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RURAL MARKETING
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"Rural Marketing is Real Marketing"--- Content provided by FirstRanker.com ---
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The predominantly rural character of India's national economy isreflected in the very high proportion of its population living in rural area's: They
were
--- Content provided by FirstRanker.com ---
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Year
Rural Population
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In 1901
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89 per cent
In 1951
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83 percentIn 1971
80 percent
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In 1981
76 per cent
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In 199174 per cent
In 2001
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73 per cent
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With more than 700 million people living in rural areas, in some
5,80,000 villages, about two--third of its workforce was engaged in agriculture
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and allied activities with a contribution of 29 percent of India's Gross DomesticProduct (GDP), India's economy is predominantly rural in character.
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India's economy can be thought of as comprising of two main sectors,
namely, the Rural Sector and the Urban Sector. The Rural sector is, in turn,
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1
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MBA-H4010
Rural Marketing
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composed of two main sub sectors i.e. the agricultural sub sector and the non--agricultural sub sector.
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See Fig.:
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--- Content provided by FirstRanker.com ---
INDIAN ECONOMY
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RURAL SECTOR
URBAN SECTOR
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AGRICULTURAL
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NON--AGRICULTURAL
--- Content provided by FirstRanker.com ---
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Fig.: Classification of Indian Economy
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2
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MBA-H4010
Rural Marketing
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The non-agricultural sub sector comprises agricultural and alliedeconomic activities such as Crop Cultivation, Animal Husbandry, Dairying,
Fisheries, Poultry and Forestry (Floriculture) etc.
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The non--agricultural sub sector consists of economic activities relating
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to Industry, Business and Services. Industry have refers to cottage and villageindustries, Khadi, handloom, handicraft, etc.
--- Content provided by FirstRanker.com ---
Business refers to trading of general goods, small shops, petty traders
etc., whereas services refers to Transportation, Communications, Banking,
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Postal, Education etc.The size and potential market of the rural sector could be measured in
--- Content provided by FirstRanker.com ---
terms of the rural population, the population of livestock, the extent of land,
forest and other natural resources.
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According to the population census of 1991, India's rural population was
62.87 crore, which accounted for 74.3 percent of the country's total population.
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Till recently, the focus of marketers in India was the urban consumer and
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by large number specific efforts were made to reach the rural markets. But nowit is felt that with the tempo of development accelerating in rural India, coupled
with increase in purchasing power, because of scientific agriculture, the
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changing life style and consumption pattern of villagers with increase in
education, social mobility, improved means of transportations and
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communication and other penetrations of mass media such as television and itsvarious satellite channels have exposed rural India to the outside world and
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3
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MBA-H4010
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Rural Marketing--- Content provided by FirstRanker.com ---
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hence their outlook to life has also changed. Because of all these factors, rural
India in now attracting more and more marketers.
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Increase in competition, saturated urban markets, more and move new
products demanding urban customers, made the companies to think about new
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potential markets. Thus, Indian rural markets have caught the attention of many
companies, advertisers and multinational companies. According to a recent
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survey conducted by the National Council for Applied Economic Research(NCAER), the purchasing power of the rural people has increased due to
increase in productivity and better price commanded by the agricultural
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products. By and large this rise in purchasing power remains unexploited and
with the growing reach of the television, it is now quite easy for the marketers to
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capture these markets.Rural marketing has become the latest mantra of most corporate.
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Companies like Hindustan Lever, Colgate Palmolive, Britannia and even
Multinational Companies (MNCs) like Pepsi, Coca Cola, L.G., Philips, Cavin
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Kare are all eyeing rural markets to capture the large Indian market.Coming to the frame work of Rural Marketing, Rural Marketing broadly
--- Content provided by FirstRanker.com ---
involves reaching the rural customer, understanding their needs and wants,
supply of goods and services to meet their requirements, carrying out after sales
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service that leads to customer satisfaction and repeat purchase/sales.Earlier, the general impression was that the rural markets have potential
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only for agricultural inputs like seed, fertilizers, pesticides, cattle feed and
agricultural machinery. There is a growing market for consumer goods as well.
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4
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MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing
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For example: According to CIRCA 1998; survey report. The rural nail
polish market was pegged at Rs 270 million against Rs. 81 million in the cities.
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The rural market for lipstick was around Rs 250 million, compared to estimated
at about 1099 tonnes against 426 tonnes in the cities, while shampoos had a
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potential of 2257 tonnes in the villages compared to 718 tonnes in the cities.Even the mosquito repellent market was reckoned at Rs. 173 million to ignore
such a big segment i.e., Rural India. This has particularly been music to ears of
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big corporate as well as multinational companies.
--- Content provided by FirstRanker.com ---
Development indicators: India--- Content provided by FirstRanker.com ---
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1980
--- Content provided by FirstRanker.com ---
19851990
1995
--- Content provided by FirstRanker.com ---
Latest
CARG CARG
--- Content provided by FirstRanker.com ---
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1980
1990
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Agriculture
--- Content provided by FirstRanker.com ---
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Unit--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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Average size
--- Content provided by FirstRanker.com ---
Ha1.8
1.7
--- Content provided by FirstRanker.com ---
1.6
-
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--1.6
-
--- Content provided by FirstRanker.com ---
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of holding--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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Gross sown% of RA
--- Content provided by FirstRanker.com ---
56.6
58.5
--- Content provided by FirstRanker.com ---
60.261.2
61.7
--- Content provided by FirstRanker.com ---
.6
.4
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
area
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Area under
% of GCA 23.2 23.1 23.0
--- Content provided by FirstRanker.com ---
22.7
--- Content provided by FirstRanker.com ---
23.0
--- Content provided by FirstRanker.com ---
.5
--- Content provided by FirstRanker.com ---
.4--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Rice
--- Content provided by FirstRanker.com ---
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Area under
% of GCA 13.0 13.3 13.0
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13.5
--- Content provided by FirstRanker.com ---
13.8
--- Content provided by FirstRanker.com ---
.7
--- Content provided by FirstRanker.com ---
1.1--- Content provided by FirstRanker.com ---
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wheat
--- Content provided by FirstRanker.com ---
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Gross irrigated % of GCA 28.5 30.4 33.8
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36.7
--- Content provided by FirstRanker.com ---
38.52.4
--- Content provided by FirstRanker.com ---
2.2
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
area
--- Content provided by FirstRanker.com ---
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--- Content provided by FirstRanker.com ---
FertilizerKg/ha
30.7 45.7 63.9
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68.0
--- Content provided by FirstRanker.com ---
78.7
--- Content provided by FirstRanker.com ---
7.6
--- Content provided by FirstRanker.com ---
3.0consumption
--- Content provided by FirstRanker.com ---
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
5
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MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing
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--- Content provided by FirstRanker.com ---
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--- Content provided by FirstRanker.com ---
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Value ofRs/ha
1950.0 5462.0 8578.0 11691.0 -
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16.0
6.4
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production
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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Value of
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Rs/capita
501.0 1305.0 1899.0 2370.0
--- Content provided by FirstRanker.com ---
-
14.3
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4.5
--- Content provided by FirstRanker.com ---
agriculture--- Content provided by FirstRanker.com ---
production
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Value of--- Content provided by FirstRanker.com ---
228.3 294.5
5.2
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Rs/capita
-
--- Content provided by FirstRanker.com ---
-
--- Content provided by FirstRanker.com ---
---- Content provided by FirstRanker.com ---
mineral
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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production--- Content provided by FirstRanker.com ---
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Energy and--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
infrastructure
--- Content provided by FirstRanker.com ---
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Villages
--- Content provided by FirstRanker.com ---
64.3
--- Content provided by FirstRanker.com ---
81.386.0
--- Content provided by FirstRanker.com ---
6.5
1.1
--- Content provided by FirstRanker.com ---
% of
43.4
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
electrified
--- Content provided by FirstRanker.com ---
villages--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Road length/100sq.km. 45.4
--- Content provided by FirstRanker.com ---
51.3
60.4
--- Content provided by FirstRanker.com ---
66.175.0
2.9
--- Content provided by FirstRanker.com ---
3.2
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Railway route
--- Content provided by FirstRanker.com ---
1.9
1.9
--- Content provided by FirstRanker.com ---
1.91.9
.2
--- Content provided by FirstRanker.com ---
.1
--- Content provided by FirstRanker.com ---
/100sq.km. 1.9--- Content provided by FirstRanker.com ---
length
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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--- Content provided by FirstRanker.com ---
Post offices
--- Content provided by FirstRanker.com ---
/lakh pop 20.8
19.4
--- Content provided by FirstRanker.com ---
17.816.6
148.1
--- Content provided by FirstRanker.com ---
-1.5
30.4
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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Telephone
--- Content provided by FirstRanker.com ---
.4
--- Content provided by FirstRanker.com ---
.61.1
2.2
--- Content provided by FirstRanker.com ---
6.3
16.3
--- Content provided by FirstRanker.com ---
/100
.3
--- Content provided by FirstRanker.com ---
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connections
--- Content provided by FirstRanker.com ---
persons--- Content provided by FirstRanker.com ---
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Industries
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Banking--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Branches
--- Content provided by FirstRanker.com ---
7.1
7.3
--- Content provided by FirstRanker.com ---
6.96.7
4.3
--- Content provided by FirstRanker.com ---
-1.0
--- Content provided by FirstRanker.com ---
/lakh pop4.8
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Deposits
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
1043.0 2075.0 4117.0 6967.0 16.114.4
--- Content provided by FirstRanker.com ---
Rs/capita 466.0
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Credit671.0 1259.0 2291.0 3816.0 13.4
--- Content provided by FirstRanker.com ---
13.1
--- Content provided by FirstRanker.com ---
Rs/capita ---- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Credit to408.0 11.2
--- Content provided by FirstRanker.com ---
8.2
--- Content provided by FirstRanker.com ---
Rs/capita -118.0 201.0 271.0
--- Content provided by FirstRanker.com ---
agriculture
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Credit to
Rs/capita
--- Content provided by FirstRanker.com ---
-277.0
614.0 1045.0 1876.0 17.2
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
13.2
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industryHealth
--- Content provided by FirstRanker.com ---
6
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--- Content provided by FirstRanker.com ---
MBA-H4010
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--- Content provided by FirstRanker.com ---
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Rural Marketing
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Primary health /lakh pop
.8
--- Content provided by FirstRanker.com ---
1.0
--- Content provided by FirstRanker.com ---
2.3
--- Content provided by FirstRanker.com ---
2.3
-
--- Content provided by FirstRanker.com ---
10.9.4
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
centers
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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Hospital and
/lakh pop
--- Content provided by FirstRanker.com ---
84.888.1
--- Content provided by FirstRanker.com ---
97.3
--- Content provided by FirstRanker.com ---
94.5
-
--- Content provided by FirstRanker.com ---
1.4
-.6
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
dispensary--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
beds--- Content provided by FirstRanker.com ---
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Education--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Primary
--- Content provided by FirstRanker.com ---
/lakh pop
73.7
--- Content provided by FirstRanker.com ---
70.9
--- Content provided by FirstRanker.com ---
67.7
--- Content provided by FirstRanker.com ---
66.364.9
-.9
--- Content provided by FirstRanker.com ---
-.7
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
schools
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Middle/ higher /lakh pop17.7
--- Content provided by FirstRanker.com ---
18.1
--- Content provided by FirstRanker.com ---
18.320.1
--- Content provided by FirstRanker.com ---
19.7 .3
1.3
--- Content provided by FirstRanker.com ---
schools
--- Content provided by FirstRanker.com ---
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Source: Center for management of Indian economy, 2000
--- Content provided by FirstRanker.com ---
Notes:
--- Content provided by FirstRanker.com ---
CARG: Compound Annual Rate of Growth
--- Content provided by FirstRanker.com ---
Ha: Hectare
--- Content provided by FirstRanker.com ---
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--- Content provided by FirstRanker.com ---
7
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
PAPER - XVI
--- Content provided by FirstRanker.com ---
RURAL MARKETINGCOURSE CODE: 36
--- Content provided by FirstRanker.com ---
PAPER CODE: H4010
--- Content provided by FirstRanker.com ---
UNIT-II CONTENTS
--- Content provided by FirstRanker.com ---
CHAPTERS
--- Content provided by FirstRanker.com ---
Rural Marketing - Concept and Scope
II. Characteristics of Rural consumers
--- Content provided by FirstRanker.com ---
III. Rural Vs Urban MarketingIV. Potential and size of the Rural Markets
--- Content provided by FirstRanker.com ---
V. Rural Marketing Information System
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REFERENCES:
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
"Hind Lever to Expand Project Shakti Reach", Business Standard,November 18, 2003.
--- Content provided by FirstRanker.com ---
"HLL Aims for Rural Market", www.blonnet.com, May 10, 2000.
--- Content provided by FirstRanker.com ---
"HLL Plans Rural Campaign to Reposition Lifebuoy ? To Pitch on
--- Content provided by FirstRanker.com ---
Hygiene Platform", www.blonnet.com, February 13, 2002.
--- Content provided by FirstRanker.com ---
"HLL Rewrites Strategy for Greater Penetration of Rural Markets",
www.domain-b.com, February 4, 2003.
--- Content provided by FirstRanker.com ---
"HLL Takes Pepsodent Rural with a Vengeance", www.blonnet.com,
--- Content provided by FirstRanker.com ---
October 12, 2002.--- Content provided by FirstRanker.com ---
"Rural sales drive growth", Business Standard, April 12, 2004.
--- Content provided by FirstRanker.com ---
Aarati Krishnan, "Sachet Revolution ? Buy Less, Save More",
www.blonnet.com, January 21, 2001.
--- Content provided by FirstRanker.com ---
8
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Advertising in Rural India: Language, Marketing Communication, and
--- Content provided by FirstRanker.com ---
Consumerism; Institute for the Study of Languages and Cultures of Asiaand Africa, Tokyo University of Foreign Studies; Tokyo Press, Tokyo,
Japan. 2000
--- Content provided by FirstRanker.com ---
Aileen Ionesca-Somers and Ulrich Steger, "Hindustan Lever ? Leaping a
--- Content provided by FirstRanker.com ---
Millennium", IMD Case, 2002.Ajita Shashidhar; Colas' countryside crusade; The Hindu Business Line;
--- Content provided by FirstRanker.com ---
Financial Daily from THE HINDU group of publications; Thursday, Jul
03, 2003
--- Content provided by FirstRanker.com ---
Anant Kulkarni, "Another look at Rural marketing" USP AGE,
--- Content provided by FirstRanker.com ---
September, 2004.
--- Content provided by FirstRanker.com ---
C.K. Prahalad and Stuart Hart, "Strategies for the Bottom of thePyramid", www.wri.org.
--- Content provided by FirstRanker.com ---
Development Informatics - Reaching the Rural India; Role of NIC; D.C.
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Misra, Senior Technical Director and Head, Rural Development &Panchayati Raj Divisions; National Informatics Centre; Dr. N.
Vijayaditya , Director General, National Informatics Centre
--- Content provided by FirstRanker.com ---
E M E R G I C. o r g; Rajesh Jain's Web log on Emerging Technologies,
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Enterprises and MarketsG. Krishnan; Challenges in rural marketing;Strategic Marketing Forum
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Harish Bijoor; A market in waiting; The Hindu Business Line; BusinessDaily from THE HINDU group of publications; Thursday, Aug 17, 2006
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Hetal Adesara; Making inroads into the hinterlands;
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Indiantelevision.com's Perspectives; 23 October 2004Ishita Ayan Dutt and Sambit Saha, "Hind Lever in Plans to Raise Rural
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Spoils", Business Standard, July 20, 2002.
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MBA-H4010
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Rural Marketing
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Mohanbir Sawhney, McCormick Tribune Professor of Technology,
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Kellogg School of Management, USA; ITC's E-Choupal Movement ?
Initiatives of Rural Development in India by ITC Limited
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Namrata Singh, "10% of HLL's Rural Sales from Project Shakti",
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www.financial express.com, November 24, 2003.
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Namrata Singh, "Project Bharat to Push HLL's Rural Sales to 50% by
2004", www.expressindia.com, August 9, 1999.
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P. Balakrishna; B Sidharth; Selling in Rural India; The Hindu Business
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Line; Financial Daily from THE HINDU group of publications; Monday,Feb 16, 2004
--- Content provided by FirstRanker.com ---
Preeti Mehra, "HLL Doing a Grameen Bank ? Leverages Microcredit to
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Tap Rural Market", www.thehindubusinessline.com, May 21, 2001.--- Content provided by FirstRanker.com ---
Purvita Chatterjee, "HLL Plans Rural Thrust for Toothpaste Brands",
The Hindu Business Line, February 21, 2002.
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Ramkishen Y.,New Perspectives on Rural Marketing; Jaico Publishing
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house
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Rashmi Vasudeva, "Empowering Women", Deccan Herald, June 15,2003.
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Rekha Balu, "Strategic Innovation ? Hindustan Lever Ltd.", Fast
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Company, Issue 47, June 2001.Rustom S Davar, 1998 Modern Marketing Management, University
--- Content provided by FirstRanker.com ---
Book Stall, New Delhi.
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Shanthi Kannan; Rural market - A world of opportunity; The Hindu;
Online edition of India's National Newspaper; Thursday, October 11,
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2001
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Shanti Kannan, "Rural Market ? A World of Opportunity", The Hindu,
October 11, 2001.
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MBA-H4010
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Rural Marketing
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Sourav Majumdar and Namrata Singh, "HLL Project Shakti to Cover All
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Rural India", The Financial Express, March 2, 2004.
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Sushma, "Indian Rural Marketing - Knowing the Potential", MarketingMastermind, July, 2005.
--- Content provided by FirstRanker.com ---
Swati Bharadwaj, "HLL Target 1 Cr Rural Consumers by '05",
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www.economictimes. indiatimes.com, January 30, 2004.V.S. Ramaswamy and S. Nama Kumari, Marketing Management ?
--- Content provided by FirstRanker.com ---
Planning Implementation and Control, Macmillan India limited 2002.
--- Content provided by FirstRanker.com ---
Vinay Kamath, "HLL's `Shakti' to Help Partners in Rural India",
www.thehindu businessline.com, April 26, 2004.
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Vinay Kamath, "Where HLL's Shakti comes from", The Hindu Business
--- Content provided by FirstRanker.com ---
Line ? Catalyst, May 29, 2003.--- Content provided by FirstRanker.com ---
www.domain-b.com.
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www.hll.com.
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Ramkishen Y., New perspectives on Rural Marketing
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MBA-H4010
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Rural Marketing
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CHAPTER I: RURAL MARKETING ? CONCEPT AND SCOPE
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Objective:
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The objective of this chapter is to understand:
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The concept and scope of rural markets--- Content provided by FirstRanker.com ---
The nature and attractiveness of rural markets
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Roadblocks of Indian Rural Markets
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Solutions to problems of rural markets
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Definition of Rural Market and Rural Marketing
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India is a land of diversity and about 70% of the Indian population lives
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in villages. These villages contribute in the economic development of the nationthrough the production of food grains, vegetables, fruits, etc. Export of these
agricultural commodities result in the generation of capital and earnings of
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foreign exchange.
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There are 600,000 villages in India. 25% of all villages account for 65%of the total rural population. So we can contact 65% of 680 million or 700
million population by simply contacting 150000 villages ? which shows the
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huge potential of this market.
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Indian rural market has a vast size and demand base. Before going intomore aspects on rural marketing, let us understand how rural is defined.
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Rural Marketing
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The Census defines urban India as - "All the places that fall within the
administrative limits of a municipal corporation, municipality, cantonment board
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etc or have a population of at least 5,000 and have at least 75 per cent male
working population in outside the primary sector and have a population density
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of at least 400 per square kilometer. Rural India, on the other hand, comprises allplaces that are not urban!"
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The government of India only defines a non-urban market. An urban
market is the one which has a population density of 400 people per sq/km. 7% of
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its population has to be involved in non-agricultural activities and there is amunicipal body. If we go by statistics, roughly around 70% of the Indian
population lives in the rural areas. That's almost 12% of the world population.
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To expand the market by tapping the countryside, more and more MNCs
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are foraying into India's rural markets. Among those that have made someheadway are Hindustan Lever, Coca-Cola, LG Electronics, Britannia, Standard
Life, Philips, Colgate Palmolive and the foreign-invested telecom companies.
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Rural Marketing
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Rural marketing involves the process of developing, pricing, promoting,
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distributing rural specific product and a service leading to exchange betweenrural and urban market which satisfies consumer demand and also achieves
organizational objectives.
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It is a two-way marketing process wherein the transactions can be:
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Rural Marketing
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Urban to Rural: It involves the selling of products and services by urban
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marketers in rural areas. These include: Pesticides, FMCG Products,
Consumer durables, etc.
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Rural to Urban: Here, a rural producer (involved in agriculture) sells his
produce in urban market. This may not be direct. There generally are
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middlemen, agencies, government co-operatives, etc who sell fruits,
vegetables, grains, pulses and others.
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Rural to rural: These include selling of agricultural tools, cattle, carts and
others to another village in its proximity.
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Features of Indian Rural Markets:
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Large, Diverse and Scattered Market: Rural market in India is large, and
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scattered into a number of regions. There may be less number of shops
available to market products.
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Major Income of Rural consumers is from Agriculture: Rural Prosperity is
tied with agriculture prosperity. In the event of a crop failure, the income
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of the rural masses is directly affected.
Standard of Living and rising disposable income of the rural customers: It is
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known that majority of the rural population lives below poverty line andhas low literacy rate, low per capital income, societal backwardness, low
savings, etc. But the new tax structure, good monsoon, government
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regulation on pricing has created disposable incomes. Today the rural
customer spends money to get value and is aware of the happening
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around him.Traditional Outlook: Villages develop slowly and have a traditional outlook.
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Change is a continuous process but most rural people accept
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Rural Marketing
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change gradually. This is gradually changing due to literacy especially in
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the youth who have begun to change the outlook in the villages.
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Rising literacy levels: It is documented that approximately 45% of rural
Indians are literate. Hence awareness has increases and the farmers are
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well-informed about the world around them. They are also educating
themselves on the new technology around them and aspiring for a better
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lifestyle.--- Content provided by FirstRanker.com ---
Diverse Socioeconomic background: Due to dispersion of geographical
areas and uneven land fertility, rural people have disparate
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socioeconomic background, which ultimately affects the rural market.Infrastructure Facilities: The infrastructure facilities like cemented roads,
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warehouses, communication system, and financial facilities are
inadequate in rural areas. Hence physical distribution is a challenge to
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marketers who have found innovative ways to market their products.As part of planned economic development, the government is making
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continuous efforts towards rural development. In this age of liberalization,
privatization and globalization, rural market offers a big attraction to the
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marketers to explore markets that are untapped.Roadblocks of Indian Rural Markets:
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There are several roadblocks that make it difficult to progress in the rural
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market. Marketers encounter a number of problems like dealing with physical
distribution, logistics, proper and effective deployment of sales force and
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effective marketing communication when they enter rural markets. The majorproblems are listed below.
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Rural Marketing
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Standard of living: The number of people below the poverty line is more
in rural markets. Thus the market is also underdeveloped and marketing
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strategies have to be different from those used in urban marketing.
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Low literacy levels: The low literacy levels in rural areas leads to a
problem of communication. Print media has less utility compared to the
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other media of communication.
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Low per capita income: Agriculture is the main source of income and
hence spending capacity depends upon the agriculture produce. Demand
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may not be stable or regular.
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Transportation and warehousing: Transportation is one of the biggest
challenges in rural markets. As far as road transportation is concerned,
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about 50% of Indian villages are connected by roads. However, the rest
of the rural markets do not even have a proper road linkage which makes
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physical distribution a tough task. Many villages are located in hillyterrains that make it difficult to connect them through roads. Most
marketers use tractors or bullock carts in rural areas to distribute their
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products. Warehousing is another major problem in rural areas, as there
is hardly any organized agency to look after the storage issue. The
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services rendered by central warehousing corporation and statewarehousing corporations are limited only to urban and suburban areas.
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Ineffective distribution channels: The distribution chain is not very well
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organized and requires a large number of intermediaries, which in turnincreases the cost and creates administrative problems. Due to lack of
proper infrastructure, manufacturers are reluctant to open outlets in these
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areas. They are mainly dependent on dealers, who are not easily
available for rural areas. This is a challenge to the marketers.
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Many languages and diversity in culture: Factors like cultural
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congruence, different behavior and language of the respective areas
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make it difficult to handle the customers. Traits among the sales force are
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required to match the various requirements of these specific areas.Lack of communication system: Quick communication is the need of the
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hour for smooth conduct of business, but it continues to be a far cry in
rural areas due to lack of communication facilities like telegraph and
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telecommunication systems etc. The literacy rate in the rural areas israther low and consumer's behavior in these areas is traditional, which
may be a problem for effective communication.
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Spurious brands: Cost is an important factor that determines purchasingdecision in rural areas. A lot of spurious brands or look-alikes are
available, providing a low cost option to the rural customer. Many a time
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the rural customer may not be aware of the difference due to illiteracy.
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Seasonal demand: Demand may be seasonal due to dependency onagricultural income. Harvest season might see an increase in disposable
income and hence more purchasing power.
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Dispersed markets: Rural population is highly dispersed and requires alot of marketing efforts in terms of distribution and communication.
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The entire points discussed above offer challenges to the marketer. He
tries to uncover newer ways to market his product as he cannot afford to miss
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this huge opportunity existing in rural markets. He tries to identify solutions tothese marketing problems.
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Solutions to problems of rural markets:
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To solve the problems of rural markets in India, the following
suggestions can be used by marketers.
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Rural Marketing
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Regarding the problems of physical distribution, the marketer may
have a joint network of stockist/ clearing-cum-forwarding (C&F) agents at
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strategic location for facilitation of physical distribution for its products in the
rural market. The main advantage of this scheme is that the costs of physical
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distribution can be shared by the companies and stockists. The combination ofdifferent modes of transport based on availability of tracks will be beneficial to
the companies. Presently, bullock-cart plays a very vital role in rural distribution
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where the roads are not available. Some of the leading companies use delivery
vans in rural areas for resolving the distribution problems in rural market. The
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delivery van takes the products to the retail shops in every corner of the ruralmarket and it enables the company to establish direct sales contact with majority
of the rural consumers which helps in sales promotion.
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The rural market is composed of a number of retail sales outlets along
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with fair price shops under the public distribution system. It is suggested that thegovernment should encourage private shopkeepers and cooperative stores to
come forward and establish their business in rural areas instead of the weekly
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market known as weekly bazaar. Fertilizer companies have opened their outlets
for proper distribution of fertilizer among the farmers. Similarly, the companies
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dealing in consumer goods can apply this model. The company may also appointa number of retailers in and around the feeder towns and attach them to the
stockist who distributes the goods to the retailers as per the potential of the
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market. This system has the benefit of penetrating into the interior areas of the
rural markets.
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To solve the problems of sales force management, it is suggested that
the company takes due care in the recruitment and selection of sales people
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because the traits they require are different from urban and suburban sales
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MBA-H4010Rural Marketing
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persons. For the rural markets, only those sales people should be preferred for
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selection who is willing to work in rural areas. They must be aware of the locallanguage and must have the patience to deal with rural customers and can
discharge the duties of a bare-footed salesman. Administration of such a large
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and scattered sales force, supervising and supporting them in sales calls, guiding
them, attending to their official and personal problems, and motivating them for
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better results should be an exacting task for the sales manager. Thus, the peopleoperating in rural areas should invariably be from the rural background and
should have a missionary zeal to serve the rural masses.
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With reference to marketing communication in rural areas, the
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company should use organized media-mix like TV, Radio, cinema and POP(point of purchase) advertising. Television is gaining popularity in the rural
areas but due to poor supply of electricity, radio is performing significantly
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better. Since, the rural people need demonstration, short-feature films with
disguised advertisement messages, direct advertisement films and documentaries
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that combine knowledge and advertisements will perform better rural marketingcommunication. Here the companies may also use audiovisual publicity vans,
which may sell the products with promotion campaign. To attract the rural
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consumers, companies can organize village fairs, dance and drama shows, group
meetings to convince the rural consumers about the products and services. In
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most Indian villages, there are some opinion leaders. For the rural markets, onlythose sales people should be preferred for selection who is willing to work in
rural areas like Sarpanch, Pradhan and other elderly persons. They can be
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approached by the marketers to propagate their messages; these persons can
prove to be effective communicators within the rural masses.
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The rural market in India is quite fascinating and challenging in spite of
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all the difficulties existing. The potential is enormous. Even though, these
markets have weaknesses they also have tremendous opportunities which should
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be availed by the marketers. It is well known that "Markets are created and notborn". The market so created should be tapped effectively. An ideal example is
that of LIC. The Life Insurance Corporation of India generates life insurance
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business by appointing the insurance agent from the village itself so that he can
easily convince his near and dear ones. LIC started a scheme called Gram Vikas
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where the Sarpanch is given a target to sell a minimum of 10 policy plans andthe commission so earned is spent on the development of their respective
villages.
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The marketers have to come up with innovative ideas through which the
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villagers also get involved in getting business from their respective villages.The Indian rural market is quite fascinating and challenging. It provides
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tremendous opportunities which beckon a marketer to explore.
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Summary--- Content provided by FirstRanker.com ---
Indian rural market has a vast size and demand base. Rural marketinginvolves the process of developing, pricing, promoting, distributing rural
specific product and a service leading to exchange between rural and urban
--- Content provided by FirstRanker.com ---
market which satisfies consumer demand and also achieves organizational
objectives.
--- Content provided by FirstRanker.com ---
As part of planned economic development, the government is making
continuous efforts towards rural development.
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MBA-H4010
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Rural Marketing--- Content provided by FirstRanker.com ---
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There are several roadblocks that make it difficult to progress in the rural
market. Marketers encounter a number of problems like dealing with physical
--- Content provided by FirstRanker.com ---
distribution, logistics, proper and effective deployment of sales force andeffective marketing communication when they enter rural markets.
--- Content provided by FirstRanker.com ---
The rural market in India is quite fascinating and challenging in spite of
all the difficulties existing. The potential is enormous. Even though, these
--- Content provided by FirstRanker.com ---
markets have weaknesses they also have tremendous opportunities which shouldbe availed by the marketers. The marketers have to come up with innovative
ideas through which the villagers also get involved in getting business from their
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respective villages.
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Questions--- Content provided by FirstRanker.com ---
What is rural marketing and how do you define rural markets?
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What are the features of rural markets?
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What are the drawbacks of Indian Rural markets?
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How do you solve the problems of Indian rural markets?--- Content provided by FirstRanker.com ---
"Rural marketing cannot be neglected". Explain.
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MBA-H4010
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Rural Marketing
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CHAPTER II: CHARACTERISTICS OF RURAL CONSUMERS
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Objective:
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The objective of this chapter is to understand:
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Classification of rural consumers
--- Content provided by FirstRanker.com ---
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Changing profile of rural consumers--- Content provided by FirstRanker.com ---
Influencing the rural consumers
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Classification of rural consumers
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The rural consumers are classified into the following groups based on their
economic status:
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The Affluent Group: They are cash rich farmers and a very few in
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number. They have affordability but not form a demand base large
enough for marketing firms to depend on. Wheat farmers in Punjab and
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rice merchants of Andhra Pradesh fall in this group.--- Content provided by FirstRanker.com ---
The Middle Class: This is one of the largest segments for manufactured
goods and is fast expanding. Farmers cultivating sugar cane in UP and
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Karnataka fall in this category.--- Content provided by FirstRanker.com ---
The Poor: This constitutes a huge segment. Purchasing power is less,
but strength is more. They receive the grants from government and reap
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the benefits of many such schemes and may move towards the middleclass. The farmers of Bihar and Orissa fall under this category.
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Rural Marketing--- Content provided by FirstRanker.com ---
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Profile of rural consumers
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IMRB (Indian Market Research Bureau) and NCAER "(National Council
for Applied Economic Research) have made available a few studies based on
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which rural consumers profile can be arrived at.--- Content provided by FirstRanker.com ---
Literacy: 23% of rural Indian population is literate and people are getting
added to this list year after year. There are still some villages which are
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underdeveloped. Maximum education is primary school or in some caseshigh school. To this group the marketing promotional strategy to be
adopted is demonstration of product features and advantages. Print media
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and posters do not make any impact.
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Income: An average rural consumer has a much lower income than his
urban counterpart. The disposable income has increased in the recent
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years to considerable extent. In spite of this, the common traits of rural
consumers are low purchasing power, low standard of living, low per
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capita income and low economic and social positions.--- Content provided by FirstRanker.com ---
Density: Rural population is scattered across 7 lakh villages. This implies
that rural demand is scattered and urban demand is concentrated.
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Influencers: There are many reference groups in a village. These include
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teacher, doctor, panchayat members, health workers, bank manager and
co-operative board workers. These influencers need to be kept in mind
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when a marketer decides on rural marketing.--- Content provided by FirstRanker.com ---
Occupation: The main occupation is agriculture. The size and ownership
of land determines the basis for differentiation and consumption patterns.
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Culture: Rural consumers are traditional in their outlook. They associate
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faster with messages that match their cultural behavior.
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Language: English is not a language of rural India. Hence a marketer
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should aim for communication in the local language.
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MBA-H4010Rural Marketing
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Media Habits: Television, radio, vedio and theatre are some of thetraditional media that a rural consumer identifies with.
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The above are some of the factors that differentiate the rural consumer from
his urban counterpart. A marketer has to decide on all the above parameters
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while designing a marketing plan.Changing profile of rural consumers
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Rural consumers as studied are dependent on agriculture and were not
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very literate about products and services available. This scenario is slowly
changing due to increase in literacy and disposable income.
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Not long ago, rural consumers went to a nearby city to buy``branded
products and services". Only select household consumed branded goods, be it
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tea or jeans. Earlier, big companies flocked to rural markets to establish their
brands.
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Rural markets today are critical for every marketer - be it for a branded
shampoo or a television. Earlier marketers thought of van campaigns, cinema
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commercials and a few wall paintings to entice rural folks under their folds.
Today a customer in a rural area is quite literate about myriad products that are
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on offer in the market place, thanks to television. Many companies are forayinginto the rural markets and educating them on newer products and services.
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The rural youth today are playing a far more significant role in
influencing the purchase decisions. They travel frequently out in the village and
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are the drivers of purchase decisions regarding radios, television (black andwhite as well as color), automobiles and other goods. They may not be the end
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MBA-H4010
Rural Marketing
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customers but often are the people who influence the purchase of high valueproducts and they decide on which brands to choose.
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Penetration levels of consumer durables in the rural sector have risen
dramatically in the last decade or so. Even the rural woman is coming out of the
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closet. She is exercising her choice in selecting categories - the choice of brandsmay still be with the males of the household.
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The prerogative of making the final purchase decisions stills rests with
the chief male. In other words, the "chief wage earner" syndrome still applies in
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the rural markets.Influencing the rural consumers
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The biggest challenge today is to develop a scalable model of influencing
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the rural consumers' mind over a large period of time and keep it going. This
needs to be achieved in a limited or a reasonable budget. That's where the
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marketers who really understand rural markets and advertising agencies canmake a difference and develop a scalable media/communication model.
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The mass media has the drawback that the time gap between the point of
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exposure and the time of purchase is long. Hence it is difficult to use it in ruralcommunication.
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The most important element in rural communications is that the marketer has
to integrate 3 things in communication.
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MBA-H4010
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Rural Marketing
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Exposure of a message
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Trial or demonstration--- Content provided by FirstRanker.com ---
Final sale.
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There is minimal brand loyalty in rural consumers. This is mainly due to a
bigger problem of brand recognition. There are a lot of looks alike in the rural
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market. The challenge is to create communication that would help the ruralconsumer in recognizing brands, logos, visuals, colors, etc., so that he or she
actually buys the actual brand and not something else.
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Summary
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The rural consumers are classified into: the affluent group, the middle
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class and the poor based on their economic status.IMRB (Indian Market Research Bureau) and NCAER "(National
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Council for Applied Economic Research) have made available a few studies
based on which rural consumers profile can be arrived at.
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The rural youth today are playing a far more significant role in
influencing the purchase decisions. They may not be the end customers but often
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are the people who influence the purchase of high value products and they
decide on which brands to choose.
--- Content provided by FirstRanker.com ---
The biggest challenge today is to develop a scalable model of influencing
the rural consumers' mind over a large period of time and keep it going.
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MBA-H4010
Rural Marketing
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Questions
--- Content provided by FirstRanker.com ---
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Who are the rural consumers? How are they classified?
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The biggest challenge today is to develop a scalable model of influencing
the rural consumers' mind. Explain.
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What are the profiles of a rural consumer?--- Content provided by FirstRanker.com ---
How do you influence a rural consumer?
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MBA-H4010
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Rural Marketing
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CHAPTER III: RURAL VERSUS URBAN MARKETING
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Objective:
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The objective of this chapter is to understand:
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Characteristics of rural market
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Challenges of rural marketing
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The 4Ps of rural marketing--- Content provided by FirstRanker.com ---
The Changing Scenario--- Content provided by FirstRanker.com ---
A dramatic change is in progress in the villages. Villagers who used tocrack open peanut candies, eat the nut and throw away the shell are now
demanding chocolate candies that will melt in their mouths, not in their hands.
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The new advertisement of Perk featuring Rani Mukerjee speaks about the
demand created in rural markets for chocolates.
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Charcoal, neem twigs and twigs of babool tree to cleaned teeth are
replaced by Paste. Today, the ultra bright shine of Colgate or some other
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international brand of toothpaste holds more appeal than the traditional methods
of cleaning teeth.
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The terminologies being used to describe activities are also undergoing
change with respect to marketing appeal of products. Consumerism and
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globalization is invading parts of India where, as some would venture to say,
time seems to have ceased for centuries.
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MBA-H4010Rural Marketing
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These villages and small towns, which were once inconsequential dots
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on maps, are now getting the attention of global marketing giants and mediaplanners. Thanks to globalization, economic liberalization, IT revolution, female
power, and improving infrastructure, middle class rural India today has more
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disposable income than urban India. Rural marketing is gaining new heights in
addition to rural advertising.
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Characteristics of rural market
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The rural markets are of diverse nature. There are people from diverse
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cultural, linguistic and religious background. No two markets are alike
and it is dispersed across India.
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Shift towards rural markets are mainly because of saturation and
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competitiveness of urban market. Marketers do not want to neglect this
huge untapped market.
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The incomes of rural customers are also increasing. As seen earlier
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disposable income of rural consumers have increased and they spend on
FMCG and consumer durables.
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Rising literacy has generated a demand of life style products. Lot of
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youth move out of the village and visit surrounding cities. They come
back and influence decision making.
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Cable television has also contributed to an increase in life style. The
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reach has increased and marketers are in a position to promote their
products much more easily,
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MBA-H4010Rural Marketing
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Challenges of rural marketing
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The rural market may be attracting marketers but it is not without its
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problems: Low per capita disposable incomes that is half the urban disposableincome; large number of daily wage earners, acute dependence on the vagaries
of the monsoon; seasonal consumption linked to harvests and festivals and
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special occasions; poor roads; power problems; and inaccessibility to
conventional advertising media.
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However, the rural consumer is not unlike his urban counterpart in many
ways. The more marketers are meeting the consequent challenges of availability,
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affordability, acceptability and awareness in rural market.
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Availability--- Content provided by FirstRanker.com ---
The first challenge in rural marketing is to ensure availability of theproduct or service. India's 7, 00,000 villages are spread over 3.2 million sq km;
700 million Indians may live in rural areas, finding them is not easy. They are
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highly dispersed.
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Given the poor infrastructure, it is a greater challenge to regularly reachproducts to the far-flung villages. Marketer should plan accordingly and strive to
reach these markets n a regular basis. Marketers must trade off the distribution
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cost with incremental market penetration.
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India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has builta strong distribution system which helps its brands reach the interiors of the
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MBA-H4010
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Rural Marketing--- Content provided by FirstRanker.com ---
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rural market. To service remote village, stockists use auto rickshaws, bullock-
carts and even boats in the backwaters of Kerala.
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Coca-Cola, which considers rural India as a future growth driver, has
evolved a hub and spoke distribution model to reach the villages. To ensure full
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loads, the company depot supplies, twice a week, large distributors which who
act as hubs. These distributors appoint and supply, once a week, smaller
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distributors in adjoining areas.LG Electronics has set up 45 area offices and 59 rural/remote area
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offices to cater to these potential markets.
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Affordability--- Content provided by FirstRanker.com ---
The second major challenge is to ensure affordability of the product orservice. With low disposable incomes, products need to be affordable to the
rural consumer, most of who are on daily wages.
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A solution to this has been introduction of unit packs by some
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companies. This ensures greater affordability.Most of the shampoos are available in smaller packs.
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Fair and lovely was launched in a smaller pack.
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Colgate toothpaste launched its smaller packs to cater to the traveling
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segment and the rural consumers.
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MBA-H4010
Rural Marketing
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Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs.
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Hindustan Lever has launched a variant of its largest selling soap brand,
Lifebuoy.
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Coca-Cola has addressed the affordability issue by introducing the
smaller bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new
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drinkers now come from the rural markets. A series of advertisement for this
was rune showing people from diverse backgrounds featuring Aamir Khan.
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Acceptability
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The next challenge is to gain acceptability for the product or service.
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Therefore, there is a need to offer products that suit the rural market.
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LG Electronics have reaped rich dividends by doing so. In 1998, it
developed a customized TV for the rural market named Sampoorna. It was a
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runway hit selling 100,000 sets in the very first year.Coca-Cola provided low-cost ice boxes in the rural areas due to the lack
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of electricity and refrigerators. It also provided a tin box for new outlets and
thermocol box for seasonal outlets.
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The insurance companies that have tailor-made products for the rural
market have also performed well. HDFC Standard LIFE topped private insurers
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by selling policies worth Rs 3.5 crore in total premia. The company tied up with
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MBA-H4010
Rural Marketing
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non-governmental organizations and offered reasonably-priced policies in thenature of group insurance covers.
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Awareness
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A large part of rural India is inaccessible to conventional advertising
media. Only 41 per cent rural households have access to TV.
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Building awareness is another challenge in rural marketing. A common factorbetween the rural and the urban consumer is the interest for movies and music.
Family is the key unit of identity for both the urban and rural consumer.
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However, the rural consumer expressions differ from his urban
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counterpart. For a rural consumer, outing is confined to local fairs and festivalsand TV viewing is confined to the state-owned Doordarshan. Consumption of
branded products is treated as a special treat or indulgence.
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Hindustan Lever has its own company-organized media. These are
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promotional events organized by stockists. Godrej Consumer Products, which istrying to push its soap brands into the interior areas, uses radio to reach the local
people in their language.
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Coca-Cola uses a combination of TV, cinema and radio to reach the rural
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households. It has also used banners, posters and tapped all the local forms ofentertainment. Since price is a key issue in the rural areas, Coca-Cola
advertising stressed its `magical' price point of Rs 5 per bottle in all media. LG
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Electronics uses vans and road shows to reach rural customers. The company
uses local language advertising. Philips India uses wall writing and radio
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advertising to drive its growth in rural areas.33
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MBA-H4010
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Rural Marketing
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Also, in India, the retailers are highly fragmented, highly dispersed. At
the same time, each of these regions serves a large population. The media
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penetration in rural areas is only about 57%.
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It has been seen that, two out of five Indians are unreached by any mediaTV, Press, Radio and Cinema put together. Haats, mandis and melas are
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opportunities.
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The 4Ps of Rural Marketing--- Content provided by FirstRanker.com ---
Most of the companies treat rural market as a dumping ground for the lowerend products designed for an urban audience. But, this scenario is slowly
changing and importance is given to the need of the rural consumer. Hence it is
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important to understand the 4Ps of rural marketing with respect to a rural
consumer.
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1. Product
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A product is the heart of rural marketing. It is a need satisfying entity to a rural
consumer. NCAER has classified consumer goods into 3 categories. These
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categories cover most of the products from Rs. 100 to Rs. 20000 and above.
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Category I
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Category II
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Category III--- Content provided by FirstRanker.com ---
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Pressure Cookers2-in-1 (mono)
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C TVs (S)
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Pressure Pans
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2-in-1 (stereo)C TVs (R)
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Mono Cassette Recorders
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B and W TV (S)
VCRs/ VCPs
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Wrist watches (mechanical)
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B and W TV (R)
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Scooters
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Wrist watches (quartz)Instant Geyser
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Mopeds
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MBA-H4010
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Rural Marketing
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Radio/Transistors
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Storage Geysers
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Motor Cycles--- Content provided by FirstRanker.com ---
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Electric ironsSewing Machines
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Refrigerators
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Ceiling Fans
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Vacuum Cleaners
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Washing Machines--- Content provided by FirstRanker.com ---
Table Fans
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Mixer/grinders
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Bicycles
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The hierarchy depends on the needs of the rural consumers. Most of theproducts under category 1 are of immediate use to the family. Category 2
products reduce the strain of the households and also act as a source of
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entertainment. Category 3 is a combination of means to supplement income.
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Rural branding aims at creating and disseminating the brand name so thatit is easily understood and recognized by the rural consumers.
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In rural markets, brands are almost non-existent. They identify FMCG by three
things:
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Color,
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Visuals of animals and birds and
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Numbers.--- Content provided by FirstRanker.com ---
So a 555, 777, hara goli, pila hathi, lal saboon, saphed dantmanjan are thekind of terms with which they identify brands.
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Hence it is very important for us to understand that a lot needs to be done
in terms of communications, media, marketing and branding. There are a
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number of cases which suggest that to sell brands in the rural market, it isnecessary to simultaneously educate the consumers. If you have to create brand
communication, marketing efforts must be supported by education.
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MBA-H4010
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Rural Marketing--- Content provided by FirstRanker.com ---
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The following have to be kept in mind while the marketer makes a decision on
the product.
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The product for the rural markets has to be simple, easy to use and
provide after sales service or maintenance.
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2. The product has to be packed for low price and convenient usage.
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The pack has to be easily understood by the rural consumer. The
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information on the pack is preferred in local language communicating
the functional benefit of the product.
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2. Pricing
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A rural customer is price sensitive and shops for value. This is mainly
because of his lower income levels than his urban counterparts. Hence the
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marketer has to find ways of making the product affordable to the rural
consumer.
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Banks offer loans for tractors, pump sets, television sets and so on to make
the product affordable to a rural consumer.
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Smaller unit packs are preferred in the case of FMCG products to offer at
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lower prices. The product packaging and presentation offers scope for keepingthe price low. Reusable packs or refills are also preferred and are seen as value
addition.
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4. Placement or Distribution
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Distribution of products is one of the biggest challenges of rural marketing.
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There are CWC (Central Warehousing Corporation) and SWCS (State36
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MBA-H4010
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Rural Marketing
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Warehousing Corporations) set up in rural areas to store and distribute products.
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A three tier rural warehousing setup exists:
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CWC/SWCs
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Co-operatives--- Content provided by FirstRanker.com ---
Rural Godowns
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CWC and SWCs reach up to the district levels. The co-operatives are at the
mandi level. The Rural Godowns are at the village level wherein they are owned
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by panchayat heads. All these tiers provide warehousing facilities only to theirown members. Hence it is a big problem for a company to store its goods in
rural areas.
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There are some problems of rural distribution:
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Transportation has not been fully developed.
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Lack of proper channels of communication like telephone, postal
services, and so on pose a lot of problem to marketer to service the
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retailer as it is difficult to the retailers to place order for goods.
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Storage of goods in rural areas is also a problem for the marketers.--- Content provided by FirstRanker.com ---
Multiple tiers push up the costs and channel management is a major
problem for marketers due to lot of middlemen in the process.
