Services Marketing
Southwest Airlines: Aligning People, Processes, And Physical Evidence
Southwest Airlines occupies a solid position in the minds of U.S. air travelers as a reliable, convenient, fun, low-fare, no- frills airline. Translated, this position means high value—a position reinforced by all elements of Southwest’s services marketing mix, It has maintained this position consistently over 30 years while making money every year; no other U.S. airline comes close to this record. As further evidence of the airline’s financial stability, Southwest was the only air line to remain profitable in the months immediately following the September11, 2001, tragedies in the United States that sent many airlines to near bankruptcy.
Success has come for a number of reasons. One is the airline’s low Cost structure. It flies only one type of plane (Boeing 737s), which lowers costs because of the fuel efficiency of the aircraft itself combined with the ability to standardize maintenance and operational procedures. The airline also keeps its costs down by not serving meals, having no preassigned seats, and keeping employee turnover very low. Southwest Airlines’ Herb Kelleher (president of Southwest from its inception until 2001, and currently serving as chairman) is famous for his belief that employees come first, not customers. The Dallas-based carrier has managed to be the low-cost provider and a preferred employer while enjoying high levels of customer satisfaction and strong customer loyalty. Southwest Airlines has the best customer service record in the airline industry and has won the industry’s “Triple Crown” for best baggage handling, on-time performance, and best customer complaint statistics many years in a row. This is a feat accomplished by no other airline. Southwest is also the number one airline in volume of tickets sold over the Internet.
Observing Southwest Airlines’ success, it is clear that all of its marketing mix is aligned around its highly successful market position. The three new marketing mix elements all strongly reinforce the value image of the airline:
• People Southwest uses its people and its customers very effectively to communicate its position. Employees are unionized, yet they are trained to have fun, allowed to define what “fun” means, and given authority to do what it takes to make flights lighthearted and enjoyable. People are hired at Southwest for their attitudes; technical skills can be and are trained. And they are the most productive workforce in the U.S. airline industry. Customers also are included in the atmosphere of fun, and many get into the act by joking with the crew and each other and by flooding the airline with letters expressing their satisfaction.
• Process The service delivery process at Southwest also reinforces its position. There are no assigned seats on the aircraft, so passengers line up and are “herded” by number onto the plane, where they jockey for seats. The airline does not transfer baggage to connecting flights on other airlines. Food is not served in flight. ln all, the process is very efficient, standardized, and low-cost, allowing for quick turnaround and low fares. Customers are very much part of the service process, taking on their roles willingly.
• Physical evidence All of the tangibles associated with Southwest further reinforce the market position. South west’s aircraft are orange and mustard brown, which accentuates their uniqueness and low-cost orientation. Employees dress casually, wearing shorts in the summer to reinforce the “fun” and further emphasize the airline’s commitment to its employees’ comfort. The reusable plastic boarding passes are another form of physical evidence that signals low cost and no frills to customers. No in-flight meal service confirms the low-price image through the absence of tangibles—no food. Because many people joke about airline food, its absence for many is not viewed as a value detractor. Southwest’s simple, easy-to-use website is yet another form of consistent, tangible evidence that supports the airline’s strong positioning and reinforces its image.
The consistent positioning using the services marketing mix reinforces the unique image in the customer’s mind, giving Southwest Airlines its high-value position, which has resulted in a huge and committed following of satisfied customers and consistently increasing profits.
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Saturday, October 18, 2008
IS THE MARKETING OF SERVICES DIFFERENT? A HISTORICAL PERSPECTIVE
IS THE MARKETING OF SERVICES DIFFERENT? A HISTORICAL PERSPECTIVE
In 1979 Gary Knisely, a principal of the consulting firm Johnson Smith & Knisely, asked the above question to practicing services marketers. Specifically, Knisely interviewed several high-ranking marketing executives who had all gone to work in the consumer service industry after extensive experience in the consumer packaged goods industry (known for its marketing prowess).These executives found differences, all right. Their discoveries came from attempts to apply (with mixed success, it turned out) consumer goods marketing practices directly to services. James L. Schorr of Holiday Inns Inc., formerly with Procter & Gamble, found that he could not overlay consumer goods firm’s marketing system onto a service firm. He, and the other executives interviewed, expressed certain recurring themes. First, more variables exist in the marketing mix for services than for consumer goods. Schorr claimed that in a service business, marketing and operations are more closely linked than in a manufacturing business; thus the service production process is part of the marketing process. Second, customer interface is a major difference between goods marketing and services marketing. Executives from packaged goods companies never had to think in terms of a direct dialogue with their customers. For Schorr, the marketing of hotel rooms boiled down to a “people-on-people” sale. Robert L.Catlin, in relating his experience in the airline industry, stated, “Your people are as much of your product in the consumer’s mind as any other attribute of the service.” People buy products because they believe they work. But with services, people deal with people they like and they tend to buy services because they believe they will like them. This makes the customer-employee interface a critical component of marketing.
The executives also commented on how the marketing mix variables common to both goods and services have vastly different implications for marketing strategy in the two industries. In the distribution and selling of services, the firm cannot rely on well stocked shelves past which the consumer can push a cart and make selections. Consumers’ exposure to the full range of need-fulfilling service products may be limited by the salesperson’s “mental inventory” of services and how he or she prioritizes them We can say that the service product manager is competing for the “mental shelf space” of the firm’s sales personnel. For Rodney Woods, group marketing officer at United States Trust Co., pricing was the most critical factor in the marketing of services versus products. For Woods, determining the costs associated with service production and delivery proved very difficult, much more of a challenge than he had faced in his earlier career working with such large packaged goods companies as Pillsbury, Procter & Gamble, and Bristol-Myers. Also, the benefits of using price as a promotional weapon were not as apparent. Promotional price cuts tended to erode hard fought positioning and image. While scholars debated early on the issue of whether marketing management differs for goods versus services, for top managers with experience in both areas the differences were pronounced in 1979. They still are today. The differences these early service marketers noted were the impetus for many of the ideas, concepts and strategies practiced today.
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Services Marketing
In 1979 Gary Knisely, a principal of the consulting firm Johnson Smith & Knisely, asked the above question to practicing services marketers. Specifically, Knisely interviewed several high-ranking marketing executives who had all gone to work in the consumer service industry after extensive experience in the consumer packaged goods industry (known for its marketing prowess).These executives found differences, all right. Their discoveries came from attempts to apply (with mixed success, it turned out) consumer goods marketing practices directly to services. James L. Schorr of Holiday Inns Inc., formerly with Procter & Gamble, found that he could not overlay consumer goods firm’s marketing system onto a service firm. He, and the other executives interviewed, expressed certain recurring themes. First, more variables exist in the marketing mix for services than for consumer goods. Schorr claimed that in a service business, marketing and operations are more closely linked than in a manufacturing business; thus the service production process is part of the marketing process. Second, customer interface is a major difference between goods marketing and services marketing. Executives from packaged goods companies never had to think in terms of a direct dialogue with their customers. For Schorr, the marketing of hotel rooms boiled down to a “people-on-people” sale. Robert L.Catlin, in relating his experience in the airline industry, stated, “Your people are as much of your product in the consumer’s mind as any other attribute of the service.” People buy products because they believe they work. But with services, people deal with people they like and they tend to buy services because they believe they will like them. This makes the customer-employee interface a critical component of marketing.
The executives also commented on how the marketing mix variables common to both goods and services have vastly different implications for marketing strategy in the two industries. In the distribution and selling of services, the firm cannot rely on well stocked shelves past which the consumer can push a cart and make selections. Consumers’ exposure to the full range of need-fulfilling service products may be limited by the salesperson’s “mental inventory” of services and how he or she prioritizes them We can say that the service product manager is competing for the “mental shelf space” of the firm’s sales personnel. For Rodney Woods, group marketing officer at United States Trust Co., pricing was the most critical factor in the marketing of services versus products. For Woods, determining the costs associated with service production and delivery proved very difficult, much more of a challenge than he had faced in his earlier career working with such large packaged goods companies as Pillsbury, Procter & Gamble, and Bristol-Myers. Also, the benefits of using price as a promotional weapon were not as apparent. Promotional price cuts tended to erode hard fought positioning and image. While scholars debated early on the issue of whether marketing management differs for goods versus services, for top managers with experience in both areas the differences were pronounced in 1979. They still are today. The differences these early service marketers noted were the impetus for many of the ideas, concepts and strategies practiced today.
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Services Marketing
Rural Marketing
Rural Marketing
Quite clearly, large Indian companies have begun looking at rural markets seriously. Some of them are even developing exclusive marketing strategies to tap this huge mass of consumers. Of India's one billion plus population, nearly 70 per cent live in non-urban or rural areas. According to a National Council for Applied Economic Research (NCAER) study, there are as many "middle income and above" households in rural areas as there are in urban areas. There are almost twice as many "lower middle income" households in rural areas as in urban. According to NCAER's projections, the number of middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. In Urban India, the same is expected to grow from 46 million to 59 million. Hence the absolute size of middle and high income households in Rural India is expected to be nearly double that of Urban India.
Percentage Distribution of household population and income
HOUSEHOLDS POPULATION INCOME
RURAL 73.6 74.6 55.6
URBAN 27.4 25.4 44.4
ALL INDIA 100 100 100
Thus we see that Rural India contributes almost 56% to the National Income as against 44% contributed by Urban India. Although it is contributed by 76% of the total population, which has its own challenges like how to sell small quantities to large base of consumers.
PERCENTAGE OF POPULATION BELOW POVERTY LINE BY RURAL-URBAN LOCATION STATE WISE (1999-2000)
STATES RURAL URBAN
ALL-INDIA 36.35 28.76
ANDHRA PRADESH 25.48 32.28
ASSAM 61.78 12.48
BIHAR 58.85 45.10
GUJARAT 26.22 21.70
HARYANA 14.86 13.79
KARNATAKA 38.50 24.55
KERALA 26.50 31.89
MADHYA PRADESH 39.35 46.29
MAHARASTRA 50.00 32.16
ORISSA 62.67 34.27
PUNJAB 14.24 6.74
RAJASTHAN 15.01 24.36
TAMIL NADU 39.37 29.82
UTTAR PRADESH 29.87 36.39
WEST BENGAL 55.16 16.74
In terms of poverty, unemployment and level of development rank of India in:
1947 86
1991 123
2000 136
OUT OF 156 COUNTRIES
Thus the Situation has further worsened as per the Report on Human Development Index.
DIAGNOSIS OF THE FAILURES
The apparent disparity requires introspection to identify the gaps, which can then be bridged between rural & urban India.
1 LOW PRIORITY TO AGRICULTURE
Relative share (%) of agriculture to total GDP
SECTOR 1950-51 1995-96
AGRICULTURE 56 29
MANUFACTURING 15 29
TRANSPORT & TRADE 11 20
BANKING 9 11
ADMINISTRATION (SERVICES) 9 11
Growth rates in different sectors of economy
PARTICULARS 1990-91 91-92 92-93 94-95
GROWTH IN REAL GDP % 5.2 1.1 4.3 4.3
GROWTH IN AGRICULTURE PRODUCTION % 3.0 -1.9 2.9 2.9
GROWTH IN INDUSTRIAL PRODUCTION % 8.3 0.6 2.3 4.1
2 SUBSISTENCE ORIENTATION OF AGRICULTURE
a. Productivity is low
b. Not enough value addition
c. Land degradation
3 FAILURE OF LAND REFORMS
d. Failure of redistribution of land in favor of poor.
e. Large numbers of workers dependent on agriculture leading to low labor productivity.
f. Splitting of families and rise in population has shrunk the size of operational land holding.
g. Landlessness is increasing forcing more and more people joining labor market every year.
4 INADEQUATE FOOD SUPPLIES
a. At national level India is self-sufficient but inadequate at the household level.
b. Increase in food production mainly due to few crops like wheat & rice but production of bajra, barley etc has declined considerably (as these are the corps used by poor in rural India).
5 SLOW GROWTH OF INFRASTRUCTURE
a. Still 40% of India’s villages are without proper roads.
b. 1.8 Lac villages do not have primary schools within 1 km.
c. 4.5 Lac villages have drinking water problem.
6 INADEQUATE INPUTS
a. Research extension systems are weak, no direct link between scientists and farmers.
b. Problems faced in the timely availability of improved seeds, fertilizers and pesticides in required quantity.
c. Credit is major constraint, which adversely affects adoption of new technologies especially by the small farmers.
7 SLOW DOWN OF RURAL INDUSTRIALIZATION
The rural industrialization has slowed down although the expenditure on rural industries increased from Rs.42/- crores (1st plan) to Rs.6334/- crores (8th plan). However %age of allocation decreased from 2.1% to 1.6%.
Plan outlay on rural industrialization (Rs. Crore)
PLAN PUBLIC SECTOR
OUTLAY RURAL
INDUSTRY %
I 1960 42 2.1
II 4672 187 4.0
III 8577 241 2.8
ANNUAL PLAN 6628 126 1.9
IV 15779 293 1.9
V 39426 592 1.5
ANNUAL PLAN 12601 289 2.3
VI 97500 1780 1.8
VII 180000 2753 1.5
VIII 434100 6334 1.6
Rural Marketing: A silent revolution is sweeping the Indian countryside. It has compelled marketing whizkids to go rural. The marketing battlefield has shifted from the cities to the villages. “Go Rural” seems to be the latest slogan.
Adi Godrej of Godrej soaps says:
“The rural consumer is discerning and the rural market is vibrant. At the current rate of growth it will soon outstrip the urban market. The rural market is not sleeping any longer. We are.”
C. K. Prahlad, the management guru observes:
“Selling to the poor may be more profitable than selling to you and me. This is where the future is. Opportunities are every where. The digital divide is not about lack of opportunity, it is about the lack of imagination.”
Evolution of Rural Marketing
PHASE ORIGIN FUNCTION MAJOR
PRODUCTS SOURCE
MARKET DESTINATION
MARKET
I Before Mid-1960 Agricultural Marketing Agricultural
Produce Rural Urban
II Mid- Sixties Marketing Of
Agricultural Inputs Agricultural
Inputs Urban Rural
III Mid- Nineties Rural
Marketing Consumables And
Durables For
Consumption & Production Urban Rural Rural
Nature of Rural Market
Is rural marketing transactional or developmental in its approach?
It is true, rural markets have become an attractive proposition for commercial business organizations.
The role of rural marketing as such is more developmental than transactional. It is more a process of delivering better standard of living and quality of life to the rural environment taking into consideration the prevailing village milieu.
Transactional Vs Developmental: For better comprehension of this role let us distinguish development marketing and transactional marketing. Table 3.5 brings out the differences in brief.
Transactional Vs Development Marketing
S.No. Aspect Transactional Development
1. Concept Consumer orientation, Marketing concept Society orientation, societal concept
2. Role Stimulating and conversional marketing Catalytic and transformation agent
3. Focus Product-market fit Social change
4. Key task Product innovations and communications Social innovations and communications
5. Nature of activity Commercial Socio-cultural, economic
6. Participants Corporate enterprises, Sellers Government, voluntary agencies, corporate enterprises, benefactors
7. Offer Products and services Development
projects/schemes/programs
8. Target group Buyers Beneficiaries and buyers
9. Communication Functional Developmental
10. Goal Profits
Customer satisfaction
Brand image Market development
Corporate Image
11. Time-Frame Short-medium Medium-Long
12. Motivation Profit-motive
Business policy Service-motive
Ideological or Public policy
Model: The model of rural marketing represents a combination of the transactional and developmental approaches.
• Rural marketing process is both a catalyst as well as an outcome of the general rural development process. Initiation and management of social and economic change in the rural sector is the core of the rural marketing process. It becomes in this process both benefactor and beneficiary.
• Innovation is the essence of marketing. Innovative methods of social change for successful transformation of traditional society are virtual. Such a change narrows the rural-urban divide.
• The process of transformation can be only evolutionary and not revolutionary. The growth of the rural market can be a planned evolutionary process based on strategic instruments of change rather than constitute just short-term opportunities for commercial gains.
• The exposure of ruralites to a variety of marketing transactions during the change process puts them in the role of beneficiaries than of just `buyers' of modern inputs and infrastructural services.
• Communication is the vital element of rural marketing. It should serve to resolve social conflicts, encourage cooperation and strengthen competitive spirit during interactions between rural and urban as well as within rural areas. Another critical point for communication is the point of conversion of ruralite from an "induced beneficiary" to an "autonomous buyer".
ATTRACTIVENESS OF RURAL MARKET
1 Large population
2 Rising prosperity
3 Growth in consumption
4 Life cycle changes
5 Life cycle advantages
6 Market growth rate higher than urban
7 Rural marketing is not expensive
8 Remoteness is no longer a problem
1 Large Population: The rural population is large and its growth rate is also high. Despite the rural urban migration, the rural areas continue to be the place of living majority of Indians.
2 Rising Rural Propensity:
INCOME GROUP 1994-95 2000-01 2006-07
ABOVE RS. 100,000 1.6 3.8 5.6
RS. 77,001-100,000 2.7 4.7 5.8
RS. 50,001-77,000 8.3 13.0 22.4
RS. 25,001-50,000 26.0 41.1 44.6
RS.25,000 & BELOW 61.4 37.4 20.2
Projections based on 7.2% GDP growth.
Thus we see that population between income level of Rs. 25,000- 77,000 will increase from 34.3% in 1994-95 to 67.0% in 2006-07.
3 Growth in consumption:
PER CAPITA HOUSEHOLD EXPENDITURE (IS RS.)
LEVEL NO. STATES EXPENDITURE
High
(Above Rs 382/-) 7 Punjab 614
Kerala 604
Haryana 546
Rajasthan 452
Gujarat 416
Andhra Pradesh 386
Maharastra 384
Average
(Rs. 382/-) 5 West Bengal 382
Orissa 381
Tamil Naidu 381
Uttar Pradesh 373
Karnataka 365
Low
(Below Rs. 382/-) 3 Assam 338
Madhya Pradesh 326
Bihar 289
Distribution household’s income wise (projection in Rs Crore)
INCOME GROUPS 2001 – 02 2006 – 07
RURAL RURAL
TOTAL NO. % TOTAL NO. %
HIGH 0.26 0.07 26.9 0.52 0.12 23.1
MIDDLE 12.04 7.73 64.2 16.72 10.32 61.8
LOW 5.7 5.09 88.7 3.68 3.52 95.7
TOTAL 18.04 12.89 71.4 20.90 13.96 66.7
Spending pattern (Rural Household’s in Rs.)
ITEM % RICH POOR AVERAGE
FOOD ARTICLES 44 147 73 95
TOILETRIES 20 67 33 43
WASHING MATERIAL 13 43 22 28
COSMETICS 10 33 17 21
OTC PRODUCTS 4 13 6 9
OTHERS 9 30 15 19
TOTAL 333 166 215
Average rural household spends on consumables excluding food grains, milk & vegetables are Rs. 215/-.
4 Life style changes:
Income vs. usage of packed consumer goods (% of household using)
GOODS MONTHLY HOUSEHOLD INCOME (RS.)
UP TO 350 351 – 750 751 – 1500 1501 +
WASHING CAKES/BARS 60 78 86 91
TOILET SOAPS 57 72 89 93
TOOTH PASTE/POWDER 22 36 65 85
TALCUM POWDER 20 25 41 63
TEA (PACKAGED) 22 30 48 64
5 Life cycle advantage:
STAGES IN LIFE CYCLE
PRODUCT URBAN MARKET GROWTH
RATE % RURAL
Popular soaps Maturity 2 Growth
Premium soaps Late growth 11 Early growth
Washing powder Late growth 6 Early growth
Skin creams Maturity 1.1 Growth
Talcum powder Maturity 4 Growth
6 Market growth rates higher: Growth rates of the FMCG market and the durable market are higher in rural areas for many products. The rural market share will be more than 50% for the products like toilet soaps, body talcum powder, cooking medium (oil), cooking medium (vanaspati), tea, cigarettes and hair oil.
