PRODUCT STRATEGY

Objectives
• Marketing mix challenges.
• Product concept and classification.
• New product development with adoption
process of consumers.
• Lifecycle of a product and Strategies in
rural packaging and after sales service.
 Marketing mix challenges.
• Product – Acceptability
• Price- Affordability
• Place- Availability
• Promotion- Awareness
 Availability
• First challenge- To ensure the availability
of product or services.
• 638000 villages spread over 3.3 million sq
km ; 742 million Indians may live in rural
areas but finding them is not easy.
• Poor state of roads – a greater challenge
to send products to far flung villages on a
regular basis.
• Solution strong distribution system.
• Example
• HLL’s strong distribution
system- uses auto-rickshaws ,
bullock carts and even boats in
the backwaters of Kerala.
• Coca-cola uses hub and spoke
model.
 Affordability
• With low disposable incomes products need to
affordable to rural consumers.
• Most of them are daily wage earners.
• Some companies addressed the problem by
introducing small unit parks.
• Example includes
• Godrej – 3 brands of cinthol, fairglow and godrej
in 50gms pack prices rupees 4-5.
• HLL – lifebuoy at Rs 2 for 50 gm.
• Coca cola – Returnable 200 ml glass bottle at
Rs.5/-.
 Acceptability
• Need to provide product that suit the rural
market.
• L.G.Electronics- Customized television
and christened it Sampoorna.
• Coca cola – low cost iceboxes, tin box for
new outlets and thrmocol box for seasonal
outlets because of lack of electricity and
absence of refrigerators.
 Awareness
• Large parts inaccessible to conventional
media. Only 41 percent got access.
• Outing confined to local fairs and festivals
• Television viewing to state owned
channel- Doordarshan.
• HLL – relies on its own company
organised media.
• Godrej – uses radio to reach people in
their own language.
 Products concepts and
classification
• Market mix planning begins with offering.
• Rural consumers judges offering on the
basis of three elements
1) Product features and quality.
2) Service mix and quality.
3) Appropriateness of offering’s price.
• Companies should not dump the
goods for urban consumers into rural
market.
• Understand the cultural dynamics
and specific needs.
• Cadbury launched Chocolate
flavored biscuit- mothers opt for
affordable rather than expensive.
• Eveready found plastic torches for
urban consumers have got no
demand in rural area they prefer
heavy brass torches – Importance of
product feature.
 Five levels of product
• Each level adds more customer value and
constitute a scale of customer value
hierarchy.
• Five levels are core benefit, basic product,
expected product, augmented product,
and potential product.
• First two levels remains the same in both
urban and rural market. Difference from
the third level only.
• Third level- marketer prepares an
expected product and defines a set of
attributes and conditions that a consumer
normally expects .
• Rural television buyer expects good
picture quality, clear sound and easy to
operate set. Urban consumer goes for
digital sound, flat screen etc.
• Fourth level – marketer prepares an
augmented product that meets the
customers desires beyond expectations.
• This could be a television which runs on
batteries and better picture quality in weak
signal conditions also local languages etc.
• Where as for urban consumers this could
be an inbuilt DVD player with a television
etc.
• Fifth level – encompasses all
augmentations and transformations that
the product may ultimately undergo in
future. New ways to satisfy their
customers.
• Example electric bulbs that sustain high
voltage fluctuations.
 Rural Product
Categories
•FMCG’s
•Consumer Durables
•Agri Goods
•Services
FMCG Main Players
FMCG Market
• According to NCAER survey, the rural
market accounted for 53% of the total
consumption in the country in 1998-99
• The estimated size was around
– Rs. 484 billion in 1998-99
– Rs. 650 billion in 2002
FMCG Growth
• Rural market has grown consistently in the 1990’s
• A spatial distribution of the FMCG rural market
shows that four states namely Uttar Pradesh,
Andhra Pradesh, Maharashtra and West Bengal
account for 50% share of this market
• High income households spends 3.6 times more
than the lower income households on FMCG’s.
FMCG Products
• About 50% of sale of soaps, detergents
and beverages, 37% of personal products
(shampoo, toothpaste and skin cream)
and 12% of food products comes from the
rural market.
Market Growth
• The average annual per capita spend on
FMCGs in rural is Rs. 9400 as compared
to Rs. 13000 for urban among rich
households.
• 70% of the population accounts for only
50% of even relatively well-penetrated
categories such as soaps and detergents.
Consumer Durables
• Durable goods include products like home
appliances, automobiles, watches,
funrniture.etc
Main Players
• NCAER has classified durables into 3
categories:
– Low priced(<Rs. 1000)
– Medium priced(Rs. 1000- 6000)
– High priced(>Rs. 6000)
Consumer Durables Market
• As per NCAER Indian Market
Demographics Report 2002, rural India
accounted for over 60% share of durables
in 1998-99.
• The estimated annual size of the rural
market is Rs. 130 billion
Rural Share
• The rural share of durables has risen from
54% in 1989-90 to over 60% in 1998-99.
• Number of durables with over 75% share
has increased from one to four products.
• For several high priced products, the rural
share continues to below 50%
Durable Products
• The rural penetration of most products is
very low compared to urban except for
bicycles, radios and mechanical wrist
watches.
• The rural-urban disparity is highest in case
of electrical goods.
Market Growth
• The mid 1990’s witnessed impressive
growth rates
• It increased from 8.8% in the mid 1990’s to
11.5% from 2000 onwards.
Agricultural Goods
• Agri products are goods that are used for
farm activities.
• The agri inputs market accounts for Rs.
450 billion annually.
• The major players are Rallis India,
Monsanto, DCM Shriram, Chambal
Fertilizers, IFFCO, Mahindra & Mahindra,
Eicher and Escorts
Services
• Major services in rural include
telecommunication, transport, health care,
banking, insurance and education, ITES
like the internet, DTP and mobile phone
services.
• This category is led my LIC, SBI, BSNL,
Reliance infocomm, ITC’s e-Choupal,
ICICI Prudential Life Insurance,etc.
New product development
1.Idea generation
2.Concept testing
3.Product development
4.Test marketing
 e.g
• 5 k.g cooking gas cylinder by HPCL
• Jolly battery operated colour television
• Free power radio
• Jugad the rural public trans port in north
india
• Kishan credit card
 Max gas cylinder
• Auto cut regulator
• Double-seated cylinder
• Special steel-braided hose pipe
• Wide base of cylinder
• Top ring open one side
 EXAMPLE
• Mahindra maxx
• Hpcl,5-kg cylinder
• Vardhanm free bidi by Dalmia consumer
care
• Water purifier-jalshodhak
• Value added product: an aborted idea
• Phillips mahasangram
 Product Life Cycle (PLC)