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Availability of suitable dealers
--- Content provided by FirstRanker.com ---
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Poor viability of rural outlets--- Content provided by FirstRanker.com ---
Rural outlets need banking support for remittances to principals, get fast
replenishment of stocks, receive supplies through bank and facilitate
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credit. This gets handicapped due to inadequate bank facilities.There are a lot of private shops in the rural sector.
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MBA-H4010
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Rural Marketing--- Content provided by FirstRanker.com ---
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Retailers in rural markets
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There are different kinds of retailers.
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Shops within the village
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Shops located on the main road and not exactly within the village--- Content provided by FirstRanker.com ---
Kasba market or the tahsil market.
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The clientele for these markets also varies. For the shops within the village,
the stocking pattern is very much dependent on the kind of investment the
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retailer can make in a one-time purchase.Margins are very important to a rural retailer. The pushing by the retailers
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depends on margins and the pushing by the wholesalers depends on retailers.
The gap is very wide because the local manufacturers do not undertake
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investments either in terms of advertising or anything. Hence they are very fastimitators. For rural retailers, it's the question of simple economics ? Am I
getting more money if I invest much less on these brands? He decides based on
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this question. More the margin better choice to stock and sell.
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The rural retailer stocks few brands in each category. This may haveimportant implications for a company and its managers because whoever
reaches the market first gets the share of the market. The rural retailer may keep
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some amount of area or space for a certain product category and he won't keep
more than one or two brands. So unless the marketer reaches there first and re-
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stocks at frequent intervals, he will not be able to sell more.--- Content provided by FirstRanker.com ---
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The other important development has been that more number of companies
are offering smaller packs. The retailer today has far more shelf space than he
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had earlier. Shampoos are available in sachets. He can simply string theshampoo sachets and hang it.
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4. Promotion
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Communication to rural consumer is through organized media. More
number of rural consumer (~70%) listen to radio and many go to cinema.
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Rural communication can be through Conventional media or through a non-
conventional media. The most common conventional media include: Print,
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Cinema, Television and Print. The Non-conventional media include: Theatre,
Posters, Haats and Melas.
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The conventional media have excellent reach, less expensive and create a
better impact. But at the same time, it is not customized to each village and also
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offers unnecessary coverage at times.
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Low literacy rates, culture, traditions, rural reach, attitudes and behaviorare the other problems in rural communication.
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An effective promotion should plan for a proper mix of media. This is
very important to create a mind share in the rural consumers. Hence, talking to
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the customer in a language known to him, advertising the functional benefits anddemonstrating the product go a long way in capturing the rural market.
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The Indian rural market today accounts for only about Rs 8 billion (53
per cent - FMCG sector, 59 per cent durables sale, 100 per cent agricultural
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products) of the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of thetotal share. So clearly there seems to be a long way ahead.
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Hindustan Lever is the first company that comes to mind while thinking
of rural marketing. Amul is another case in point of aggressive rural marketing.
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Some of the other corporates that are slowly making headway in this area areCoca Cola India, Colgate, Eveready Batteries, LG Electronics, Philips, BSNL,
Life Insurance Corporation, Cavin Kare, Britannia and Hero Honda to name a
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few.
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Until some years ago, the rural market was being given a step-motherlytreatment by many companies and advertising to rural consumers was usually a
hit and miss affair. More often than not, the agenda being to take a short-cut
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route by pushing urban communication to the rural market by merely
transliterating the ad copy. Hence advertising that is rooted in urban sensitivities
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didn't touch the hearts and minds of the rural consumer. This is definitelychanging now but is still a slow process. The greatest challenge for advertisers
and marketers is to find the right mix that will have a pan-Indian rural appeal.
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Coca Cola, with their Aamir Khan Ad campaign succeeded in providing just
that.
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Corporates are still apprehensive to "Go Rural." Since, the rural
consumers are scattered and it is difficult to predict the demand in the rural
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market. A few agencies that are trying to create awareness about the rural
market and its importance are Anugrah Madison, Sampark Marketing and
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Advertising Solutions Pvt Ltd, MART, Rural Relations, O&M Outreach,Linterland and RC&M, to name a few. Also, the first four agencies mentioned
above have come together to form The Rural Network. The paramount objective
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of the Network is to get clients who are looking for a national strategy in rural
marketing and help them in executing it across different regions.
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Summary
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The rural markets are of diverse nature. There are people from diverse
cultural, linguistic and religious background. The incomes of rural customers are
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also increasing. Rising literacy has generated a demand of life style products.
The reach has increased and marketers are in a position to promote their
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products much more easily,The marketers are meeting the consequent challenges of availability,
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affordability, acceptability and awareness in rural market.
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Most of the companies treat rural market as a dumping ground for thelower end products designed for an urban audience. But, this scenario is slowly
changing and importance is given to the need of the rural consumer.
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In rural markets, brands are almost non-existent. They identify FMCG by
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three things: Color, Visuals of animals and birds and Numbers. Hence it is veryimportant for us to understand that a lot needs to be done in terms of
communications, media, marketing and branding. There are a number of cases
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which suggest that to sell brands in the rural market, it is necessary to
simultaneously educate the consumers. If you have to create brand
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communication, marketing efforts must be supported by education.A rural customer is price sensitive and shops for value. This is mainly
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because of his lower income levels than his urban counterparts. Hence the
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marketer has to find ways of making the product affordable to the rural
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consumer.Distribution of products is one of the biggest challenges of rural
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marketing. There are CWC (Central Warehousing Corporation) and SWCS
(State Warehousing Corporations) set up in rural areas to store and distribute
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products. All these tiers provide warehousing facilities only to their ownmembers. Hence it is a big problem for a company to store its goods in rural
areas.
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Rural communication can be through Conventional media or through a
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non-conventional media. The most common conventional media include: Print,Cinema, Television and Print. The Non-conventional media include: Theatre,
Posters, Haats and Melas.
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Questions
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What are the emerging characteristics of a rural market?--- Content provided by FirstRanker.com ---
"A dramatic change is in progress in the villages". Explain.
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What are the challenges of rural marketing?
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Ensuring availability of products in rural markets is a great challenge.
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Explain.--- Content provided by FirstRanker.com ---
Is affordability important to rural consumer? Why?
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Why is building awareness a challenge in rural marketing?
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Elaborate on the 4Ps of rural marketing.
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Rural Marketing
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CHAPTER IV: POTENTIAL AND SIZE OF THE RURAL MARKETS
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Objective:
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The objective of this chapter is to understand:
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The potential of rural markets
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The size of rural markets
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Opportunity and size of rural markets
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The Indian rural market with its vast size and demand base offers a huge
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opportunity that MNCs cannot afford to ignore. With approximately 128 million
households, the rural population is nearly three times the urban.
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Due to the growing affluence, fuelled by good monsoons and the
increase in agricultural output to 200 million tonnes from 176 million tonnes in
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1991, rural India has a large consuming class with 41 per cent of India's middle-
class and 58 per cent of the total disposable income.
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The importance of the rural market for some FMCG and durable
marketers is underlined by the fact that the rural market accounts for close to 70
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per cent of toilet-soap users and 38 per cent of all two-wheeler purchased.
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The rural market accounts for almost half the total market for TV sets,fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder.
The rural market for FMCG products is growing much faster than the urban
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counterpart.
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The market size has always been large. The size of this rural market iswell over 700 million. All these individuals have needs, wants, desires and
aspirations that anyone in Urban India has. The fulfillment of these needs was
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by an unbranded commodity till a few years back. Today, however, there is a
rampant craving for the brand offering for a host of needs.
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The main area of concern key dilemma for MNCs eager to tap the large
and fast-growing rural market is whether they can do so without hurting the
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company's profit margins. As, capturing rural markets could be costly. Mr. Carlo
Donati, Chairman and Managing-Director, Nestle, while admitting that his
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company's product portfolio is essentially designed for urban consumers,cautions companies from plunging headlong into the rural market as capturing
rural consumers can be expensive. "Any generalization" says Mr. Donati, "about
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rural India could be wrong and one should focus on high GDP growth areas, be
it urban, semi-urban or rural."
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Trends indicate that the rural markets are coming up in a big way and
growing twice as fast as the urban, witnessing a rise in sales of typical urban
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kitchen gadgets such as refrigerators, mixer-grinders and pressure cookers.
According to a National Council for Applied Economic Research (NCAER)
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study, there are as many 'middle income and above' households in the rural areasas there are in the urban areas. There are almost twice as many 'lower middle
income' households in rural areas as in the urban areas. At the highest income
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level there are 2.3 million urban households as against 1.6 million households in
rural areas.
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As per NCAER projections, the number of middle and high income
households in rural India is expected to grow from 80 million to 111 million by
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2007. In urban India, the same is expected to grow from 46 million to 59
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million. Thus, the absolute size of rural India is expected to be double that of
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urban India.The study on ownership of goods indicates the same trend. It segments
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durables under three groups:
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4 5 6 7 8 9N
ecessary products - Transistors, wristwatch and bicycle,
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4 5 6 7 8 9
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Emerging products ? Black and White TV and cassette recorder,
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4 5 6 7 8 9
L
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ifestyle products ? Colour TV and refrigerators.--- Content provided by FirstRanker.com ---
Marketers have to depend on rural India for the first two categories forgrowth and size. Even in lifestyle products, rural India will be significant over
next five years.
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The price-sensitivity of a consumer in a village is something the
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marketers should be alive to. It is very difficult to establish a demand pattern inrural markets as the disposable income is dependent on monsoon.
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Apart from increasing the geographical width of their product
distribution, the focus of marketers should be on the introduction of brands and
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develop strategies specific to rural consumers. Britannia Industries launchedTiger Biscuits especially for the rural market. It clearly paid dividend. Its share
of the glucose biscuit market has increased from 7 per cent to 15 per cent.
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District Marketing
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Mr. Francis Xavier, Managing Director, Francis Kanoi Marketing
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Research, wants to see the urban-like village dweller as an urbanised personfrom the districts. The district becomes the basic geographical entity. The village
then becomes a location or a suburb of a district. Since the urban-like
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populations in the villages are taken as a part of the district, they will represent45
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Rural Marketing
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the dominant part of the market in most of the districts. This will compel the
kind of attention that it deserves.
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This perspective removes the complexities, heterogeneity, access and
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targetability that have hindered rural marketing initiatives. He feels that ruralmarketing requires every element of marketing including product, pricing,
packaging, advertising, and media planning to have the rural customer as the
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target. This becomes applicable if we have districts marketing as a separate
entity.
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Impact of globalization
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Globalization will have its impact on rural India also. It will be slow. It
will have its impact on target groups like farmers, youth and women. Farmers,
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today 'keep in touch' with the latest information and also look up what is
happening globally. Price movements and products' availability in the
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international market place seem to drive their local business strategies. On youthits impact is on knowledge and information and while on women it still depends
on the socio-economic aspect.
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The marketers who understand the rural consumer and fine tune their
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strategy are sure to reap benefits in the coming years. The leadership in anyproduct or service is linked to leadership in the rural India except for few
lifestyle-based products, which depend on urban India mainly.
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There has been a substantial increase in the penetration of consumer
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durables in the Indian rural sector. One thirds of the premium luxury goods arenow sold in the rural market. Two thirds of the middle-income households are
now in the rural market.
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Rural Marketing
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A study which compared the rural income and buying power established
that if the rural income in India goes up by 1%, there would be a corresponding
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increase of about Rs. 10,000 crores in the buying power. On the other hand, the
urban sector has showed saturation in the recent years.
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The fact remains that the rural market in India has great potential, which
is just waiting to be tapped. Some have progressed on this road, but there seems
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to be a long way for marketers to go in order to derive and reap maximum
benefits. Rural India is not as poor as it used to be a decade or so back. Things
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are looking up!Summary
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The Indian rural market has 128 million households. The rural market
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accounts for almost half the total market for TV sets, fans, pressure cookers,
bicycles, washing soap, blades, tea, salt and toothpowder.
--- Content provided by FirstRanker.com ---
The rural market for FMCG products is growing much faster than the
urban counterpart. The market size has always been large. The size of this rural
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market is well over 700 million.
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The study on ownership of goods indicates the same trend. It segmentsdurables under three groups: Necessary products, Emerging products and
Lifestyle products. Marketers have to depend on rural India for the first two
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categories for growth and size. Even in lifestyle products, rural India will be
significant over next five years.
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The price-sensitivity of a consumer in a village is something the
--- Content provided by FirstRanker.com ---
marketers should be alive to. It is very difficult to establish a demand pattern in
rural markets as the disposable income is dependent on monsoon.
--- Content provided by FirstRanker.com ---
Globalization will have its impact on rural India also. It will be slow. It
will have its impact on target groups like farmers, youth and women.
--- Content provided by FirstRanker.com ---
The marketers who understand the rural consumer and fine tune their
--- Content provided by FirstRanker.com ---
strategy are sure to reap benefits in the coming years. The leadership in anyproduct or service is linked to leadership in the rural India except for few
lifestyle-based products, which depend on urban India mainly.
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Questions
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Indian villages offer a huge potential to marketers. Explain.
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What is district marketing?
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How will globalization affect rural India?--- Content provided by FirstRanker.com ---
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CHAPTER V: RURAL MARKETING INFORMATION SYSTEM
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Objective:
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The objective of this chapter is to understand rural marketing
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information system and its application.
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Introduction--- Content provided by FirstRanker.com ---
The villages are the backbone or the soul of India. With more than twothirds of the Indian population living in rural areas, rural India reflects the very
essence of Indian culture and tradition. A holistic development of India as a
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nation rests on a sustained and holistic development of rural India.
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Farmers could use the connected computers to get commodity pricesfaster, or get information on new agricultural techniques. The youth would get
details on job opportunities across the state. The district administration could get
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details of problems in near real-time. The eligible could search for matrimonial
matches across adjacent villages. The voters would communicate their concerns
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to the politicians and bureaucrats electronically, with a trail of thecommunication. The village officials could share governance best practices
faster among their counterparts elsewhere.
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The National Informatics Centre is proposing a "Rural Studio" initiative
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for developing reusable software components and services for the ruraldevelopment sector,
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Computers were used in the process of governance in India, way back
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in the 1980's with some of the early and popular initiatives such as theComputerized Rural Information Systems Project (CRISP, http://crisp.nic.in) by
the Department of Rural Development (Government of India), the District
--- Content provided by FirstRanker.com ---
Information Systems of the National Informatics Centre (DISNIC) Project, the
National Resource Data Management System (NRDMS) by Department of
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Science and Technology (Govt. of India) and Surendra Nagar Experiments,among others.
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The Land Records Computerization Project (LRCP, http://dolr.nic.in)
was another key initiative taken by the Government of India in addressing issues
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related to land records management and ownership. These projects wereconceptualized and executed when ICTs, particularly networking technologies,
were in a very nascent stage in India and had not gained roots in the government
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segment. Most of these projects focused on exploiting the computing/processing
power of computer systems. At the district level, computers were primarily used
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to process data (spatial, non-spatial or both) related to various developmentalschemes to strengthen the monitoring and planning done by the district
administration.
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Now, ICT has advanced to levels where it is being used in various
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sectors and helps in providing efficient services round the clock.ICT has emerged as a new way of reaching out to the people at grass root
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level. ICT applications into the domain of Indian Rural Development (RD) dates
back to 1986 when the Computerized Rural Information Systems Project
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(CRISP- http://crisp.nic.in) was launched in 1986 by the Ministry of RuralDevelopment (MoRD). Under this project, every district in the country was
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provided with computers and a software called CRISP (now re-named as
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RuralSoft ? http://ruralsoft.nic.in) to help District Rural Development Agencies
(DRDAs) to manage MoRD's Programmes more efficiently. The RD domain
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has come a long way now both in terms of ICT infrastructure as well as softwaresolutions. The results have now started trickling down to the common people in
rural areas.
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Some of the major grass root level ICT initiatives by NIC include:
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Land Records Computerization--- Content provided by FirstRanker.com ---
The Land Records Computerization aims at employing state-of-the-artInformation Technology (IT) to galvanize and transform the way of maintaining
land records in the country. The project is a collaborative effort with Ministry of
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Rural Development providing funds to states for data collection, collation and
site preparation etc. while NIC provides technical support, training etc. Various
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kinds of land records software operational in different States include Bhoomi(Karnataka), Tamil Nilam (Tamil Nadu), e-Dharni (Goa), Bhuyan (Chhatisgarh),
Apna Khata (Rajasthan), e-Dhara (Gujarat), Bhumi (West Bengal), Himbhoomi
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(Himachal Pradesh) etc.
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eNRICH Community Software Solution Framework
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eNRICH (http://enrich.nic.in) is another ICT solution that has been developed as
a Community Software Solution Framework addressing the needs of rural
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people. eNRICH, which was initially developed for UNESCO to facilitate intra-
community communications, was subsequently enhanced to work as a
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framework capable of networking communities and building collaborations51
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between government and citizens, particularly mainstreaming the rural people
who are most disadvantaged and underprivileged.
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AGMARKNET--- Content provided by FirstRanker.com ---
AGMARKNET (http://agmarknet.nic.in) is a NICNET based AgriculturalMarketing Information System Network that links all important Agricultural
Produce Market Committees (APMCs), State Agricultural Marketing
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Boards/Directorates and Directorate of Marketing & Inspection (DMI)
regional offices located through out the country for effective information
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exchange on market prices related to agricultural produce. This web basedinformation system enables farmers to sell their produce in the nearest
market at remunerative prices.
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Community Information Centres (CICs)--- Content provided by FirstRanker.com ---
The North Eastern region has been traditionally less developed due to itsremoteness and difficult hilly terrain. To provide a boost to all-round
development of the region through ICT, 487 Community Information Centres
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(CICs) have been set up in all the eight States of the region as part of the CIC
Project initiated by the Department of IT, Government of India. Each CIC has its
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own web-site accessible through http://www.cic.nic.in and provides informationon forms, rules and procedures, government tenders, notification for
employment opportunities, information on tourism, culture, examination results,
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schemes, legal issues, guidelines for bank loans, weather information etc.
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ASHA
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NIC Assam in partnership with Agribusiness consortium has developed a
model
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ASHAfor
facilitating
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agribusiness
through
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CIC(http://www.assamagribusiness.nic.in). The site aims at building up of
information useful for farmers and establish direct link between buyers and
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sellers thus promoting agribusiness.
--- Content provided by FirstRanker.com ---
RuralBazar
--- Content provided by FirstRanker.com ---
RuralBazar (http://ruralbazar.nic.in) is an e-commerce solution developed by
NIC to address the marketing needs of the rural producers. The software
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provides provision for simple showcasing of the products, off-line payment
as well as on-line payment. It has been implemented in the States of Tripura,
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Goa and Tamil Nadu.--- Content provided by FirstRanker.com ---
Property Registration
--- Content provided by FirstRanker.com ---
NIC has developed Property Registration Systems that aim at setting quality
and time standards for all registration services. The features include
--- Content provided by FirstRanker.com ---
registration of deeds on the transactions relating to immovable propertiesbetween citizens and include calculation of stamp duty; Revising the rates of
market values, Deed writing, providing computerized copies of Records of
--- Content provided by FirstRanker.com ---
Right (ROR), computerized history of transactions on property & land
record mutation etc.
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MBA-H4010
Rural Marketing
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Panchayat Informatics
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NIC has also initiated efforts to provide ICT solutions for streamlining the
functioning of panchayats to enable easy access to information and services
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by the common man. Some of the applications in this area include National
Panchayat Portal, Priasoft - Panchayati Raj Institutions Administration
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Software, e-Gram Vishwa Gram, e-Panchayat and InfoGram.--- Content provided by FirstRanker.com ---
e-Governance for Rural Masses
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NIC has designed applications to deliver e-Governance services to the rural
masses. Some of these include:
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Rural Digital Services
--- Content provided by FirstRanker.com ---
Rural Digital Services provide a single window for all government
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services at village level. In the first phase of the project, the services
offered include Birth/Death Registration and Certificates (Caste,
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Income, Widow, Unemployment, No Tenancy etc.).--- Content provided by FirstRanker.com ---
Lokvani
--- Content provided by FirstRanker.com ---
Lokvani provides citizens an opportunity to interact with government
without actually visiting the government offices. The services
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provided through the kiosks include information about variousgovernment schemes, forms, list of old-age pensioners, list of
scholarship beneficiaries, allotment of food grains to kotedars,
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allotment of funds to gram panchayats, land records etc.
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MBA-H4010Rural Marketing
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LokMitra
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Lokmitra is an initiative of Government of Himachal Pradesh that
envisages taking the benefits of IT to the door-step of general public,
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especially those living in rural areas through Lokmitra Soochana
Kendras set up at 25 centrally located Panchayats. NIC provided the
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Lokmitra software and necessary training to the Soochaks, whomanage the Soochana Kendras. The services offered through the
Lokmitra Kendras include Classified Complaints, Forms download,
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Job Vacancies, Tenders, Schemes information, market rates etc.
Efforts are underway to expand this initiative to all the districts in the
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State.--- Content provided by FirstRanker.com ---
Gyandoot
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Gyandoot is an intranet in Dhar District that connects rural cyber
cafes catering to everyday needs of the masses. Some of the services
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provided, using the software applications developed by NIC, throughthe kiosks set up in the villages of the rural district include
Commodity/Mandi Marketing Information System, Income
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Certificate, Domicile Certificate, Caste Certificate, Driving License,
information regarding Rural Markets etc
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Backend e-Governance Solutions
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The success of how efficiently the ICT services are delivered to the
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common man depends largely on the extent of backend computerization.
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MBA-H4010Rural Marketing
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Some of the back-end rural informatics solutions developed by NIC are as
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Follows:
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Ruralsoft
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RuralSoft (http://ruralsoft.nic.in) is a solution that helps capturing
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monthly progress of various poverty alleviation schemes sponsored
by the Ministry of Rural Development (MoRD) and State Rural
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Development Departments (SRDs).--- Content provided by FirstRanker.com ---
Monitoring Software for DDWS Schemes
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The Department of Drinking Water Supply provides funds to the
states for rural drinking water supply and sanitation programmes.
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ITC - eChoupals
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ITC is setting up eChoupals across the agricultural belt in India to offer
the farmers of India all the information, products and services they need to
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enhance farm productivity, improve farm-gate price realization and cut
transaction costs. Farmers can access latest local and global information on
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weather, scientific farming practices as well as market prices at the village itselfthrough this web portal - all in Hindi. Choupal also facilitates supply of high
quality farm inputs as well as purchase of commodities at their doorstep. This
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has been done in a phased approach:
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In Phase I, the business goal was to create a physical infrastructure of eChoupalsat the village level and create local level ownerships through the identified
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Sanchalaks. At this stage the business goal was supported by creating a local
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language portal, which provided the required information to farmers such as
local weather, market prices and best practices.
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In Phase II, the business goal was to get the farmer registered and
transacting by selling directly to ITC Ltd. through the virtual market. This goal
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was supported by creating a B2B site, which integrated the transactions directly
to the back-end ERP and ensured that there was no latency in processing any of
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the procurement by the processing units.In Phase III, the business goal was to create a full fledged meta-market.
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In this phase, the market would facilitate other operators like inputs providers
and rural distributors to work effectively through the eChoupal to deliver and
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procure goods from every participating village.The technology road map to support this phase was to have a secure,
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consolidated Farmers database with all information pertaining to their holdings
and credit worthiness to be available online. This database, along with
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identification provided by smart cards would enable support for onlinetransactions through the eChoupal leading to integration with participating
financial institutions such as banks, insurance and credit agencies. A more
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detailed description of the ecosystem being created by the eChoupals comes
from a note on the World Resources Institute Digital Dividend Knowledge Bank
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site:This reorganization of the role of middlemen results in lower
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procurement costs for ITC, despite having to pay higher prices to the farmers.
Transaction costs are also minimized for the farmer by buying output at the
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farmers' doorstep, and through transparent pricing and weighing practices. A57
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MBA-H4010
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Rural Marketing
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substantial quantity has already been procured through this channel, resulting in
overall savings. The savings are shared between buyer (ITC) and seller (farmer).
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On the marketing front, ITC is able to maintain and grow the trust of its farmers
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by enhancing their productivity and wealth. ITC leverages this position of trustamong farmers, as well as its distribution capabilities, to market its own
consumer good brands and those of partner companies offering products and
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services that ITC does not. Sales of consumer goods through the e-Choupals
have been particularly successful because the cost-savings associated with
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dealing directly with the manufacturer allow Sanchalaks to offer goods at lowerprices than other village-level traders or retailers can afford to do.
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A digital transformation
--- Content provided by FirstRanker.com ---
The following have been some of the initiatives of e-choupal
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ITC began the silent e-volution of rural India with soya growers in the
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villages of Madhya Pradesh. For the first time, the stereotype image of
the farmer on his bullock cart made way for the e-farmer, browsing the
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e-Choupal website. Farmers now log on to the site through Internetkiosks in their villages to order high quality agri-inputs, get information
on best farming practices, prevailing market prices for their crops at
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home and abroad and the weather forecast ? all in the local language. In
the very first full season of e-Choupal operations in Madhya Pradesh,
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soya farmers sold nearly 50,000 tons of their produce through the e-Choupal Internet platform, which has more than doubled since then. The
result marks the beginning of a transparent and cost-effective marketing
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channel. No doubt, this brought prosperity to the farmers' doorstep.
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MBA-H4010Rural Marketing
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Farmers grow wheat across several agro-climatic zones, producing grainsof varying grades. Though these grades had the potential to meet diverse
consumer preferences, the benefit never trickled down to the farmers,
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because all varieties were aggregated as one average quality in the
mandis. ITC's e-Choupal intervention helped the farmers discover the
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best price for their quality at the village itself. The site also providesfarmers with specialised knowledge for customising their produce to the
right consumer segments. The new storage and handling system
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preserves the identity of different varieties right through the 'farm-gate to
dinner-plate' supply chain encouraging the farmers to raise their quality
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standards and attract higher prices.--- Content provided by FirstRanker.com ---
ITC's Aqua Care Centre in Kakinada, Andhra Pradesh, has
revolutionized the concept of shrimp seed testing. Its sophisticated
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laboratory detects the deadly White Spot virus in the shrimp seed and
advises farmers on appropriate remedial action.
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echoupal.com has become popular among coffee growers as an effective
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platform for global trade. Coffee planters in India have for years been
tossed between the highs and lows of the international coffee market.
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The information needed to manage risks in the volatile global coffeemarket, price updates and prevalent trends in coffee trading were just not
available to them. Launch of e-Choupal.com has equipped India's coffee
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planters with appropriate knowledge base and risk management tools.
The site arms them with the latest prices posted on commodity
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exchanges like CSCE in New York and LIFFE in London. Planters haveaccess to technical analysis by experts to help them comprehend trends,
trading ranges and chart patterns in simple language. 'Parity Chart' and
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the 'Calculator' on the site convert the coffee prices quoted in
international auctions into raw coffee equivalent for the benefit of the
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small growers in India. Tradersnet, a special link on the site, bringstogether a large number of coffee planters, traders and roasters, creating
a virtual market for transparent price discovery. ITC empowers Indian
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coffee growers with expert knowledge in logistics and risk management,
thereby enabling them to face global competition.
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ITC has shown how the rural market can be tapped for mutual benefit of
the customer and the marketer.
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Hence, a Rural Information System caters mainly to agricultural
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marketing. All the above examples give us an idea of what the government andother organizations are doing to help in agricultural marketing.
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Summary
--- Content provided by FirstRanker.com ---
A Rural Information System caters mainly to agricultural marketing.
--- Content provided by FirstRanker.com ---
There have been a lot of initiatives by ICT in this regard.--- Content provided by FirstRanker.com ---
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Questions
--- Content provided by FirstRanker.com ---
What are the utilities of a rural marketing information system?
--- Content provided by FirstRanker.com ---
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Explain some of the initiatives taken by ITC to computerize in ruralareas. What has been the benefit of such schemes?
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MBA-H4010
Rural Marketing
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What are the lessons to be learnt from ITCs E-choupal initiative?
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How will computers change the life of rural consumers?
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MBA-H4010Rural Marketing
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UNIT-IIILESSON 3.1
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SELECTION OF MARKETS
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This Lesson explains the three tasks, viz. segmenting, targeting and
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positioning involved in the process of selecting markets.Lesson Outline
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Introduction
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Concepts and Process
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Segmentation
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Degree of SegmentationGuides to Effective Segmentation
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Bases of Segmentation
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Targeting
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Positioning
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Questions--- Content provided by FirstRanker.com ---
INTRODUCTION--- Content provided by FirstRanker.com ---
Companies are today developing different brands in different pack sizesand formulations to win over the consumers. Different people want different
quantities and different mixes of benefits from the product they buy. Take
--- Content provided by FirstRanker.com ---
detergents for example, Hall has Surf, Rin Shakti and Wheel powder to meet the
needs of different income groups. Palmolive has three varieties of toilet soaps
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offering skin care benefits to three different types of skins of consumers. In--- Content provided by FirstRanker.com ---
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MBA-H4010Rural Marketing
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reality they are dividing the markets into attractive segments to reach them
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efficiently, serve them effectively and achieve results economically.CONCEPTS AND PROCESS
--- Content provided by FirstRanker.com ---
Selecting and attracting markets involves three key decisions, viz.,
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segmenting, targeting and positioning
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Segmenting is the process of dividing or categorizing market into
different groups based on one or more variables.
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Targeting is selecting the market segments, which can be servedefficiently and profitability. It is, deciding on market coverage strategies.
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Positioning is a market attraction strategy, which involves placing the
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brand in the minds of the customers in the target market.The various steps involved in the market coverage and attraction process are:
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Decision
--- Content provided by FirstRanker.com ---
Actions--- Content provided by FirstRanker.com ---
Segmentation
--- Content provided by FirstRanker.com ---
Identification of various bases for segmenting
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market
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Developing profiles of the market segments
--- Content provided by FirstRanker.com ---
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Targeting--- Content provided by FirstRanker.com ---
Evaluating the market segments for their
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attractiveness
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Deciding the market coverage strategy
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Positioning
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Communicating the chosen competitiveadvantage to the customers
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Identifying a set of possible competitive
advantages of the brand
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Selecting the right competitive advantage
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MBA-H4010
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Rural Marketing
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SEGMENTATION
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Segmentation is the process of dividing a heterogeneous market into
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homogeneous sub-units. The division is based on the premises that different
people have different preferences. The following are the basic market
--- Content provided by FirstRanker.com ---
preferences:Homogeneous preferences where consumers have roughly the same
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preferences
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Diffused preferences where consumers are scattered throughout the
market by their preferences.
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Clustered preferences where consumers are found in distinct preference
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groups.DEGREES OF SEGMENTATION
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If segmentation is considered as a process with two polar points from
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zero to complete, four distinct segmentation approaches are identifiable.
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Degree of
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Zero
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Complete
segmentation
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--- Content provided by FirstRanker.com ---
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MassSegment
Niche
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Micro
Type
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
marketing
marketing
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marketing
marketing
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Serves
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Identifies
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Focuses on
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Considers allselectively
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people as
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individuals or
Approach
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
people as a
one or very
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different
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very smallbunch
--- Content provided by FirstRanker.com ---
few groups of
--- Content provided by FirstRanker.com ---
groups--- Content provided by FirstRanker.com ---
groups
people
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(i) Mass Marketing
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In the early period of the twentieth century, many companies practiced
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mass production and mass distribution. As economies evolved and societies
became civilized, consumer choice and requirements came into focus. Until
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now, the rural market was considered a homogeneous mass as was the IndianMarket till some 20 years ago. Some companies depend on mass marketing,
while many others do not.
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(ii) Segment Marketing
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The principal of segment marketing rests on the realization that buyers differ
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in their needs, wants, demands and behaviors. The need for segment marketingarises when:
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Consumers have become more diverse, sophistical and choosy.
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Competition has become tough
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Benefits of segment marketing:
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Company can service its customers more effectively and efficiently
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Company gains the image of a creative and innovative organization
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Company may gain monopoly by virtue of its unique marketing offer.
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Prerequisites for segment marketing:
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Understanding of consumer needs and wants
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Awareness of competitors, products and services
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Rural Marketing
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Innovative capabilities of marketers to fine tune products and services to
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the varied customer groups.
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Niche Marketing
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A niche is a very small group with a distinctive set of traits, who seek a
special combination of benefits. Niche marketing identifies special sub-groups
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within larger segments and offers different products and services.
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(iv) Micro Marketing--- Content provided by FirstRanker.com ---
Micro Marketing involves tailoring products and programs to suit thetastes of specific locations and individuals. It includes local marketing and
individual marketing.
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Local marketing: It involves and programs to suit the tastes of specificlocations and wants of local customer groups on a geographical basis.
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The advantages of local marketing are:
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Effective marketing in the face of difference in demographics and life
styles and communities in different regions.
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Supports and stimulates retailers, who prefer offers customized to theirlocality.
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Disadvantages:
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It may create logistical problems as companies try to meet the varied
requirements of different regions.
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It may reduce economies of scale.--- Content provided by FirstRanker.com ---
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It may affect the overall image of a brand as promotion programs vary
from place to place
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Individual marketing: Individual marketing is customized marketing or
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one-to-one marketing. Tailoring units, hotels, tourist operators and doctors
provide individualized services. Building contractors build houses or flats to the
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specific requirements of customers.GUIDES TO EFFECTIVE SEGMENTATION
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Any process can be effective, if it has a sound philosophy and practical validity.
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Segmentation can be effective only if it satisfies the following requirements:
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(i) Measurable
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Segments are formed with the help of certain variables. These variables
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should be distinct, clear and measurable. Only then segments can be described inexact terms and differences understood. Companies, so far, are not able to reach
rural markets due to lack of proper data. In the absence of information related to
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size, purchasing power and profiles of rural consumers, they considered them
similar to urbanites.
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(ii) Accessible
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Reach is important to serve the segments. Till recently, marketers
preferred urban markets to rural ones because of the inaccessibility of the latter.
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They were dependent on the mobile vans and nearby town distributors and retail
outlets to reach rural consumers. Now, research has established that effective
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Rural Marketing
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means of reaching rural folk is possible by participation in haats or shandis
organized weekly. Also, there is considerable improvement in the infrastructure
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Making several villages accessible.
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(iii) Differentiable
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Segments merit consideration of marketers only when they have
distinguishing features. Rural marketers are identified as a different segment, for
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their responses are different from the urban in case of some products andprogrammes. For instance, in case of buying wrist watches, rural consumers
differ with urbans. Rural buyers are more worried about the value for money and
--- Content provided by FirstRanker.com ---
weigh the watch in hand to know how heavy it is. On the contrary, urban
consumers prefer light ones with latest technology.
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(iv) Substantial
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A segment is attractive only when it is profitable. A segment should as
such possess the following characteristics:
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Homogeneous--It should consist of people, who are similar in perceptions,learning, preferences, attitudes and action. As such, covering them will be easy.
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Large--It should comprise of either large number of light users or small
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number of heavy users so that marketing becomes beneficial to the companies.68
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MBA-H4010
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Rural Marketing
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--- Content provided by FirstRanker.com ---
It is observed that rural areas are not homogeneous. Region-wise differences are
found in language, thinking and behaviour. However, it is difficult to design
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separate promotional programmes as the size of consumers is not large enough
to make the effort viable.
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BASES OF SEGMENTATON
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There is no one way of segmenting the market. A marketer may look for
one or more variables viz., geographic, demographic, psychographic and
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behavioral, to distinguish and describe their market segments.
--- Content provided by FirstRanker.com ---
(1) Geographic Segmentation--- Content provided by FirstRanker.com ---
Geographic segmentation is made based on variables like zones/regions,states, districts, cities/town/ villages by size, density, climate and culture.
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Zones: The country is divided into four
--- Content provided by FirstRanker.com ---
zones. East : West Bengal, AssamWest : Maharastra, Punjab, Haryana
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North : Delhi, UP, Bihar. Himachal Pradesh
--- Content provided by FirstRanker.com ---
South : Tamil Nadu, Andhra Pradesh, Kerala, Karnataka.
--- Content provided by FirstRanker.com ---
The number of villages with a population of less than 5000 people
is: East : 1,61,982,West : 1,35,936,North : 2,00,106,South : 73,585
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States, Districts and Villages: The country is divided into states on the
--- Content provided by FirstRanker.com ---
basis of language. For the convenience of administration each state is divided
into districts.
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69
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MBA-H4010
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Rural Marketing
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Density: The density of population per square kilometer in the rural areas is
very low
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Climate: The country is divided by climatic conditions as follows:? Tropical? Rainy? Cold
--- Content provided by FirstRanker.com ---
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Culture: Media will be effective when its messages are fine-tuned to the
culture of the people. As such, the political division is immaterial for the various
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media. Ogilvy-Rural has divided the country into 56 Socio-Cultural Regions(SCR).
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(ii) Demographic Segmentation
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Markets are divided into segments based on variables such as age, life-
cycle, gender, family size, income, occupation, education, religion and
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nationality.Age
--- Content provided by FirstRanker.com ---
:
Under 6, 6--12, 13--19, 20--40, 41--60, 60+.
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Life--cycle:
Infants, children, teens, young adults, elders,
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
seniors.Gender
:
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Male--Female.
Marital status
--- Content provided by FirstRanker.com ---
:Married--Unmarried.
Family size
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:
1--2, 3--4, 5+
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Income:
Rs.25, 000 and below, Rs.25, 001-50,000,
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Rs.50,001-75,000, Rs. 75,001, Rs. 1 lakh, above--- Content provided by FirstRanker.com ---
Rs. 1 lakh.
Occupation
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:Farmer, agricultural labourer, artisan, non-
--- Content provided by FirstRanker.com ---
agricultural labourer, Business, Professional
--- Content provided by FirstRanker.com ---
employee, retired, student, unemployed.
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MBA-H4010Rural Marketing
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Education
--- Content provided by FirstRanker.com ---
Illiterate, literate, elementary school, highSchool, college, university.
--- Content provided by FirstRanker.com ---
Religion
--- Content provided by FirstRanker.com ---
Hindu, Muslim, Christian and Others.--- Content provided by FirstRanker.com ---
Age and Life-cycle: The age and life--cycle classification
applicable to urbans is valid to rurals as well. The specific
--- Content provided by FirstRanker.com ---
products for the age segments are:
--- Content provided by FirstRanker.com ---
Age Segment
--- Content provided by FirstRanker.com ---
Products
Typical Brands
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Infants
--- Content provided by FirstRanker.com ---
Milk,
Powder,
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Glaxo, Nestle, Johnson and Johnson,
--- Content provided by FirstRanker.com ---
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cereals,soaps, Wipro, HLL
--- Content provided by FirstRanker.com ---
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diapers--- Content provided by FirstRanker.com ---
Children
--- Content provided by FirstRanker.com ---
Toothpaste,
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Pepsodent, NUTRINE Britannia, Parle,
--- Content provided by FirstRanker.com ---
confectionery,
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BSA, Atlas, Hero, Amar Chitra Katha
--- Content provided by FirstRanker.com ---
sports cycles, story
--- Content provided by FirstRanker.com ---
series, Chand Mama, Balamitra
--- Content provided by FirstRanker.com ---
books, magazines
--- Content provided by FirstRanker.com ---
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Teens
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Toothpaste,
Face
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Close-up, Fair & Lovely, North Star,
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creams,
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shoes, Nike, TVS, Luna, Coke, Pepsi, Thums
--- Content provided by FirstRanker.com ---
mopeds, soft drinks Up
--- Content provided by FirstRanker.com ---
Young Adults
--- Content provided by FirstRanker.com ---
Magazines, shoes, Sport star, Computer Digest, Reebok,
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TV, music systems, Philips, Sony, Samsung, HCL, Compaq,
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computers, scooters Bajaj, LML
--- Content provided by FirstRanker.com ---
Elders
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Briefcases,
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VIP, Samsonite, Ray ban, Bosche and--- Content provided by FirstRanker.com ---
spectacles, suitings, Lamb, Raymond, Park Avenue, Tatacell phones
--- Content provided by FirstRanker.com ---
Cellular, Magic
--- Content provided by FirstRanker.com ---
Seniors
--- Content provided by FirstRanker.com ---
Rocking chairs,
Modfurn, Conybio, Cipla, Glaxo,
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knee pads, selfReddy Labs
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diagnostic--- Content provided by FirstRanker.com ---
kits,
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MBA-H4010
Rural Marketing
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medicines--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Gender: Gender differences are observed in terms of dress, footwear,cosmetics and other products. The peculiarities of women like gynecological
problems and beauty consciousness offer marketers an opportunity to supply
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unique products like sanitary napkins, estrogen medicines, bust creams, and face
packs.
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Marital Status: The influence of marital status is obvious. Some companies
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can benefit on this ground.
Unmarried:
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Residence
-
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Small size houses/flats, working women's hostels
Eat out
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-Fast food centres
Occasions
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-
Valentine's Day
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Married:
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Tourism and Hotels -
Honeymoon packages
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Events
-
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"Best Couple" competitions
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Family size: As family size increases, consumption of consumables will
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increase. In rural areas, it is found that large families with low incomes arebuying consumer durables like TV. The promotion of consumables as `family
product' particularly in economy refill packs works well with large families.
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Large families may buy more than one brand of a product to meet specific
individual preferences and tastes. As such, multi-brand consumption of a
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product may be there. While, Colgate is family toothpaste, Close-up is morepersonalized with its focus on the youth. Naturally, it makes inroads into
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MBA-H4010
Rural Marketing
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families with young members and adequate buying power and co-exists with
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Colgate.
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Income: Rural households fall under different income categories as shown
below.
--- Content provided by FirstRanker.com ---
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Income Rangeof Rural
--- Content provided by FirstRanker.com ---
Households
--- Content provided by FirstRanker.com ---
Above Rs.1,00,000
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3.8
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Rs.75,001 ? 1,00,000
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4.7
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Rs.50,000 ? 75,000
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13.0
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Rs.25,001 ? 50,000
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41.1
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Rs.25,000 & below
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37.4
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The importance of income in influencing the purchase decisions relatingto quantity and quality need not be over emphasized. The rural rich buy
premium brands like the urban rich. It is interesting, that today even the low-
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income groups buy some brands that the rich rurals buy. The sale of the
premium brands to low income groups is made possible through sachet
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revolution. Products offered in sachets like Velvettee shampoo, Dairy top andColgate are highly successful in rural markets. The high-income group provides
market potential to durables like refrigerators, CTVs and washing machines.
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Occupation: Occupational needs vary.
--- Content provided by FirstRanker.com ---
Farmer
:
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Seeds, fertilizers, pesticides, tractors, harvesters,
--- Content provided by FirstRanker.com ---
Pump sets, etc.
Employee
--- Content provided by FirstRanker.com ---
:
Pens, stationery items, etc.
--- Content provided by FirstRanker.com ---
Doctor:
Stethoscope, BP kit, medicines, syringes,
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Animal husbandry
:
--- Content provided by FirstRanker.com ---
Feed, medicines, consultancy.--- Content provided by FirstRanker.com ---
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MBA-H4010
Rural Marketing
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The identification of specific products provides an opportunity to marketers to
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develop, design and distribute products to cater to the particular markets.
--- Content provided by FirstRanker.com ---
Education: Education provides knowledge and skill. It improves the
thinking process and facilitates understanding of issues on a higher and wider
--- Content provided by FirstRanker.com ---
plane.
--- Content provided by FirstRanker.com ---
Religion: The influence of religion on the consumer purchase behaviour is
an important consideration for marketers. Religion provides a `code of life' and
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links the visible real world, with invisible world after death. It furnishes the do's
and don'ts to be followed.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Religion
--- Content provided by FirstRanker.com ---
Product / ItemsOccasions / Events
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Christians
--- Content provided by FirstRanker.com ---
Church, Holy bible, cross, candles,
Good Friday, Easter,
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
rose, water, Christmas trees, bells,
--- Content provided by FirstRanker.com ---
Christmas--- Content provided by FirstRanker.com ---
stars
--- Content provided by FirstRanker.com ---
Hindus
--- Content provided by FirstRanker.com ---
Temples, rivers, icons of God,
--- Content provided by FirstRanker.com ---
Deepavali, Vinayaka,--- Content provided by FirstRanker.com ---
cotton thread for lamps, lamps,Chaturthi, Krishna
--- Content provided by FirstRanker.com ---
license sticks, camphor,
Jayanthi Sravan Fridays,
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coconuts, fruits, betel leaves, nut
--- Content provided by FirstRanker.com ---
Kartika month
--- Content provided by FirstRanker.com ---
Margasira monthpowder sandal paste, Kumkum
--- Content provided by FirstRanker.com ---
Muslims
--- Content provided by FirstRanker.com ---
Mosque, perfumes, white caps.
Id-ul-Fitr, Bakrid,
--- Content provided by FirstRanker.com ---
license sticks, Holy Quran, Agar
Miladun-nabi, Muharram
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
(II,) Psychographic Segmentation
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MBA-H4010
Rural Marketing
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While geographic and demographic segmentations provide a physical view ofthe markets, the true dynamics of purchase can be assessed and marketing offer
can be designed only on the basis of psychographics of the people. An example,
--- Content provided by FirstRanker.com ---
to prove this point:
Market is divided into different segments based on three variables viz.
--- Content provided by FirstRanker.com ---
Social class
--- Content provided by FirstRanker.com ---
Life style, and
--- Content provided by FirstRanker.com ---
Personality--- Content provided by FirstRanker.com ---
Social class: Society consists of a structure, which represents a hierarchy of
classes or grades of people. Caste was one of the divisions of class system in
--- Content provided by FirstRanker.com ---
India along with wealth. However, in recent times, social class is determined by
a combination of factors like education, occupation, income, wealth and others.
--- Content provided by FirstRanker.com ---
Media Research Users Council (MRUC) and Indian Readership Survey (IRS)--
95 have come out with a new rural Socio-Economic Class (SEC), which maps
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the rural market on three variables.
--- Content provided by FirstRanker.com ---
Education of the chief wage earnerOwnership of durables
--- Content provided by FirstRanker.com ---
Type of the house (Pucca, Semi-pucca or Kuchha)
--- Content provided by FirstRanker.com ---
The social classes may be categorized into six groups as shown in Table 3.1.
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Table 3.1 Social Classes: Characteristics and Preferences
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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S.No. ClassCharacteristics
--- Content provided by FirstRanker.com ---
Preferences
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Upper-Upper
--- Content provided by FirstRanker.com ---
Social elite, wealth inherited,
--- Content provided by FirstRanker.com ---
Jewellery,
antique,
--- Content provided by FirstRanker.com ---
well
known
--- Content provided by FirstRanker.com ---
family farm houses, vacations,background, ascribed status, luxury, products at
aristocrats, small in number
--- Content provided by FirstRanker.com ---
high prices
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MBA-H4010
Rural Marketing
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
reference group for others.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
2.--- Content provided by FirstRanker.com ---
Lower-Upper Social elite, wealth earned, Status symbols ? cars,--- Content provided by FirstRanker.com ---
educated and
professional homes, refrigerators,
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
active in social and civic
expensive
--- Content provided by FirstRanker.com ---
schools,--- Content provided by FirstRanker.com ---
affairs, aspire, and associate exhibition products, art
--- Content provided by FirstRanker.com ---
with upper, upper stratum.
--- Content provided by FirstRanker.com ---
pieces, sculptures, etc.3.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Upper-middle Career oriented dependent on Quality of
life,
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
education and hard work, products
and
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
dual career familiesseek entertainment,
good
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
comfort, ambitious
interior
--- Content provided by FirstRanker.com ---
decoration,--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
vacations, traveland
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
tour
regular
--- Content provided by FirstRanker.com ---
but
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
economics
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
entertainment.