7 Rural marketing is not expensive: Conventional wisdom dictates that since rural consumers are dispersed, reaching them is costly. However, new research indicates that the selling in Rural India is not expensive. According to one research it costs roughly Rs.1 Crore to promote a consumer durable inside a state. This includes the expenses of advertising in vernacular newspapers, television spots, in-cinema advertising, radio, van operations and merchandising and point of purchase promotion. Campaign like this, which can reach millions, costs twice as much in urban area.
8 Remoteness is no longer a problem: Remoteness in a problem but not insurmountable. The rural distribution is not much developed for the reasons,
Lack of proper infrastructure such as all-weather roads, electrification and sanitation, and
Lack of marketer’s imagination and initiative.
Marketers have so far, failed in analyzing the rural side and exploiting rural India’s traditional selling system- Haats & Melas.Their near obsession with just duplicating the urban-type network and that too with very limited success, has kept them blind to the potential of these two outlets.
RURAL VS URBAN MARKETING-SUMMARY
NO. ASPECT URBAN RURAL
1 PHILOSOPHY Marketing & Societal Concepts & Relationship Marketing Marketing & Societal Concepts, Development Marketing & Relationship Marketing
2 a) MARKET
b) DEMAND High Low
c) COMPETITION Among Units In Organized Sector Mostly From Unorganized Units
CONSUMERS
LOCATION Concentrated Widely Spread
LITERACY High Low
INCOME High Low
EXPENDITURE Planned, Even Seasonal, Variation
NEEDS High Level Low Level
INNOVATION/ADOPTION Faster Slow
3 PRODUCT
AWARENESS High Low
CONCEPT Known Less Known
POSITIONING Easy Difficult
USAGE METHOD Easily Grasped Difficult To Grasp
QUALITY PREFERENCE Good Moderate
4 PRICE
SENSITIVE Yes Very much
LEVEL DESIRED Medium-high Medium-low
5 DISTRIBUTION
CHANNELS Wholesalers, stockists, retailer, supermarket, specialty stores, & authorised showrooms Village shops, “Haats”
TRANSPORT FACILITIES Good Average
PRODUCT AVAILABILITY High Limited
6 PROMOTION
ADVERTISING Print, audio visual media, outdoors, exhibitions etc. few languages TV, radio, print media to some extent. More languages
PERSONAL SELLING Door-to-door, frequently Occasionally
SALES PROMOTION Contests, gifts, price discount Gifts, price discounts
PUBLICITY Good opportunities Less opportunities
MARKETING MIX (4 P’S OF MARKETING)
Product: - Product variety, quality, design, features, packaging, sizes, services, and returns.
Price: - List price, discounts, credit terms.
Promotion: - Sales promotion, advertising, public relation, direct marketing.
Place: - Channels, coverage, assortment, locations, inventory.
BUYING HABITS VARY DEPENDING ON THE TYPES OF GOODS
CONVENIENCE GOODS
-Consumer purchase it with least effort
-Low unit prices and frequently purchased
-Not much planning require
-Products of daily consumption
E.g.: Toothpaste, soap.
SHOPPING GOODS
-Consumer spend some time in buying these goods
-Medium unit prices and bought occasionally
-Some planning is require
-Products like: shoe, dresses etc.
Specialty Goods
-Consumer spend considerable time in buying these goods
-Medium unit prices and bought less frequently than shopping goods
-Lot of planning is require
-Products like: car watches.
According to the readiness in trying new product, customers are categorized as:
INNOVATORS: THESE ARE THOSE BUYERS WHO WOULD BE THE FIRST ONE TO TRY THE NEW PRODUCT. THEY ARE RISK TAKERS. THEY LOVE TO BE SEEN WITH THE LATEST OR NEW PRODUCTS.
EARLY ADOPTERS: THESE BUYERS BUY THE PRODUCT SUFFICIENTLY EARLY BUT NOT AS EARLY AS INNOVATORS. THEY BECOME THE OPINION LEADERS IN THEIR COMMUNITY
EARLY MAJORITY: THESE BUYERS BUY PRODUCT BUT AHEAD OF THE AVERAGE PERSON IN THE COMMUNITY. THEY ARE IN LARGE NUMBER. THEY ARE SLIGHTLY CONSERVATIVE IN NATURE AND THEY WANT TO BE TOTALLY SURE BEFORE BUYING A PRODUCT.
LATE MAJORITY: THESE ARE THE BUYERS WHO ARE VERY CAUTIOUS. THEY WOULD ONLY ACCEPT THE PRODUCT WHEN A WHOLE OR BIG CHUNK OF COMMUNITY HAS BOUGHT THE PRODUCT.
LAGGARDS: THESE ARE THE CUSTOMERS WHO ARE THE LAST ONES TO BUY ANY PRODUCT. THEY ARE HIGHLY RESISTANT TO CHANGE.
ROLE PLAYED BY PEOPLE IN BUYING DECISION
Initiator: - The person who first suggests the idea of buying the product or services.
E.g. In a family the youngest son who is in school suggest that we should go in for the change of car to his father that is he has initiated the process for buying the car.
Influence: - The people whose views or advise influence the decision. E.g.: Now father talks to his son who is elder to the above who is studying in MBA. Since he is always studying about cars he is well vested with the various models. He suggests his father that we should think of INDICA or ZEN. He has influenced his father.
Decider: - The person who decides on any component of a buying decision; whether to buy, what to buy, how to buy or where to buy.
E.g.: Third son of the father who is working in an MNC when asked by the father, he tells him that INDICA would be a better option as it would reduce the monthly bill being a car which runs on diesel. He has decided what car to buy for the father.
Buyer: - the person who makes the actual purchase. E.g.: Father has now made a decision and bought INDICA from one of the dealer who was to known to him. Father paid the money and is the buyer,
User: - The person who consumes or uses the product or services. E.g.: This new INDICA is actually to be used by their sister who teaches in the school.
Buying Behavior
Consumer decision making would vary with the type of buying decision. You would agree that decision to buy toothpaste, a tennis racket; personal computer and a car are all different.
There are 4 types of buying behavior based on the degree of buyer involvement and the degree of difference between buyers: -
Complex buying behavior: - This type of buying behavior is involved when the product is expensive, bought infrequently. E.g.: Automobile
The consumer will spend lot of time in discussing and planning about the purchase of such a product.
Dissonance reducing buying behavior: - This type of buying behavior is involved when purchase is expensive, infrequent and risky but there is not much difference between the various brands. E.g.: you are planning to buy a DDA flat in a particular locality. You would agree that all the flats are similar in size and construction. Once you decide to buy a particular flat you will be more concerned that you should not have any problem after buying it. Let us assume you wanted to buy a flat and you have not noticed a dustbin close to it. Now when you come to know about dustbin you would not have buys that flat.
Habitual buying behavior: - This type of buying behavior is for the product, which have low involvement and the absence of significant difference between the brands. These products are frequently purchased. E.g.: When you want to buy product like salt you don’t even think when you go to store whatever brand is available you would have pick it up.
Variety seeking buying behavior: - This type of buying behavior is involved when low involvement is there but there are significant differences between the brand.
E.g.: Think about cookies, you may want to change the cookies that you had last time not because they were bad but you want to change the taste.
FIVE STAGE MODEL OF CONSUMER BUYING PROCESS
NEED IDENTIFICATION: the buying process starts when the buyer recognizes a problem or need, this need could be because of internal or external stimulation.
INTERNAL STIMULATION: say when we are hungry we may want to eat something.
EXTERNAL STIMULATION: say when we are passing through a bakery shop you smell the freshly baked biscuits based on this you may want to buy, to consume biscuits.
INFORMATION SEARCH: Once the need has been identified the consumer would look for more information about the product. This information he may get from personal sources {family friends, neighbors, etc.} or commercial sources {advertising, sales person, dealers, displays}
EVALUATON OF ALTERNATIVES: Now that consumer has got information of the product and the companies that are selling their product. He would to evaluate the various alternatives that he has, various products will have different attributes on which they would be evaluated. For e.g.: cameras, picture sharpness, camera speed, camera size and price
PURCHASE DECISION: As the consumer has evaluated various alternatives, he would then purchase the product. This is the final act that the consumer performs after evaluating all the alternatives.
POST PURCHASE BEHAVIOUR: Once the consumers have purchased the product, he would either satisfied or dissatisfied. If the consumer is satisfied, he will tell his friends about the same and as such a better word of mouth is spread of the product. But in case the consumer is dissatisfied he will tell to all his friends and associates about the dissatisfaction that he had after using or consuming the given product.
A survey conducted by MFL-fabrics division indicated certain new realities:
• More than seven out of ten rural households possess watches.
• One in fifty households have a color television set.
• Seven out of every hundred households own an electric iron.
• 70 per cent of the sales of tables and portable radios, bicycles and cigarettes are from the rural market.
• Rural people are very particular when it comes to attitudes and aspirations.
• Rural consumers are even more particular about quality and value than their urban counterparts.
• Rural consumers are more brand loyal than the urban consumers.
• And social mores and norms impact the rural consumer in ways very different from their urban counterparts, especially in case of reference group influences and opinion.
MARKETING INFORMATION SYSTEM
Marketing Information System is defined as an assembly of inter-related information subsystems: receiving, processing and disseminating information on a continued basis to help make marketing decision.
The subsystems of marketing information
SUBSYSTEM INFORMATION
INTERNAL REPORTING SYSTEM Internal reports as order, sales, deliveries, inventory, credit sales etc. It is data of events occurred and results obtained.
MARKETING INTELLIGENCE SYSTEM Information about relevant events or developments external to the firm. The sources are newspapers, magazines, journal and other publications, conferences, exhibitions, meetings etc.
MARKETING RESEARCH SYSTEM Systematic investigation of information about a phenomenon specific to marketing situation. Desk or field research own research or through agency.
DECISION SUPPORT SYSTEM A coordinated set of models and procedures with supporting computer software & hardware.
New research tools Rural Markets:
As conventional research tools proved ineffective in these markets, researchers have started working out new solutions to these problems. Since the tools have to be such that the rural respondent can understand hence use of written text is reduced but images and the association of colors is being used which they can understand easily.
1. Images: Faces
2. Colors
Differences in Urban-Rural Market Research
ASPECT URBAN RURAL
RESPONDENTS Literate, brand aware, individual respond individually Semiliterate or illiterate, brand unaware, difficult to get individual responses, generally group responses
TIME Willing to respond, have time pressures, spares little time for researcher Hesitant but devotes time.
ACCESSIBILITY Easy to access, though many suffer from research fatigue Tough to access:
Geographical distances and psychological apprehension are barriers
Do not speak to outsiders easily
SECONDARY DATA SOURCE Internal data, syndicate research, published media, many sources and large data Very few sources and less data
PRIMARY DATA SOURCES Large number of middlemen, experts, sales force, consumers opinion leaders Less number of all categories
SAMPLING Respondents form relatively homogenous group. Income can be a criterion Heterogeneous groups. Income and land holding be carefully applied
DATA COLLECTION Use of sophisticated instruments, style and admiration.
Respondents comfortable with numbers ratings. Requires simplified instruments.
Respondents comfortable with colors & pictures.
SELECTING & ATTRACTING NEW MARKETS
Selecting and attracting markets involves three decisions viz., segmenting, targeting and positioning
Concepts & Process
o Segmentation is the process of dividing or categorizing market into different groups based on one or more variables.
o Targeting is selecting the market segment, which can be served efficiently and profitably. It is deciding on market coverage strategy.
o Positioning is a market attraction strategy, which involves placing the brand in the minds of the customers in the target market.
The various steps included in the market coverage and attraction process are:
DECISION ACTIONS
SEGMENTATION Identification of various bases for segmenting the market.
Developing profiles of the marketing segments.
TARGETING
Evaluating the market segment for their attractiveness.
Deciding the market coverage strategy
POSITIONING Identifying a set of possible competitive advantages of the brand
Selecting the right competitive advantage
Communicating the chosen competitive advantage to the target
customers
Segmentation is the process of identifying & establishing alternative market segments.
Next step that is ,targeting involves is evaluation, selection & coverage.
Evaluation of segments (following criteria may be applied):
Profitability - relevant information required is:
i. Sales volume
ii. Distribution cost
iii. Promotion cost
iv. Sales revenue
v. Profit margins
Attractiveness
Growth rate
Company objectives
Limitations
Selection of segments.
Coverage of segments
SEGMENTATION TYPE OF MARKETING COVERAGE STRATEGY
Zero Mass Undifferentiated
Substantial Segmented Differentiated
Selective Niche Concentrated
CHOOSING A COVERAGE STRATEGY
VARIABLE STRATEGY
UNDIFFERENTIATED DIFFERENTIATED CONCENTRATED
RESOURCES Moderate Large Limited
PRODUCT VARIABILITY Less More Less
PRODUCT LIFE CYCLE STAGE Introduction Growth Introduction
MARKET VIABILITY Less High High
POSITIONING
Positioning is the act of finding a place in the minds of consumers and locating a brand therein. Positioning involves:
1. Identifying the difference of the offer vis-à-vis competitor’s offer.
2. Selecting the differences that have greater competitive advantage.
3. Communicating such advantages effectively to the target audience.
Identifying the differences - marketing offer may be differentiated along the following lines:
Product
Service
People
Image
GUIDES TO EFFECTIVE SEGMENTATION
Segmentation can be effective only if it satisfies the following requirements:
1 Measurable:
• Segment formed with the help of variables should be distinct, clear and measurable.
• Companies have not been able to reach rural markets due to lack of proper data
2 Accessible:
• Reach is important to serve the segments.
• Marketers till recently prepared urban markets to rural ones because of the inaccessibility or the later.
• “HAATS” organized weekly are the places where one would be able to contact Rural customer.
3 Differentiable:
• Segments merit consideration of marketers only when they have distinguishing features. E.g. Buying of wrist watches heavy for rural light for urban customers.
4 Substantial:
a. A segment is attractive only when it is profitable.
i. Homogeneous
ii. Large
PRODUCT HAS DIFFERENT LEVELS OF AN OFFER
Core: It is something which is must or something which the product should do right.
Enhancement: - It is something, which the marketer is offering to the customer.
True Extras: - It is added to the product that increases the value in the eyes of the customer.
Special Products for Rural Markets:
• Rural Transporter: Mahindra & Mahindra is busy developing the prototype of what it calls a ‘Rural Transporter’ – basically a hybrid between a tractor and a rural transport vehicle. The product at 20-25 HP will be targeted at those who cannot afford a normal tractor and would also fulfill the need of family transporter that could take in the rural roughs but would be much more comfortable and safer than the conventional tractor-trolley.
• Sampoorna TV: LG Electronics, the Korean firm has rejigged the TV to appeal to local needs. It spent Rs. 21 Lacs to develop a set that would have on-screen displays in the vernacular languages of Hindi, Tamil and Bengali. The logic, rural consumers unfamiliar with English would still be able to use the TV without being intimidated.
• Titan Watches: A recent NCAER study revealed that there is a great potential for watches in rural areas. In fact it is considered to be a high priority list. It was also found that a rural consumer looks for the ruggedness of the watch more than the urban consumer does. He prefers thick watches than slim watches.
The biggest problem that the Marketers are facing in the Rural Markets is Of IMITATIONS. Imitations may result in two types of goods depending upon the purpose, commitment, and competence of imitator. A poor imitator will end up in producing deceptive, spurious, fake, copycat products. He dupes the gullible customer by offering products having close resemblance with the original. In quality, it is poor cousin to the original. On the other hand, a poor imitator may even produce an improved version of the original product.
In this scenario the job of the Marketer becomes even more difficult in the sense that he has not to fight other competitors but also the imitated products.
The advantages that these products enjoy in the rural markets are that the Imitators who are in the villages are making these and they are offering
More Margins & Better credit Facilities.
To solve this problem the Marketer has to educate the consumer about his product and show him the benefits of his products over the imitated ones.
Project Shakti of HLL is a step in this direction where Ladies from the villages distribute these products of HLL where by they explain the benefits of using good products and it helps them to increase their household income.
Need-Product Relationships and the changes happening in Rural India
Needs Old Products New Products
Brushing Teeth Neem sticks, Charcoal, Rocksalt, Husk Toothpaste, tooth powder
Washing Vessels Coconut fibre, Earthy materials, Brick Powder, Ash Washing Powders, soaps and liquids
Transport Bullock Cart, Horses, Donkeys Tractors, LCVs, Mopeds, Scooters, Motor cycles
Irrigation Wells, Canals, Water lifters, Wind Mills Bore-wells, Motors, Power Generators, Pump Sets
Hair Wash Shikakai powder, Retha, Besan Shampoos and hair care soaps
PRICING
Among the four A’s of rural marketing viz.
Affordability
Availability
Awareness &
Acceptability
Affordability is the major determinant of consumption.
Affordability is determined by two factors
1 Incomes of the consumer
2 Prices of the products or services
As such the corporate will have to adopt a two pronged strategy of boosting incomes of rural consumers through Development Marketing and adopting pricing policies and methods that make products affordable.
Price is a multi-dimensional concept
• To company, it is revenue generator.
• To the consumers, it is their cost of purchase as well as cost of living.
• To the economy, it is the mechanism by which the resources are allocated.
Pricing Frame-Work
S.No. Situation Major Factors Approach Method
1 New Product introduction Demand -Elastic
-Inelastic Cost-oriented
Demand-oriented Cost-plus or mark-up, Penetration, Skimming
2 Product-life cycle (short) Cost
Demand
Competition Cost-oriented Payback/capital recovery,
Rate of return
3 Growing markets Cost Cost-oriented Cost plus, mark-up
Experience curve
4 Mature markets
Stiff competition Competition Competition-oriented Leader pricing,
Competitive pricing (bidding),
Going rate pricing
5 Growing/mature markets.
Discerning buyers Demand Demand-oriented Discriminatory,
Differential,
Perceived value,
Psychological,
Value pricing
6 Product-mix promotion Demand
Cost
Competition
Image Demand-oriented Product-line,
Optional feature,
Captive product,
Two-part,
Product bundling
7 Distribution to scattered
Customers Geographical
Cost Cost-oriented Geographical pricing
8 Motivating channel Competition
Channel members Competition-oriented Discount pricing
Approaches to pricing would be based on one or more of the following bases:
1 Cost
2 Competition
3 Demand
Various methods of pricing are discussed in the following tables:
Cost-based Methods
Method Description
Cost-plus or Mark-up All associated costs of production are computed. Prices are fixed by making up a fixed percentage over average or marginal costs.
Marginal cost or Contribution Price is determined to recover marginal cost and make a contribution to the firm.
Target return Prices are set in anticipation of earning a desired target return on investment.
Pay back method (capital recovery) Price is determined to enable the firm to cover all costs and capital investment within a specific time period.
Experience curve An experience curve represents the relationship between costs and cumulative experience. With learning, costs decline and allow fixation of lower prices.
Competition – Based Pricing Methods
Method Description
Leader pricing Some product items may be priced low, to attract customers and to generate more overall demand for other items.
Competitive pricing It matches the market prices of competitors. It is reactive.
Going rate pricing (Follow the crowd/leader) Firm prices its products at the same level or below the prices of leading competitors.
Sealed bid pricing In industrial marketing, open or closed bids are invited. Firms quote their prices, anticipating what the competitor would quote.
Demand-based pricing Methods
Method Description
Discrimination / Differential / Variable / Flexible Products are sold at two or more prices based on customer segment, product-form, image, location and time.
Perceived-value Based on perceived value of each component of the product, the price is estimated and employed.
Psychological Based on attitudes of consumers in quality-price relationship, (high price indicates high quality) odd prices (convey the notation of a discount or bargain) and reference (a price on an average considered right for a product), prices are determined.
Value Pricing to generate value satisfaction to consumers. Every Day Low Pricing (EDPL) charges low prices on all days. High-low pricing charges higher prices on ever day basis but lower prices during special promotion period.
