RURAL PRODUCT STRATEGYModule IV

Product

“ Anything that has a value in exchange”

Product – price – place – promotion Challenges – Availability,

affordability, acceptability & awareness

Marketing Tools Marketing Challenge

Product Acceptability

Price Affordability

Place Availability

Promotion Awareness

Source: The Rural Marketing Book- Kashyap. P & Raut. S

Cont’d

Appropriate Product Strategies

Existing & New Products Product features – service quality – price

& performance relationship Simplicity is key “ Sense & Simplicity” – Phillips Global

Campaign Urban market successes could be rural

market failures Appropriate new product development

processes

CORE BENEFIT

BASIC PRODUCT

EXPECTED PRODUCT

AUGMENTED PRODUCT

POTENTIAL PRODUCT

Product Levels

Cont’d Product Level Characteristics Example Rural Vs Urban

Core Benefit Fundamental benefit/ services

Entertainment Same

Basic Product Benefit/service into tangibles

Television Set Same

Expected Product

Attributes & conditions buyers normally expect

Digital sound, flat screen

Appearance of differences in expectations

Augmented Product

Exceeding customer expectations

Battery Operated TV

Pleasant surprise for rural customer

Potential Product

Encompassing all augmentations & transformations

Jolly Startek TV Uniquely rural value proposition

Product Development Stages Stage Marketing Activities

Idea Generation •Searching for new product ideas

Idea Screening •Select the most promising ideas and drop those with only limited potential. Study the needs and wants of potential buyers, the environment and competition.

Concept Testing •Describe or show product concepts and their benefits to potential customers and determine their responses. Identify and drop poor product concepts. Gather useful information from product development and its marketing personnel.

Business Analysis •Assess the product’s potential profitability and suitability for the market-place. Examine the company’s research, development, and production capabilities. Ascertain the requirements and availability of funds for development and commercialisation. Project ROI.

Product Development •Determine technical and economic feasibility to produce the product. Convert the product idea into a prototype. Develop and test various marketing mix elements.

Test Marketing •Conduct market testing. Determine target customers’ Reactions. Measure its sales performance. Identify Weaknesses in product or marketing mix.

Commercialisation •Make necessary cash outlay for production facilities. Produce and market the product in the target market and effectively communicate its benefits.

Rural product Classification FMCGs Consumer durables Services Agricultural goods

FMCG Consumption Trends Products Urban( 1000 HH) Rural ( 1000 HH)

Toilet Soap 998 992

Washing Cake 980 950

Cooking Oil 968 952

Hair Oil/ Cream 897 787

Tea 876 758

Toothpaste 822 449

Washing Powder 819 576

Electric Bulb 723 394

Shampoo 663 352

Biscuits 579 314

Health Beverages 324 67

Source: National Council for Applied Economic Research, 2002

Consumption Ranking Rank Rural Product Urban Product Rural HH

Consumption grams / month

1 Toilet Soap Toilet Soap 268

2 Washing Powder Biscuits 950

3 Packaged Tea Washing Powder 268

4 Biscuits Packaged Tea 302

5 Detergent Cake Detergent Cake 893

Source: A.C Nielsen Retail Audit, MAT, July -2004 & ORG- MARG Retail Consumer Panel, 2001

Product decision and Strategies

Marketers have to make product decisions at three levels:

Individual product decisions Product line decisions Product mix decisions

Individual product decisions This involves decisions related to

product attributes, branding, packaging, labeling and product support services

Attributes such as: Quality Features Design and style

Godrej Chotu Kool

The Godrej Group has recently developed the cheapest environment-friendly refrigeration system, Chotukool, mainly aimed at the rural Indian market.

Unlike the normal refrigerators that run with the traditional compressor-based cooling system, the battery-powered Chotukool cools the raw food products with a specially-developed chip. The refrigerator, worth Rs 3,500

Product line and mix decisions A product line is a group of closely

related products price priced within a certain range targeted at the same customer group distributed through the same channel

Product mix is a set of all product lines and items offered by a company

Strategies may be :

Width extension Length extension Line pruning Depth extension

Significance of product strategy Achieves product market fit Encourages innovation Provides competitive edge Makes better use of resources

Eveready’s Jeevan Sathi Torch: Eveready’s (Union carbide) Jeevan Sathi brass torch is

another example of successful rural specific product strategy.