--- Content provided by FirstRanker.com ---
4.
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Lower-middle Average paid
--- Content provided by FirstRanker.com ---
employees, Better lifeproducts,
--- Content provided by FirstRanker.com ---
small businessmen, college nice,
--- Content provided by FirstRanker.com ---
homes,
nice
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
background,fashion, furniture,
decent
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
oriented but
traditional dual school,
--- Content provided by FirstRanker.com ---
occasional--- Content provided by FirstRanker.com ---
career families.
--- Content provided by FirstRanker.com ---
vacations, travel
and
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
tour
--- Content provided by FirstRanker.com ---
regularbut
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
economical
--- Content provided by FirstRanker.com ---
5.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
entertainment--- Content provided by FirstRanker.com ---
Upper-lower
--- Content provided by FirstRanker.com ---
Above poverty line ? Depend Economy,products,
--- Content provided by FirstRanker.com ---
on loans and advances, hand installment and credit
--- Content provided by FirstRanker.com ---
tomouth, dual career buying, low priced
--- Content provided by FirstRanker.com ---
families, traditional, strong popular brands
and
--- Content provided by FirstRanker.com ---
family ties, school education local
unbranded
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
products.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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MBA-H4010
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Rural Marketing--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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--- Content provided by FirstRanker.com ---
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6.
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Lower-Lower
--- Content provided by FirstRanker.com ---
Below poverty line, daily Local
unbranded
--- Content provided by FirstRanker.com ---
incomes, low per capital products,
--- Content provided by FirstRanker.com ---
dailyincome poor health and purchases,
--- Content provided by FirstRanker.com ---
cheap
hygiene, dependence on varieties, buy seconds
--- Content provided by FirstRanker.com ---
petty loans and charityor collect thrown out
--- Content provided by FirstRanker.com ---
clothes, food etc.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Life style: With the rural populace has the advent of satellite television and
cable networks all across the country, been exposed to the rich life style of the
--- Content provided by FirstRanker.com ---
urban households. The rural consumer's brand choices are not that different
from his urban counterparts. But while the brand choices tend to converge,
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packing preferences don't. By and large, the rural preference is for smallerpacks. Wherever an option exists in case of durables, premium models are
preferred by the rural rich.
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One way of life style classification is:
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? Trend setters? Traditionalists? Chameleons
--- Content provided by FirstRanker.com ---
A separate classification for woman may be helpful. One such classification
is: A capable home maker, career women, and a free spirit
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Personality: Personality refers to the set of psychological and physical
--- Content provided by FirstRanker.com ---
characteristics of a zdividua1 that determine individual behaviour. These
characteristics are unique making individuals different from one another.
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Personality can be defined with the help of characteristics like self-confidence,sociability, adaptability assertiveness, autonomy, creativity, sensitivity, and so
on.
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Segmentation--- Content provided by FirstRanker.com ---
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MBA-H4010
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--- Content provided by FirstRanker.com ---
Behaviour of consumers is a better guide to segment the markets. To understandthe behaviours the following questions may be raised.
When do people buy?
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Occasions
--- Content provided by FirstRanker.com ---
Why do people buy?Benefits sought
--- Content provided by FirstRanker.com ---
Do they buy? Once? More?
User status
--- Content provided by FirstRanker.com ---
How much do they buy?
Usage rate
--- Content provided by FirstRanker.com ---
Do they repeat the buy?
--- Content provided by FirstRanker.com ---
Loyalty statusWhere do they buy?
--- Content provided by FirstRanker.com ---
Place-retail outlet.
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What do they buy?Products possessed.
--- Content provided by FirstRanker.com ---
Occasions: Most of the durables are purchased during the month of January
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when farmers incur agricultural income. Other occasions are festivals like
Diwali and Dussehra. Also, rural people prefer buying required goods when
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melas and jaats are organised. As a routine, weekends are the times of purchaseby rurals at shandies and haats.
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Benefits sought: The benefits sought from a product vary from consumer to
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consumer. A rural consumer may buy a motor bike seeking one or more of thefollowing benefits.
? Status symbol
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? Sense of fulfillment
--- Content provided by FirstRanker.com ---
? Convenience of transport
--- Content provided by FirstRanker.com ---
? Economy in commuting
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Based on the benefits sought, consumers are grouped and positioning iseffectively done to pull them to buy.
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User status: Consumers may be categorised as follows based on their user
status. The corresponding marketing actions can be given as under.
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MBA-H4010
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Rural Marketing
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User Status
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Marketers action--- Content provided by FirstRanker.com ---
Ex-user
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Stopped usingConvince then about benefit
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Using other brand
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First time user
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Trial
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Assure benefits--- Content provided by FirstRanker.com ---
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Regular users
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Repeat buy--- Content provided by FirstRanker.com ---
Appreciate them and advice them
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on usage. Assure service
?
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Evidently, each category of users is to be treated as a separate segment and
marketing offer should be designed to suit each one of them.
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Usage rate: Based upon the size of their consumption, consumers may becategorised as:
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Light users
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Medium users
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Heavy users--- Content provided by FirstRanker.com ---
Loyalty status: A market can also be segmented on the basis of consumer
loyalty to brands, stores and companies. In rural areas, brand loyalty is higher, as
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decisions are collectively made. Strong loyalty is reported only in the case of
Lifebuoy.
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Company may design marketing actions based on loyalty status.
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Loyalty Status
Goal
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Marketing Action
Strong
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To retainImprove the features and
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promotions
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Weak
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To attractSupport with good promotion
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Non-loyal
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To convert
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Heavy Sales promotion campaign
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Rural Marketing--- Content provided by FirstRanker.com ---
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Place: Rural people may buy at the following places:
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Weekly haats or shandies
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Occasional Melas and Jaataras--- Content provided by FirstRanker.com ---
Nearest town, the feeding centre for villages
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Mobile vans
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Products may be promoted by developing an understanding of the place where
the potential buyers congregate mostly and prefer to buy the products. Marketers
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are today considering the traditional retail spaces viz., haats or shandies as theyrealise their potential in promoting sales of several products.
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Product possession categories: Targeting the buyer on the basis of products
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he already possesses is appropriate. NCAER has categorised products to helpmarketers of durables target the next customer.
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Category I products are of immediate use to the family or things which tend to
be instrumental in supplementing the income in these households.
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Category II products consists of a combination of the products that ease the
households, works train and act as a source of entertainment.
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Category III products show a combination of classy products that fulfill all the
above needs.
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Category Product price
Products
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I
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Below Rs.1000Wrist watches, Transistor, Fan, Bicycle,
Electric irons, Mono cassette recorder, Pressure
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cooker / Pan
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II
Between Rs.1000
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Two-in-one, TV (B&W), sewing machine,
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and Rs.6000
Mixer-grinder, Geyser, Vacuum cleaner Two-
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III
Above Rs.6000
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wheeler, Refrigerator, TV (Colour) VCR / VCP
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Washing machine--- Content provided by FirstRanker.com ---
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This categorization can be used as a guideline to target the next customer.
Purchases in Category II are made after purchase of 3 or 4 items in category I.
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Purchases in category III are made after purchasing 5 to 6 products in category Iand II. Some times it can be a straight jump from category I to category III.
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Multi-variable segmentation
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Very rarely, marketers depend on a single variable for segmentation.
Target market to be meaningful requires the use of several variables. One of the
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recent developments in multi-variable segmentation is geo-demographicsegmentation.
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Thompson Rural Market Index (TRMI): Hindustan Thompson Associates
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Ltd. developed TRMI as a guide to segment markets in the rural areas in 1972and improved it in 1986. They compiled a data out of 335 districts, based on 26
variables. Further, they collected the value of agricultural output data for each
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district. It is considered to be the overall indicator of rural market potential as it
has strong correlation with 10 selected agriculture-related variables viz.,
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Agricultural labourers
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Gross cropped area--- Content provided by FirstRanker.com ---
Gross irrigated area
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Area under non-food crops
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Pump sets
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Fertilizer consumptions
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Tractors--- Content provided by FirstRanker.com ---
Rural credit,
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Rural deposits and
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Villages electrified
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Based on the index number, the districts have been classified as A, B, C, D and
E class of markets as shown in table below.
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Table: Classification of Markets
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Class of Markets Index Range
No. of Districts
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Percentage of
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Market
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60.00 to 100.00
22
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17.8
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40.00 to 59.99
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3920.5
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30.00 to 39.99
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54
20.4
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20.00 to 29.9986
23.0
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Below 20.00
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15418.3
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Total
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355
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100.00--- Content provided by FirstRanker.com ---
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Lin: Quest: Initiative Media developed Lin: Quest, a software package that
provides marketers with data on rural India. The data can be sorted on five
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parameters:
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Demographic
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Agricultural
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Income
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Literacy--- Content provided by FirstRanker.com ---
Civic amenities
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Depending on the product being launched, marketers will be interested in certain
parameters such as literacy levels, male-female ratios, bank deposits, income
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levels, accessibility (via road, rail and water), dispensaries, schools, and distancefrom the nearest town. The software allows marketers to assign a weighted
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average on each of these. The package then lists all the places that satisfy the
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marketer's criteria. For the rural launch of a regional daily newspaper the
parameters could be villages (population over 10,000), income (over Rs.2000)
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distance from the nearest town (not more than 45 km) and literacy levels. Lin:Quest provides a list of districts and villages within the district.
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MICA rating: MICA has developed "MICA Rural Market Rating". It is
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available in a CD-ROM with digital maps and provides the relative marketpotential of a particular district. The ratings have been arrived at by using six
parameters.
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Total value of agricultural output--- Content provided by FirstRanker.com ---
Bank advances
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Cropped area
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Irrigated area
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Number of cultivators, and
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Fertilizer consumptionIt also highlights the village haats- when and where they are held and the
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proximity to the centre by road and rail.
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TARGETTING--- Content provided by FirstRanker.com ---
Segmentation is the process of identifying and establishing alternativemarket segments. As a next step, targeting involves evaluating the various
segments and selecting how many and which ones to target. The three aspects in
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targeting are evaluation, selection and coverage.
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(i) Evaluation of Segments
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In evaluating market segments a company has to first identify the criteria
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for evaluation. The following criteria may be applied to determine the
attractiveness of segments.
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Profitability: The Company has to collect information on aspects required to
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conduct cost benefit analysis and ascertain profitability of the segment. Relevant
information includes:
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Sales volumes
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Distribution costs--- Content provided by FirstRanker.com ---
Promotion costs
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Sales revenues
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Profit margins
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Attractiveness: Marketers should know whether they should designeffective programmes to attract and serve the market skills. Smaller companies
or new companies may lack the skills, experience and resources needed to serve
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the larger segments. Some segments may be less attractive when there is already
more competition.
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Growth rate: A segment's attractiveness depends not only on its current
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profitability but also future prospects. The growth rate of the segment in terms
of growth in population, rise in purchasing power, and increase in preferences
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for the use of the products is to be considered.--- Content provided by FirstRanker.com ---
Company objectives: Company should evaluate the segment opportunity
with reference to their short term and long term objectives. If a company's
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objective is to expand the sales, it has to go rural instead of pulling ruralconsumers to the nearby town.
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Limitations: Finally, a company should examine whether the entry into the
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segment is acceptable to the society and government. If its entry provokesunnecessary criticisms, the company may have to struggle hard to explain its
stand and safeguard its image.
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(ii) Selection of Segments
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Segments may be ranked based on the scores obtained and be considered forselection. Those with high scores will be accepted and others will be kept aside
for future consideration.
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(iii) Coverage of Segments
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Organization has three alternative coverage strategies to suit their segmentation
approaches.
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Segmentation
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Type of marketing
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Coverage strategy--- Content provided by FirstRanker.com ---
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ZeroMass
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Undifferentiated
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Substantial
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SegmentDifferential
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Selective
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Niche
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Concentrated--- Content provided by FirstRanker.com ---
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Undifferentiated strategy: Undifferentiated marketing strategy focuses on
"What is common" among the consumers and tries to employ it in the design of
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its marketing offer. For instance, many toilet soap users prefer medicinal value,
cosmetic strength, economy and freshness feeling in toilet soap. Medimix offers
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all these and claims that, it is a beauty care Ayurvedic family soap. This soap
appeals to all types of consumers.
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Undifferentiated marketing strategy is adopted by some firms to promote theirproducts in urban and rural markets. Despite certain differences between rural
life styles and urban life style, they find some convergence. "Fair & Lovely"
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proves this point. In the skin cream market, Fair & Lovely fairness cream, which
has spread its tentacles in the urban market has a high penetration of 75 percent
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in the rural market. Other such products are Lifebuoy, Ponds talcum powder,and many others.
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Differentiated strategy: Differentiated marketing strategy investigates and
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identifies differences between segments and tries to match the market offer tothe desires and expectations of each segment.
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The results of such exercise would be-Strong identification of the company in
the product category. More costs but higher sales. Hence more profits and more
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loyal consumers.Are companies using differentiated strategy within rural areas? Obviously, there
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are products, which are exclusive to rural areas like fertilizers, tractors, seeds,
etc. Following examples explain the use of this strategy.
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S.No.
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Product
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Type
Segmentation
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--- Content provided by FirstRanker.com ---
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1Tractor
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-30HPMarginal or small farmer
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HP
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Large farmer
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2.
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Pepsodent
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gMiddle and high income
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g
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Low income
--- Content provided by FirstRanker.com ---
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Concentrated strategy: Concentrated strategy directs all marketing effortstowards one selected segment. It facilitates specialization in serving the segment
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and achieving higher level of consumer satisfaction, delight and loyalty.
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However, it is not without risks. In course of time,
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Preferences of consumers may change, and
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Large companies may become competitors seeing the success of this company.
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Generally, large companies may prefer to offer specialized services as a part of
their diversification move. O& M has set up "O& M Rural Communication New
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Work" to implement rural communication packages and devise distributionstrategies.
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(iv) Choosing a Coverage Strategy
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The following check list guides companies in making their coverage
strategy choices, with reference to the state of the four variables for example,
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company resources, product variability, product life-cycle stage and marketvariability. For instance, undifferentiated strategy is to be chosen, when
company resources are moderate, product variability is less, and product is in the
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introduction stage in a market that has less variability.
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Variable--- Content provided by FirstRanker.com ---
Strategy
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Undifferentiated DifferentiatedConcentrated
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--- Content provided by FirstRanker.com ---
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Company resources
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Moderate
Large
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Limited--- Content provided by FirstRanker.com ---
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Product variability
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Less
More
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Less
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Product life-cycle stage
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Introduction
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GrowthIntroduction
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--- Content provided by FirstRanker.com ---
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Market variabilityLess
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High
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High
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Rural Marketing
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Positioning is the act of finding a place in the minds of consumers and
locating the brand therein. Companies have to plan positions that give their
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products the necessary advantage in the target markets. Positioning involves
three tasks--
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Identifying the differences of the offer vis-a-vis competitors' offers.
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Selecting the differences that have greater competitive advantage.
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Communicating such advantages effectively to the target audience.--- Content provided by FirstRanker.com ---
Identify Differences--- Content provided by FirstRanker.com ---
The marketing offer may be differentiated along the following lines:--- Content provided by FirstRanker.com ---
Product
--- Content provided by FirstRanker.com ---
Services
--- Content provided by FirstRanker.com ---
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People, or image--- Content provided by FirstRanker.com ---
Product differentiation: Products can be differentiated on attributes
like shape, size, colour, quality, composition, and performance. Functional
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differentiations signify ease in process and benefits of use.
--- Content provided by FirstRanker.com ---
Coke has 400 calories where as Diet coke has 1 calorie. Diet Coke is for
diabetics.
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`Singer' sewing machine stitches, `memory craft' can even scan designs.--- Content provided by FirstRanker.com ---
Usha `fighter' is low priced fan whereas `senator' delivers air to the far
corners of a room.
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Cinthol Sandal promises twin benefits of flawless, blemish free
--- Content provided by FirstRanker.com ---
complexion and freedom from perspiration odor owing to TCC.
(Trichlora carbanalide content)
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? Products come in different sizes, shapes and colours.--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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Brand
--- Content provided by FirstRanker.com ---
Shape
Size
--- Content provided by FirstRanker.com ---
Colour
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Mysore sandal
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Round
--- Content provided by FirstRanker.com ---
g
--- Content provided by FirstRanker.com ---
Sandal
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Ovalg
--- Content provided by FirstRanker.com ---
Sandal
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Square
--- Content provided by FirstRanker.com ---
gSandal
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Mysore
Sandal
--- Content provided by FirstRanker.com ---
Round
--- Content provided by FirstRanker.com ---
150gWhite,
Lilac,
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--- Content provided by FirstRanker.com ---
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Special
--- Content provided by FirstRanker.com ---
Sandal--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Mysoresandal
--- Content provided by FirstRanker.com ---
Oval
75g
--- Content provided by FirstRanker.com ---
Sandal,--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
classic with
Translucent
--- Content provided by FirstRanker.com ---
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Close Up
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Sachet
--- Content provided by FirstRanker.com ---
g
Red, blue, Green
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Tube
--- Content provided by FirstRanker.com ---
g
Red, Blue, Green
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Tube
--- Content provided by FirstRanker.com ---
g
--- Content provided by FirstRanker.com ---
Red, Blue, Green--- Content provided by FirstRanker.com ---
Tube
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
gRed, Blue, Green
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Services differentiation: Services may be differentiated in respect of
delivery, installation and maintenance. Long warranty periods, free service
--- Content provided by FirstRanker.com ---
coupons, service at phone call distance, 24 hours service, emergency care, etc.,are some examples.
--- Content provided by FirstRanker.com ---
People: People, who come into contact with users, may quite often influence
--- Content provided by FirstRanker.com ---
the decision of consumers. In this era of relationship marketing, differentiationby people is worth considering.
--- Content provided by FirstRanker.com ---
Service organisations like hospitals, schools, banks, road transport and
telecommunication, require people who serve with smile and are efficient.
--- Content provided by FirstRanker.com ---
Service organisations mainly emphasise on the competencies of their people.--- Content provided by FirstRanker.com ---
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MBA-H4010Rural Marketing
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Image: The image of a brand or company may win the consumer, eventhough the product is very much similar to a competitive one. Image is built by
advertisements, symbols, signs, colours, logos, atmosphere of organisation, and
--- Content provided by FirstRanker.com ---
social activities.
--- Content provided by FirstRanker.com ---
Selecting the Right DifferencesWhen a company identifies several differences it can evaluate them with the
--- Content provided by FirstRanker.com ---
help of the following criteria.
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Attractive--
Does it provide value to the customer?
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Distinctive
--
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Is it different from that of its competitors?Preemptive
--
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Is it very difficult for competitors to copy it'?
Affordable
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--Can buyers pay for it?
Communicable --
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Can the difference be clearly expressed?
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Is it visible? Understandable?
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The evaluation requires the following steps:
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Identification of attributes, which can give competitive advantage. For
example, quality, service, technology and economy.
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Use of a rating scale. Say, 10 point scale.
--- Content provided by FirstRanker.com ---
Rating the attributes on the five criteria viz., attractive, distinctive,
--- Content provided by FirstRanker.com ---
preemptive, affordable and communicable.Then, developing a comparative table of competitive advantages to arrive at
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an appropriate decision.
--- Content provided by FirstRanker.com ---
Communicating--- Content provided by FirstRanker.com ---
Once the company has chosen the differences, it has to choose anappropriate marketing strategy.
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MBA-H4010
Rural Marketing
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QUESTIONS
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Explain the rationale for segmentation.
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"Marketing approaches vary with degree of segmentation". Explain with
--- Content provided by FirstRanker.com ---
examples.
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What are the prerequisites for effective segmentation?--- Content provided by FirstRanker.com ---
List the bases of segmentation.
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How do you segment markets based on geographical variables? Explain
with examples.
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Using demographical variables, segment markets for
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a) TVs b) Cosmetics c) Tooth paste
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What is psychographic segmentation? Is it superior to other types of
--- Content provided by FirstRanker.com ---
segmentation?--- Content provided by FirstRanker.com ---
Identify life styles of men and women and show their influence on
product preferences with suitable examples.
--- Content provided by FirstRanker.com ---
Explain how Indian marketers are differentiating their products based on
personality variables.
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Examine the importance and possibilities of multi-variable segmentation.--- Content provided by FirstRanker.com ---
How do you evaluate and select target markets?
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MBA-H4010
Rural Marketing
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--- Content provided by FirstRanker.com ---
UNIT-IIILESSON -3.2
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PRODUCT STRATEGY-PRODUCT MIX DECISIONS
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In this Lesson, the product related concepts, and classifications are
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explained. The significance of product strategy for a company is outlined andthe strategic alternatives are briefly discussed. Finally, the different strategies
adopted by Indian companies for rural markets are also highlighted.
--- Content provided by FirstRanker.com ---
Introduction
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Product Concepts and Classifications
--- Content provided by FirstRanker.com ---
Concept and Significance of Product Strategy
--- Content provided by FirstRanker.com ---
ScopeProduct Mix Decisions
--- Content provided by FirstRanker.com ---
Product Item Decisions
--- Content provided by FirstRanker.com ---
Competitive Product Strategies
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Questions
--- Content provided by FirstRanker.com ---
INTRODUCTION
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How well do we know Rural India?
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Rural India buys 46% of soft drinks sold49%of motor cycles
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59% of cigarettes
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18 million TV sets are in rural India
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Of 2 million BSNL mobile connections,
--- Content provided by FirstRanker.com ---
50 % are in small towns/villages11% of rural women use lipstick and fastest growing markets of the world.
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Rural Markets need to be understood thoroughly, before they can be serviced.
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MBA-H4010
Rural Marketing
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A clear understanding has to be obtained of the rural environment, its limitationsand opportunities, before effective strategies can be formulated.
--- Content provided by FirstRanker.com ---
A sensitization to the rural environment is absolutely vital, to ensure effective
implementation of strategies, in the framework of new paradigms that are
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emerging, due to the transformations taking place in Rural India. This has to befurthered supported by an on-line monitoring mechanism that enables timely
mid-course fine tuning.
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The learning cycle becomes complete, only when, the knowledge and
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experience gained from every implementation, can be systematically transferred,through effective training and dissemination
--- Content provided by FirstRanker.com ---
The central decision in marketing mix strategy is product decision. In the
emergent dynamic, competitive environment, multi-product firms are fighting
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hard to gain commanding market through their product strategies. It is throughcontinuous design and redesign of product mixes a company lays its way to
success and fame.
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PRODUCT CONCEPTS AND CLASSIFICATIONS
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Products required in rural areas may be classified in different ways. In
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the process, let us whether there are any significant differences between urbanand rural product classifications.
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Based on tangibility goods are classified into two groups:
Tangible goods referred to as products
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Intangible goods referred to as services
The following Table compares them.
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MBA-H4010
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Rural Marketing
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CharacteristicsProduct
--- Content provided by FirstRanker.com ---
Service
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Tangibility
--- Content provided by FirstRanker.com ---
YesNo
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Separability
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Yes
No
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--- Content provided by FirstRanker.com ---
Variability
--- Content provided by FirstRanker.com ---
Some times, customization
Yes
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Perish ability
--- Content provided by FirstRanker.com ---
Some products
--- Content provided by FirstRanker.com ---
Yes--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
ExamplesSoft drinks, office furniture,
--- Content provided by FirstRanker.com ---
Repairs,
construction
--- Content provided by FirstRanker.com ---
houses, etc.services, legal services,
--- Content provided by FirstRanker.com ---
medical services etc.
--- Content provided by FirstRanker.com ---
Based on the purpose of use
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Purpose
--- Content provided by FirstRanker.com ---
Type
User
--- Content provided by FirstRanker.com ---
Products--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Composition
--- Content provided by FirstRanker.com ---
Consumer
--- Content provided by FirstRanker.com ---
Households
--- Content provided by FirstRanker.com ---
Toiletries cosmetics,--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
beverages, home
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
appliances, etc.
--- Content provided by FirstRanker.com ---
Production
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Industrial /
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Industries frame / Raw materials,Agricultural goods
poultries etc
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components,
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agricultural inputs
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and machinery,animal feeds, etc.
--- Content provided by FirstRanker.com ---
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(iii) Based on the functional life of the products
--- Content provided by FirstRanker.com ---
Type
--- Content provided by FirstRanker.com ---
Nature of use FunctionalExample
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Life period
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Consumables One time
Short
--- Content provided by FirstRanker.com ---
Food & beverages, soft drinks--- Content provided by FirstRanker.com ---
Durables
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Life timeLong
Furniture, computers, cars,
--- Content provided by FirstRanker.com ---
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cameras
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Cheaper goods are those, which are characterized by, low quality and low price.
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They perform the core function but they lack certain attributes, which make their
use less comfortable, less pleasant and less desirable. Shopping goods (clothing.
--- Content provided by FirstRanker.com ---
furniture, home appliances, etc.)Moderate Occasional Complex.
--- Content provided by FirstRanker.com ---
For example: Jewellery. silk sarees, cars, bungalows, high priced cosmetics,
toiletries and perfumes
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(vi) Based on product development:
--- Content provided by FirstRanker.com ---
Innovations
--- Content provided by FirstRanker.com ---
Imitations (Novelties, Me-too goods, Copy Cats)
--- Content provided by FirstRanker.com ---
Innovations: Innovation is the key for survival in a highly competitiveenvironment. A company which innovates always has an edge over others.
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Every organization will have to learn to innovate and this can now
be organized in a systematic process.
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Product mix of the companies is heavily skewed towards "me too" types of
products and their success largely depends upon the company's expertise in
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developing and using marketing innovations thereby enabling them to get
differential advantages for their "me too" products against those of their
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competitors.Implementation of marketing innovations on a national scale involves a lot of
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risk and therefore it is desirable that the companies experiment these
innovations in controlled areas and verify their results before they are finally
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adopted on a national scale.--- Content provided by FirstRanker.com ---
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Imitations: Imitations may result in two types of goods depending upon thepurpose commitment, and competence of imitator. A poor imitator will end up
in producing deceptive spurious, fake, copy cat products. He dupes the gullible
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customer by offering products having close resemblance with the original. In
quality, it is a poor cousin to the original. On the other hand, the competent
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imitator may even produce an improved version of the original product.--- Content provided by FirstRanker.com ---
Original ProductLimitations
--- Content provided by FirstRanker.com ---
Novelties
Copy cat
--- Content provided by FirstRanker.com ---
Lifebuoy
Nirma buoy
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New Lime Buoy, Nimba buoyColgate
Pepsodent
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College
Nirma
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WheelNeerbha, Nima, Narima
Fair & lovely
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Fairever
Friends & Lovely
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CONCEPT AND SIGNIFICANCE OF PRODUCT STRATEGY
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Concept
--- Content provided by FirstRanker.com ---
Product strategy refers to the long-range competitive plan involving
decisions on products, product line and product mix to make proper utilisation of
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resources and achieve marketing goals.
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Significance--- Content provided by FirstRanker.com ---
An effective product strategy offers the following benefits.96
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Rural Marketing
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Achieves product--market fit: A well thought out product strategy will be
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able to offer products based on market needs. Thus, it achieves product market,
fit and avoids the pitfalls of marketing myopia. Consequently, it provides
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insurance for survival.--- Content provided by FirstRanker.com ---
Encourages innovativeness: The key of product strategy is innovation with
a view to fine tune the market offer to the current and future needs of customers.
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Product strategy relies on creativity processes, methods and techniques.Innovation is an in-built feature of product strategy.
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Provides competitive edge: In this competitive era, marketers need good
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intelligence on how to anticipate competitive moves and launch their newproduct. Companies will have to use product strategy to attack and to flank their
competition, to defend their positions, and to wage guerilla warfare.
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(iv)Makes better use of resources: The product additions and deletions, based
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on rational appraisal of marketing and production strengths and weaknessesallow for better utilization of physical, financial and human resources. It thus
helps achieve high productivity levels. Consequently, there will be no idle
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capacities and no demoralized work force.
--- Content provided by FirstRanker.com ---
SCOPE:Product strategy embraces decisions at three levels.
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Product mix
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Product line, and
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Product item
--- Content provided by FirstRanker.com ---
Various strategies adopted at these levels are given in Table97
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MBA-H4010
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Rural Marketing
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Table: Product Strategies--An Overview
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--- Content provided by FirstRanker.com ---
Level
--- Content provided by FirstRanker.com ---
Strategy
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Product MixWidth extension ? New Product lines
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Length extension ? New product items
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Depth extension ? new product variants
--- Content provided by FirstRanker.com ---
Product Line
--- Content provided by FirstRanker.com ---
Stretching ? Upward, downward, both ways line pruning ?
--- Content provided by FirstRanker.com ---
line modernization
--- Content provided by FirstRanker.com ---
Product item
--- Content provided by FirstRanker.com ---
Quality, Features, Design, Brand and Package
--- Content provided by FirstRanker.com ---
Augmentation
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
PRODUCT MIX DECISIONS
--- Content provided by FirstRanker.com ---
Product mix is a set of all product lines and items offered by the company.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Horizon oneHorizon two
--- Content provided by FirstRanker.com ---
Horizon three
--- Content provided by FirstRanker.com ---
Soaps and Detergents
--- Content provided by FirstRanker.com ---
Popular foods
--- Content provided by FirstRanker.com ---
Direct-to-home products--- Content provided by FirstRanker.com ---
Beverages
Culinary products
--- Content provided by FirstRanker.com ---
Value-added foods
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Oil and Dairy fats
--- Content provided by FirstRanker.com ---
Personal products
--- Content provided by FirstRanker.com ---
Bread and biscuits
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Specialty chemicals
--- Content provided by FirstRanker.com ---
Ice-creams--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Animal feeds
--- Content provided by FirstRanker.com ---
Home care products
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
New Beverages
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Profitable growth
--- Content provided by FirstRanker.com ---
Top line growth
--- Content provided by FirstRanker.com ---
Development and learning--- Content provided by FirstRanker.com ---
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MBA-H4010
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Rural Marketing
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Product line is a group of closely related products priced within a range and
distributed the - some channels to the same customer groups. It has two
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dimensions: Length and Depth.
--- Content provided by FirstRanker.com ---
Length -It refers to the total number of items in the line.
--- Content provided by FirstRanker.com ---
Depth -
It is the total number of variants to product items.
--- Content provided by FirstRanker.com ---
Length of Product line: How long the product line should be? It is like asking,
--- Content provided by FirstRanker.com ---
`how long re legs should be? The reply to this question is: `long enough to reach
the ground.' Similarly, product- line length should be evaluated in the light of
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company profitability. If profitability can be increased by dropping items, theexisting length is more than necessary. If profitability can be increase: `adding
items, the existing length is short.
--- Content provided by FirstRanker.com ---
There is a need to work out optimal length. It should be neither too short nor too.
--- Content provided by FirstRanker.com ---
Arguments in favour of short and long lines are summarised below.
--- Content provided by FirstRanker.com ---
Short line
--- Content provided by FirstRanker.com ---
Long line--- Content provided by FirstRanker.com ---
1. When focus is on specializationIf companies want to be positioned as
full line companies
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As a result of flanking strategy
--- Content provided by FirstRanker.com ---
2. As a consequence of
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contraction defense strategy
--- Content provided by FirstRanker.com ---
3. If profitability is the objectiveIf market growth and market-share are the
objective
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
When line pruning is done, Product line proliferation. Zealously Lossmaking products are new products are added. A sort of
--- Content provided by FirstRanker.com ---
dropped
undisciplined growth.
--- Content provided by FirstRanker.com ---
Life Stretching: Line stretching is lengthening the product line beyond its
current range. The stretch can be in three directions:
--- Content provided by FirstRanker.com ---
Down ward -
--- Content provided by FirstRanker.com ---
adding lower end items99
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Upward
--- Content provided by FirstRanker.com ---
-adding high end items
--- Content provided by FirstRanker.com ---
Both ways
-
--- Content provided by FirstRanker.com ---
adding items at both higher and lower ends--- Content provided by FirstRanker.com ---
Reasons: The line stretching decision is made for the following reasons:--- Content provided by FirstRanker.com ---
Reaction-As a reaction to competition, innovative product items are
added.
--- Content provided by FirstRanker.com ---
Opportunity- To utilise the existing market gap, new items are
introduced.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Image-To have a full line company image, rolling upward or downwardor both ways is done.
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Pressure-Yielding to pressure of sales force and dealers, new
product items is introduced.
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Strength-To use the available excess capacity, line stretching is done.
? Desire-
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To fulfill the desire of a top executive or product
--- Content provided by FirstRanker.com ---
manager, to introduce a new product item, line stretchingis done.
--- Content provided by FirstRanker.com ---
Line Pruning: Product lines tend to lengthen over time. Some times they are
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stretched on rational rounds. At other times, they are lengthened because of
emotional reasons. In either case, some dead wood will accumulate. It is weeded
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out based on periodical review of the contribution of product items. The productitems can be classified as:
--- Content provided by FirstRanker.com ---
Traffic builders--which attract customers but generate marginal incomes
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Bread winners--which generate major share of incomes
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Parasites--which incur losses and depend on bread winners.
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Product line pruning may be done when:
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It is identified that dead wood is depressing profits,
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Rural Marketing
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It is found that the production capacity is limited and cannot handle all
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the existing products.
--- Content provided by FirstRanker.com ---
Line Modernisation: When technological developments change the products, adecision to amp the old line and design a modem line becomes inevitable. The
modemisation decision is to - taken with great care. The aspects to be considered
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are:
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Timing--It should not be too early or too late. Remember, `Strike the
iron while it is hot'. Proper timing of modernisation decision is
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important. The timing decision requires information about
--- Content provided by FirstRanker.com ---
Conversion readiness of consumers from old to new products
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Competitors moves
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Profitability levels of existing product line.
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--- Content provided by FirstRanker.com ---
Approach- Whether the change is total or piece-meal? The merits (+) anddemerits (-) of these two approaches are given below.
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3.
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Total
--- Content provided by FirstRanker.com ---
Piece-meal
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
- Requires heavy cash flowLess draining on company's cash
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flow
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Surprises, competitors no chance to
- Allow competitors to see changes
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imitate
and start designing their own time.
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- Implementation of change involvingPeople affected by change easily
dealers and customers is difficult
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understand and adopt.
--- Content provided by FirstRanker.com ---
The example of HLL provides a clear understanding of contemporary
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line modernizations attempts.
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HLL's soaps, detergents and `household care business continued to grow
ahead of market despite the recessionary trends and growing competition Rapid
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innovations in Products and the supply chain, backed by aggress, marketing anddistribution achieved this performance, Rural market accounts for about 50-60
per cent HLL's Sales of detergents soaps and household care products division
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which in turn contributes 40 per cent of HLL's total sales.
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Personal wash category: The top-end (premium toilet soaps) segment
witnessed the launch of Savfon and Lint Rain Fresh Lux International was re-
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launched Intensive sampling activities were initiated on Dove, Liril Lux and
Rexona continued to gain sales. In the? discount segment, a new herbal variant
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of Breeie was put on test market, Breez and Jai continued as before. LifebuoyGold and Lifebuny plus were relaunchad,
--- Content provided by FirstRanker.com ---
Fabric wash category: In concentrates segment at the top end of the market
international, Surf Excel was re-launched with properties to remove even dried
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stains. In the mid-price segment, fin Shakti powder and bar were re-launched,With superior formulations Sunlight powder and Super 501 bar be are re-
launched.
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In the mass-market segment, Blue Wheel powder was re-launched with new
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active system. Wheel powder was also made available in sachets priced at Rs1to further increase penetration among low-income rural consumers, The
franchise was extended with the test market Of international Wheel Active
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offering stain removal at an affordable price and the entry of Wheel laundry
soap.
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Household category: Vim Dish wash Bar was re-launched with a superior
formulation, Vim Bar, the first such product fuelled the growth of dish wash bar
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segment by Over 200 per cent in the last five years. It is converting consumers
from unbranded proxy products like ash and mud to branded products The
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Domex range of surface cleaners also sustained growth,PRODUCT ITEM DECISIONS
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Product or service is an offer made by marketer that has the ability to satisfy the
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needs and wants of customer. Products are physical and tangible. Examples are
fertilizers, mosquito repellants, analgesics and footwear Services are intangible
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and people-based or equipment Examples is soil testing, retailer advice, trainingand health care.
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The key consideration in individual product/service offer is developing of the
product at three levels.
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Core product development
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Tangible product development
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Augmented product development--- Content provided by FirstRanker.com ---
(1) Core Product--- Content provided by FirstRanker.com ---
Core product refers to the benefits, which are specified by consumerneeds. What is the consumer really buying? Core product developer has to focus
on the needs of consumer. Product is to be seen not from manufacturing point of
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view but from marketing point of view. Business is to be viewed as a customer
satisfying process, not a goods-producing process. Products are transient, but
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basic needs of customer groups remain. The below Table illustrates this point.--- Content provided by FirstRanker.com ---
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Table Need--Product relationships--- Content provided by FirstRanker.com ---
Needs
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Old products
New products
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Brushing
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Neem sticks, Charcoal, Ash
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Tooth paste, tooth powder andTeeth
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Rock salt, Husk, Powder
liquids
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mixtures
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Washing
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Coconut fiber, EarthyWashing soaps, powders, and
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vessels
materials, brick powder, Ash liquids
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Transport
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Bullock cart, Horse,
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Tractors, LCVs Mopeds, Scooters,Donkeys Chariots,
Motor Cycles, Trains, buses
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Palanquins
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Irrigation
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Wells, Canals, Water liftersBore-wells, Motors, Powers
Wind mills
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generators, Pump sets
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Hair wash
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Shikakai powder, Aricanut
Shampoos And Hair Care Soaps
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(soap nut), Besan
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A product that provides the important form utility and ensures performance ofthe basic function is the core product. The testing question therefore is: Is the
product capable of fulfilling the needs of customers?
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Taking the above examples, the relevant questions are:
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Can the toothpowder brush the teeth clean?
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Can the tractor run, even when, the soil is muddy, and roads are rough?
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(ii) Tangible Product--- Content provided by FirstRanker.com ---
When psychological needs are specified in physical terms, productconcept becomes visible and operational. Any product or service has five
characteristics.
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Quality
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Features
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Style/design
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PackagingBranding
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It is in these terms that a consumer expresses and expects benefits from a
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product to satisfy his needs. Accordingly, marketers have to design andcommunicate `product' with the above five Characteristics. The task involves
answering two questions:
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What is each characteristic to the consumer?
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How much of each is to be incorporated in product design?
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Quality: It is the first characteristic of a product and service. What quality
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signifies the ability of product to meet the following expectations?
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Durability-It should last for a certain period
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Capacity-It should possess the requisite ability to function
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Efficiency-It should function better to give desired outcomes with less
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inputs
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Economy-Its operational cost, time and energy are less
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Reliability-It is dependable in providing the desired function and results.
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Product designers should necessarily interact with marketers to know howconsumers evaluate quality of a product. Is the consumer dependent on technical
specifications? Or has he any other parameters to decide quality levels?
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Experience tells that consumers develop their norms, notions and beliefs to
sense quality. By knowing them, product designer has to provide physical signs
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and cues, which represent them. These are termed as emotional specifications.For instance, a rural consumer views heavy watches as quality watches; he
judges quality of cement by its bitter taste. Table provides technical
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specifications and emotional specifications of a few products.
--- Content provided by FirstRanker.com ---
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Technical (Rational)
Sensory (emotional)
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Product
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
specifications
Specifications
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Watches
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Mechanical or Winding typeWeight
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Moped
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Fuel efficiency, power
Style and colour
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Capacity in liters
Noiseless
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Coffee
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Coffee, Chicories content
--- Content provided by FirstRanker.com ---
Smell--- Content provided by FirstRanker.com ---
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How much? Success in marketing depends on offering the desired qualityproducts to market segments which will be profitable. We find successful
products on a quality spectrum in the market. The following figure shows
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examples of products on the quality continuum
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QualityHigh
Low
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Product
Surf Excel
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Rin
Nirma
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Detergent
Wheel
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Toilet Soaps Lux
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Santoor
Lifebuoy
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Supreme
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Fig. Quality Spectrum
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Features: Humans are progressive in thinking and behaviour. They arenever happy with what they have. They continually seek improvements, for
more comfort and convenience. In a lighter vein, someone remarked, "when
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hunger is satisfied, people demand music. Evidently, bare-bone models of
product do not satisfy consumers. They look for features.
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What? Features are extras to a product, which are of value to the buyers.
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Features are of two types.
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Rational, problem-solvingEmotional, fancy
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The consumer of a product seeks solutions to the problems he has in using the
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product. Also, he is willing to pay for the solutions. It is the willingness to buysolutions that leads marketers to add features to the `stripped-down' model.
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The second type of features is those which capture the attention of the buyers.
They are less functional and more fanciful. The below table presents the features
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of some products.Table Features of Products
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Product
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Rational
Emotional
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35 mm Camera
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Focusing
Auto-focus
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Color
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LightingFlash
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Size
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Carrying Flash
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`Bare-bones' models do not completely satisfy people. Consumers look forfeatures which are of value to them.
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How many? Based on market research studies, one can identify numerous
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feature ideas. They require screening and evaluation on the prime considerations
outlined here below.
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Consumer point of view--desirability and affordability of consumer. What is
the perceived value of the feature? What price is he willing to pay?
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Competition point of view--Is it necessary, in view of competition? What are
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the features of the products of competitors? What features they propose to add?What features we have to add to become even with competitors? To excel them?
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Company point of view--Js the feature profitable? If cost-benefit analysis
reveals that feature costs are lower than the price, the feature is viable. It can be
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added.Design and Style: Design means the arrangement of parts, form, colour, etc.,
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so as to produce an artistic unit with functional structure and attractive shape.
Style represents the characteristic manner of appearance and function.
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A designer has to give consideration to the functionality, aesthetics,ergonomics, and convenience of operation, ease of repair and service and costs.
Good design contributes to product usefulness and attractiveness. Design
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descriptors include words like compact, sleek, elegant, sensational, unusual etc.
Table illustrates the designs and styles of some products.
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Table: Design and Style of Products
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Product
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DesignStyle
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Gold Flake Filter Kings
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Elegant
Gracious
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Annadatha Magzine
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Trim and Plain
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Smart and wise--- Content provided by FirstRanker.com ---
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Garden SareesGeometric
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Modern
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It is through design that a product acquires structure, shape and style, the three
components of personality. Brand personality considerations occupy central
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place of marketer's decision making in respect of positioning and target
marketing.
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Packaging: Every product requires a package and label. Packaging is providing
a container or wrapper for a product. Packaging is done at three levels.
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Primary Package--It holds the product for example, bottle
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Secondary package--It holds the primary package for example, Cardboard
box
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Shipping Package --It helps carry the packed products from one place to
another for example, corrugated box
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All products need shipping packaging as they are to be transported to
different places. It mainly protection and handling convenience. Some products
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need secondary packaging for example, after-shave lotion, hair dyes,
toothpastes, fairness creams, toilet soaps, etc. Some products are sold with
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primary packaging for example, talcum powder hair oils, edible oils, beverages,etc. Therefore, marketer has to make primary packaging appealing in case of all
products. The secondary package should be made attractive, wherever
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necessary.
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Today, we see a variety of packages in use. They appeal consumers atthree different levels: sensory, emotional and rational. Various considerations
are necessary for creating appealing packages at the three levels as given in
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Table below
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Table Three Levels of Appeal by Packages--- Content provided by FirstRanker.com ---
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No. Level
Purpose
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Package
Determinations
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--- Content provided by FirstRanker.com ---
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Package
characteristics
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1.
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SensoryAttention
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Attractive
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Easy to identify--- Content provided by FirstRanker.com ---
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--- Content provided by FirstRanker.com ---
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Distinctive--- Content provided by FirstRanker.com ---
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Visibility
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2.
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EmotionalInterest
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Adoptability
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Easy to carry--- Content provided by FirstRanker.com ---
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Desire
Compatibility
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Easy to use--- Content provided by FirstRanker.com ---
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Communicability
Easy to store
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Attractive to reuse
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Easy to dispense
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3.
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RationalEvaluation
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Informative
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Easy to know
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InteractiveEasy to store
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Preservative
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Good to reuse--- Content provided by FirstRanker.com ---
Economical
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Fair price--- Content provided by FirstRanker.com ---
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Now we consider the examples of different packages that offer differentbenefits.
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Easy to identify and easy to recognize:
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Different shapesDifferent sizes
Different colours
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Easy to carry, easy to use and easy to dispense:Tetra packs--Soft drink, Milk
Polythene covers--Sanitary napkins, Dairy milk
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Metal, Plastic tubes--Toothpaste, Medicines (ointments), Fairness
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Creams Cardboard/paper packs--Toilet soaps, Hair dyes, Shavingcreams, Mosquito coils Small bottles--Honey, Sauce, Jam, Tonics and
Synips (kids)
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Spray bottles--Air fresheners
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Tear sheets--Medicines (tablets), mosquito mats
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Tins-Threptin biscuits, Protex, Ovaltine, Lamitubes,Cherry blossom
--- Content provided by FirstRanker.com ---
Good to store: Food grade plastic/glass bottles-Beverages like
Bournvita, Boost and Horlicks, Edible oils like Saffola and Sakola.
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Attractive to reuse: Good to store bottles are often reusable.--- Content provided by FirstRanker.com ---
Easy to evaluate: Purchase decisions are based on evaluation of the
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following.Product quality
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Product use information
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Life period of the product.
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Through labeling or by presenting information on the package, evaluation
process is made easy. Packages are becoming interactive to permit easy
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evaluation by sight and smell.
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Branding: Contemporary marketing relies on branding to give products anidentity, personality, image, equity, and attractiveness
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Brand Concept: Brand is a name, term, sign, symbol, design or colouring or a
combination of them, which help identify seller's products and differentiate
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them from those of competitors.Examples:
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Brand Name
--- Content provided by FirstRanker.com ---
Marks
--- Content provided by FirstRanker.com ---
Lion Honey
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Lion
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Dabur ChyawanprashRishi
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Asian Paints
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Gattu--- Content provided by FirstRanker.com ---
Goodlass Nerolac
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Tiger
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Kelvinator
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Penguin
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Kingfisher
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Kingfisher
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Brand Name
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Marks--- Content provided by FirstRanker.com ---
Nivean
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Bright Blue
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Eveready, Coke, Lifebuoy
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Red
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Maggi noodles
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Red and yellow
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LirilLemon green
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Tata Tea
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Green--- Content provided by FirstRanker.com ---
Max Tea
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Green
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Maxtouch cellular
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Orange and black
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Tide
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Orange
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Branding Policy: Branding decisions are not easy ones. Branding dilemmasinclude:
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To brand or not to brand?--- Content provided by FirstRanker.com ---
Sponsorship--company or middlemen?
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Name--Individual or family?
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Branding- The need: The arguments for and against branding are briefed here.
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Arguments for--- Content provided by FirstRanker.com ---
Identity helps processing: Brand name gives identity to a company's
product. It helps recognition and processing easy for the company,
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distributors and consumers. It thus saves costs and time in
manufacturing, warehousing, transporting and order processing for the
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company in selling. Distributors can reap similar benefits in handling theproducts and selling them. Consumers find it easy to spot and select the
product.
--- Content provided by FirstRanker.com ---
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Image gives competitive advantage: Brands earn recognition andreputation by their performance. The image helps the existing products in
the line as well as new products. It gives commanding position to the
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marketer to charge higher prices than competitors and to convince
distributors to carry the products.
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Personality convinces consumers: Brands in course of their association
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with consumers develop personality. Advertisers take this opportunity to
match personality of brands with that of prospects. It helps build brand
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loyalty-a lasting companionship, a strong bondage between a brand andconsumer.
