask for a brand- advertised – recognise the product by its packaging

• This is why (imitating the packaging ) is available in village shops

SKU• Stock keeping unit• Organisations should maintain a smaller number

of SKU for the rural market• As the rural retailer has a limited working capital

Product strategies

• In rural marketing• 1) new/modified product designs

– A) research and marketing department think – new design according to their (rural) life style

– B)rural environment- product tough- rough handling, rough roads and frequent power fluctuation

– C) nokia’s1100- customised model for rural– D)dust resistant, small torch, economically etc.

• 2)sturdy product- sturdy enough to stand rough handling, transport and storage

• 3) utility oriented product- more concerned with the functional utility of the product than its appearance and sophistication

• 4)avoiding sophistication packaging• 5) refill packs/ reusable packaging• 6) application of value engineering-

substituting the costly raw material with the cheaper one- cheaper but better quality

• 7)brand name- brand awareness in the rural areas is fairly high. The only issue is that the brands are known differently than they are known in the urban market (fake product)

• 8) small unit packaging• Low per capita income – single serve packets or

sachets are enormously popular• The use of 50 p or 7 ml sachets is declining in

the rural areas by 10%• Bigger packs for jam and milk powder are doing

well even smaller is available

Price• Price is the most important phenomena

affecting rural market• Little extra for better qualilty- cheaper version• Some retailers in the interior villages charge

more than the maximum retail price(mrp)-to fetch – spend time and money – from distributors

• Prices of substitutes also must be studied along with the pricing of the competitors

• As coca cola found out that it was not just pepsi that they were competing with in the rural market, but also nimbu paani, jal jeera and others

Pricing strategies• As per capita income of india was low• Extremely price sensitive• (a)large volume- low margin : rapid or slow

penetration strategy• To focus on generating large volumes• Not big profit margins

• (b)over all efficiency and passing on benefits to consumer

• The strategy should be to cut down the production distribution and advertising cost

• Passing the benefits to the customers to further increase the turnover

• Observed that advertising has less to dowith product sales in the rural areas

• © low cost/value for money products• The price can be kept low by smaller unit

packaging• (d) low volume – low price strategy• Reducing the package size- more affordable

especially in finance• (e) ensuring price compliance• Rural retailers most of the time, charge more

than the MRP• Manufactures has to ensure price

Place• Third ‘P’• Village as place for promotion, distribution-

different form town or city – general marketing theories can’t be applied

• Reaching right place is the toughest part in today’s market

• Because high distribution cost• Most –the rural retailers themselves go to the

urban areas to procure these goods

Significance of distribution• The best product, price, promotion and

people come to nothing if the product is not available for sale at the point

• Good distribution system- company has greater chance of sellling it s product more than its competitors

• In the FMCG industry in india – companies have to distribute to over 10 lakh retail outlets or point of sale

• Now a days – direct marketing – through internet- feasible for the smaller villages

Place strategy• (a) segmentation• Examine the market potential of different

villages and target the villages that can be served ina financially viable

• Not viable to contact and serve all the village

• (b)coverage of villages with 2,000 and above population

• Distribution network in about 55000 villages – have population of 2000 person and above

• can cover about 25 crore rural consumers• Good to begin with lesser populations• © distribution up to feeder markets/mandi

towns• The feeder markets and mandi town offer

excellent scope for distribution

• The rural consumers visit these towns at regular intervals, not only for selling their agricultural product but also for purchase

• (d)joint distribution by non-competing companies

• As distribution vans can be unviable for a single company

• Different non- competing companies can come together to jointly operate distribution vans

• (e)direct contact with rural retail• Along with the efforts of wholesalers and

dealers, companies need to have direct points of contact, with retailers and sub- retailers

• (f) shandies/haats• Held on a particular day of every week• Distributors in the area can utilise mobile

tractors to sell the products

• (g) agricultural input dealers• As per the essential commodities act,fertilizers

should be made available to the farmers with ina range of 4 to 5 KM from their residence

• About 2 lakh fertilizer dealers in the country• Both in coopertative and private sectors• These outlets can be used to market• (h) use of co operative societies• At least one cooperative society of one form or

the other, for every 1 or 2 villages

• (i)utilisation of public distribution system• (j) multi-purpose distribution centers by

petroleum companies• The petroleum retail outlets now will be seen

stocking some non-petroleum retail outlets now will be seen stocking

• (k) post and telegraph department • (l) alternate retail /distribution channels• Milk man, vegetable vendor, entry and exit

point of village

• (m) personel selling network• Residents of the village or community• (n) e- marketing• E-choupals, direct contact with the rural

consumer

Promotion• As it is thin population- promotion aspect is

challenge • ‘Media dark’- inaccessible to television

signals- not only denied to access to product but also knowledge about it.

