Project ShaktiMarketing FMCG to Rural Consumer

Introduction• Unilever, the world's largest Fast Moving Consumer Goods (FMCG)

company with a worldwide revenue of $55 billion

• It's Indian subsidiary, the Hindustan Lever Limited (HLL) is the country's largest FMCG company with combined volumes of about 4 million tonnes and revenues $2.43 billion and 6.4 million retail outlets

• HLL was an established brand in India, largely successful in urban regions

Market ScenarioCompetitor Analysis

• Low Price Segment – Local Players• Operating in small geographies• Little investment in brand building• Low selling price & High trade margin• Nirma – Laundry business, Personal wash category

• High Price Segment – National Brands• Colgate Palmolive - market leader in oral-care category• P&G - hair care, Fabric wash, Feminine hygiene categories• Godrej & TOMCO

Sales & Distribution System

HLL

CFA

RS

Wholesaler Retailer

Consumer

• Limitations : • Not appropriate for small

markets• Ill equipped for modern

trade

Redesigned system : Channel Approach• Top End of Diamond :• Represented modern trade encompassed self service stores and retail

chains• Accounted for 10% of the overall FMCG market

• Middle Part of Diamond• Largest part of the diamond• Profit-center-based sales teams to cultivate, penetrate and grow markets

• Bottom End of Diamond• Direct distribution in rural markets• Accounted for 20% of HLL’s business

HLL’s Rural Distribution Matrix• Following HLL, some competitors were adopting Streamline

Strategy, hence HLL focused on a complete new market which had Low Business Potential and was an Inaccessible Market.

• A + B + C = 220 million population reach• Project Shakti = Rest 500 million

Market/Business Potential

Low Business Potential

High Business Potential

Accessible Markets

Indirect Coverage (25%) - A

Direct Coverage (40%) - B

Inaccessible Markets

Streamline (35%) - CProject Shakti

Project Shakti: Strength & Empowerment• Born in December 2000, in Nalgonda district of Andhra

Pradesh• An ambitious venture by HLL to spur growth and penetration

of its products in rural India while changing lives and boosting incomes.• Sales and Distribution initiative – delivers growth• Communication initiative – build brand• Micro-enterprise initiative – creates livelihoods• Social initiative – improve standard of living in rural India

Objectives• Business objective: • To extend HLL's reach into untapped markets and to develop its brands through local influencers.• To reach 100 million consumers by 2006

• Social objective: • To provide sustainable livelihood opportunities for underprivileged rural

women.• To scale up the number of Shakti entrepreneurs from 12000 (2004) to

25000 (2006)

Political

Government Co-operation

Support of district

administration

Economic

Low income group

Micro credit

Socio- Cultural

- Social awareness programs-Language

Barriers

-Women as salespersons

was a new idea.-To cash on women as influencers

Technological

iShakti

Sachets, an innovative packaging solution

PEST ANALYSIS

Strengths

• Local knowledge of markets through Self-Help Groups (SHGs)

• Technology necessary to operationalize the model

Weakness

• Skepticism in the minds of local people

• Untrained women entrepreneurs

Opportunities

• Ever increasing demand due to untapped rural market

• Increasing self awareness for hygiene, beauty ,etc. which would lead to high turnover over long run

• Create a channel for brand communication • Integrating business with social

responsibility

Threats

• Time taken by the project to break even

• Competitor’s entry into rural market following the same model

SWOT Analysis

Channel Design Decisions

Analyze customer needs & wants

Establishing Objectives & Constraints

Identify channel alternatives

Evaluate channel alternatives

• Lot size – The number of units the channel permits a user to purchase

• Waiting & delivery time – average time customers wait for receipt of goods

• Spatial convenience – degree to which marketing channel makes it easy for customer to purchase their product

• Product variety – Refers to the assortment provided by the marketing channel

• Service backup – add on services (credit, delivery etc)

• Objectives:• To extend HLL’s reach into untapped markets• To develop the brand through local influencers

• Constraints:• Rural market scattered over large areas• Low per capita consumption• Connectivity from urban to rural areas

• Different channels like sales forces, distributors, dealers etc. have unique strengths and weaknesses.

• Channel alternatives differ in three ways – • Types of Intermediaries, No. of intermediaries, Terms &

Responsibilities of channel members• Available alternatives for HLL

• Profit center based sales and distribution model, Diamond Model, Project Shakti

• Economic Criteria• Control and Adaptive Criteria

Evaluating Different Channels• Each channel alternative is evaluated against:

• Economic criteria• Control Criteria• Adaptive Criteria

• Profit center based model:• Was based on geographies and product categories• Not appropriate for small markets since potential business was small and assigning

one stockist exclusively for each profit center was not economical.

