RURAL MARKETING BY HERO HONDAINTRODUCTIONHero Honda Motors Limited, based in Delhi, India, is the worlds third largest manufacturer ofmotorcycles after Honda and Yamaha. Hero Honda is a joint venture that began in 1984 betweenthe Hero Group of India and Honda of Japan. It has been the worlds biggest manufacturer of 2-wheeled motorized vehicles since 2001, when it produced 1.3 million motorbikes in a singleyear. During the fiscal year 2008-09, the company has sold 3.28 million bikes and the net profitof the company stood at Rs.1281.7 crore, up 32% from the previous fiscal year. Its 2 plants are inDharuhera and Gurgaon, both in India. Third plant at Haridwar, Uttaranchal has also startedproduction by April, 2008. It will have production facilities such as Lean Manufacturing concept,more flexible lines & stream line material flow, within & proximity (planning to set vendors innearby locations constituting HHML Park) to achieve just-in-time manufacturing. It specializesin dual use motorcycles that are low powered but very fuel efficient.HERO HONDAS SPLENDORHero Hondas Splendor is the worlds largest selling motorcycle. Hero Honda has consistentlygrown at double digits since inception; and today, every second motorcycle sold in the country isa Hero Honda. Every 30 seconds, someone in India buys Hero Hondas top-selling motorcycle:Splendor. A legendary Fill it - Shut it - Forget it campaign captured the imagination ofcommuters across India, and Hero Honda sold millions of bikes purely on the commitment ofincreased mileage.Hero Honda Splendor has come up with all possible features of any standard bikes for priceoriented people. Apart from these features, this bike also has many advanced and customerfriendly features. This bike is equipped with every safety and comfort features for theconvenience of the biker. These are the four product variants available for Hero Honda Splendor:· Super Splendor· Splendor +· Splendor NX
CHALLENGES OF MARKETING IN RURAL INDIA:The Indian society is a complex social system with different castes, classes, creeds and tribes.The high rate of illiteracy added to the inadequacy of mass media impedes reach almost to 80%of Indias population who reside in village. Mass media is too glamorous, interpersonal andunreliable in contrast with the familiar performance of traditional artist whom the villager couldnot only see and hear, but even touch. Besides this villagers are more conservative buyers thentheir urban counterparts. Their desire to innovate with new product is restricted. Traditionalmedia can be used to reach these people in the marketing of new concept. The traditional mediawith its effective reach, powerful input and personalized communication system will help inrealizing the goal. Besides this when the advertisement is couched in entertainment it goes downeasily with the villager.WHY COMPANY CHOOSE RURAL MARKET?Hero Honda has worked out a major expansion strategy for the rural markets and is planning tostrengthen retail financing to support the initiative that could lead to setting up of its own financearm. Indias largest two wheeler company Hero Honda Motors is spreading its wings to capturethe commuting bikers imagination in rural India, after witnessing flat sales growth in 2008-09.The two wheeler market leader plans to cover 100,000 of the 600,000 villages in the country bythe end of this financial year under a campaign named Har Gaon, Har Aangan (every village,every household). It has dawned upon the company that, while two-wheeler penetration in urbanareas is 25 per cent, it is only 10 per cent in rural areas and so the latter segment needs to betapped more extensively. Under the rural vertical, they started collecting a lot of data at ruraltouch point. Many of our dealers are now meeting sarpanchs, headmasters, workers and otheropinion makers to understand the rural consumer better.
4A’s OF HERO HONDA1. Availability a) Hero Hondas 2 plants are in Dharuhera and Gurgaon, both in India. Third plant at Haridwar, Uttaranchal has also started production by April, 2008. b) Hero Hondas extensive sales and service network have spans over 3,000 customers touch points.Hero Honda followed a "Hub and Spoke System" in distributing its products in rural areas. c) The number of touch points (dealerships plus sales and service outlets) is already 3,500 from 2002 and another 500 would be added every year. d) For banking upon the aspiration of rural people Hero Hondas Splendor is available in different fancy colors namely: · Frost Blue · Cloud Silver · Mono Tone Black · Dual Tone Black · Blazing Red2. Affordability a) Hero Honda offer cheapest motorcycles in India cost between Rs 30,000 and Rs 35,000. b) Hero Honda with the help of ICICI Bank provides loan to the customers & also provide easy monthly installment scheme to urban customers. The company is tying up with local NBFCs and regional rural banks to arrange for finance for rural customers. c) Special event pricing by Hero Honda - Rs. 500 campaign3. Awareness a) Hero Honda Motors Ltd was the top advertiser then, accounting for a little over 25% (one fourth) of the share in both rural and urban arcade. b) Five hundred sales representatives were taken on board for the mission Har Gaon, Har Aangan (every village, every courtyard.)