• Problem in mass media communication- time gap between the point of exposure and the time of purchase

• The memorability of the message – while it last till the time of purchase

• Survey – 16%of rural and 25% of urban consumer felt that advertising influenced them to frequently or always to buy products they donot really need

• 19% rural and 30% urban – advertisements are frequently misleading

case

• Responses to Consumer Behaviour• Hindustan Lever found that retailers in villages

were cutting its large• 100 gm Lifebuoy soap into smaller pieces and

selling these. So it• introduced a smaller 75 gm pack. It also

introduced Wheel detergent• in a 100 gm pack (Joshi, 1991).

Media vehicles and rural market

• 1.mass media• In rural market, 2 out of 5 indians are not

reached by any media : tv, press, radio and cinema together

• (a) television• Tv penetration in rural homes was about 26%

in 2002 , 66% of urban area• In 1993 it was 13% and 49% in urban area

• Although the number of television channels have increased from 6 channels in 1991 to 300 by the end of 2004

• As of now doordarshan telecast network nearly covers the entire country

• 55% reach in 1997 DD’s• Since, one third of india is not covered by DD

• (b) radio: primary source of entertainment in rural market

• listenership stands in the 20% range for both urban and rural

• 20% listenership is a good number in terms of popualation

• © print media• Literacy level is low in rural areas• Through dailies, periodicals, pamphlets, booklets

•

• But reading habit in the rural areas does not appear to be very good

• Reaches the rich families of the villages- so work of mouth

• Should not ignored – because it reach the opinion leaders

• (d) cinema • ¾ of rural adult population view cinema in the

southern region – so effective media

• (e)hoarding/ wall paints• Walls of shops and other place are easily

available• Relatively longer span than other mass medis

Unconventional media• As media does not cover as much as 43% of

rural india• Events like fair, festivals, cinema van, shop

front• Stickers on hand pumps, wall of wells, putting

on tin plates on all the trees, pond- innovative media used by HLL for lux, life boy and wheel

• Folk media – quite popular in different regions and state

High frequency Low frequency

High reach Jeep, wall painting, bus stand , haat, hoarding

Van based advertising , melas, direct to home, exhibitions/ created events

Low reach Co operative notice, shop front painting, tin plating – calender / label

Tin plating – trees / shop leaflets, posters and banners , danglers

Promotion strategies

• 1.Think global act local• Rural population is diverse• But the commonalities of their ethos and

simple living habits need to be understood for advertising to succeed( context, story line, language and idioms)

• 2. think in local idiom• ‘thanda matlab coca cola’

• 3.simplicity and clarity• 4.Narrative story style• 5.Choice of brand ambassadors• govinda in the mirinda ad boosted the sales

of the drink in rural market.

Additional P’s of rural marketing

• 1. passion – it represents an attitude of three dimension

• a) passion to earn goodwill for the company

• b) passion to serve and educate the consumer

• c) passion to give 100% to the rural marketing effort.

• 2) pace (step by step)• Rural market need to be launched into the

heart of the customer• Working capital and storing space donot allow

rural retailer to store numerous brand• He can sell whatever he is stocking• Thus companies have to reach the retailer

early

4 A’s of rural marketing mix

• 1. affordability : not cheaper product, designing products which match the needs of rural consumers, at a price that they feel

• 2. availability: lesser number of brands available at rural retail outlet

• Ensuring the reach of the products at the retailer’s shelf is one of the most critical function

• 3.awareness : they use unconventional media along with commercial media like TV , Radio

• Elements like colour, logo, slogan – designed according to the rural consumer

• 4. Acceptability • They must feel that the product serves its

purpose, then they are ready to even spend extra for the product

examples

Oscar Television’s Offering to the Rural Marketsthe leading television brands. Arpita Khurana, the director of the

Oscar television competed effectively in the rural markets againstcompany expects a boom in the rural market with growth of nearly80 per cent.