Initially Eveready’s brass torch was not picking up well in the rural areas. Union Carbide launched a market research study for locating the reasons. The study by the ad agency OBM found that the rural folks rejected the torch since all its parts were not made of brass.

The design, developed abroad, had given the products certain plastic parts, like the reflectors.

The Indian rural consumer felt that the plastic parts would not be durable.

OBM also found out that the rural people were prepared to pay a higher price for the same torch if it were made ‘all brass’.

Eveready then introduced for the rural market the all brass torch designed to last life long and positioned it Jeevan Sathi as a life long companion.

It also came up with ‘Jeevan Sathi’ communication campaign matching to product strategy.

The communication depicted side-by side, two Jeevan Sathis (the farmer’s wife who is his life long companion) and the brass torch (another life long companion)

Model variants: Models developed specifically for the

rural market have found more takers in the market.

For instance, motorcycles that are designed to take on the rigors of rural roads have succeeded more in the rural market

Color variants:

The rural consumers differ from their urban cousins in color preference

In the case of some products, color may matter very much.

For example in the paint business, Asian paints understood the substantial difference between the urban and rural buyer in color preference.

AP introduced paints with bright colors for the rural markets.

AP also communicated the features well through its communication campaigns.

Packaging

Associated with affordability -

Convenience - Consumer recognition &

product protection

Packaging material, size, convenience

and aesthetics

Example: Chik Sampoo

Corporate Responses to Fakes

Look-alikes- Spell-alikes &

Duplicates

Prices range from MRP to 60 % of MRP

Margins range from 60 % to 300 %

Legal action – awareness programmes –

New Package Development

Fakes: Some Examples

Cont’d

Types of product strategies1.Product Innovation

strategies- Urban product in rural segment- Rural special

- products that meet specific needs

- Products overcoming problems

- Augmentation by value add ons

Apollo Hospitals is now reaching out to the rural and urban areas. It has launched Apollo Reach . Through this, it plans to open 25 hospitals by 2010.

The Apollo Group is not satisfied with its position in the urban healthcare market. It is now focusing on the rural and semi-urban markets, especially Tier-II cities. It's looking to invest Rs 1,500 crore through its latest venture Apollo Reach to set up 25 hospitals in these areas by 2010.

The cities in focus are Karaikudi, Nellore, Karim Nagar, Trichy, and Chittor for starters. A new focus brings with it promise of cheaper healthcare. 

The Shaan is a modern multi-utility tractor with the ideal combination of looks and performance that will helps with more than just agriculture—its multi-utility design

The State Bank of India (SBI) has started a zero-balance bank account program for villagers. Called the SBI Tiny account, there are no physical branches or officials, just a paid volunteer who is equipped with a small box and a cellphone.

The box enables biometric measurements (fingerprints), at the time of opening the account to confirm the account holder's identity.

The cellphone enables communication with the zonal office to check on available balance. Payments under programs such as the NREGS and pensions are made directly to these accounts. The advantage for the villagers is that they can withdraw money from their accounts at any time of the day or night. 

Affordability -- Godrej introduced three brands of Cinthol, Fair Glow and Godrej (soap) in 50-gram packs, priced at 10 cents; Adidas and Reebok increased their sales by 50% in rural markets by reducing prices

 Size and design changes -- Videocon introduced a washing machine without a drier for US$60; Philips launched a low-cost smokeless chulha(stove); DCM Shriram developed a low-cost water purifier especially for rural areas

Improving product acceptance -- LG Electronics developed a customized TV (cheap and capable of picking up low-intensity signals) for the rural markets and christened it Sampoorna. It sold 100,000 sets in the first year; Coca-Cola provided low-cost iceboxes as regular power outages meant families could not depend on refrigerators

Customer Value strategies

Mass product strategy Premium product strategy

Product Identity strategies Branding strategies Packaging and labeling strategies

Product branding in Rural markets Branding concept is a very late entrant

in rural markets Good quality, value for money and

sense of identity with brand act as key determinants of FMCG brands in rural India.

