PRODUCT STRATEGY

OBJECTIVES

Marketing mix challenges. Product concept and classification. New product development with

adoption process of consumers. Lifecycle of a product and Strategies in

rural packaging and after sales service.

Marketing mix challenges. Product -Acceptability Price-Affordability Place-Availability Promotion-Awareness

AVAILABILITY

First challenge-To ensure the availability of product or services.

638000 villages spread over 3.3 million sq km ; 742 million Indians may live in rural areas but finding them is not easy.

Poor state of roads ±a greater challenge to send products to far flung villages on a regular basis.

Solution strong distribution system

Example HLL¶s strong distribution system-

uses auto-rickshaws ,bullock carts and even boats in the backwaters of Kerala.

AFFORDABILITY

With low disposable incomes products need to affordable to rural consumers.

Most of them are daily wage earners. Some companies addressed the problem by

introducing small unit parks. Example includes Godrejs 3 brands cinthol, fairglow and godrej in

50gms pack prices rupees 4-5. HLL’s lifebuoy at Rs 2 for 50 gm. Coca cola’s Returnable 200 ml glass bottle atRs.5/-

ACCEPTABILITY

Need to provide product that suit the ruralmarket.

L.G.Electronics-Customized television and christened it Sampoorna.

Coca cola low cost iceboxes, tin box for new outlets and thermocol box for seasonal outlets because of lack of electricity and absence of refrigerators

 AWARENESS

Large parts inaccessible to conventional media. Only 41 percent got access.

Outing confined to local fairs and festivals

Television viewing to state owned channel-Doordarshan.

Godrej uses radio to reach people in their own language.

PRODUCTS CONCEPTS AND CLASSIFICATION

Market mix planning begins with offering.

Rural consumers judges offering on the basis of three elements

1)Product features and quality. 2)Service mix and quality. 3)Appropriateness of offering price.

Companies should not dump the goods for urban consumers into rural market.

Understand the cultural dynamics and specific needs.

Cadbury launched Chocolate flavored biscuit-mothers opt for affordable rather than expensive.

Eveready found plastic torches for urban consumers have got no demand in rural area they prefer heavy brass torches

Importance of product feature.

FIVE LEVELS OF PRODUCT

Each level adds more customer value and constitute a scale of customer value hierarchy.

Five levels are ,core benefit, basic product, expected product, augmented product , and potential product.

First two levels remains the same in both urban and rural market.

Difference from the third level only.

Third level-marketer prepares an expected product and defines a set of attributes and conditions that a consumer normally expects

Rural television buyer expects good picture quality, clear sound and easy to operate set.

Urban consumer goes for digital sound, flat screen etc.

Fourth level :marketer prepares an augmented product that meets the customers desires beyond expectations.

This could be a television which runs on batteries and better picture quality in weak signal conditions also local languages etc.

Where as for urban consumers this could be an inbuilt DVD player with a television etc.

Fifth level :encompasses all augmentations and transformations that the product may ultimately undergo in future.

Example electric bulbs that sustain high voltage fluctuations.

RURAL PRODUCT CATEGORIES

FMCGs Consumer Durables Agri Goods Services

FMCG MARKET

According to NCAER survey, the rural market accounted for 53% of the total consumption in the country in1998-99

The estimated size was around Rs. 484 billion in 1998-99 and Rs. 650 billion in 2002

FMCG GROWTH

Rural market has grown consistently in the1990s

A spatial distribution of the FMCG rural market shows that four states namely Uttar Pradesh, Andhra Pradesh, Maharashtra and West Bengal account for 50% share of this market

FMCG PRODUCTS

About 50% of sale of soaps, detergents and beverages, 37% of personal products (shampoo, toothpaste and skin cream)and 12% of food products comes from the rural market.

MARKET GROWTH

The average annual per capita spend on FMCGs in rural is Rs. 9400 as compared to Rs. 13000 for urban among rich households.

70% of the population accounts for only50% of even relatively well-penetrated categories such as soaps and detergents.

