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DISTRIBUTION STRATEGY
INTRODUCTION• Availability determines volume and market  share• Challenge : Reaching 6 lakh villages and  feeding a retail...
Problems faced in rural distribution:• Large number of small markets• Dispersed population and trade• Poor road connectivi...
• Poor storage systems• Highly credit-driven market, low investment  capacity of retailers• Poor visibility and display of...
Coverage Status in Rural Markets• Rural – any location with a population of less  than 50,00.• 50% of rural population res...
Channels of Distribution   Five layers of distribution channels for movement of   products from company depot to interior ...
Rural Distribution System•   Wholesalers•   Retailers•   Mobile traders•   Vans•   Weekly haats                     Prof. ...
Wholesaling• 70% of rural market – beyond reach of direct  marketing• 50% rural consumption through wholesalers• Speculati...
Rural retail system• Rural retail spread  - Rural India - 65% retail outlets in country  - 35 lakh retail outlets spread o...
Rural premises:  - infrastructural constraints              * lack of sufficient space              * inadequate power sup...
Rural retail shelves• Filled with local and regional brands – higher margins and  longer credit periods• Less variety of b...
Vans• Salesman loads van with stocks from nearest  stockist or company stock point• Works around surrounding markets• Then...
Mobile Traders• Direct to home, unorganised distribution• Daily need products – mostly local brands –  detergent, cosmetic...
Haats/ Shandies• Oldest marketing channel in India• Profile of haat visitors and purchase behaviour                  Prof....
BEHAVIOUR OF CHANNEL•   Credit facilities to customers•   Pricing by channel•   Reason for stocking a product / brand•   S...
PREVALENT DISTRIBUTION MODELS   RETAIL                              WHOLESALE VAN/SUBSTOCKI                         FEEDER...
MARKETING                      DISTRIBUTION MODEL 1                                COMPANY                                ...
CHARATERISTICS• Rural distribution separated from urban distribution• Company appoint a sub distributor(SD)under rural  di...
DISTRIBUTION MODEL 2    DISTRIBUTION MODEL 2            COMPANY           C&FA / DEPOT           DISTRIBUTOR              ...
CHARATERISTICS• There is no separate channel for rural distribution• Minimises distribution costs, allowing companies to o...
NIRMA DISTRIBUTIONSYSTEM                 NIRMA DISTRIBUTION SYSTEM                                 NIRMA                  ...
DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 1                           LG                         DEPOT                ...
MARKETINGDURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 2                       PHILIPS                        DEPOT    DIS...
Retail outlets are not able to sell more durables because:• They lack variety• Transport costs increase the prices (The ne...
NIRMA DISTRIBUTION SYSTEM              DISTRIBUTION OF FAKE PRODUCTS                    MANUFACTURER                   WHO...
Channels of distribution:Channel 1: Manufacturers to wholesaler/retailer in big city or  small          town, or directly ...
EMERGING DISTRIBUTION          MODELS.Marketers are innovating new cost effective      approaches to reach markets.       ...
CORPORATE- SHG LINKAGE(self help             group)• 10-15 women organized by govt bodies.• To boost the self worth among ...
TTK PRESTIGE PRESSURE COOKER CASE• Stagnating Sales and declining returns.• Company saw SHG women as an opportunity  to en...
Satellite Distribution Model.             (HUB & SPOKE SYSTEM).  Stockists are appointed in major towns and feedertowns.R...
Pioneers in Satellite Distribution model     COKE & PEPSI              Prof. Raghavendran Venugopal   31
SYNDICATED DISTRIBUTIONDistribution is posing a major problem for anew company to penetrate to Rural market.Two or more co...
JK Diary Case• JK diary launched a WHITENER DIARY TOP in  50 gm. sachets priced at 6.50 Rs targeting at  Rural customers.•...
Problems with syndicated Distribution.• Markets for the coverage of two companies  are different.• Terms of Payment are di...