Oscar television competes in the rural market by providing a no frillvalue for money product. For instance, Oscar, which derives 40 percent of its sales from the semi-urban and rural sectors, has launcheda battery-operated television model in the 14" segment to cater toparts of Eastern UP and Bihar. This has boosted the company’s salesby 5 per cent to 7 per cent. It is planning to come out with a similar21" model in the near future. Says Khurana, ‘Since electricity is aproblem in these areas, we felt the model would be a success’.Source: (Ghosh and Verma, 2003).

casesProduct Design that Responds to Consumer Perceptions

Union Carbide found that its slick plastic torches, which were allthe rage in the metros, had no takers in the villages. Farmers preferredheavy brass torches. Says Union Carbide Managing director,V.P. Gokhale ‘With brass torches, they feel they are getting value formoney’.

Texla drew a blank with its television sets with grey and blackcabinets as farmers did not prefer the somber urban shades. It introduceda new range in bright red and yellow, which was refl ected ina dramatically increased acceptance by rural markets (Das Guptaand Menon, 1990).

Philips promotes the size of its music systems to rural consumers.Consumers are willing to pay a higher price for larger models assumingthat big is better. The company now makes its rural models oneand a half times larger and louder than the ones for urban markets(Mukherjee, 1993).

New product development for the rural market

• Not invention- minor modification – existing product• Objectives • 1.Satisfy customer demand• 2.Competitors launch new product• 3.Expand strategy• 4.Changes in technology• 5.Increase in sales and profit• 6.Single product business vulnerable to multi product

business• 7.Maturing stages and decline stage

New product development process

• A) exploration stage:• Ideas for new products is within a company itself• 60% of industrial and 46% of consumer new product

ideas came from the research staff engineers , sales people

• 30% of consumer product ideas came from the user• Market feed back and research- key role to play• Team - assimilate all new product ideas on a single

format• evaluation

• B) screening stage• Elimination process- which carry unacceptable level

of risk• Vital criteria for evaluation

– 1) nature of demand – 2) compatibility –new idea matches with the

corporate objectives, impact the existing product– 3)resource – what amount of money, tech, time– 4) competition – actual competition – strength

and weakness

• C) detailed value offering evaluation• After screening only few are left for consideration• Time for detail product specification – need

satisfying, simple and easy, convenient store, tough and solid appearance, affordable, rural product usage, environment

• Electrolux’s bijlee refrigerator can store power for 12 hours as back up

• Urban imagery (feel and comfort)- Mahindras Maxx- styles and finish

• Chassis is designed to keep the mother board cool at tem 45deg c

• D) business alnalysis• Likely cost? Potential demand? Recovered?.

ROI?• E) product development • Approves particular product• Executed in research lab – stage – concept on

the paper is transformed in to a product in hand

• F) development of marketing mix• Product : packaging, colour, logo and brand

name taken at this stage • ‘sampoorna’ chosen as a brand name for

televisions by LG, is a word from the four leading languages spoken in rural Hindi, Tamil, Marathi, Bengali.

• Promotion : selecting media, punch line – TATA ACE

• Price : retail price, dealer and retailer margins are taken at this stage

• TATA ACE slightly higher price that three wheeler – it enabled the customer to climb the ladder by paying a slightly higher price

• Place: TATA MOTORS conceived a concept called 1st outlets for the distribution of ACE. 1st retail out lets that handle only sales of ACE

• G) product Testing :– 1) product testing : before it is formally launched

in the market Intel took the personal computer designed for rural market

– Test in pilot project – changes made accordance to it

– 2) concept testing : entire product concepts is presented to the customer –to have their reaction – it might be successful or not

– 3) test marketing – done by selling the product in limited

• H) commercialisation or launch :• New product is actually launched in its target market place : do

some effort

– Promotion strategy – TATA Ace road show, demonstrated test- drive, using the metaphor of an elephant – baby elephant TATA TRUCK – mother elephant