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Equity enhances value: Brands by their popularity not only enhance
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their value-in-use but also value-in-exchange. A company that has builtbrand image over a period of time by its incessant innovative effort gets
a reward for example, premium price offer for its brand from a
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competitor or interested entrepreneur willing to own it.
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Arguments against--- Content provided by FirstRanker.com ---
Investment-returns doubtful: Brand building is not an easy task. It requiresa great deal of long range investment. It is to be supported by R & D investment,
advertising budget and dealer discounts. However, there is no assurance of
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returns. Many brands have failed. Many are struggling hard despite the good
images they have built over a time.
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Image and personality an emotional nonsense: All the talk about brand
personality and image are psychological fantasies created by self-seeking
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marketers. No product sells on brand name. Only when it fulfills a need, it stays
and succeeds in the market. The image of a product or brand cannot help other
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brands. Instances of such failures are many. Brand personality issues are moreacademic rhetoric. It is an overstretched concept with little practical value.
When a person buys the product, the overriding, considerations are cost (price
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and operational economics) and functional benefits. It is true with a vast
majority of consumers.
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Brand equity--sensible but not new: Brand equity concept replaces the old
term good will'. It is not, something new to be argued in favour of a `brand'. It
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is outcome of business built over a period. Why marketers glorify branding in
this context? It is only an identification factor that helps marketers promote
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distinctiveness.Brand Sponsoring
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The marketer has to decide "who has to sponsor the brand"? Alternative
ways are:
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Manufacturer brand (National brand)
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Distributor brand (Private brand)
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The development of super markets and retail chains provides the
opportunity to leave branding to distributors. The go and no go reasons for
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manufacturer brands are stated below.--- Content provided by FirstRanker.com ---
Manufacturer brand
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Go
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No Go
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Consumer prefer certain
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National brands are high priced, Localnational brands
brands are relatively cheap. Due to
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price advantage, sales will be low.
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Many product categories are National brands are quality products.
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not feasible or attractive on a But consumers accept product in a
private brand basis.
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quality range. If there is a low pricedlocal product in the same quality
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range, they prefer it.
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Branding reduces marketingcosts and improves sales
opportunities by its
--- Content provided by FirstRanker.com ---
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Only when consumer's affordability and quality consciousness are
reasonably fair, national brands will be successful. Today, companies are
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seriously considering supply chain management to make distribution more
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active, creative, competitive, productive and profitable. The change in this
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direction favours branding by manufacturers.Brand Identity: The primary purpose of branding is creating an identity of the
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product. However, there are two important considerations.
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Name what?Name how?
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Name What? The key questions are:
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Should each product be given a brand name?
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Should each group of products be named with a family brand name?Or all products?
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Should company trade name be associated with the brand name?
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The branch naming options are related to product levels, as indicated below:
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(1) Product 1evel-1ndividua brand names
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Product line level-Product group family names
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Product-mix level-Blanket or umbrella family name.
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Individual names: The policy envisages a separate brand name for each
individual product. This can be done with or without associating the
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company trade name.
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Individual names without companyname. The examples are:
Godrej
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:
Cinthol, Marvel, Ganga
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HLL:
Lifebuoy, Liril, Lux, Pears
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P & G
:
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Peposdent, ArielMerits
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The image of the company is not affected by failure of the individualbrands.
The company is free to introduce low quality products without any adverse
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impact on the image of high quality products in the line. Also, it can
introduce high end products without being bogged down by low end
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products.The strategy allows searching for brand names that evoke desired
associations and positive response from target consumers.
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Demerits
--- Content provided by FirstRanker.com ---
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Too many brand names result in confusion. Also identification of
products with their company is difficult.
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Development costs (name, identification, research, expenditure and
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name recognition advertising expenditure) are to be incurred for each
brand. When added up they make development costs high.
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The `spill--over benefits' of successful brands are marginal.
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Over zealous product managers may launch new brands without
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proper analysis and caution.Individual names with company name.
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Some companies prefer to tag individual brand names with the company
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trade name.Examples:
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Ponds
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:Ponds Dream Flower Talc, Ponds Magic
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TVS
:
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TVS5OXL117
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MBA-H4010
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Rural Marketing
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Wipro
:
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Wipro-Shikakai
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Merits
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Company name legitimizes, whereas an individual nameindividualizes the product.
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The image and benefits of successful products help other products of
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the company.Demerits
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Product failures tarnish the image of the company.
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Product group family name: Multi-product group companies may choose to
name different groups with different family brand names.
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Examples:
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Merits
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Helps promote a group of products. Hence development costs are less.
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Failure of a product will have limited negative impact on its group only.Different groups need different psychological associations. Different brand
names help evoke different and appropriate responses.
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Demerits
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Individual items will not have sufficient brand power and recognition.
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Blanket family name: This policy advocates naming all the products of a
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company with one name family brand name.118
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MBA-H4010
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Rural Marketing
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Examples are:
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Usha-
fans, sewing machines, industrial pumps
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Nirma-
detergent. toothpaste, soap
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Colgate- dental cream, toothbrushes
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Merits
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Development costs are very less. Under the umbrella brand name all
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products get easy recognition.
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The fear of failure makes management cautious in launching new
products.
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Marginal products also do better aided by the success of otherproducts.
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New products get instant recognition. It saves time and money during
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product launch.Demerits
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Unsuccessful products may dilute the company image.--- Content provided by FirstRanker.com ---
Brand name alone cannot help sell products. A variety of cues,
stimuli and associations for different products are to be created to
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make the `brand' desirable.Name How? Names generate some distinct thoughts in the minds of the
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people. The name Sita is associated with `Virtuousness', Bhima with
`strength' and Arjuna with `Chivafry'. Brand names in similar way, reflect
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particular characteristics and accomplishments.Following guidelines help name brands effectively.
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Easy to use
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Easy to understand
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Easy to distinguish
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The Table below shows examples of effective brand names.--- Content provided by FirstRanker.com ---
Table Effective brand names--- Content provided by FirstRanker.com ---
Guideline
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Description
--- Content provided by FirstRanker.com ---
Example
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Easy to use (Learning Short, simple and easy to Tide, Surf, Rin, Colgate
and memory)
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pronounce,read and
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remember
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--- Content provided by FirstRanker.com ---
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Easyto
understand Meaningful and suggest Ever
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youth
Coltage,
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(Associate)characteristics,
and Super Shakthi, Medimix,
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functions of product
Kleenex, Amrutanjan
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Easy
to
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distinguish Unique,peculiar and Clinic
plus,
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Pepsi,
(Preference)
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distinctive, Not a close Oraagnics,Vicco
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imitation
to
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another Vajradanti,
Parachute,
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product
like the ones Kit kat
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given as examples
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The association of brand grows larger beyond the product with which it is
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first associated. Brand identity starts slowly with the product to which thename is given. It grows next to become a symbol, a person and finally an
organisation. Take Philips. Philips brings to our mind electrical products; it
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stands as a symbol for quality, it presents an energetic, capable, illustrious
person, and an innovative great company. Thus, a brand is a product, a
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person and finally on organisation.(iii) Augmented Product
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MBA-H4010
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Marketers should have vision to look at the specific needs (core
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products) of consumers, and also their related requirements. He needs abroader view to have the whole picture of the consumption c the consumer to
woo him or her with the right offer. It also helps differentiate his offer with
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that of the competitors. The holistic approach helps to systematically
differentiate the offer. The Table given below shows components.
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Table : Components of an Offer
--- Content provided by FirstRanker.com ---
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Product relatedServices ? related
--- Content provided by FirstRanker.com ---
Channel
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Quality
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Ordering
--- Content provided by FirstRanker.com ---
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Design / Style
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Delivery andExpertize
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Features
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credit Installation
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Performance--- Content provided by FirstRanker.com ---
Packaging
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Customer tracking
Courtesy
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Augmentation requires fortifying the product strategy with additional force
drawn from other Products as a result, the product offers make buying and
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using a pleasant and exciting experience. As Karl Van Clause with advised:The greatest possible number of troops should be brought into action at the
decisive point This is the principle of force
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Following it, to win brand battles, a marketer has to assemble a wide range
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of benefits to make the offer complete, different and strategically superior.--- Content provided by FirstRanker.com ---
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MBA-H4010
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UNIT-III
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LESSON-3.3COMPETITIVE PRODUCT STRATEGIES FOR RURAL MARKETS
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The basic product strategies of different companies in the market arena
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are as follows:
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(i) Leader--- Content provided by FirstRanker.com ---
Product innovation strategyQuality improvement strategy
--- Content provided by FirstRanker.com ---
Multi-brand strategy
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Brand extension strategy
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Superior service strategy
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Image building strategy--- Content provided by FirstRanker.com ---
ii) Challenger--- Content provided by FirstRanker.com ---
Cheaper goods strategyPrestige goods strategy
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Economy goods strategy, and
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Reacting or Pro-acting in the above strategies of a leader on a high or
moderate level
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iii) Follower
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Innovative imitation strategy, and
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Other strategies of leader and challenger maintaining low profile
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MBA-H4010Rural Marketing
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iv) Nicher
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High quality strategy
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Narrow product line
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Superior service, and
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Indifference to other companies as none of them is a competitor.From the above list, we can take the following strategies for the
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consideration of marketers.
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Identity StrategiesCommodity strategy
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Branding strategy
--- Content provided by FirstRanker.com ---
Customer Value Strategies
--- Content provided by FirstRanker.com ---
Mass product strategy
--- Content provided by FirstRanker.com ---
Premium product strategy
--- Content provided by FirstRanker.com ---
Innovation Strategies
--- Content provided by FirstRanker.com ---
Rural common
--- Content provided by FirstRanker.com ---
Special for rural
--- Content provided by FirstRanker.com ---
Quality Strategies
--- Content provided by FirstRanker.com ---
Quality improvement strategySpurious goods strategy
--- Content provided by FirstRanker.com ---
Packaging Strategies
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Brand Strategies
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Rural Marketing--- Content provided by FirstRanker.com ---
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Brand extension strategy
--- Content provided by FirstRanker.com ---
Multi brand strategyCo-branding strategy
--- Content provided by FirstRanker.com ---
Brand image/Equity management
--- Content provided by FirstRanker.com ---
Identity Strategies
--- Content provided by FirstRanker.com ---
Commodity strategy: Commodity describes products and services that are
--- Content provided by FirstRanker.com ---
highly standardized perceived to be homogen05 They are unbrandedproducts Examples are food grains, vegetables, fruits, edible oil, sugar, steel,
and edibles It is reported that as many as 75 per cent of oil consumed in rural
--- Content provided by FirstRanker.com ---
households is unbranded and locally branded.
--- Content provided by FirstRanker.com ---
When sold as commodities, the marketer can differentiate them in thefollowing ways:
--- Content provided by FirstRanker.com ---
Grading
--- Content provided by FirstRanker.com ---
Delivery
--- Content provided by FirstRanker.com ---
Services
--- Content provided by FirstRanker.com ---
Relationships
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Branding strategy: According to a famous marketing researcher
"Branded goods comprise 65 per cent of sales in villages today. The share of
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non-branded goods is shrinking dramatically". Realising this, Castrolbranded lubricants successfully in a product category where consumers
bought the product as a commodity: They aggressively targeted non-
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conventional outlets like automobile and mechanical shops and built
awareness and loyalty for their lubricant brands through powerful
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advertising--- Content provided by FirstRanker.com ---
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MBA-H4010
Rural Marketing
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Brand names make products familiar and evoke possessiveness.
--- Content provided by FirstRanker.com ---
This has become true in case of LG Electronics of India. It named thecustomised TV developed for the rural market, Sampoorna The word is a
part of Bengali, Hindi Marathi and Tamil language The strategy worked
--- Content provided by FirstRanker.com ---
About Rs 114 crores worth TV sets were sold in the villages in a year.
Strategy becomes effective when other elements are in consonance with it.
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The case for branding is gaining strength. It is reported that in 18 categories,
branded consumption accounts for 80 per cent of sales in rural India.
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(ii) Customer Value Strategies
--- Content provided by FirstRanker.com ---
Mass product strategies: While urban consumers are brand conscious, rural
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consumers are price sensitive. They are more concerned about functionalbenefits of the products and the value for money they pay. Accordingly,
several companies have launched `no frills', economy products to attract
--- Content provided by FirstRanker.com ---
rural consumers and low-end urban markets.
--- Content provided by FirstRanker.com ---
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MBA-H4010Rural Marketing
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Bonus--- Content provided by FirstRanker.com ---
Maharaja Appliances Limited (MAL) has launched a range of "no frills"home appliances, Bonus, specially for the rural and semi-urban markets.
MAL realises that the demand for home appliances is mushrooming. It has
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already a share of about 40 per cent in the rural market Since branded and
quality products -are unavailable, rural -folk have to make do with
--- Content provided by FirstRanker.com ---
substandard or--illegal, products More over, the difference between the priceof grey products and legal branded products is also a major detergent.
Maharaja counters this by sliding a sturdy Bonus Washing Machine without
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a driver, priced at Rs.2990. Thus, it filled the gap between the cheaper
unbranded goods and the more expensive, branded ones. Maharaja will have
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something of edge, as it is an entrant.Rajdoot 223
--- Content provided by FirstRanker.com ---
Escorts launched: Rajdoot 223 priced at Rs. 33300 to meet the needs and
--- Content provided by FirstRanker.com ---
expectations of the rural market. It is cheaper than most motorbikes and is
preferred over mopeds and scooters because of its sturdiness and its weight
--- Content provided by FirstRanker.com ---
carrying capability Moreover rural folks know that it is easy to maintain(spares are easily available). Today Escorts has about 2000 authorised
service points
--- Content provided by FirstRanker.com ---
To tackle the young village .yuppie demand for something more fancy
--- Content provided by FirstRanker.com ---
Escorts launched: `Ace" with 175 cc engine. It is much sleeker and pricedjust marginally high at As. 37560. Though not many models are seen in the
urban areas, it has done quits well in the rural market demanding 15 per cent
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of the production capacity of Rajdoot.
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MBA-H4010Rural Marketing
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--- Content provided by FirstRanker.com ---
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Agni Tea--- Content provided by FirstRanker.com ---
`Rural households consume more than half of all the tea sold in India.Tata Tea is a major player with brands like Tata Tea, Kannan Devan, Chakra
Gold (Premium tea in the dust grade) Gemini and Tata Tetley (tea bags).
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Each of these brands is positioned for a particular region and with a distinct
blend to satisfy the customer's choice in the targeted market.
--- Content provided by FirstRanker.com ---
Videocon is launching the lowest priced TV in a tie-up with a Chinese
manufacturer.
--- Content provided by FirstRanker.com ---
Premium product strategy: Rural consumers exhibit preferences similar to
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those of urban consumers at least in case of some products. Historically,most companies, especially those that hawk consumer durables, have always
believed that cheap products do well in the villages. That is necessarily true.
--- Content provided by FirstRanker.com ---
Premium brands are gaining wide acceptance in the rural bastions.
--- Content provided by FirstRanker.com ---
Innovation Strategies
--- Content provided by FirstRanker.com ---
Rural-urban common: The products that are common to rural and
--- Content provided by FirstRanker.com ---
urban markets are also many. Example: toiletries, comotics,washing
powders, communication services, postal services, etc.
--- Content provided by FirstRanker.com ---
Special for rural: Some companies choose to develop products
--- Content provided by FirstRanker.com ---
especially to meet rural needs. Others experiment with packaging.
--- Content provided by FirstRanker.com ---
Rural Transporter: Mahindra & Mahindra is busy developing the prototypeof what it calls a `Rural Transporter'--basically a hybrid between
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MBA-H4010
Rural Marketing
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a tractor and a rural transport vehicle. The product at 20-25HP will be
--- Content provided by FirstRanker.com ---
targeted at those who cannot afford a normal tractor and would also fulfill
the need of a family transporter that could take in the rural roughs but would
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be much more comfortable and safer than the conventional tractor-trolley.TVS--50 XL: TVS--50 XL India's first indigenously developed moped by
Sundaram Clayton, hit the roads in 1980. It was the first entry of a two-
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seater moped. At that time there were other models in the market such as
Luna and Suvega, but these were single seater mopeds. TVS--50 were
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powered by a 48 cc engine and had enough strength to carry a load of over120 kg. It was, therefore the most powerful in its class. .
--- Content provided by FirstRanker.com ---
Sampoorna TV: LG Electronics, the Japanese firm has re-jigged the TV to
appeal to local needs. It spent $50,000 (Rs. 21 lakhs) to develop a set that
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would have on-screen displays in the vernacular languages of Hindi, Tamiland Bengali. The logic, rural consumers unfamiliar with English would still
be able to use the TV without being intimidated.
--- Content provided by FirstRanker.com ---
Nyle Shampoo: Nyle Herbal Shampoo has identified the problem in brand
--- Content provided by FirstRanker.com ---
identification. Who reads? Who can read brand names in rural areas? Amongshampoos, it is known by its green colour. The health freshness of green is
symbolised by a lady wearing similar looking green colour.
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Hero Cycles: It is modifying its cycles to meet different needs in different
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regions. It has. as such, a special orientation towards rural needs.Titan Watches: A recent NCAER study revealed that there is a great
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potential for watches in rural areas. In fact, it is considered to be a high
priority item. Impressed by this the
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MBA-H4010
Rural Marketing
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company is launching a pilot project for low--priced models.Green Cards: Andhra Bank and Allahabad Bank issued credit cards
--- Content provided by FirstRanker.com ---
known as `Green
--- Content provided by FirstRanker.com ---
Cards' to the farmers. The cards issued by Allahabad banks are:Damond Card (for farmers having more than 9 acre land)
--- Content provided by FirstRanker.com ---
Gold Card (for farmers having 7-9 acre land)
Silver Card (for farmers having 5-7 acre land)
--- Content provided by FirstRanker.com ---
(b) Market
--- Content provided by FirstRanker.com ---
(iv) Quality Strategies
--- Content provided by FirstRanker.com ---
Quality is one of the major differentiators. Many companies utilise the
quality aspect to win the customers. In the organized sector, competition
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requires quality improvements.
--- Content provided by FirstRanker.com ---
Quality improvement strategy: TVS--50: In 1980, TVS--50 XL was
introduced by Sundaram Clayton. It was powered by 48 cc engine and a load
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carrying capacity of 120 kg. In 1983, the company researched the uses that
the vehicle was being put to. Its utility varied from a farmer in the village
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taking his family of four to the nearby town or carrying sacks of paddy to besold in the local market, to a dhobi carrying a massive bundle of clothes for
washing. The company decided to give TVS--50 XL a 53.3 cc engine,
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which was, at that time, the highest powered in its class. The Luna was a 49
cc moped.
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After some time, the engine capacity of TVS--50 XL was reduced to
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49.9 cc, as the company it this size had the right combination of power and
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MBA-H4010Rural Marketing
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mileage. However, in 1991, to again give the vehicle more power as it was
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primarily being used as LCV on two wheels, a multi-port engine and a fullchain cover for safety were introduced.
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Spurious goods strategy: Corporate marketer, often finds the
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competition from copy cats as a big menace and debates on the ways ofmitigating it. Spurious products, generally marketed by the unorganized,
low--end entrepreneurs, somehow, make their way into the market and eat
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away the large chunk of corporate marketer's profits. The imitations will
have resemblances that dupe the gullible consumer. Look at these examples:
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Lifebuoy : LoveboyTata: Teta
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They use similar pack designs and pack sizes. In case of bottled products, the
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company logo is embossed.We will now discuss the spurious product marketer's strategies as well as the
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encounter strategies. Loosely defined, spurious products are look-alike
products with similarity in packaging and minor alterations in the name.
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The primary motive is to capitalize on the trust built by established brands.
The marketer of spurious products has less experience and limited resources.
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As such, he seeks to benefit from the images of the popular brands and low
prices of his brands.
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Facilitators: Ambient conditions in the operating environment would be:
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Acceptance of substitutes with dubious antecedents.
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Best sale point having substantial influence on the consumer buying
decision.
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Price consciousness outreaching quality consciousness.--- Content provided by FirstRanker.com ---
High costs to trace and pin down multiple sources of look a like
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MBA-H4010Rural Marketing
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products.
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Lack of clearly defined or effective legal remedies.
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Poor literacy levels make brand recall primarily a mix of phonetics,
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Users in villagers are largely first generation and long term
brand associations are rare.
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Timing: The ideal time to launch a spurious brand is just after the entry and
initial consolidation of the original.
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Marketing strategy: The four Ps of the marketers are:
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Product resemblances: The copy cats resemble the original in manyWays.
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Brand: Phonetics: To woo the largely illiterate customer, the names
usually have a close phonetic resemblance to the original--Loveboy for
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Lifebuoy, Nirbha for Nirma, Teta for Tata.Package: Visuals: Similar pack designs and pack sizes are adopted.
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Colours bear close resemblance to the original. Bottled products have the
company logo embossed. Generally empties of the original are collected and
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Quality. Intangible: Generally inferior in quality. However, consumer
can not gauge it before using it. As such, consumer relies on retailer opinion
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MBA-H4010
Rural Marketing
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Low prices: Lower end consumer prices are fixed attracting price
sensitive, value-for-money al consumers.
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Silent Promotion: As higher margins are given to retailers, they advocateconsumers to buy these products. Retailer push goes a long way to induce
fist time trials.
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Limited and anonymous distribution: The copycat seller keeps hisidentity unknown. He prefers distribution in the local areas where he can
establish secret links with retailers. This is necessary to avoid future
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litigations.
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Consequences: As a consequence of operations of the spurious productmarketers, corporates loose in two ways.
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Loss in sales, and
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Spoiled image of the brand as well as the company
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The most affected products are personal care products. A rural marketer
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believes in value--for- money and would not compromise on quality say, inthe case of a tractor or a torch.
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The Encounter Strategy: Corporate marketers may analyse the situation
and embark on an offensive strategy to push out the imitators.
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Encounter Problems
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Limited rural reach of media makes educating the consumer
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cumbersome.
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Spurious brands have highly localized presence. A successful brand may
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face a different set of fakes every 200 km, which makes tracing eachduplicate source both difficult and costly.
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Litigation is cumbersome.
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Strategy Components: The formulation of encounter strategy requires an
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intelligent understanding of consumer needs and wants, their perceptions ofproducts and weak points. The strategy components are:
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Complicated packaging: Packaging could be made more difficult to
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replicate. Liquid soaps in tetra packs with design patterns as complicatedas currency notes with a hologram thrown in for a measure--expensive
but unique--could settle for a test for differentiation.
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Products at low end: A range of products targeted for the ruralconsumer could be launched with low price and low quality to counter
the spurious products. This can be done by developing franchisee units to
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manufacture low-end products with a highly localized
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Rural pull promotion: Rural sales schemes to reach consumers and
enlist support of retailers should be envisaged.
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Promoting quality consciousness: Local promotion in individual villagemarkets could be an effective route to educate them. Area specific
examples, of the harm spurious products can have, could be
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communicated.
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MBA-H4010
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Rural Marketing
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Example: Bindis, which have an adhesive coating, are hawked by many tiny
units in the north. On sustained usage, the spurious ones discolour skin, at
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times triggering allergies.
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Boosting ego needs: In the highly status conscious village society with
rigidly defined community structures, the spurious brands be depicted as the
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ideal fit for the down and out.
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Syndicated: National players could join hands to promote their products
in rural areas as well as counter spurious products.
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(v) Packaging Strategies
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Packaging is defining new paradigms in rural marketing, making it perhaps
the most vital component in the marketing mix. According to the survey of
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National Council for Applied Economics and Research (NCAER) in 1998, it
is the low-income group which now comprises an overwhelming majority of
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consumers for mass consumption products. The study indicated that almost90 per cent of goods surveyed were purchased by people earning less than
Rs. 18,000 per annum. Marketers have realised, "To enter the rural market, it
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is necessary to offer products at the lowest unit price". At the same time,
innovative packages are necessary to add value to the premium products.
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Particularly, innovations, which help lower the price, are desirable. Smallpacks and combi-packs have become a major attraction in rural India.
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Small packs: The reasons for high preference to small pack low--unit
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Affordability: The income of rural consumers is unsteady. The sources
of income as well as the size of income earned per day vary. They cannot
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hence make planned purchases and large purchases. Small pack sizes helpthe rural consumer pick the product at a price that he can afford.
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Usage: Certain products like detergent and paste are bought in larger
quantities, whereas shampoos, toilet soaps, eatables are bought in small pack
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sizes. The reason for this is: `The products that are common to familymembers are bought in large pack sizes whereas individual--use products
are preferred in small packs'.
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Storability: The storage life of a product also has a bearing on thisdecision. Edibles, for example, cannot last long unless preserved and kept
under ideal conditions. Further, the shelf space of rural consumers is also
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limited as they live in small huts or semi-pucca houses.
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Benefits to Retailer: The small pack sizes are convenient to the retailer
to do his business and promote the national brands. The shelf space of rural
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retailers is less. He cannot afford big premises. Small pack sizes do not
demand shelf space.
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Display: Smaller sizes are easy to display. They increase the visual
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appeal they carry compared to large ones, the colours on the smaller packs
are looked at with more interest.
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Implications to Marketers: Manufacturers prefer producing large pack
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sizes. The economies of scale indicate that small pack sizes are less feasible.
However, on the marketing side, benefits are revealing.
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They induce strongly the rural consumers to buy.135
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Rural Marketing
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Trial sales of national brands are on the rise.
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Regular sales are growing up for many products. The regional/local players
are finding it difficult to face competition from the big players on their home
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turf.Examples: Many companies have become participants in the package
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revolution that is sweeping the rural side and the economy strata in the urban
area.
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JK Dairy came up with a 50 gm sachet of Dairy Whitener at Rs.6.50.
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P & C introduced Vicks VapoRub in a tiny 5 gm tin and Tidedetergent in 30 gm sachets priced at Rs.3.
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Godrej sells its Velvette shampoo in sachets priced at Rs.1.25.
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Marico Industries launched low prices sachets of hair oil.
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Combi-packs: Another packaging innovation is `combi-packs'. When
related products are racked together and sold at economy prices, the
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consumer finds it a better option to buy. The Combi-Pack may become an
`assortment' when more than two products are packed together. Johnson &
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Johnson's baby care assortment package priced around Rs. 175 consists of apowder, soap, shampoo, hair oil and cream.
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See-through packs: Many companies are coming up with new packages
that are attractive as all as economical.
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The transparent packing of new Palmolive Naturals is not lust a matter of
aesthetics The see through wrappers, which are a first of its kind in India
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enable Colgate Palmolive to offer a :premium product at a competitive price
of Rs.17 for a 100 gm pack.
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MBA-H4010
Rural Marketing
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vi) Brand Strategies
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Brand Extension: Product innovations are a regular feature for a
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competitive organisation. Should they be launched as separate brands or as
extensions of the existing strong brand? The decision in favour of brand
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extensions is made for one or more of the following reasons.? To make a brand more visible
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? To reduce development costs of a brand
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? To reduce risk, by banking on the image of a reputed brand.
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? To meet competition or to complete the line of offer.
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Types of Extensions: In pursuance of the two types of product--related
growth strategies, three types of brand extensions are observed. The three
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types of extensions are elaborated and illustrated with suitable examples asgiven below:
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expansion--new products but related
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UnrelatedDiversification growth
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Horizontal diversification
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Product--mix width
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expansion--new products, unrelated
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Category related: The parent brand name is given to product variants, whichhave the same use but slightly different benefits. Here, the common point
is--same customer needs. Only tastes differ. It satisfies variety seekers. It is
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part of the flanking strategy of a company.
Image related: The parent brand name is given to the product items in a
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different product--line. Here, the common factor is customer group. The137
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related needs of the customer groups will be satisfied by these product items.
The image of the parent product and its emotional benefits can be transferred
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to the brand extensions.
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Unrelated: There is not even one common factor between the parent brandand the extension. It is entirely a different product line requiring a different
marketing strategy catering to different customer groups.
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The three brand extensions are illustrated in the following table:
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S.No.
Product
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Category
Image related Unrelated
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related
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1.Godrej Shaving
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Godrej
Godrej hair
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cream
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shaving cakedye
refrigerator
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2
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T-Series folk musicT-series film T-series video T-series
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audio cassettes
music audio cassettes
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washing
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cassettes
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power
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3.Usha ceiling fan
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Usha
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table Usha sewingUsha
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fan
machine
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industrial
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pumps
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Evaluating brand extensions: Whether brand extension is beneficial? Or
would it harm company's prospects? Marketers have to make follow-up
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study of the impact of brand extensions. The brand extension decision is
considered sound when the following outcomes are observed:
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When the new brand is successful.When the new brand does not cannibalize the parent brand.
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When there is no brand dilution due to the failure of the brand extension.
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When there is no brand dilution by brand proliferation.
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Category brand extensions (variant brands) generally cannibalize or eat away
the shares of parent brands partly. But they may open up a new segment and
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boost sale. But on the whole, there are more sales. In some cases, the brandextension may surprise the company by increasing the sales of the Parent
brand or shock it by hurting the brand image.
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When Godrej introduced `New Cinthol', the sales of old Cinthol had
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gone up, P & 0 introduced low paced detergent powder under the brandname Mel super soaker It was a mistake as it hurt the image of the
mother brand Ariel' which s a premium detergent Later it was re-
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launched as Garn' detergent
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Hindustan Lever Limited (HLL) Plans to lead the development ofthe branded food market by upgrading consumers from unbranded
commodities to superior branded products. By doing this, the company
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hopes that the popular food division would emerge as the largest division
of the company.
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`Relentless creativity leading to innovation' will be the
company's strategy for its growth. The company currently markets the
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Kissan Annapurna iodized salt and wheat atta in the Indian market. The
company also plans to extend the Kissan brand into a whole range of
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Multi--Branding: A company may introduce several brands in aproduct--line with different features to appeal to different categories in the
same customer group. Many FMCG companies follow this strategy.
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Benefits include:
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Flanking of the major brand
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Occupying more shelf space of retailers
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Disadvantages include:Each brand may have a small market share
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Cannibalization of some brands of the company
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High development costs as many brands are to be developed.
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Company
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Product GroupMulti-brands
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HLL
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Soaps
Lifebuoy, Liril, Lux
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Godrej
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Soaps
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Cinthol, Ganga, Marvel, Fair flow
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Co--Branding: Today, we find offers with two or more brands of the same
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company or different companies. When a marketer offers one brand with
another brand of the same company or another company it is called co-branding.
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Such offers may take two different formsIngredient co-branding
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Product co-brandingIngredient co-branding takes place when
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The maker of the parts. to he visible to the market and to gain image for the
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brand, insists on publicizing it.140
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The part is important and the maker has an image that enhances the
consumer acceptance of the ultimate product, and when
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Competitors are following such practices
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Brand Image/Equity Management: When brands are effectively
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managed they acquire `value' and become `assets' with `good-will'.Effective brand image management involves
Enhancing brand personality Protecting brand identity
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Brand personality: Like a person then, brand is a psychosocial being
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having an appearance, emotional feelings and rational behaviors. Brand
personality can therefore be described at three levels.
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Sensory--How would the brand see, smell, taste, touch, and hear if it is a
person? What are its `demographics'? Is it having an attractive and socially
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acceptable personality? Emotional--If a brand were to become an emotion
what would it be? What are the underlying subjective, non-functional,
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emotions of the brand? Is it trustworthy? Is it a desirable companion'?Rational--What would the brand, as a person, do? Achieve? What are the
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functional benefits? Is it a person with expertise?
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Brand
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Sensory
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EmotionalRational
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Image
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Onida
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Ugly Male
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Greed,
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QualityHi-tech
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devilIrritation
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Lux
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Beautiful,
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Aspiration andSoft, high
Star with
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Feminine
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Achievement
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qualitycharisma
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TAFE
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Sturdy,
Macho, tough
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Fuel efficient Reliable hard
Rugged male
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comfort
working
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Interaction
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Attractiveness Trustworthiness Expertise
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out come
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The interaction of a consumer with the brand at the three levels producesan image, which may reflect attractiveness, trustworthiness and expertise.
Generally, these evoked feelings as strengthened by the testimony or
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assurance of popular and credible celebrities. Following Table illustrates
this.
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LevelFeature
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Image
Celebrity
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Sensory
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AttractivenessBeautiful
Madhuri Dixit
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Lux
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Emotional
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Trustworthiness
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ReliableKapil Dev
Boost
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Rational
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Expertise
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Knowledge
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Sachin Tendulkar
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Brand personality creates impressions in the minds of people. The
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impressions left by a brand in the minds of people are summarily explainedby the word--brand image. Brand image as perceived by both users as well
as non--users is important to marketers because purchase behaviour is
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influenced by it. Three behavioural patterns are predicted:
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Consumer buys products consistent with self-image.Avoids buying products inconsistent with self-image.
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Upgrades to brands that enhance self-image.
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Protecting Brand Identity: To protect brand identity, a marketer has to
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depend on semiotics and mnemonics. The dictionary meaning of semiotics is thestudy of signs, symbols and their interpretation. In the rural context, the
interpretation of these signs and symbols becomes the deciding factor to build
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the brand value and image. Semiotics primarily works best for products that
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have low-involvement at the time of purchase and have very frequent usage.
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FMCGs such as soaps, shampoo, tyres and tea are the ones that fit the bill best.Though the signs and symbols help identify products, they may not always
succeed in making the consumer remember the product. Mnemonics also
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become crucial to nurture and retain products in mind space.
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Brand names depicting numbers or animals or symbols like 555 soap, Monkeybrand toothpowder Gemini tea (with elephant), Cheetah light matches, Sheru
beed) Tiger Msik cigarettes, 3 Roses tea, Tortoise mosquito coil etc.
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ITC sells its Gold Flake brand with yellow colour in the South, where it is
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associated with prosperity and purity, compared to a golden one in the North,where yellow is often associated with jaundice and ill--health Many companies
have changed their logos to make them contemporary Brooke Bond is one These
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boo enshrines better the pioneering attitude, dynamism and charitable the brand
About 60 per cent of the brand equity of Asian Paints.
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Selling in Rural India
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The Indian rural market with its vast size and demand base offers a
huge opportunity that MNCs cannot afford to ignore.
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To expand the market by tapping the countryside, more and more MNCs
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are foraying into India's rural markets. Among those that have made some headwayare Hindustan Lever, Coca-Cola, LG Electronics, Britannia, Standard Life, Philips,
Colgate Palmolive and the foreign-invested telecom companies.
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Opportunity
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The Indian rural market with its vast size and demand base offers a
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huge opportunity that MNCs cannot afford to ignore. With 128 millionhouseholds, the rural population is nearly three times the urban.
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As a result of the growing affluence, fuelled by good monsoons and the
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increase in agricultural output to 200 million tonnes from 176 million tonnes in1991, rural India has a large consuming class with 41 per cent of India's
middle-class and 58 per cent of the total disposable income.
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The importance of the rural market for some FMCG and durable
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marketers is underlined by the fact that the rural market accounts for close to 70per cent of toilet-soap users and 38 per cent of all two-wheeler purchased.
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The rural market accounts for half the total market for TV sets, fans,
pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder,
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What is more, the rural market for FMCG products is growing much faster thanthe urban counterpart.
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The 4A approach
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The rural market may be alluring but it is not without its problems:
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Low per capita disposable incomes that is half the urban disposable income;
large number of daily wage earners, acute dependence on the vagaries of the
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monsoon; seasonal consumption linked to harvests and festivals and specialoccasions; poor roads; power problems; and inaccessibility to conventional
advertising media.
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However, the rural consumer is not unlike his urban counterpart in many
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ways.
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The more daring MNCs are meeting the consequent challenges of
availability, affordability, acceptability and awareness (the so-called 4 As)
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Availability
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The first challenge is to ensure availability of the product or service.
India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians
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may live in rural areas, finding them is not easy. Over the years, India's largestMNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution
system which helps its brands reach the interiors of the rural market. To service
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remote village, stockists use auto rickshaws, bullock-carts and even boats in the
backwaters of Kerala. LG Electronics defines all cities and towns other than the
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seven metros cities as rural and semi-urban market. To tap these unexploredcountry markets, LG has set up 45 area offices and 59 rural/remote area offices.
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Affordability
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The second challenge is to ensure affordability of the product or service.
With low disposable incomes, products need to be affordable to the rural
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consumer, most of whom are on daily wages. Some companies have addressedthe affordability problem by introducing small unit packs. Godrej recently
introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs,
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priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar
Pradesh -- the so-called `Bimaru' States.
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Hindustan Lever, among the first MNCs to realise the potential of India's
rural market, has launched a variant of its largest selling soap brand, Lifebuoy at
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Rs 2 for 50 gm. The move is mainly targeted at the rural market. Coca-Cola has
addressed the affordability issue by introducing the returnable 200-ml glass
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bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkersnow come from the rural markets. Coca-Cola has also introduced Sunfill, a
powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is
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available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve
sachet of 200 gm priced at Rs 15.
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Acceptability
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The third challenge is to gain acceptability for the product or service.
Therefore, there is a need to offer products that suit the rural market. One
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company which has reaped rich dividends by doing so is LG Electronics. In
1998, it developed a customised TV for the rural market and christened it
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Sampoorna. It was a runway hit selling 100,000 sets in the very first year.Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola
provides low-cost ice boxes -- a tin box for new outlets and thermocool box for
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seasonal outlets.
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The key dilemma for MNCs eager to tap the large and fast-growing ruralmarket is whether they can do so without hurting the company's profit margins.
Mr. Carlo Donati, Chairman and Managing-Director, Nestle, while admitting
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that his company's product portfolio is essentially designed for urban consumers,
cautions companies from plunging headlong into the rural market as capturing
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rural consumers can be expensive. "Any generalisation" says . Donati, "aboutrural India could be wrong and one should focus on high GDP growth areas, be
it urban, semi-urban or rural."
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THE Rs 1,425-crore shampoos market bubbled over in 2005, riding on
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the back of a surge in rural demand. According to industry sources, the overallshampoo market, which sees annual volume sales of approximately 63,000
tonnes, saw rural off take grow by 40 per cent last year, while urban demand
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grew half that, at 21 per cent.
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Industry players say that the fierce price cuts and volume rejigs havebeen good for the shampoo industry, a product which has an all-India
penetration of only 46 per cent. "Small packs have been driving penetration and
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growth. There has also been a drive towards pricing shampoos in a way to drive
penetration," says the CEO of an FMCG company.
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QUESTIONS
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Attempt a classification of product.
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What is the significance of product strategy in the current marketing
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environment?Identify the three levels of product decisions with suitable examples.
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Stating a company of your choice, explain its product--mix decisions. How
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do you evaluate the effectiveness of product--mix?Do you prefer short or long product--line? Give arguments to support your
answer.
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State the reasons for line stretching. Provide examples of line stretching.
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Explain when and how line pruning or line modernizations are done. Give
examples.
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What are the considerations in developing a tangible product?
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How do you design products for rurals and urbans?
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Discuss the customer value strategies used in rural markets with suitable
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examples.--- Content provided by FirstRanker.com ---
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UNIT-IV
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4.1 Pricing Strategy
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Pricing decisions have strategic importance in any enterprise Pricing
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governs the very feasibility of any marketing programme because it is the only
element in a marketing mix accounting for demand and sales revenue. Other
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elements are cost factors. Price is the only variable factor determining the revenuesor income. A variety of economic and social objectives came into prominence in
many pricing decisions. We now come to the most absorbing question of pricing.
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What is Price?
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Economist defines price as the exchange value of a product or service always
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expressed in money. To the consumer the price is an agreement between seller andbuyer concerning what each is to receive. Price is the mechanism or device for
translating into quantitative terms (Rupees and Paise) the perceived value of the product
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to the customer at a point of time. We shall define the price as the amount charged for
the product or service including any warranties or guarantees, delivery, discounts,
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services or other items that are part of the conditions of sale and are not paid forseparately. To the buyer price is a package of expectations and satisfactions. Thus, price
must be equal to the total amount of benefits (physical, economic, sociological and
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psychological benefits). Any change in the price will also bring about alterations in the
satisfaction side of the equation. To the ultimate consumer, the price he pays for a
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product or service represents a sacrifice of purchasing power. Prices paid by resellersare also sacrifices. Price is the only objective criteria (although an imperfect measuring
rod) for the consumer for comparing alternative items and making the final choice. To
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the consumer price is a product disfeature, i.e., a feature of which he disapproves.
However, to the seller price is a source of revenue and a main determinant of profit. To
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the seller it is a product feature most welcome.Pricing is equivalent to the total product offering. This offering includes
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a brand name, a package, product benefits, service after sale, delivery, credit and
so on. From the marketer's point of view, the price also covers the total market
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offering, i.e., the consumer is also purchasing the information throughadvertising, sales promotion and personal selling and distribution method that
has been adopted. The consumer gets these values and also covers their costs.
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We can now define price as the money value of a product or service agreed upon
in a market transaction. We have a kind of price equation, where :
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Money (Price) = Bundle of Expectations or Satisfactions.
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Included in the bundle of expectations may be physical product plus other attributes
such as delivery, installation, credit, return privileges, after-sales servicing and so on.
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Importance of Pricing
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Price is a matter of vital importance to both the seller and the buyer in the
market place. In money economy, without prices there cannot be marketing.
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Price denotes the value of a product or service expressed in money. Only when a
buyer and a seller agree on price, we can have exchange of goods and services
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leading to transfer of ownership.In a competitive market economy, price is determined by free play of demand
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and supply. The price will move forward or backward with changing supply and
demand conditions. The going market price acts as basis for fixing the sale price. Rarely
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an individual seller can dishonour the current market price. In a free market economy,we have freedom of contract, freedom of enterprise, free competition and right to
private property. Price regulates business profits, allocates the economic resources for
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optimum production and distribution. Thus, price is the prime regulator of production,
distribution and consumption of goods. Economics revolves around pricing of
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resources. Price influences consumer purchase decisions. It reflects purchasing power ofcurrency. It can determine the general living standards. In essence, by and large, every
facet of our economic life is directly or indirectly governed by pricing. This is literally
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true in our money and credit economy.
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Pricing decisions interconnect marketing actions with the financial objectives ofthe enterprise. Among the most important marketing variables influenced by pricing
decisions are: 1. sales volume, 2. profit margins, 3. rate of return on investment, 4.
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trade margins, 5. advertising and sales promotion, 6. product image, 7. new
product development. Therefore, pricing decisions play a very important role in
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the design of the marketing mix. Pricing strategy determines the firm's positionin the market vis-a-vis its rivals. Marketing effectiveness of pricing policy and
strategy should not suffer merely on account of cost and financial criteria.
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Price is a powerful marketing instrument. As a marketing weapon,
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pricing is the big-gun. However, it must be used with great caution. It is adangerous and explosive marketing force. It may doom a good product to
failure. Low pricing strategies are irreversible decisions. They must be used
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correctly from the outset. Every marketing plan involves a pricing decision.
Therefore, all marketing planners must make accurate and planned pricing
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The Significance of the Price Factor
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The selling price plays a unique role in business because the price level:
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controls the sales volume and the firm's market share, 2. determines the total
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sajes revenue (sales revenue=sales volume X unit price), 3. regulates the rate ofreturn on investment (ROI) and through ROI price influences sales profitability,
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creates an impact on unit cost in mass production. Low price increases total
production and sales turnover, and ultimately mass production (through
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economies of scale) leads to the lower unit cost of production. Law priceinduces also efficiency in production and marketing. Henry Ford stated: "Our
policy is to reduce the price, extend operations and improve the product.
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OTHER BANKING
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STRATEGIES
PRICE STRATEGY
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PRODUCT
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(a)
DISTRIBUTION
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ADVERTSING
PRICE
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REVENUE
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PERSONAL SELLING--- Content provided by FirstRanker.com ---
SALES PROMOTION
COST PRICE
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RELATIONSHIP
REVENUES=UNIT PRICE
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MULTIPLIED BY VOLUME OF
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SALES
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(b)
PRICE
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PRICE, REVENUES
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RELATIONSHIP
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1. Place of Prince in the Marketing Strategy
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Comments
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All other elements (except price) in the marketing mix are called non-price
factors. They influence price and are also influenced by price. All elements
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are interdependent interacting factors.2.We have two relationships: (a) Cost/Price relationship, and (b) Price/ Revenue
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relationship.
3.Price and other marketing mix variables are complementary factors. They may
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be partial substitutes for each other.4.Together all elements in the marketing mix collaborate to accomplish a
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common objective, viz., to produce sales and sales revenues.
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5.All non-price factors of the marketing mix are cost factors involvingexpenditure -- outflow of funds.
6.Price is the only marketing variable to determine revenues or income --inflow
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of funds. Revenues must be high and must exceed production costs as well as
marketing costs. Thus, price has a unique role extending beyond the area of
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marketing policy.7.A firm is an organisation producing economic utilities. Within the firm, price
factor tries to achieve an equilibrium between revenues and costs. It aims at
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profitability. Hence, revenues must exceed total costs. Price also acts as a
balancing force to maintain the balance between firms' own marketing mix and
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Typical Pricing Objectives
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A variety of objectives may guide pricing decision:
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1.Growth in Sales: A low price can achieve the objective of increase in sales
volume. A low price is not always necessary. A right price can stimulate the
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desired sales increase. In practice, price and non-price objectives are co-ordinated to produce the desired increase in sales. Competitive price, if used
wisely, can secure faster increase in sales than any other marketing weapon.
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2.Market Share: Price is typically one of those factors that carries the heaviest
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responsibility for improving or maintaining market share -- a sensitive indicatorof customer and trade acceptance.
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Predetermined Profit Level: Return on Investment, say 20 to 25 per cent is a
common decision in marketing. Pricing for profit is the most logical of all
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pricing objectives.
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4.Meet or Follow Competition: Many firms desire the stabilisation of pricelevels and operating margins as more important than the maintenance of a
certain level of short-run profits. The price leader maintains stable prices in the
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industry. Follow the leader.
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Control Cash-flow: A principal pricing objective is to return cash as muchas possible (the funds invested) within a given period. Investment in research
and development, market development, promotion, etc., should pay back
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within a specified period. Capita] expenditure on any project must be
recovered within 5 to 10 years. Pay-back or cash-flow objectives fits in
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easily with other corporate objectives.Note: 1. While determining objectives of a pricing policy, marketers must take
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into account reactions of a number parties such as customers, competition,
resellers or dealers, government, public opinion, and so on.
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The objectives may not be mutually exclusive. Marketers have to resolve
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their conflicts. For instance, there may be a conflict between sales
maximisation objective and a return on investment or profit objective.
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However, it should be noted that maxmium market penetration in the short-run (in the early phase of the product life cycle) is the key to maximum ROI.
in the long run.
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Probable Pricing Objectives
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Profit - CentredSales - oriented
Status quo
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AcroPDF - A QualityPDF Writer and PDF Converter to create PDF files. To remove
the line, buy a license.
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Growth in Sales
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Growth inMaintaining
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Market
Market Share
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Market Price
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The market price is the price determined by the free play of demand and
supply. The market price of a product affects the price paid to the factors of
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production -- rent for land, wages for labour, interest for capital and profit for
enterprise. In this way, price becomes a prime or basic regulator of the entire
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economic system because it influences the allocation (distribution) of theseresources (factors of production). For example, when the price of a commodity
has a rising tendency, we shall have higher wages attracting more labour, higher
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interest attracting more capital, and so on, in the industry in which prices are
rising. Conversely, under falling prices, low wages, low rent, low interest, and
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low profits will reduce the availability of labour, land, capital and risk-takers ina free market economy. Prices direct and control production and consumption.