c) Company gives advertisement in different media vehicles time to time like in television, magazines, newspaper, billboards etc. d) Hero Honda also organizes free service camps every year. e) Hero Honda also takes part in trade fair, haats, melas etc. f) Hero Honda has established mobile service centers to take care of rural customers. Reinforce product quality through service indicators.4. Acceptability a) Hero Honda has accepted by people both in rural and urban region because it‟s strong brand image and product quality. b) Hero Honda is considered to be most fuel-efficient bike on Indian roads. c) Hero Honda bikes are purchased more by daily users who needs more average of bikes as well as look.
SWOT ANALYSISStrengths:Technological support from Honda Motors, Japan. The company has a deeply penetrated dealernetwork. The company provides good after sales service through its well established dealernetwork. The company enjoys a huge market share and well established brands like Splendor,CD100, CBZ, etc.Weaknesses:Hero Honda depends on Honda for new products and this is a big weakness considering it fromthe post 2005 point of view. The reason being that the technological tie-up between Hero Hondaand Honda Motors of Japan will cease to exist. The company doesnt have a product catering toRs. 25,000 - Rs. 30,000 segment, and the company might suffer on account of this as theimported motorcycles and foreign players motorcycles are expected to cater to this particularsegment of the market. This can result in fall in the market share of the company. The companyimports about 31% of its spares requirements. This makes the company vulnerable to the importpolicies of the government. It also exposes them to the exchange rate risk.Opportunities:The motorcycle segment is growing at the rate of 33%, which provides a great opportunity forthe company to cash on. Also it is experiencing a shift in the customer preference from 4-strokemobikes to 2-stroke mobikes. This again provides an excellent opportunity to Hero Honda toleverage its market share and market leadership for sustained profitability.Threats:The technical collaboration with Honda is valid only till 2005 and this is a serious threat as theyhave been dependant on Honda for technology. Also Honda has set up its 100% subsidiary inIndia which shall start producing motorcycles from 2004. This will further increase thecompetition. The company has plans to foray into the scooter segment, which can also be a majorthreat for the future prospects of the company. The reason being that the consumers are shiftingfrom scooters to motorcycles and at this hour moving from motorcycles to scooters doesnt soundlogical.
VARIOUS MARKETING STRATEGIES THAT ARE ADOPTED BY HERO HONDA:PLAN HAR GAON HAR AANGANHero Honda was quick to realize that there was a huge opportunity waiting to be tapped. Fivehundred sales representatives were taken on board for the mission Har Gaon, Har Aangan (everyvillage, every courtyard.) These representatives have been given work tasks and not sale targets -they need to meet potential customers and opinion leaders in villages. It has increased themonthly sale of hero Honda by 15,000-16,000 motorcycles per quarter. Farmers, Hero Hondaknows, have money in their pockets twice a year when they harvest their crop - once around Mayand June and then around October and November. These "waves" are mounted just before theharvest so that Hero Honda is on their radar screen when they have cash in hand. It also realizedthat one reason customers in these markets choose Hero Honda over others is the easyavailability of spares and authorized mechanics. As a result, in the resale market, it commands apremium over rivals. This makes Hero Honda a preferred brand, thus the company decided toramp up rapidly its touch points with customers - showrooms, service centers and so on. From2,000 in 2009, the number has risen to 3,500 now. The company plan is to add at least 500 everyyear. Most of these will be service points. Customers can travel over long distances to buy amotorcycle but not for service. A customer can take his motorcycle for servicing four or fivetimes a year. Many of these touch points can start as a service centre and over time become a salecentre.ADVERTIZING THROUGH TRADITIONAL MEDIA:Some of the available options exploited by Hero Honda in the traditional media are Puppetry,Folk Theater & Song, Wall Painting, Demonstration, Posters, Agricultural Games, Post Cards etcAdvantages of traditional media:- The accessibility is high. Involves more then one sense. Interest arousal capability is high. Less operational liability ¨ Minimum cost.