Pricing strategy has to pass through three tests of effectiveness:
1 Is it in tune with the expectations of customer?
2 Is it consistent with other P’s of marketing strategy?
3 Is it competitive enough to give the target market share?
CONSUMER CATEGORIES (RURAL CONSUMER)
Category Annual Income Life Style
Quality conscious Over Rs. 1,50,001 Very rich
Value conscious Rs. 45,001 – 1,50,000 Consuming class
Price Conscious Rs. 22,001 – Rs. 45,000
Rs. 16,001 – Rs. 22,000
Below Rs. 16,000 Climbers
Aspirants
Destitute
Price in Marketing Mix
S.No. Rural Consumers Product Price Promotion Place
1. Quality conscious,
Concerned with
Functional benefits,
Value for money Premium
Product High High Show rooms,
Malls, hyper
General and Fancy stores
2. Value conscious
Price sensitive,
Concern for
Functional benefits
No frills. Value for money Mass
Product Medium High General and fancy stores, super markets, Kirana, paan shops and Haats.
3. Price conscious
No concern for quality Spurious
Products Low No Kirana, paan shops and Haats
Skimming Vs Penetration Strategies
Factor Skimming Use if: Penetration Use if:
Price elasticity of primary demand Inelastic Elastic
Price elasticity of selective demand Inelastic Elastic
Cost of production and marketing relative to potential competitors Higher Lower
Economies of Scale No Yes
Ease with which competitors will enter the market Difficult for them to enter Easy entry
Rate at which the consumer will accept the concept New concept (slow) Known concept (fast)
Market segments based on price Exist. Can be taken one segment at a time Mass market exits
The firm’s resources to produce and market product Small or restricted Large
PROMOTIONAL STRATEGY
Promotion has become the biggest challenge, to rural marketers today.
Rural marketers have to skillfully communicate with a much larger but scattered audience characterized by variations in language, culture and lifestyles.
Poor message comprehension and low media exposure only add to the problem of communication through mass media.
The requirement is three folds:
1. To explore the available media at the different locations.
2. To develop region-specific consumer profiles to understand the characteristics of target market.
3. To design right communication and motivation strategies to induce target audience to buy the product.
EXPLORING MEDIA
Promotion media may be classified broadly into three categories: Mass media, local media and personalized media. The various media vehicles are given below.
Mass Media Local Media Personalized Media
Radio Haats, Melas, Fairs Direct Communication
Cinema Wall Paintings Dealers
Press Hoardings Sales Persons
TV Leaflets
Video Vans
Folk Media
Animal Parade
Transit Media Researchers
Mass media like TV are gaining ground in the rural market through regional channels but one cannot deny the importance of the Local and Personalized media.
With the low cost of Local media and its effectiveness it is gaining importance in the rural markets.
DESIGNING RIGHT PROMOTION STRATEGY
In designing the right promotion, the considerations are:
Approach Same or different
Design (i) Message Rational or emotional or moral
(ii) Media Mass, local, customized one-to-one
(iii) Communications Advertising, sales promotion, publicity and personal selling.
Budget allocation Media mix
Approach: Same or Different?
The controversy regarding the validity of a universal approach to attract urban and rural consumers may continue for some years to come. Until all the rural areas are almost equally urbanized, marketers have to pay heed to the voice of experts. Based on its survey findings, A.P. Lintas advocates:
“In mass media, a different idiom for rural India is not required. The chasm between rural and urban India is narrowing”.
Ogilvy Rural Communication Network (ORCN) considers rural specific promotion is necessary.
“Advertisements for the rural markets must be relevant to those markets if they are to create brand awareness and penetration. For advertisements to succeed, companies have to adopt the principle of multi-national companies i.e., think global and act local.”
These two viewpoints are valid, as they represent two different markets of evolving rural markets. It is for the individual marketing manager to find out the applicability of the views. When we observe the practices of leading consumer companies, we find that they are following a more localized and personalized approach in the selection of media and designing of messages. The time has perhaps come for advertising agencies to look into issues specific to the regions and also at the products, to succeed in the large rural markets.
DESIGNING PROMOTION
The process of designing promotion mix with appropriate message, media and promotions is not an easy task. It involves the following steps.
• Determining communication objectives.
• Creating message content or appeals.
• Evolving message structure.
• Developing message format.
• Choosing message source.
• Selecting the channel.
• Deciding on promotion mix.
• Establishing promotion budget.
(a) Communication objectives: After analyzing the characteristics of target audience and identifying available media, the next step is Setting Communication objectives. The market may seek one or more of the following objectives
1. To achieve awareness among a certain percentage of target audience.
2. To improve product knowledge among target customers.
3. To strengthen liking or preference to buy the product.
4. To persuade the consumers to buy the product.
In urban markets the emphasis is on brand switching and promoting more usage. But in the rural markets, many companies are rightly emphasizing on brand awareness building objective. This is the route for more and regular sales according to HLL, Philips, Godrej and Dabur.
(b) Message content: Messages are to be created to induce, inform and persuade target audience. There should be a theme, an appeal or a unique selling proposition (USP) touching the heart and stimulating the mind. There are three types of appeals: rational, emotional and moral. They are briefly explained and illustrated in the following table:
APPEAL ASPECTS EXAMPLES
Rational Benefits: Quality, value, Hero Honda Fill it, shut it.
performance, etc. forget it. Three rose tea: color,
taste and flavor
Emotional Positive: humor, love, pride, Prestige pressure cooker: Those who
and joy love their wife cannot say no to
Prestige pressure cooker
Negative: Fear, guilt, and shame Onida: Neighbors envy, owner’s pride
Moral Right behavior, social causes Aids campaign. Fight cancer
Campaign
(i) Rural Vs Urban: A commercial's content, however, contains both aspirational and functional elements, which may or may not synchronize with rural consumers as much as they go well with the urbanites. In case of broad based products like toothpaste, toilet soaps, hair oils, toilet powders, shampoo, and fairness creams, more similarities are observed. However, shades of differences are clearly visible while an achieving woman has universal acceptance, the liberated showpiece woman or half-nude or a woman shaking hair bewitchingly is looked down in rural areas. Given below are a few examples of common communication campaigns for rural and urban markets.
BRAND FUNCTIONAL ELEMENT ASPIRATIONAL ELEMENT
Lux Pure and mild Glamour and escape
Lifebuoy Health Heroism
Ponds Dream Flower Body care Achievement, Career women
Blue Wheel Washing bright Achievement
What stimuli may be offered to the rurals to induce them to buy? Emotional appeals like heroism escape. Fantasy, family love, achievement, and humor have universal appeal. It is believed that functional elements have stronger appeal to rural consumers than emotional appeals. Quality, theme and value-for-money propositions attract man rural consumers. Companies, which have understood the interest of the rural consumers, have become successful.
• HLL is actively promoting Fair & Lovely to achieve higher penetration.
• Nirma soap was successful for it was offered at half the price of the rival brands but with the same quality.
• Godrej introduced II different varieties of 165 litre classic models, as it became popular among the rural consumers.
(ii) Rural Vs Rural: In urban areas, due to the urbanizing forces. Socio-cultural similarities are many. However, in rural areas, souci-cultural differences are many for the following reasons.
• Villages are scattered far and wide.
• Linguistic and cultural variations are many.
Rural marketers have to look for these differences to determine the success of the appeals. The case of an urban marketer is just opposite to this. He searches for identifying commonalties to evolve a unifying and enticing appeal to the urban consumer. Philips is one company that has organized two different campaigns for rural in two different linguistic states-Engaveettu Super Star (the super star of our house) and Ma Inti Mega Star (the mega star of our house) in the villages of Tamil Nadu and Andhra Pradesh respectively.
(c) Message structure: The arrangement of the message in an appropriate order for presentation is as important as message formulation. The message is structured by words sentences and paragraphs. It can be:
• Tall or short
• Linear or non-linear.
Tall structures become essential when a marketer desires to explain the product benefits or company's standing on an issue. Generally, for product promotion short structures with brief messages will be more effective. In the case of rural, pictorial presentations make better impact than verbal descriptions, since their ability to read and understand is limited. Linear stories work well with rural consumers unlike urban consumers, they cannot process non-linear messages. Simple logic, sequential ordering of thoughts, easy to understand arguments and clearly drawn conclusions, are essential to make communication effective.
(d) Message format: The components of the message and their presentation are important aspects in message design. Different media provide different opportunities to format the messages.
Media Format aspects
Print ad Headline, copy, illustration and color
Radio Words, voice quality and vocalization
TV/Person Words, voice quality, vocalization and body
Language (Postures, gestures, facial expressions, etc.)
Pictures, dramatizing voices, attractive expressions and color have more influence on rural consumers.
(e) Message source: If both, the person delivering the ~ and the message are credible the message will achieve the objectives set for it. As such, marketers not only make efforts to create appropriate messages but also try to choose attractive, popular or expert sources. The credibility of a source is determined by three factors.
• Expertise
• Trustworthiness
• Likability
The Table below illustrates the use of celebrities, professionals, common persons or elderly persons to endorse the products.
BRAND CELEBRITY CHARACTERISTIC IMAGE
Agni tea Sridevi Attractiveness Energy
Horlicks Couple, elderly Trustworthiness Dependable
Tea Ustad Expertise Skilled
Cine stars Govinda and Dharmendra have more of a rural following Escorts promoted its motor cycle with the testimony of Dharmendra.
(f) Selecting the Channels: Communication channels are of two types: personal and non- personal. Mass communication is to be seen as a two-step-flow -of communication process. Messages of marketer's flow from mass media (TV, press, and radio) to people who are exposed to them. They become opinion leaders and through word-of-mouth disseminate information to the less informed people. The personal and non-personal channels include the following.
CHANNEL SUB-CHANNELS CONSTITUENTS
Personal Advocate channels Sales people. Social workers.
Expert channels Professionals (Doctors, Bank manager)
Social channels Neighbors,friends,family members and associates
Non- personal Media Print, TV, radio. direct mail,
websites.
Hoardlngs, posters
Atmospheres Environment of sales points
Events Sports, music, festivals, melas, jataras, Haats.
(i) Personal Channels: Personal influences have a significant role in the rural markets. Here buyers are less exposed to media, and more community bonded. They sock opinions before making final decisions. Companies can activate several sources to influence rural consumers.
• Distribute products through retail outlets, which facilitate interaction.
• Create opinion leaders by supplying certain people with products on attractive terms, or work through community influential such as local political leaders, doctors, teachers, etc.
• Develop advertising that has high conversational value or interactivity.
• Train middlemen in interacting with consumers.
• Establish Tele links for online transactions.
Distribute products for interaction: Companies are realizing that distribution is not an exercise in mere physical placement of products. It goes beyond, it needs to he animated by people and atmosphere. Distribution will he effective when the consumers:
i. Find the outlet a familiar place for a confident entry.
ii. Find the ambience appealing being compatible with their style of living and reflects their aspirational needs.
iii. Find the interaction with the retailer and his personnel pleasant and helpful.
Create Opinion leaders: Social norms and mores impact the rural consumers in ways different from their urban counterpart. It is found that decisions are mostly opinion-driven. They value social conformance in their decisions. As they live in communities, they prefer to have social sanction for their actions. That is why there are brand villages-Escort village. Nirma villages, etc. Wisdom of the elders, suggestions of the leaders, and advice of the educated are sought with high regard by the rural consumers. As such, the Panchayat head, the school teacher, the doctor, and elderly persons play a crucial role in the decision making process. Accordingly, some companies have started giving more importance to positive word-of-mouth campaigning through opinion leaders.
Advertising with interactivity: Advertisements is newspapers and magazines have limited value in rural areas. More than the radio, TV can impact rural audience by its audio-visual effects. Compared to these ads, live demonstrations, programs like story telling (Harikatha, Burrakatha, etc) or skits will be more powerful media as they provide scope for direct interaction With the audience.
.
Train middlemen: For a company to stay in the forefront. Its representatives should be strong communicators. Their ability to inform and convince the consumers is significant as the rural consumers are increasingly exposed to as many brands options as the urbanites but with less education less media exposure and less experience Measures are necessary to improve among middlemen the knowledge of products and skills of persuasion.
Tele links for online transaction: The information revolution is also sweeping the countryside. The remote rural villages scattered far and wide are now being Tele linked with the world. Villages are becoming netizens. Companies are talking an advantage of this new proposition.
(ii) Non-Persona, Channels: When it comes to selecting a media, one has to keep in mind that mass media reaches barely 30 per cent of the rural audience. It makes little sense to use this to reach out to the rural consumers, unless it is used as a supplementary tool. Infact, the major sources of information gathering and entertainment for the rural consumer continue to be local events and the best way would be to physically reach out to them by becoming a part of their daily life. Companies that have attempted to use local idioms to convey product message in a meaningful context had more success
Events like Haats, Jaataras and Melas create the right kind of atmosphere for rural consumers to go on a shopping spree. Socialization and jubilation mark the occasions. For rural consumers, fun, excitement, and humor are good ingredients in product message design. When advertisement is coined in entertainment it goes down well with rural audience. Stalls at fairs that combine games with the brand message are preferred routes of brand communication.
(g) Deciding on Promotion Mix: Besides advertising, a company may utilize one or more of the promotional tools. For example, sales promotion, direct marketing, publicity and personal selling.
(i) Sales Promotion: There are a host of sales promotion measures, which communicate, attract and benefit the consumers. They draw a stronger and quicker response and boost sales.
(i) Contests and Demonstrations:
(ii) Sampling: Generally, people tend to be conformists. The propensity to try a new product is less among people, particularly in the rural areas. Besides. Advertising, there should be some promotional measures to induce consumers to buy the products. Sampling as a promo tool does this job. While advertising creates awareness, distribution of samples achieves both brand awareness and conviction.
The efficacy of sampling in rural areas is, however, debatable. Marketers have varied experiences and different opinions. They are summarized here:
AGAINST
• REACH PROBLEM: MANY A TIME, PEOPLE ARE UNSURE OF WHETHER THE SAMPLES EVER REACH THE RIGHT TARGET I.E., THE DECISION-MAKER. THE FINAL DECISION-MAKERS ARE .1.5 AY IN THE FIELDS, WORKING THROUGH OUT THE DAY. THE TRIAL PACKS NEVER REACH THEM.
• Conversion lags: Conversion does not take place easily and immediately. It is a long process. A case in point could be Kellogg’s, which took .1 long time [0 convert urban dwellers to take to breakfast cereals. So, one can imagine the time it would take to convert rural folk to brands.
For
• Brand registration: The purpose of sampling is not brand sales. It is brand registration. Brand registration is vital in the rural perspective because it may then spread to other products under the same brand umbrella, such as Clinic Plus, hitching a ride on the benefits awareness of Clinic shampoo. Sampling goes a long way in the registration of the brands the minds of the rural folk.
• Brand Conversion: With more number of brands competing for the attention of rural consumers. Conversion to a better brand in the same category is a rather difficult proposition. So sampling is perhaps the only way to achieve this conversion the expected immediate effect of sampling, therefore, is brand registration. Even this requires the support of sales promotion measures to make the brand a talk of the village.
(iii) Installment Schemes: Rural consumer would not have much use for a monthly installment finance scheme as in an agrarian economy, income is generated primarily at harvest time. However, there are some success cases.
DIRECT MARKETING
The need to establish direct contacts with retailers and the village consumers has become
This view is gaining strength with increasing competition among companies and the growing power of retailers. They are finding it difficult to retain shelf space and displays in the retail outlets The current view as such, is:
"If you depend entirely on your wholesalers now, you are bound to lose your market to the competitor There is no substitute for stretching direct communication to the farthest".
In the rural context, personal one-to-one communication is effective. Such relations can be established through sales persons and mailers. Brushing aside wholesales and dealers, companies now have "direct points of contact" with retailers and sub-retailers.
(h) Communication budget: There should be an objective analysis of the goals and tasks of communication for determining the size and allocations of budget. The rural advertising budget of companies is generally between Rs. 6 and Rs. 15 crore. Though it does not seem much, according to an expert, Rs. 10 crore spent in the villages achieves the same visibility as Rs 50 crore in the towns and cities. MNCs like Samsung are spending Rs. 40 crore on advertising in semi-urban areas.
Allocation: Promotion should be turned around from the current 80:20) to 30:70. Thirty per cent of the budget for urban conventional media with priority sequence to radio. TV and press. Seventy per cent of the budget for rural local media, which includes publicity, vans, wall paintings, stalls, hoardings, and audio-visual publicity at haats and melas, sampling and other tools.
DISTRIBUTION STRATEGY
Many companies view the rural markets as great opportunity for expanding their sales but find distribution as a major problem. Unfortunately, it is almost impossible to transplant strategies which work successfully in urban markets onto rural markets, namely, extensive retailing and sustained pull generation through mass media advertising.
The road blocks to reach the rural customers are:
• Lack of adequate transport facilities.
• Large distances between villages.
• Lack of pucca roads connecting villages to nearest townships.
• Lack of proper retail outlets
• Lack of mass media infrastructure.
The marketers were of the opinion that the villagers would come to nearby towns and buy the products that they want.
What has been found is that if we have to serve the rural consumer we will have to take our products to him through the channels that he is using and some innovative ways of getting to him.
THE OLD SETUP
The historically available people & places for distribution include: - Whole seller, Retailer, Vans, Weekly Haats, Bazaars & Shadies.
1. Wholesalers
The Indian wholesaler is principally a Galla – Kirana (food-grain) merchant who sustains the belief that business is speculative rather than distributive in character.
He is a trader / commodity merchant rather than a distributor and therefore tends to support a brand during boom and withdraw support during slump.
The reason for this speculative character and dormant role of wholesalers are: -
• Indian market was largely sellers market. There was no need for active sales growth.
• Companies laid more emphasis or retailers in urban areas, who are very large in number. As a result of retail based distribution was weakened.
• Rural markets were neglected by many. The occurrence of retail outlets was low. Therefore many companies were dependent on whole salers.
The current need is to activate and develop wholesaler of the adjoining market as a distributor of products to rural retail outlets and build his loyalties to the company.
2. Retailers
Village retailers have traditionally been among the most mobile of rural residents.
Often doubling up as money lenders.
Their multi – person interaction in the closed village society.
As a result retailers play a significant role.
I. CREDIBILITY: -
- He enjoys the confidence of the villagers.
- His views are accepted and followed by the rural people whose awareness and media exposure levels are low.
(- The urban retailer is not trusted.
- He is seen as a businessman with profit motto.
- His view points are evaluated with other sources of information.)
II. INFLUENCE LEADER: -
- His role as influence leader is indisputable. From tender twig of neem to washing powder retailer testimony has been vital part of the product adoption process.
- The role of urban retailer is weak.
- The urban consumers have numerous sources of information.
- Although retailer’s opinion is sought it may not be 100% believed and followed.
III. BRAND PROMOTER: -
- In rural market retailers remains the deciding factor to sell particular brand.
- Retailers helps in identification and selection of brands, there is less influence of shelf displays and point of purchase promotion.
- Presence of spurious brands is an ample testimony to this view.
(- The urban retailer has a limited role as a brand promoter.
- He cannot directly, recommend the brands.
- He is to intelligently drive home his recommendations, as
urban consumers do not trust him completely.
- It is through shelf displays and incentive offers that he has to push the
brands.)
IV. RELATIONSHIP MARKETER
- Village retailer practices relationship marketing.
- He caters to a set of buyers who have income from immovable land resources and would be static over a much longer time span.
- The relationship could extend beyond three generations, backed by historical credibility of the retailer as a product referral.
(- on the contrary, the urban retailers have to make an effort to adopt
relationship marketing.
- His customers base comprises largely the mobile service class prone to
shift residence at least once, if not more, in less than a decade. This
limits the time span and perspective of the retailer – customer
relationship.)
V. HARBINGER OF CHANGE
- In an environment relatively isolated from external developments, he has
been harbinger of change.
- He is one of the main sources of information and opinion as well as
supplier of product and services.
(As against this, we find urban retailer, wielding limited influence in changing the product choices and quality of life of consumers.)
3. Vans
Mobile vans long since, have an important place in distribution and promotion
of the products in villages.