• Diamond Model:• A three layered channel consisting of:• Self service stores and retail stores : synergy across profit centers• For cultivation, penetration and growing new markets : Profit center based

model was applied.• Direct distribution in rural market which focused on economies of scale

• Project Shakti Model (Shakti entrepreneur)

• A direct distribution channel for rural market penetration• Shakti entrepreneurs directly sold to retailers as well as consumers• Initial reduction in profit margin but overall an increase in sales led to

increase in profits• High control over the distribution channels.• Aimed at building consumers for life

Evaluating Different Channels

Project Shakti: Consumer Marketing Channel

HLL (Manufacturer)

SHG

Retailers

Consumers

• Integrated Multichannel System

Shakti Entrepreneurs

• Advantages: • Access to untapped market

• Drawback:• Income Generated very small• No sense of belongingness

• Advantages: • Responsibility was not shared among many• Income was not shared

Channel Conflict• Channel Conflict :

• Generated when one channel member’s action prevent another channel from achieving its goal

• Types :• Horizontal Channel Conflict • Occurs between channel members at same level

• Vertical Channel Conflict• Occurs between channel members at different level

• Multichannel Conflict• Exists when the manufacturer has established multiple channels that cater to the

same market• Occurs when member of one channel gets a lower price or works with low margin

Channel Conflict and Cooperation

Channel Conflict• HLL sold its products to Shakti

entrepreneurs at some discount relative to general trade.

• Entrepreneurs selling to a local outlet which in turn sells to consumers

• Have to sell at the price which can enable the outlet to earn a viable retail margin

• Limited the amount that the Shakti entrepreneur can earn, which is nothing but Channel conflict

Cooperation• Shakti entrepreneur can sell direct

to the consumers

• This allowed Shakti entrepreneurs to earn more by retaining the retail margin

• HLL can control the discount offered to them to manage channel conflict

Channel Management Decisions

SELECT TRAIN MOTIVATE EVALUATE MODIFY

• Villages with a population of 2000 – 3000 are targeted.• Personnel from HLL approach SHG’s• The representative of the company meets panchayat/village head and

identifies who would be suitable as Shahti amma.• One shakti entrepreneur (shakti amma) is appointed for 1 village &

villages that are 2 kms from her village

• To train the Shakti entrepreneur, RSP system was introduced.• Incentive programmes for newly appointed entrepreneurs.• Rewarding them in cash for visiting a specified no. of homes,

irrespective of the amount sold.• Additional incentives on sales of specific brand popular in a region.

• Shakti amma’s evaluated on sales growth and improvement in the sales techniques.

• No channel strategy remains effective over the whole product life cycle.• Customer data on low income rural income group is very limited. HUL

designed a GPS and density mapping technology to design its rural supply chains and sales networks.

• Population density helps in determining the no. of recruits, volume of product that supply chain needs to handle.

• With seasonal migration a common occurrence in rural India, the ability to continue to map population density quickly is a key competitive advantage, and a critical factor in building a flexible supply chain.

Shakti Vani: The Communicator

• Branded social communication program targeted at the rural community• Program implemented by Ogilvy Outreach, the rural activation unit of

advertising agency Ogilvy & Mather

• Structure:• To communicate best practices in the area of personal health • Local woman appointed as Vani, trained and positioned as health and hygiene expert• Cover cluster of villages, organize school-contact programs, SHG meetings & other

social occasions

• Advantages:• Stable HLL brands cost 10-15 % of sales in promotion, while this program cost 3-5 % • Primary awareness about personal health would benefit HLL by growing the market for

its products in long run

iShakti : The Portal• Initiative to extend the benefits of information technology to rural India

and to empower the rural community by creating access to information

• Structure:• Dialogue-interactive software installed in the desktop• Registers user can log on to the site and get various information free of cost

• Advantage:• Communication channel of HLL, which other media failed to reach

Source: http://www.managementexchange.com/story/doing-well-doing-good-changing-lives-rural-india

Sustainable Competitive Advantage• Low Pricing (LUPs)• Brand Recognition (also Shakti Vani - HLL popularity due to

Project Shakti)• Distribution and Information Systems• Community Development – iShakti, NGOs and SHGs• Women Empowerment – Shakti Entrepreneur• Customer Service• Consumer for life

Conclusion• Delivers growth with its sales and distribution initiative • Builds brands of HLL in the consumers’ mind • Extends HLL’s reach into untapped markets• Provides sustainable livelihood opportunities for underprivileged

rural women• Improves standard of living in rural India

References• http://

www.hul.co.in/sustainable-living/casestudies/Casecategory/Project-Shakti.aspx

• http://www.managementexchange.com/story/doing-well-doing-good-changing-lives-rural-india

Thank YouGroup - 1

Katib Ali A005

Siddhartha Biswal A012

Archisman Chaterjee A013

Kumar Rohan A042

Sameer Sehgal A047

Karan Shah A050

Ravneet Singh A052

Jinesh Vora A056