– Pricing strategy : tied up with auto financer in urban areas who offer five year financing for the vehicle (three – wheelers get only two/three year financing

– Finance companies comfort level with salary slip than the agricultural income

– Place strategy : nine state, 300 exclusive sales outlets across India, with in a range of 50 to 100 km from their village, tied up with local garages apart from its existing dealers,

– Training to the staff of these local garages

Rural market and product life cycle

• The four stages of PLC – Introduction, growth, maturity and decline

• This fact remains true for the rural market as well

• Introduction to decline varies from one product to another

• PLC determined by the following factorsmarket conditiongrowthtrends in buyer’s spendingtechnologicalcompany policy

Characteristics of different stages of PLC and marketing mix

strategiesIntroduction stages: • Growth , sales volume is low, • Product awareness is limited• Profit is unlikely• Focus on to build awareness• Establish distribution network

• Marketing strategies for introductory stage• A)product strategies : small trial pack• B)place strategies: encourage to stock the

product, offer scheme• C)promotion strategies : generate greater

awareness, by educating and reaching the opinion leader, targeting the innovators

• As competition is less, highlight the benefit of the product concept

• D) pricing strategy : go for introductory price offer,

• Rapid or slow penetration can be taken on the basis of the resources.

Growth stage• Becomes aware of the product of its benefitsCharacteristics : • rapid growth in sales and profit ,• economies of scales, • lower prices are possible,• the competitors move in the market

• So focus :• To build brand preference,• To increase market shareMarketing strategies for growth stages• A)product strategies : • i) brand reinforcement – educating the

customer about benefits

• ii)modification or value addition in the product

• iii) making the product more relevant for the customer

• iv) launching medium packaging – HLL created bubble pack’s shampoo- neither sachets nor bottle

• B) pricing strategies – option to either maintain or lower the price even further – economies of scale due to the significant increase in sale

• C)place strategies-strengthening relationship with distributor, deepening the penetration – tapping some of the rural segment

• D)promotion strategies- increase in promotional budget, highlighting the quality or performance of the product

Maturity stage• Competition becomes even more intense• Most of the product remains in this stage

globally for a considerably long timeCharacteristics of maturity stage• Maximum sales and profit• Intense competition• Face tough competition - withdraw

• Focus : defending the market share, maximising the profit, tractors and chemical fertiliser- entered maturity stage like in punjab

• A) elongate the maturity stage :• Imperative to sustain the customer’s interest• So saves the product from entering into

decline stage

• B) product strategies : by adding interesting features,

• Update the product• Being decided to market its ketchup in

different colour• Organisation need to strengthen the

perception that their product is better and different from others, so R and D to enhance features

• C) promotion strategies• Appear novel in product promotion• Brand repositioning – add new market

segments, promote how their offerings are different and better from competitors

• Promotion needs to be made broad based – potential consumers – due to their conservative attitude.

• D)place strategies : deepen the distribution network

• Incentives to channel partners• E)price strategies• Lowering prices

• Decline stage• It is not possible to extend the maturity stage• Tooth paste- maturity stage- but still they

cannot be considered immune from declining stage

• Washing soaps taken oven by detergent• Characteristics• Sales drop, demand diminishes, market for

product shrinks, inventories start piling up, profit decline

• Marketing strategies• A)rejuvenate the product • i) revive the product by additional features• ii) harvest the product • Sell their manufactured product at reduced

prices

Branding product for rural market

• Despite create an awareness of their goods and services – still un tapped

• Lifebuoy- one of the first soaps with rural areas as the key target market- create brand loyalty

• Colgate, Bajaj, Tata – adopts right set of brand building tools- for long term

Brand• Origin- Norwegian word- brandr- means ‘to

burn’• A brand is defined as a name , term, sign,

symbol or special design or some combination of these elements that is intended to identify or differentiate the goods or service of one seller or a group of sellers (American Marketing Association)

• If Mercedes Benz is a brand name- the star is a brand mark.