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Since market price is determined in an impersonal way through the
general relations of demand and supply, the individual seller has no control over
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the market price and the actual market price at any given time may be above or155
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below the costs of individual sellers. Market price is indicated by published
prices, market reports, etc. A seller will have to change his output to adjust with
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the current market price in order to secure maximum gains or minimise his
losses. He can also minimise operating costs.
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Price as a Measure of Value
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Economic theory of price has a few simple assumptions regarding
products and buyer behaviour. Buyer's tastes and preferences are considered as
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given (constant). Buyer is considered essentially a rational human being. The
marketing concepts like brand image, brand loyalty and benefit segmentation
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'emotional motivation' are outside the scope of price theory. Hence, in practice,the classical price theory, saying price determines value of the product, is not
true.
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Marketers have recognised the importance of perception, learning, and
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attitudes creating psychological reactions to price, at least in consumer goods.The social and psychological factors must be recognised in the evaluation of
pricing strategies. The social and psychological influences are responsible to
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support the consumer's inclination to use price as an indicator of quality for
certain products e.g., cosmetics, jewellery, and clothing. Such products have
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concealed values and benefits which the consumer cannot evaluate rationally oron objective basis. Consumer does not have physical cues or guides suggesting
product quality in many cases and social psychological dimensions may
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dominate in the consumer behaviour. Under such situations, price is the most
handy (but rough) available indicator of product quality and value for many
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customers. Buyers believe in the implicit subjective process viz., "You get whatyou pay for", "If it costs more, it must be better". Marketers are bound to exploit
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buyer's emotions, preferences and habits. Price-quality relationship applies to
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products whose quality is difficult to judge and whose brands vary widely in
quality, e.g., cosmetics jewellery, clothing, wine, floor wax, etc.
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Charm pricing is another psychological dimension of pricing. Accepted
pricing conventions have a charm for the consumer, e.g., price like Rs. 99. The
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quotation of Rs. 19.90 sounds better value than Rs. 20.
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Price lining is another psychological dimension of pricing accounting for acommon marketing practice. For example, a reasonable price range for a new
Television set is between Rs. 8,000/- and Rs. 14,000/- for most people. Only
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handful of buyers would seriously consider purchasing TV set costing Rs.
20,000/- or more, and new TV set costing less than Rs. 4,000/- would generate
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doubts and suspicion.The consumers answer the question (Is it worth it?) in terms of the
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familiar equation:
Satisfaction = Benefit -- Cost
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The price is the cost part of the equation. It indicates sacrifice of purchasing
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power.The reasons for the inability of price to determine the perceived value . of the
product are:
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There are considerable differences in the market information available to
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consumers. 2. We have significant differences in the bargaining power ofconsumers. 3. In large parts of the retail market we have non-price competition
replacing price competition. The purpose of non-price competition is also to
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make sales or demand curve less sensitive to price and the price of an article
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might be raised without adverse effect on sale (demand has become less price
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elastic due to promotion). The higher price compensates for promotion costsincurred in stimulating demand.
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Multistage Price Determination Process
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The marketing manager knows that the 'cost-plus a reasonable profit'
doctrine is self-defeating. Pricing strategy must be based on the consumer (on
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the demand side), just as strategies on product distribution and promotion arebased on the consumer. Of course, costs (the supply side) are not forgotten but
they are given proper place in the pricing process. Pricing process must start in
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the market, in the circle of exchange.
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Decisions on pricing are taken in the light of marketing opportunities,competition and many other variables influencing pricing. The price decisions
must take into account all factors affecting both demand price and supply price.
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The price determination process involves the following steps: 1. Market
segmentation, 2. Estimate of total demand, 3. Market share, 4. Designing the
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marketing mix, 5. Estimate of total costs, 6. Selecting pricing policies, 7.Determining pricing strategies, 8. Developing the price structure!
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1.Market Segmentation: On the basis of market opportunity analysis and
assessment of firms' strengths and weaknesses marketers will find out specific
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marketing targets in the form of appropriate market segments. There should be aperfect match or a kind of marriage between the firm and its market. Marketers
will have firm decisions on: (a) the type of products to be produced or sold, (b)
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the kind of service to be rendered, (c) the costs of operations to be estimated,
and (d) the types of customers or market segments sought.
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Estimate of Demand: Marketers will estimate total demand for the products.
It will be based on sales forecast, channel opinions and degree of competition in
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the market. Prices of comparable rival products can guide us in pricing our
products. We can determine market potential by trying different prices in
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different test markets. Once we know the expected prices, we can compute salesvolume at several prices.
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The Market Share: Marketers will choose a brand image and" the
desired market share on the basis of competitive reaction. Market planners must
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know exactly what his rivals are charging. Level of competitive pricing enablesthe firm to price above, below, or at par and such a decision is easier in many
cases. Higher initial price may be preferred if you anticipate a smaller market
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share, whereas if you expect a much larger market share for your brand, you will
have to prefer relatively lower price. Proper pricing strategy is evolved to reach
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the expected market share either through skimming price or through penetrationprice or through a compromise, i.e., fair trading, or fair price -- to cover cost of
goods, operating expenses and normal profit margin.
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The Marketing Mix: The overall marketing strategy is based on an
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integrated approach to all the elements of marketing mix. It covers: l. Product-market strategy, 2. promotion strategy, 3. pricing strategy, and 4. distribution
strategy. All elements of the marketing mix are essential to the overall success of
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the firm. Marketers will have to assign an appropriate role to price as an element
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of the marketing mix. Price plays an important role in relation to and in supportof other elements of the marketing mix. Promotional strategy will affect pricing
decisions. The design of the marketing mix can indicate the role to be played by
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pricing in relation to promotion and distribution policies. Price is critical
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strategic element of the marketing mix as it influences the quality perception and
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enables product or brand positioning. It is also a good tactical variable. Changesin price can be made much faster than in any other variable of marketing mix.
Hence, price has a good tactical value.
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Estimate of Costs: Straight cost-plus pricing is not desirable always as it is
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not sensitive to demand. Marketing must take into account all relevant costs aswell as price elasticity of demand, if necessary, through market tests.
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Pricing Policies: Price policies provide the general framework within which
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managerial decisions are made on pricing. Pricing policies are guidelines to
carry out pricing strategy. Pricing policy may desire to meet competition or we
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may have pricing above or below the competition. We may have fixed orflexible pricing policies. Pricing policies must change and adapt themselves
with the changing objectives and changing environment.
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Pricing Strategies: Pricing policies are general guidelines for recurrent and
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routine issues in marketing. Strategy is a plan of action (a movement or countermovement) to adjust with changing conditions of the market place. New and
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unanticipated developments may occur, e.g., price-cut by rivals, government
regulations e.g., (mandatory Environment Audit) economic recession,
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fluctuations in purchasing power of consumers, changes in consumer demand,and so on. Situations like these demand special attention and relevant
adjustments in our pricing policies and procedures.
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The Price Structure: developing the price structure on the basis of pricing
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structure will now define selling prices for all products and permissible discounts
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and allowances to be given to middlemen as well as various types of buyers.
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Note: The ultimate goal is to set a price that is in tune with the rest of themarketing mix ingredients and that will enable the firm to achieve its
objectives, (bottom line profit through consumer citizen satisfaction)
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Price is a vital managerial function. Price determination function
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involves consideration of many relevant internal and external variables orfactors.
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Internal variables are involved under the multi-stage process of price
determination, e.g., pricing objectives, roleofprice in marketingprogramme,
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costs of production and marketing, image of the firm and its products, and so on.The internal forces are controllable pricing variables. But there are also
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external variables mostly uncontrollable by an enterprise and these include such
factors as government regulation, competition, buyer behaviour, economic
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conditions, social and ethical considerations, characteristics of demand and soon.
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Every marketer involved in price decision must take into consideration
the impact of both the controllable and uncontrollable variable when he is called
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upon to develop pricing policies and procedures. The price decision as it isaffected by all variables is shown in the model of pricing forces.
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Note: 1. Reactions to pricing policy can be expected from: 1. Resellers, i.e., the
wholesale and retail trade, 2. ultimate users i.e., individuals, organisations, 3.
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competitors, 4. the government, suppliers, trade unions and public opinion. 5.
compulsory pollution control. 2. Inner circle indicates internal variables and
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Base Price
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After pinpointing the market, estimating demand, and discovering rival's
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prices, marketer can identify basic price alternatives. Basic price is a realistic
market price. It resembles an ideal price. However, it is only a starting point in
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the determination of actual pricing structure.Pricing decisions are guided by overall organisation objectives. A base
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price is usually established, and adjustments from that base price is made to
ensure closer correlation between the product of the firm and consumer wants
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and desires, i.e., matching the product offering with the expected bundle ofsatisfactions (perceived value by consumer). The figure given below indicates
number of choices in setting the base price. A base price acts as a reference
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price. It is a price from which actual prices can be determined by adding extras
and deducting discounts. The actual prices reflect differentials from the base
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price because of market structure, geographical location, competitive conditions,and the terms of individual transactions
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Comments
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At one extreme (at the top) there is a price (too high) at which there is no
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demand at all. At the other extreme (the bottom) there is aprice (too low)at which no amount of demand will yield enough revenues to cover
costs.
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Skimming price (skim the cream) is rather high in the range of possible
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prices. A new product enters the market with a high price to generate themost profitable sales. At the introduction stage demand is more inelastic.
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Rich buyers are not price conscious. Too high price can be lowered more
easily subsequently.
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A low price may be deliberately fixed to penetrate the market easily. It
provides maximum product exposure. Sales growth potential is very
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high.
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Under usual circumstances, marketer selects base price somewhere
between skimming price and penetration price for each product line.
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Factors influencing the choice of base price are shown in the figure.
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Unique product features, rising costs or a company reputation for quality
and services are me factors influencing the base price in an upward
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direction. A unique product offered by reputed and respected company
can have a high price and buyers may be prepared to buy it.
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Sophisticated Vimal fabrics of Reliance Industries adopted highpremium price to the fashion conscious upper middle class of urban India
and buyers welcomed the premium quality fabrics.
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On the other hand, objective of a large market share, government pricecontrols, intensive competition from rivals would compel the marketer to
fix the base price lower and lower.
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4.2 Pricing Policies
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Price is an important element in the marketing mix. Arrival at the right
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selling price is essential in a sound marketing mix. Right price can bedetermined through pricing research and by adopting the test market techniques.
A price policy is the standing answer of the firm to recurring problem of pricing.
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It provides guidelines to the marketing manager to evolve appropriate pricing
decisions. If competition is mainly on a price basis, then each company
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generally prices its products at the same level as its competitors. If there is non-
price competition, each marketer chooses from among the three alternatives:
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Price in Line (Pricing at the mark et): The sale at c urren t market price
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is desirable under free competition and when a traditional or customary pricelevel exists. It is preferable when product differentiation through branding is
minimum, buyers and sellers are well-informed, and we have a free market
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economy. Under such conditions price loses its importance as a weapon
ofcompetition and sellers have to adopt other means of non-price
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competition, e.g., branding, packaging, advertising, sales promotion, credit,etc., to capture the market.
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2.Market-Plus (Pricing above the market): The sale above the market prices
under free competition is profitable only when your product is distinctive,
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unique and it has prestige or status in the market. Customer is inclined to put agreater value on the product if the package is very good or he brand is well-
known. Otherwise, it will be akillingpricepolicy, specially if the customer is
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price-conscious. Reputed brands have higher prices. Price of a product is
associated with value, quality, durability, performance, service after sale, credit,
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and many other attributes. Product-differentiation through branding introducesmonopoly element in pricing and established brands can afford higher prices
without reducing volume of sales. In foreign countries, such as the U.S.A. and
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the U.K., almost all consumer goods are branded and large national concerns
have used branding as an instrument of monopoly.
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3.Market-Minus (Pricing below the market): The sale below the market price,
particularly at the retail level, is profitable only to large chain stores, self-service
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stores and discount houses. These large retailers can sell
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well-known nationally advertised brands 10 to 30 per cent below the suggested
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retail prices, list prices or fixed resale prices by the manufacturers. If you havelower costs because your product is of inferior quality, you may have to fix
lower price. Similarly, you may prefer a lower price without promotion expenses
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(which your rivals are undertaking on a large scale). A lower price is a substitute
for sales promotion and advertising. Prices of national brands are higher as there
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is heavy expenditure on advertising and sales promotion to maintain the brandloyalty.
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Right Pricing: In the long run, the best pricing policy in a competitive market is
the market based metliod of pricing. It is safer to follow the prices of important
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competitors who dominate the market. Such a price policy will prevent pricewar, and assure normal profits.
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Non-Price Competition: The seller should rely more on non-price factors to
capture the consumer demand. At present in many countries business firms
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avoid price reduction as a means of competition. With or without pricecompetition, increasing emphasis is being given on the various weapons of non-
price competition. Non-price competition devices are: 1. Branding, 2. Attractive
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packaging, 3. Service after sale, 4. Liberal credit, 5. Free home delivery, 6.
Money-back guarantee (return of goods), 7. Sales promotion, 8. Advertising, 9.
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Personal salesmanship, 10. Product improvements and innovations. We can alsoconsider indirect price competition when a seller offers certain benefits in the
form of indirect price concession e.g., advertising allowance, free merchandising
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services, dealer training programme and so on.
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Price is not the sole determinant of purchasing. Besides fair price,consumers demand better services, better quality and reliability, fair trade
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practices, personalised relation with sellers, quality guarantee, credit, etc. Non-
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price factors are important selling points, in addition to price. Non-price
competition tends to increase as buyers put more stress upon quality, fashion,
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variety, style, finish and service than on price.Conditions Favouring Premium or (Higher) Prices: 1. Higher sales
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promotion expenditure is needed, 2. Production is as per order, 3. Initially small
market share is preferred, 4. Sales turnover is slow, 5. Good many ancillary
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services are needed, 6. Goods are durable, 7. Package is unique. 8. Product itselfis unique. 9. Customers are rich.
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Conditions Favouring Lower Prices: 1. Little sales promotion is necessary, 2.
We have mass-production, 3. We are ready for mass-distribution and we want
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larger market share, 4. Sales turnover is quick i.e., fast selling is anticipated, 5.Very few or no additional services are needed, 6. There is no special package,
and 7. We have perishable goods demanding quick clearance. 8. Buyers are not
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rich.
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Skim-the-cream Price (high Pricing): A manufacturer introducing a newproduct may adopt this pricing strategy deliberately to build up the image of
quality and prestige for his new product.
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In the earlier stages of product life cycle, a strategy of high price
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associates with heavy expenditure on promotion, and at the later stage of theproduct life cycle, a strategy of lower prices with normal promotional
expenditure pays a rich dividend.
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Reasons for Skimming Price Policy: There are a few reasons supporting skim-the-cream pricing for a new unique product in its introduction stage: I. In the
initial stage, we have less elastic demand. Price is less important in purchase
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decisions. There are buyers who are not sensitive to price and they do not mind
higher price. As the product is new and distinctive, there is little competition. 2.
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When entry of rivals is difficult, costs are uncertain, life-cycle is short, weshould prefer skimming price. 3. Skimming price enables the firm to take the
cream of the market, at a higher price and then it may attempt to appeal price-
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sensitive sections of the market by adopting penetration, i.e., lower price. 4.
High initial price can provide a large margin which generates cash flow easily,
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and if the price is too high, it can be easily lowered. Reverse is not practical. 5.High initial price can keep demand within limit of your productive capacity.
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There are two disadvantages of skimming price: 1. It attracts competition. 2. If
entry of rivals is easy, this policy is risky.
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Penetration Pricing (Low Pricing): The approach is favourable under the
following conditions:
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1. Product has greater elasticity of demand.
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2.Mass-production provides substantial reduction in unit cost of production.
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3.Very strong competition is expected soon after the product enters the market.
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High-income section of the population is not adequate. We have bulk of thepopulation in the middle and lower income group.
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Reasons for Low Pricing: When product has long life cycle, it has a mass
market, entry of rivals into the market is easier and demand is elastic,
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penetration price is always preferable as rivals are discouraged to enter themarket and you can establish a strong hold on the market share, incidentally
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making future entry of rivals difficult. The only disadvantage of this pricing is
you may have excess demand within a short period.
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One-Price vs. Variable Price Policy
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Under one-price policy, a seller will charge all similar types of buyers
exactly the same price and there will be no discrimination or difference among
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the buyers of the same commodity. There is no question of negotiation,
bargaining or higgling. No favouritism is shown to any buyers. Terms of sale are
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the same for similar quantities of the product. Discounts and allowances aregranted on equal terms to all buyers. It is a fair trade practice. It gains customer
confidence. A fair and fixed policy in line with the normal market price and
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providing for normal margin of profit is the best pricing policy. Through
efficient management and best marketing mix, the manufacturers and dealerr,
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should bringdown marketing costs and improvequality of services to theultimate consumers. The consumers should be offered lower price and better
quality under any normal pricing policy.
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In the U.S.A. and other developed countries, particularly at the retail
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level, they have adopted one-price policy. In India and many other developingcountries, sellers have usually variable-price policy, i.e., prices are subject to
negotiation and higgling.
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Under variable-price or negotiated price policy, the seller will sell same
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quantities to different buyers at different prices. Certain favoured customers areoffered lower prices. The terms of sale, e.g., discounts and allowances, are
granted on unequal terms to buyers. Especially in developing countries, sellers
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commonly use variable pricing for most consumer items. In retail trade the price
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discrimination is usual. A foam leather handbag was quoted by a well-known
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retailer at Rs. 300/- in the first instance. The price was reduced to Rs. 250/- andthen to Rs. 225/-. On sensing that the customer was aware of its real price, the
price was scaled down ultimately to Rs. 200/- only. Street sellers use this
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pricing.
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Uniform return from each sale -- assured and certain profits.Lower selling costs, saving of time in sale as no question of price bargaining.
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Many a time, higgling drags on the sales talk and it is a time killer.
Customer confidence is secured. In the absence of a preferential price, there is
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no risk of losing of a customer. Timid or weak bargainers are not at adisadvantage. The seller can maintain his goodwill. 4. It is eminently suitable for
self-service retailing, mail order selling and automatic vending or selling. Large
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retailers follow this policy.
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Advantage of Variable Price PolicySeller can have flexibility in his dealings with different customers. 2. Certain
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valuable customers can be offered lower price, e.g., a promising large-scale
buyer in the near future. 3. Flexible price policy enables to attract customers of
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When the size of the transaction is large, price should be negotiable, i.e.,
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subject to bargaining e.g., sale of a motor car. 5. The sellers of consumerdurables often adopt variable price policy. 6. Some buyers have greater
bargaining power or they are able to pay cash. They will always insist on
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negotiated price.
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On the whole, one-price policy is the best policy. Variable price policycreates ill-will and spoils the seller's reputation. It can lead to a price war and
unhealthy competition. Managerial control is also less on selling cost and on
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profits. It reduces confidence. It is not equitable.
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Cost-plus or Mark-up Pricing--- Content provided by FirstRanker.com ---
This method is considered the best approach to pricing. It is based on theseller's per-unit cost of the product plus 'an additional margin of profit. There are
four items in determining the sale price: I. Cost of producing/ acquiring goods.
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Cost of operating/selling expenses. 3. Interest, depreciation, etc. 4. Expected
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profit margin-mark-up. The mark-up is indicated as a percentage of the cost ofgoods. The mark-up as a percentage of selling price is a very common practice
particularly in retail trade.
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Cost-plus pricing is very popular in retail trade and wholesale trade. Some form
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of customary mark-up pricing or cost-plus pricing is most practical in trade, asitems for sale are innumerable.
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Discounts and Allowances
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Discounts and allowances are price concessions offered to traders or
buyers in the form of deductions from the list price or from the amount of a bill
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or invoice. They are forms of indirect price competition. The common forms ofdiscounts and allowance are:
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Trade discount, 2. Cash discount, 3. Quantity discount, 4. Seasonal discount,
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Promotional discount, 6. Advertising and display allowances, 7. Freight
allowances.
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We will now describe some of the important discounts and allowances.
Trade Discount
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Trade discount is a kind of functional discount. It is given to the buyers
buying for resale, e.g., wholesaler or retailer, in payment for marketing functions
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which these traders are expected to perform. Sellers quote price less discount
rather than net price.
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Illustration: A manufacturer feels that Rs. 10 per unit of his product can be a fair
retail price. The manufacturer's list price is Rs. 120 per dozen. He quotes trade
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discount at 33.33% and 15% from the list price. This indicates that the
wholesaler pays Rs. 120 less 33.33% (Rs. 40) less 15% of Rs. 80 (Rs. 12), or Rs.
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68 for one dozen items. In selling to the retailer, the wholesaler retains 15%which is his margin to cover his expenses and profit. The wholesaler will quote
Rs. 120 less 33.33% or Rs. 80 per dozen to the retailer. Thus, the retailer also
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has a margin of 33.33% to cover his expenses and profit and he can sell the
product at the list price or suggested retail price, viz., Rs. 120 per dozen or Rs.
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10 per unit. Please not that 33.33% and Rs. 15% do not constitute a total of48.33% off the list price. Each trade discount percentage in the chain is
calculated on the remaining amount after the preceding percentage has been
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deducted.
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Purposes of Trade Discount--- Content provided by FirstRanker.com ---
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Trade discount provides the cover for expenses and profit of each middleman
in the chain of distribution, when the manufacturer fixes the retail price and it is
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advertised and printed on the packages. It is a remuneration for marketing
services rendered by the traders. It is paid only to the resellers.
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The catalogue or price list has printed prices. Actual market price may be
fluctuating. If the actual price changes, the seller will merely change the rate of
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discount for adjustment of the two prices -- list price and current market price.
He need not print a new price list or catalogue. These are revised periodically,
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e.g., once in three months. Trade discount is altered inversely to change in
prices, i.e., falling prices will invite rising discounts, and vice versa.
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The trade discount can also act as a weapon of price competition. It makes price
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structure flexible. The seller can offer a larger trade discount to attract businessfrom the rivals. The dealer is enabled to sell to consumers at the price even
lower than the list price as he is given a higher discount. The dealer can show
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the price list to the consumer and point out that he is getting a good bargain.
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Limitations of Trade Discount--- Content provided by FirstRanker.com ---
1.The manufacturer may offer a larger trade discount to the wholesaler andretailer so that they do a better selling job and take greater interest in his
products. But the traders may pass on the additional margin to their customers in
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the form of price reductions rather than using it for additional sales promotion
efforts.
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2.The increased discounts given to the traders may lead to unhealthy
competition and competitors may follow the initiator by raising their trade
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discount. So ultimately there may not be any real gain. In fact, it may result in
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cut-throat competition.Cash Discount
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It is merely a rebate or a concession given to the trader or consumer to
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encourage him to pay in full by cash or cheque within a short period of the date
of the bill or invoice. It is a deduction from the amount of the bill or invoice
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amount to be paid. The period to avail the cash discount is usually 10 days.Illustration: The wholesaler quotes to the retailer as a term of payment, "2% 10
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days, net 30". This indicates that if the invoice amount is paid with 10 days he
will get rebate of 2% but if he pays after 10 days and of course, within 30 days,
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he has to pay the net invoice amount without any rebate. It means if the retailerforgoes the cash discount, he has to pay 2% price for 20 days accommodation,
or in effect he has to pay 36% interest per year. The retailer would prefer to
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borrow from his bank at 15% and pay the wholesaler cash within 10 days of the
invoice. In the absence of bank credit, trade credit may be inevitable.
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Purpose of Cash Discount: 1. The wholesaler need not have a larger working
capital as he need not sell on credit to the retailer. 2. There is relief in the
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recovery of debts and no danger of bad debts. To the seller cash sales are always
welcome. In practice, trade credit becomes necessary, as a lesser evil.
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Cash discount is calculated on the net amount due after first deducting trade and
quantity discounts from the initial list or catalogue price. It is a percentage
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reduction on the net amount due.
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Quantity Discount174
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In order to encourage a customer to make bulk or large purchases at a
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time or to concentrate his purchases with the seller, quantity discount may be
offered to large buyers.
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Quantity discount can reduce the prices for bulk purchase order. These
may be even cumulative, i.e., on the total volume of purchases made during a
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certain period. They are really patronage discounts.
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Purposes of Quantity Discount: 1. Sales of slow moving items can bestimulated. 2. Manufacturer can have real economies in production as well as in
selling. This will reduce his total costs. 3. The manufacturer will have no
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problem of accumulated stocks or inventories.
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Seasonal Discount--- Content provided by FirstRanker.com ---
The manufacturer may offer additional seasonal discount of say 5, 10 or15% to a dealer or a customer who places an order during the slack season. This
will ensure better use of his plant and production facilities.
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Allowances
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The manufacturer may offer promotional allowances, Eg.., advertising
allowance, window display allowance, free samples, free display materials, free
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training in sales demonstration and sales talk, etc. It amounts to a price reductionof an equal amount of service expected.
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Comments
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Discounts and allowances are rarely given in selling to the ultimate
consumers. They are offered to resellers only. 2. They are common in wholesale
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and retail trade--in the sale of manufactured goods. 3. Such price concessionsare good weapons of healthy competition and sales promotion. 4. If these price
concessions are given to all dealers and merchants without discrimination there
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is no problem of ill-will in trade. But in practice, many a time, they are not
offered to all competing customers on Proportionally equal terms, in which case
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they are considered as unfair and unwise trade practices. In many countries,promotional allowances are controlled by law to ensure fair trading. 5. We also
come across secret or confidential discounts given by manufacturers to preferred
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customers. These are given in highly competitive lines or especially during a
trade depression. These are also undesirable and unfair trade practices. It is
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difficult to control these malpractices by legislation alone. Business itself mustevolve a code of conduct to prevent such malpractices. Self-regulation and self-
discipline are always superior than compulsory rule or forced discipline. Fair
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trading is now recognised as a social responsibility of the business.
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Price Leadership--- Content provided by FirstRanker.com ---
In every industry, we do have a few big and dominant businessenterprises who act as leaders for setting the price by others. When the leader
raises or lowers the price, all others usually follow the leader. The non-leading
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firms have no other practical alternative but to follow the leader in their price-
fixing. In many consumer goods industries we do come across one or a few price
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leaders and the market price is dictated by them.Psychological Pricing
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It is used to create an illusion of a bargain. It is a popular practice of
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setting the prices at odd points, e.g., Rs. 17.95, Rs. 49 00, Rs. 995, etc. This
policy is followed usually in consumer goods industry, e.g., Bata Shoe Company
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has psychological pricing in shoe prices. Prices of consumer durables such ascars, refrigerators, etc., are usually fixed in odd amounts. Such a pricing strategy
is based on the belief that a buyer is mentally prepared to pay a little less than
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the rounded figure, e.g., Rs. 10.85 instead of Rs. 11 for a product. Even prices
create an impression that the product is of high quality. Thus, pricing can create
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expected motivation.Charging What the Traffic will Bear
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There are two principles, in pricing. One is called cost of service
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principle and another is called value of service principle. The second one is also
termed as charging what the traffic will bear. It points out demand price. It is
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usually adopted by railways in our country. Professionals like doctors, lawyers,chartered accountants, consultants, etc., adopt this principle of charging what the
customer will bear. They charge their fees on the basis of ability to pay and the
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cost factor is secondary in their charges. In business, particularly in commodity
markets, we do not have such a price discrimination based on the customer's
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ability to pay. A monopolist, of course, can afford to adopt this principle tomaximise his profits. In a sense, such pricing renders justice to customers. Dual
pricing of sugar in India is based on this principle of ability to pay. Electricity
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company also has different rates for domestic and industrial customers.
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Premium Pricing--- Content provided by FirstRanker.com ---
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Premium pricing is a mix of What the traffic will bear' idea and the value
for money'. Marketer has a premium product, i.e., superior quality / good
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variety. He uses best technology. He employs premium promotion programme.
He has at his disposal premium distribution process. Hence, he opts out for non-
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price competition. Thus, he is ready to adopt premium pricing strategy. Ofcourse, under this pricing approach, we need aggressive and proactive (not
reactive) pricing. Again, premium pricing can give rich dividend when buyers
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are not price conscious and they are willing to pay higher price if they get a
better product and wider choice.
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Reliance adopted this pricing strategy for vimal fabrics: Price is nothing
but perceived value -- what the customer perceives as value. Reliance assured
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that its buyers perceived the prices of Vimal textiles as really good value for
money. Premium pricing is an aggressive pricing strategy. Upper middle-class
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buyers constitute the target market for premium pricing. In India, this approachis now adopted by renowned marketers. It assures growth and higher profits
through higher customer satisfaction and service. Going premium is the latest
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trend in respose to the consumer's desire for high quality products on par with
foreign goods.
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The Indian cosmetics and toiletries market is now adopting premium
pricing. Indian marketers are hurrying into the premium segment in order to
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prempt foreign competition. That it is going to be a tough fight for a niche
consumer segment is undoubted. Exposure to western lifestyles on television,
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and an increasing trend towards perfect gfooming has opened up ample scopefor selling beauty at a premium price. Similar trend in favour of premium
pricing is noticeable in the sale of fashion clothing, wrist watches (Titan), Ray
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Ban goggles and clolured TV sets.
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4.3 DESIGNING RIGHT PROMOTION MIX
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(A) PROMOTION
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Promotion is a fornrftf communication with an additional element of
pursuasion to accept ideas, products, services and hence pursuasive commu-
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nication becomes the heart of promotion, the third element of marketing mix. In
essence, promotion is the spark plug of our marketing mix and an important
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marketing strategy. People must know that the right product at the right price isavailable at the right place. It is said that in a competitive market without
promotion nothing can be sold.
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In marketing, effective communication is absolutely necessary even
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though you have a supurb product, best package and also you offer a fair price.People will not buy your product, if they have never heard of it and they are
simply unaware of its existence.
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What is Promotion?
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Promotion is the process of marketing communication to inform,
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persuade, remind and influence consumers or users in favour of your product orservice. Promotion has three specific purposes. It communicates marketing
information to consumers, users and resellers. It is not enough to communicate
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ideas. Promotion persuades and convinces the buyer and influences his/her
behaviour to take the desired action. Promotional efforts act as powerful tools of
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competition providing the cutting edge of its entire marketing programme.179
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Promotion has been defined as "the co-ordinated self-initiated efforts to establish
channels of information and persuasion to facilitate or foster the sale of goods or
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services, or the acceptance of ideas or points of view," It is a form of non-price
competition.
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Essentially promotion is persuasive communication to inform potential
customers of the existence of products, to persuade and convince them that those
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products have want satisfying capabilities. Consumers really speaking buy a
bundle of expectations (a package of utilities) to satisfy their economic, psycho-
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social wants and desires. The promotion offers the message, viz., thecommunication of these benefits to consumers. Hence, promotion message has
two basic purposes: 1. persuative communication, 2. tool of competition.
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Promotion is responsible for awakening and stimulating consumer demand for
your product. It can create and stimulate demand, capture demand from rivals
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and maintain demand for your products even against keen competition. Ofcourse, it is taken for granted that your product has the capacity to satisfy
consumer expectations and can fill their wants and desires. It is a truism that
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nothing can be sold and nothing can make money (except mint) without some
means of promotion.
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Marketers have adopted a communication view of their firms' promo-
tional activities. Receiver is now regarded as an active participant in the process
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of communication. All marketing communications must be planned as part of a
total system, not as independent pieces. The promotion mix includes four
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ingredients, viz., 1. advertising, 2. publicity, 3. personal selling, and 4. all formsof sales promotion. All forms of promotion try to influence consumer's attitudes,
beliefs, ways of living or life style, values and preferences towards a company
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and its products, and thereby influence his/ her behaviour.
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Advertising: It is defined as any paid form of non-personal presentation and
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promotion of ideas, goods and services by an identified sponsor. It is impersonalsalesmanship for mass selling, a means of mass communication.
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Publicity: It is non-personal stimulation of demand for a product, service or a
business unit by placing commercially significant news about it in a publication
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or obtaining favourable presentation of it upon radio, television, or stage that isnot paid for by the sponsor.
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Personal Selling: It is the best means of oral and face-to-face communication
and presentation with the prospect for the purpose of making sales. There may
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be one prospect or a number of prospects in the personal conversation.Sales Promotion: It covers those marketing activities other than advertising,
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publicity and personal selling that stimulate consumer purchasing and dealer
effectiveness. .Such activities are displays, shows, exhibitions, demonstrations,
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and many other non-routine selling efforts at the point ofpurchase. Sales promotion tries to complement the other means of promotion
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given above.
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All kinds of promotion play the role of communication channels betweenthe marketer (the source and the sender of message) and the consumer (the
receiver of the message). Promotion as an element of marketing mix has three
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broad objectives: (a) information, (b) persuasion, (c) reminding. The overall
objective of promotion is, of course, influencing the buyer behaviour and his
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predispositions (needs, attitudes, goals, beliefs, values and preferences).Four promotion mix elements have a definite role in all stages of the selling
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process. Publicity is more effective in the awareness stage. Advertising
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gradually becomes less and less effective over a time span. Hence, reminder
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advertisement is necessary. Personal selling becomes more and more effective asinterpersonal interaction assumes increasing importance. Closing of sales needs
not only personal selling but also sales promotion tools at the point of purchase
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in order to provide additional incentives for buyer's action.
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Today, promotion is not regarded as the sole tool of marketing communications.We have now the wider concept of the term 'marketing communications.' In the
communication mix of the firm we now include all the four components of
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marketing mix (the four Ps): 1. The total product personality covering product
quality and other features, brand name, company name, package and label. 2.
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Price conveying quality, status, fair charge, and unique technological features. 3.Promotion-mix covering personal salesmanship, advertising, publicity, and sales
promotion. 4. Place or point of sale indicating store choice, store image, store
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display and store services.
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Thus, all 4 ps. (product, price, promotion and place of distribution)communicate and act as senders of marketing messages. Of course, promotion
proper is the most substantial and most eminent component of marketing
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communication mix. Without it marketing is impossible in a competitive and
changing marketing environment.
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The Process of Communication in Marketing
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There are three essential parts of communication, viz., the source,
message and receiver. True communication takes place only when the message
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means the same thing (in common) to both the parties i.e., the sender of message
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and its receiver.Marketing communication involves sharing of meaning, information, and
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concepts by the source and the receiver about products and services and about
the firm selling them. Marketing communication is undertaken by marketers
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through the devices of promotion viz., advertising, publicity salesmanship andsales promotion. We have also word-of-mouth communication to accelerate the
spreading over of marketing communication.
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The effective communication occurs when a sender (source) sends a
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message and a receiver responds to the message in a manner which satisfies thesender. Both must have identical meaning of the message.
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Effective communication is equal to: receipt of the message plus
understanding plus acceptance plus action. In marketing action means decision
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to purchase.In marketing management, the source or communicator is the marketer
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who desires to promote his product. He attempts to deliver a message to a
receiver. He can deliver the message in many ways. All forms of promotion are
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media or channels of communicating or sending the message. The receiver oraudience is the target market segment, i.e., the group of consumers for whom the
message is sent. Message is received and interpreted by consumers and if their
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predispositions become favourable, they decide to purchase. Feedback is the
reverse How of communication from the consumer to the marketer.
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When the message is transmitted through personal salesmanship, the
seller may have prompt feedback from the receiver. The sender can find out how
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the message is being received as we have face-lo-face direct communication
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through sales talk and conversation. The salesman can balance the message on
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the basis of feedback from the buyer. This is the real advantage of personalselling. Personal interaction is the most efficient form of communication. Under
mass communication or advertising, mass sellers must rely for information
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feedback (returned message from buyer) on dealers, consumerism, complaints
from consumers, marketing research or total sales results given through sales
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analysis. Mass communication is essentially one-way communication. Feedbackis difficult and usually delayed. Consumer surveys, electronic devices, and other
types of marketing research are used to get the feedback. However, this
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feedback is delayed and it is of no use in altering the future advertising message.
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Distortion and Noise in the Promotion Channel
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Marketing communications may be distorted particularly when a
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message passes through a number of channels. Noise is a more serious problem.It can arise due to faulty transmission, faulty reception, or interference.
Competitive communications constitute the most serious noise. A consumer may
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be tuned to many communication flows (advertisements) at the same time.
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Promotion Messages--- Content provided by FirstRanker.com ---
The message transmitted through all forms of promotion must describethe product features in terms of customer wants and desires. The problemsolving
or need-satisfaction approach is better while transmitting the message. It
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develops better understanding of customer needs and problems. Remember that
customers are buying a bundle of benefits services. The promotion message
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promotion message must achieve two basic objects: Communication and
persuasion. For effective communication, sender and receiver must have a
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common background of experience, e.g., a common culture, common language
so that they will be able to symbolise certain ideas, concepts and events in a
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manner easily understandable to each other.Promotion by definition is persuasive communication. The message is
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arranged to facilitate the consumer decision-making process (awareness,
knowledge, liking, preference, conviction and action). Promotion message is one
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source of information (though very important) at the disposal of a buyer. Thebuyer behaviour is influenced by many other sources of information available
from many sources. If promotion message is useful, relevant and credible, the
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buyer will be influenced and persuaded to take action as desired by the marketer
or communicator.
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Unfortunately, we come across fraudulent, deceitful and misleading
promotion message. The innocent consumer, relying on the promotion message,
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purchases the product but very soon he discovers the dissonance and frustration
in his post-purchase experience. Without satisfaction, repurchase and consumer
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loyalty will be impossible, on the other hand, word of mouth communicationwill act as anti-advertisement.
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The Message Form: We have spoken and written words, picture and music.
Communication involves transmission of ideas, not merely words. Message need
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not always be translated into the language. There are other ways for transmissionof ideas. A picture communicates a message very effectively. Any visual, non-
verbal media can attract attention. Visual contact is stronger and longer than a
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word contact. Picture permits easier association for the viewer.
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Spoken word is also an effective communication tool. Music contributes to
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effective communication. Hence, television is perfect advertising medium.Main Purpose of Promotion
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The overall purpose of promotion is to influence buyer behaviour and
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alter the location and shape of the consumer demand curve in favour of the
products. All promotional efforts, i.e., marketing communications are directed to
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alter the demand curve or buyer behaviour. The following figure demonstratesthe effect of promotion on the demand curve.
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Large quantity OQ2 sold at the same price OP,
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Same quantity OQ1 sold at the higher price OP,--- Content provided by FirstRanker.com ---
Promotion tries to alter demand curve to the right (from D l to D2). Thus,promotion is employed to retain the price and secure increasing sales at the same
price. Promotion can also raise the price but retain the sales level by making the
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demand relatively inelastic e.g., through creating brand loyalty and patronage by
intensive advertising and sales promotion. Either through shifting the demand to
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the right or making the demand more inelastic, the object of higher sales revenuecan be accomplished with the help of persuasive marketing communications. In
short, all forms of promotion can act as the best means of non-price competition,
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and without any change in the price, marketers can succeed in influencing to a
certain extent the buyer behaviour and partially exercise control over demand
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and market without using the weapon of price to meet competition.The favourable change in the pattern of consumer demand is secured
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through commercial information, persuasion and influence with the help of
personal selling, advertising, publicity and sales promotion devices.
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Note: 1. Each tool of promotion is a vehicle or medium of communication in the
field of marketing management.
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The marketer as an artist creates the most favourable blend of all promotion
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elements to influence buyer behaviour and the process of decision-making inpurchases. Thus, sales can be promoted through a promotion campaign.
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Is there a Promotion Opportunity? There are five conditions indicating
favourable opportunity to promote: 1. favourable trend in demand, 2. strong
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product differentiation, 3. hidden product qualities, 4. emotional buying motives,5. adequate finance to promote.
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4.4 Innovating Pricing Methods for Rural Markets
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Present Marketing Environment--- Content provided by FirstRanker.com ---
By the middle of 1994, India's population has reached 920 million. Withthe advent of 21 st century, we may almost touch 1000 million. World
population stands at 5.63 billion. China's population is around 1.2 billion.
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U.S.A., 261 million, Indonesia 195 million. Per day 236,000 persons enter the
world.
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The middle class explosion accounts for 300 million consumers. The
upper middle class accounts for 60 million, with annual income over Rs. 10 lacs
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(like a fabulous 16 lacs annually in U.S.A.). There are around 10 million rural
families (around 50 million consumers) with annual income over Rs. 40,000.
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India is considered the 5th largest market in the world. By the year 2001 A.D.we would have around 500 million middle class buyers.
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India's new prosperity and market potential is attributable to the
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government's ongoing commitment to economic reforms introduced in 1991.These reforms -- deregulation, liberalisation, privatisation -- have allowed
India to rebuilt its economy and foreign exchange reserves, reduce inflation and
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most importantly improve competition and efficiency in the market place by
relaxing substantially economic, trade and investment controls.
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The result has been a sharp rise in incomes and private consumption,
especially among the India's growing middle class (not only in urban but also in
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the rural areas) and similar growth in the affluent class. Private consumption in
1991 was around Rs. 4000 billion ($125 billion), 15percentincrease over the
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previous year and fourfold increase over 1981. By the year 2001 the total privateconsumption may exceed Rs. 8,000 billion.
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However, though our consumer market is estimated to be the 6th largest
in the world, the total private consumption at present is quite low by any
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measure. The present consumption levels are: toothpaste at just 50 gms; per headannually against Brazil's 300 gms; four bottles of soft drinks per head annually
as against the U.S.A.'s almost 30 bottles; 70-TV sets per 100 households against
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145 per hundred households in Japan. Of course, this state of low consumption
indicates that potential of the Indian market is quite remarkable and marketers in
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India have ample opportunity to exploit this potential with the help of moderntools of advertising and sales promotion. For marketers the ever-growing urban
and rural markets, in India, represent an unprecedented opportunity. As the
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poverty reduces, and as the middle classes continuously migrate up the
economic ladder, and as the professionals representing the elite class also grows
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with further industrialisation, so their consumption patterns change almostradically. For food they move out of the
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wet market and enter into the super or hyper market; they trade commodities for
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reputed branded goods and even premium price brands and become home
builders rather than members of an extended family. So they buy the latest white
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and brown goods to fill their new homes. The large urban middle class andgrowing richer rural class (due to green/white revolution in India) is wealthy,
entrepreneurial and happy to spend money lavishly.
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India's growing rural market is also experiencing increasing demand for
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fair-priced, fast moving consumer goods as well as for some consumer durablegoods such as cycles, scooters, cookers, mixers, radios, televisions and so on.
Lacs of upper class rural households do have an income level high enough to
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allow for discretionary spending.
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A distinct change in rural India is also quite visible. In the countrysidepoverty may be widespread; nevertheless there are regions where tractors and
agricultural machines have replaced bullock carts and old traditional methods of
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farming. Silent green and white revolutions are responsible for agricultural
prosperity in many regions,e.g., Punjab, Gujarat, and Maharashtra. Television
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aerials are common place and satellite dishes are booming, particularly inPunjab, India's richest agricultural state, where farmers come in from the wheat
and rice fields at midday to watch the BBC news broadcasts on Star TV in their
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homes.
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Suddenly, India's burgeoning population (slated to outrun China's 1.2billion in the next 25 years), for long was in its dark spot, now has worked out to
its advantage. The return of multinationals to India such as Coca-Cola and IBM
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and entry of many other MNCs such as General Electrics, Pepsi, Motorola,
Proctor & Gamble, and Japan's electronic gaints clearly proves that India has a
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vast market....rising incomes .... a booming middle class, rising rural elites withadequate purchasing power offering long-term opportunities for Indian as well
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as foreign industries forprofitable marketing and distribution even in the buyers
markets.
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India Vs. China
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1993 was China's year. It suddenly became the key issue on every
nation's agenda. China became acceptable as a stable market and every country
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wanted to be there. In 1990, advertising budget of $ 1 million was considered as
huge. In 1993-94, $ 10 million was regarded usual and normal in China.
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Almost all important press reports compared India with China and announced
that 1994 onwards it would be India's years. They recommended investing in
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India over China from 1994 onwards.
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There is twice as much American direct investment going into India as in Chinasince 1994. Unlike China, India, they say, operates within a rule of law. India
has also a much larger and far more capable infrastructure of local companies
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which serve as good partners (e.g., Ambani, Godrej, Tata, Birla, Modi, Bajaj,
and so on) and tough competitors. Unlike China, India has much more cheap
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labour to offer. India has the enormous pool of skilled and professional labour.More engineer graduate each year are there in India than in China and South
Koria combined. For instance, motorola wants to make India a " Brain Centre"
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for engineering and design work. Even Japan chose Indian software engineers
over its own Japanese employees.
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In short, in the International world, India is today recognised as one of
the best emerging markets. Till J 990, business planning was the monopoly of
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the bureaucrats. Since 1991 onwards business/marketing planning is being done
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by businessmen and marketers in India, and business management has adopted
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customer-oriented approach in marketing and distribution.The Consumer Market
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The consumer market has changed radically during the last ten years. We
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are witnessing a complete transformation of the consumer markets in India.
There is a definite shift from seller's market to buyers' market, from Caveat
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Emptor (Buyer Beware) to Caveat Vendor (Seller Beware). The IndianConsumer has really begun to consume and that too with a revenge. The reasons
are many: 1. rapid growth in the market supply of goods and services, 2.
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increasing effective demand due to rising purchasing power of middle class
population, 3. remarkable prosperity both in the vast rural areas and in the highly
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concentrated population in the urban regions, 4. overflowing unaccountedmoney every where, 5. inflationary conditions compelling everybody to enter
the market and maximise their purchases from time to time, 6. Aggressive
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advertising on TV, radio and in the press inspiring the children, the youth and
the women to go all out and buy either from current income, or/rgrn savings or
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on creditThe cyclonic changes in the Indian marketing environment precedingthe advent of 21st century ought to be intelligently forecast through marketing
research so that enlightened marketer can prepare himself for the Big Leap in the
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21st century.
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Intense competition in the market is really proving a big boon or awindfall for Indian consumers who is emerging as the king/queen after over two
generations (more than five decades) labouring under shortages of even essential
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consumer goods. It is really surprising that though inflation has become a
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permanent guest in our life, it is not creating any obstacle to the new marketboom even in the midst of poverty and unemployment still persisting in India. A
real boom in consumer products market clearly points out its growth in size,
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range and sophistication.
Year Size of Consumer Market
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1960-61
Rs. 2,400 Cr.
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1986-87
Rs. 30,000 Cr.
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1995-96Over Rs. 50,000 Cr. (Estimate)
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The Middle Class Explosion
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The emergence of large middle class as the dominant consumption
community of the country can be regarded as one of the most noteworthy
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developments in India. It has grown in size, and prosperity. Its disposable and
discretionary income has gone up considerably. The upper middle class is now
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regarded by marketers as a distinct profitable target market. Its consumption ofnon-food items is continuously growing. The upper middle class has money to
invest on the stock exchange. They constitute a lucrative market for consumer
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durable goods, for electronic entertainment goods for status symbol goods, and
for all the modern amenities of life. They are now reaching out to satisfy their
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higher level psychological wants after satisfying their economic needs. Its newand growing pattern of consumption is determined not merely by its econoomic
profile but also by its new social and life style profile. The potential of this
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market segment in India is now almost on par with the total potential of major
European countries like U.K. France or West Germany. Middle Class Life-style
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The current life-style of the middle class and the upper-income class consumersacting as the consumption community of modern, India is depicted below:
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Modern Kitchen appliances, 2. entry of white goods such as T.V., V.C.R.,
Freeze, Washing Machines, Sophisticated music system, microwave ovens, etc.,
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interior home decoration, furniture and fixture, 4. personal means of transport,fashionable readymade garments for both sexes eg. Levi Jeans, Lotto Shoes,
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Double Bull, Arrow Shirts, 6. lots of jewellery, and countless varieties of
cosmetics and personal items, craving for new status symbols. The new-man-
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about city is not going to scrimp where it comes to showing off his status. Allthe mega cities in India faithfully reflect the new life-style of Indian urban
population.
