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Rural Product strategy

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Rural Product strategy

  1. 1. PRODUCT STRATEGYPRODUCT STRATEGY
  2. 2. 4Ps4Ps  44AsAs  Rural marketers need to deliver value to consumers by developing suitable products at a price they are willing to pay and at a place where they can conveniently purchase the products. 4Ps are still the tools 4As are the challenges Product Acceptability Price Affordability Place Availability Promotion Awareness
  3. 3. AvailabilityAvailability  India’s 638,000 villages are spread over 3.3 million sq. kms. Thus finding them is not easy.  Given the poor state of Indian roads, it is a great challenge to send products to far away villages on a regular basis.  Companies would do best by first reaching out to villages of population above 5,000 (20,000 villages) and next stage move onto villages with population of 2000-5000 (87,000 villages).
  4. 4. o HUL has built a strong distribution system with stockists using auto- rickshaws, bullock carts and even boats. o Coke has company depots which supply twice a week to large distributors who in turn supply to small distributors in other areas. o LG has set up 45 area offices and 59 remote area offices.
  5. 5. AffordabilityAffordability  With lower incomes, the products should be affordable to the rural consumers, many of whom are daily wage earners. o Godrej recently introduced 3 brands (Cinthol, Fair Glow and Godrej) in 50gm packs priced at Rs.5 meant specially for Bihar, MP and UP. o Coke came out with its Rs.5 Chotta bottle which was an instant success as today 80% of new drinkers are from rural India. o Videocon introduced a washing machine named the “Washer” priced at Rs. 3000 and without a dryer, it has seen 100% growth. The rural people were more than willing to purchase a branded product over locally manufactured ones.
  6. 6. AcceptabilityAcceptability  In order for a product to be accepted it needs to suit thesuit the mindsetmindset and requirements of that market. It needs to understand the daily lives and way of life of the rural people.  LG’s “Sampoorna” was one product that really worked wonders selling 100,000 TVs in the first year itself.  HDFC topped private insurers by selling rural policies worth Rs. 3.5 crores (premium collected)
  7. 7. AwarenessAwareness  With only 41% of rural households having access to television, building awareness is a huge challenge.  Doordarshan is still the primary medium of communication for marketers as rural TV viewing is confined to this.  Outings are confined to visiting local fairs and festivals. o Godrej which tries to push its soaps into rural areas uses radio in local languages. o Coke uses a combination of TV, cinema and radio to reach 53% of HHs. It doubled its spending on DD. Its ads stressed the magical pricing of Rs 5. o LG uses vans and road shows to each rural customers. o Philips uses wall writings and radio ads.
  8. 8. What companies doWhat companies do Company Products What they do Bajaj Electricals Home appliance Pricing closer to small-scale sector Electrolux Refrigerator, washing m/c Test marketing urban models in rural Punjab Eveready Batteries Van coverage Hero Bicycles Modifying pdts to suit different needs LG Color TV Selling high-priced TVs with local language display Marico Hair oil Selling low-priced sachets Titan Watches Pilot project with low-cost pdts Videocon Durables Pushing walkmans
  9. 9. PRODUCT CONCEPTSPRODUCT CONCEPTS The rural customer judges the offering onThe rural customer judges the offering on  Product features and quality  Services mix  Appropriateness of the pricing.  The rural marketer needs to understand that productsThe rural marketer needs to understand that products made for the urban market cannot be dumped in ruralmade for the urban market cannot be dumped in rural areas by changing the price or another feature. LG,areas by changing the price or another feature. LG, Philips and HLL succeeded through innovation ofPhilips and HLL succeeded through innovation of products.products.  Eg. Cadbury launched ChocoBix, a chocolate flavored biscuit, based on consumer insight that rural mothers opt for biscuits as they are less expensive than chocolates.
  10. 10.  Eveready found that their plastic torches which had a strong sales in urban markets was not doing well in rural areas. It was later that they realized that farmers preferred heavy brass torches because of the scrap value that the metal/alloy fetches.
