35399383-Product-Strategy-in-Rural-Marketing.ppt

PRODUCT STRATEGY

ObjectivesMarketing 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 AcceptabilityPrice- AffordabilityPlace- AvailabilityPromotion- Awareness

AvailabilityFirst 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.

ExampleHLLs strong distribution system- uses auto-rickshaws , bullock carts and even boats in the backwaters of Kerala.Coca-cola uses hub and spoke model.

AffordabilityWith 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 includesGodrej 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/-.

AcceptabilityNeed 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.

AwarenessLarge 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 classificationMarket mix planning begins with offering.Rural consumers judges offering on the basis of three elements Product features and quality.Service mix and quality.Appropriateness of offerings 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 productEach 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 CategoriesFMCGsConsumer DurablesAgri GoodsServices

FMCG Main Players

FMCG MarketAccording to NCAER survey, the rural market accounted for 53% of the total consumption in the country in 1998-99The estimated size was around Rs. 484 billion in 1998-99Rs. 650 billion in 2002

FMCG GrowthRural market has grown consistently in the 1990sA 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 marketHigh income households spends 3.6 times more than the lower income households on FMCGs.

FMCG ProductsAbout 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 GrowthThe 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 DurablesDurable goods include products like home appliances, automobiles, watches, funrniture.etc

Main Players

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

Consumer Durables MarketAs 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 ShareThe 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 ProductsThe 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 GrowthThe mid 1990s witnessed impressive growth ratesIt increased from 8.8% in the mid 1990s to 11.5% from 2000 onwards.

Agricultural GoodsAgri 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

ServicesMajor 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, ITCs e-Choupal, ICICI Prudential Life Insurance,etc.

New product development1.Idea generation2.Concept testing 3.Product development4.Test marketing

e.g5 k.g cooking gas cylinder by HPCLJolly battery operated colour televisionFree power radioJugad the rural public trans port in north indiaKishan credit card

Max gas cylinderAuto cut regulatorDouble-seated cylinderSpecial steel-braided hose pipeWide base of cylinder Top ring open one side

EXAMPLEMahindra maxxHpcl,5-kg cylinderVardhanm free bidi by Dalmia consumer careWater purifier-jalshodhakValue added product: an aborted ideaPhillips 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 MixSimple- 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 PackagingPlays significant role as it is associated withAffordability, ability to recognize, convenience of usage product appealNeeds special focus because ofPoor transport systemDifficulties of safe storagePoor facilities

Marketers have to consider following factors in packagingPackaging materialPack size and conveniencePackaging aesthetics

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

Pack Size and CovenienceSachet revolution pioneered by Velvet Shampoo at Re. 1 in later 1970s later followed by HLL, Godrej, Dabur etcSachet packaging replicated in many product categories- Tiger biscuits, Close-up toothpaste, Parachute hair oil, Ponds cold cream, Fair & Lovely, Chota Pepsi etcConvenience- 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 AestheticsLower literacy levels in rural market Consumers appreciate bright coloursEg: Lifebuoy identified as red soap

Distict lettering, use of local languages on the pack, images or symbols that convey products benefits influence consumer perception about the brand

Branding in Rural IndiaPopular brands show an unusual trendBrand association with colours, numbers and visuals and not necessarily with the name of the brandRetailers play a major role in rural brand promotion

BRAND BUILDING IN RURAL INDIABRAND 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 IDENTITYChallenge: need to relate the brand with the rural lifestyleBrands are introduced to urban markets and then move to ruralTata Steel Tata Shaktee sheets (qualities of strength, durability and toughness)Britannia Tiger Biscuits ( smart, active and sharp child)

BUILDING A BRAND IMAGEBrand has a personality of its ownHelps in brand connect Mahindra & Mahindra Bhumiputra series of tractors and Sarpanch series

BRAND LOYALTY vs STICKINESSRural people are less likely to switch brands as they do not have the required informationComfortable in purchasing tried and tested brands : brand sticky than brand loyalWhat should a Brand do to establish itselfEducate rural customersDevelop their interest through interactive communicationEncourage their desire to ownDeepen confidence through live demonstrationsBuild a long term relationshipEg:

Reasons for Brand Stickiness Many rural customers are still discovering the benefits of the productsEarly Mover Advantage of the dominating brandEntry of new brands very difficult

FAKE BRANDSBonds for ponds talcFair & lonely for Fair & LovelyLikeboy 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 CategoriesLookalikesThe colour scheme on packaging material closely resembles that of a popular brand.Eg: Shagun for Lifebouy(150 mg)Lalita Amla for Dabur Amla

Spell-alikesNames are subtly and cleverly misspeltEg: Paracute for ParachutePomes for PondsDuplicatesExact replicas of original brands

STRATEGY TO COUNTER FAKESUpgraded packagingEg: Dabur

Ensure deeper penetration and continuous and regular availability of productsForge strong relationships with local retailers.

STRUCTURE OF COMPETITION IN RURAL INDIACompetition from other urban national products branded tea and detergent powderRegional urban branded products - brands of the unorganised sector, like soaps, talc.Local urban brands ribbons, banglesLocal village brands ropes, bread, food itemsSubstitutable products or indirect competition neem twigs.

CONCLUSIONProduct at the heart of marketingProducts 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 StrategyAffordability is, in determined by two factors-1.Income of consumer2.Price of the Product & Services

Factors influencing the price Internal FactorsCost Pricing ObjectiveExternal FactorsCustomersSuppliersCompetitors

Cost Factor (Contd.)Promotion as a cost factor

Credit-based transactions increase cost.

ITC E-chaupal: A distribution channel to control costsBuy 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 turnoverDeeper penetration of the marketHere 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 shampooCavinkare 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 toothpasteLegal environment

Pricing StrategiesOptional-product pricingCaptive-product pricing

Low price pointsAvoid sophisticated packagingRefil packs/ reusable packsHighlight value, not priceProduct sharing services

Market-Entry strategyPenetration pricingEconomy pricingValue pricingCoinage pricingPsychological pricingPrice adjustmentsDiscounts and allowancesFree giftSchemes for retailersDiscriminatory pricing

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