ITC’s DISTRIBUTION MODEL.• Reached Rural Consumers through its e-  Choupal model for backward and forward  linkages for it...
NYKS Haat DISTRIBUTION MODEL• Nehru Yuva Kendra Sangathan.• Hires young people as National Service Volunteers  (NSV) for 2...
PROJECT DISHA- CASE.• MART selected500 ex volunteers to promote  company Brands(COLGATE).• Volunteers will be provided wit...
AGRICULTURE INPUT DEALERS.• 2,62,000 fertilizer dealers in country.• Fertilizer companies have retail outlets within  a ra...
PETROL PUMPS & EXTENSION COUNTERS.• 60% of 12000 Petrol pumps in INDIA is located  on Highways close to villages.• Selling...
OTHER CHANNELS.• HERO HONDA Company reported emergence of  Unofficial channel of distribution.(Village Mechanics, Real Es...
IDEAL DISTRIBUTION FOR RURAL.• Per Capita Sales=Annual Sales/Market Population..    Name of the Model                     ...
THANK YOUProf. Raghavendran Venugopal   42
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Rural Marketing, VTU Syllabus Module 6

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Transcript of "Rural Marketing, VTU Syllabus Module 6"

  1. 1. DISTRIBUTION STRATEGY
  2. 2. INTRODUCTION• Availability determines volume and market share• Challenge : Reaching 6 lakh villages and feeding a retail network of over 35 lakh village shops• 68% of rural markets still lies untapped due to inaccessibility.• Some successful regional brands : Ghari detergent, Anchor toothpaste, Gemini Oil Prof. Raghavendran Venugopal 2
  3. 3. Problems faced in rural distribution:• Large number of small markets• Dispersed population and trade• Poor road connectivity• Multiple tiers – higher costs• Poor availability of suitable dealers• Low density of shops per village, high variation in their concentration• Inadequate bank and credit facilities for rural retailers – poor viability of retail outlets Prof. Raghavendran Venugopal 3
  4. 4. • Poor storage systems• Highly credit-driven market, low investment capacity of retailers• Poor visibility and display of product• Poor communication of offers and schemes – poor reach of media Prof. Raghavendran Venugopal 4
  5. 5. Coverage Status in Rural Markets• Rural – any location with a population of less than 50,00.• 50% of rural population resides in 1 lakh off large villages ( 2000+ population)• Account for 60% of rural wealth• 2.3 lakh tiny villages (<500 population) – hardly any shops• Distribution becomes uneconomical towards smaller towns Prof. Raghavendran Venugopal 5
  6. 6. Channels of Distribution Five layers of distribution channels for movement of products from company depot to interior village markets: Layer Channel Partner LocationLayer 1 Company depot/ C&FA National/State levelLayer 2 Distributor/ van operator/ District level super stockist/ rural distributorLayer 3 Sub-distributor/ Retail stockist/ Tehsil HQ, towns Sub-stockist/ Star seller/ and large villages Shakti dealerLayer 4 Wholesaler Feeder towns, large villages,haatsLayer 5 Retailer Villages, haats Prof. Raghavendran Venugopal 6
  7. 7. Rural Distribution System• Wholesalers• Retailers• Mobile traders• Vans• Weekly haats Prof. Raghavendran Venugopal 7
  8. 8. Wholesaling• 70% of rural market – beyond reach of direct marketing• 50% rural consumption through wholesalers• Speculative rather than distributive - insufficient product availability - urban areas – most concentration on retailers - wholesale distribution less -companies neglected rural markets Prof. Raghavendran Venugopal 8
  9. 9. Rural retail system• Rural retail spread - Rural India - 65% retail outlets in country - 35 lakh retail outlets spread over 6 lakh villages - High distribution cost * geographical spread * low volumes per outlet - Average monthly sale per shop < Rs. 5000 - restricts variety and range of products stocked - 58% of villagers prefer to buy from haats rather than shops coz of better price, quality and variety - Availability of shops in villages is poor Prof. Raghavendran Venugopal 9