• All trade marks are brands and include both the brand name and Pictorial designs- which are legally protected

• Exclusive rights to use brand – granted by trademark law, unlike patents and copy rights – which have expiry date

• Brand- attributes, value, personality, culture• Brand is a complex symbol- not just a name-

identity and builds a personality around itself.

Branding process• Branding is a process, a tool, a strategy and an

orientation• The process of creating a brand stem from

research that starts with the concept of what the product is and what its functions and objectives are

• Brand building is usually a long, tedious and methodical work

• It is not static- continuous change in product appearance and performance

• Brands is some thing which is designed by the marketer, but which is built over time by the consumer

Brand loyalty• “the degree of consistency in buying particular

brands as a function of cognition, emotion , satisfaction, commitment, habit and positive attitude towards brand”

• Consumer loyalty refers to the unwillingness on part of consumer to switch over to the other products, brands, or stores

• Consumer loyalty is a board term encompassing brand loyalty and store loyalty.

Factors determining brand loyalty

1.Emotion- emotional bond between the customer and the brand

2.Objectivity- people who constantly reassess their buying decisions on objective purchase parameters

3.Inertia – rarely reassess their purchase decisions- out of involvement or high switching costs

• Satisfaction, customer relationship management- not only this

• Recency, frequency, and monetary value- regard as good measure of customer loyalty.

• Indian consumers tried on average 6.2 brands of the same packaged good product in one year, compared with 2.0 brands for American consumers.

Benefits of brand loyalty for the organisation1.Loyal customer are typically less price

sensitive than other2.Provides firms with a valuable time to respond

to competitive action3.Cost- attracting – new customer – six times

higher – than the cost of retaining current customer.

Significance of brands• Market place teeming with thousands of

product and servicing • A brand differentiates a product from similar

other products• World’s top three brand – represent

enormous capital value• Value of coca- cola –(Rs 3,17,400 crores)• Microsoft – 2,99,000 crores• IBM- 2,43,800 crores, BMW- 64,400 crores

Regional brands• A regional brand is need specific and unique to a

particular region• However, should not be confused with a national

brand• Mass consumption product like tea, soap,

detergent and dish washing powder have several regional brands with loyal customers.

• 555 and chhokra soap – strong regional brands in punjab

• Arun ice cream of Hatsun foods- third of market share

Reasons for the success of regional brands1.Spread of cable and satellite television2.Understanding of the need of regional

consumers3.Low overheads- regional brands can offer the

promise of value because of their low overheads.

4.Legacy5.Large regional markets- fairly homogeneous

6. One to one relationship with channel partners.

The personal touch that the entrepreneurs are able to provide is something that the national level companies find it difficult to replicate.

7. Entrepreneurial spiritBecause of small- take quick decision – in any

change in the consumer demand

Regional brand: success stories• Anchor toothpaste- vegetarian toothpaste• Parakh foods- gemini oil- sunflower or • Ghari – Kanpur based detergent powder , no 3

just behind nirma and levers

Regional brands : competitive response of national brands

• The national brands are not serious- to moves of the regional player

• But once reach – threatening to the growth and market share of the national brand

• Price cut, promotional efforts and brand building initiatives

• Half of 2003 national brand surf, colgate, tide- battle with regional brands like Ghadi, Anchor, Ajanta etc,

• Most of the cases national brands managed to snatch market share from the regional brand

• One view is that the regional brand should not try to emulate national leaders

• Squeezed by large Indian companies on one side and cheap imports on the other, only a few regional brands make it big.

• Regional brands can not fight the battle with price alone- innovation, value system, faster response, entrepreneurial spirit, lean organisational, Rand D etc.

Brand building in rural marketCustomisation• Find out the needs, wants and aspirations of

rural consumers by directing contacting them• Reengineering the product- according to need

of rural consumers• Then the entire brand building efforts has to be

built on the basis of their needs and aspiration• Nokia’s 1100 promoted with caption of “Made

for India”

RelevanceThe brand name or the punch line is in

vernacular languageThe same logic applies to the colour, logo and

sloganCelebrity – not only the brand awareness spread

but it also has a good impact on over all sales volume growth.