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Comments
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Middle class explosion in reality reflects faithfully urban and suburbanmarkets as this class is the backbone of urban target market.
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Any marketer in India is deeply interested in this class as it offers the
maximum demand potential and wide scope.
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Though one has to consider cultural, linguistic and to some extent regionaldifferences, in general middle class life-style, buying behaviour and also
consumption pattern are similar throughout India.
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Urban consumer is receptive to new ideas, welcomes innovation. However, by
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temperament, a middle class consumer is usually price-conscious, cautious andhe wants economic/emotional security. Comforts and a few luxuries are
regarded by him as status symbols and marketers selling consumer durables
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ignite his sense of prestige or status.
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The middle class housewife is educated, employed and plays an active role inhome management. She is cost-conscious, quality-conscious, cautious but not
against change, fashion-loving but not crazy for fashionable goods. Please note
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that she is the main decision-maker in all family purchases.
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6.The intense competition among the marketers in India should assure cost-
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effectiveness and quality of goods to consumers. Consumer Protection Actwould also induce good business response to growing consumerism and to fair
trading.
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The glamour of Western life and culture is responsible for the
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revolutionary changes in the life-style and culture of urban and semi-urbanIndian population, particularly in the teenager Indian youth.
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Rural Markets
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India has now achieved self-sufficiency in its food grain needs and can even
export food and fruit products. White revolutions are considered as economic
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marketing miracles.65 per cent population is rural. Rural market, however, accounts for
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hardly 40 per cent of total expenditure on consumption. Rural market is vast but
partially tapped. The top 15 per cent of farmers account for about 40 per cent of
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expenditure on consumer goods in the rural markets. It should be noted that ruralmarket's untapped potential is throwing a big challenge/' opportunity to
marketers in India and now as rural market is duly exposed to radio. TV. and
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satellite communications and a? literacy is also growing in rural India, marketers
can have integrated marketing plans and programmes and meet the challenge by
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capitalising immense marketing opportunity. If they succeed in exploiting ruralmarket potential, we will witness a new era of economic prosperity in the Indian
villages in the near future.
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The communications revolution is also now influencing rural India.Around 66 per cent of our population is intensely exposed to the electronic
media power, specially TV. Seeing is believing. Union of sound, sight and
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movement in television makes it the most powerful sales medium to influence
the consumers. Rural consumers are also increasingly exposed to this media.
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The marketers are exploiting fully this media to convert millions of rural
prospects into actual customers for their brands. The rural folk are also
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responding though with some resistance to the attractions of materially good
life.
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Typical Problems Encountered in Rural Marketing
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Large Market: The rural market of India consists of about 60 crores
consumers. It is a big market having considerable potential as it is still partially
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tapped. Even then it is offering a market worth Rs. 20,000 crore of non-foods
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per year at present.Scattered Market: The rural markets are very widely scattered covering
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about 5.6 lacs of villages spread over the entire length and breadth of India.
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Seasonal and Irregular Demand: Not only the rural market is very large andvery widely scattered (fragmented) but the demand is also seasonal (not regular
or constant) because the rural demand is closely associated with farming and
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farming in India depends on the vagaries of monsoon even today. Hence, rural
demand is tied down to agricultural harvesting seasons and also to fairs/festivals
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which many a time coincide with harvests.Economic and Social Backwardness: Average per capita income and
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purchasing power in rural India is low though gradually growing. Literacy is
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also low. The village life is still governed by custom and tradition though it is
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slowly being exposed to modernism. We have also to face diversities relating tolanguage, customs, and culture.
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Special Problems in Marketing: We have already noted that the
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marketing of goods in rural India is a big challenge to marketers. There arespecial problems in rural marketing: 1. problems in physical distribution.
problems of distribution channels, 3. problems of promotion and market ing
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communication, and 4. problems of salesforce management.
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Rural marketer is not called upon just to find the market and tap it with the helpof promotion and distribution. In a sense, the marketer must adopt creativity and
create the market and develop it through innovative marketing management.
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'Markets are made and not merely found' is literally true in the case of the rural
market of India.
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Marketing Communication in Rural India
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In the evolution of a proper mix of marketing communications, there are
two major problem areas: 1. Appropriate media mix, 2. Nature of rural
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consumer. Let us deal with these problems.
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Communication media: It is a fact that a high degree of illiteracy is stillexisting in rural India. We have hardly 40 per cent male literates and 25 per cent
female literates in rural India. Hence, press and other print media is playing a
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very minor role in our rural markets. TV and radio are ideal media with the rural
consumers. But they are only partially available for use in the rural regions.
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Hardly 20 percent of the rural consumers can be tapped by the print media ofadvertisement. Cinema is relatively acting as a better medium of communication
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in rural markets. 35 per cent of total cinema income in India is emanating from
rural viewers.
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Nature of Rural Consumer: Marketer cannot use printed word or message as a
means of communication. In addition to low literacy, we have diverse cultural
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backgrounds, different languages changing from region to region, varied
customs, and traditions, economic backwardness. As we cannot use Hindi and
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English languages for marketing communication, the problem of ruralcommunications becomes quite formidable.
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About 200 million of the rural population have the purchasing power but
hardly 100 million adults in the rural areas are the target consumers. There are
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less than 15 newspapers for every 1000 people. 50 per cent of the totalcirculation of newspapers is confined only to thefour metros and hardly 2 per
cent of the copies of newspapers circulate in rural India.
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Thus, marketer encounters a great difficulty in the formulation of
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appropriate media mix to establish effective rural communication to a targetrural market.
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4.5 Appropriate Media
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Media Selection
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In making media decision, we have to consider the following factors: 1.
The financial allocation for advertising. 2. The nature of the product and the
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The nature of competition and the extent of coverage required. 5. Cost of
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media, co-operation and promotional aids offered by media, media circulation.
Right media of advertisement will enable the advertiser to deliver the message
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effectively to the intended markets or prospects.Note: 1. Displays, Shows, Exhibitions, Showrooms, Arcades, Trade Fairs, Point-
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of-Purchase Materials are normally included in sales promotion devices. 2.
Advertising Specialities such as Calendars, Diaries, Blotters, Pen Stands, Ball
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Pens, Pencils, Key Rings, and many other novelties are partly for advertisingand partly for sales promotion. These are business gifts and means of publicity
and patronage.
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Characteristics of Important Media
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Mural Advertising: Mural or outdoor advertising has long life. It has ageneral and wide appeal. It can attract attention of numerous people It is good to
remind prospects. An advertiser has ample scope to use his skill and art in
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advertising.
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However, outdoor advertising has certain limitations. Ii cannot have along message. It is not useful in selective advertising or for specialised products.
It has a low retention value. Its effectiveness cannot be accurately measured and
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it may lead to considerable wastage also hill boards and hoardings are not
welcome today on Ifce highways due to adverse public opinion.(They spoil the
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natural beauty and environment).--- Content provided by FirstRanker.com ---
Press Advertising: Newspapers have a general and wide appeal. It is
very common method of publicity. Newspapers are flexible and timely.
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Repeat advertising is possible. Periodical change in size and contents is alsoeasy. Selective advertising to some extent is available. Effectiveness of
advertising can be estimated by having keyed advertisements. Newspapers offer
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promotional assistance. Coloured and attractive advertisements are now
available even in newspapers. They are the best source of market information.
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Newspapers are truly a way of life to most of the literate people. They have
short closing times. Closing times refer to the period before publication when
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the copy must be submitted. For newspapers, this period is only 24 hours. The
adage 'seeing is believing is applicable to press advertisements. It offers greater
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prestige and believability.However, newspapers have short span of life. Waste in advertising is
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considerable. Illiteracy affects its utility. Magazines and trade journals are other
means of press publicity. They are best for coloured and attractive
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advertisements. They have longer life, greater retentive value as well asreference value. Selective appeal is possible. We can approach particular market
segment only. Waste can be reduced. However, they need advance planning, do
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not facilitate repetitive advertisements. They have limited circulation. They have
higher unit cost per contact.
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Film Advertising: It has a wide appeal. It can overcome language barriers.
Audio-visual (sound and sight) technique has maximum impact on audiences.
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Sound and sight both are employed for communicating our message. Repeat
advertising is possible. However, both cost of production as well as cost of
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distribution of slides and films are quite high. Selective advertising is notpossible. Effectiveness cannot be measured. Waste in film publicity can be
considerable.
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Radio Advertisement: Of all the media, radio has the shortest closing times:
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Radio uses only an audio (sound) signal. The copy can be submitted ip to airtime. Announcements can be made very quickly. It can secure dealer support. It
has a very wide appeal. It is suitable even for illiterate people. Repeat message is
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quite common. Spoken word has greater impact than written word. With the
entry of FM radio programme ranging from all-talk to Indian and Western
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Music, certain target markets can be easily approached. However, radio cannotpermit selective advertising. It cannot give detailed information. It has low
memory value. People remember far more of what they see than of what they
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hear. It may not be very effective as listeners may not like it. Many a time, they
are bored by repeat messages. The length of time media is momentary. The
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message may be lost, if the radio is not tuned. Radio has low listening level as itis often used as background for working, studying or some other activity.
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Television Advertisement: Television uses both video (sight) and audio
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(sound) signals. It is a unique combination of vision, motion and sound.Products can be demonstrated and also described. We have best sales
presentation. Television has all the advantages of radio, namely, sound and
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explanation, plus the additional advantage of sight. It can appeal through ear as
well as eye. Product can be demonstrated with explanation. Television reaches
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the audience almost like personal face-to-face contact. To that extent it is justlike personal salesmanship. Full opportunity exists for product demonstration
and the amplification of selling points with audio presentation. It is really a
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wonderful means of mass communication for creating market. Television
combines all of the elements of communication: 1. Illustration, 2. Music, 3.
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Spoken words, 4. Written words. We can have short commercials as well as--- Content provided by FirstRanker.com ---
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sponsored programmes combining entertainment with advertisement. It
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represents typical combination of salesmanship and advertising.
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TV Advertisements in India: The total number of TV sets in India by 1994 hadgone up to 16m. Exceeding 100 million Indian's have now access to TV. By the
year 2001, India should have appreciable nation-wide TV audience. More than
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70 per cent TV advertisements represent all types of consumer (softs/durable)
goods.
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Please note that TV is expensive medium. It lacks permanence. TV
message must be seen and understood immediately. Hence, TV does not allow
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complicated messages. The remote control device for changing channels and for
fast-forwarding to skip over the commercials -- this reduces audience size. TV
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advertisers, therefore, must have shorter and more entertaining commercialspots.
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In India, within a few years we would have round the clock coloured TV.
Programmes with multi-channel facilities. TV programmes can be tailor-made
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for each age-group or each market segment. TV has penetrated even in ruralIndia.
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Transit Advertising: Transit advertising consists of card advertising, which
is located within buses, subways, railways and outside displays, which appear on
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the fronts, sides, and backs of buses or other public transport and attransportation terminals. Transit advertising is the lowest-cost media. It gives
geographic selectivity and seasonal selectivity. It has high readership. It can
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reach pedestrains and travelling public. However, non-riders are not exposed to
car-cards located inside the vehicle. Car-cards have small size and they can
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carry only short copy. Transit advertising is limited in quantity by the number ofpublic vehicles in operation.
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Direct Mail: Direct mail is any advertising sent by mail (postal transmission)
including sales letters, folders, pamphlets, booklets, catalogues and the like. Direct
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mail is the most personal and selective media. It reaches only the desired prospects.It has minimum waste in circulation. The advertising copy can be very flexible. It
has maximum possible personal features even without personal contact. It can
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provide detailed information about the product or service, creating lasting
impression. Its effectiveness is measurable. It can be timed as per advertiser's will. It
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has maximum personal appeal. It can take any size, shape or form permitted by thepost office. It is not in direct competition with the rival's matter. Extensive testing
can be done on the product, price, appeal or other factors before the entire mailing is
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sent out. The results of direct mail advertising can be checked by means of an offer
incorporated in the mailing. However, direct mail is costly. We may not have proper
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mailing list. Receiver may consider it as junk mail as it may not have entertainmentvalue. It is not a good means of mass communication.
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Advertising Specialities: These include a wide variety of items, such as
calendars, books, matches, pens, pencils, knives, key rings, diaries,
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memopadvertisements, cigarette lighters, blotters, paper weights, electronic
clocks, purses, rainhats and so on. They are given to advertising targets
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without cost or obligation. Advertiser's name, address, phone number, and a
short sales message are imprinted on the item. The advertiser can choose from
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among 5,000 specialities in the market. Advertising specialities are reminder
type of promotion. It is hoped that they will lead to customer's orders and re-
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orders. However, they have limited space available for sales message. They arealso costly.
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Point-of-Purchase Advertising: It really represents sales promotion
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devices. It covers the display material used in advertising programme. Such
point-of-purchase material may include advertising on the package, window
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banners, shelf-talkers, merchandise tags, package stuffers, information foldersand booklets and such other displaying materials.
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Advertising Spends/Estimates 1990-1993
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(Rs. in
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1990
1991
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1992
1993
--- Content provided by FirstRanker.com ---
Press1050
--- Content provided by FirstRanker.com ---
1200
1400
--- Content provided by FirstRanker.com ---
1600Doordarshan/Satelli
280
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350
406
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500Outdoor
60
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75
87
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100Radio
40
--- Content provided by FirstRanker.com ---
50
60
--- Content provided by FirstRanker.com ---
70Video/Cable
10
--- Content provided by FirstRanker.com ---
15
20
--- Content provided by FirstRanker.com ---
25Cinema
8
--- Content provided by FirstRanker.com ---
5
5
--- Content provided by FirstRanker.com ---
5Total
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1452
1695
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19782300
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4.6 PROMOTIONAL COMPAIGNS--- Content provided by FirstRanker.com ---
Sales promotion is an important instrument in marketing to lubricate themarketing efforts. Today, sales promotion is a necessity and not merely a luxury
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or a fashion. It is not an expenditure; it is an investment which can pay rich
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dividends. It is an integral part of the marketing effort.
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What is Sales Promotion?
--- Content provided by FirstRanker.com ---
Sales promotion is referred to the promotional activities other than
--- Content provided by FirstRanker.com ---
personal salesmanship, advertising and publicity, which stimulate consumer
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purchasing and dealer effectiveness, e.g., displays, exhibitions and showrooms,demonstrations, free samples, coupons, premiums, contests and various other
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non-recurrent selling efforts not in the ordinary routine. It is a plus ingredient in
the marketing mix, whereas advertising and personal salesmanship are essential
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and basic ingredients in the marketing mix.In short, sales promotion is a bridge or a connecting link covering the
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gap between advertising and personal salesmanship, the two wings of
promotion.
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The manufacturer or wholesaler may have a good product, reasonable
price, attractive package, etc. He may have a good sales force. He may have
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spent a lot on advertising. Even then he knows that the product may not sell by
itself. He can get orders from dealers or retailers. But many more things than
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orders are required to he arhip.ved The sale of the product has to be promotedthrough a number of influences at the place where retailers and prospective
buyers meet face to face, i.e., at the point of purchase. In short, all prospective
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buyers must be attracted, urged and even persuaded to buy your product. Sales
promotion is a vital link between advertising and fieldselling. It aims at
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stimulating consumer purchasing at the point of sale and dealers effectiveness atthe retail channel of distribution, particularly because retailing is a highly
competitive field.
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Why Use Sales Promotion?
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Sales promotion and publicity, when combined with advertising and
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personal selling programmes, really add up to more than the sum of the parts.Sales promotion is that "something extra" (2 + 2 = 5). It can arouse enthusiasm,
create a buying mood or spark an immediate reaction from consumers, dealers
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and the firm's salesperson. Many sales promotion campaigns involve the use of
incentives. Incentives are something of financial value added to an offer to
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encourage some obvious behavioural response. Sales promotion is often thoughtas special selling effort to accelerate sales. Point-of-purchase displays give a real
pay off, sales rising by 25 to 50 per cent or even more.
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Sales Promotion Objectives
--- Content provided by FirstRanker.com ---
Sales promotion has dual objectives: 1. to increase buying response by
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ultimate consumers, and 2. to increase selling efforts and intensity by dealers aswell as by sales personnel. 3 to supplement and co-ordinate efforts of
Advertising/Personal Selling. The result of an effective total marketing
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programme is sales success, which entirely depends on positive customer
reaction and an intense, well organised selling effort by resellers and
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salespersons.One study suggested the following reasons for undertaking actively all
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forms of sales promotion: 1. calling attention to new products and product
improvements, 2. informing buyers of new brand and new package, 3.
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Improving market share, 4. increasing usage rate by present customers, 5.maintaining customer patronage and brand loyalty, 6. obtaining dealer outlets, 7.
securing additional shelf-space and added display, 8. creating talking points for
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salepersons, 7. meeting competition.
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Sales Promotion/Advertising: 1. Sales promotion is a direct and openpersuasion to the consumer to try the product immediately. Advertising is
indirect and subtle approach persuading consumers to buy a product. 2. Sales
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promotion performs an immediate job of boosting sales. Advertising has usually
longer-term goal, e.g., to build brand awareness, image or loyally, or
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repositioning of a brand. 3. Sales promotion only alters price-value relationship205
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Rural Marketing
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of the product. Advertising adds some value to the product. Sales promotion
supplements both personal selling and advertising and co-ordinates them and
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helps to make them effective.
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Strengths of Sales Promotion--- Content provided by FirstRanker.com ---
1.It stimulates positive attitudes toward the product. 2. It gives extraincentive to the customer to make a purchase. 3. It gives direct inducement to
take immediate action now rather than later. 4. It has flexibility and it can he
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used at any stage of a new product introduction. Sales promotions are very
effective: (a) when a new brand is introduced, (b) when we have to
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communicate a major improvement in our product, (c) when we want to amplifythe results of the advertising, (d) when we want to increase the number of retail
stores to sell our products.
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Limitations of Sales Promotion
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1, Sales promotions have temporary and short life not exceeding threemonths. Sales promotion alone cannot build up brand loyalty. 2. Sales
promotions are only supplementary devices to supplement selling efforts of
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other promotion tools. 3. They are non-recurring in their use. They have seldom
reuse values. 4. Too many sales promotions may affect adversely the brand
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image, suggesting its lack of popularity or overstocking by a company. 5.Advertising agencies accord low status to sales promotions and usually employ
junior staff for sales promotion so that they may be trained for more creative
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jobs. Sales promotions are ineffective: (a) when established brands have a
declining market, (b) there are no product improvements, (c) when there is
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intensive competition on consumer sales promotion.206
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Rural Marketing
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Kinds of Sales Promotion
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There are two kinds of Sales Promotion:
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(a)Activities intended to educate or inform the consumers and those
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intended to stimulate the consumers. These are called consumer salespromotion.
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(b)Activities to increase the interest and enthusiasm of dealers and
distributors. These are called dealer/distributor sales promotion devices.
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Consumer Sales Promotion: These devices are: 1. Sampling, usually called
consumer sampling. Free samples are given to consumers to introduce a new
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product or to expand the market. The consumers can try the product. 2.
Demonstrations or instructions educating the consumers in the manner of using
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the product. 3. A coupon is a certificate that reduces price. When a buyer gives acoupon to the dealer, he gets the product at a lower price (Regular price is Rs.
20; with a coupon it is Rs. 18). Coupons (same as money) are accepted as cash
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by retailers. 4. Money-refund orders, i.e., full purchase price is refunded, helping
the introduction of a new product. Refund offer creates additional interest and
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increases sales considerably. It is a good device for creating new user and tostrengthen the brand loyalty. 5. Premium (gift) offers are temporary price
reductions, which appeal to bargain instinct, e.g., instant coffee sold in carafes
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by one company was very successful. Towels, dinnerware, hair-brushes, key
chains, artificial flowers, ball pens, toilet soaps, blades, were given as inpack
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premiums. Attractive reusable jars costing separately Rs. 8 may be given at anextra charge ofRs. 4 only. Liril gave a soap box almost free with two toilet
soaps. 6. Price-off, e.g., Rs. 2 off on a Brooke Bond pack of 500 grams; the
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price-off label is printed on the package. It gives a temporary discount to the
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consumers. 7. Fashion shows and parades are good promotion aids or helps in
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men's and women's sophisticated clothings. 8. Contests or quizzes for consumershelp to stimulate consumer interest in the product. In these contests, and quizzes,
participants compete for prizes on the basis of their skill or creative ideas. In
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sweepstakes, they submit their names to be included in a drawing of prize
winners. This type of sales promotion is not a lottery because there is chance or
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luck, prizes are offered and a payment to participate is there. 9. Trading stampsare given for purchasing in a particular shop
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The Quiz/Contest Craze
--- Content provided by FirstRanker.com ---
The advent of Star, Zee and Metro (Satellite TV) Channels has thrown
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open to business concerns the possibilities of brand promotion via the countlessquizzes and contests now being telecast at a small percentage of norma!
promotional cost. With quizzes and contests on television gaining increasing
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popularity, many companies are gifting their own products in an attempt at
gaining mileage for their brands.
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Sponsor companies on the television are adopting the quiz and contest
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route as a profitable means of establishing brand equity over a period of time. Inprogrammes like Philips Top Ten. Boumvita, Close-up Antakshari, Bajaj Ke
Tarane and Lux Kya Scene Hai, brand equity has been used as a format. These
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programmes have gained considerable popularity and they will be remembered
for a long time. T. V. has gained substantial audience in India.
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The basic strategy in contests is to provide an extra-incentive to the
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consumer for buying a product. Full exploitation of contests at retail level must208
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MBA-H4010
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Rural Marketing
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be planned. Retailers must be briefed about the contest and enough merchandise
should be available to satisfy all customer demand. A well planned quiz contest
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has to be unique, interesting to the buyer, related to the product being sold, and
tied in with sales in some way.
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Contests are used to reach short-term sales goals. If properly designed,
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they can achieve other objectives as well. In fact, they are even used as versatileways to hit non-sales related targets. As markets evolve, contests will be used
for winning the upper hand, by emphasising a particular aspect of a product,
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coping with competitive pressures or increasing recall. But competitions, like
any form of sales promotion, have their limitations--they cannot, for instance,
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sell an inadequate product or one with a poor distribution network overnight orwork miracles.
--- Content provided by FirstRanker.com ---
Currently the companies are caught up in the contest/quiz fever. Viewers
are not complaining either. Marketers should make the most of the quiz and
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contest opportunity before the magic fades. And then they may latch on to some
new fever, for there is never an end to new opportunities.
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Dealer's Sales Promotion: These devices or helps are: 1. There is a provision
--- Content provided by FirstRanker.com ---
of free display material either at the point of purchase (POP) or point of sale(POS), depending on one's viewpoint. Display reaches consumers when they are
buying and actually spending their money. 2. Retail demonstrators are supplied
--- Content provided by FirstRanker.com ---
by manufacturers for preparing and distributing the product as a retail sample,
e.g., Nescafe instant coffee to consumers for trying the sample on the spot or
--- Content provided by FirstRanker.com ---
demonstration regarding the method of using the product. 3. Trade deals areoffered to encourage retailers to give additional selling support to the product,
--- Content provided by FirstRanker.com ---
e.g., toothpaste sold with 30% to 40% margin. 4. Seller gives buying allowance
209
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of a certain amount of money for a product bought. 5. Buy-back allowance is
given to encourage repurchase of a product immediately after another trade deal.
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A buy-back is a resale opportunity. 6. Seller gives free goods e.g., one free with11, or 2 free with 10 are common free deals. 7. Advertising and display
allowance may be given. 8. Sales contests for salesmen are held. 9. Dealer
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loader (a gift for an order) is a premium given to the retailer for buying certain
quantities of goods or premium for special display done by a retailer. 10. Dealer
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and distributor training for salesmen, which may be provided to give them abetter knowledge of a product and how to use it.
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Dealer sales promotion provides the selling devices. Sales promotion
devices at the point of purchase inform, remind, and stimulate buyers to
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purchase products. People who see these devices are in a buying mood and thus
they can be easily persuaded to buy those products. Tell tags are informative
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labels affixed on the product, describing in detail the features of the product andits unique selling points. Shelf talkers are similar labels attached to the shelves
close to product displays. Counter top racks, posters, mechanised signs are other
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point-of-purchase displays.
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Each form of sales promotion is used to encourage quick movement of
products along the channel of distribution and enhancing the tempo of sales
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campaign. It also creates extra incentive or gives extra value to the channel ofdistribution itself, e.g., retailer's. Hence, sales promotion offers a direct
inducement which gives an extra value or incentive to the distributors, their sales
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force and the ultimate consumer.
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Surging Popularity of Sales Promotion
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Since 1990, sales promotion has become very popular and is now
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integrated into the total marketing strategy. Factors accounting for importancegiven to sales promotion are: 1. Sales promotion offers quick results which are
also measurable. 2. Competitive pressure compels many firms to retaliate with
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their own sales promotions, e.g., contests, price off, gifts, etc. 3. Continuous
rising prices oblige consumers to become more price conscious. Sales
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promotions become more attractive to them. 4. Tools are needed at the point ofpurchase (POP) to boost sales in retail stores.
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Reasons for Sales Promotion (Merchandising Aids)
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Introduction of a new product. 2. Stimulus for a new use of a product.
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Encouragement for increasing frequency of purchase. 4. Appeal to a special
area of the market. 5. Combination offer to encourage the use of other product.
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Creation of dealer interest and inducing them to stock the articles. 7. Securing
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shelf space in the retail window. 8. Counter-balancing price competition. 9.Special training of salesmen. 10. Seasonal and grand reduction sales. 11.
Capturing bargain hunting and non-brand conscious buyers through bargain
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sales. 12. Acceleration to slow selling lines.
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Thus, sales promotion is used at the time of introducing a new consumer
product, to secure maximum dealer stocking, display space and attention of
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customers. Sales promotion involves a lot of expenditure. It also has difficulties.But because it pays rich dividends, sellers have accepted it as an important item
in the marketing mix. Not only does it give profit but it also serves other
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purposes such as provision of information, creation of demand, repeat buyers,
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sales stabilisation and quick inventory turnover. The successful promotional
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effort has many ingredients such as personal selling, sales promotion devices,advertising, public relations, and publicity.
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Industrial sales need higher personal salesmanship. In the sale of
consumer goods, we need a good combination of personal sales with advertising
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and a lot of point-of-purchase help. Numerous final customers in mass
distribution cannot be approached through personal salesmanship. Hence, we
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need devices to promote sales, such as contests, sweepstakes, premiums,coupons, product demonstration, exhibits, point-of-purchase display, trading
stamps, samples, free trips to Kashmir and so on. The marketing manager must
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co-ordinate the promotional effort of the sales manager, advertising manager,
and sales promotion manager. At present, Advertising Agencies help in both --
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advertising and sales promotion devices.Joint Promotion (through advertising or through promotional events)
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Two years ago, in an unusual print ad, Mafatla! Fabrics endorsed Procter
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Gamble's new detergent product. Ariel. Not that it was only Ariel: that stood
to gain from this approach. Mafatlal too, gained mileage through: the ad. This
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was, perhaps, the first noticeable instance ofjoint promotion on the part of two
brands that hoped to gain in visibility.
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Joint promotions as a marketing device has finally come into its own.
The. reasons for this are manifold. Rising advertising rates in the various media
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makes brand visibility an expensive affair. Also, with the clutter of parallel
products in the market and messaging on the media, attempts at establishing
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brand equity has become a more complex exercise. The days of distinct USPsare by now in the past
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If two brands that already have an established equity, endorse each other,
the likelihood of success even beyond regular advertising stands a good chance.
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The Godrej-Titan promotional tie-up that was carried out in November 1993, isa case in point. The sales of the Godrej refrigerators trebled. However, in a
similar exercise, when an alarm clock made by a small scale manufacturer was
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offered free with the Godrej refrigerator, the increase in sales was just 20 per
cent.
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Joint promotions between two brands that pose no threat to each other,
yet aim at the same target audience and belong to the same usage category (a
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detergent and washing machine for example), stand to gain in terms of
competitive edge by endorsing each other. The most notable examples here are
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the Surf Ultra Videocon washing machine tie up, and car dealer Autoriders IndiaLimited's cooperative marketing venture with financial institutions, spare parts
dealers and insurance companies. Moreover, even though the target segment is
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the same, the participants are not in direct competition with each other.
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Cost sharing on joint promotions is an attractive benefit for advertisersand promoters, specially in the face of escalating advertising costs. Marketers in
the joint-promotions game claim that such strategies can reduce media spend by
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as much as 70 per cent.
Proponents of Joint-promotions claim that this is the second most
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important marketing platform after advertising, and is one method of achieving adirect face-off with the consumer. Fears that such cooperative marketing efforts
might dilute the brand's identity are discounted on the grounds that in fact, they
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serve to provide incremental enhancement for the brand.
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Among the most recent and unique joint-promotion platforms has been apromotional tool itself: the Snuggy Club of Diapers India Limited. With a
strength of 3,000 members who are mothers of children up to three-year-olds,
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the Club was recently used for the launch of a number of children's product by
Wipro, Johnson & Johnson, Milton (the Funny Bunny range) and Leo Mattel.
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Joint-promotions may yet be at a nascent stage. Fast becoming an
important marketing tool, it is bound to see a lot more innovations and
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sophistication in the near future, as the need for closer interaction with the
consumer increases. Joint promotion, i.e., joining hands for visibility offers also
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mutual increase in brand loyalty.--- Content provided by FirstRanker.com ---
Exhibitions and Trade Fairs--- Content provided by FirstRanker.com ---
An exhibition stand or stall is a form of showroom, but it is a very
distinctive form of showroom. It provides a temporary market place at which
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buyers and sellers meet. There are various types of exhibitions, internationaltrade fairs, national and local fairs and exhibitions (usually sponsored by a
chamber of commerce or trade association). We may have indoor or outdoor
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public exhibitions and fairs and shows, e.g., agricultural and industrial
machinery and equipment, cottage industries and handicrafts, fashion shows and
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parades, domestic electric appliances, office machines and appliances, etc.--- Content provided by FirstRanker.com ---
An article shown at an exhibition at least makes a good impression withoutcreating actual demand. A man is greatly impressed with a typewriter, time-
clock or simple appliance. He makes up his mind to buy one sooner or later.
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Usually, people are in a buying mood when they visit an exhibition.
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A successful stand in an exhibition or a trade fair gives three services to the
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owner:It provides entirely new business which cannot be secured by any other
method.
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Buyers unwilling to meet salesmen or visit the shop or show-room will, on
their own account, do a lot of purchases at these fairs or exhibitions. These
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buyers are usually resellers.--- Content provided by FirstRanker.com ---
Competitors compete with each other for getting maximum business. Theconservative buyer can compare the competitive lines displayed in close
distance to one another. They need not disclose their identity. They welcome
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criticism of their regular suppliers only at such exhibitions. Thus, at exhibitions
constructive and conservative buyers (resellers) can be easily handled and
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captured by rival sellers.--- Content provided by FirstRanker.com ---
In many trades, exhibitions are held annually at the same period of the year,These exhibitions attract a large number of buyers every day. These annual
exhibitions become the basis of many sales campaigns. Buyers purchase all their
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requirements, e.g., utensils, furnishings, appliances, clothing, fittings, at these
exhibitions.
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The Fashion Shows
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The fashion show idea can be exploited intelligently in the overall
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promotional strategy. A series of glamorous fashion shows are held in the metro
cities like Bombay, Delhi, Calcutta, on a massive scale. Currently they are also
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organised on the television, the best medium of advertisement to reach the target215
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MBA-H4010
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Rural Marketing
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audience. TV now commands a viewership over 12 crores for a prime time flash
in the national hook-up.
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Indian Fashion Scene
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The fashion market in the national and the international scenario is increasing ata maddening pace. With the export boom coming through in a very big way, the
fashion scenario has received a further boost. Looking at the number of
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boutiques and studios springing up in the country, one can sense the potential of
the fashion business. A number of multinationals have entered and continue to
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enter into the Indian fashion business.--- Content provided by FirstRanker.com ---
Fashion--- Content provided by FirstRanker.com ---
The industry has Rs. 12,000 crore internal market and Rs. 1600 crore
export market. About 25,000 jobs are generated each year in the fashion field.
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Stagnation in this field seems a distant fear as the fashion market is growing at atremendous rate. Hence, fashion shows and exhibitions are becoming very
popular as means of promotion, it is said that if the world is 'sound' then fashion
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is the 'melody.' If the world is 'sky', then the fashion is the 'rainbow.' Fashion
usually means the 'current style.' Life would be drab without fashion.
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Exclusive Showrooms
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Generally the showroom idea is used as a tool of distribution. Currently
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in the face of growing competition and unfair undercutting by dealers, a number
of consumer durable companies are opening plush, exclusive showrooms,
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Rural Marketing
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arcades, gallaries as powerful means of sales promotion to boost their sales.
Exclusivity plays the role of Unique Selling Proposition (USP) to increase the
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sales.
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Onida has set up around 20 Arcades in big cities. Bush has exclusivegaliaries. Sumeet has established gallary-cum-service centres Ceat has (Ccat
Shoppes). Vimal textiles have a large network of ultra-modern showrooms all
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over India.
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A very great advantage the exclusive showrooms offer to a company, isthe ability (o impress the consumer with the whole range of its products at a time
when all companies are going in for diversifications and range expansions.
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Of course, the showrooms are only additional means of sales promo-
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tion/distribution. The distributor/dealer network systems have not been done
away with completely. One cannot deny the importance of dealers. A prospect
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about to invest more than Rs. 15,000 will obviously want to look at other brandsin the market before making up his mind. The showroom idea is also to
encourage customers to go back to dealers stocking the brands.
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The exclusive showroom idea as a promising marketing device has
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proved a draw is undoubted. The future of such showrooms, particularly for
T.V., V.C.R., Washing Machines, costly textiles seems to be bright at the
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moment. Some companies have franchise-owned showrooms with identicalcolour schemes, furnishings, flooring and identical services.
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Rural Marketing
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Publicity/Public Relations
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Publicity is also called marketing public relations. Publicity is not paid
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for by the organization. Publicity comes from news reporters, columnists andjournalist people. It comes to the receiver as the truth rather than as a
commercial. Public relations and publicity taken together become the fourth
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major ingredient of promotion mix. These activities are, however, not
controllable by the firm. Every firm tries to create a good public relations so as
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to give good publicity.--- Content provided by FirstRanker.com ---
Defective products, unfair trade practices, anti-social activities oftenresult in unfavourable publicity, consumer ill-will, bad product image, increased
consumer protests, government regulations and so on. The firm having a poor
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public image will have lower sales and lower profits. Reducing the impact of
bad news is as important as creating good publicity.
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Under the social marketing concept, publicity and public relations are
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assuming unique importance in the firm's promotion mix. Consumerism isaltering consumer attitudes not only towards products, but also towards the firm
and dealers selling the products of the firm.
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Public Relations: Public relations have now become an important marketing
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function. The total processof building goodwill toward abusiness enterprise and
securing a bright public image of the company is called public relations. It
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creates a favourable atmosphere for conducting business. There are four groupsof public: 1. customers, 2. shareholders, 3. employees, 4. the community. The
marketers should have the best possible relations with these groups. Public
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relations complement advertising by creating product and service credibility.
Effective marketing communication is not possible without establishing and
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maintaining mutual understanding between the company and its customers. Thelubricant making the wheel of marketing run smoothly is public relations. Bright
image is created and maintained only by public relations. Liberal aid in all social
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welfare projects enhances the public image of the marketer.
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4.7 Promotion Strategy--- Content provided by FirstRanker.com ---
Strategy lays down the broad principles by which a company hopes tosecure an advantage over competitors, exhibit attractiveness to buyers, and lead
to full exploitation of company resources.
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When marketers resort to promotion or persuasive communication in
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marketing, we have a kind of the promotion square. It has four sides of equalimportance, viz.: 1. The product described in the marketing communication. 2.
The prospect to be converted into a customer through persuasion and influence
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by promotion. 3. The seller or the sponsor who undertakes promotion, and 4.
The channel or the route along which the product will move from marketer to
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buyer. The promotion strategy will depend upon these four sides. The promotionstrategy deals with the following decisions: 1. the blend of promotional activities
(advertising, publicity, personal selling and sales promotion), 2. the amount
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allocated for the various forms of promotion particularly to the advertising
media such as press, radio, television, and so on, 3. the kind of promotion to be
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used. Each kind of promotion has strengths and weaknesses as a communicationmedium. Each mode of promotion depends on the nature of the products,
characteristics of the market, stage of market development and stage of the
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buyer's decision-making. These unique strengths and weaknesses must be duly
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recognized while designing the promotion (communication) mix. Then again we
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have also interactions among the various forms of promotion. These interactionsdetermine the total promotion effectiveness. The interdependencies of all kinds
of promotion demand an integrated approach to promotion mix.
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1.The Product: The product is one of the factors determining the form of
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promotion. Toys, Toilet Soups and Cosmetics are effectively shown ontelevision. Press advertisements are unsuitable for children. Mass selling
consumer goods can be easily promoted through radio and television
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advertising. Industrial and specialty goods should be promoted through technical
journals and through sales engineers.
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2.The Buyer: If the marketers are to provide realistic solutions to the problem
of buyers, they must know their customers, their needs and desires, their
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attitudes, values, aspirations and expectations. Hence, marketers must have up-
to-date information about consumer demand and consumer behaviour.
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3.The Company: The firm has a unique public image in the market. The firm'simage must be closely associated with promotional strategy so that its goodwill
can be exploited. Corporate advertisements usually emphasize more on the
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character, reputation, reliability and responsibility of the marketing firm. Source
credibility in promotion plays a very important role in making promotion
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believable to the receiver. Effectiveness of communication depends upon thefirm's image in the market. When the perceived risk in buying a product is
higher, the source credibility is an important factor in purchase decisions. A
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credible or trustworthy source produces much greater change in buyer's
predisposition than one that is not credible.
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4.The Channel Choice: The promotional strategy also depends on the channel
or route through which products of the firm flow to consumers. There are pull
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and push strategies in promotion. Pull strategies depend upon mass
communication. Products are literally pulled by buyers through the channels on
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the basis of mass promotional efforts. In a pull strategy the product is pulledthrough the channel by creating end-user demand. Customers force retail shops
to stock those mass-promoted products. In turn, retailers demand the highly
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advertised product from wholesalers. The firms having well-known brands can
exercise control over channels through pull promotion strategies. Personal
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salesmanship plays a secondary role in pull promotion. Marketer rely onintensive distribution. Dealer margins are also lower in pull promotion.
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A PUSH STRATEGY
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MANUFACTURER'S
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WHOLESALER'S
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RETAILERSSALESMAN
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SALESMAN
SALESMAN
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MANUFACTURER
WHOLESALER
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RETAILERCONSUMER
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B PULL STRATEGY
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MBA-H4010
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Rural Marketing
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ADVERTISING
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ANDSALES
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MANUFACTURERWHOLESALER
RETAILER
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CONSUMER
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Note: 1. Under push strategy, producer directs all promotion efforts mainly on
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the middlemen i.e., wholesalers and retailers. Product is pushed throughthe channel. So flow of promotion and flow of goods move from the
producer to the wholesaler and from the wholesaler to the retailer and
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from the retailer to the consumer.
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Under pull strategy, all efforts of promotion now flow directly to the targetmarket, i.e., consumers and then consumers literally pull the wanted
products from the retailer and the retailers in turn pulling the products
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from the wholesalers who are forced to stock those products by
approaching the producer. So we have the request for*the product
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starting from consumers V up to producers.222
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MBA-H4010
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Rural Marketing
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A pull strategy is also called a suction strategy. Extensive and heavy use
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of advertising and sales promotion would be necessary to generate consumer
demand. There is less emphasis on personal selling at all stages of the marketing
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channel. Small firms are unable to depend entirely on advertising and salespromotion, because large investment is involved due to emphasis of advertising
and sales promotion. A push strategy is called a pressure strategy. It places
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heavy emphasis on personal selling.
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Industrial marketing strategies are mostly the push type strategies relyingprimarily on personal selling. In the sale of medical products and in life
insurance, marketers have to use large number of sales-people to call on
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physicians and prospects for life insurance. In push type promotion, personal
selling expenses are considerable and dealer margin is also higher. In push type
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promotion, after-sale service is also important. In push type promotionmarketers rely on selective distribution. Push strategy can be successfully used
when: 1. we have a high quality product with unique selling points, 2. we have a
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high-priced product, and 3. we can offer adequate incentives (financial) to
middlemen and their salesmen.
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Most consumer goods manufacturers generally employ a pushpull
(combination) strategy to sell their products. The ratio of pull to push may differ
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according to the requirements of market situation. Salesmen are used to push the
goods through the marketing channel, while advertising and sales promotion will
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support personal selling to accelerate sales. Thus, all tools of promotion worktogether.
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Promotion Decisions--- Content provided by FirstRanker.com ---
Once the marketing plan is ready we can develop a total promotionprogramme to approach the target audiences. Budget for each element of
promotion is prepared.
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Promotion objectives must be set before we decide on message contents,
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layout and delivery of message. Contents and layout decisions are based onstrengths and weaknesses of the various media vehicles. Delivery decisions are
based on the needs of carrying particular types of messages. Promotion
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objectives, message design, message delivery and promotion budget are the
constituents of promotion programme. All these are highly inter-related decision
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areas.When the promotion budget is fixed by the top management all decisions
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on promotion programme must be within that budget. If the promotion budget is
not so fixed, promotion programme will be designed to support the marketing
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plan. The promotion budget to implement marketing plan will be approved bytop management.
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OVERALL CORPORATE OBJECTIVE
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INCREASE OF R.O.I BY 3 P.C.
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MARKETTING OBJECTIVE
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INCREASE IN MARKET SHAREBY 5 P.C
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MBA-H4010Rural Marketing
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PERSONAL
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SALES
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PUBLICITY
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SELLING
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PROMOTIONADVERTISING
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OBJECTIVE
OBJECTIVE
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OBJECTIVEOBJECTIVE
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INCREASE IN
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INCREASE IN
SUPPLY
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INCREASE IN
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FIRM'S IMAGE-
SALESMAN'S
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DEALERS AIDSBRAND
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SOCIAL
CALLS ON NEW
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AND GET 5000PREFERENCE
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AWARENESS IN
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ACCOUNTS BYNEW
BY 10 P.C
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ITS PROMOTION
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50 P.CRETAILERS TO
PLANS
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DISPLAY NEW
PRODUCTS
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Fig.5 Hierarchy of Objectives for the Promotion Mix of the Marketing
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Programme of a firm
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Note: 1. There are three specific purposes of promotion: (a) to communicate, (b)
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to convince, and (c) to compete. Ideas (communicated) must convince enough
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the consumer to take the desired action. Promotion is the vital tool of giving
--- Content provided by FirstRanker.com ---
competition.--- Content provided by FirstRanker.com ---
2.A good product, an efficient channel, and an appropriate price will not beenough. A strong promotional element in the marketing strategy alone can carve
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out a market niche and create a differential advantage for your products. The
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competitive character of promotion defines its vital role in marketing
--- Content provided by FirstRanker.com ---
programme (for increasing the market share).
--- Content provided by FirstRanker.com ---
Note: 1. There are three specific purposes of promotion: (a) to communicate, (b)
--- Content provided by FirstRanker.com ---
to convince, and (c) to compete. Ideas (communicated) must convince enough--- Content provided by FirstRanker.com ---
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the consumer to take the desired action. Promotion is the vital tool of givingcompetition.
--- Content provided by FirstRanker.com ---
A good product, an efficient channel, and an appropriate price will not be
enough. A strong promotional element in the marketing strategy alone can carve
--- Content provided by FirstRanker.com ---
out a market niche and create a differential advantage for your products. Thecompetitive character of promotion defines its vital role in marketing
programme (for increasing the market share).
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Rural Marketing
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UNIT V
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Lesson -1DISTRIBUTION
--- Content provided by FirstRanker.com ---
Learning objectives
--- Content provided by FirstRanker.com ---
After you have studied this chapter, you will be able to ...
--- Content provided by FirstRanker.com ---
Explain the concept of distribution
--- Content provided by FirstRanker.com ---
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Understand the significance of channel management--- Content provided by FirstRanker.com ---
Describe the key players in the channel structure
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Contents
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Introduction
--- Content provided by FirstRanker.com ---
Concept and nature of distribution
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Channel functions--- Content provided by FirstRanker.com ---
Channel Structures
--- Content provided by FirstRanker.com ---
Channel types
--- Content provided by FirstRanker.com ---
Distribution practices of select firms
--- Content provided by FirstRanker.com ---
Summary
--- Content provided by FirstRanker.com ---
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Short questions--- Content provided by FirstRanker.com ---
Discussion questions
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References
--- Content provided by FirstRanker.com ---
Introduction
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227--- Content provided by FirstRanker.com ---
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MBA-H4010Rural Marketing
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A key decision among the four Ps of marketing managers is distribution.
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Distribution decides the manner in which product and services are madeavailable to the target customers. It involves the bridging of place utility gaps
between manufacturer and customers. The design of physical distribution,
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referred to logistics and supply chain management and trade channels of
distribution are the major components in distribution. .
--- Content provided by FirstRanker.com ---
CONCEPT AND NATURE OF DISTRIBUTION
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The link between manufacturers and customers is the channel of
distribution. It consists of producer, consumer, and any intermediary
--- Content provided by FirstRanker.com ---
organizations that are aligned to provide a means of transferring ownership
(title) or possession of a product from producer to consumer. The characteristic
--- Content provided by FirstRanker.com ---
features of distribution are:--- Content provided by FirstRanker.com ---
Distribution is an ancient function.
--- Content provided by FirstRanker.com ---
It was found in a primitive economy in which people realized the need
for specialization and exchange. They understood that efficiency can be gained
--- Content provided by FirstRanker.com ---
if one person specializes in a certain activity, such as hunting, and anotherperson specializes in a different activity, such as fishing or farming. They
exchanged one good for another to satisfy their needs. In a primitive economy,
--- Content provided by FirstRanker.com ---
distribution is straightforward; in today's global economy, it is far more
complex. It is because of the distances, variety of supporting trade services, and
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variety of needs of buyers.Key external resource:
--- Content provided by FirstRanker.com ---
While manufacturing, research, engineering and field sales personnel
--- Content provided by FirstRanker.com ---
represent internal resources, distribution represents a key external resource. It is
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outcome of a significant corporate commitment to a large numbers of
--- Content provided by FirstRanker.com ---
independent organizations whose business is distribution.Complex with flows
--- Content provided by FirstRanker.com ---
Channels represent a set of interdependent relationships among
--- Content provided by FirstRanker.com ---
intermediaries and producer. The channel facilitates forward flows (physical
goods, title of goods, and promotion offers) and back ward flows (ordering and
--- Content provided by FirstRanker.com ---
payment). Some of these flows are forward flows (physical transportation, title,and promotion); others are backward flows (ordering and payment); and still
others move in both directions (information, finance, and risk taking).
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Channel functions
--- Content provided by FirstRanker.com ---
Distribution channel performs various tasks necessary to promote sales
--- Content provided by FirstRanker.com ---
of products and services to the ultimate customers. They may include some orall of the following:
--- Content provided by FirstRanker.com ---
Buying--every middleman must purchase products for resale or contract as an
agent to receive a supply of product.
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Selling--every middleman must contact potential customers, promote the
product, and solicit orders.
--- Content provided by FirstRanker.com ---
Assorting--the typical middleman brings together an assortment of
--- Content provided by FirstRanker.com ---
merchandize, usually of related items, from several sources to better serve hispotential customers.