Disadvantages of traditional media:- Range of mode choice is narrow. Potential for cognitive gain retention is possible but restricted. Depends on the skill of the performer But for optimum effect all elements in the rural communication system will have to be merged into a united whole. Competitors like Bajaj, Rajdoot, have also used these methods to the fullest extent. Conventional Non- Conventional Personalised Television Haat and Mela Direct mailer Radio Folk Media( puppet POS and magic show) (demonstration, leaflet) Press Video Van Word of mouth Cinema Mandi Interpersonal communication Outdoor: Wall Animator Painting, HoardingCOMMUNICATING THROUGH DEMONSTRATION:"Direct Contact" is a face to face relationship with people individually and with groups such asthe Panchayats and other village groups. Such contact helps in arousing the villagers interest in
their own problem and motivating them towards self-development. In result demonstration, helpof audio -visual media can add value.The five steps to make any demonstration effective are below: Information about people Objectives to be accomplished Demonstration plan & Execution of the plan Evaluation of the demonstration Reconsideration after evaluation.MAINTAINING A YOUTHFUL IMAGE:To give a boost to its youthful image the company has chosen Saurav Ganguly and HrithikRoshan as brand ambassadors. The company has also embarked on in-film advertising in aforthcoming Hindi movie.MOBILE WORKSHOP AND SHOWROOMIn order to expand its reach to rural areas, the company has recently launched a marketinginitiative in towns with a population of less than 50,000 in Uttar Pradesh. As a part of thisinitiative, it started a mobile workshop and showroom, through which people will be able togather knowledge about the companies vehicles and can also buy them. These mobile marketingefforts are focused on Splendor and Joy.CORPORATE SOCIAL RESPONSIBILITY:Hero Honda Motors takes considerable pride in its stakeholder relationships, especially onesdeveloped at the grassroots. The Company believes it has managed to bring an economically andsocially backward region in Dharuhera, Haryana, into the national economic mainstream. AnIntegrated Rural Development Centre has been set up on 40 acres of land along the Delhi-JaipurHighway. The Centre-complete with wide approach roads, clean water, and education facilitiesfor both adults and children-now nurtures a vibrant, educated and healthy community. TheFoundation has adopted various villages located within vicinity of the Hero Honda factory atDharuhera for integrated rural development. This includes:
· Installation of deep bore hand pumps to provide clean drinking water.· Constructing metalled roads and connecting these villages to the National Highway (NH -8).· Renovating primary school buildings and providing hygienic water and toilet facilities.· Ensuring a proper drainage system at each of these villages to prevent water logging.· Promoting non-conventional sources of energy by providing a 50 per cent subsidy on biogas plants.RURAL HEALTH CAREBesides setting up a modern hospital, the Foundation also regularly providesdoorstep health care services to the local community. Free health care and medicalcamps are now a regular feature in the Hero Groups community outreach program.ADULT LITERACY MISSIONThis Scheme was launched on 21st September, 1999, covering the nearby villages of Malpura,Kapriwas and Sidhrawali. The project started with a modest enrolment of 36 adults. Hero Hondais now in the process of imparting Adult Literacy Capsules to another 100 adults by gettingvillage heads and other prominent villagers to motivate illiterate adults.MARRIAGES OF UNDERPRIVILEGED GIRLSMarriages are organized from time to time, particularly for girls from backward classes, by theFoundation by providing financial help and other support to the families.RAMAN MUNJAL VIDYA MANDIRThe Raman Munjal Vidya Mandir began with three classes (up to class II) and 55 students fromnearby areas. The school has a spacious playground, an ultramodern laboratory, a well-equippedaudio visual room, an activity room, a well-stocked library and a computer centre.