Media• The media selected to promote the brand is very

important• As the conventional mass media may not prove

to be very effective when used alone – select other below the line media- live demonstration, contests

• Demonstration vans with audio visual equipments – have deep rooted impact, than the short commercial on TV

• Haats can be an effective medium for rural marketing

Message• Message should meet the rural sensibilities• With emotion touch and story line are most

effective• Commercials with gimmicky hi-tech story- not

work well • Rural consumers have strong visual sense.

Recongnition• Either does not understand english or even

illiterate• Cavinkare strategy – 5 empty sachets of chic

shampoo – contest – by the consumer conscious that he is buying only the chic shampoo

Word of mouth publicity• Target the right set of opinion leaders-

develop the brand recall than the five or ten seconds commercial on the Tv

• The stories they hear from others are more believable for rural

• Crores of rupees invested in brand building – efforts can go waste- if not available at the retailer shelf.

Branding and rural buyer behaviour

• What is the response of rural consumer towards the brands?

• In eighteen product categories consumption of branded items accounted for about 80% of the sales in 2005 – not only national brands – also include regional and locally manaufactured

• “branded goods comprise 65% of sale in villages today and the share of non-branded goods is shrinking dramatically”

• Sign that a market for premium goods is emerging 0.9% denum talc, 0.7% shampoo using pantene

• Rural consumers recognises Parle’s pack of biscuits by its yellow stripes and the baby

• Youth in the family buy national brands• Senior members use regional or local or low

value national brand• Two different detergents, shampoo, tooth

paste and talcum powder might be found in a single home

Product innovation and design

• Product are classified in to 2 categories based on nature of innovation- original, novel product and imitation.

• Original, novel product• An innovative firm will surely succeed• However, it should be careful in making

technical innovation . Ex – tractors, pesticides, fertilizers

• Imitation• Imitations may result in two types• A poor imitator will end up in producing

deceptive, spurious , fake, copycat products.• On the other hand, a competent imitator may

even produce an improved version of the original product

Product design decision

• A product or a service is an offer made by a marketer, which has the ability to satisfy the needs and wants of customers

• It can be physical and tangible• Service are intangible- soil testing, retailer

advice, training.

The key consideration in individual product/service offers is the development of the product at three levels

• 1. core product development• 2. Tangible product development• 3. Augmented product development

Core product • A core product provides benefits that correspond to

the need specified by consumers• What are the needs of consumers?• What kind of form and functional utilities are

consumer demanding?• A core product is one that provides important form

utility and ensure performance of the basic function• Can the tooth powder be used to keep the teeth

clean?

Tangible product• The product concept becomes visible and

operational when psychological needs are specified in physical terms

• A) quality – durability, capacity, efficiency, economy, reliability

• B) features – 1) rational problem solving- it is willingness to buy solutions that leads marketers to add features to the stripped down model 2) emotion fancy- the second type of features are those that capture the attention of the buyer . They are less funtional and more fanciful.

• C) design and style – so as to produce an artistic unit with functional structure and attractive shape

• A designer has to give consideration to the functionality, aesthetics, ergonomics, convenience of operator, ease of repair, service and costs.

• D)packaging: packaging is the process of providing a container or wrapper for a product. packaging is done at three level

• 1.primary package – it hold the product, for ex. Bottle

• 2. secondary – it holds the primary package (ex) cardboard box

• 3. shipping package : (ex) corrugated box.• E) branding – it give products an identity- the

brand is a name, term, sign, symbol, design or colour or a combination of them that helps identity the seller’s product.

Augmented product• Marketers should have the vision to look at

the specific needs of consumers and also their related requirement

• Augmentation requires fortifying the product strategy with additional force drawn from other P’s. as a result buying and using the product becomes a pleasant and exciting experience.

Unit VDistribution trends1.Emergence of new customer groups : more and

more price conscious consumers are demanding the best value for the money they spend. They are now brand conscious and looking for exposure, explanation.

2.High media exposure: highly active media is both boon and bane for marketers. Brands can be build over night and can also demolishes. The penetration of Tv, DTH- highlighted

3. It revolution: ITC e- choupals, I-shakti of HUL, kisan kendras in addition to internet kiosks of entrepreneurs, have opened up new windows for information. Seeking villagers.