  11. 11.  Philips found that rural people are willing to pay more for larger models as they perceived bigger products to be costlier. Thus radios became larger.  Usha fans introduced table fans designed to meet the aesthetic tastes of rural people.  LG brought washing machines with double the capacity as they found that rural HHs had more members and thus more washing to do. Thus products intended for rural use should beThus products intended for rural use should be  Simple  Easy to use (convenient)  Visually identifiable  Affordable
  12. 12.  Philips radio Usha fan
  13. 13. 5 Levels of Products5 Levels of Products 1. Core Benefit (eg. Entertainment, mobility) 2. Basic Product (eg. TV, Bike) 3. Expected Product (TV-good pic quality, easy to operate for rural, digital sound, flat screen for urban) (Bike- good shock absorbers, mileage for rural, power & style for urban) 4. Augmented Product- meet desires beyond expectations. Can be done only by studying the physical environment of consumer (TV- battery operated, display local language, better picture in weak signal) 5. Potential Product- finding new ways to satisfy consumers tomorrow.
  14. 14. Philips- Free Power RadioPhilips- Free Power Radio  Philips came with an innovative radio that neither consumed power through battery nor electricity. It used a one-minute winding spring (like mechanical watches) which would give enough power for 30 minutes listening time.  Since the average radio costs Rs.1000 worth of batteries per year, Philips radio would bring savings too.
  15. 15. Classification of ProductsClassification of Products  While rural product categories do not differ much from those urban, there are 2 separate ones:  Agri goodsAgri goods (agri inputs like fertilizers, pesticides etc.)  Agri implementsAgri implements (tractors, threshers, harvesters, pump sets etc.) Rural Products FMCGs Durables Agri Goods Services
  16. 16. Fast Moving Consumer GoodsFast Moving Consumer Goods  Consists of all non- durable goods like toiletries, cosmetics, foods, beverages, footwear etc. These are consumed quickly and purchased frequently.  Major players in this category include HUL, Dabur, Marico, Colgate- Palmolive, Nirma, CavinKare, Godrej Product BasketProduct Basket Toilet soap Biscuits Washing cake Tea Tooth powder Beverage Talcum powder Cooking oil Hair oil Vanaspati Shampoo Bulb Face cream Tube Lipstick Footwear Nail polish Cigarette
  17. 17. FMCG Consumption PatternFMCG Consumption Pattern Income Group’s Share in Total Market-1999 (%) Class Urban Rural Low 9 32 Low-middle 26 37 Middle 25 16 Upper Middle 18 8 High 22 7 100 100
  18. 18.  Though it was found that high income households spent 3.6 times that of lower-income groups, it was the two lowest income groups that accounted for 69% of consumption in the rural market. Thus there was a clear signal that marketers need to address the bottom of the pyramid with cost- effective value-for-money products. Most PopularMost Popular ConsumablesConsumables RuralRural UrbanUrban Toilet soap Toilet soap Washing powder Biscuits Packaged tea Washing powder Biscuits Packaged tea Detergent cakes Detergent cakes
  19. 19. Consumer DurablesConsumer Durables  This group includes home appliances, watches, automobiles, furniture etc. Rural consumers purchase from nearby towns while urban consumers purchase from city dealers.  The major players are Usha, Bajaj, Philips, Titan, Godrej, Videocon, Onida, Salora, Hero Cycles, Hero Honda, Mahindra, Tata.  Can be divided into 3 price ranges- low, medium, high-priced products. Group1Group1 (<Rs.(<Rs. 1000)1000) Group2Group2 (Rs. 1K-(Rs. 1K- 6K)6K) Group3Group3 (<Rs.(<Rs. 6000)6000) Pressure Cooker TV (black &white) Color TV Pressure pan Geyser VCR/ VCD Bicycle Sewing m/c Scooter Watch Mixer/ grinder Motor cycle Electric iron Stereo Fridge
  20. 20. Rural Share of Consumer DurablesRural Share of Consumer Durables Share in % 1998-99 Over 75 Bicycle, transistor, wrist watch, B&W TVs 50-75 VCR, pressure cooker, table fan, ceiling fan, sewing m/c, motorcycle 30-50 Moped, scooter, Color TV, Electric iron 20-30 Refrigerator 10-20 Washing machines 5-10 - <5% VCR/ VCD
  21. 21. Agricultural GoodsAgricultural Goods  These are goods used for farm activities. These include inputs like seeds, fertilizers, pesticides, insecticides and implements like tractors, tillers, threshers.  This market accounts for Rs.450 billion annually.  Major players include Rallis India, Monsanto, DCM Shriram, Chambal Fertilizers, IFFCO, Mahindra, Eicher, Escorts.