RAMAN MUNJAL MEMORIAL HOSPITALMulti-specialty hospital equipped with the latest diagnostic and surgical technology. The RamanMunjal Memorial Hospital provides healthcare to the rural population in and around Dharuhera,and also caters to accident and trauma victims driving along the Delhi-Jaipur highway.RAMAN MUNJAL SPORTS COMPLEXThe Raman Munjal Sports Complex has basketball courts, volleyball courts, and hockey andfootball grounds are used by the local villagers. In the near future, sports academies are plannedfor volley ball and basket ball, in collaboration with National Sports Authority of India.VOCATIONAL TRAINING CENTREIn order to help local rural people, especially women, Hero Honda has set up a VocationalTraining Centre. So far 26 batches comprising of nearly 625 women have been trained intailoring, embroidery and knitting. The Company has helped women trained at this centre to setup a production unit to stitch uniforms for Hero Honda employees. Interestingly, most of thewomen are now self-employed.HERO HONDA’S ADVERTIZING AND PRICING STRATEGY IN RURAL MARKETIN ACCORDANCE WITH ITS LIFE CYCLE:In most cases the product is developed for the urban market and is later published pushed intothe rural market. Only in recent years have companies started customizing their products forrural markets and one of the best examples is hero Honda Splendor. It has been observed that thePLC of a product in the rural market is often longer than it is in the urban market. Many products that enter rural markets without serious planning die out either soon afterthe introduction or during the growth stage. Hero Honda has focused on brand building and thosethat continue to innovate constantly can sustain themselves in rural markets. Unlike urbanmarkets the product mix in rural markets is simple. Mostly only one product of a particularcompany registers its availability on rural areas. So accordingly Hero Honda has positioned itsbrand well in the rural areas and similarly now the brand is in the maturity stage but it has keepson re-growing its brand through some new product lines in the market that attract people andmake them buy its product and the brand association of Hero Honda is very strong compared to
its competitors and it has very well managed to keep shuffling between product growth andmaturity and made also helped adapting the customer with its new products. In addition to all this even Hero Honda has been outperforming the 2W industry and its focuson the rural market has been one of the main reasons for this. Penetration levels of less than 10%in rural areas as compared to 23% in urban areas offer a huge opportunity share. Some of thecompanys key initiates include targeting opinion makers such as the sarpanch, appointing a localperson as a sales executive, opening cost-effective showrooms to ensure the viability of dealersand tying up with local NBFCs and regional rural banks to arrange for finance. These are certaininitiatives Hero Honda has taken to re-grow its product again and again and not letting it gobeyond the maturity stage and towards the decline stage which one the best marketing strategiesHero Honda has adopted.PRICING STRATEGYPrice is a major element of the marketing mix. In rural markets, marketers have to deploy aproportionally large amount of resources to develop an effective marketing mix because ofinfrastructural constraints. So accordingly Hero Honda has taken a few steps to keep an effectivepricing strategy and it has been quite successful as because overall it has more than 50% marketshare in motorcycle market and 40% sales in rural areas. They have understood that use of massmedia is not as effective in rural because television penetration is low and press reach is limited.Also rural people desire the „touch and feel‟ experience before they become convinced of theneed to buy a particular product and so accordingly Hero Honda has arranged platforms such asskits in villages and advertising though melas and haats trough which message can be broughtout to the mass in rural areas. Hero Honda did not expect short term profits when entering the rural market as they placedtheir product at an affordable price and penetrated the market well and initially they did notstress on making instant profits and they settled down well in the market and slowly but surelythey have increased their market share in the market and priced their product matching thecustomer‟s satisfaction. Hero Honda has also expanded its product by increasing its product linesand introducing various other version and models.
Certain facts Hero Honda has understood well while pricing its product such as that ruralmarket requires investment and it is not a dumping ground where you can sell the products youare unable to sell in the urban market. They have implied on what can sell in the rural marketrather than sell what is already made. They have also understood price consciousness and valueconsciousness well and that rural market is not price conscious but value conscious becausespending a rupee pinches the rural people a lot rather than spending a rupee on who earnsthousands of rupee and Hero Honda has kept this in mind while pricing its product. The ruralpeople have a emotional value attached to every product they purchase and Hero Honda hasunderstood this very well and it has brought out its products very cautiously and customers arehappy with it. There are certain stages in which Hero Honda has mastered itself and it has captured the marketpretty well and it has become a market leader and these steps are : It has willingly designed products to meet the people‟s needs. They have done it and it has worked. They have recognized the distribution of the rural markets and it is very small and it has a positive and a negative impact such as that if it is negative they will not buy your product but if it has a positive impact they will only buy your product and it has happened with Hero Honda. Hero Honda has also recognized the frequency of use in rural areas which is very different from urban areas. As in this case the roads in the urban areas is better than rural so the motorbike made has to be tough enough to sustain in the rural conditions and as of now there are not enough service centres in the rural area so the product offered should just not be cheap but it should be with some added extra benefits and that what Hero Honda has stressed upon. Hero Honda is also coming up with bikes ranging from Rs 12500 to Rs 15000 for all class of buyers and its main intention is to target the rural customers. This step taken by Hero Honda will certainly create an excessive demand in the rural market. Also Hero Honda has understood that price sensitivity of customers in largely based upon the various personal, social, economic, or geographical factors and they have set their prices