4. Consumer as seller a recent trend ushered in by HUL is the

engagement of women in rural areas as channel participants. Earlier , Amway had introduced network marketing in which consumers acted as dealer.

Distribution strategy• Ensure constant availability of advertised

products in the market• In India – what ever is available at the outlet,

influenced largely by the retailer’s advice and recommendation

• Reaching to 6 lakh villages is a – distribution nightmare

• Despite increasing in the number of consuming class- 68% of the rural market still lies untapped primarily due to inaccessibility.

• Yet some regional brands like Ghari detergent, Anchor toothpaste and gemini oil have achieved rural reach from MNCs like HLL, colgate

• One should know the key challenges• 1)large numbers of small markets• 2) dispersed population• 3) poor road• 4) multiple tiers( intermediaries)• 5) poor availability of suitable dealers

• 6) low density of shop• 7) inadequate bank• 8) poor storage system• 9) poor visibility on rural shop shelves• 10) poor communication – poor reach of

media.

Channels of distribution

• Managing such a massive sales and distribution network is in itself a huge task.

• It is estimated that over a million market intermediaries – wholesalers, stockists, transporters and retailers.

• Urban areas have a variety of distribution outlets, ranging from large supermarkets to smaller retail stores.

• Small shop alone are the back bone of the local retail network

• There are 5 layers of distribution channels for the movement of products from the company depot to the interior village markets

• Layer channel location• 1 company depot national/state level• 2 distributor district• 3 sub-distributor town• 4 wholesaler large village• 5 retailer village

• Most companies have direct representation up to level 3 in the form of sub- distributor

• To achieve an advantage in rural markets, marketers need to maximize direct flow and control of stocks from layer 3 to layer 5

• The last layer is the most crucial as well as the most challenging- because existing distribution models fails to provide of products to the village.

• FMCG distribution has the maximum channel partners . In contrast, the durable goods channels has fewer partners

Evolution of rural distribution system

• Historically, the rural distribution system has included wholesalers, retailers, mobile traders, vans and weekly haats

• Wholesaling : more than 70% of the rural market is still beyond the reach of direct distribution- due to low density- rural market were neglected, company distributors focused mainly on the large number of retailers in urban areas

• Rural retail spread: rural india accounts for 65% of retail outlet in the country . Restricts the variety and range of the products stocked. Distributors can cover most of the larger 2000 and population villages numbering around 1,10,000

• Retail premises: three out of four shops have less than 100 sq.ft area. Constraints (lack of sufficient space, inadequate power suppley, lack of proper storage system, )

• Rural retail shelves: products are stocked in a cluttered and disorganized way. Slow- moving product covered with dust. Visibility of brands is very poor- due to the absence of proper rack and stand

• Stock turnover: the cash outlay of rural retail outlet is extremely low. So offer- combination of attractive margin, credit facility etc

• Van: is important place in the distribution and promotion of product. Eveready and JK dairy use vans for distribution.

• Rural mobile trades: the last mile distributors is an age-old, direct to home, unorganized distribution system in rural India

• Haats/shandies – to play a vital role in the rural economy

• Public distribution system – with a network of about 4.76 lakh FPS is perhaps the largest distribution network of its type in the world

• Co operative societies- the largest network of cooperative in the world consisting of more than 4 lakh cooperative .

Emerging distribution models

• The SHG distribution model ( project shakthi), satellite distribution, syndicated distribution, the NYKS model, use of IT kiosks(e- choupal) PDS, cooperatives, petrol pumps, agricultural input dealers and other unconventional channels of distribution are recent initiatives .

• SHG – 10-15 women , with over 10 lakh SHGs across India. The initiatives taken by HLL,TTK prestige and TVS mopeds

• Satellite distribution (the hub and spoke system-strong and viable model)

• Syndicated distribution- 2 or more companies come together to form a syndicated trading organization, to jointly distribute a collective group of household product in rural markets by sharing distribution cost (ex) P & G to sell with Ariel, tide etc, Cavinkare- Amrutanjan pain balm.

• NYKs haat distribution model: the Nehru Yuva Kendra Sangathan hires young people (18-35 ages) . Pay monthly stipend of Rs 2,000. assigned to 15-20 villages to organize awareness camps, cultural and sport events.