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PRODUCT STRATEGY

Objectives
Marketing 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 Acceptability
Price- Affordability
Place- Availability
Promotion- Awareness

Availability
First 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.

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

Affordability
With 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 includes
Godrej 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/-.

Acceptability
Need 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.

Awareness
Large parts inaccessible to conventional
media. Only 41 percent got access.
Outing confined to local fairs and festivals
Television viewing to state owned channelDoordarshan.
HLL relies on its own company
organised media.
Godrej uses radio to reach people in
their own language.

Products concepts and


classification

Market mix planning begins with offering.


Rural consumers judges offering on the
basis of three elements
1) Product features and quality.
2) Service mix and quality.
3) 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 product


Each 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
Categories
FMCGs
Consumer Durables
Agri Goods
Services

FMCG Main Players

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

FMCG Growth
Rural market has grown consistently in the 1990s
A 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 market
High income households spends 3.6 times more
than the lower income households on FMCGs.

FMCG Products
About 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 Growth
The 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 Durables
Durable goods include products like home
appliances, automobiles, watches,
funrniture.etc

Main Players

NCAER has classified durables into 3


categories:
Low priced(<Rs. 1000)
Medium priced(Rs. 1000- 6000)
High priced(>Rs. 6000)

Consumer Durables Market


As 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 Share
The 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 Products
The 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 Growth
The mid 1990s witnessed impressive
growth rates
It increased from 8.8% in the mid 1990s
to 11.5% from 2000 onwards.

Agricultural Goods
Agri 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

Services
Major 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 development


1.Idea generation
2.Concept testing
3.Product development
4.Test marketing

e.g

5 k.g cooking gas cylinder by HPCL


Jolly battery operated colour television
Free power radio
Jugad the rural public trans port in north
india
Kishan credit card

Max gas cylinder

Auto cut regulator


Double-seated cylinder
Special steel-braided hose pipe
Wide base of cylinder
Top ring open one side

EXAMPLE
Mahindra maxx
Hpcl,5-kg cylinder
Vardhanm free bidi by Dalmia consumer
care
Water purifier-jalshodhak
Value added product: an aborted idea
Phillips 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 Mix
Simple- 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 Packaging
Plays significant role as it is associated with
Affordability,
ability to recognize,
convenience of usage
product appeal

Needs special focus because of


Poor transport system
Difficulties of safe storage
Poor facilities

Marketers have to consider following


factors in packaging
Packaging material
Pack size and convenience
Packaging aesthetics

Packaging Material

Most commonly used- plastics since they


are waterproof, provides barriers to
vapours, sunlight resistant, lightweight

Pack Size and Covenience


Sachet revolution pioneered by Velvet Shampoo at
Re. 1 in later 1970s later followed by HLL, Godrej,
Dabur etc
Sachet packaging replicated in many product
categories- Tiger biscuits, Close-up toothpaste,
Parachute hair oil, Ponds cold cream, Fair & Lovely,
Chota Pepsi etc
Convenience- 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 Aesthetics
Lower literacy levels in rural market
Consumers appreciate bright colours
Eg: 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 India


Popular brands show an unusual trend
Brand association with colours, numbers
and visuals and not necessarily with the
name of the brand
Retailers play a major role in rural brand
promotion

BRAND BUILDING IN RURAL


INDIA
BRAND 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 IDENTITY


Challenge: need to relate the brand
with the rural lifestyle
Brands are introduced to urban
markets and then move to rural
Tata Steel Tata Shaktee sheets
(qualities of strength, durability and
toughness)
Britannia Tiger Biscuits ( smart, active
and sharp child)

BUILDING A BRAND IMAGE


Brand has a personality of its own
Helps in brand connect
Mahindra & Mahindra Bhumiputra
series of tractors and Sarpanch series

BRAND LOYALTY vs STICKINESS


Rural people are less likely to switch brands
as they do not have the required information
Comfortable in purchasing tried and tested
brands : brand sticky than brand loyal

What should a Brand do to establish itself


Educate rural customers
Develop their interest through interactive
communication
Encourage their desire to own
Deepen confidence through live demonstrations
Build a long term relationship
Eg:

Reasons for Brand Stickiness


Many rural customers are still discovering the
benefits of the products
Early Mover Advantage of the dominating brand
Entry of new brands very difficult

FAKE BRANDS
Bonds for ponds talc
Fair & lonely for Fair & Lovely
Likeboy 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 Categories


1. Lookalikes
The colour scheme on packaging material
closely resembles that of a popular brand.
Eg: Shagun for Lifebouy(150 mg)
Lalita Amla for Dabur Amla

2. Spell-alikes
Names are subtly and cleverly misspelt
Eg: Paracute for Parachute
Pomes for Ponds

3. Duplicates
Exact replicas of original brands

FEATURES

DUPLICATES

SPELL-ALIKES

LOOKALIKES

Brand Name

Original

Misspelt

Different

Pack appearance

Replica

Identical

Similar

Manufacturers
address

Original

Incomplete

Own Nam

Price

M.R.P

40% low

10-15% low

Margins

200-300%

100-150%

60-70%

Quality

Very poor

poor

Reasonable

Intention of retailer

To cheat

To mislead

To freeload

Consumers

unaware

unaware

Want cheaper
products

Identity

none

Only literate

Majority

Other

none

discounts

schemes

STRATEGY TO COUNTER FAKES


Upgraded packaging
Eg: Dabur

Ensure deeper penetration and


continuous and regular availability of
products
Forge strong relationships with local
retailers.

STRUCTURE OF COMPETITION
IN RURAL INDIA
Competition from other urban national products
branded tea and detergent powder
Regional urban branded products - brands of the
unorganised sector, like soaps, talc.
Local urban brands ribbons, bangles
Local village brands ropes, bread, food items
Substitutable products or indirect competition neem
twigs.

CONCLUSION
Product at the heart of marketing
Products 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 Strategy
Affordability is, in determined by two factors1.Income of consumer
2.Price of the Product & Services

Factors influencing the price


Internal Factors
Cost
Pricing Objective
External Factors
Customers
Suppliers
Competitors

Cost Factor (Contd.)


Promotion as a cost factor
Credit-based transactions increase cost
.

ITC E-chaupal: A distribution channel to


control costs
Buy 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 turnover
Deeper penetration of the market
Here 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 shampoo
Cavinkare 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 toothpaste
Legal environment

Pricing Strategies
Optional-product pricing
Captive-product pricing

Low price points


Avoid sophisticated packaging
Refil packs/ reusable packs
Highlight value, not price
Product sharing services

Market-Entry strategy

Penetration pricing
Economy pricing
Value pricing
Coinage pricing
Psychological pricing
Price adjustments
Discounts and allowances
Free gift
Schemes for retailers
Discriminatory pricing

THANK YOU