  22. 22. ServicesServices  This includes telecommunication, transport, healthcare, banking, insurance and education.  Emerging services include ITES, Internet, Mobile phone services.  The major players include LIC, SBI, SBNL. There are also new entrants which include Reliance Infocomm, ITC e- Choupal, ICICI Prudential Life Insurance, IFFCO-TOKIO General Insurance etc.
  23. 23. New Product DevelopmentNew Product Development The process involves:  Idea generation  Concept testing  Product development  Test marketing Some new products introduced in rural markets are 5-kg cooking gas cylinder by HPCL; Jolly batter-operated color TV, Philips Free Power Radio, Kisan Credit Card etc.
  24. 24. Rural Product designRural Product design  Rural consumers are reluctant to switch to LPG for cooking – burst accidentally, gas leakage, no way to check quality of gas  Max gas cylinder – private player - came up with auto cut-off regulator, double sealed cylinder that assures the correct weight, special steel branded noise pipe, wider base of cylinder, top ring open from one side for easy handling
  25. 25. HPCL IntiativesHPCL Intiatives  LPG penetration is as high as 74% in urban but only 15% in rural areas  HPCL 5-kg gas cylinder which can be used for cooking and lighting. The initial and recurring cost has been brought down from Rs. 1600 and Rs 270 to Rs 800 and Rs. 99
  26. 26. ““Jaishodhak”Jaishodhak”  95% of disease in rural India are water borne.  Less than 50% villages have a piped drinking water.  DCM Shriram came out with a low cost water purifier. They introduced twin pack consisting of two 30 ml bottles( one contains chemicals to reduce the turbidity of floating solids and the other contains a disinfectant) sufficient for needs of a family of five people for one month.
  27. 27.  Philips launched a CTV exclusively for rural market and named it Vardhan. It is priced at Rs. 6,500
  28. 28.  Idea generation:Idea generation: in rural homes, the detergent bar used for washing clothes is cut into two pieces before use to ensure that it lasts longer due to less melting. But no marketer has addressed this need so far. Similarly areas with a problem of hard water would appreciate detergents able to cope with this factor.  Concept testing:Concept testing: this needs to be done in different regions as needs change from area to area. Eg. A concept of low-cost dry toilet promoted by UNICEF (requiring less water) was appreciated in water-scarce regions of Rajasthan, but was opposed in other regions where water availability is not a problem.
  29. 29.  Dalmia consumer care developed a tobacco free bidi, Vardaan. It also found that target customer will be mostly literate and thus packaging was developed into 9 languages. It developed promotional tools like street plays, audio visual presentations, video clips, outreach programme for women etc to continously reach out to tobacco bidi users and impress upon them the importance of switching to a non tobacco bidi for health reasons
  30. 30.  Test Marketing:Test Marketing: this is the most important factor in deciding the success or failure of the product. It becomes critical in the rural context where failure rates are high. Thus companies need to realize that the cost of test marketing is very low compared to the risks involved.  Eg. Eicher Tractors aborted its idea of generating electricity through its tractors with the use of a generator powered by tractor engine. This was because the company found that it could not take care of the farmer’s agricultural power purposes and could only be used for domestic purposes.  It found that farmers use 5-KW water pumps for irrigation which ran on 3-phase power supply. Hence the company’s single-phase, 3KW generator was not suitable. Because of limited space on tractors a bigger one could not be fit either. So safest bet was to abort!
  31. 31. Eicher tractorsEicher tractors
  32. 32. Product Life CycleProduct Life Cycle  PLC stages in rural India are usually much longer than urban markets.  Companies struggle to push growth of their products through consumer education and adopting alternate channels to reach deeper to grow the market.  HUL, ITC and Eveready having tasted success by introducing products at the maturity stage have now entered new segments and gone for brand extension.