(iv) Weekly Haats, Bazaars, Shandies
4. Weekly Haats, Bazaars, Shandies
The haats are the oldest outlets to purchase household goods and for trade. These markets are very well organised with shopkeepers having pre-assigned spaces for them to sell their wares. A typical market is in an open field with ample space for displaying all sorts of goods. Its location changes every week. These markets have different names in different 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.
(a) Merits:
1. Convenience: The entire market can be related to large departmental stores in cities, where the advantage is a one-stop shopping exercise. These outlets crop up every week, providing consumers immense choice and prices.
2. Attractive: The weekend shopping is not only convenient but also entertaining. The markets start early and will be over by lunch. Afterwards, there will be entertainment. In respect of transactions, it is an attractive place to those who want to buy second hand durables and to those who prefer barter transactions. Further the freshness of the produce, buying in bulk for, a week and the bargaining advantage attract the frugal and week long hard working rural folk.
3. Availability: It is a market for every one and for every thing. Household goods, clothes, durables, jewellery, cattle, machinery, farming equipment, raw materials and a host of products are available.
(b) Implications to Marketers: Pradeep Kashyap, Director, MART, who has conducted many studies on these markets observed:
"These markets have high potential that corporate are now waking up to".
They offer good scope for distribution. For urban marketers, who have stockist and distributors that don't service remote areas, this form of selling can be a boon. A simple re-distributorship arrangement can be worked out.
(v) Melas and Fairs
This is another low cost distribution channel available to the marketers. It is comparable with urban events like Wills Trophy, India International Trade Fair (IITF), Sajavat or Consumex in which audience participation varies from a few thousands to a few lakh
people. These me/as are ancient and part of Indian cultural heritage.
Most of the fairs are associated with either a religious event or a festival. Among the most famous melas is the mighty Kumbh Mela at Allahabad (Triveni Sangam), Pushkar mela in Rajasthan, Kullu Dusshera mela in Himachala Pradesh, Sonepur mela in Bihar and Makar Vilakku in Kerala. People from all over the country gather to taste the wonders of India. According to the Indian Market Research Bureau (IMRB) around 8000 melas are held in rural India every year. According to Rural Scan (Quarterly News letter by MICA (Mudra Institute of Communications, 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.
The interesting questions are: Do these meals provide an opportunity for sales? How are they organised? At a me/a there can be as many as 854 stalls. Some 18.4 per cent of these are local stalls (belonging to a few hundred villages), 40.8 per cent are regional (they belong to a few districts) and 40.8 per cent are national.
An interesting statistic is that the share of manufactured goods at melas is around 42 per cent. Like urban events these melas need little or no prepublicity. They have come to occupy a firm position in the rural calendar of festivities. Most of the fairs are associated with a religious event or a festival. As with religious events, the dates of most fairs are determined by the Hindu calendar, not the Gregorian one. Most fairs are expressions of local need to celebrate. A villager, who has attended it since his childhood looks forward to it months in advance.
A majority of the melas are held during October-November and January-April. This coincide with the Kharif and Rabi harvests when the farmer's purchasing power is high. With both money and leisure at hand, he is inclined to indulge his family with a day out at the mela. He also looks forward to updating himself on the latest farming practices and on consumer goods. Visitors to fairs are thus highly receptive to try out new products and also come with enough money to do so.
Exhibit-I profiles the organisation of a mela.
THE NEW PLAYERS
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 altering.
(i) Unofficial Channels
Such instance are facilitating as well as forcing companies to review their distribution set-ups to ensure that they are present even in the smallest villages.
(ii) Cooperative Society
Cooperatives occupy an important place in India's rural economy, in terms of their coverage of population and their share in total supply of agricultural inputs, including credit. India can rightly claim to have the largest network of cooperatives in the world. By 1994, there were 3.95 lakh cooperatives. Cooperatives in 1999 account for 62 per cent of the total credit supplied in rural areas and 34 per cent of total quantity of fertilizers distributed in the country.
Rural Scan reports that there are 4398 Primary Marketing Societies and 2933 Large Agricultural Multipurpose Primary Marketing Services (LAMPS) in the country. Other members are:
• District Level Cooperative Marketing Societies : 191
• State Level Cooperative Marketing Federations : 29
• Commodity Cooperative Marketing Federations : 22
• Regional Cooperative Marketing Societies : 11
Generally, a cooperative exists for 2 or 3 villages. Farmer's Service Cooperatives (FSCs) is a mini super market. Such an arrangement can be tried with others.
(iii) Public Distribution System (PDS)
The Fair price shops run by government can be utilised to sell consumables and low value durables.
(iv) Petrol Bunks
Petrol bunks have become multi-purpose distribution centres at some places. Such concept can be effectively promoted.
(v) Agricultural Input Dealers
Fertilizer companies have retail outlets within a range of 5 km to any village. They offer a scope for marketers.
(vi) NGOs
Another alternative is working with Non Government Organisations (NGOs), which reach interiors of villages. Ideologies and methods may vary but most NGOs have programmes focussing on sustainable development through providing avenue for income generation. They command substantial influence where the programmes are implemented. Companies may join hands with them to mutual benefit. With NGOs undertaking distribution, companies realise benefits accuring from infrastructure and grass roots level networking. Also organisation security would provide a buffer against delayed retail collections. From the NGOs standpoint, such association with companies could yield employment opportunities for local residents.
(vii) Barefoot Salesmen
Companies may train sons-of-the soil to operate as barefoot salesmen. Fluency in the local dialect and familiarity with persons and terrain in the area of operation would be among the factors enhancing the efficacy of this approach.
A barefoot salesman, operating on a retailer-cum-commission basis, could book orders from retailers in villages within a limited radius of his village. On aggregating orders, which permit distribution economies, he could coordinate with the area stockist to arrange deliveries and make collections.
(viii) Syndicated Distribution
A viable and novel approach to reach the rural markets is syndicated distribution. Under this approach, marketers of household products could group together and consider the formation of a syndicated trading organisation which could jointly distribute a collective group of household products in the rural market and enjoy shared economies. The guidelines for formation of the syndicated organisation may be as follows:
Guidelines:
• Companies willing to work together may contribute to the capital of the organisation.
• It could be privately held and need not be open to the public or government agencies.
• The distribution by this organisation may replace or supplement the existing distribution.
• A formula for expense sharing is to be worked out in advance by the participating organisation.
NEW APPROACHES
i) DISTRIBUTION TRENDS
The changes in distribution are not only baffling but also challenging.
Changes in distribution.
Elements of sales From To
Time Restricted, limited timings Unrestricted, anytime
Place Own retail outlet, occasionally public place Anywhere
Choice Limited to brands Any product – to all specification, unlimited choice
Sales Products Products, experience relationships, achievement
Result Customer satisfaction Customer participation and satisfaction
ii) 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.
The 2 forms of DTH are: -
(a) Network Marketing
(b) Internet Marketing
(a) NETWORK MARKETING: - is a form of direct selling. It can take place at 2 levels.
• Single level – distributor appoints sales persons. He earns profits on sales, made by him.
• Multi level – distributor introduces another distributor (a friend or relative in general) who in turns introduces another distributor.
Like that the network is created.
The “Network” markets products.
Each distributor gets profits on his sales and also a percentage on sales made by his “Network”.
Thus one earns by “Retailing and Recruiting”.
THE RURAL APPLICABILITY: -
The introduction of network marketing in rural markets will be beneficial not only to
the companies but also to the villagers.
HLL’s project SHAKTI is adaptation of network marketing.
(b) INTERNET MARKETING: - Although at present due to low penetration of Pc’s it is not a viable media.
But some agencies and companies have started using this medium in a collective way to distribute information and products.
E.g. TAARA HAAT (DA), E – CHAUPALS (ITC)
COMPARISON OF RM, NWM & IM
Aspect RELATIONSHIP
RM NETWORK
NWM INTERNET
IM
Seller Company or its agents Consumers Company or its DOT.com agents
Role of consumer Buying and evaluating Buying, evaluating and selling Buying and evaluating
Focus Foster relationship & loyalty Strengthen relationships of consumers To be built
Supply Products, Experiences Products achievements Products Experiences, choice conveniences
Browsing experience Limited Limited Unlimited
Choice Limited to brand or category Limited to brand or category Any product customization
Time Fixed and limited Flexible, but limited by convenience Any time
Place Retail outlets Any where Any where
Cost High Low low
RELATIONSHIP MARKETING: - HLL
HLL is involved in building relationships with the customers in rural areas through education programmes, home – to – home contacts and cinema shows.
Focus
The objective in rural areas is to tap first time users.
Statistics indicate low usage patterns.
In China 90% of the people use toothpaste compared to 47% in India.
Only 20% have visited a Dentist. About 27% use toothpowder.
Even urban areas where majority of people use toothpaste right from childhood,
The overwhelming majority uses toothpaste only once in the morning whereas teeth required brushing most at bedtime.
Strategy
(a) Product:- HLL has introduced a 15 gms Prepsodent pack to target the first time user.
Close – up is introduced at retail outlets in suburban and rural areas with a price Tag of Rs. 3.50
(b) Campaign:- the operation, bharat programme. HLL’s door – to – door campaign in rural areas concentrates on educating the consumer by holding free dental camps.
In India there are scholarship for students in dental colleges for collaborating in research at such centres.
Dental check-up camps are conducted in schools.
A rural hygiene programme a counterpart to urban is to cover 350000 villages and has target of reaching 20 crore people.
(c) Door – to – Door sales: - in this HLL is selling a discounted personal care kit containing mini-packets of shampoo, toothpaste, talcum powder and face cream.
The kit is sold at Rs. 15
Sold separately the products would together cost Rs. 27
(d) Cinema: - after home – to – home contact and sales in villages during the day, HLL concentrates on cinema time in the evenings. There are still villages which donot have TVs , hence cinema shows are quite popular.
COVERAGE STRATEGY
A marketer aiming to extend distribution to rural areas might be confronted by the following issues.
• Which villages merit direct coverage at all?
• What would mode of coverage be?
Direct distribution to village settlements less than specific population or number of retail outlets would not be viable. Yet for future payoffs, systematised distribution efforts are imperative to consolidate brand shares and monitor product movement in a high growth market segment. Marketer has to evaluate plans to cover the villages by vans and participation in that market.
Differential development of infrastructure, divergent geo-climatic conditions and variations in locational density of village settlements preclude the application of uniform approach across rural markets. Pockets of similarity need to he identified and strategies be determined in consonance with individual pockets. Further refinements would be necessitated by local conditions and unique improvisions.
CASE: IS RURAL COVERAGE VIABLE?
Rajpuria Hudan is a small village near Lunkaranser in Bikaner district, Rajasthan. Parshu Ram Rathore is the largest among a total of three retailers in this village. Receiving a 15 day credit line, he purchases stocks on a fortnightly basis from one of the larger shopkeepers of Lunkaranser. He has been doing so for the past three decades. There are no telephones in the proximity of the village. Public transport is limited to a bus rendezvous twice a day at the metalled road head, about1 km from the village. A marketer aiming to extend distribution to rural Bikaner, or Rajpuria
Hudan, might be confronted by the following issues.
• With just three retailers, does Rajpuria Hudan merit direct coverage at all?
• What would the mode of coverage be? Access constraints with low-volume expectations indicate a single visit covering order booking, delivery and collections-a delivery van with sales personnel.
• If the product be a consumer soft with end consumer price of Rs. 4 a net margin to the marketer of 5 per cent, and operating costs of over Rs. 600 per day for a delivery van with personnel-it would necessitate minimum daily sales of Rs. 12,000 (3000 units) for the operation to at least break-even.
• A well-designed van route would enable coverage of at best eight village markets in a day. Larger inter village distances would reduce the coverage in the Bikner area to five.
• A van route could be operated with Rajpuria Hudan and four other markets covered in a day. A repeat coverage could be provided after a fortnight to tally with Rathore's inventory schedule.
• The issue is, whether consumption levels would yield off-take of at least 1 3 units per retailer per day in villages with just three retail outlets? Even if this was possible, what advantage would Rathore and his retailing brethren receive by purchasing stocks from the van?
With cost considerations occupying centre stage, the marketer offering a price advantage and credit are ruled out. Collections being the perennial month-end bogey, extension of credit to numerous small retailers like Rathore would cause accounting mess.
PRODUCT STRATEGY
The central decision in marketing mix is product decision.
Product classifications: -
(i) Based on Tangibility
- Products
- Services
(ii) Based on the purpose of use
Purpose Type User Products
Consumption
Consumer
Goods
Household
Toiletries,
Cosmetics,
Beverages etc.
Production
Industrial /
Agricultural
Goods
Industries
Farm / poultries etc.
Raw materials components, agricultural inputs and machinery etc.
(iii) Based on the functional life of the product
Type Nature of use Functional
Life period Example
Consumables
One time
Short
Food & beverages
Durables
Life time
Long
Furniture,
Computers, cars and cameras
(iv) Based on habits
3 categories based on shopping habits: -
Goods Product
Type Buyer involvement / frequency / buying decision Buying place
Convenience
Goods
Consumables
Low / frequent / simple
Paan, shop, kirana shop,
Cooperative stores, fair price shops, fairs & mandis
Shopping goods
(clothing, furniture, home appliances etc.)
Durables
Moderate / occasional / complex
Fairs, haats, mandis & shops in feeder towns.
Speciality
Goods
(camera, two wheelers, tractors etc.) Durable High /
Once in life / complex Shops in towns or cities
(v) Based on the price and quality
2 types of goods are identified: -
(a) Mass product (cheaper and economy goods)
(b) Premium product (superior goods)
- Cheaper goods are those, which are characterized by, low
quality and low price.
They perform core functions but lack certain attributes, which
make their use less comfortable, less pleasant and less
desirable.
e.g. Nirma washing powder is cheap good.
The package is poor. Powder spills over. When the powder is mixed
in water, burning sensation is felt in the skin and palms.
- Economy goods are products with all necessary functional
features but no fancy features.
Its price and quality are fairly reasonable.
In case of durables, its operating and maintenance expenditures
are low.
As such, they are money savers while being need
e.g. T.v without remote etc.
Premium goods are such products, which appeals to the ego of the
buyer.
They are described as, goods for premium consumption.
e.g. Jewellery, cars etc.
(vi) Based on product development
Innovations
Imitations (novelties, copycat)
Innovations: - innovate products rule the market.
An innovate firm will surely succeed. However, it should be
careful in making technical innovations in tune with changing
market behaviours.
Imitations: - imitations may result in two types of goods depending
upon the purpose, commitment and competence of imitator.
A poor imitator will end up in producing deceptive, spurious, fake
copy cat products.
On the other hand, the competent imitator may even produce an
improved version of the original product.
Original
product
Immitations
Novelties Copy Cat
Life buoy
Nirma buoy,
New lime buoy
Nimba bouy
Colgate
Pepsodent
College
Nirma
Wheel
Neerbha, nima, nilima, narima
Fair and
Lovely
Fairever
Friends and lovely
(vii) Based on brand hierarchy level
There are 5 levels of products based on branding.
While urban market is exposed to the 5 different brands,
Rural market is now finding the national and global brands at
their threshold and doorstep.
• Global brands - pepsi, coke, lg, p & g
• National brands - godrej, tata
• Regional brands - sun tv channel
• Local brands - surya masale, joy chips
• Unbranded products - oil, food grain, tougue cleaner
• Commodities - tamarind, cloves, fish, eggs
CONCEPT AND SIGNIFICANCE OF PRODUCT STRATEGY
Product strategy refers to the long – range competitive plan involving decisions on: -
- Products
- Product line and
- Product mix
To make proper utilization of resources and achieve marketing goals.
Significance: -
An effective product strategy offers the following benefits.
(i) Achieves Product – Market Fit: -
A well thought out product strategy will be able to offer
products based on market needs.
thus, it achieves product market, fit and avoids the pitfalls of
marketing myopia
consequently it provides insurance for survival.
(ii) Encourages Innovativeness: -
The key to product strategy is innovation with a view to fine tune
the market offer to the current and future needs of consumers.
(iii) Provides Competitive Edge: -
Marketers need good intelligence on how to anticipate
competitive moves and launch their new products.
Companies will have to use product strategy to
• Attack
• Flank their competition
• Depend their positions and
• Wage guerilla warfare.
(iv) Makes Better Use Of Resources: -
The product additions and deletions, based on rational appraisal
of marketing and productions strengths and weakness.
Allow for better utilization of physical, financial and human
resources.
SCOPE
Product strategy embraces decisions a 3 level.
(i) Product mix
(ii) Product line
(iii) Product item
Product strategies – an overview
Level Strategy
Product mix
Width extension – new product lines
Length extension – new product items
Depth extension – new product variant
Product line
Stretching – upward, downward, bothways
Line pruning
Product item
Quality, features, design brand and package
Augmentations
Product line is a group of closely related products priced within a range and distributed through same channels to the same customer group.
It has two dimensions: -
- Length
- Depth
Length – it refers to the total numbers of items in the line.
Depth – it is the total number of product items.
1. Length of product line: -
How long should be the product line?
It is like asking “how long should the legs be?”
The reply to this question is :- “long enough to reach the ground.”
Similarly, product line length should be evaluated in the light of
company profitability.
If profitability can be increased by dropping items, the existing
length is more than necessary.
If profitability can be increased by adding items, the existing
length is short.
It should be neither too short nor too long.
Arguments in favor of short and long lines are summarized below: -
Short line Long line
When focus is on
Specialization.
If companies want to be positioned as full line companies.
As a consequence of
contraction
defense strategy
As a result of flanking strategy
If profitability is
the objective
If market growth and
Market – share are the objectives.
When line pruning is done.
Loss making products are
dropped.
Product line proliferation
Zealously new products are added.
Line stretching: - is lengthening the product
Line beyond its current range.
The stretch can be in 3 directions: -
Downward – adding lower end items.
Upward – adding high end items.
Bothways – adding items at both higher and lower ends.
Reasons: -
• Reaction – as a reaction to competition, innovative product items are added.
• Opportunity – to utilize the existing market gap, new items are introduced.
• Image – to have a full line company image, rolling upward or downward or both ways is done.
• Pressure – yielding to pressure of sales force and dealers, new product items are introduced.
• Strength – to use the excess capacity, line stretching is done.
• Desire – to fulfill the desire of top executive or product manager, to introduce a new product item, line stretching is done.
2. Line Pruning: - product lines tend to lengthen over time.
Sometimes they are stretched on rational grounds at other times; they are lengthened because of emotional reasons.
In either case, some dead wood will accumulate.
It is weeded out based periodical review of the contribution of product items.
The product items can be classified as: -
(i) Traffic Builders:- which attract customers but generate marginal incomes.
(ii) Bread Winners:- which generate major share of incomes.
(iii) Parasites:- which incur losses and depend on bread winners
Product line pruning may be done when:-
• It is identified that dead wood is depressing profits, and
• It is found that the production capacity is limited and cannot handle all the existing products.
e.g. HLL has pruned 80 strong brand, portfolio to the 30 power brands, which account for 75% of its FMCG turnover.
3. Line Modernization:- when technological developments change the products, a decision to revamp the old line and design a modern line become inevitable.
The aspects to be considered are:-
(i) Timing: it should not be too early or too late.
The timing decision requires information about:
• Conversion readiness of consumers from old or new products.
• Competitors moves.
• Profitability levels of existing product line.
(ii) Approach: whether the change be total or piece meal?
The merits (+) and demerits (-) of these two approaches are given below:-
Total Piece-Meal
- requires heavy cash flow + less draining on company’s cash flow
+ surprise competiter no chance to imitate - allow competitors to see changes & start
designing their own time
- implementation to change involving dealers and
customers is difficult + people affected by change easily understand
and adopt
COMPETETIVE PRODUCT STRATEGIES
The Basic Product Strategies Of Different Companies In The Market Arena as follows: -
(i) Identity Strategies
• Commodity Strategy:-
Commodity describes products and services that are highly standardized
and perceived to be homogeneous.
They are unbranded products.
e.g. foodgrains, vegetables, fruits, edible oil, sugar, steel etc.