CONSUMER DURABLES

Durable goods include products like home appliances, automobiles, watches , furniture etc

Main Players

NCAER has classified durables into 3categories:

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

Consumer Durables Market As per NCAER Indian Market

Demographics Report 2002, rural India accounted for over 60% share of durables in 1998-99.

The estimated annual size of the rural market is Rs. 130 billion

RURAL SHARE

The rural share of durables has risen from54% in 1989-90 to over 60% in 1998-99.

Number of durables with over 75% share has increased from one to four products.

For several high priced products, the rural share continues to below 50%

DURABLE PRODUCTS

The rural penetration of most products is very low compared to urban except for bicycles, radios and mechanical wristwatches.

The rural-urban disparity is highest in case of electrical goods.

MARKET GROWTH

The mid 1990s witnessed impressive growth rates

It increased from 8.8% in the mid 1990s to11.5% from 2000 onwards.

AGRICULTURAL GOODS

Agri products are goods that are used for farm activities.

The agri inputs market accounts for Rs.450 billion annually.

The major players are Rallis India, DCM Shriram, Chamba lFertilizers, IFFCO, Mahindra & Mahindra,Eicher and Escorts

Services Major services in rural include

telecommunication, transport, health care, banking, insurance and education. This category includes LIC, SBI, BSNL, Reliance info com, ITCs ,ICICI Prudential Life Insurance etc.

NEW PRODUCT DEVELOPMENT

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

Eg: 5 k.g cooking gas cylinder by HPCL Jolly battery operated colour television Free power radio Kishan credit card

Product Life Cycle (PLC)

PLC of a product in the rural market is often longer than in the urban market due to challenges involved in distribution , communication and adoption

Products that enter rural markets without serious planning die out either soon after the introduction or during the growth stage

Companies have to focus on brand building and should innovate constantly to sustain in rural market

Pioneers in rural markets having high penetration with products at the maturity stage now extends their brands

PRODUCT MIX

Simple-mostly only one product of a particular company registers its availability on rural shelves due to

 limitations of investments in stocks,  slow movement and replenishment of

stocks,  dominance of retailer in the rural market Exceptions-HUL, Dabur 

RURAL PACKAGING

Plays significant role  Affordability,

ability to recognize, convenience of usage  product appeal Needs special focus because of Poor transport system Difficulties of safe storage Poor facilities

Marketers have to consider following factors in packaging

Packaging material Pack size and convenience 

PACKAGING MATERIAL

Most commonly used-plastics since they are waterproof, provides barriers to vapors, sunlight resistant, lightweight.

PACK SIZE AND COVENIENCE

Sachet revolution pioneered by Velvet Shampoo at Re. 1 in later 1970s later followed by HLL,Godrej, Dabur etc

Sachet packaging replicated in many product categories-Tiger biscuits, Close-up toothpaste,Parachute hair oil, Ponds cold cream, Fair &Lovely etc

Convenience- factor that affects the decision to use a product

Eg: Colgate tooth powder in small sachet with cap , close-up toothpaste, Fair& Lovely, Parachute coconut oil in Re.1 plastic bottles easy to use anytime

OTHER FACTORS IN PACKAGING

Lower literacy levels in rural market Consumers appreciate bright colours  Eg: Lifebuoy identified as red soap Distinct lettering, use of local languages on

the pack, images or symbols that convey products benefits influence consumer perception about the brand

BRANDING IN RURAL INDIA

Brand association with colors, numbers and visuals and not necessarily with the name of the brand

Retailers play a major role in rural brand promotion

BRAND BUILDING IN RURALINDIABRAND NAME DEVELOPMENT-FACILITATES

easy brand recall-some brands are known by their names.-

Colours (Lal dant manjan, lal sabun lifebouy, Red battery eveready)

Numbers and Visuals -Eg:Sampoorna rural television brand of LG. Ajanta toothpaste Sansar sewing machine