PLC of a product in the rural market is often

longer than in the urban market due to
challenges involved in distribution,
communication and adoption
• Products that enter rural markets without
serious planning die out either soon after
the introduction or during the growth stage

• Companies have to focus on brand

building and should innovate constantly to
sustain in rural market
• Pioneers in rural markets having high
penetration with products at the maturity
stage now extends their brands
 Product Mix
• Simple- mostly only one product of a
particular company registers its availability
on rural shelves due to
– limitations of investments in stocks,
– slow movement and replenishment of stocks,
– dominance of retailer in the rural market

• Exceptions- HUL, Dabur

 Rural Packaging
• Plays significant role as it is associated with
– Affordability,
– ability to recognize,
– convenience of usage
– product appeal
• Needs special focus because of
– Poor transport system
– Difficulties of safe storage
– Poor facilities
• Marketers have to consider following
factors in packaging
– Packaging material
– Pack size and convenience
– Packaging aesthetics
 Packaging Material

• Most commonly used- plastics since they

are waterproof, provides barriers to
vapours, sunlight resistant, lightweight
 Pack Size and Covenience
• Sachet revolution pioneered by Velvet Shampoo at
Re. 1 in later 1970s later followed by HLL, Godrej,
Dabur etc
• Sachet packaging replicated in many product
categories- Tiger biscuits, Close-up toothpaste,
Parachute hair oil, Ponds cold cream, Fair & Lovely,
Chota Pepsi etc
• Convenience- factor that affects the decision to use
a product
• Eg: Colgate tooth powder in small sachet with cap,
closeup toothpaste, Fair& Lovely, Parachute
coconut oil in Re.1 plastic bottles easy to use
anytime
 Packaging Aesthetics
• Lower literacy levels in rural market
• Consumers appreciate bright colours
– Eg: Lifebuoy identified as red soap

• Distict lettering, use of local languages on

the pack, images or symbols that convey
product’s benefits influence consumer
perception about the brand
 Branding in Rural India
• Popular brands show an unusual trend
• Brand association with colours, numbers
and visuals and not necessarily with the
name of the brand
• Retailers play a major role in rural brand
promotion
 BRAND BUILDING IN RURAL
INDIA
• BRAND NAME DEVELOPMENT
- Facilitates easy brand recall
- some brands are known by their names.
- Colours (Lal dant manjan, lal sabun
lifebouy, Red battery eveready),
- Numbers and Visuals
- Eg:
Sampoorna rural television brand of LG.
Ajanta toothpaste
Sansar sewing machine
• CREATING A BRAND IDENTITY
• Challenge: need to relate the brand
with the rural lifestyle
• Brands are introduced to urban
markets and then move to rural
• Tata Steel – Tata Shaktee sheets
(qualities of strength, durability and
toughness)
• Britannia Tiger Biscuits ( smart, active
and sharp child)