  10. 10. Rural premises: - infrastructural constraints * lack of sufficient space * inadequate power supply * lack of proper storage system - financial constraints * inadequate funds * unwillingness of banks to extend loans - low retail space per capita – <100 sq.ft area - travel and transport costs Prof. Raghavendran Venugopal 10
  11. 11. Rural retail shelves• Filled with local and regional brands – higher margins and longer credit periods• Less variety of brands available• Number of brands per product category decreases towards smaller villages• Ensure visibility on shelves• Product stocking – cluttered &disorganised• Slow moving products – dust covered• Absence of proper racks, display box, stand• Strategies: provide display & storage systems Prof. Raghavendran Venugopal 11
  12. 12. Vans• Salesman loads van with stocks from nearest stockist or company stock point• Works around surrounding markets• Then moves to next stock point – journey cycle• Used for both sales & promotions• Eg.: Everyday , J.K. Diary• Effective but expensive Prof. Raghavendran Venugopal 12
  13. 13. Mobile Traders• Direct to home, unorganised distribution• Daily need products – mostly local brands – detergent, cosmetics, personal care, garments, footwear• Carry products on bicycles, mopeds, handcarts• Deep reach• Good rapport with clients• Mostly sell fakes and local brands Prof. Raghavendran Venugopal 13
  14. 14. Haats/ Shandies• Oldest marketing channel in India• Profile of haat visitors and purchase behaviour Prof. Raghavendran Venugopal 14
  15. 15. BEHAVIOUR OF CHANNEL• Credit facilities to customers• Pricing by channel• Reason for stocking a product / brand• Seasonal pattern of stocking• Information source and influence on retailer• Purchase source for the retailer• Purchasing cycle• Channel promotion Prof. Raghavendran Venugopal 15
  16. 16. PREVALENT DISTRIBUTION MODELS RETAIL WHOLESALE VAN/SUBSTOCKI FEEDER TOWNS ST WHOLESALE AND RETAIL RURAL MARKET Prof. Raghavendran Venugopal 16
  17. 17. MARKETING DISTRIBUTION MODEL 1 COMPANY C&FA DISTRIBUTOR DISTRIBUTOR (RURAL) (URBAN) SUB- WHOLESALER WHOLESALERDISTRIBUTOR RETAILER RETAILER RETAILER RETAILER RETAILER (RURAL) (LOCAL) (SATELLITE (URBAN) (URBAN) MKT) Prof. Raghavendran Venugopal 17
  18. 18. CHARATERISTICS• Rural distribution separated from urban distribution• Company appoint a sub distributor(SD)under rural distributor(RD)• Owing to poor road networks & low volume per outlet, RD covers a large area• DM1 model focuses more on RD’s & SD’s rather than the wholesale channel and has large no. of points appointed in the rural areas as locations are scattered. This ensures that companies products reach maximum no. of areas• Advantages include better monitoring, price discipline and control over the sale and distribution of products• Companies prepare PJP’s (Permanent Journey Plan) – six working days. Outlets are covered only fortnightly• No. of outlets covered in a day is 30 – 40 of which 15 – 20 are productive Eg. HLL Prof. Raghavendran Venugopal 18
  19. 19. DISTRIBUTION MODEL 2 DISTRIBUTION MODEL 2 COMPANY C&FA / DEPOT DISTRIBUTOR WHOLESALERRETAILER RETAILER(LOCAL) Prof. Raghavendran Venugopal 19
  20. 20. CHARATERISTICS• There is no separate channel for rural distribution• Minimises distribution costs, allowing companies to offer better margins to distributors and other channel partners (fewer)• Companies with limited no. of SKUs and high sales volume adopt this model• It is also preferred by new entrants who lack infrastructure required to have wide distribution network• Example: Priyagold biscuit, Nirma (Shakti detergent, Nirma soaps, Camay & other toiletries)Issues:• Coverage, No SD to cover interior parts Prof. Raghavendran Venugopal 20