  33. 33. Rural PackagingRural Packaging  Packaging plays an important role in product offering in rural markets as it is associated with affordability, ability to recognize (visibility, readability), convenience of usage, product appeal, protection of product and aesthetics. Packaging for rural markets needs special focus because of  Poor transport system (poor road conditions)  Difficulties of safe storage (rats, moisture, heat, rain water)  Poor facilities (erratic power supply leading to poor cold-storage facilities for food products) Thus packaging has to haveThus packaging has to have  Longer shelf life than urban products  Able to withstand harsh weather conditions  Able to withstand sudden and jerky movements during transportation.
  34. 34.  Packaging Material:Packaging Material: Plastics and tetra-packs are the new packaging mediums. Plastic advantages include that it is waterproof, provides effective barriers to vapors, is sunlight resistant and is lightweight.  Pack size and convenience:Pack size and convenience: Velvet shampoo and Chik kick started the sachet revolution.  Packaging Aesthetics:Packaging Aesthetics: Lower literacy levels in rural markets increase the need of highlighted packaging. Lifebuoy is identified as the red soap, tiger biscuits identified by the animal on the cover. Thus perception is influenced by use of local languages, images and symbols.  Eg. The picture of lightning used on Rin detergent pack is distinct and communicates the brand benefits of whiteness easily to the illiterate consumer.
  35. 35. Brand Building in Rural IndiaBrand Building in Rural India  Brand name:Brand name: should facilitate easy brand recall through color, visual or numeric association. Thus names like Nirma, Sampoorna, Utsav were chosen by those firms.  Creating & building brand identity:Creating & building brand identity: all promotions should match the identity you wish to create. Thus Tata Steel branded its sheets as Tata Shaktee to create an identity of strength, durability, toughness. Britannia Tiger biscuits associates an identity with smart, active and sharp children.  Mahindra maintained its image through the Bhumiputra seriesBhumiputra series of tractors and SarpanchSarpanch seriesseries both of which matched the tough, hardworking image the company wanted associations with.
  36. 36. Brand VarietyBrand Variety Category/Category/ dealerdealer Average Number of BrandsAverage Number of Brands RuralRural UrbanUrban Toothpaste 3 7 Toothbrush 3 6 Biscuits 3 9 Hair oil 3 7
  37. 37. Largest Rural Brands ( AC NeilesenLargest Rural Brands ( AC Neilesen July 2004)July 2004) Brand Category Growth % Parle-G Biscuits 8.2 Lifebuoy Active Toilet soap 6.4 Lux Toilet soap 5.6 Nirma Washing powder 13.1 Ghari Washing powder 21.5
  38. 38. Fake BrandsFake Brands  Fakes are common in rural India. A visit to the haats where the rural people regularly visit will show an almost complete absence of genuine brands. A survey found that for every 100 strips of genuine Vicks Action 500, more than 50 were counterfiet. Thus weThus we have Bond’s, Fair & Lonely,have Bond’s, Fair & Lonely, Likeboy etc.Likeboy etc.  Lookalikes, Spell-alikes, Duplicates all have the advantage of being able to reach the inner- most villages, manufactured by small time companies.
  39. 39. Strategies to counter fakeStrategies to counter fake  Dabur – replaced its plastic blow-moulded container with a premium four-colour shrink- sleeve packaging, which was a grainy texture and water bubbles. The packaging is difficult to replicate. This resulted in a sales growth of 12% of the original product.  P&G initiated action against the manufacturers of lookalike Vicks vaporub and Lozenges. It was marketed under the brand name Vikas.  Coca cola has put into place 48 consumer response.
  40. 40. After sales serviceAfter sales service  Tractor servicing – Most tractor companies regularly organize service camps in big villages/small towns. They invite tyre, battery, fuel injection and other component suppliers to participate.  Videocon company mechanics go around to villages twice a week to provide after sales services.  The tractor and heavy commercial vehicle requires 3 mn batteries per year. Exide company officials travelled to remote areas to convert local manufacturers (Ustad) into exide dealers. R&D team designed low cost battery.

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