• BUILDING A BRAND IMAGE

• Brand has a personality of its own
• Helps in brand connect
• Mahindra & Mahindra – Bhumiputra
series of tractors and Sarpanch series
• BRAND LOYALTY vs STICKINESS
– Rural people are less likely to switch brands
as they do not have the required information
– Comfortable in purchasing tried and tested
brands : brand sticky than brand loyal
• What should a Brand do to establish itself
• Educate rural customers
• Develop their interest through interactive
communication
• Encourage their desire to own
• Deepen confidence through live demonstrations
• Build a long term relationship
• Eg:
• Reasons for Brand Stickiness
• Many rural customers are still discovering the
benefits of the products
• Early Mover Advantage of the dominating brand
• Entry of new brands very difficult
 FAKE BRANDS
• Bond’s for pond’s talc
• ‘Fair & lonely’ for ‘Fair & Lovely’
• ‘Likeboy’ for ‘Lifebouy’

• The main problem of rural market is the low

penetration and the poor availability of branded
products.
• No distribution channel to reach the customer.
Led to the growth of spurious brands to fill the
gap in the demand.
• THE FAKES MARKET – Categories
1. Lookalikes
• The colour scheme on packaging material
closely resembles that of a popular brand.
• Eg: Shagun for Lifebouy(150 mg)
Lalita Amla for Dabur Amla

2. Spell-alikes
• Names are subtly and cleverly misspelt
• Eg: Paracute for Parachute
Pome’s for Pond’s
3. Duplicates
• Exact replicas of original brands
FEATURES DUPLICATES SPELL-ALIKES LOOKALIKES

Brand Name Original Misspelt Different

Pack appearance Replica Identical Similar

Manufacturer’s Original Incomplete Own Nam

address
Price M.R.P 40% low 10-15% low

Margins 200-300% 100-150% 60-70%

Quality Very poor poor Reasonable

Intention of retailer To cheat To mislead To freeload

Consumers unaware unaware Want cheaper

products
Identity none Only literate Majority

Other none discounts schemes

STRATEGY TO COUNTER FAKES
• Upgraded packaging
– Eg: Dabur

• Ensure deeper penetration and continuous

and regular availability of products
• Forge strong relationships with local
retailers.
 STRUCTURE OF COMPETITION
IN RURAL INDIA
• Competition from other urban national products –
branded tea and detergent powder
• Regional urban branded products - brands of the
unorganised sector, like soaps, talc.
• Local urban brands – ribbons, bangles
• Local village brands – ropes, bread, food items
• Substitutable products or indirect competition – neem
twigs.
 CONCLUSION
• Product – at the heart of marketing
• Products must achieve the best fit with
rural conditions.
• The shift of rural consumers from product
generalisation to product specialisation
promises better growth for urban centric
products.
• The first mover in new product categories
will benefit.
PRICING STRATEGY
 Pricing Strategy

Affordability is, in determined by two factors-

1.Income of consumer
2.Price of the Product & Services
 Factors influencing the price
Internal Factors
• Cost
• Pricing Objective
External Factors
• Customers
• Suppliers
• Competitors
 Cost Factor (Contd.)

• Promotion as a cost factor

• Credit-based transactions increase cost

.
• ITC E-chaupal: A distribution channel to
control costs
Buy crop directly from the farmers. The
farmer is then paid for the crop and is also
given a transport fee. Bonus points are
given to those crops with high quality.
 Pricing Objective (Contd..)
• Profit maximization in the long run
eg.sell shampoos in sachets

• Minimum returns on sales turnover

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

• Keeping with competition

Videcon :Pricing Strategy

Videcon was one of the first companies to enter the

rural market with a plethora of products in the home
appliances. It attacked market leader Phillips by
launching a radio set for Rs.180(the Phillips radio set
cost Rs.250) and grabbed a major chunk of the market.
Low Priced shampoo
Cavinkare realized that for a family of five members at
rs.2 per sachet and minimum of four hair washes per
person per month would mean a Rs. 40 spend fro a
shampoo . Many rural families cannot afford this
expense. hence 50 p sachet shampoo were introduced.
 External influences
• Customers
the price sensitivity of customers depends on personal, social, economic,
geographical factors.
eg.chic shampoo introduced 50 p targeting daily and weekly labourers,
sampoorna CTV from LG

• Suppliers

Retailers give credit to regular customers.

• Competitors

Initially competition in the rural market was on basis of price. But lately
competition is on non price factors. eg-anchor whites vegetarian toothpaste
• Legal environment
 Pricing Strategies
• Optional-product pricing
• Captive-product pricing

• Low price points

• Avoid sophisticated packaging
• Refil packs/ reusable packs
• Highlight value, not price
• Product sharing services
 Market-Entry strategy
• Penetration pricing
• Economy pricing
• Value pricing
• Coinage pricing
• Psychological pricing
• Price adjustments
• Discounts and allowances
• Free gift
• Schemes for retailers
• Discriminatory pricing
THANK YOU…