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Marketing Casestudy

Marketing Casestudy

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Published by: gohelgohel on Sep 07, 2009
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02/15/2011

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Marketing ManagementAssignment
ByVidya Gorakshkar, Roll No. 16Casestudy 1Adeco in Rural marketsQUESTIONS1. Do you think the rural marketing strategy of Adeco wasright? If you were the decision maker what suggestionswould you give to Adeco?AnswerThe rural marketing strategy has some very commendablepoints
. Some of the salient ones are that the
Adeco tried toreach out to so far untouched segment of rural marketing.
According to NCAER’s the rural population accounted for asignificant chunk, in case of households earning between 2 to 5 lacsa year, the rural share was as high as 36%. Drought proofing of agriculture & dairy had contributed to rural prosperity, which madeit a promising lucrative market waiting to be served. Before startingthe countrywide sales promotion Adeco did
experimentation on asmaller scale
initially in Saurashtra & thereafter in Northern &Southern states. Adeco also did use innovative
advertising &awareness generation
drives using the local concept such asChofulla & Gumbatbari apart from films & music. Adeco used
Hub &spoke distribution model
for distribution to ensure that ruralmarket is reached and also catered effectively. Adeco tried to
overcome the problems associated with the electricity &refrigeration problems in rural area
by providing not onlyrefrigerators but also the tin & thermacol boxes with an associationwith the local ice factories.
In short Adeco had all the basicscovered as far as rural markets are concerned, in depthknowledge of rural psyche, strong distribution channels andawareness form the basic pre-requisites for making a dentin rural markets.
I feel that
Adeco made a major mistake in pricing of theproduct,
to penetrate the rural market Adeco kept the prices of ‘Chota Adecofar too low. The model used by Adeco was largevolumes and low margin
. The possible problems such as rise inthe raw material prices, rise in transportation costs, rise thedealers & distributers would expect over a period of timewere not foreseen & were not factored in
while deciding theproduct price. Though foreseeing the unexpected events like the
 
fertiliser controversy is not possible, had the pricing beenappropriate, it would have been possible for Adeco to sustain thebad patch had the price been appropriately decided. Increasing theprice is always difficult, because customers are reluctant to do so.
Had I been the decision maker I would have done followingthings;
1.
Direct the advertisement campaign to overcome the‘fertiliser controversy
, both nationally through newspaper &media advertisement, and also use local initiatives such asChaufulla & Gumbatbari to this purpose.2. I would
not opt for cutting the margins of retailers
, becauseif retailers do not have an incentive to push the product, they areless likely to do so.3. I would suggest
organising the meets of distributors andretailers
to explain to them the ‘fertiliser controversy’ and that thesubsequent tests suggest that Adeco products do not have fertilisersin them. Since they are the contact people for customers they canexplain to customers if they ask about the fertiliser controversy. Thereports of tests for safety norms, which cleared the allegationsagainst Adeco, could be prominently displayed in shops sellingAdeco products. Incentives could be given to retailers anddistributers doing the maximum sales.4. The Rs. 5 cost of Chota Adeco is too lowly set,
instead of raisingthe price phasing out of 200 ml bottles and widelyintroducing the 300 ml bottles would be a better option.
5. Company can think of 
prominently building its communityfriendly & socially responsible image.
Adeco’s belief that itshould enhance and develop environment and strengthen localcommunities and the efforts done towards that end can be widelypublicised. The help of Adeco’s board, comprising of eminent peoplelike retd. Cabinet secretaries, army staff, chief justice, economistscan be taken in this regard along with its employees and associatesworking in plants, franchisees, contract packers.
Question 2Analyse the business environment and highlight the factor/factors you think have been responsible for the failure of the affordability strategy.AnswerThe SWOT analysis of Adeco reveal following findingsStregths
Adeco is world leader having more than 400 brands
Adeco reflected Indian tests & life style.
 
Created direct & indirect jobs for Indians
Socially responsible company.
Strong distribution network
Company owned & franchisee bottling operations, also anaccess to 29 contract packers.
Introduced a affordability based penetration priced ChotaAdeco at Rs. 5.
Weakness
Price point was advertised heavily which turned to be aweakness later on, because only thing which customersassociated Adeco with was Chota Adeco at Rs. 5.
Margins were set too low, the increase in input cost resulted inlosses.
 To decrease losses retailers margins were reduced whichresulted in drop in sales.
Pricing of 300 ml Adeco was not attractive to customersbecause of too much stress on Chota Adeco.
Opportunities
Untapped market potential for colddrinks, global per capitaconsumption is 67.5 liters, whereas it is 6 bottles per personfor Indians. Even within India, a great rural urban divide inconsumption, highest of it is 50 bottles in Delhi.
Lucrative & expanding rural markets.
Increased aspirations of rural people to get facilities andconsumer items like urban counterparts
Threats
 The biggest threat was the fertiliser controversy raised byCentre for Science & environment which resulted in set back.
Increased cost of inputs & distribution.
Factors responsible for failure of the affordability strategywere
1.
Too low margins
which could not sustain the decline in volumes,because Adeco’s strategy was to reduce price & increase volume. The high volumes were expected to justify the trade off thedistribution cost with incremental market penetration. 2.
Consumer psyche
, they related to Rs. 5 cost so closely that theycould not dissociate from it. The
strong campaign
was a mistake,as price was too strongly embedded in people’s mind, and for themto get used to new price was not easy. The strong campaignstressing only one-price aspect of product was a factor responsiblefor the failure.

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