Better finish and good looks, recommendations from retailers were found be key determinants of a consumer durable brand in rural India.

Rural consumers’ brand associations is mainly with colours, numbers and visuals and not necessarily with the name of the brand

Colors – Lal dhant manjan, lal sabun (lifebuoy), red battery

Numbers – Godrej No. 1 soap. 555 detergent bar. Brooke bond A1 chai

Visuals – 3 Roses tea, Cycle agarbhatti

Building brands in rural markets Developing a brand name Creating a brand identity Building a brand image

1. Everyday battery with a cat symbol – rural consumers remember it as ‘billi wali battery’.

2. Lifebuoy soap – rural consumers remember it as ‘lal saboon’

3. Mahindra tractor’s brand ‘Bhumiputra’4. Slogan of Red Label Tea “jiyo mere

lal” proved very effective to promote sale.

Shree Ultra

Shree Ultra is a flagship brand, contributing to more than half of our sales volume and is the first manifestation of our strategic move from commodity to brand marketing.

Its two variants, Shree Ultra OPC and Shree Ultra Jung Rodhak Cement are distinctly positioned in the market

Shree Ultra Jung Rodhak Cement through its unique rust prevention properties, has high acceptance amongst brand influencers (masons etc.) and high brand recall value.

The brand, while enhancing its presence in highly educated markets of Delhi has increased its reach in the interior markets of Madhya Pradesh, Uttrakhand, Uttar Pradesh and Punjab.

Brand loyalty Vs Brand stickiness Rural consumers are more comfortable with

tried and tested brands They are therefore b rand sticky than brand

loyal LIC introduced a village adoption scheme –

LIC Jeevan Bhima Gram Brand loyalty is low in low involvement

product but very high in case of chyavanprash, skin creams, hair oils and shaving creams

Regional brands also have a high brand loyalty

Duplicate and counterfeit products Spurious products are the copy of

established brand name at a cost of few thousand rupees and sold it in the rural market.

This duplication takes place in all sectors and especially in FMCG, food items and medicines.

Counterfeiting is a kind of duplication where the fake products bear the identical name of the original product, its packaging, graphics, color pattern, design and even same name and address as the genuine manufacturer

A pass-off product is one that comes with a few minor changes from the original product. The slight changes are made to avoid legal problems.

Example: Head and Shower – Head and

Shoulder Pantane – Pantene Sunmilk – Sunsilk Lifebuoy – Loveboy Climik Plus – Clinic Plus Parla G – Parle G Vikas – Vicks

Coco cola’s strategy for rural markets

Coca-Cola India adopted an innovative two pronged approach in 2002 to gain foothold in rural markets. It devised an innovative pricing strategy to attract price sensitive rural customers, which was backed by the rural centric ’Thanda Mathlab Coca Cola’ campaign. Adopting an aggressive pricing strategy, the company reduced the price of 200 ml bottle by half to INR 5 - a psychological price point which worked in favour of the brand. Coinage pricing addresses the psychological barrier of shelling out a 10 rupee note on a bottle of Coca cola. The combination of clever pricing and astute marketing worked in Coca Cola’s advantage in rural marketsThe video shows how Coca Cola used its pricing strategy effectively to gain impressive growth in rural markets

Questions•What were the critical success factors for Coca Cola in rural markets?•Identify two major brands which adopted a similar pricing strategy to crack rural markets

Pricing in rural Markets

Pricing – Concept and Significance The price represents the market

value of a product or service The price of a product is significant

for the following reasons:> It indicates the market value of the product> Price gives an image to the product> Price is a major tool of marketing in designing offers for consumers to be high quality goods> It helps consumers determine their status

Price decisions are important for the following reasons

To determine the level of demand the product can have

To generate sales, revenues and profits for the firm

To stay competitive in the market

Pricing objectives

Pricing decisions are important for estimating demand, promoting sales, creating revenues and profits and outwitting competitors

Profit objectives

Profit maximization This goal is employed by firms that

have made substantial investments and have short pay back periods to recoup

Innovative product firms that have limited period of protection from imitators will follow this goal

Traders dealing with perishable goods also follow the same strategy

Profit objectives

Target Return This is common among firms

operating in a competitive world Securing maximum sales without

sacrificing profitability Need for funds for expansion Desire to recover investment early Mitigating competition Management attitude of win - slow