accordingly in the rural market. They have also understood the limited and fluctuating purchasing power of rural consumers. So Hero Honda has not only kept in mind the customer‟s ability to pay but also the modes of payments and their timings that rural consumers mostly adopt such as promoting and encouraging the buying in the harvesting season which also coincides with the marriage season.HOW THE CHALLENGE OF RURAL MARKETING FOR BIKES IS DIFFERENTFROM THAT OF MARKETING TO URBAN CONSUMERS?This article seeks to identify how the challenge of rural marketing is different from that ofmarketing to urban consumers. Rather than extend their urban marketing program and practicesbrand owners should recognize the key differences and adapt their strategies accordingly. Hereare some of the important characteristics of rural markets that need to be addressed: 1. Intra community influences are relatively more important than inter-community ones. Being geographically scattered, rural communities are relatively detached from the mainstream population. But they are significantly more close-knit, with relationships largely within the community rather than without. This makes intra community communications rather critical. Generating positive Word of Mouth, particularly from local sources of authority, is as critical as mass media advertising. It is therefore important for marketers of Splendor to understand rural hierarchies and tap into local opinion leaders to help brand adoption and diffusion within a rural community. Winning over key opinion leaders is the key to penetration in rural communities. For example, young people are early adopters of technology and tend to be the key opinion leaders within rural communities for bikes. 2. Scarcity of media bandwidth. But abundance of attention. The key challenge for marketers in rural markets is reach rather than attention. Unlike urban consumers who are exposed to a proliferation of media channels but suffer from an attention deficit, the key issue in communicating to rural audiences is media access. Though penetration of TV is increasing (and urban targeted communication spills over to rural consumers) there are few exclusive rural channels of any significance in most
markets. However, on the plus side, once they are reached, rural consumers are more receptive to advertising than their urban counterparts3. Slow to adopt brands. Slow to give them up. Being relatively closed societies, rural consumers are slower to adopt new brands and categories than their urban counterparts. Generating trial becomes more difficult than gaining loyalty - whereas in the more mature urban markets retention is a bigger issue. Marketers therefore have to front-load their investment, and probably plan for longer lead times before their investment yields returns. However, the higher level of loyalty that can be expected (as rural consumers are slower in giving up brands once they have adopted them) helps justify the initial brand investment4. Expenses are year long; income is seasonal. A unique feature of the rural market is the seasonality of demand. Being predominantly agrarian, rural incomes tend to be skewed towards a couple of months in the year (post harvest). Thus demand (particularly for high value items like bikes) is highly seasonal and concentrated on one or two points during the year. It is therefore important that marketers of high value product like bikes focus their marketing activities during times in which incomes peak rather than distribute them over the year, as they would do in urban markets.5. Information hungry; but entertainment starved. Rural communities have limited entertainment options, which make it easier for marketing communications to generate higher levels of involvement by making their communications more entertaining.6. Higher receptivity to advertising, with lower persuasion. Rural consumers are more readily persuaded by marketing that touches them directly, such as personal experience, seeing others using it, or live demonstrations of the brand in action.7. Commercially profitable; and socially acceptable. Commercial enterprises (particularly with MNC connection like Honda in case of Hero Honda) should be vary of being seen to be too aggressive or mercantilist when dealing with rural consumers, or they could potentially face a backlash.
CONSUMER SEGMENT IN RURAL MARKETWHY PEOPLE PREFER HERO HONDA?
WHY IT IS SUCCESSFUL BRANDHero Honda has managed to put in spectacular performance going from strength despite increasein competition; the companys sales have witnessed an uptrend, registering an average growth of42% in the three years under review. Hero Honda has managed to achieve this because its strongbrand image and proven product quality underpinned the performance growth in recent years.Apart from the strong brand "splendor" the companys performance across the spectrum of themotorcycle market helped it exploit the growing demand for 4-stroke motorcycle.CONCLUSION:Hero Honda has been a success as its has created wealth for people in terms of providing peoplewith product of core benefit to them and they have become a part of their rural society and theyare growing with them and lastly they have very well distinguished between price and value andhave believed on the fact that “Grow with the people rather than grow at their expense”.BIBLIOGRAPHY: The Rural Marketing Book by Pradeep Kashyap and Siddhartha Raut www.herohonda.com www.herohonda.com/products& prices.htm www.strategylabs.net/search-hero-honda-advertising-strategy_p14.asp www.ecch.com/casesearch/product_details.cfm?id=90615