  21. 21. NIRMA DISTRIBUTIONSYSTEM NIRMA DISTRIBUTION SYSTEM NIRMA Ahmedabad DEPOT Hyderabad, Kolkata, Kanpur DIRECT DISTRIBUTOR At district levelSUB DISTRIBUTOR/BIG WHOLESALER At Tehsil level Covers 300-400 outlets directlyWHOLESALER RETAILER WHOLESALER RETAILER Prof. Raghavendran Venugopal 21
  22. 22. DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 1 LG DEPOT NEW RURAL DISTRICT OFFICE C&F AGENTS WAREHOUSE EXCLUSIVE DEALERS MULTIPLE DEALERS CONSUMER Prof. Raghavendran Venugopal 22
  23. 23. MARKETINGDURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 2 PHILIPS DEPOT DISTRIBUTOR STOCKIST (URBAN) (RURAL) RETAILER RETAILER (URBAN) (RURAL) CONSUMER Prof. Raghavendran Venugopal 23
  24. 24. Retail outlets are not able to sell more durables because:• They lack variety• Transport costs increase the prices (The net landed cost of a 21-inch Color TV is Rs. 1000 more compared to the price offered by a dealer in the city)Rural buyers prefer to buy from city stores because:• More choices are available• It is possible to get competitive prices through bargaining• Rural buyer can see many options, visit several shops and check different pricesProblem:• To generate volumes, companies give huge discounts to the big city dealers, which results in price differences and put the rural retailer at disadvantage Prof. Raghavendran Venugopal 24
  25. 25. NIRMA DISTRIBUTION SYSTEM DISTRIBUTION OF FAKE PRODUCTS MANUFACTURER WHOLESALER IN BIG CITY WHOLESALER IN SMALL TOWN/KASBA HAAT VILLAGE MOBILERETAILER RETAILER TRADER CUSTOMER Prof. Raghavendran Venugopal 25
  26. 26. Channels of distribution:Channel 1: Manufacturers to wholesaler/retailer in big city or small town, or directly to customerChannel 2: Wholesaler in big city to wholesaler in small town/kasbaChannel 3: Wholesaler in small town /kasba to village retailer/mobile trader/haatFakes reach consumers through the following channels:• Small kirana shops located within the village• Big shops generally located on the main road• Door-to-door visits by salesmen who pose as company representatives• Salesmen in local trains and buses• Mobile traders• Haats Prof. Raghavendran Venugopal 26
  27. 27. EMERGING DISTRIBUTION MODELS.Marketers are innovating new cost effective approaches to reach markets. Objectives: Maximize existing infrastructure. Ensuring participation and economic sustainability of all stakeholders
  28. 28. CORPORATE- SHG LINKAGE(self help group)• 10-15 women organized by govt bodies.• To boost the self worth among women.• Loan assistance from rural banks for setting up of income generating enterprises.• Rapid Growth provided an opportunity to establish a path breaking distribution model through the linkage of the groups for marketers. Prof. Raghavendran Venugopal 28
  29. 29. TTK PRESTIGE PRESSURE COOKER CASE• Stagnating Sales and declining returns.• Company saw SHG women as an opportunity to enter to the rural market.• Meetings were organized with the group .• Interested women were chosen as dealers and demo cookers were given to present at the SHG meetings.• Women dealers also visited other potential buyers and booked orders. Prof. Raghavendran Venugopal 29
  30. 30. Satellite Distribution Model. (HUB & SPOKE SYSTEM). Stockists are appointed in major towns and feedertowns.Retailers in feeder towns get attached to these stockists.Manufacturer supplies goods to stockists.Functions performed by stockists include Financing, Ware housing, Sub distribution.Volume done by retailers varies due to location, capacity etc.Over a period of time some retailers will be elevated to stockists points. Prof. Raghavendran Venugopal 30