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Financing--by investing in inventory and by extending credit to customers, the
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middleman helps to finance the exchange process.Storage--products must be assembled in a convenient location to assure
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availability and must be protected to prevent deterioration and loss.
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Sorting--in some situations, the middleman provides the important function ofbuying in large quantities and breaking the bulk purchase into smaller quantities
for resale.
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Grading--it may be necessary for the middleman to inspect, test, or judge the
--- Content provided by FirstRanker.com ---
products he receives for quality and to assign distinct quality grades to them.Transportation--this is the logistics function, managing the physical flow of the
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product.
--- Content provided by FirstRanker.com ---
Market Information--the middleman typically has some responsibility for
--- Content provided by FirstRanker.com ---
providing market information both to his customers and to his suppliers,including information about availability, product quality, competitive
conditions, customer needs, and so on.
--- Content provided by FirstRanker.com ---
Risk-taking--risk is inherent in the ownership of an inventory of product that
--- Content provided by FirstRanker.com ---
can deteriorate or become obsolete.The design of a marketing channel is an attempt to get each of these
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functions performed as efficiently and effectively as possible.
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Rural Marketing
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Channel Structures
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Channel structures are evolved based on the type of company products,
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target market segments and competition. Three different channel structures arebriefly explained here. Table ?1 shows the different systems.
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Table 1 Marketing systems
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System
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Description
--- Content provided by FirstRanker.com ---
Benefits--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Vertical marketing systemComprise producer, wholesaler
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
and retailer (s) acting as
Achieve economies through
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their size, bargaining power,
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a unified system.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
and elimination of duplicated
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services and channel conflicts.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Horizontal marketing
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Readiness or willingness of two Economy of effort. A channelsystem
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or more non-related companies
may become viable and
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to put together resources toattractive. Eg: Shakti groups
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exploit an emerging market
opportunity.
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--- Content provided by FirstRanker.com ---
Multi- channel marketing
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Simultaneous use ofEfficient reach. Wider coverage.
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system
different channels.
--- Content provided by FirstRanker.com ---
Telemarketing and indirect
distribution as in the case of
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marketing of mobile phones.
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Channel types
--- Content provided by FirstRanker.com ---
One key question in channel decisions is- whether to go for indirect or
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direct marketing.--- Content provided by FirstRanker.com ---
Direct to customers
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Producer ?> Customer through (i) own sales force without own branch net work
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(ii) own sales force with own branch net work (iii) Telemarketing (iv) E-Channels
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Indirect to customers
--- Content provided by FirstRanker.com ---
Because of the wide variety of channel arrangements that exist, it is
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difficult to generalize the structure of channels across all industries. However,distribution channels are usually of two types:
--- Content provided by FirstRanker.com ---
Direct Marketing Channel (or Zero level). This type of channel
--- Content provided by FirstRanker.com ---
has no intermediaries. In this distribution system, the goods go fromthe producer direct to the consumer, e.g., Eureka-Forbes.
--- Content provided by FirstRanker.com ---
0 level
--- Content provided by FirstRanker.com ---
Producer
--- Content provided by FirstRanker.com ---
Consumer
--- Content provided by FirstRanker.com ---
Indirect marketing Channel. This may further be classified in the
--- Content provided by FirstRanker.com ---
following categories--- Content provided by FirstRanker.com ---
One-Level Channel. In this type of channel there is only one
intermediary between producer and consumer. This intermediary may be
--- Content provided by FirstRanker.com ---
a retailer or a distributor.
--- Content provided by FirstRanker.com ---
1 Level
--- Content provided by FirstRanker.com ---
Producer --------- Retailer ----------- ConsumerIf the intermediary is a distributor, this type of channel is used for
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specialty products like washing machines, refrigerators or industrial
products.
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Producer -------- Distributor --------- Consumer
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Two-Level Channel. The type of channel has two intermediaries, namely
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wholesaler/distributor and retailer.
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2 LevelProducer ----- Distributor --- Retailer -- Consumer
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Three ? Level Channel. This type of channel has three intermediaries
namely distributor, wholesaler and retailer. This pattern is also used for
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convenience productsProducer ----- Distributor ---- Wholesaler --- Retailer -- Consumer
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Four ? Level Channel. This type of channel has four intermediaries
namely Agent, Distributor, wholesaler and Retailer. This channel is
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somehow similar to the previous two. This type of channel is used for
consumer durable products also.
--- Content provided by FirstRanker.com ---
Producer ----- Agent ---- Distributor ---- Wholesaler --- Retailer --
--- Content provided by FirstRanker.com ---
Consumer
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Let us now draw distinctions between direct and indirect marketingefforts. Table-.2 presents them
Table 2 Direct vs Indirect marketing
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--- Content provided by FirstRanker.com ---
S. No
--- Content provided by FirstRanker.com ---
Aspect
--- Content provided by FirstRanker.com ---
DirectIndirect
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
1.Type of market
--- Content provided by FirstRanker.com ---
Vertical-few buyers
--- Content provided by FirstRanker.com ---
Horizontal-Many buyers,
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
fragmented and widely--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
distributed2.
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Market potential
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High volumeLess volume
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
3.Market density
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High
Thin
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
4.
--- Content provided by FirstRanker.com ---
Buying habitsLarge volumes per order, Small volume per order,
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less frequent buying,
frequent buying, not particular
--- Content provided by FirstRanker.com ---
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preference to direct contact
--- Content provided by FirstRanker.com ---
about contact with supplier
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
5.Buying process
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Involves extensive
--- Content provided by FirstRanker.com ---
Less negotiation--- Content provided by FirstRanker.com ---
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negotiation and bargaining--- Content provided by FirstRanker.com ---
6
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Product
Customized solutions,
--- Content provided by FirstRanker.com ---
Standardized
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
7
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Pricing
--- Content provided by FirstRanker.com ---
Volatile,
need
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many Less volatile, few adjustments
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
adjustments--- Content provided by FirstRanker.com ---
8
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PromotionStrong need for information Less need for information
--- Content provided by FirstRanker.com ---
/communications
service
--- Content provided by FirstRanker.com ---
service
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
9Distribution
--- Content provided by FirstRanker.com ---
Less emphasis on logistics Strong emphasis on logistics
--- Content provided by FirstRanker.com ---
services, need for deep services (like lot size, deliveryproduct
knowledge
--- Content provided by FirstRanker.com ---
and time, assortment and so on),
personal attention
--- Content provided by FirstRanker.com ---
need for availability of productsand not brand specific.
--- Content provided by FirstRanker.com ---
5.
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Servicesof Complex
--- Content provided by FirstRanker.com ---
Less complex
--- Content provided by FirstRanker.com ---
installation
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
operation
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
maintenance
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
6.
Quality
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Important concern for buyer Normal considerations
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
7.Own
financial Strong.
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Can
support Weak. Requires quick returns
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
position
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branches--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Marketing objective Long range ? Better relations
Short range ? profit orientation.
--- Content provided by FirstRanker.com ---
with customers
--- Content provided by FirstRanker.com ---
Source: Krishnamacharyulu and Lalitha, (2006) Industrial Marketing, Jaico Publishing House,
Mumbai,
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The internet is expected to cause disinter mediation (destruction of
--- Content provided by FirstRanker.com ---
intermediary function) as manufacturers bypass middlemen and deal directly
with customers. However, channel members continue to thrive in many
--- Content provided by FirstRanker.com ---
industries. Surprisingly, internet is now being used to collaborate and supportthe middlemen and to build customer loyalty.
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MBA-H4010Rural Marketing
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Distribution Practices of select firms
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Shakti model of HLL
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HLL's new distribution model, named project Shakti, was piloted in
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Nalgonda district in 2001.It has been scaled up and extended to over 5,000
villages in 52 districts in AP, Karnataka, Gujarat and Madhya Pradesh with
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around 1,000 women entrepreneurs in its fold. The vision is ambitious: to createby 2010 about 11,000 Shakti entrepreneurs covering one-lakh villages and
touching the lives of 100 million rural consumers.
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HLL has operated Project Shakti through the self-help groups. AP was
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chosen for the pilot project as its has the most number and better establishedSHGs ? there are about 4.36 lakh SHGs in AP covering nearly 58.29 lakh rural
women. The objectives of Project Shakti, are to create "income-generating
--- Content provided by FirstRanker.com ---
capabilities for underprivileged rural women by providing a sustainable micro
enterprise opportunity" and to improve rural living standards through "health
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and hygiene awareness". For HLL. it is "enlightened self-interest". Creatingopportunities to increase rural family incomes puts more money in their hands to
purchase the range of daily consumption products ? from soaps to toothpastes ?
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that HLL makes. It also enables HLL access hitherto unexplored rural
hinterlands.
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For HLL greater penetration in rural areas is also an imperative ?
presently over 50 percent of its incomes for several of its product categories like
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soaps and detergents come from rural India. The challenge for HLL now is to
take its products to towns with a smaller population ? under 2,000 people.
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HLL's conventional hub-and-spoke distribution model which it uses to great235
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MBA-H4010
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Rural Marketing
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effect in both urban and semi-urban markets, wouldn't be cost-effective in
penetrating the smaller villages. Now, with this new distribution model, the
--- Content provided by FirstRanker.com ---
smaller markets are now being referred to as `Shakti markets'.
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Typically, a women from a SHG selected as a Shakti entrepreneurreceives stocks at her doorstep from the HLL rural distributor and sells direct to
consumers as well as to retailers in the village. Each Shakti entrepreneur
--- Content provided by FirstRanker.com ---
services 6-10 villages in the population strata of 1,000 ? 2,000 people.
Typically, a Shakti entrepreneur sets off with 4-5 chief brands from the HLL
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portfolio ? Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic Plus. Thesebrands apart, other brands, which find favour with a rural audience, are: Lux,
Ponds, Nihar and 3 Roses tea. Typically, unit packs are small. All the brands are
--- Content provided by FirstRanker.com ---
national and HLL is cool to the idea of creating a rural-specific brand as it will
only dissipate the advertising media effort for the brands.
--- Content provided by FirstRanker.com ---
Having perfected the model in Nalgonda, in 2003 HLL plans to extend
Shakti to a 100 districts in Madhya Pradesh, Gujarat and UP. There are other
--- Content provided by FirstRanker.com ---
plans brewing. One is to allow other companies which do not compete with HLL
to get onto the Shakti network to sell their products. Talks are on with battery
--- Content provided by FirstRanker.com ---
companies like NIPPO, TVS Motor for mopeds, insurance companies for LICpolicies. "We wanted to first stabilize the project before we can look at other
companies. It requires somebody with scale and size to build a platform and then
--- Content provided by FirstRanker.com ---
invite other companies onto this platform", elaborates Sehgal. HLL is now in the
process of piloting `I-Shakti', an IT-based rural information service that will
--- Content provided by FirstRanker.com ---
provide solutions to key rural needs in the areas of agriculture, education,vocational training, health and hygiene. The project will be plotted in Nalgonda
district again, Based on a palm pilot, HLL is looking at sourcing
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MBA-H4010Rural Marketing
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appropriate low-cost hardware from Hewlett-Packard while Unilever Research
--- Content provided by FirstRanker.com ---
out of London is developing the consumer interactivity software.The Usha International Ltd. (UIL), the company which is known for the
--- Content provided by FirstRanker.com ---
sewing machines, also has the marketing arm of Rs. 1300 crore Siel Group
selling the industrial and farm equipments as well as appliances. The company
--- Content provided by FirstRanker.com ---
has a wide distribution network which includes:Divisional Officers (15)
--- Content provided by FirstRanker.com ---
Warehouses (26)
--- Content provided by FirstRanker.com ---
Company Owned retail outlets (50)
--- Content provided by FirstRanker.com ---
Exclusive sales and service centers and multi-brand outlets (5000).
And
--- Content provided by FirstRanker.com ---
Centralized spare parts facility centers for small appliances (8)
--- Content provided by FirstRanker.com ---
The UIL has a strong network of distribution channels and the products
are made available to the customer at the low cost with higher extent of
--- Content provided by FirstRanker.com ---
satisfaction as compared to the other companies. The distribution of 5000 sales
and services centers of the company provides better access to the retailers and
--- Content provided by FirstRanker.com ---
customers.--- Content provided by FirstRanker.com ---
Summary
--- Content provided by FirstRanker.com ---
Distribution is important from firm as well as economy point of view. A
--- Content provided by FirstRanker.com ---
channel of distribution links marketer and customers directly or through
intermediaries. Distribution is an ancient function, a key external resource, a
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237
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MBA-H4010
Rural Marketing
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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link between seller and customer, a channel with flows and complex in nature.Channel structures present vertical, horizontal and multi-channel marketing
systems. Vertical marketing system is of three types ? corporate, administered
--- Content provided by FirstRanker.com ---
and contractual. One key question in channel decision is whether to go for direct
or indirect marketing. Direct marketing is appropriate when buyers are few and
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buy large volumes per order, product is customized ,buying requires negotiation,information needs are many and long range relationships are important.
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Indirect channels include wholesalers, retailers, dealers, cooperative
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agencies, self-help groups etc. Direct marketing channels include branch houses,
sales force, telemarketing service bureau and internet info mediaries.
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Short questions
--- Content provided by FirstRanker.com ---
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Channel flows--- Content provided by FirstRanker.com ---
Channel functions
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Types of middlemen
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Vertical marketing system
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Horizontal marketing system
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Multi-cannel marketing system--- Content provided by FirstRanker.com ---
Indirect vs direct marketing
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Wholesalers
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Retailers
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Self help groups as middlemen
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Info mediaries--- Content provided by FirstRanker.com ---
Telemarketing service bureaus
(m)International channels
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Discussion questions--- Content provided by FirstRanker.com ---
Explain the concept and significance of marketing channels
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Discuss the merits and demerits of direct and indirect marketing
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Explain the role of technology in direct marketing.
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Identify the different players in indirect marketing.--- Content provided by FirstRanker.com ---
Mini Projects--- Content provided by FirstRanker.com ---
Visit a nearby village and observe how retailing is taking place.
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Examine how poultry marketing is taking place in villages.
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Know from the poultry firms
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References
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Philip Kotler(2002), Marketing Management, Prentice ? Hall of IndiaPvt. Ltd., New Delhi,
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William G. Zikmund and Michael d' Amico,(2002) Marketing,
Thomson Asia Pvt. Ltd., Singapore,
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Rajan Sexena, ( 2002), Marketing Management, Tata McGraw Hill
--- Content provided by FirstRanker.com ---
Publishing Company, New Delhi, 2002.
--- Content provided by FirstRanker.com ---
R. S. Davar(2000), Modern Marketing Management, ProgressiveCorporation Pvt. Ltd, Bombay,
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Rajagopal, Marketing Management, Vikas Publishing House Pvt. Ltd.,
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New Delhi.Lesson ?2
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LOGISTICS MANAGEMENT
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Learning objectives
--- Content provided by FirstRanker.com ---
After you have studied this lesson, you will be able to....
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Appreciate the concept and role of logistics in marketing--- Content provided by FirstRanker.com ---
Explain the concept and characteristics of supply chain management
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Relate value chain to supply chain
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Contents
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--- Content provided by FirstRanker.com ---
Introduction--- Content provided by FirstRanker.com ---
Concepts
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Significance of logistics
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Objectives
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Key decisions
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Supply chain defined--- Content provided by FirstRanker.com ---
Goals and significance
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Value chain
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Supply Chain in Practice
--- Content provided by FirstRanker.com ---
Summary
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Short questions--- Content provided by FirstRanker.com ---
Discussion questions
--- Content provided by FirstRanker.com ---
References
--- Content provided by FirstRanker.com ---
Introduction
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240
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Logistics management is one of the time and cost saving strategies of
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business organizations. It is now being related to supply chain management.Supply chain has become important to companies to gain competitive advantage
in terms of speed and cost of delivery of products and services to customers.
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Marketers therefore should have a good understanding of the goals of logistics
and value chains.
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Concepts
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Distribution can be analyzed into two aspects: physical distribution and
channels of distribution. Physical distribution refers to the process of moving
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goods from factory to points of purchase by customers. It includes location of
plants and warehousing, transportation mode, inventory and packing. The
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systems concept of physical distribution establishes firm linkages among thesecomponent activities. It is called as a integrated market logistics that recognizes
interdependence of costs of each activity. It involves activities that begin when
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the customer places the order and that end with the delivery of the product to the
customer. The main elements are:
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Order processing
--- Content provided by FirstRanker.com ---
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Ware housing--- Content provided by FirstRanker.com ---
Inventory
--- Content provided by FirstRanker.com ---
Transportation
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Recently, the concept of integrated market logistics system is referred to
as supply chain management, which is broader in it s scope. It is concerned with
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all the flows starting from supplier to manufacturer to customer. As such
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integrated market logistics system is a subset of supply chain management of afirm.
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Significance of logistics
--- Content provided by FirstRanker.com ---
Responsive logistical service is very important from the point of view of
customer sas well as competition. It enhances customer satisfaction and creates
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the opportunity for closer and more profitable buyer-seller relationships. It is
often ranked by buyers next to "quality" as a criterion for selecting a vendor.
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(1) Place factor
--- Content provided by FirstRanker.com ---
Logistics creates place utilities to consumers. Companies lose their
customers when they fail to supply goods at the right place. Many products fail
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in the competitive market when they are not available at the points of purchase
at the right time.
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(2) Time factor
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An important utility required by customers is time utility. If products or
services are not available at the right time, the customers look for substitutes. If
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the failure to supply is frequent, customers shift their preferences to the timely
available product though it is less satisfying.
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(3) Cost factor
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Experts believe that substantial savings can be obtained in physical
distribution area. For this reason it has been described as `the lost frontier for
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cost economies'. Physical distribution decisions when uncoordinated, result in242
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high cost. There is a need to make use of modern operations research tools and
computer programming for coordinating inventory levels, transportation modes,
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and plant, warehouse and store locations.
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(4) Promotion factor--- Content provided by FirstRanker.com ---
It is a potent promotool in competitive marketing. Companies can attractadditional customers by offering better service or lower price through
improvements in physical distribution.
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Objectives
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The objective of physical distribution is getting the right goods to theright places at the right time for the least cost. Evidently, this involves a trade--
off between customer service and cost. The conflict in goals can be expressed as
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follows.
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Maximum customer service implies large inventories,
premium transportation and multiple warehouses all of which
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raise distribution cost.
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Minimum distribution cost implies cheap transportation,
low stocks and few warehouses.
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Optimization of each of the components(subsystems) ?order processing,
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warehousing, inventory and transportation, may appear to be the right answer.But it is not correct. Physical distribution decisions must aim at optimization of
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total system and not the sub optimization at the subsystem levels i.e., order
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processing, warehousing, inventory and transportation.
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Customer service:
--- Content provided by FirstRanker.com ---
Marketers have to decide their service standards based on key
information about customers and competitors.
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What the customers are looking for?--- Content provided by FirstRanker.com ---
What the competitors are offering?
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Table -1 describes the various elements of service. Typical service standards
are:
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Put the product within an arms length of customers
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To deliver at least 95 per cent of the dealer's orders within
seven days of the receipt
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To ensure that damage to merchandise in transit does not exceed 5
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percent
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However, not all products or all customers require the same level oflogistical service.
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Many business products that are made to order--such as heavy
machinery--have relatively low logistical service requirements. Others, such as
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replacement parts, components, and subassemblies, require extremelydemanding logistical performance. Similarly, customers may be more or les
responsive to varying levels of logistical service. Table -1 Elements of Logistics
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Service
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ElementsDescription
--- Content provided by FirstRanker.com ---
Delivery time
The time from the creation of an order to the fulfillment
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and delivery of that order encompasses both order-
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processing time and delivery or transportation time.
--- Content provided by FirstRanker.com ---
Delivery reliability The most frequently used measure of logistics service,
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delivery reliability focuses on the capability of having
--- Content provided by FirstRanker.com ---
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products available to meet customer demand.
Order accuracy
--- Content provided by FirstRanker.com ---
The degree to which items received conform to the
--- Content provided by FirstRanker.com ---
specification of the order. The key dimension is the
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incidence of orders shipped complete and without error.
Information access The firm's ability to respond to inquires about order status
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and product availability
Damage
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A measure of the physical conditions of the product when
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
received by the buyer.
Ease
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ofdoing A range of factors including the ease with which orders,
business
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returns, credits, billing, and adjustments are handled
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Value-addedSuch features as packaging, which facilitates customer
services
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handling, or other services such as pre pricing and drop
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
shipments.
--- Content provided by FirstRanker.com ---
Source: Jonathon L. S. Byrnes, William C. Copacino, and Peter Metz, "Forge
Service into a Weapon with Logistics," Transportation & Distribution,
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Presidential Issue 28 (September 1987): p.46.--- Content provided by FirstRanker.com ---
Cost:
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The next step is developing a cost function for a service level as shown
below.
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D = T + FW + VW + S-------------------- (15.1)
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Where
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D = total distribution cost of proposed system
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T = total freight cost
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FW = total fixed warehouse costs
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VW = total variable warehouse costsS = Total cost of sales lost due to average delivery delay under proposed
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system.
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The company should aim at minimizing the distribution cost ofreaching a target level of customer service.
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Key Decisions
--- Content provided by FirstRanker.com ---
We will now examine the four major decision issues
--- Content provided by FirstRanker.com ---
How should orders be handled? (order processing)
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Where should stocks be located? (warehousing)--- Content provided by FirstRanker.com ---
How much stock should be held? (inventory), and
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How should goods be shipped? (transportation).
--- Content provided by FirstRanker.com ---
(a) Order Processing:
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The first phase in physical distribution is order ? shipping ? billing cycle.
--- Content provided by FirstRanker.com ---
A customer order initiates several steps
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Order department prepares multi copy invoices and dispatches them to
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various departments.Order is checked with available stock. Items out of stock are back
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ordered
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Items are shipped. Shipped items are accompanied by shipping and
billing documents with copies going to various departments.
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The whole process is now expedited with the help of computers by warehousing
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(b) Ware housing
--- Content provided by FirstRanker.com ---
A storage function is necessary because the production will be more than
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customer orders in general. Striking a balance between customer servicestandards and distribution costs, marketers has to
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Decide on a desirable number of stocking locations depending
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upon the markets the firm intends to serve
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Choose the type of warehouses. Today a variety of warehouses,
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with advanced material handling systems and storage facilitiesare available.
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Inventory
--- Content provided by FirstRanker.com ---
Inventory management requires decisions relating to
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Level of stock ? Determining optimum order quantity--- Content provided by FirstRanker.com ---
Time of ordering ? Reorder point
--- Content provided by FirstRanker.com ---
Minimum stock level to meet emergencies ? safety stock
--- Content provided by FirstRanker.com ---
Today, just ? in ? time production practices and product customization
are changing the inventory planning practices
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(d) Transportation
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Marketers have to make careful choice of transportation mode and
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organizations. In choosing a transportation mode for a particular product,shippers consider such criteria as
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Speed
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Frequency
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Dependability--- Content provided by FirstRanker.com ---
Capability
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Availability
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Cost
--- Content provided by FirstRanker.com ---
Supply Chain Defined
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It is a network of facilities including material flow from suppliers and
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their "upstream" suppliers at all levels, Transformation of materials into semi-finished and finished products, and distribution of products to customers and
their "downstream" customers at all levels. Briefly then, L&SCM is enshrined in
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the 5Rs -- making the Right product available at the Right place, at the Right
time, at the Right cost and in the Right quality.
--- Content provided by FirstRanker.com ---
According to Cooper, Lambert, and Pagh, the following is a formal
definition of supply chain management:
--- Content provided by FirstRanker.com ---
Supply chain management (SCM) is the integration of business processes from
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end user through suppliers that provides products, services and information thatadd values for customers.
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A supply chain consists of all parties involved, directly or indirectly, in fulfilling
a customer request. A typical supply chain may involve a variety of stages.
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These supply chain stages include:Customers
--- Content provided by FirstRanker.com ---
Retailers
--- Content provided by FirstRanker.com ---
Wholesalers /Distributors
--- Content provided by FirstRanker.com ---
Manufacturers
--- Content provided by FirstRanker.com ---
Component/Raw material suppliers--- Content provided by FirstRanker.com ---
The appropriate design of the supply chain and the number of stages willdepend on both the customer's needs and the roles of the stages involved.
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Table ?2 Supply Chain Stages--- Content provided by FirstRanker.com ---
Interface
Cycle
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Activities
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Manufacturer-SupplierProcurement cycle
Order based
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manufacturer's
production schedule
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Supplier productionscheduling
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Component
manufacturing and
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shipping--- Content provided by FirstRanker.com ---
Receiving at
manufacturer
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--- Content provided by FirstRanker.com ---
Distributor
- Manufacturing cycle
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Order arrival
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Manufacturer
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Production
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scheduling
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Manufacturing and
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--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
shipping--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
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Receiving--- Content provided by FirstRanker.com ---
Retailer -Distributor
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Replenishment cycle
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Retail order trigger
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Retail order entry
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--- Content provided by FirstRanker.com ---
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Retail order
--- Content provided by FirstRanker.com ---
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fulfillment
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Retail order receiving
--- Content provided by FirstRanker.com ---
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Customer ?Retailer
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Customer order cycle
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Customer arrival
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Customer order entry
--- Content provided by FirstRanker.com ---
Customer order
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fulfillment
--- Content provided by FirstRanker.com ---
Customer orderreceiving
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Goals and Significance
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The objective of every supply chain is to maximize the overall value
generated. Today companies are giving L&SCM due importance because of two
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reasons: cost control and retaining markets. And, both these factors are crucial todefending bottom lines.
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Value chain concept
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Supply chain strategies sub serve competitive strategies of a company. A
company's competitive strategy defines the set of customer needs that it
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seeks to satisfy through its products and services. Competitive strategy targetsone or more customer segments and aims to provide products and services that
satisfy these customers' needs. To see the relationship between competitive and
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supply chain strategies, consider value chain for a typical organization, as shown
in Figure 1
--- Content provided by FirstRanker.com ---
The value chain begins with new product development linked to
Marketing and Sales, Operations, Distribution and Service. These are core
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functions that must be performed for a successful sale. Finance, accounting,
information technology, and human resources support and facilitate the
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functioning of the value chain. To execute a company's competitive strategy, allthese functions play a role and each must develop its own strategy.
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A Product development strategy specifies the portfolio of new products that
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a company will try to develop. It also dictates whether the developmenteffort will be made internally or outsourced.
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A Marketing and sales strategy specifies how the market will be segmented
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and how the product will be positioned, priced, and promoted.--- Content provided by FirstRanker.com ---
A supply chain strategy determines the nature of procurement of raw
materials, transportation of materials to and from the company, manufacture
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of the product or operation to provide the service, and distribution of theproduct to the customer, along with any follow-up service.
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From a value chain perspective, supply chain strategy specifies what
operations, distribution, and service will try to do particularly well. Additionally,
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in each company, strategies will also be devised for finance, accounting,information technology, and human resources. The value chain
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emphasizes the close relationship between all the functional strategies within a
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company..
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Finance, Accounting Information Technology, human Resources
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
New Product
--- Content provided by FirstRanker.com ---
Marketing
Operations
--- Content provided by FirstRanker.com ---
DistributionService
--- Content provided by FirstRanker.com ---
Development
and
--- Content provided by FirstRanker.com ---
Sales--- Content provided by FirstRanker.com ---
Figure -1 Value chain
--- Content provided by FirstRanker.com ---
The strategic fit requires that a company achieve the balance
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between responsiveness and efficiency in its supply chain that best meets the
--- Content provided by FirstRanker.com ---
needs of the company's competitive strategy. Table -3 makes a comparison ofefficient and responsive supply chains.
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Table 19-3 Comparison of Efficient and Responsive Supply chains
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Aspect
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Responsive
supply Efficient supply chain
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chain
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Primary goal
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Supply demand at
--- Content provided by FirstRanker.com ---
the Respond quicklyto
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lowest cost
--- Content provided by FirstRanker.com ---
demand
--- Content provided by FirstRanker.com ---
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Product design Strategy
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Maximize performance at Createa modularity
to
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minimum
product
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costallow postponement of--- Content provided by FirstRanker.com ---
product differentiation
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Rural Marketing
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Pricing strategy--- Content provided by FirstRanker.com ---
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Lower margins becauseHigher margins because
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price
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price is not a prime
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is a prime
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customer customer driver--- Content provided by FirstRanker.com ---
driver
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Manufacturing Strategy
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Lower costs
through Maintain capacity flexibility
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high utilization
to buffer against demand/
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supply uncertainty
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Inventory strategy
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Minimize inventory to
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Maintain bufferlower cost
inventory
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to deal with
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demand/supply
uncertainty
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Lead time strategyReduce but not at the
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Aggressively
reduce
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expense of costs
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even if the costs are--- Content provided by FirstRanker.com ---
significant
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Supplier strategySelect based on cost and Select based on speed ,
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qualityflexibility, reliability and
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quality.
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Source: Marshall L. Fisher "What is the Right Supply Chain for your Product?",
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Harvard Business Review (March ? April 1997), 83-93.To understand how a company can improve supply chain performance in
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terms of responsiveness and efficiency, one has to examine the four drivers of
supply chain performance: facilities (warehouses), inventory, transportation, and
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information. These drivers not only determine the supply chains performance in--- Content provided by FirstRanker.com ---
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term of responsiveness and efficiency, they also determine whether strategic fit
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is achieved across the supply chain.For each of the individual drivers, supply chain managers must make a
trade-off between efficiency and responsiveness. The combined impact of these
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drivers then determines the responsiveness and efficiency of the entire supply
chain. Table -4 shows the logistics-mix for responsiveness and efficiency.
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Table 4
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Logistics-Mix of a firm for Different Responses
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ElementsResponsiveness
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Efficiency
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Warehouses
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More and distributedFewer
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and
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concentrated--- Content provided by FirstRanker.com ---
Inventory
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High level
Low level
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Transportation
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Faster mode, high
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Slow mode, low--- Content provided by FirstRanker.com ---
cost.
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cost--- Content provided by FirstRanker.com ---
Information
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Information needs
Information needs
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and costs are high
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and costs are less.
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Supply chain in practice
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MBA-H4010Rural Marketing
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With limited scope for passing on hikes in raw material costs and with
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increasing pressures to improve growth, companies have been aiming at bothorganic and inorganic growth. While companies abroad have been looking
seriously at M&A to expand markets and products, Indian companies are relying
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more on cost reduction. So much inefficiency is built into the system that there
is surely a considerable scope for cost reduction. Many Indian organizations
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have adopted supply chain concepts and improved their competitiveness.--- Content provided by FirstRanker.com ---
Asian Paints (India) Ltd (APIL)
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Asian Paints set up three plants located at Ankleshwar (1981),
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Patancheru (1985) and Kasna (1990). All the plants have captive resin
manufacturing facilities and are capable of producing the entire range of paints.
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Asian Paints believes that technology is a critical aspect that can help it continueto move forward. Manish Choksi, Vice-President, Strategic Planning and
Information Technology, says:
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"Our philosophy is to adopt best-of-breed technologies and business
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practices to maintain our position as the largest paint company in India".Asian Paints is the first Indian paint company to implement the SCM
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solution of i2 Technologies and ERP in 1990. The implementation of the SCM
solution of i2 Technologies and ERP made production process flexible. The
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flexibility in the production process helped the customer to choose their owncolor/shade of paint, unlike the earlier mass-produced shelf products. SCM
includes the span of the materials function, manufacturing and quality
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management. Asian Paints has one of the best distribution networks in India.
The customer service network consists of over 15,500 dealers, serviced by 70
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Sales offices from 4 plants and 6 Regional Distribution Centers. The networkcovers the entire country and goes well into the rural India, and posses and
exciting challenge for the distribution team.
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Asian Paints has plans to strengthen its backbone by integrating systems
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using EAI and enable advanced analysis by setting up a data warehouse. Anemployee portal along with a Knowledge Management (KM), that would
enhance employee productivity and create a common forum for employees, is
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being rolled out. Also on the anvil are several initiatives on the SRM and CRM
front that would harness the Internet to provide business benefit by integrating
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and collaborating with suppliers and customers.Summary
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Physical distribution includes warehouses, inventory, transportation,
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information and packing. The systems concept of distribution led to integrated
logistics system and now to supply chain management. Logistics can contribute
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to savings in both time and cost and enhance promotional value of products.Supply chain management is the integration of business processes from end user
through suppliers that provides products, services and information that add
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values for customers. Supply chain components include customers, retailers,
whole sales, manufacturers and suppliers. Supply chain strategy represents a
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value chain and forms a subset of competitive strategy. Supply chains can beresponsive or efficient by design.
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Short questions
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MBA-H4010Rural Marketing
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Physical distribution
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Logistics
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Supply chain
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Value chain--- Content provided by FirstRanker.com ---
Integrated logistics system
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Discussion questions
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Explain the concept and importance of integrated logistics
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system.Discuss the concept and process of supply chain management.
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Discuss the application of supply chain in a firm known to you.Mini projects
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1.
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Visit Websites of Godrej and HL and
prepare a report an
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`Logistics in select consumer goods companies".
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Conduct a study on logistics system of local enterprises and make
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a class room presentation.References
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Sunil Chopra and Peter Meindl (2004) Supply Chain Management,
Pearson Education Asia, New Delhi.
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Michael D. Hutt and Thomas W. Spech (2004) Business Marketing
Management, Thomson Asia Pte Ltd, Singapore
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Philip Kotler (2002), Marketing Management, Person Education Asia,New Delhi.
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Rural Marketing
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David A. Taylor (2004), Supply Chain: A manager's Guide, Pearson
Education Asia, Singapore.
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Lesson ?3--- Content provided by FirstRanker.com ---
CHANNEL SELECTION--- Content provided by FirstRanker.com ---
Learning objectives--- Content provided by FirstRanker.com ---
After you have studied this chapter, you will be able to.--- Content provided by FirstRanker.com ---
Know the members in the of channel
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Understand basic issues in channel selection
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Appreciate the importance of channel management relationships
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Contents
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MBA-H4010
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Introduction
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Concept
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Types of middle men
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Channel components
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Channel selection--- Content provided by FirstRanker.com ---
Summary
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Short questions
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Discussion questions
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References
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Introduction
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Marketing activity starts with the customer and ends with the customer.
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So customer is the ultimate target for the marketer. Availability and affordability
are the two important considerations for buying. Availability depends upon the
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efficiency of the distribution channel. Channels of distribution keep changingfrom one product to another. There is a need for marketers to emphasize more
on easy availability at acceptable price.
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Concept
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According to Kotler:
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Every producer seeks to link together the set of marketing
intermediaries that best fulfill the firm's objective. This set of
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marketing intermediaries is called marketing channel"
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Its purpose is transfer of ownership of the product through intermediariesor directly to the buyer.
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Types of middlemen
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There are three types of middlemen that facilitate the flow of goods and
services from the manufacturer to the customer.
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Merchant middlemen: These are the intermediaries who take title to the
goods and services and resell them. They are known as distributors, dealers,
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wholesalers and retailers. These middlemen get margins and bonuses as
compensation. They share the risk with manufacturers when they take title and
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physical possession of the goods.Agents: These are intermediaries who do not take title to the goods and services
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but help in identifying potential customers and even help in negotiations. The
typical example is that of sales agents and manufacturers' agents or
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manufacturers' representatives, C&F agents, brokers, jobbers, and so on who acton behalf of the producer only to the limited extent of prospecting, warehousing
and redistributing the products. They do not share risk with the manufacturers,
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as they do not take the title to goods and services. Agents earn a commission and
are reimbursed for all expenses by the manufacturers.
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Facilitators: These are independent business units that facilitate the flow of
goods and services from the producer to the customer, without taking a title to
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them or negotiating for them on behalf of the producer. Transport companies,
banks and independent warehouses are examples of these institutions. These
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institutions are paid their service charges, as in the case of a transporter whocharges freight or a banker who is paid service charges or warehouses, cold
storages and go downs which earn rent.
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MBA-H4010Rural Marketing
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Channel components
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The historically available people and places for distribution include:
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wholesaler, retailer, vans, weekly haats, Bazaars and shandies.
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(i) Wholesalers
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The Indian wholesaler is principally a galla-kirana (food-grain) merchant
who sustains the belief that business is speculative rather than distributive in
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character. He is a trader/commodity merchant rather than a distributor and
therefore, tends to support a brand during boom and withdraws support during
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slump.The current need is to activate and develop wholesaler of the adjoining
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market as a distributor of products to rural retail outlets and build his loyalties to
the company.
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(ii) Retailers
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Retailers are the front-end characteristics players with direct access to
customers. They have the following.
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Credibility: he enjoys the confidence of the villagers. His views areaccepted and followed by the rural people whose awareness and media
exposure levels are low.
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Influence leader: His role as influence leader is indisputable. Fromtender twig of neem to washing powder, retailer testimony has been vital
part of the product adoption process.
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Brand promoter: With the increasing number of brands in the place ofcommodities concept selling has come to a close. Brand choices are easy
as the brand characteristics and benefits are communicated through
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different promotion media. Despite the direct one-to-one communication,
the retailer remains the deciding factor to sell a particular brand.
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Relationship marketer: village retailer practices relationship marketing.
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He caters to a set of buyers who have incomes derivative from
immovable land resources and would be static over a much longer time
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span. The relationship could extend beyond three generations, backed byhistorical credibility of the retailer as a product referral.
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Harbinger of change: Village shopkeeper has not been merely a seller of
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wares in an environment relatively isolated from external developments,he has been harbinger o change. He is one of the main sources of
information and opinion as well as supplier of product and services. As
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against this, we find urban retailer, wielding limited influence in
changing the product choices and quality of life of consumers.
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The retail outlets are now in for a change with the corporate marketers
finding them as right places for promoting their products.
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(iii) Vans
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Mobile vans long since, have an important place in distribution and
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promotion of the products in villages.--- Content provided by FirstRanker.com ---
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(iv) Weekly Haats, Bazaars, Shandies
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The haats are the oldest outlets to purchase household goods and for
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trade. These markets are very well organized with shopkeepers having pre-
assigned spaces for them to sell their wares. A typical market is in an open field
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with ample space for displaying all sorts of goods. Its location changes everyweek. These markets have different names in different regions. But they are
strikingly similar every week. These markets have different names in different
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regions. But they are strikingly similar in what they sell. It is reported that there
are, in all. About 47,000 haats held through out the country.
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Melas and Fairs
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These are low cost distribution opportunities in rural area. They are like
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the urban events India International Trade Fair (IITF), Sajavat or Cnsumex in
which audience participation varies form a few thousands to a few lakh people.
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Most of them are associated with either a religious event or a festival.Some of the well known melas are: kumbh mela at Allahabad (triveni
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sangam), pushkar mela in Rajasthan, Kullu Dusshera mela in Himachala
pradesh, Sonepur mela in Bihar and Makar Vilakku in Kerala. People from
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allover the country gather there. According to the Indian Market ResearchBureau (IMRB) around 8000 melas are held in rural India every year. According
to rural scan (Quarterly News letter by MICA (Mudra Institute of
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Comunications, Ahmedabad), there are on an average, 1000 melas held in a state
annually. The average duration of a mela is anywhere from one to 45 days.
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Manufacturer ? is one who recognizes a consumer need and produces a product
from raw materials, component parts or labor to satisfy that need.
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MBA-H4010
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Channel design
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At conceptual design level, deciding on the best channels or ideal ones might
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not be a problem. But at operational level, there will be many problems thatrequire modifications to the ideal one. Examples include the following
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To modify with latest technology to create a new channel ,or
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To convince one or few available middlemen to handle the line.
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Therefore, keeping in mind the operational aspects, manufacturer has to
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make decisions.
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Designing a channel system involves the following steps.--- Content provided by FirstRanker.com ---
Assess customer needsEstablish channel objectives
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Identify channel design constraints
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Identify channel alternatives and networks
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Evaluate channel networks
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Build a channel network modelImplement the model
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Assess customer needs
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Firms should adopt marketing concept and view channel management as
the process of creating value-added networks. Therefore, managers should begin
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the channel design process with a thorough customer value assessment.--- Content provided by FirstRanker.com ---
What is the core marketing offer?
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Rural Marketing
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What are the customer expectations about augmented product and
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services?
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What is the service output level desired by the customers?
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How much are they worth to them?
--- Content provided by FirstRanker.com ---
What is the aggregate demand function for each of the service outputs?
--- Content provided by FirstRanker.com ---
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Establish Channel objectives
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Channel objectives must be consistent with over all corporate and
marketing objectives. Some of the objectives used by the marketing managers
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are:--- Content provided by FirstRanker.com ---
Delivery of superior value to customers
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Low cost of operation
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Control
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Sales maximization
--- Content provided by FirstRanker.com ---
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Image--- Content provided by FirstRanker.com ---
Identify channel alternatives
--- Content provided by FirstRanker.com ---
Products and services flow from a supplier firm either directly or indirectly
through reseller to a market segment. When diagrammed, conventional channels
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resemble linear pipelines. Various channel member firms appear as nodes in
pipelines as shown below.
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Level
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ChannelPlace
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Level
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Company depot
National/State
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
A--- Content provided by FirstRanker.com ---
Redistribution stockiest, C&F agents,
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District
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--- Content provided by FirstRanker.com ---
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Level
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Semi-wholesalers and retailers
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Headquarters--- Content provided by FirstRanker.com ---
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B
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Tehsil Headquarters
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Level
Semi-wholesalers and retailers
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Mofussil towns
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C
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Industrial townships.--- Content provided by FirstRanker.com ---
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Itinerant traders, Vans, Petrol bunks semi Haats
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Level
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wholesalers,
retailers,
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Cooperative Large villages
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D
societies
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Retailers, Vans, sales people, NGOs,
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Villages
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Level
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Government agencies
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E--- Content provided by FirstRanker.com ---
Most companies have direct representation in the form of redistribution
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stockist at level B and C. Level C in a district would comprise at best 7-10towns. High outlet density and large customer population permit economies in
developing these markets through regular working of sales ?cum ?distribution
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van. On consolidating market penetration, direct representation could be
extended to the towns by way of sub-dealers or stockists.
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To achieve a winning edge in rural sales the object is to maximize
directed flow and control of stocks at levels C to E. Approaching level D
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requires prior selection of haat markets and villages located in contiguous
clusters. Sorting of easily accessible census data enable listing of villages above
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a predetermined population bracket and of occurrence schedule of haat markets.266
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MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing
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Various schedules with level C stockist at nodal points could be operated
towards self-sustaining distribution rates for level D markets.
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The next level is E. the villages are too small too allow economies in
--- Content provided by FirstRanker.com ---
van distribution. But these villages form the bulk of the consumption in ruralareas.
--- Content provided by FirstRanker.com ---
Identify channel design constraints
--- Content provided by FirstRanker.com ---
Now, operationally the objectives are to be considered in the light of
--- Content provided by FirstRanker.com ---
constraints stemming from the company and environment.--- Content provided by FirstRanker.com ---
Product characteristics. The nature of the product affects channel
design.
--- Content provided by FirstRanker.com ---
Company characteristics. The size of the company, its goals,
--- Content provided by FirstRanker.com ---
financial resources, product mix and marketing strategy influence
channel design.
--- Content provided by FirstRanker.com ---
Larger the size of a company, larger the market it services
--- Content provided by FirstRanker.com ---
Long run growth goals specify the channel development
requirements.
--- Content provided by FirstRanker.com ---
Financial resources impose investment and cost constraints--- Content provided by FirstRanker.com ---
Competitor Characteristics. What the competitors are doing and
through which channels they are delivering goods? Should we follow
--- Content provided by FirstRanker.com ---
them or set up a different channel? These are the relevant questions.--- Content provided by FirstRanker.com ---
Middlemen characteristics. Marketing intermediaries differ in their
aptitude for handling promotion, negotiation, storage, contact and
--- Content provided by FirstRanker.com ---
credit. They differ in their strengths and weaknesses. An evaluationof these aspects is primary in choosing the middlemen.
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267
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MBA-H4010
Rural Marketing
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--- Content provided by FirstRanker.com ---
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Environmental characteristics. Legal regulations and restrictions state
of the economy; infrastructure developments and technology affect
--- Content provided by FirstRanker.com ---
channel decisions. For instance, inflation may require costminimization and modifying channels to achieve that.
--- Content provided by FirstRanker.com ---
Channel member selection
--- Content provided by FirstRanker.com ---
Channel member selection involves several issues.
--- Content provided by FirstRanker.com ---
(i) Carefully Select Channel Partners:
--- Content provided by FirstRanker.com ---
First, marketers prepare list of reseller firms using one or more of the sources.
--- Content provided by FirstRanker.com ---
internally generate a comprehensive list of candidates for each reseller
--- Content provided by FirstRanker.com ---
type targetedacquire them from governments-local, state and central.,
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
obtain from database marketing firms,--- Content provided by FirstRanker.com ---
secure from trade associations
--- Content provided by FirstRanker.com ---
Next, they select the existing or potential channel partner firms that can best
perform some or all the required channel functions. The factors considered in the
--- Content provided by FirstRanker.com ---
selection generally include the following:--- Content provided by FirstRanker.com ---
technical competence,
--- Content provided by FirstRanker.com ---
sales force deployment,
--- Content provided by FirstRanker.com ---
warehouse and delivery capabilities,
--- Content provided by FirstRanker.com ---
financial stability, and
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Leadership.268
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MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Managers eliminate those resellers that do not meet screening requirements.
--- Content provided by FirstRanker.com ---
Managers then conduct a market research survey to assess customer
preferences for, and satisfaction with, specific reseller firms. Then, they
--- Content provided by FirstRanker.com ---
reconcile this list with the one developed already to create a list of prospective
resellers. Selection depends not only on judgment of marketer but also the
--- Content provided by FirstRanker.com ---
willingness of resellers to be a channel member. Reputed companies likeTISCO, BHEL, and WIPRO can attract any number of intermediaries. A new
company has to work hard to line up the desired number of qualified middlemen
--- Content provided by FirstRanker.com ---
(ii) Specify the terms and responsibilities
--- Content provided by FirstRanker.com ---
Business market managers now enter into partnership negotiations with
--- Content provided by FirstRanker.com ---
preferred resellers. Following, productive negotiations, the supplier and its
resellers summarize the terms of their relationship in the sales agreement. The
--- Content provided by FirstRanker.com ---
agreement will identify the responsibilities of all parties for completing businessprocesses and the rewards that each will receive. The terms and responsibilities,
when stated clearly pave the way for successful performance and durable
--- Content provided by FirstRanker.com ---
business relationships. The main elements in the `trade ? relations mix' are:
--- Content provided by FirstRanker.com ---
Price Policies
--- Content provided by FirstRanker.com ---
Conditions of sale
--- Content provided by FirstRanker.com ---
Territorial rights
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Specific services expected--- Content provided by FirstRanker.com ---
Price policy establishes list price and discount structure. The discountsshould be attractive and equitable to middlemen.
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269
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MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Conditions of sales refer to the payment terms and to guarantees. Generally,
the payment terms induce early payment by offering discounts. For instance net
--- Content provided by FirstRanker.com ---
2/10, 30 payment terms offers 2% discount for paying on or before 10th day.Guarantees are offered to replace defective merchandise or compensation in case
--- Content provided by FirstRanker.com ---
of price decline. Territorial rights grant right to operate in the specific market
area. Full credit for sales in that area is given to that particular middleman.