It is reported as many as 75% of coconut oil consumed in rural households
is unbranded and locally branded.
When sold as commodities, the marketer can differentiate them in the
following ways:
- Grading
- Delivery
- Services
- Relationships
• Branding Strategy:-
“The share of non-branded goods is shrinking”.
e.g. Castrol branded lubricants successfully in a product category where consumers bought the product as a commodity.
They aggressively targeted non-conventional outlets like automobile and mechanical shops and built awareness and loyalty for their lubricant brands through powerful advertising.
(ii) Customer Value Strategies
• Mass Product Strategies:-
While urban consumers are price brand conscious,
Rural consumers are price sensitive.
They are more concerned about functional benefits of the products and the value-for money they pay.
Hence many companies have launched “No Frills”, economy products to attract rural consumers and low end urban markets.
e.g. Maharaja Appliances “bonus” range of “no frills” home appliances.
Bonus washing machine priced at Rs. 2990/- without the drier.
Escorts “Rajdoot 223” to meet the needs and expectations of the rural consumer.
• Premium Product Strategy:-
Premium brands are gaining wide acceptance in the rural markets.
- Priced at Rs. 14400 LG’s Sampoorna costs Rs. 2000 more than equivalent products from firms like BPL or Philips.
Yet it was sold more than those of all competitors put together.
- Toyota Kirloskar motor limited had launched “Qualis” targeted at urban and semi-urban audience.
They have a rural marketing plan, which will address rich farmers and landowners.
• Innovation strategies:-
- Rural-Urban common
Realizing this, Castrol branded lubricants successfully in a product category where consumers bought the product as a commodity. They aggressively targeted non-conventional outlets like automobile and mechanical shops and built awareness and loyalty for their lubricant brands through powerful advertising.
Brand names make products familiar and evoke possessiveness.
This has become true in case of LG Electronics of India. It named the customized TV develop for the rural market, Sampoorna. The word is a part of Bengali, Hindi, Marathi and Tamil language. The strategy worked. About Rs. 114 crore worth TV sets were sold in the villages in year.
Strategy becomes effective when other elements are in consonance with it.
Brooke Bond’s Red Label Tea is a good example. Packed in red colour carton it has made identification of the brand easy. In its recent repositioning exercise, ads were designed with the slogan “jiyo-mere-lal (long live my son)” Lal has another meaning ‘red’. This made identification complete arousing emotional bondage.
The case for branding is gaining strength. It is reported that in 18 categories, branded consumption accounts for 80 percent of sales in rural India.
Bonus
Maharaja Appliances Limited (MAL) has launched a range of “no frills” home appliances, Bonus, specially for the rural and semi-urban markets. MAL realizes that the rural demand for home appliances is mushrooming. It has already a share of about 40 percent in the rural market. Since branded and quality products are unavailable, rural folk have to make do with substandard or illegal products. More over, the difference between the price of grey products and legal branded is also a major deterrent. Maharaja counters this by selling a sturdy Bonus Washing Machine, without 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 something of an edge, as it is an entrant.
Rajdoot 223
Escorts launched Rajdoot 223, priced at Rs. 33,300 to meet the needs and expectations of the rural market. It is cheaper than most mobikes and is preferred over mopeds and scooters because of its sturdiness and its weight carrying capability. Moreover, rural folks know that it is easy to maintain (spares are easily available). Today Escorts has about 2000 authorised service points.
To tackle the young village yuppie demand for something more fancy, Escorts launched ‘Ace’ with 175 cc engine. It is much sleeker and priced just marginally high at Rs. 37,560. Though not many models are seen in the urban areas, it has done quite well in the rural market demanding 15 percent of the production capacity of Rajdoot.
Agni Tea
Rural households consume more than half of 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 Tetly (tea bags). Each of these brand is positioned for a particular region and with a distinct blend to satisfy the customer’s choice in the targeted market.
In 1999, Tata Tea launched Agni as an economy brand. It was positioned at a blend competing with loose tea. The packaging was done with the objective of positioning the product for the masses. The communication strategy leaned heavily on the quality aspect and also the reputation of the house of Tata. Agni was retailed with a price tag of Rs. 130 per kg. Industry sources say that, within12 months of its launch, Agni has notched a volume of 12 million kg from zero bag. It is all set to assume the mantle of a leading brand among the tea majors.
Quite clearly, large Indian companies have begun looking at rural markets seriously. Some of them are even developing exclusive marketing strategies to tap this huge mass of consumers. Of India's one billion plus population, nearly 70 per cent live in non-urban or rural areas. According to a National Council for Applied Economic Research (NCAER) study, there are as many "middle income and above" households in rural areas as there are in urban areas. There are almost twice as many "lower middle income" households in rural areas as in urban. According to NCAER's projections, the number of middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. In Urban India, the same is expected to grow from 46 million to 59 million. Hence the absolute size of middle and high income households in Rural India is expected to be nearly double that of Urban India.
Percentage Distribution of household population and income
HOUSEHOLDS POPULATION INCOME
RURAL 73.6 74.6 55.6
URBAN 27.4 25.4 44.4
ALL INDIA 100 100 100
Thus we see that Rural India contributes almost 56% to the National Income as against 44% contributed by Urban India. Although it is contributed by 76% of the total population, which has its own challenges like how to sell small quantities to large base of consumers.
PERCENTAGE OF POPULATION BELOW POVERTY LINE BY RURAL-URBAN LOCATION STATE WISE (1999-2000)
STATES RURAL URBAN
ALL-INDIA 36.35 28.76
ANDHRA PRADESH 25.48 32.28
ASSAM 61.78 12.48
BIHAR 58.85 45.10
GUJARAT 26.22 21.70
HARYANA 14.86 13.79
KARNATAKA 38.50 24.55
KERALA 26.50 31.89
MADHYA PRADESH 39.35 46.29
MAHARASTRA 50.00 32.16
ORISSA 62.67 34.27
PUNJAB 14.24 6.74
RAJASTHAN 15.01 24.36
TAMIL NADU 39.37 29.82
UTTAR PRADESH 29.87 36.39
WEST BENGAL 55.16 16.74
In terms of poverty, unemployment and level of development rank of India in:
1947 86
1991 123
2000 136
OUT OF 156 COUNTRIES
Thus the Situation has further worsened as per the Report on Human Development Index.
DIAGNOSIS OF THE FAILURES
The apparent disparity requires introspection to identify the gaps, which can then be bridged between rural & urban India.
1 LOW PRIORITY TO AGRICULTURE
Relative share (%) of agriculture to total GDP
SECTOR 1950-51 1995-96
AGRICULTURE 56 29
MANUFACTURING 15 29
TRANSPORT & TRADE 11 20
BANKING 9 11
ADMINISTRATION (SERVICES) 9 11
Growth rates in different sectors of economy
PARTICULARS 1990-91 91-92 92-93 94-95
GROWTH IN REAL GDP % 5.2 1.1 4.3 4.3
GROWTH IN AGRICULTURE PRODUCTION % 3.0 -1.9 2.9 2.9
GROWTH IN INDUSTRIAL PRODUCTION % 8.3 0.6 2.3 4.1
2 SUBSISTENCE ORIENTATION OF AGRICULTURE
a. Productivity is low
b. Not enough value addition
c. Land degradation
3 FAILURE OF LAND REFORMS
d. Failure of redistribution of land in favor of poor.
e. Large numbers of workers dependent on agriculture leading to low labor productivity.
f. Splitting of families and rise in population has shrunk the size of operational land holding.
g. Landlessness is increasing forcing more and more people joining labor market every year.
4 INADEQUATE FOOD SUPPLIES
a. At national level India is self-sufficient but inadequate at the household level.
b. Increase in food production mainly due to few crops like wheat & rice but production of bajra, barley etc has declined considerably (as these are the corps used by poor in rural India).
5 SLOW GROWTH OF INFRASTRUCTURE
a. Still 40% of India’s villages are without proper roads.
b. 1.8 Lac villages do not have primary schools within 1 km.
c. 4.5 Lac villages have drinking water problem.
6 INADEQUATE INPUTS
a. Research extension systems are weak, no direct link between scientists and farmers.
b. Problems faced in the timely availability of improved seeds, fertilizers and pesticides in required quantity.
c. Credit is major constraint, which adversely affects adoption of new technologies especially by the small farmers.
7 SLOW DOWN OF RURAL INDUSTRIALIZATION
The rural industrialization has slowed down although the expenditure on rural industries increased from Rs.42/- crores (1st plan) to Rs.6334/- crores (8th plan). However %age of allocation decreased from 2.1% to 1.6%.
Plan outlay on rural industrialization (Rs. Crore)
PLAN PUBLIC SECTOR
OUTLAY RURAL
INDUSTRY %
I 1960 42 2.1
II 4672 187 4.0
III 8577 241 2.8
ANNUAL PLAN 6628 126 1.9
IV 15779 293 1.9
V 39426 592 1.5
ANNUAL PLAN 12601 289 2.3
VI 97500 1780 1.8
VII 180000 2753 1.5
VIII 434100 6334 1.6
Rural Marketing: A silent revolution is sweeping the Indian countryside. It has compelled marketing whizkids to go rural. The marketing battlefield has shifted from the cities to the villages. “Go Rural” seems to be the latest slogan.
Adi Godrej of Godrej soaps says:
“The rural consumer is discerning and the rural market is vibrant. At the current rate of growth it will soon outstrip the urban market. The rural market is not sleeping any longer. We are.”
C. K. Prahlad, the management guru observes:
“Selling to the poor may be more profitable than selling to you and me. This is where the future is. Opportunities are every where. The digital divide is not about lack of opportunity, it is about the lack of imagination.”
Evolution of Rural Marketing
PHASE ORIGIN FUNCTION MAJOR
PRODUCTS SOURCE
MARKET DESTINATION
MARKET
I Before Mid-1960 Agricultural Marketing Agricultural
Produce Rural Urban
II Mid- Sixties Marketing Of
Agricultural Inputs Agricultural
Inputs Urban Rural
III Mid- Nineties Rural
Marketing Consumables And
Durables For
Consumption & Production Urban Rural Rural
Nature of Rural Market
Is rural marketing transactional or developmental in its approach?
It is true, rural markets have become an attractive proposition for commercial business organizations.
The role of rural marketing as such is more developmental than transactional. It is more a process of delivering better standard of living and quality of life to the rural environment taking into consideration the prevailing village milieu.
Transactional Vs Developmental: For better comprehension of this role let us distinguish development marketing and transactional marketing. Table 3.5 brings out the differences in brief.
Transactional Vs Development Marketing
S.No. Aspect Transactional Development
1. Concept Consumer orientation, Marketing concept Society orientation, societal concept
2. Role Stimulating and conversional marketing Catalytic and transformation agent
3. Focus Product-market fit Social change
4. Key task Product innovations and communications Social innovations and communications
5. Nature of activity Commercial Socio-cultural, economic
6. Participants Corporate enterprises, Sellers Government, voluntary agencies, corporate enterprises, benefactors
7. Offer Products and services Development
projects/schemes/programs
8. Target group Buyers Beneficiaries and buyers
9. Communication Functional Developmental
10. Goal Profits
Customer satisfaction
Brand image Market development
Corporate Image
11. Time-Frame Short-medium Medium-Long
12. Motivation Profit-motive
Business policy Service-motive
Ideological or Public policy
Model: The model of rural marketing represents a combination of the transactional and developmental approaches.
• Rural marketing process is both a catalyst as well as an outcome of the general rural development process. Initiation and management of social and economic change in the rural sector is the core of the rural marketing process. It becomes in this process both benefactor and beneficiary.
• Innovation is the essence of marketing. Innovative methods of social change for successful transformation of traditional society are virtual. Such a change narrows the rural-urban divide.
• The process of transformation can be only evolutionary and not revolutionary. The growth of the rural market can be a planned evolutionary process based on strategic instruments of change rather than constitute just short-term opportunities for commercial gains.
• The exposure of ruralites to a variety of marketing transactions during the change process puts them in the role of beneficiaries than of just `buyers' of modern inputs and infrastructural services.
• Communication is the vital element of rural marketing. It should serve to resolve social conflicts, encourage cooperation and strengthen competitive spirit during interactions between rural and urban as well as within rural areas. Another critical point for communication is the point of conversion of ruralite from an "induced beneficiary" to an "autonomous buyer".
ATTRACTIVENESS OF RURAL MARKET
1 Large population
2 Rising prosperity
3 Growth in consumption
4 Life cycle changes
5 Life cycle advantages
6 Market growth rate higher than urban
7 Rural marketing is not expensive
8 Remoteness is no longer a problem
1 Large Population: The rural population is large and its growth rate is also high. Despite the rural urban migration, the rural areas continue to be the place of living majority of Indians.
2 Rising Rural Propensity:
INCOME GROUP 1994-95 2000-01 2006-07
ABOVE RS. 100,000 1.6 3.8 5.6
RS. 77,001-100,000 2.7 4.7 5.8
RS. 50,001-77,000 8.3 13.0 22.4
RS. 25,001-50,000 26.0 41.1 44.6
RS.25,000 & BELOW 61.4 37.4 20.2
Projections based on 7.2% GDP growth.
Thus we see that population between income level of Rs. 25,000- 77,000 will increase from 34.3% in 1994-95 to 67.0% in 2006-07.
3 Growth in consumption:
PER CAPITA HOUSEHOLD EXPENDITURE (IS RS.)
LEVEL NO. STATES EXPENDITURE
High
(Above Rs 382/-) 7 Punjab 614
Kerala 604
Haryana 546
Rajasthan 452
Gujarat 416
Andhra Pradesh 386
Maharastra 384
Average
(Rs. 382/-) 5 West Bengal 382
Orissa 381
Tamil Naidu 381
Uttar Pradesh 373
Karnataka 365
Low
(Below Rs. 382/-) 3 Assam 338
Madhya Pradesh 326
Bihar 289
Distribution household’s income wise (projection in Rs Crore)
INCOME GROUPS 2001 – 02 2006 – 07
RURAL RURAL
TOTAL NO. % TOTAL NO. %
HIGH 0.26 0.07 26.9 0.52 0.12 23.1
MIDDLE 12.04 7.73 64.2 16.72 10.32 61.8
LOW 5.7 5.09 88.7 3.68 3.52 95.7
TOTAL 18.04 12.89 71.4 20.90 13.96 66.7
Spending pattern (Rural Household’s in Rs.)
ITEM % RICH POOR AVERAGE
FOOD ARTICLES 44 147 73 95
TOILETRIES 20 67 33 43
WASHING MATERIAL 13 43 22 28
COSMETICS 10 33 17 21
OTC PRODUCTS 4 13 6 9
OTHERS 9 30 15 19
TOTAL 333 166 215
Average rural household spends on consumables excluding food grains, milk & vegetables are Rs. 215/-.
4 Life style changes:
Income vs. usage of packed consumer goods (% of household using)
GOODS MONTHLY HOUSEHOLD INCOME (RS.)
UP TO 350 351 – 750 751 – 1500 1501 +
WASHING CAKES/BARS 60 78 86 91
TOILET SOAPS 57 72 89 93
TOOTH PASTE/POWDER 22 36 65 85
TALCUM POWDER 20 25 41 63
TEA (PACKAGED) 22 30 48 64
5 Life cycle advantage:
STAGES IN LIFE CYCLE
PRODUCT URBAN MARKET GROWTH
RATE % RURAL
Popular soaps Maturity 2 Growth
Premium soaps Late growth 11 Early growth
Washing powder Late growth 6 Early growth
Skin creams Maturity 1.1 Growth
Talcum powder Maturity 4 Growth
6 Market growth rates higher: Growth rates of the FMCG market and the durable market are higher in rural areas for many products. The rural market share will be more than 50% for the products like toilet soaps, body talcum powder, cooking medium (oil), cooking medium (vanaspati), tea, cigarettes and hair oil.
7 Rural marketing is not expensive: Conventional wisdom dictates that since rural consumers are dispersed, reaching them is costly. However, new research indicates that the selling in Rural India is not expensive. According to one research it costs roughly Rs.1 Crore to promote a consumer durable inside a state. This includes the expenses of advertising in vernacular newspapers, television spots, in-cinema advertising, radio, van operations and merchandising and point of purchase promotion. Campaign like this, which can reach millions, costs twice as much in urban area.
8 Remoteness is no longer a problem: Remoteness in a problem but not insurmountable. The rural distribution is not much developed for the reasons,
Lack of proper infrastructure such as all-weather roads, electrification and sanitation, and
Lack of marketer’s imagination and initiative.
Marketers have so far, failed in analyzing the rural side and exploiting rural India’s traditional selling system- Haats & Melas.Their near obsession with just duplicating the urban-type network and that too with very limited success, has kept them blind to the potential of these two outlets.
RURAL VS URBAN MARKETING-SUMMARY
NO. ASPECT URBAN RURAL
1 PHILOSOPHY Marketing & Societal Concepts & Relationship Marketing Marketing & Societal Concepts, Development Marketing & Relationship Marketing
2 a) MARKET
b) DEMAND High Low
c) COMPETITION Among Units In Organized Sector Mostly From Unorganized Units
CONSUMERS
LOCATION Concentrated Widely Spread
LITERACY High Low
INCOME High Low
EXPENDITURE Planned, Even Seasonal, Variation
NEEDS High Level Low Level
INNOVATION/ADOPTION Faster Slow
3 PRODUCT
AWARENESS High Low
CONCEPT Known Less Known
POSITIONING Easy Difficult
USAGE METHOD Easily Grasped Difficult To Grasp
QUALITY PREFERENCE Good Moderate
4 PRICE
SENSITIVE Yes Very much
LEVEL DESIRED Medium-high Medium-low
5 DISTRIBUTION
CHANNELS Wholesalers, stockists, retailer, supermarket, specialty stores, & authorised showrooms Village shops, “Haats”
TRANSPORT FACILITIES Good Average
PRODUCT AVAILABILITY High Limited
6 PROMOTION
ADVERTISING Print, audio visual media, outdoors, exhibitions etc. few languages TV, radio, print media to some extent. More languages
PERSONAL SELLING Door-to-door, frequently Occasionally
SALES PROMOTION Contests, gifts, price discount Gifts, price discounts
PUBLICITY Good opportunities Less opportunities
MARKETING MIX (4 P’S OF MARKETING)
Product: - Product variety, quality, design, features, packaging, sizes, services, and returns.
Price: - List price, discounts, credit terms.
Promotion: - Sales promotion, advertising, public relation, direct marketing.
Place: - Channels, coverage, assortment, locations, inventory.
BUYING HABITS VARY DEPENDING ON THE TYPES OF GOODS
CONVENIENCE GOODS
-Consumer purchase it with least effort
-Low unit prices and frequently purchased
-Not much planning require
-Products of daily consumption
E.g.: Toothpaste, soap.
SHOPPING GOODS
-Consumer spend some time in buying these goods
-Medium unit prices and bought occasionally
-Some planning is require
-Products like: shoe, dresses etc.
Specialty Goods
-Consumer spend considerable time in buying these goods
-Medium unit prices and bought less frequently than shopping goods
-Lot of planning is require
-Products like: car watches.
According to the readiness in trying new product, customers are categorized as:
INNOVATORS: THESE ARE THOSE BUYERS WHO WOULD BE THE FIRST ONE TO TRY THE NEW PRODUCT. THEY ARE RISK TAKERS. THEY LOVE TO BE SEEN WITH THE LATEST OR NEW PRODUCTS.
EARLY ADOPTERS: THESE BUYERS BUY THE PRODUCT SUFFICIENTLY EARLY BUT NOT AS EARLY AS INNOVATORS. THEY BECOME THE OPINION LEADERS IN THEIR COMMUNITY
EARLY MAJORITY: THESE BUYERS BUY PRODUCT BUT AHEAD OF THE AVERAGE PERSON IN THE COMMUNITY. THEY ARE IN LARGE NUMBER. THEY ARE SLIGHTLY CONSERVATIVE IN NATURE AND THEY WANT TO BE TOTALLY SURE BEFORE BUYING A PRODUCT.