Sales objectives

Many organizations state their pricing objectives in sales related terms such as:

Growth in absolute sales Growth in market share

Competition objectives

Some firms set pricing objectives in relation to the action of competitors. This may be done:

To meet or prevent competition To destroy competition

Development objectives

Firms pursue development objectives by diversification strategies by:

Expanding existing markets Entering into new markets

Pricing strategies

Pricing issue in rural markets is closely related to positioning and packaging

Competition is generally with the unorganized sector

Its not true that cheaper brands sell in rural markets

Farmers prefer Usha’s premier century brand, though it is priced 20 percent higher

How do companies price?

Target pricing ( tata Nano) Absolute pricing ( Re.1, Rs.2, Rs.5)

Absolute amount is more important than the content

Pricing should be based on the consumers ability to pay for all the necessities from the wages earned

Pricing is there fore influenced by income stream and consumption

Consumer psychology and pricing Rural consumers are very conscious

of value for money Consumers still do not perceive the

premium value of brands, they are happy to deal with basic products

Compares a products price to a reference price considered reasonable for a certain type of product

Setting the price for rural products and services (Pricing policies)Internal factors> Cost

- Promotion cost- Distribution cost

> Pricing objectives of the company

External factorsPrice sensitivityChannel costsCompetition Environment

Price setting strategies

Market entry strategies> Skimming pricingPenetration pricing

Product Mix pricing StrategiesOptional product pricingCaptive product pricingBundle pricing strategy

Skimming pricing

A pricing strategy where in a company charges the highest initial price that customers will pay for the product

As the demand of the first customer is satisfied company lowers the price to attract another set of customers

Eg: Tide

Optional product pricing Pricing of optional products or accessories

along with the main product Helps to bring customers who are not

inclined to buy high value products This pricing method allows companies to

present a low base price that is capable of attracting customers while maintaining the possibility of generating high customer revenues by selling costly add-ons later

Captive product pricing Setting price for products that must be

used along with the main product Producers of captive products often price

the main product low and then set high markups on the supplies or expendable products.

According to Kotler many companies make very low margins on the main products but are able to make very high margins on the expendable secondary products

Bundle pricing

 HUL is planning to bring out branded packs called ‘Bharat,' targeted at the rural hinterland pegged at Rs 25

The pack would comprise smaller SKUs costing Rs 4-5, and consist of toothpaste, shampoos, powder and soaps

With the festival of lights just round the corner, Vodafone has announced its "Magic Box" offer, essentially a bundled handset offer on two of its newest handsets; the Vodafone Black & White, and the Vodafone Color. 

Under the "Magic Box" offer, the two handsets come with an array of services at no additional cost to the consumer. 

They bundle a free pre-paid Vodafone connection with six months validity; one month free subscription for Caller Tunes; one month free subscription for Vodafone News Alerts (national and regional); Rs 50 worth of talk time free; two Bonus cards with very low call rates; and a two-year replacement warranty. 

Price adjustment strategies> Discounts and allowance pricingFreebiesSpecial event pricingEconomy pricingValue pricingPsychological pricingDiscriminatory pricing

Rural specific strategies

Low price points Low cost packaging Refillable/reusable packs Highlight value not price Coinage pricing Product sharing services

HPCL Rasoi Ghar

Literally translated as 'cooking room', the Rasoi Ghar™ is a community kitchen shared by several households of one village- a modern version of the traditional sanjha chulla.

Centrally located in a target cluster of a selected village, the Rasoi Ghar is a ready kitchen set up in a pucca house, allowing several villagers at a time to cook their daily meals comfortably, safely and quickly.

Each rasoi ghar is equipped with an adequate water supply; a cooking slab; basic cooking utensils and a minimum of 2 stoves connected to replaceable LPG cylinders.

 

The concept of the Rasoi Ghar was a strategic component of the HPCL effort to extend LPG use throughout rural households in India.

The costs of setting up each Rasoi Ghar is covered by HPCL, with users being charged an average of Rs.4/hour to meet the refill costs of a cylinder- a cheaper daily alternative to having an individual LPG connection installed in ones home.