CREATING A BRAND IDENTITY Challenge: need to relate the brand with the rural

lifestyle Brands are introduced to urban markets and then

move to rural Tata Steel

Tata Shaktee sheets(qualities of strength, durability and toughness)

Britannia Tiger Biscuits ( smart, active and sharp child) BUILDING A BRAND IMAGE Brand has a personality of its own Helps in brand connect

BRAND LOYALTY VS STICKINESS

Rural people are less likely to switch brands as they do not have the required information

Comfortable in purchasing tried and tested brands : brand sticky than brand loyal

Educate rural customers Develop their interest through interactive

communication Deepen confidence through live

demonstrations Build a long term relationship

REASONS FOR BRAND STICKINESS

Many rural customers are still discovering the benefits of the products

Early Mover Advantage of the dominating brand

Entry of new brands very is difficult

FAKE BRANDS

Bonds for ponds talc Fair & lonely or Fair & Lovely Likeboy for Lifebouy The main problem of rural market is the low

penetration and the poor availability of branded products.

No distribution channel to reach the customer.

Led to the growth of spurious brands to fill the gap in the demand

THE FAKES MARKET CATEGORIES

1.Lookalikes The colour scheme on packaging material

closely resembles that of a popular brand. Eg: Shagun for Lifebouy(150 mg)Lalita Amla for

Dabur Amla 2.Spell-alikes Names are subtly and cleverly misspelt Eg: Paracute for Parachute Pomes for Ponds 3.Duplicates Exact replicas of original brands

STRATEGY TO COUNTER FAKES

Upgraded packaging Eg: Dabur Ensure deeper penetration and

continuous and regular availability of products

Forge strong relationships with local retailers.

STRUCTURE OF COMPETITION IN RURAL INDIA

Competition from other urban national products branded tea and detergent powder

Regional urban branded products -brands of the unorganized sector, like soaps, talc.

Local urban brands ribbons, bangles Local village brands ropes, bread, food items Substitutable products or indirect

competition

CONCLUSION

Product at the heart of marketing Products must achieve the best fit with

rural conditions. The shift of rural consumers from

product generalization to product specialization promises better growth .

First mover in new product categories will benefit.

PRICING STRATEGY

PRICING STRATEGY

Affordability is, in determined by two factors-1.Income of consumer

2.Price of the Product & Services

Factors influencing the price Internal Factors Cost Pricing Objective

External Factors Customers Suppliers Competitors

Cost Factor (Contd.) Promotion as a cost factor Credit-based transactions increase cost

ITC E-chaupal: A distribution channel to control costs

Buy crop directly from the farmers. The farmer is then paid for the crop and is also given a transport fee. Bonus points are given to those crops with high quality.

Pricing Objective (Contd..) Profit maximization in the long run eg.sell shampoos in sachets Minimum returns on sales turnover

Deeper penetration of the market Here objective is market expansion so the company launches its product at a lower price

Keeping with competition

Videocon :Pricing Strategy Videcon was one of the first companies to enter the

rural market with a plethora of products in the home appliances. It attacked market leader Phillips by launching a radio set for Rs.180(the Phillips radio set cost Rs.250) and grabbed a major chunk of the market.

Low Priced shampoo Cavinkare realized that for a family of five members at

rs.2 per sachet and minimum of four hair washes per person per month would mean a Rs. 40 spends for a shampoo . Many rural families cannot afford this expense. hence 50 p sachet shampoo were introduced.

External influences

Customers the price sensitivity of customers depends on personal, social,

economic , geographical factors .eg.chic shampoo introduced 50 p targeting daily and weekly labourers , sampoorna CTV from LG

Suppliers Retailers give credit to regular customers. Competitors Initially competition in the rural market was on basis of price. But

lately competition is on non price factors. eg-anchor whites vegetarian toothpaste

Legal environment

Pricing Strategies Optional-product pricing Captive-product pricing Low price points Avoid sophisticated packaging Refil packs/ reusable packs Highlight value, not price Product sharing services

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

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