LATE MAJORITY: THESE ARE THE BUYERS WHO ARE VERY CAUTIOUS. THEY WOULD ONLY ACCEPT THE PRODUCT WHEN A WHOLE OR BIG CHUNK OF COMMUNITY HAS BOUGHT THE PRODUCT.
LAGGARDS: THESE ARE THE CUSTOMERS WHO ARE THE LAST ONES TO BUY ANY PRODUCT. THEY ARE HIGHLY RESISTANT TO CHANGE.
ROLE PLAYED BY PEOPLE IN BUYING DECISION
Initiator: - The person who first suggests the idea of buying the product or services.
E.g. In a family the youngest son who is in school suggest that we should go in for the change of car to his father that is he has initiated the process for buying the car.
Influence: - The people whose views or advise influence the decision. E.g.: Now father talks to his son who is elder to the above who is studying in MBA. Since he is always studying about cars he is well vested with the various models. He suggests his father that we should think of INDICA or ZEN. He has influenced his father.
Decider: - The person who decides on any component of a buying decision; whether to buy, what to buy, how to buy or where to buy.
E.g.: Third son of the father who is working in an MNC when asked by the father, he tells him that INDICA would be a better option as it would reduce the monthly bill being a car which runs on diesel. He has decided what car to buy for the father.
Buyer: - the person who makes the actual purchase. E.g.: Father has now made a decision and bought INDICA from one of the dealer who was to known to him. Father paid the money and is the buyer,
User: - The person who consumes or uses the product or services. E.g.: This new INDICA is actually to be used by their sister who teaches in the school.
Buying Behavior
Consumer decision making would vary with the type of buying decision. You would agree that decision to buy toothpaste, a tennis racket; personal computer and a car are all different.
There are 4 types of buying behavior based on the degree of buyer involvement and the degree of difference between buyers: -
Complex buying behavior: - This type of buying behavior is involved when the product is expensive, bought infrequently. E.g.: Automobile
The consumer will spend lot of time in discussing and planning about the purchase of such a product.
Dissonance reducing buying behavior: - This type of buying behavior is involved when purchase is expensive, infrequent and risky but there is not much difference between the various brands. E.g.: you are planning to buy a DDA flat in a particular locality. You would agree that all the flats are similar in size and construction. Once you decide to buy a particular flat you will be more concerned that you should not have any problem after buying it. Let us assume you wanted to buy a flat and you have not noticed a dustbin close to it. Now when you come to know about dustbin you would not have buys that flat.
Habitual buying behavior: - This type of buying behavior is for the product, which have low involvement and the absence of significant difference between the brands. These products are frequently purchased. E.g.: When you want to buy product like salt you don’t even think when you go to store whatever brand is available you would have pick it up.
Variety seeking buying behavior: - This type of buying behavior is involved when low involvement is there but there are significant differences between the brand.
E.g.: Think about cookies, you may want to change the cookies that you had last time not because they were bad but you want to change the taste.
FIVE STAGE MODEL OF CONSUMER BUYING PROCESS
NEED IDENTIFICATION: the buying process starts when the buyer recognizes a problem or need, this need could be because of internal or external stimulation.
INTERNAL STIMULATION: say when we are hungry we may want to eat something.
EXTERNAL STIMULATION: say when we are passing through a bakery shop you smell the freshly baked biscuits based on this you may want to buy, to consume biscuits.
INFORMATION SEARCH: Once the need has been identified the consumer would look for more information about the product. This information he may get from personal sources {family friends, neighbors, etc.} or commercial sources {advertising, sales person, dealers, displays}
EVALUATON OF ALTERNATIVES: Now that consumer has got information of the product and the companies that are selling their product. He would to evaluate the various alternatives that he has, various products will have different attributes on which they would be evaluated. For e.g.: cameras, picture sharpness, camera speed, camera size and price
PURCHASE DECISION: As the consumer has evaluated various alternatives, he would then purchase the product. This is the final act that the consumer performs after evaluating all the alternatives.
POST PURCHASE BEHAVIOUR: Once the consumers have purchased the product, he would either satisfied or dissatisfied. If the consumer is satisfied, he will tell his friends about the same and as such a better word of mouth is spread of the product. But in case the consumer is dissatisfied he will tell to all his friends and associates about the dissatisfaction that he had after using or consuming the given product.
A survey conducted by MFL-fabrics division indicated certain new realities:
• More than seven out of ten rural households possess watches.
• One in fifty households have a color television set.
• Seven out of every hundred households own an electric iron.
• 70 per cent of the sales of tables and portable radios, bicycles and cigarettes are from the rural market.
• Rural people are very particular when it comes to attitudes and aspirations.
• Rural consumers are even more particular about quality and value than their urban counterparts.
• Rural consumers are more brand loyal than the urban consumers.
• And social mores and norms impact the rural consumer in ways very different from their urban counterparts, especially in case of reference group influences and opinion.
MARKETING INFORMATION SYSTEM
Marketing Information System is defined as an assembly of inter-related information subsystems: receiving, processing and disseminating information on a continued basis to help make marketing decision.
The subsystems of marketing information
SUBSYSTEM INFORMATION
INTERNAL REPORTING SYSTEM Internal reports as order, sales, deliveries, inventory, credit sales etc. It is data of events occurred and results obtained.
MARKETING INTELLIGENCE SYSTEM Information about relevant events or developments external to the firm. The sources are newspapers, magazines, journal and other publications, conferences, exhibitions, meetings etc.
MARKETING RESEARCH SYSTEM Systematic investigation of information about a phenomenon specific to marketing situation. Desk or field research own research or through agency.
DECISION SUPPORT SYSTEM A coordinated set of models and procedures with supporting computer software & hardware.
New research tools Rural Markets:
As conventional research tools proved ineffective in these markets, researchers have started working out new solutions to these problems. Since the tools have to be such that the rural respondent can understand hence use of written text is reduced but images and the association of colors is being used which they can understand easily.
1. Images: Faces
2. Colors
Differences in Urban-Rural Market Research
ASPECT URBAN RURAL
RESPONDENTS Literate, brand aware, individual respond individually Semiliterate or illiterate, brand unaware, difficult to get individual responses, generally group responses
TIME Willing to respond, have time pressures, spares little time for researcher Hesitant but devotes time.
ACCESSIBILITY Easy to access, though many suffer from research fatigue Tough to access:
Geographical distances and psychological apprehension are barriers
Do not speak to outsiders easily
SECONDARY DATA SOURCE Internal data, syndicate research, published media, many sources and large data Very few sources and less data
PRIMARY DATA SOURCES Large number of middlemen, experts, sales force, consumers opinion leaders Less number of all categories
SAMPLING Respondents form relatively homogenous group. Income can be a criterion Heterogeneous groups. Income and land holding be carefully applied
DATA COLLECTION Use of sophisticated instruments, style and admiration.
Respondents comfortable with numbers ratings. Requires simplified instruments.
Respondents comfortable with colors & pictures.
SELECTING & ATTRACTING NEW MARKETS
Selecting and attracting markets involves three decisions viz., segmenting, targeting and positioning
Concepts & Process
o Segmentation is the process of dividing or categorizing market into different groups based on one or more variables.
o Targeting is selecting the market segment, which can be served efficiently and profitably. It is deciding on market coverage strategy.
o Positioning is a market attraction strategy, which involves placing the brand in the minds of the customers in the target market.
The various steps included in the market coverage and attraction process are:
DECISION ACTIONS
SEGMENTATION Identification of various bases for segmenting the market.
Developing profiles of the marketing segments.
TARGETING
Evaluating the market segment for their attractiveness.
Deciding the market coverage strategy
POSITIONING Identifying a set of possible competitive advantages of the brand
Selecting the right competitive advantage
Communicating the chosen competitive advantage to the target
customers
Segmentation is the process of identifying & establishing alternative market segments.
Next step that is ,targeting involves is evaluation, selection & coverage.
Evaluation of segments (following criteria may be applied):
Profitability - relevant information required is:
i. Sales volume
ii. Distribution cost
iii. Promotion cost
iv. Sales revenue
v. Profit margins
Attractiveness
Growth rate
Company objectives
Limitations
Selection of segments.
Coverage of segments
SEGMENTATION TYPE OF MARKETING COVERAGE STRATEGY
Zero Mass Undifferentiated
Substantial Segmented Differentiated
Selective Niche Concentrated
CHOOSING A COVERAGE STRATEGY
VARIABLE STRATEGY
UNDIFFERENTIATED DIFFERENTIATED CONCENTRATED
RESOURCES Moderate Large Limited
PRODUCT VARIABILITY Less More Less
PRODUCT LIFE CYCLE STAGE Introduction Growth Introduction
MARKET VIABILITY Less High High
POSITIONING
Positioning is the act of finding a place in the minds of consumers and locating a brand therein. Positioning involves:
1. Identifying the difference of the offer vis-à-vis competitor’s offer.
2. Selecting the differences that have greater competitive advantage.
3. Communicating such advantages effectively to the target audience.
Identifying the differences - marketing offer may be differentiated along the following lines:
Product
Service
People
Image
GUIDES TO EFFECTIVE SEGMENTATION
Segmentation can be effective only if it satisfies the following requirements:
1 Measurable:
• Segment formed with the help of variables should be distinct, clear and measurable.
• Companies have not been able to reach rural markets due to lack of proper data
2 Accessible:
• Reach is important to serve the segments.
• Marketers till recently prepared urban markets to rural ones because of the inaccessibility or the later.
• “HAATS” organized weekly are the places where one would be able to contact Rural customer.
3 Differentiable:
• Segments merit consideration of marketers only when they have distinguishing features. E.g. Buying of wrist watches heavy for rural light for urban customers.
4 Substantial:
a. A segment is attractive only when it is profitable.
i. Homogeneous
ii. Large
PRODUCT HAS DIFFERENT LEVELS OF AN OFFER
Core: It is something which is must or something which the product should do right.
Enhancement: - It is something, which the marketer is offering to the customer.
True Extras: - It is added to the product that increases the value in the eyes of the customer.
Special Products for Rural Markets:
• Rural Transporter: Mahindra & Mahindra is busy developing the prototype of what it calls a ‘Rural Transporter’ – basically a hybrid between a tractor and a rural transport vehicle. The product at 20-25 HP will be targeted at those who cannot afford a normal tractor and would also fulfill the need of family transporter that could take in the rural roughs but would be much more comfortable and safer than the conventional tractor-trolley.
• Sampoorna TV: LG Electronics, the Korean firm has rejigged the TV to appeal to local needs. It spent Rs. 21 Lacs to develop a set that would have on-screen displays in the vernacular languages of Hindi, Tamil and Bengali. The logic, rural consumers unfamiliar with English would still be able to use the TV without being intimidated.
• Titan Watches: A recent NCAER study revealed that there is a great potential for watches in rural areas. In fact it is considered to be a high priority list. It was also found that a rural consumer looks for the ruggedness of the watch more than the urban consumer does. He prefers thick watches than slim watches.
The biggest problem that the Marketers are facing in the Rural Markets is Of IMITATIONS. Imitations may result in two types of goods depending upon the purpose, commitment, and competence of imitator. A poor imitator will end up in producing deceptive, spurious, fake, copycat products. He dupes the gullible customer by offering products having close resemblance with the original. In quality, it is poor cousin to the original. On the other hand, a poor imitator may even produce an improved version of the original product.
In this scenario the job of the Marketer becomes even more difficult in the sense that he has not to fight other competitors but also the imitated products.
The advantages that these products enjoy in the rural markets are that the Imitators who are in the villages are making these and they are offering
More Margins & Better credit Facilities.
To solve this problem the Marketer has to educate the consumer about his product and show him the benefits of his products over the imitated ones.
Project Shakti of HLL is a step in this direction where Ladies from the villages distribute these products of HLL where by they explain the benefits of using good products and it helps them to increase their household income.
Need-Product Relationships and the changes happening in Rural India
Needs Old Products New Products
Brushing Teeth Neem sticks, Charcoal, Rocksalt, Husk Toothpaste, tooth powder
Washing Vessels Coconut fibre, Earthy materials, Brick Powder, Ash Washing Powders, soaps and liquids
Transport Bullock Cart, Horses, Donkeys Tractors, LCVs, Mopeds, Scooters, Motor cycles
Irrigation Wells, Canals, Water lifters, Wind Mills Bore-wells, Motors, Power Generators, Pump Sets
Hair Wash Shikakai powder, Retha, Besan Shampoos and hair care soaps
PRICING
Among the four A’s of rural marketing viz.
Affordability
Availability
Awareness &
Acceptability
Affordability is the major determinant of consumption.
Affordability is determined by two factors
1 Incomes of the consumer
2 Prices of the products or services
As such the corporate will have to adopt a two pronged strategy of boosting incomes of rural consumers through Development Marketing and adopting pricing policies and methods that make products affordable.
Price is a multi-dimensional concept
• To company, it is revenue generator.
• To the consumers, it is their cost of purchase as well as cost of living.
• To the economy, it is the mechanism by which the resources are allocated.
Pricing Frame-Work
S.No. Situation Major Factors Approach Method
1 New Product introduction Demand -Elastic
-Inelastic Cost-oriented
Demand-oriented Cost-plus or mark-up, Penetration, Skimming
2 Product-life cycle (short) Cost
Demand
Competition Cost-oriented Payback/capital recovery,
Rate of return
3 Growing markets Cost Cost-oriented Cost plus, mark-up
Experience curve
4 Mature markets
Stiff competition Competition Competition-oriented Leader pricing,
Competitive pricing (bidding),
Going rate pricing
5 Growing/mature markets.
Discerning buyers Demand Demand-oriented Discriminatory,
Differential,
Perceived value,
Psychological,
Value pricing
6 Product-mix promotion Demand
Cost
Competition
Image Demand-oriented Product-line,
Optional feature,
Captive product,
Two-part,
Product bundling
7 Distribution to scattered
Customers Geographical
Cost Cost-oriented Geographical pricing
8 Motivating channel Competition
Channel members Competition-oriented Discount pricing
Approaches to pricing would be based on one or more of the following bases:
1 Cost
2 Competition
3 Demand
Various methods of pricing are discussed in the following tables:
Cost-based Methods
Method Description
Cost-plus or Mark-up All associated costs of production are computed. Prices are fixed by making up a fixed percentage over average or marginal costs.
Marginal cost or Contribution Price is determined to recover marginal cost and make a contribution to the firm.
Target return Prices are set in anticipation of earning a desired target return on investment.
Pay back method (capital recovery) Price is determined to enable the firm to cover all costs and capital investment within a specific time period.
Experience curve An experience curve represents the relationship between costs and cumulative experience. With learning, costs decline and allow fixation of lower prices.
Competition – Based Pricing Methods
Method Description
Leader pricing Some product items may be priced low, to attract customers and to generate more overall demand for other items.
Competitive pricing It matches the market prices of competitors. It is reactive.
Going rate pricing (Follow the crowd/leader) Firm prices its products at the same level or below the prices of leading competitors.
Sealed bid pricing In industrial marketing, open or closed bids are invited. Firms quote their prices, anticipating what the competitor would quote.
Demand-based pricing Methods
Method Description
Discrimination / Differential / Variable / Flexible Products are sold at two or more prices based on customer segment, product-form, image, location and time.
Perceived-value Based on perceived value of each component of the product, the price is estimated and employed.
Psychological Based on attitudes of consumers in quality-price relationship, (high price indicates high quality) odd prices (convey the notation of a discount or bargain) and reference (a price on an average considered right for a product), prices are determined.
Value Pricing to generate value satisfaction to consumers. Every Day Low Pricing (EDPL) charges low prices on all days. High-low pricing charges higher prices on ever day basis but lower prices during special promotion period.
Pricing strategy has to pass through three tests of effectiveness:
1 Is it in tune with the expectations of customer?
2 Is it consistent with other P’s of marketing strategy?
3 Is it competitive enough to give the target market share?
CONSUMER CATEGORIES (RURAL CONSUMER)
Category Annual Income Life Style
Quality conscious Over Rs. 1,50,001 Very rich
Value conscious Rs. 45,001 – 1,50,000 Consuming class
Price Conscious Rs. 22,001 – Rs. 45,000
Rs. 16,001 – Rs. 22,000
Below Rs. 16,000 Climbers
Aspirants
Destitute
Price in Marketing Mix
S.No. Rural Consumers Product Price Promotion Place
1. Quality conscious,
Concerned with
Functional benefits,
Value for money Premium
Product High High Show rooms,
Malls, hyper
General and Fancy stores
2. Value conscious
Price sensitive,
Concern for
Functional benefits
No frills. Value for money Mass
Product Medium High General and fancy stores, super markets, Kirana, paan shops and Haats.
3. Price conscious
No concern for quality Spurious
Products Low No Kirana, paan shops and Haats
Skimming Vs Penetration Strategies
Factor Skimming Use if: Penetration Use if:
Price elasticity of primary demand Inelastic Elastic
Price elasticity of selective demand Inelastic Elastic
Cost of production and marketing relative to potential competitors Higher Lower
Economies of Scale No Yes
Ease with which competitors will enter the market Difficult for them to enter Easy entry
Rate at which the consumer will accept the concept New concept (slow) Known concept (fast)
Market segments based on price Exist. Can be taken one segment at a time Mass market exits
The firm’s resources to produce and market product Small or restricted Large
PROMOTIONAL STRATEGY
Promotion has become the biggest challenge, to rural marketers today.
Rural marketers have to skillfully communicate with a much larger but scattered audience characterized by variations in language, culture and lifestyles.
Poor message comprehension and low media exposure only add to the problem of communication through mass media.
The requirement is three folds:
1. To explore the available media at the different locations.
2. To develop region-specific consumer profiles to understand the characteristics of target market.
3. To design right communication and motivation strategies to induce target audience to buy the product.
EXPLORING MEDIA
Promotion media may be classified broadly into three categories: Mass media, local media and personalized media. The various media vehicles are given below.
Mass Media Local Media Personalized Media
Radio Haats, Melas, Fairs Direct Communication
Cinema Wall Paintings Dealers
Press Hoardings Sales Persons
TV Leaflets
Video Vans
Folk Media
Animal Parade
Transit Media Researchers
Mass media like TV are gaining ground in the rural market through regional channels but one cannot deny the importance of the Local and Personalized media.
With the low cost of Local media and its effectiveness it is gaining importance in the rural markets.
DESIGNING RIGHT PROMOTION STRATEGY
In designing the right promotion, the considerations are:
Approach Same or different
Design (i) Message Rational or emotional or moral
(ii) Media Mass, local, customized one-to-one
(iii) Communications Advertising, sales promotion, publicity and personal selling.
Budget allocation Media mix
Approach: Same or Different?
The controversy regarding the validity of a universal approach to attract urban and rural consumers may continue for some years to come. Until all the rural areas are almost equally urbanized, marketers have to pay heed to the voice of experts. Based on its survey findings, A.P. Lintas advocates:
“In mass media, a different idiom for rural India is not required. The chasm between rural and urban India is narrowing”.
Ogilvy Rural Communication Network (ORCN) considers rural specific promotion is necessary.
“Advertisements for the rural markets must be relevant to those markets if they are to create brand awareness and penetration. For advertisements to succeed, companies have to adopt the principle of multi-national companies i.e., think global and act local.”
These two viewpoints are valid, as they represent two different markets of evolving rural markets. It is for the individual marketing manager to find out the applicability of the views. When we observe the practices of leading consumer companies, we find that they are following a more localized and personalized approach in the selection of media and designing of messages. The time has perhaps come for advertising agencies to look into issues specific to the regions and also at the products, to succeed in the large rural markets.
DESIGNING PROMOTION
The process of designing promotion mix with appropriate message, media and promotions is not an easy task. It involves the following steps.
• Determining communication objectives.
• Creating message content or appeals.
• Evolving message structure.
• Developing message format.
• Choosing message source.
• Selecting the channel.
• Deciding on promotion mix.
• Establishing promotion budget.