--- Content provided by FirstRanker.com ---
Specific services expected of the middleman, if any, are to be specified.Generally, exclusive dealers or franchisees are provided with infrastructure and
marketing support. In turn, they are expected to operate their outlets and perform
--- Content provided by FirstRanker.com ---
services as stipulated by the company. Problems in channel
--- Content provided by FirstRanker.com ---
Summary
--- Content provided by FirstRanker.com ---
Channel design objectives may include delivery of superior value to
--- Content provided by FirstRanker.com ---
customer, low cost operation, control, sales maximization and image. Variousconstraints to channel design comprise characteristics of product, company,
competitor, middlemen and environment.
--- Content provided by FirstRanker.com ---
Short questions
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Channel design process--- Content provided by FirstRanker.com ---
Channel objectives
--- Content provided by FirstRanker.com ---
Direct vs indirect channels
--- Content provided by FirstRanker.com ---
Selection of channels
--- Content provided by FirstRanker.com ---
Selection of channel members
--- Content provided by FirstRanker.com ---
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270
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MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Discussion questions
--- Content provided by FirstRanker.com ---
Examine the factors influencing channel design decisions
--- Content provided by FirstRanker.com ---
How do you select channel members.?
--- Content provided by FirstRanker.com ---
Mini projects
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Meet intermediaries and develop a profile of them. Gather data
on sales, stock, number of invoices per year, average collection
--- Content provided by FirstRanker.com ---
period, outstanding debts, number of employees, number ofinside and outside sales persons, space available, computerization
of operations, and problems encountered from the company and
--- Content provided by FirstRanker.com ---
customers.
--- Content provided by FirstRanker.com ---
References--- Content provided by FirstRanker.com ---
Risley, George, Modern Industrial Marketing, Mc Grew Hill, New York,
1970,
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
James A. Anderson and James A. Narus and (2004),Business MarketManagement, Pearson Education Asia Pte Ltd, Singapore,2004.
--- Content provided by FirstRanker.com ---
Philip Kotler, A frame work for Marketing Management, pp 235 -
239,2004
--- Content provided by FirstRanker.com ---
RL Varshney and SL Gupta, Marketing Management and Indian
--- Content provided by FirstRanker.com ---
perspective, pp 363 - 385.
--- Content provided by FirstRanker.com ---
Krishnamacharyulu and Lalitha, Rural Marketing , Persaon Education,New Delhi,2000.
--- Content provided by FirstRanker.com ---
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271--- Content provided by FirstRanker.com ---
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MBA-H4010Rural Marketing
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Economic Reforms
--- Content provided by FirstRanker.com ---
Since 1991, India has been going through a process of economic reforms
and liberalization. The reforms have embraced almost all aspects of the
--- Content provided by FirstRanker.com ---
countries economy. Policies relating to industrial licensing trade and foreign
investment have undergone major changes. In addition significant macro
--- Content provided by FirstRanker.com ---
economic adjustments have also taken place. Economic institutions too haveundergone significant change the banking sector and capital markets in
particular have been major targets of the change. And finally structural
--- Content provided by FirstRanker.com ---
adjustments covering areas like subsidies the price environment and the public
sector have also taken place. Collectively these reforms aim at modernization of
--- Content provided by FirstRanker.com ---
the countries industrial system removal of unproductive controls strengtheningof private investment including foreign investment and integration of India's
economy with the global economy In one word it can be said that all round
--- Content provided by FirstRanker.com ---
opening up of the countries economy has been the essence of the reforms (
Ramaswamy and Namakumari 2002 p 37). The programme of macro economic
--- Content provided by FirstRanker.com ---
adjustment and structural reforms has stabilized the economy and integrated itwith world economy the board content of the structural reforms programme are
not new they are an elaboration and intensification of changes were aimed at
--- Content provided by FirstRanker.com ---
increasing productive efficiency of the economy by creating a ore open and
competitive environment for both the public and private sector (Ahluwalia 1993
--- Content provided by FirstRanker.com ---
p 80) there seems to be a general consensus on the desirability of reforms todismantle the bureaucratic regulatory apparatus evolved over the years that may
have out lived its utility ( Kumar 2000 p 803).
--- Content provided by FirstRanker.com ---
Corporate Response to the Change
--- Content provided by FirstRanker.com ---
How did the Indian corporate sector respond to these economic liberalization
measures ? Basant (2000) suggested that;
--- Content provided by FirstRanker.com ---
272
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MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
The Indian corporate sector is vigorously restructuring itself to retain
--- Content provided by FirstRanker.com ---
competitiveness. Restructuring is mainly geared towers consolidation in
a few chosen areas to correct the inefficiencies created by over
--- Content provided by FirstRanker.com ---
diversification in the pre reform era.--- Content provided by FirstRanker.com ---
MNC's have actively participated in the mergers and acquisitions process
to get market entry or to strengthen their presence.
--- Content provided by FirstRanker.com ---
MNC's are better poached vis-?-vis domestic firms in the acquisition
--- Content provided by FirstRanker.com ---
game because of their deep pockets and relatively cheaper access to
capital.
--- Content provided by FirstRanker.com ---
the reliance of the Indian corporate sector on foreign technology
--- Content provided by FirstRanker.com ---
purchase has in creased. More and more technology flows are now tied
with equity.
--- Content provided by FirstRanker.com ---
Firms are making efforts to improve manufacturing capability. This is
--- Content provided by FirstRanker.com ---
being done through building alliances as will as through initiatives
within the firms. quality up gradation seems to be their key priority. the
--- Content provided by FirstRanker.com ---
effort at Improving manufacturing capability may still prove to beinadequate to meet the competitive challenges.
--- Content provided by FirstRanker.com ---
Product differentiation strategy seems to be dominating over strategies of
--- Content provided by FirstRanker.com ---
building distributed and market related complementary assists.--- Content provided by FirstRanker.com ---
Export based growth strategies are being adopted by some of the
corporate sector firms but such strategies are not widespread export
--- Content provided by FirstRanker.com ---
orientation increased appreciably in he early years of reforms but hasbeen a major collapse since 1997- 98.
--- Content provided by FirstRanker.com ---
The performance of the Indian corporate escrow in the 1990s has shown
--- Content provided by FirstRanker.com ---
mixed tendencies. Profitability rates export performance as well asexport to import ratios have shown varied trends across industry groups.
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273
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MBA-H4010
Rural Marketing
--- Content provided by FirstRanker.com ---
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Tougher the competition in the business environment increased efficiency
--- Content provided by FirstRanker.com ---
became a must for a corporate enterprise to survive. This implied business
reengineering process to be adopted in an enterprise. This involves a
--- Content provided by FirstRanker.com ---
fundamental change that effects multiple business functions. This required thecompany to look back and rethink the way it did business and reshape and re
align it's strategies business processes technology people and infrastructure with
--- Content provided by FirstRanker.com ---
what the customer needed fundamentals of business changed and flexibility
team work customer focus speed to market quality management became vey
--- Content provided by FirstRanker.com ---
important for an enterprise and the realization that being complacent with thestatus quo is certainly the fastest way to lose one' leadership position.
--- Content provided by FirstRanker.com ---
According to Khanna (1993 p 144) following emerged to be important in
he changed business environment:
--- Content provided by FirstRanker.com ---
Customers perspective is the only perspective
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
management commitment and involvement--- Content provided by FirstRanker.com ---
Far reaching goals combined with continuous measurement of
performance
--- Content provided by FirstRanker.com ---
End to end view of processes across all functional and organizational
--- Content provided by FirstRanker.com ---
boundaries
--- Content provided by FirstRanker.com ---
Cooperationist focus around customer driven business results.
--- Content provided by FirstRanker.com ---
The elimination of non value added activities
--- Content provided by FirstRanker.com ---
Ownership at all levels of the organization and people empowered with
--- Content provided by FirstRanker.com ---
knowledge tools and authority.
--- Content provided by FirstRanker.com ---
Timely dissemination of information and
--- Content provided by FirstRanker.com ---
Continuous improvements.
--- Content provided by FirstRanker.com ---
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274--- Content provided by FirstRanker.com ---
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MBA-H4010Rural Marketing
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Marketing in Pre Reforms Era
--- Content provided by FirstRanker.com ---
Despite the fact that the Industrial Policy Resolution (6th April 1948)
emphasized a very important role of cottage and small scale industries in
--- Content provided by FirstRanker.com ---
national economy and despite having realized marketing as a key economic
activity marketing in India had faced a stepchild treatment. This way clearly a
--- Content provided by FirstRanker.com ---
fall out of the over regulated economic development molded pursued.Neelmeghan (2000 p. 4) summarized he main ingredients of these models
pursued in the past.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Within the overall framework of mixed economy public sector wasgiven the role and responsibility of occupying commanding heights
of the economy.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
there was active government intervention in fields such sinvestment and imports mainly through regulatory and promotional
measures such as subsidies concessions reservations controls
--- Content provided by FirstRanker.com ---
licensing permits and tariffs
--- Content provided by FirstRanker.com ---
Heavy emphasis on self reliance and high priority to building up
heavy and capital goods industry and.
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Pursuing import substitution strategy with a view to redactingdependence on foreign supplies and achieveing self sufficiency
stage over as wide an areas as possible.
--- Content provided by FirstRanker.com ---
It was often perceived that since rural consumes largely comprised of
--- Content provided by FirstRanker.com ---
poor , there was inadequate motivation for (rural) marketing to take shape andfor corporate sector to tap rural markets. Let's see this situtation. Gaikwad
(1972) provided a comprehensive classification of rural consumers, as following
--- Content provided by FirstRanker.com ---
six categories :
--- Content provided by FirstRanker.com ---
275
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MBA-H4010
Rural Marketing
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Category 1 : A class of proprietors of land (comprising of old zamindars,malguzars, money-lenders and traders with hold over land and plantations or
mine owners)
--- Content provided by FirstRanker.com ---
Category 2 : A small group of rich farmers (generally belonging to the
--- Content provided by FirstRanker.com ---
dominant caste of the region).Category 3 : A class of small peasants with tiny uneconomic holdings;
--- Content provided by FirstRanker.com ---
Category 4 : A class of tenant farmers;
--- Content provided by FirstRanker.com ---
Category 5 : A growing class of agricultural labour; and
--- Content provided by FirstRanker.com ---
Category 6 : A class of ruined artisans and others (Gaikwad, 1972, pp. 160-161,
as quoted by Jha, 1988, p. M-12).
--- Content provided by FirstRanker.com ---
The rural consumers as per category-1 (The landlords) and Category-2
(Rich Farmers) were few, and were largely inaccessible and less-severed due to
--- Content provided by FirstRanker.com ---
several problems of rural marketing, such as scattered ness of village, poor
communication and infrastructure in rural areas. The remaining others
--- Content provided by FirstRanker.com ---
(Category-3 to Category-6) wer large chunk out of rural population, with veryles per capita monthly expenditures, were "extremely poor and live most often
below subsistence level. Their needs for consumer products are the bare
--- Content provided by FirstRanker.com ---
essentials-food and clothing (Balakrishnan, 1978). Low agro-producton, lack of
basic amenities, facilities and infrastructure, poor communication as well as
--- Content provided by FirstRanker.com ---
movement links. Very low purchasing power resulting in low standards ofliving, and blinkered attitudes of marketers were the major highlights of the rural
markets four decades ago (Vyas, 1997, p. 54). Since the mid-eighties, a silent
--- Content provided by FirstRanker.com ---
revolution has occured in rural India. With successive years of bumber crops, an
indicator of increased purchasing power and accessibility the most owerful and
--- Content provided by FirstRanker.com ---
cost-effective communication media in the form of television, the ruralconsumer has begun to play a vital role. Acceptance and adoption of new
agronomic practices selective mechanisation, multiple cropping to include non-
--- Content provided by FirstRanker.com ---
276
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MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
food crops, and growth of dairying have resulted in a substantial increase in the
disposable incomes of rural consumers (Vyas, 1997 p. 54) ".
--- Content provided by FirstRanker.com ---
Rural Marketing in Changed Scenario
--- Content provided by FirstRanker.com ---
The rural scene is now undergoing a sea-change, resulting from the
multi-pronged activities undertaken for the overall development of rural areas.
--- Content provided by FirstRanker.com ---
There have been significant improvements in the rural sector in respect of
agricultural production, spread of education, banking facilities, electrification,
--- Content provided by FirstRanker.com ---
transportation, communication, etc. All these changes have led to the creation ofgeneral awareness for achieving a new and better style of living. With the
increased purchasing power accessed purchasing Power access to
--- Content provided by FirstRanker.com ---
communication and awareness about modern life styles he rural sector needs a
better marketing thrust. The recent economic policy initiatives. of the
--- Content provided by FirstRanker.com ---
government have resulted in increased investments in the corporate sector bydomestic as well as overseas investors. The growth of the corporate sector
means increased production and this in turn requires identification and
--- Content provided by FirstRanker.com ---
penetration into high growth potential markets. In this contest rural markets have
good prospects for most of the goods and services of this liberalized economy. It
--- Content provided by FirstRanker.com ---
also indicates that the twenty first centuray is going to see the full blossoming ofthe Indian rural market (Chahal and Pal 1997 p 223).
--- Content provided by FirstRanker.com ---
As change came in 1991 when government took a series of bold
initiatives to take the economy away from controls. The programme included for
--- Content provided by FirstRanker.com ---
reaching trade fiscal marketing and industrial policy measures with a majorthrust on improvement of competitive efficiency of Indian industries by utilizing
foreign investment and technology to a much greater degree than in the past.
--- Content provided by FirstRanker.com ---
Moreover the new reform measures ended the regime of licensing and controls
and made the industry virtually independent Significantly the new policy
--- Content provided by FirstRanker.com ---
277
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MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
permitted the free import and export of virtually all products with some
exceptions.
--- Content provided by FirstRanker.com ---
Plan
Programmes
--- Content provided by FirstRanker.com ---
Years of
Period
--- Content provided by FirstRanker.com ---
Induction1.
Community Development Programme
--- Content provided by FirstRanker.com ---
1952
--- Content provided by FirstRanker.com ---
National Extension Scheme1955
2.
--- Content provided by FirstRanker.com ---
Khadi and Village Industries
1957
--- Content provided by FirstRanker.com ---
multi purpose Tribal Development Block
1959
--- Content provided by FirstRanker.com ---
Package Programme and Intensive Agriculture Distric
--- Content provided by FirstRanker.com ---
1960Development Programme
--- Content provided by FirstRanker.com ---
1962
3.
--- Content provided by FirstRanker.com ---
Applied Nutrition Programme1964
--- Content provided by FirstRanker.com ---
Intensive Agricultural Area Development Programme
1966
--- Content provided by FirstRanker.com ---
HYV Seeds Programme
1966
--- Content provided by FirstRanker.com ---
Farmers Training Education
--- Content provided by FirstRanker.com ---
1966Well Construction Programme
--- Content provided by FirstRanker.com ---
1967
--- Content provided by FirstRanker.com ---
Rural Works Programme1968
--- Content provided by FirstRanker.com ---
Tribal Development Block
1969
--- Content provided by FirstRanker.com ---
Rural Manpower Programme
1969
--- Content provided by FirstRanker.com ---
Composite Programme for women and Pre school
--- Content provided by FirstRanker.com ---
1968Going Children
--- Content provided by FirstRanker.com ---
4.
--- Content provided by FirstRanker.com ---
Drought Prone Area Programme (DPAP)1969
--- Content provided by FirstRanker.com ---
Crash Scheme for Rural Employment
1970
--- Content provided by FirstRanker.com ---
278
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Marginal farmers and Agricultural Labourer Scheme1971
--- Content provided by FirstRanker.com ---
(MFAL)1971
--- Content provided by FirstRanker.com ---
Small farmers Development Agency (SFDA)
--- Content provided by FirstRanker.com ---
1971--- Content provided by FirstRanker.com ---
Tribal Are Developmnt Agency (TADA)
1972
--- Content provided by FirstRanker.com ---
Intensive Rural Employent Programme (Pilot) (IREP)
--- Content provided by FirstRanker.com ---
1972
--- Content provided by FirstRanker.com ---
Minimum Needs Programme (MNP)--- Content provided by FirstRanker.com ---
Hill Area Development Programme Special livestock
--- Content provided by FirstRanker.com ---
1974Production Programme (SLPP)
--- Content provided by FirstRanker.com ---
1975--- Content provided by FirstRanker.com ---
ood for work Programme (FWD)
1975
--- Content provided by FirstRanker.com ---
Desert Development Programme (DDP)
1977
--- Content provided by FirstRanker.com ---
Whole village Development programme (WWDP)
1977
--- Content provided by FirstRanker.com ---
Training of Rural youth for self Employment (TRYSEM) 1979
--- Content provided by FirstRanker.com ---
Integrated Rural Development Programme (IRDP)1979
--- Content provided by FirstRanker.com ---
Rural landless Employment Gurarantee Programme 1981
--- Content provided by FirstRanker.com ---
(RLEGP) National Rural Employment Programme 1981
(NREP)
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Developmnt of Wormnet and Children in Rural Areas1985
--- Content provided by FirstRanker.com ---
(DWCRA) Jawahar Rojgar Yojana (JRY)1988
--- Content provided by FirstRanker.com ---
--- Content provided by FirstRanker.com ---
Scheme for Rural Artisans (all traditional artisans living1992
--- Content provided by FirstRanker.com ---
below rashtriya mahila Kosh Credit Fund for women)1992
--- Content provided by FirstRanker.com ---
Mahila Samridhi Yojana
--- Content provided by FirstRanker.com ---
1992--- Content provided by FirstRanker.com ---
Revamped Public Distribution Scheme (PRDS)
1993
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279
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MBA-H4010
--- Content provided by FirstRanker.com ---
Rural Marketing
--- Content provided by FirstRanker.com ---
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Imports of capital goods and raw materials were made more liberal.
Introduction of automatic approvals of foreign technology agreements and
--- Content provided by FirstRanker.com ---
foreign investment restructuring of public sector. Under takings and the thrust
on export were other measures announced by the government with a view to
--- Content provided by FirstRanker.com ---
improve the competitiveness of Indian industries and promotion of exports Inshort determining the countries future growth and development for the first time
the government came out in favor of outward oriented trade and industrial
--- Content provided by FirstRanker.com ---
policies where export marketing was given prime importance. Under the new
policy industries could expand modernize diversify and internationalize their
--- Content provided by FirstRanker.com ---
operations with greater freedom (Neelmegham 2000 p 5) This changedeconomic scenario gave future stretch out to tap the so far largely untapped rural
sector markets.
--- Content provided by FirstRanker.com ---
Economic reforms have enabled GDP to grow at an average annual rate
--- Content provided by FirstRanker.com ---
of about 6.4 per cent between 1992 -93k and 1999 - 2000. Consumption too hasgone up especially the consumption of manufactured FMCGs (Fast moving
Consumer Goods). for 1997-98 market size of a basket of 20 consumer
--- Content provided by FirstRanker.com ---
expendable goods in the household sector is estimated at Rs. 801 billion (at
current prices). consumption of the same commodities was estimated to be Rs.
--- Content provided by FirstRanker.com ---
371 billion in 1992 - 93 showing an average annual growth of 16.7 per centThese figures also indicate that per houshold consumption expenditure on the
goods considered has doubled from Rs. 2387k in 1992- 93 to Rs 4736 in 1997-
--- Content provided by FirstRanker.com ---
98 Rural India in particular with a share of over 55 [per cent in total
consumption of FMCGs has also witnessed a growth of about 14 percent per
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annum during the same period. This seems to be a fairly good growth by anystandard (Brahmankar nd Gupta 2000.)
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Indian market is undergoing a significant metamorphosis because of
economic liberalization and globalization. Many players (Both national and
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global) are trying to capture the urban market of our country. but this market has280
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already reached a saturation level and it is extremely difficult to tap the urban
market with high profit margin. It is also not easy to penetrate profitably into the
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export market because of fierce competition. in export market a firm has to face
challenges from MN Cs (Multinational Companies) other foreign companies and
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domestic firms of the concerned export market in this cut throat competitioneverybody's market share will shrink as everyone in chasing the same market
(Dey Adhikari 1998 p 1) this realization is forcing companies to go rural.
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The 1990s have ushered in far reaching changes that influence the
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customers profile and therefore the market Literacy levels have risen (especiallyfemale literacy). The average size of the household is reducing; nuclear families
are increasing. This development has particular significance fro durable goods
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marketers; for instance, instead of a large refrigerator for a joint family, a
household may now need two or three smaller refrigerators. Also, sizeable youth
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segment is emerging, with it's own income or pocket money, which marketersneed to recognized (Godrej, 1993,. p. 155). Rural India is also in the way of
change, perhaps in an even more significant manner. There has been a boom in
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those markets, fuelled by the penetration of media; vast improvement in
infrastructure facilities, like roads, and shops; telecom connectivity, successive
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good monsoons, and high government spending. As a result, the rural componentis now bigger than the urban in many product categories (Godrej, 1993). Gone
are the days when a rural consumer went to a nearby city to buy "branded
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products and services". Time was when only a select household consumed
branded goods, be it tea or jeans. There were days when big companies flocked
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to rural markets to establish their brands. Today, rural markets are critical forevery marketer - be it for a branded shampoo or an automobile (Kannan, 2001).
Lifestyles and habits of rural people are changing. Yesterday's luxuries are
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becoming today's necessities. There is a boom of (both domestic and foreign)
brands of products.
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The Government Exercies in the last few decades:The Government of India has designed and implemented several issue-
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based programmes aimed at rural development. The developmental activities
under the Ministry of Rural Development cover infrastructure development and
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reforms in the agricultural sector, the non-farm sector and the social sector.,Within these sectors, issues related to production., productivity, skills, access to
institutional credit, marketing of produce or services, education, health, social
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restructuring, empowerment of women and other socially deprived section, etc.
have been the areas of focus for the policies.
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1. Changing Rural Infrastructure :
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Under the Pradhan Mantri Gramodaya Yojana (Prime Minsiter's Village
Development Programme) (PGGY), announced in the 2001-02 budget, at fund
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of Rs 5,000 crore was earmarked for infrastructural development in village,
primarily village roads for which 50 per cent of the fund was reserved. The
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remainder was planned for rural housing, drinking water and sanitation. TheCentral Government has achieved considerable success in meeting the drinking
water needs of 91 per cent of rural habitations, with an investment of more than
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Rs 40,000 crore on the rural drinking water supply
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Road Connectivity--- Content provided by FirstRanker.com ---
The Pradhan Mantri Gramin Sadak Yojna (PMGSY) is a 100 per centCentraly-sponsored scheme launched in 2000 to privde connectivity to all
uconnected habitations (around 1.60 lakh) with all-weather roads by the end of
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the Tenth Plan Period (2007). Expenditure has been estimated to be Rs 60,000
crore. The programme will connect 70 per cent of our villages by 2007
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compared with only 40 per cent villages having road connectivity till the Ninth
Five-Year Plan.
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2. Employment Opportunities:
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With the objective of promoting self-employment among the educated
unemployed ruralyouth, government programmes such as the Pradhan Mantri
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Rojgar Yojna (PMRY) and the Intergrated Rural Development Project, were
devloped. Thee programmes, implemented at the grass-roots level under the
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system of Panchayati Raj Institution, aim to provide skill-based training and linkaccess to bank credit (subsidized).
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Sampoorna Grameen Rojgar Yojana :
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The Employment Assurance Scheme and the Jawahar Gram Samridhi
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Yojana (JGSY) are two schemes under the programme. The EAS is meant tocreat additional employment opportunities during periods of acute shortage of
wage employment through manual world for the rural poor living below the
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poverty line. The JGSY aims at the creation of need-based rural infrastructure at
the village level. Under these programmes, about 3,100 lakh man days of work
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were provdied in 2002-03 and Rs 2,200 crore were disbursed as wages. Theprogrammes have contributed to alleviating rural poverty.
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Salient Features of Sapoorna Grameen Rozgar Yojana (SGRY)
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The objective of the Sampoorna Grameen Rozgar Yojana (SGRY) is to
ensure food security and gainful employment and in the process strengthen rural
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infrastructure. The salient features of SGRY are :--- Content provided by FirstRanker.com ---
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The SGRY is a Centrally sponsored Scheme (CSS), with a
total outlay of Rs. 10,000 crore.
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Under the scheme, 50 lakh tonnes of food grains amounting to about Rs.
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5,000 crore (at economic cost) is being provided every year, free of cost,to the State Governments and Union Territory Administrtions.
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Rs. 5,000 crore in csh is allocated for wages and material costs.
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About 100 crore man days of employment are envisaged to
be generated every year in the rural areas under the SGRY.
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Every worker seeking employment under the SGRY is provideda minimum 5 kg. of food grain (in kind) per man day as part of
the wages.
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The balance of the wags is paid in cash so that the workersare assured of the notified minimum wags.
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Panchayati Raj Institutions (PRIs) undertake this scheme as per the
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felt need of the area.--- Content provided by FirstRanker.com ---
Rural Housing :
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The 1991 Census revealed the presence of 1.4 crore household without
shelter or residing in unserviceable kuccha house. The Central Government
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announced a National Housing and Habitat Policy in 1998 aiming to provide'Housing for All' by facilitating the construction of 20 lakh additional housing
units (13 lakh in rural areas and 7 lakh in urban areas) annually. With an
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emphasis on extending benefits to the poor and the deprived, the Government is
committed to ending all shelterlessness by the end of the Tenth Plan period.
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By the year 2002-03, a total of 93 lakh houses at an expense of Rs.
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16,000 croer had bn built under the Indira Awaas Yojana (IAY). The ceiling on
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construction assistance under the IAY is currently Rs., 20,000 per unit for plain
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area and Rs. 22,000 for hilly/difficult areas. The ceiling on the upgradation of akuccha house to a semi-pucca/pucca is Rs. 10,000. Under the IAY, the Gram
Sabha is empowered to select the beneficiaries. Further, the allotment of
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dwelling units should be in the name of the female member of the beneficiary
household. Alternatively, it can be allotted in the name of both husband and
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wife.--- Content provided by FirstRanker.com ---
Swaranjayanti Gram Swarozgar Yojana:
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Swarnjayanti Gram Swarozgar Yojana (SGSY), an ongoing programme
for the sle-employment of the rural poor, has been in effect since 1999 after the
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restructuring of the erstwhile Intergrated Rural Development Programme(IRDP) and allied programmes like Training of Rural Youth for Self
Employment (TRYSEM) Development of Women and Children in Rural Areas
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(DWCRA), Supply of Toolkits in Rural Areas (SITRA) and ganga Kalyan
Yojana (GKY), besides the Million Wells Scheme (MWS) With the launching
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of the SGSY the earlier programmes are no longer in operation.Swaranjayanti Gram Swarojgar Yojana (SGSY) - a holistic programme for
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promoting self-employment among the rural poor
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Covers all aspects of the self-employment of the rural poor-organizationof the rural poor into Self Help Groups (SHGs), capacity building of the
group through financial assistance, training, selection of key activities,
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infrastructure build-up, technology and marketing support.
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Self Help Groups (SHGs) to be a national movement-11.47 lakh SelfHelp Groups have already been formed.
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Involvement of NGOsCBOsAnimators for social mobilization,
training, and capacity building of Self Help Groups.
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15 per cent of the Central allocation earmarked for the development of
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infrastructure and activity clusters.The programme has been able to provide access to institutional finance
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to about 1.7 crore women, i.e. 1.7 crore households, across the country. It has
enhanced opportunities for initiating small-scale income-generating activities,
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thereby increasing household income and has also contributed to theempowerment of women.
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6. District Rural Development Agency
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DRDA has been the principal organ over the years at the district level for
overseeing the implementation of various anti-poverty programmes.
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The DRDA must emerge as a spcecialized agency capable of managing the anti-
poverty programmes of the Ministry, on the one hand and effectively relating
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these to the overall efforts of poverty eradication in the district.
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Each DRDA should have the following wings :--- Content provided by FirstRanker.com ---
Self-employment wing
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Women's wing
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Wage Employment wing
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Engineering wing
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Accounts wing--- Content provided by FirstRanker.com ---
Monitoring and Evaluation wing
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General Administration wing
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Providing Institutional Finance in Rural India
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NABARD has beenthe primarygovernment institution dedicated to
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developing systems and delivering institutional finance in rural for both the farm
sector and the non-farm sector. It refinances the loans extended by grameen
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banks and cooperative banks under various government schemes.Farm Sector :
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NABARD refinances assistance for financing farm mechanization, i.e.
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purchase of tractors, power tillers and also the accessories.
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It also provides agricultural credit through the Kisan Credit Card. As a
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pioneering credit delivery innovation, the Kisan Credit Card Scheme aims at theprovision of adequate and timely support from the banking system to the farmers
for their cultivation needs, including the purchase of inputs in a flexible and
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cost-effective manner.
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At the end of the 2003-04 financial yeas, about 4 crore credit cards hadbeen issued to farmers with cultivable land and a total of Rs. 84, 000 crore had
been disbursed.
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Swarnajayanti Gram Swarozgar Yojana (SGSY) :
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SGSY, formed by restructuring ongoing self-employment programmes,
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viz. IRDP, TRYSEM, DWCRA, etc., is under implementation from 1 April1999. The programme envisages the formation of SGSY Groups and their
linkage with the banks. Individuals as well as SGSY groups members below the
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poverty line are assisted under the programme.
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Scheme for setting up of Agriclinic and Agribusiness centres:
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A scheme for financing agriculture graduates to set up agriclinics and
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agribusiness centres was launched in 2001-02 aimed at supplementing theexisting Extension Network. The objective of the scheme is to accelerate the
process of technology transfer to agriculture and supplement the efforts of State
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agencies in providing inputs and other services to farmers.
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The salient features of scheme are as under :--- Content provided by FirstRanker.com ---
The scheme is open to agriculture graduates in subjects allied to
agriculture.
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The outer ceiling of the project cost will be Rs. 10 lakh for individuals
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and Rs. 50 lackh for groups.
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Margin money assistance from NABARD's Soft Loan Assistance Fundup to 50 per cent of the margin prescribed by banks to meet any shortfall
in the borrower's contribution.
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The National Bank has prepared Model Project Profiles in respect of a
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few activities indicating the estimated cost and income streams. The banks havethe freedom to select the borrowers entrepreneurs and theactivity depending on
the potential of the area subject to technical feasibility and the financial viability
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of the proposals.
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Refinance Scheme for financeing Farmers Service Centre (FSC) :--- Content provided by FirstRanker.com ---
NABARD has decided to extend 100 per cent refinance facility to banks forfinancing Farmers Service Centres (FSC) set up in collaboration with Mahindra
Shubhlabh Services Ltd. (MSSL) for providing various extension services to
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farmers, including supply of agri-inputs. FSC is internded to benefit 288
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farmers by way of higher yields and productivity through private-sectorparticipation in technology transfer and extension services.
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8.Land Reforms :
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Land reforms aim at redistributing ownership holding from the viewpoint
of social justice and reorganizing operational holdings as a method to optimize
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land utilization.The reforms measures were as follows :
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Distribute land among the landless by taking procession of surplus landfrom large landholders.
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Provide security to sharecroppers or tenants on tenure and ownership
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rights by regulating rent payable by them to landlords.Protect the interests of tribals in landownership against encroachment by
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non-tribals.
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Induce improvement in productivity through the consolidation of
landholdings.
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Development of public land for the rural poor to give them access to
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fuelwood and fodder.--- Content provided by FirstRanker.com ---
Make land and other productive assets accessible to women.
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Protect the homestead rights of the rural poor on lands owned by them
and provide them with house sites to enable them to construct their own
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houses.
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Land Ceiling--- Content provided by FirstRanker.com ---
The land was described as an economic unit and an economic holdingwas defined as one that could provide a reasonable standard of living to the
cultivator and give full employment for a family. The land ceiling stated that no
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individual farmer should own more than three times the economic holding.
Factors like soil fertility, irrigation, methods of cultivation and the nature of
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crops were considered when fixing the ceiling. Under this, 4 ha. or 10 acres ofthe best land and 7.5 acres or 18 acres of average land were fixed as the ceiling,
considering that an annual net income of Rs. 15,000 would accrue to a family at
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1970 prices.
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Budget 2004-05 : The Government's Rural Initiatives and the Indicators forCorporates
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The 2004-05 budget is a definite attempt to redress the neglect of the
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agriculture and rural sectors in recent years. Though 58 per cent of India's
workforce is engaged in agriculture, this sector toay contributes only 22 per cent
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of GDP because of the inadequate availability of gagriculture credit, lack of cropdiversification from staple wheat and rice to more profitabe cash crops and
restrictions on agri marketing. The Finance Minister hopes to correct this
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situation by announcing a series of measures, such as the doubling of agriculture
credit in the next three years (RRBs./cooperative banks will be revamped),
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increasing the expenditure for rural infrastructure development to Rs. 8,000crore in the current years, leveraging the SHG micro finance programme to
ensure that 5.7 lakh of the 10.79 bank-linked groups take up micro enterprises
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and thereby enhance their incomes (read purchasing power) and increasing
budget allocation on accelerated irrigation programmes to Rs. 2,800 crore (last
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year Rs. 2,00 crore). Simultaneously, the Rural Infrastructure DevelopmentFund, set up under NABARD in 1994-95 and discontinued last years, is being
revied to give a fillip to infrastructure development in our rural areas.
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Although the per capita income in rural is less than half of urban, the
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rural sector already accounts for 53 per cent of FMCGs and 59 per cent of 290
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durables bought in India. However, rural penetration and consumption levels for
most product categories are much lower than urban because of limited
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purchasing power with villagers. Improved irrigation facilities, infrastructure,
better roads, free trading in agri produce, removal of excise duty on tractors, agri
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implements; and the insurance scheme for farmers announced in the Budgetshould all give a boost to the rural economy and generate a greater demand for
corporate products. However, to benefit from this new opportunity, urban
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marketers will have to gain a better understanding of rural lifestyles, needs and
aspirations and design appropriate products. Corporates will need to extend their
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distribution reach to service this new segment living in six lakh old villages,offer smaller packs at lower price points, and communicate in the local idiom to
connect with rural audiences. A rural India marketing strategy will not work.
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Corporate will have to not only think local, but also act local.
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Lesson ?5
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NEW APPROACHES IN DISTRIBUTION
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Learning objectives
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After you have studied this lesson, you will be able to ...
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Identify the problems in distribution
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Explore the emerging approaches of distribution
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Contents
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Introduction--- Content provided by FirstRanker.com ---
Problems in rural distribution
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Need of an intelligent approach
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The new players
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Coverage strategy
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Summary--- Content provided by FirstRanker.com ---
Short questions
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Discussion questions
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References
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Introduction
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The burgeoning rural markets have become a great opportunity for many
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companies to expand sales. However, many of them back out as they finddistribution as a major problem. Used to the developed distribution network in
the urban markets, they try the same tricks in rural markets, namely, extensive
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retailing and sustained pull generation through mass media advertising. As a
result they fail and place the blame on the less developed infrastructure of the
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rural markets. Creative companies like HLL, have been experimenting to findinnovative ways of reaching the rural consumers.
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Problems in rural distribution
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(i) Difficulty in reaching rural consumers--- Content provided by FirstRanker.com ---
The major problems are:--- Content provided by FirstRanker.com ---
Lack of adequate transport facilities,
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Large distances between villages,
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Lack of pucca roads connecting villages to nearest townships,
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Lack of proper retail out lets, and
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There are about 576,000 villages in India, 79 per cent of them with a
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population less than 1,000. Almost 80 per cent of the villages do not have all-
weather roads. Rural consumers are also far less homogenous than their urban
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counterparts and differ from region to region. Therefore, it is not possible tomerely extend urban production to rural markets.
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The low density of population and inaccessibility makes the problem
of servicing these villages individually difficult and often uneconomical. Direct
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delivery of goods to even the top one per cent of villages costs twice as much asservicing urban markets. Therefore, in the initial stage, it may be better to
concentrate only on the larger villages, and towns with large agricultural
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hinterlands that act as foci for distribution. The semi-wholesalers and retailers
servicing smaller villages can obtain stocks from these places or the villagers
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themselves can buy the necessary items.293
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Studies conducted by the Marketing Research Department of Hindustan
Level showed that about 20 per cent of the farmers visit the nearest town at least
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once a month to sell their produce and purchase their requirements. In other
words, the towns with large agricultural hinterlands can became the gateways
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for entry into the rural market.(ii) Multiple Tiers, Higher Costs and Administrative Problems
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In the first place, the rural distribution chain requires a larger number of
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tiers, compared to the urban one. The long distances to be covered from the
product points and the scattered locations of the consuming households cause
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this situation. At the minimum, the rural distribution chain needs the village-level shopkeeper, the mandi-level distributor and the wholesaler/stockiest in the
town. And on top of them are the manufacturers' own warehouses/branch office
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operations at selected centers in the marketing territory. Such multiple tiers and
scattered outfits push up costs and make channel management a major problem.
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The scope for manufacturers' direct outlets such as show rooms or depots isquite limited in the rural market unlike in urban areas. Lit become expensive as
well as unmanageable. The dependence of the firm on intermediaries is much
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greater in rural areas as direct outlets are ruled out. But controlling such a vast
network of intermediaries is a difficult task. Control is mostly indirect. And
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because of these factors the firm has to be more careful while selecting channelmembers in rural areas.
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(iii) Non-availability of Dealers
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Another problem is the availability of dealers. Many firms find that there
are a limited number of suitable dealers. Even if the firm is willing to start from
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scratch and try out rank newcomers, the choice of candidates is really limited.
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(iv) Poor Viability of Retail Outlets
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Retail sales outlets in the rural market suffer from poor viability. A
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familiar paradox in rural distribution is that the manufacturer incurs additionalexpenses on distribution; still the retail outlets find that the business is un
remunerative. The scattered nature of the market and the multiplicity of tiers in
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the chain use up the additional funds the manufacturer is prepared to part with.
And no additional money comes to any of the groups. Moreover, the business
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volume is not enough to sustain the profitability of all the groups and the retailoutlet suffers the most.
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(v) Inadequate Bank Facilities
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Distribution in rural markets is also handicapped due to lack of
adequate banking and credit facilities. Rural outlets need banking support for
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three important purposes:
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To facilitate remittances to principals and to get fast replenishment of stocks.To receive supplies `through bank' (retiring documents with the bank).
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To facilitate credit from banks.
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As banking facilities are inadequate in rural areas, rural dealers are handicapped
in all these aspects. It is estimated that there is only one bank branch for every
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fifth village.
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(vi) Inadequate Credit Facilities--- Content provided by FirstRanker.com ---
Inadequacy of institutional/bank credit is another constraint. Ruraloutlets are unable to carry adequate stocks due to lack of credit facilities. They
are unable to extend credit to their customers. Thus there is a vicious circle of
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lack of credit facilities leading to inadequate stocking and loss of business,
finally resulting in poor viability of outlets.
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Need for an Intelligent Approach
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There are wide regional variations in the prosperity levels of the districts
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and hence in their market potential. These need to be analyzed and understoodsectorally in order to determine the methods for approaching them. A socio-
economic survey undertaken in four pr0ogressive districts, one from each part of
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the country--Tanjore, Ludhiana, Burdwan and Kolhapur--revealed a healthy
per capita income growth of 5 per cent per annum among big and small farmer
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against a nation average of 1.5 per cent. This has come about through improveduse of land coupled with a reduction in family size.
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Further if one takes a closer look at the characteristic features of rural
market, it will be clear that distribution in fact, is no problem at all. The
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perceived problem is only a misconception of the old timers who are not awareof the changing scenario in rural areas and the potential of the existing selling
outlets. Under the rural road construction programme, the Government plans to
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link villages with a population of 1,5000 or above withal-weather roads.
Progress in this has been somewhat tardy. The end of 1985 would link at least
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20,000 such villages. If this project succeeds the entire complexion of the ruralmarket could change.
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The New Players
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Selling in rural India followed a pattern, till recently. But with the entry of
new players, and the surge in rural demand, the structure and dynamics are
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altering.296
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Rural Marketing
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Unofficial Channels
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Consider Hero Honda Motors. Its 360 dealers allover the country has reported
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the emergence of an unofficial channel of distribution ?village mechanics, localreal estate agents, shopkeepers who sell non-durables and so on. These people
are taking motorcycles from the official dealers-usually in twos and threes--
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displaying them outside their premises and closing a sale. The paper work,
though, is left to the dealer to complete.
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Such instances are facilitating as well as forcing companies to review their
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distribution set-ups to ensure that they are present even in the smallest villages.--- Content provided by FirstRanker.com ---
Cooperative Society
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In terms of their coverage of population and their share in total supply of
agricultural inputs, including credit, Cooperatives occupy an important place in
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India's rural economy. India has largest network of cooperatives in the world.Rural scan reports that there are 4398 primary marketing societies and 2933
large agricultural multipurpose primary marketing services(LAMPS) in the
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country. Other members are:
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District level cooperative marketing societies: 191
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State Level cooperative marketing federations: 29
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Commodity cooperative marketing federations: 22
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? Regional cooperative marketing societies:
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Generally, a cooperative exists for 2 or 3 villages. Farmer's servicecooperatives (FSCs) is a mini super market. Such an arrangement can be tried
with others.
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(iii) Public Distribution System (PDS)
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The fair price shops run by government can be utilized to sell
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consumables and low value durables.
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(iv)Petrol Bunks--- Content provided by FirstRanker.com ---
Petrol bunks have become multi-purpose distribution centers at someplaces. Such a concept can be effectively promoted.
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(v) Agricultural Input Dealers
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Fertilizer companies have retail outlets within a range of 5 km to any
village. They offer a scope for marketers.
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(vi) NGOs
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Non government organizations (NGOs), can reach interiors of villages.
Most NGOs have progrms focusing on sustainable development through
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providing avenue for income generation. They command substantial influence in
the villages covered by them. Companies may join hands with them to mutual
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benefit. With NGOs undertaking distribution, companies realize benefitsaccruing from infrastructure and grass roots level networking. Also organization
security would provide a buffer against delayed retail collections. From the
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NGOs standpoint, such association with companies could yield employment
opportunities for local residents.
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(vii) Barefoot Salesmen
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One useful option is to train sons ?of-the soil to operate as barefoot
salesmen. The important requirements like fluency in the local dialect and
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familiarity with persons and terrain will be the advantage in hire the persons
form villages.
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barefoot salesman, operating on a retailer-cum-commission basis,
could book orders from retailers in villages with in a limited radius of his
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village. When orders are aggregated and served there will be economies in
distribution.
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Syndicated distribution
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new alternative approach is syndicated distribution. Under this
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approach, marketers of household products could group together and consider
the formation of a syndicated trading organization, which could jointly distribute
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collective group of household products in the rural market and enjoy sharedeconomies. Distribution Trends
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The changes in distribution are not only baffling but also challenging.
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Table.1 identifies the changes in various elements of a distribution.--- Content provided by FirstRanker.com ---
Table.1 Changes in distribution--- Content provided by FirstRanker.com ---
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Element of
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FromTo
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sales
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Time
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Restricted, limited timingsUnrestricted, any time
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Place
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Own retail outlet, occasionally Any where
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public place for example, exhibitions
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ChoiceLimited to brands
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Any product-to-any
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Rural Marketing
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Sales
Products
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Products
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ExperiencesRelationships
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Achievement
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Result
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Customer satisfactionCustomer
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Participation and
satisfaction.
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(Direct-to-Home selling: Companies are embarking on 'Direct-to-Home selling'(DTH) even in rural area. It provides one-to-one communication as well as sales
without reliance on retailers.
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The two forms of DTH are: Network marketing and internet marketing.
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Network Marketing: Network marketing is a form of direct selling. It can takeplace at two levels.
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Single level--distributor appoints sales persons. He earns profits on
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sales, made by him.--- Content provided by FirstRanker.com ---
Multi-level-distributor introduces another distributor (a friend or relative,
in general), who in turns introduces another distributor. Like that the
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network is created. The network markets products. Each distributor getsprofits on his sales and also a percentage on sales made by his `network'.
Thus one earns by `retailing and recruiting'.
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In India direct selling is still very nascent, with very few players. Some of them
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are:--- Content provided by FirstRanker.com ---
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Product Group
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Organization
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Cosmetics
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Aviance, Avon, Biotique, Oriflamme
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Kitchen wareTupper ware
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Home care personal
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Aviance, Quantum, Modicare products,--- Content provided by FirstRanker.com ---
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BooksTime-life Books, LB publishers and Distributors,
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Jewellery
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Dianet
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Health care
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Conybio-Far-Infra Red products
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Amway is the pioneer of direct selling and the largest sellingorganization in India and the world. It has a network encompassing 30 lakh
independent business owners, worldwide.
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The introduction of network marketing in rural side will be beneficial not
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only to the companies but also to the villagers. Already innovative companieslike HLL have their schemes in the pipeline.
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Internet Marketing: Also referred to as cyber marketing, it is the latest in the
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series of innovations in retailing-catalogue marketing, special ?interest mailorder, telemarketing and television shopping. Though it started off in 1960s, it
was only in 1993 its potential as a commerce medium was realized. By 1998,
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individual sites among the hundreds of thousands, already in existence, were
measuring `hits' in the hundreds of millions and marketers were leading in to the
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medium because "every body else is there". Today we have success stores of e---- Content provided by FirstRanker.com ---
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tailers like FAB MART, SUBHIKSHA which have motivated many companies
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to set up their websites.
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Several corporate enterprises have facilitated rural consumers transactingthrough internet facility. Prominent among them are EID parry, ITC and
Nagarjuna Fertilizers.
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ITC has launched 3 web based in initiatives (e-choupals in company-
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speak) as a part of its strategy to vertically integrate its sourcingoperations aquachoupal.com in AP. Soya choupal. Com in MP and
planters net. Com in Karnataka. The choupals act as facilitators for
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inputs to farmers--in the aqua, soya and coffee domains.
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Currently in three states ITC has set up 235 internetkiosks which cater to 10,000 farmers and cover over
2,50,000 hectares of land. The idea is to use this network
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as a distribution channels for other products. In fact, a
pilot project to sell LPG cylinders using the network is
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already on.--- Content provided by FirstRanker.com ---
Coverage strategy
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The following issues might confront a marketer aiming to extend
distribution to rural areas,
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Which villages merit direct coverage at all?--- Content provided by FirstRanker.com ---
What would mode of coverage be?
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Direct distribution to village settlements less than specific population or
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number of retail outlets would not be viable. Yet for future payoffs,systematized distribution efforts are imperative to consolidate brand shares and
monitor product movement in a high growth market segment. Marketer has to
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evaluate plans to cover the villages by vans and participation in that market.
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Differential development of infrastructure, divergent geo-climaticconditions and variations in location density of village settlements preclude the
application of uniform approach across rural markets. Pockets of similarity need
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to be identified and strategies by determined in consonance with individual
pockets. Further refinements would be necessitated by local conditions and
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unique improvisions.An example of unique solution to unique condition is the case of brook
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bond. Broke bond used mules for distribution of Tata chaap packaged
tea to rural consumers in Gashwal-kumaon.
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Summary
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A wide array of problems hinders marketers in approaching rural areas withconfidence. The lack of fair weather roads, widely dispersed villages, low
density of population, lack of bank and credit facilities, multiple tiers, higher
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costs and administrative problems, and lack of retailers are the problems in rural
distribution. Intelligent way of approaching rural areas is required. The
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emerging distribution approaches include: Cooperative societies, petrol bunks,agricultural input dealers, NGOs, etc. Latest approaches include the direct to
home selling methods: network marketing and internet marketing.
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MBA-H4010Rural Marketing
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Short questions
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Problems in rural distribution--- Content provided by FirstRanker.com ---
Cooperative society
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NGOs
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Internet marketing
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Network marketing
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Discussion questions
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Rural distribution is not without problems. Highlight some of the
problems in rural distribution.
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What are the recent approaches to rural distribution ?
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