  31. 31. Pioneers in Satellite Distribution model COKE & PEPSI Prof. Raghavendran Venugopal 31
  32. 32. SYNDICATED DISTRIBUTIONDistribution is posing a major problem for anew company to penetrate to Rural market.Two or more companies come together toform a syndicated trading organization tojointly distribute a collective group ofhousehold products by sharing costs.Small company should not deal in the sameproducts that the big company deals Prof. Raghavendran Venugopal 32
  33. 33. JK Diary Case• JK diary launched a WHITENER DIARY TOP in 50 gm. sachets priced at 6.50 Rs targeting at Rural customers.• To cover the interiors a van was hired(125 Km *25 Days) @6Rs Per Km.• Since JK diary has only a single product they shared the travelling expense with three other companies targeting at rural customers. Prof. Raghavendran Venugopal 33
  34. 34. Problems with syndicated Distribution.• Markets for the coverage of two companies are different.• Terms of Payment are different.(Cash by one company & credit by other company).• Salesman of only one company accompanies the van: ( Pushes his companies products & does not make serious efforts to collect the payments of other companies). Prof. Raghavendran Venugopal 34
  35. 35. ITC’s DISTRIBUTION MODEL.• Reached Rural Consumers through its e- Choupal model for backward and forward linkages for its agri related business• Services provided like • Information • Knowledge • Purchase • Sale Prof. Raghavendran Venugopal 35
  36. 36. NYKS Haat DISTRIBUTION MODEL• Nehru Yuva Kendra Sangathan.• Hires young people as National Service Volunteers (NSV) for 2 years with 2000Rs stipend.• NSV is assigned with 15-20 villages :organize events and create good rapport and credibility with villagers.• After 2 years Existing NSV retire to give way to fresh NSV’s. Prof. Raghavendran Venugopal 36
  37. 37. PROJECT DISHA- CASE.• MART selected500 ex volunteers to promote company Brands(COLGATE).• Volunteers will be provided with all facilities( bicycles, umbrellas, storage boxes, T-shirts,etc).• Volunteers buy stock from nearby sub stockists and sells at near by Haats and village Shops on the way.• Average sales of 1000Rs Per day.• Result is that Company got benefited from this . Prof. Raghavendran Venugopal 37
  38. 38. AGRICULTURE INPUT DEALERS.• 2,62,000 fertilizer dealers in country.• Fertilizer companies have retail outlets within a range of 5 Km.• Marketers found the possibility of selling their products through these outlets. Prof. Raghavendran Venugopal 38
  39. 39. PETROL PUMPS & EXTENSION COUNTERS.• 60% of 12000 Petrol pumps in INDIA is located on Highways close to villages.• Selling of food Products & toiletries through these outlets.• Exploring possibility of selling agri inputs & LPG cylinders from these outlets. Prof. Raghavendran Venugopal 39
  40. 40. OTHER CHANNELS.• HERO HONDA Company reported emergence of Unofficial channel of distribution.(Village Mechanics, Real Estate Agents & Shopkeepers).Take the Bikes in 2’s or 3’s from company Dealers.Display them outside dealer’s Premises and will close the sale.Paper work left to the Dealer to complete. Prof. Raghavendran Venugopal 40
  41. 41. IDEAL DISTRIBUTION FOR RURAL.• Per Capita Sales=Annual Sales/Market Population.. Name of the Model Best situation Project Shakti.(Corporate –SHG) Low PCS, Low Population Density Segment consumers. NSV Model Low PCS High Population Density PDS, Cooperatives& Fertilizer Dealers. Segment.Rural Markets are GOLD Mines which forced marketers tocome up with innovative ideas to ensure the reach of theirProducts in these areas Prof. Raghavendran Venugopal 41
  42. 42. THANK YOUProf. Raghavendran Venugopal 42
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