(a) Communication objectives: After analyzing the characteristics of target audience and identifying available media, the next step is Setting Communication objectives. The market may seek one or more of the following objectives
1. To achieve awareness among a certain percentage of target audience.
2. To improve product knowledge among target customers.
3. To strengthen liking or preference to buy the product.
4. To persuade the consumers to buy the product.
In urban markets the emphasis is on brand switching and promoting more usage. But in the rural markets, many companies are rightly emphasizing on brand awareness building objective. This is the route for more and regular sales according to HLL, Philips, Godrej and Dabur.
(b) Message content: Messages are to be created to induce, inform and persuade target audience. There should be a theme, an appeal or a unique selling proposition (USP) touching the heart and stimulating the mind. There are three types of appeals: rational, emotional and moral. They are briefly explained and illustrated in the following table:
APPEAL ASPECTS EXAMPLES
Rational Benefits: Quality, value, Hero Honda Fill it, shut it.
performance, etc. forget it. Three rose tea: color,
taste and flavor
Emotional Positive: humor, love, pride, Prestige pressure cooker: Those who
and joy love their wife cannot say no to
Prestige pressure cooker
Negative: Fear, guilt, and shame Onida: Neighbors envy, owner’s pride
Moral Right behavior, social causes Aids campaign. Fight cancer
Campaign
(i) Rural Vs Urban: A commercial's content, however, contains both aspirational and functional elements, which may or may not synchronize with rural consumers as much as they go well with the urbanites. In case of broad based products like toothpaste, toilet soaps, hair oils, toilet powders, shampoo, and fairness creams, more similarities are observed. However, shades of differences are clearly visible while an achieving woman has universal acceptance, the liberated showpiece woman or half-nude or a woman shaking hair bewitchingly is looked down in rural areas. Given below are a few examples of common communication campaigns for rural and urban markets.
BRAND FUNCTIONAL ELEMENT ASPIRATIONAL ELEMENT
Lux Pure and mild Glamour and escape
Lifebuoy Health Heroism
Ponds Dream Flower Body care Achievement, Career women
Blue Wheel Washing bright Achievement
What stimuli may be offered to the rurals to induce them to buy? Emotional appeals like heroism escape. Fantasy, family love, achievement, and humor have universal appeal. It is believed that functional elements have stronger appeal to rural consumers than emotional appeals. Quality, theme and value-for-money propositions attract man rural consumers. Companies, which have understood the interest of the rural consumers, have become successful.
• HLL is actively promoting Fair & Lovely to achieve higher penetration.
• Nirma soap was successful for it was offered at half the price of the rival brands but with the same quality.
• Godrej introduced II different varieties of 165 litre classic models, as it became popular among the rural consumers.
(ii) Rural Vs Rural: In urban areas, due to the urbanizing forces. Socio-cultural similarities are many. However, in rural areas, souci-cultural differences are many for the following reasons.
• Villages are scattered far and wide.
• Linguistic and cultural variations are many.
Rural marketers have to look for these differences to determine the success of the appeals. The case of an urban marketer is just opposite to this. He searches for identifying commonalties to evolve a unifying and enticing appeal to the urban consumer. Philips is one company that has organized two different campaigns for rural in two different linguistic states-Engaveettu Super Star (the super star of our house) and Ma Inti Mega Star (the mega star of our house) in the villages of Tamil Nadu and Andhra Pradesh respectively.
(c) Message structure: The arrangement of the message in an appropriate order for presentation is as important as message formulation. The message is structured by words sentences and paragraphs. It can be:
• Tall or short
• Linear or non-linear.
Tall structures become essential when a marketer desires to explain the product benefits or company's standing on an issue. Generally, for product promotion short structures with brief messages will be more effective. In the case of rural, pictorial presentations make better impact than verbal descriptions, since their ability to read and understand is limited. Linear stories work well with rural consumers unlike urban consumers, they cannot process non-linear messages. Simple logic, sequential ordering of thoughts, easy to understand arguments and clearly drawn conclusions, are essential to make communication effective.
(d) Message format: The components of the message and their presentation are important aspects in message design. Different media provide different opportunities to format the messages.
Media Format aspects
Print ad Headline, copy, illustration and color
Radio Words, voice quality and vocalization
TV/Person Words, voice quality, vocalization and body
Language (Postures, gestures, facial expressions, etc.)
Pictures, dramatizing voices, attractive expressions and color have more influence on rural consumers.
(e) Message source: If both, the person delivering the ~ and the message are credible the message will achieve the objectives set for it. As such, marketers not only make efforts to create appropriate messages but also try to choose attractive, popular or expert sources. The credibility of a source is determined by three factors.
• Expertise
• Trustworthiness
• Likability
The Table below illustrates the use of celebrities, professionals, common persons or elderly persons to endorse the products.
BRAND CELEBRITY CHARACTERISTIC IMAGE
Agni tea Sridevi Attractiveness Energy
Horlicks Couple, elderly Trustworthiness Dependable
Tea Ustad Expertise Skilled
Cine stars Govinda and Dharmendra have more of a rural following Escorts promoted its motor cycle with the testimony of Dharmendra.
(f) Selecting the Channels: Communication channels are of two types: personal and non- personal. Mass communication is to be seen as a two-step-flow -of communication process. Messages of marketer's flow from mass media (TV, press, and radio) to people who are exposed to them. They become opinion leaders and through word-of-mouth disseminate information to the less informed people. The personal and non-personal channels include the following.
CHANNEL SUB-CHANNELS CONSTITUENTS
Personal Advocate channels Sales people. Social workers.
Expert channels Professionals (Doctors, Bank manager)
Social channels Neighbors,friends,family members and associates
Non- personal Media Print, TV, radio. direct mail,
websites.
Hoardlngs, posters
Atmospheres Environment of sales points
Events Sports, music, festivals, melas, jataras, Haats.
(i) Personal Channels: Personal influences have a significant role in the rural markets. Here buyers are less exposed to media, and more community bonded. They sock opinions before making final decisions. Companies can activate several sources to influence rural consumers.
• Distribute products through retail outlets, which facilitate interaction.
• Create opinion leaders by supplying certain people with products on attractive terms, or work through community influential such as local political leaders, doctors, teachers, etc.
• Develop advertising that has high conversational value or interactivity.
• Train middlemen in interacting with consumers.
• Establish Tele links for online transactions.
Distribute products for interaction: Companies are realizing that distribution is not an exercise in mere physical placement of products. It goes beyond, it needs to he animated by people and atmosphere. Distribution will he effective when the consumers:
i. Find the outlet a familiar place for a confident entry.
ii. Find the ambience appealing being compatible with their style of living and reflects their aspirational needs.
iii. Find the interaction with the retailer and his personnel pleasant and helpful.
Create Opinion leaders: Social norms and mores impact the rural consumers in ways different from their urban counterpart. It is found that decisions are mostly opinion-driven. They value social conformance in their decisions. As they live in communities, they prefer to have social sanction for their actions. That is why there are brand villages-Escort village. Nirma villages, etc. Wisdom of the elders, suggestions of the leaders, and advice of the educated are sought with high regard by the rural consumers. As such, the Panchayat head, the school teacher, the doctor, and elderly persons play a crucial role in the decision making process. Accordingly, some companies have started giving more importance to positive word-of-mouth campaigning through opinion leaders.
Advertising with interactivity: Advertisements is newspapers and magazines have limited value in rural areas. More than the radio, TV can impact rural audience by its audio-visual effects. Compared to these ads, live demonstrations, programs like story telling (Harikatha, Burrakatha, etc) or skits will be more powerful media as they provide scope for direct interaction With the audience.
.
Train middlemen: For a company to stay in the forefront. Its representatives should be strong communicators. Their ability to inform and convince the consumers is significant as the rural consumers are increasingly exposed to as many brands options as the urbanites but with less education less media exposure and less experience Measures are necessary to improve among middlemen the knowledge of products and skills of persuasion.
Tele links for online transaction: The information revolution is also sweeping the countryside. The remote rural villages scattered far and wide are now being Tele linked with the world. Villages are becoming netizens. Companies are talking an advantage of this new proposition.
(ii) Non-Persona, Channels: When it comes to selecting a media, one has to keep in mind that mass media reaches barely 30 per cent of the rural audience. It makes little sense to use this to reach out to the rural consumers, unless it is used as a supplementary tool. Infact, the major sources of information gathering and entertainment for the rural consumer continue to be local events and the best way would be to physically reach out to them by becoming a part of their daily life. Companies that have attempted to use local idioms to convey product message in a meaningful context had more success
Events like Haats, Jaataras and Melas create the right kind of atmosphere for rural consumers to go on a shopping spree. Socialization and jubilation mark the occasions. For rural consumers, fun, excitement, and humor are good ingredients in product message design. When advertisement is coined in entertainment it goes down well with rural audience. Stalls at fairs that combine games with the brand message are preferred routes of brand communication.
(g) Deciding on Promotion Mix: Besides advertising, a company may utilize one or more of the promotional tools. For example, sales promotion, direct marketing, publicity and personal selling.
(i) Sales Promotion: There are a host of sales promotion measures, which communicate, attract and benefit the consumers. They draw a stronger and quicker response and boost sales.
(i) Contests and Demonstrations:
(ii) Sampling: Generally, people tend to be conformists. The propensity to try a new product is less among people, particularly in the rural areas. Besides. Advertising, there should be some promotional measures to induce consumers to buy the products. Sampling as a promo tool does this job. While advertising creates awareness, distribution of samples achieves both brand awareness and conviction.
The efficacy of sampling in rural areas is, however, debatable. Marketers have varied experiences and different opinions. They are summarized here:
AGAINST
• REACH PROBLEM: MANY A TIME, PEOPLE ARE UNSURE OF WHETHER THE SAMPLES EVER REACH THE RIGHT TARGET I.E., THE DECISION-MAKER. THE FINAL DECISION-MAKERS ARE .1.5 AY IN THE FIELDS, WORKING THROUGH OUT THE DAY. THE TRIAL PACKS NEVER REACH THEM.
• Conversion lags: Conversion does not take place easily and immediately. It is a long process. A case in point could be Kellogg’s, which took .1 long time [0 convert urban dwellers to take to breakfast cereals. So, one can imagine the time it would take to convert rural folk to brands.
For
• Brand registration: The purpose of sampling is not brand sales. It is brand registration. Brand registration is vital in the rural perspective because it may then spread to other products under the same brand umbrella, such as Clinic Plus, hitching a ride on the benefits awareness of Clinic shampoo. Sampling goes a long way in the registration of the brands the minds of the rural folk.
• Brand Conversion: With more number of brands competing for the attention of rural consumers. Conversion to a better brand in the same category is a rather difficult proposition. So sampling is perhaps the only way to achieve this conversion the expected immediate effect of sampling, therefore, is brand registration. Even this requires the support of sales promotion measures to make the brand a talk of the village.
(iii) Installment Schemes: Rural consumer would not have much use for a monthly installment finance scheme as in an agrarian economy, income is generated primarily at harvest time. However, there are some success cases.
DIRECT MARKETING
The need to establish direct contacts with retailers and the village consumers has become
This view is gaining strength with increasing competition among companies and the growing power of retailers. They are finding it difficult to retain shelf space and displays in the retail outlets The current view as such, is:
"If you depend entirely on your wholesalers now, you are bound to lose your market to the competitor There is no substitute for stretching direct communication to the farthest".
In the rural context, personal one-to-one communication is effective. Such relations can be established through sales persons and mailers. Brushing aside wholesales and dealers, companies now have "direct points of contact" with retailers and sub-retailers.
(h) Communication budget: There should be an objective analysis of the goals and tasks of communication for determining the size and allocations of budget. The rural advertising budget of companies is generally between Rs. 6 and Rs. 15 crore. Though it does not seem much, according to an expert, Rs. 10 crore spent in the villages achieves the same visibility as Rs 50 crore in the towns and cities. MNCs like Samsung are spending Rs. 40 crore on advertising in semi-urban areas.
Allocation: Promotion should be turned around from the current 80:20) to 30:70. Thirty per cent of the budget for urban conventional media with priority sequence to radio. TV and press. Seventy per cent of the budget for rural local media, which includes publicity, vans, wall paintings, stalls, hoardings, and audio-visual publicity at haats and melas, sampling and other tools.
DISTRIBUTION STRATEGY
Many companies view the rural markets as great opportunity for expanding their sales but find distribution as a major problem. Unfortunately, it is almost impossible to transplant strategies which work successfully in urban markets onto rural markets, namely, extensive retailing and sustained pull generation through mass media advertising.
The road blocks to reach the rural customers are:
• Lack of adequate transport facilities.
• Large distances between villages.
• Lack of pucca roads connecting villages to nearest townships.
• Lack of proper retail outlets
• Lack of mass media infrastructure.
The marketers were of the opinion that the villagers would come to nearby towns and buy the products that they want.
What has been found is that if we have to serve the rural consumer we will have to take our products to him through the channels that he is using and some innovative ways of getting to him.
THE OLD SETUP
The historically available people & places for distribution include: - Whole seller, Retailer, Vans, Weekly Haats, Bazaars & Shadies.
1. Wholesalers
The Indian wholesaler is principally a Galla – Kirana (food-grain) merchant who sustains the belief that business is speculative rather than distributive in character.
He is a trader / commodity merchant rather than a distributor and therefore tends to support a brand during boom and withdraw support during slump.
The reason for this speculative character and dormant role of wholesalers are: -
• Indian market was largely sellers market. There was no need for active sales growth.
• Companies laid more emphasis or retailers in urban areas, who are very large in number. As a result of retail based distribution was weakened.
• Rural markets were neglected by many. The occurrence of retail outlets was low. Therefore many companies were dependent on whole salers.
The current need is to activate and develop wholesaler of the adjoining market as a distributor of products to rural retail outlets and build his loyalties to the company.
2. Retailers
Village retailers have traditionally been among the most mobile of rural residents.
Often doubling up as money lenders.
Their multi – person interaction in the closed village society.
As a result retailers play a significant role.
I. CREDIBILITY: -
- He enjoys the confidence of the villagers.
- His views are accepted and followed by the rural people whose awareness and media exposure levels are low.
(- The urban retailer is not trusted.
- He is seen as a businessman with profit motto.
- His view points are evaluated with other sources of information.)
II. INFLUENCE LEADER: -
- His role as influence leader is indisputable. From tender twig of neem to washing powder retailer testimony has been vital part of the product adoption process.
- The role of urban retailer is weak.
- The urban consumers have numerous sources of information.
- Although retailer’s opinion is sought it may not be 100% believed and followed.
III. BRAND PROMOTER: -
- In rural market retailers remains the deciding factor to sell particular brand.
- Retailers helps in identification and selection of brands, there is less influence of shelf displays and point of purchase promotion.
- Presence of spurious brands is an ample testimony to this view.
(- The urban retailer has a limited role as a brand promoter.
- He cannot directly, recommend the brands.
- He is to intelligently drive home his recommendations, as
urban consumers do not trust him completely.
- It is through shelf displays and incentive offers that he has to push the
brands.)
IV. RELATIONSHIP MARKETER
- Village retailer practices relationship marketing.
- He caters to a set of buyers who have income from immovable land resources and would be static over a much longer time span.
- The relationship could extend beyond three generations, backed by historical credibility of the retailer as a product referral.
(- on the contrary, the urban retailers have to make an effort to adopt
relationship marketing.
- His customers base comprises largely the mobile service class prone to
shift residence at least once, if not more, in less than a decade. This
limits the time span and perspective of the retailer – customer
relationship.)
V. HARBINGER OF CHANGE
- In an environment relatively isolated from external developments, he has
been harbinger of change.
- He is one of the main sources of information and opinion as well as
supplier of product and services.
(As against this, we find urban retailer, wielding limited influence in changing the product choices and quality of life of consumers.)
3. Vans
Mobile vans long since, have an important place in distribution and promotion
of the products in villages.
(iv) Weekly Haats, Bazaars, Shandies
4. Weekly Haats, Bazaars, Shandies
The haats are the oldest outlets to purchase household goods and for trade. These markets are very well organised with shopkeepers having pre-assigned spaces for them to sell their wares. A typical market is in an open field with ample space for displaying all sorts of goods. Its location changes every week. These markets have different names in different 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.
(a) Merits:
1. Convenience: The entire market can be related to large departmental stores in cities, where the advantage is a one-stop shopping exercise. These outlets crop up every week, providing consumers immense choice and prices.
2. Attractive: The weekend shopping is not only convenient but also entertaining. The markets start early and will be over by lunch. Afterwards, there will be entertainment. In respect of transactions, it is an attractive place to those who want to buy second hand durables and to those who prefer barter transactions. Further the freshness of the produce, buying in bulk for, a week and the bargaining advantage attract the frugal and week long hard working rural folk.
3. Availability: It is a market for every one and for every thing. Household goods, clothes, durables, jewellery, cattle, machinery, farming equipment, raw materials and a host of products are available.
(b) Implications to Marketers: Pradeep Kashyap, Director, MART, who has conducted many studies on these markets observed:
"These markets have high potential that corporate are now waking up to".
They offer good scope for distribution. For urban marketers, who have stockist and distributors that don't service remote areas, this form of selling can be a boon. A simple re-distributorship arrangement can be worked out.
(v) Melas and Fairs
This is another low cost distribution channel available to the marketers. It is comparable with urban events like Wills Trophy, India International Trade Fair (IITF), Sajavat or Consumex in which audience participation varies from a few thousands to a few lakh
people. These me/as are ancient and part of Indian cultural heritage.
Most of the fairs are associated with either a religious event or a festival. Among the most famous melas is the mighty Kumbh Mela at Allahabad (Triveni Sangam), Pushkar mela in Rajasthan, Kullu Dusshera mela in Himachala Pradesh, Sonepur mela in Bihar and Makar Vilakku in Kerala. People from all over the country gather to taste the wonders of India. According to the Indian Market Research Bureau (IMRB) around 8000 melas are held in rural India every year. According to Rural Scan (Quarterly News letter by MICA (Mudra Institute of Communications, 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.
The interesting questions are: Do these meals provide an opportunity for sales? How are they organised? At a me/a there can be as many as 854 stalls. Some 18.4 per cent of these are local stalls (belonging to a few hundred villages), 40.8 per cent are regional (they belong to a few districts) and 40.8 per cent are national.
An interesting statistic is that the share of manufactured goods at melas is around 42 per cent. Like urban events these melas need little or no prepublicity. They have come to occupy a firm position in the rural calendar of festivities. Most of the fairs are associated with a religious event or a festival. As with religious events, the dates of most fairs are determined by the Hindu calendar, not the Gregorian one. Most fairs are expressions of local need to celebrate. A villager, who has attended it since his childhood looks forward to it months in advance.
A majority of the melas are held during October-November and January-April. This coincide with the Kharif and Rabi harvests when the farmer's purchasing power is high. With both money and leisure at hand, he is inclined to indulge his family with a day out at the mela. He also looks forward to updating himself on the latest farming practices and on consumer goods. Visitors to fairs are thus highly receptive to try out new products and also come with enough money to do so.
Exhibit-I profiles the organisation of a mela.
THE NEW PLAYERS
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 altering.
(i) Unofficial Channels
Such instance are facilitating as well as forcing companies to review their distribution set-ups to ensure that they are present even in the smallest villages.
(ii) Cooperative Society
Cooperatives occupy an important place in India's rural economy, in terms of their coverage of population and their share in total supply of agricultural inputs, including credit. India can rightly claim to have the largest network of cooperatives in the world. By 1994, there were 3.95 lakh cooperatives. Cooperatives in 1999 account for 62 per cent of the total credit supplied in rural areas and 34 per cent of total quantity of fertilizers distributed in the country.
Rural Scan reports that there are 4398 Primary Marketing Societies and 2933 Large Agricultural Multipurpose Primary Marketing Services (LAMPS) in the country. Other members are:
• District Level Cooperative Marketing Societies : 191
• State Level Cooperative Marketing Federations : 29
• Commodity Cooperative Marketing Federations : 22
• Regional Cooperative Marketing Societies : 11
Generally, a cooperative exists for 2 or 3 villages. Farmer's Service Cooperatives (FSCs) is a mini super market. Such an arrangement can be tried with others.
(iii) Public Distribution System (PDS)
The Fair price shops run by government can be utilised to sell consumables and low value durables.
(iv) Petrol Bunks
Petrol bunks have become multi-purpose distribution centres at some places. Such concept can be effectively promoted.
(v) Agricultural Input Dealers
Fertilizer companies have retail outlets within a range of 5 km to any village. They offer a scope for marketers.
(vi) NGOs
Another alternative is working with Non Government Organisations (NGOs), which reach interiors of villages. Ideologies and methods may vary but most NGOs have programmes focussing on sustainable development through providing avenue for income generation. They command substantial influence where the programmes are implemented. Companies may join hands with them to mutual benefit. With NGOs undertaking distribution, companies realise benefits accuring from infrastructure and grass roots level networking. Also organisation security would provide a buffer against delayed retail collections. From the NGOs standpoint, such association with companies could yield employment opportunities for local residents.
(vii) Barefoot Salesmen
Companies may train sons-of-the soil to operate as barefoot salesmen. Fluency in the local dialect and familiarity with persons and terrain in the area of operation would be among the factors enhancing the efficacy of this approach.
A barefoot salesman, operating on a retailer-cum-commission basis, could book orders from retailers in villages within a limited radius of his village. On aggregating orders, which permit distribution economies, he could coordinate with the area stockist to arrange deliveries and make collections.
(viii) Syndicated Distribution
A viable and novel approach to reach the rural markets is syndicated distribution. Under this approach, marketers of household products could group together and consider the formation of a syndicated trading organisation which could jointly distribute a collective group of household products in the rural market and enjoy shared economies. The guidelines for formation of the syndicated organisation may be as follows:
Guidelines:
• Companies willing to work together may contribute to the capital of the organisation.
• It could be privately held and need not be open to the public or government agencies.
• The distribution by this organisation may replace or supplement the existing distribution.
• A formula for expense sharing is to be worked out in advance by the participating organisation.
NEW APPROACHES
i) DISTRIBUTION TRENDS
The changes in distribution are not only baffling but also challenging.
Changes in distribution.
Elements of sales From To
Time Restricted, limited timings Unrestricted, anytime
Place Own retail outlet, occasionally public place Anywhere
Choice Limited to brands Any product – to all specification, unlimited choice
Sales Products Products, experience relationships, achievement
Result Customer satisfaction Customer participation and satisfaction
ii) 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.
The 2 forms of DTH are: -
(a) Network Marketing
(b) Internet Marketing
(a) NETWORK MARKETING: - is a form of direct selling. It can take place at 2 levels.
• Single level – distributor appoints sales persons. He earns profits on sales, made by him.
• Multi level – distributor introduces another distributor (a friend or relative in general) who in turns introduces another distributor.
Like that the network is created.
The “Network” markets products.
Each distributor gets profits on his sales and also a percentage on sales made by his “Network”.
Thus one earns by “Retailing and Recruiting”.
THE RURAL APPLICABILITY: -
The introduction of network marketing in rural markets will be beneficial not only to
the companies but also to the villagers.
HLL’s project SHAKTI is adaptation of network marketing.
(b) INTERNET MARKETING: - Although at present due to low penetration of Pc’s it is not a viable media.
But some agencies and companies have started using this medium in a collective way to distribute information and products.
E.g. TAARA HAAT (DA), E – CHAUPALS (ITC)
COMPARISON OF RM, NWM & IM
Aspect RELATIONSHIP
RM NETWORK
NWM INTERNET
IM
Seller Company or its agents Consumers Company or its DOT.com agents
Role of consumer Buying and evaluating Buying, evaluating and selling Buying and evaluating
Focus Foster relationship & loyalty Strengthen relationships of consumers To be built
Supply Products, Experiences Products achievements Products Experiences, choice conveniences
Browsing experience Limited Limited Unlimited
Choice Limited to brand or category Limited to brand or category Any product customization
Time Fixed and limited Flexible, but limited by convenience Any time
Place Retail outlets Any where Any where
Cost High Low low
RELATIONSHIP MARKETING: - HLL
HLL is involved in building relationships with the customers in rural areas through education programmes, home – to – home contacts and cinema shows.
Focus
The objective in rural areas is to tap first time users.
Statistics indicate low usage patterns.
In China 90% of the people use toothpaste compared to 47% in India.
Only 20% have visited a Dentist. About 27% use toothpowder.
Even urban areas where majority of people use toothpaste right from childhood,
The overwhelming majority uses toothpaste only once in the morning whereas teeth required brushing most at bedtime.
Strategy
(a) Product:- HLL has introduced a 15 gms Prepsodent pack to target the first time user.
Close – up is introduced at retail outlets in suburban and rural areas with a price Tag of Rs. 3.50
(b) Campaign:- the operation, bharat programme. HLL’s door – to – door campaign in rural areas concentrates on educating the consumer by holding free dental camps.
In India there are scholarship for students in dental colleges for collaborating in research at such centres.
Dental check-up camps are conducted in schools.
A rural hygiene programme a counterpart to urban is to cover 350000 villages and has target of reaching 20 crore people.
(c) Door – to – Door sales: - in this HLL is selling a discounted personal care kit containing mini-packets of shampoo, toothpaste, talcum powder and face cream.
The kit is sold at Rs. 15
Sold separately the products would together cost Rs. 27
(d) Cinema: - after home – to – home contact and sales in villages during the day, HLL concentrates on cinema time in the evenings. There are still villages which donot have TVs , hence cinema shows are quite popular.
COVERAGE STRATEGY
A marketer aiming to extend distribution to rural areas might be confronted by the following issues.
• Which villages merit direct coverage at all?
• What would mode of coverage be?
Direct distribution to village settlements less than specific population or number of retail outlets would not be viable. Yet for future payoffs, systematised distribution efforts are imperative to consolidate brand shares and monitor product movement in a high growth market segment. Marketer has to evaluate plans to cover the villages by vans and participation in that market.
Differential development of infrastructure, divergent geo-climatic conditions and variations in locational density of village settlements preclude the application of uniform approach across rural markets. Pockets of similarity need to he identified and strategies be determined in consonance with individual pockets. Further refinements would be necessitated by local conditions and unique improvisions.
CASE: IS RURAL COVERAGE VIABLE?
Rajpuria Hudan is a small village near Lunkaranser in Bikaner district, Rajasthan. Parshu Ram Rathore is the largest among a total of three retailers in this village. Receiving a 15 day credit line, he purchases stocks on a fortnightly basis from one of the larger shopkeepers of Lunkaranser. He has been doing so for the past three decades. There are no telephones in the proximity of the village. Public transport is limited to a bus rendezvous twice a day at the metalled road head, about1 km from the village. A marketer aiming to extend distribution to rural Bikaner, or Rajpuria
Hudan, might be confronted by the following issues.
• With just three retailers, does Rajpuria Hudan merit direct coverage at all?
• What would the mode of coverage be? Access constraints with low-volume expectations indicate a single visit covering order booking, delivery and collections-a delivery van with sales personnel.
• If the product be a consumer soft with end consumer price of Rs. 4 a net margin to the marketer of 5 per cent, and operating costs of over Rs. 600 per day for a delivery van with personnel-it would necessitate minimum daily sales of Rs. 12,000 (3000 units) for the operation to at least break-even.
• A well-designed van route would enable coverage of at best eight village markets in a day. Larger inter village distances would reduce the coverage in the Bikner area to five.
• A van route could be operated with Rajpuria Hudan and four other markets covered in a day. A repeat coverage could be provided after a fortnight to tally with Rathore's inventory schedule.
• The issue is, whether consumption levels would yield off-take of at least 1 3 units per retailer per day in villages with just three retail outlets? Even if this was possible, what advantage would Rathore and his retailing brethren receive by purchasing stocks from the van?
With cost considerations occupying centre stage, the marketer offering a price advantage and credit are ruled out. Collections being the perennial month-end bogey, extension of credit to numerous small retailers like Rathore would cause accounting mess.
PRODUCT STRATEGY
The central decision in marketing mix is product decision.
Product classifications: -
(i) Based on Tangibility
- Products
- Services
(ii) Based on the purpose of use
Purpose Type User Products
Consumption
Consumer
Goods
Household
Toiletries,
Cosmetics,
Beverages etc.
Production
Industrial /
Agricultural
Goods
Industries
Farm / poultries etc.
Raw materials components, agricultural inputs and machinery etc.
(iii) Based on the functional life of the product
Type Nature of use Functional
Life period Example
Consumables
One time
Short
Food & beverages
Durables
Life time
Long
Furniture,
Computers, cars and cameras
(iv) Based on habits
3 categories based on shopping habits: -
Goods Product
Type Buyer involvement / frequency / buying decision Buying place
Convenience
Goods
Consumables
Low / frequent / simple
Paan, shop, kirana shop,
Cooperative stores, fair price shops, fairs & mandis
Shopping goods
(clothing, furniture, home appliances etc.)
Durables
Moderate / occasional / complex
Fairs, haats, mandis & shops in feeder towns.
Speciality
Goods
(camera, two wheelers, tractors etc.) Durable High /
Once in life / complex Shops in towns or cities
(v) Based on the price and quality
2 types of goods are identified: -
(a) Mass product (cheaper and economy goods)
(b) Premium product (superior goods)
- Cheaper goods are those, which are characterized by, low
quality and low price.
They perform core functions but lack certain attributes, which
make their use less comfortable, less pleasant and less
desirable.
e.g. Nirma washing powder is cheap good.
The package is poor. Powder spills over. When the powder is mixed
in water, burning sensation is felt in the skin and palms.
- Economy goods are products with all necessary functional
features but no fancy features.
Its price and quality are fairly reasonable.
In case of durables, its operating and maintenance expenditures
are low.
As such, they are money savers while being need
e.g. T.v without remote etc.
Premium goods are such products, which appeals to the ego of the
buyer.
They are described as, goods for premium consumption.
e.g. Jewellery, cars etc.
(vi) Based on product development
Innovations
Imitations (novelties, copycat)
Innovations: - innovate products rule the market.
An innovate firm will surely succeed. However, it should be
careful in making technical innovations in tune with changing
market behaviours.
Imitations: - imitations may result in two types of goods depending
upon the purpose, commitment and competence of imitator.
A poor imitator will end up in producing deceptive, spurious, fake
copy cat products.
On the other hand, the competent imitator may even produce an
improved version of the original product.
Original
product
Immitations
Novelties Copy Cat
Life buoy
Nirma buoy,
New lime buoy
Nimba bouy
Colgate
Pepsodent
College
Nirma
Wheel
Neerbha, nima, nilima, narima
Fair and
Lovely
Fairever
Friends and lovely
(vii) Based on brand hierarchy level
There are 5 levels of products based on branding.
While urban market is exposed to the 5 different brands,
Rural market is now finding the national and global brands at
their threshold and doorstep.
• Global brands - pepsi, coke, lg, p & g
• National brands - godrej, tata
• Regional brands - sun tv channel
• Local brands - surya masale, joy chips
• Unbranded products - oil, food grain, tougue cleaner
• Commodities - tamarind, cloves, fish, eggs
CONCEPT AND SIGNIFICANCE OF PRODUCT STRATEGY
Product strategy refers to the long – range competitive plan involving decisions on: -
- Products
- Product line and
- Product mix
To make proper utilization of resources and achieve marketing goals.
Significance: -
An effective product strategy offers the following benefits.
(i) Achieves Product – Market Fit: -
A well thought out product strategy will be able to offer
products based on market needs.
thus, it achieves product market, fit and avoids the pitfalls of
marketing myopia
consequently it provides insurance for survival.
(ii) Encourages Innovativeness: -
The key to product strategy is innovation with a view to fine tune
the market offer to the current and future needs of consumers.
(iii) Provides Competitive Edge: -
Marketers need good intelligence on how to anticipate
competitive moves and launch their new products.
Companies will have to use product strategy to
• Attack
• Flank their competition
• Depend their positions and
• Wage guerilla warfare.
(iv) Makes Better Use Of Resources: -
The product additions and deletions, based on rational appraisal
of marketing and productions strengths and weakness.
Allow for better utilization of physical, financial and human
resources.
SCOPE
Product strategy embraces decisions a 3 level.
(i) Product mix
(ii) Product line
(iii) Product item
Product strategies – an overview
Level Strategy
Product mix
Width extension – new product lines
Length extension – new product items
Depth extension – new product variant
Product line
Stretching – upward, downward, bothways
Line pruning
Product item
Quality, features, design brand and package
Augmentations
Product line is a group of closely related products priced within a range and distributed through same channels to the same customer group.
It has two dimensions: -
- Length
- Depth
Length – it refers to the total numbers of items in the line.
Depth – it is the total number of product items.
1. Length of product line: -
How long should be the product line?
It is like asking “how long should the legs be?”
The reply to this question is :- “long enough to reach the ground.”
Similarly, product line length should be evaluated in the light of
company profitability.
If profitability can be increased by dropping items, the existing
length is more than necessary.
If profitability can be increased by adding items, the existing
length is short.
It should be neither too short nor too long.
Arguments in favor of short and long lines are summarized below: -
Short line Long line
When focus is on
Specialization.
If companies want to be positioned as full line companies.
As a consequence of
contraction
defense strategy
As a result of flanking strategy
If profitability is
the objective
If market growth and
Market – share are the objectives.
When line pruning is done.
Loss making products are
dropped.
Product line proliferation
Zealously new products are added.
Line stretching: - is lengthening the product
Line beyond its current range.
The stretch can be in 3 directions: -
Downward – adding lower end items.
Upward – adding high end items.
Bothways – adding items at both higher and lower ends.
Reasons: -
• Reaction – as a reaction to competition, innovative product items are added.
• Opportunity – to utilize the existing market gap, new items are introduced.
• Image – to have a full line company image, rolling upward or downward or both ways is done.
• Pressure – yielding to pressure of sales force and dealers, new product items are introduced.
• Strength – to use the excess capacity, line stretching is done.
• Desire – to fulfill the desire of top executive or product manager, to introduce a new product item, line stretching is done.
2. Line Pruning: - product lines tend to lengthen over time.
Sometimes they are stretched on rational grounds at other times; they are lengthened because of emotional reasons.
In either case, some dead wood will accumulate.
It is weeded out based periodical review of the contribution of product items.
The product items can be classified as: -
(i) Traffic Builders:- which attract customers but generate marginal incomes.
(ii) Bread Winners:- which generate major share of incomes.
(iii) Parasites:- which incur losses and depend on bread winners
Product line pruning may be done when:-
• It is identified that dead wood is depressing profits, and
• It is found that the production capacity is limited and cannot handle all the existing products.
e.g. HLL has pruned 80 strong brand, portfolio to the 30 power brands, which account for 75% of its FMCG turnover.
3. Line Modernization:- when technological developments change the products, a decision to revamp the old line and design a modern line become inevitable.
The aspects to be considered are:-
(i) Timing: it should not be too early or too late.
The timing decision requires information about:
• Conversion readiness of consumers from old or new products.
• Competitors moves.
• Profitability levels of existing product line.
(ii) Approach: whether the change be total or piece meal?
The merits (+) and demerits (-) of these two approaches are given below:-
Total Piece-Meal
- requires heavy cash flow + less draining on company’s cash flow
+ surprise competiter no chance to imitate - allow competitors to see changes & start
designing their own time
- implementation to change involving dealers and
customers is difficult + people affected by change easily understand
and adopt
COMPETETIVE PRODUCT STRATEGIES
The Basic Product Strategies Of Different Companies In The Market Arena as follows: -
(i) Identity Strategies
• Commodity Strategy:-
Commodity describes products and services that are highly standardized
and perceived to be homogeneous.
They are unbranded products.
e.g. foodgrains, vegetables, fruits, edible oil, sugar, steel etc.
It is reported as many as 75% of coconut oil consumed in rural households
is unbranded and locally branded.
When sold as commodities, the marketer can differentiate them in the
following ways:
- Grading
- Delivery
- Services
- Relationships
• Branding Strategy:-
“The share of non-branded goods is shrinking”.
e.g. Castrol branded lubricants successfully in a product category where consumers bought the product as a commodity.
They aggressively targeted non-conventional outlets like automobile and mechanical shops and built awareness and loyalty for their lubricant brands through powerful advertising.
(ii) Customer Value Strategies
• Mass Product Strategies:-
While urban consumers are price brand conscious,
Rural consumers are price sensitive.
They are more concerned about functional benefits of the products and the value-for money they pay.
Hence many companies have launched “No Frills”, economy products to attract rural consumers and low end urban markets.
e.g. Maharaja Appliances “bonus” range of “no frills” home appliances.
Bonus washing machine priced at Rs. 2990/- without the drier.
Escorts “Rajdoot 223” to meet the needs and expectations of the rural consumer.
• Premium Product Strategy:-
Premium brands are gaining wide acceptance in the rural markets.
- Priced at Rs. 14400 LG’s Sampoorna costs Rs. 2000 more than equivalent products from firms like BPL or Philips.
Yet it was sold more than those of all competitors put together.
- Toyota Kirloskar motor limited had launched “Qualis” targeted at urban and semi-urban audience.
They have a rural marketing plan, which will address rich farmers and landowners.
• Innovation strategies:-
- Rural-Urban common
Realizing this, Castrol branded lubricants successfully in a product category where consumers bought the product as a commodity. They aggressively targeted non-conventional outlets like automobile and mechanical shops and built awareness and loyalty for their lubricant brands through powerful advertising.
Brand names make products familiar and evoke possessiveness.
This has become true in case of LG Electronics of India. It named the customized TV develop for the rural market, Sampoorna. The word is a part of Bengali, Hindi, Marathi and Tamil language. The strategy worked. About Rs. 114 crore worth TV sets were sold in the villages in year.
Strategy becomes effective when other elements are in consonance with it.
Brooke Bond’s Red Label Tea is a good example. Packed in red colour carton it has made identification of the brand easy. In its recent repositioning exercise, ads were designed with the slogan “jiyo-mere-lal (long live my son)” Lal has another meaning ‘red’. This made identification complete arousing emotional bondage.
The case for branding is gaining strength. It is reported that in 18 categories, branded consumption accounts for 80 percent of sales in rural India.
Bonus
Maharaja Appliances Limited (MAL) has launched a range of “no frills” home appliances, Bonus, specially for the rural and semi-urban markets. MAL realizes that the rural demand for home appliances is mushrooming. It has already a share of about 40 percent in the rural market. Since branded and quality products are unavailable, rural folk have to make do with substandard or illegal products. More over, the difference between the price of grey products and legal branded is also a major deterrent. Maharaja counters this by selling a sturdy Bonus Washing Machine, without 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 something of an edge, as it is an entrant.
Rajdoot 223
Escorts launched Rajdoot 223, priced at Rs. 33,300 to meet the needs and expectations of the rural market. It is cheaper than most mobikes and is preferred over mopeds and scooters because of its sturdiness and its weight carrying capability. Moreover, rural folks know that it is easy to maintain (spares are easily available). Today Escorts has about 2000 authorised service points.
To tackle the young village yuppie demand for something more fancy, Escorts launched ‘Ace’ with 175 cc engine. It is much sleeker and priced just marginally high at Rs. 37,560. Though not many models are seen in the urban areas, it has done quite well in the rural market demanding 15 percent of the production capacity of Rajdoot.
Agni Tea
Rural households consume more than half of 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 Tetly (tea bags). Each of these brand is positioned for a particular region and with a distinct blend to satisfy the customer’s choice in the targeted market.
In 1999, Tata Tea launched Agni as an economy brand. It was positioned at a blend competing with loose tea. The packaging was done with the objective of positioning the product for the masses. The communication strategy leaned heavily on the quality aspect and also the reputation of the house of Tata. Agni was retailed with a price tag of Rs. 130 per kg. Industry sources say that, within12 months of its launch, Agni has notched a volume of 12 million kg from zero bag. It is all set to assume the mantle of a leading brand among the tea majors.
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