Rural Market in India

Innovations as Cutting Edge Solutions in Rural Marketing

Presented By Girish V Rao V . President Sales & Marketing LG Electronics India Ltd.

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RURAL INDIA ENVISION of LGEIL RURAL INDIA ENVISION of LGEIL

RURAL INDIA The LG Vision

Re-defining the position of Indian Rural Poor by extending the boundaries for their activities (products and services) through Cutting Edge initiatives.

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Rural Population Distribution

Distribution of villages in India

Population
Less than 200 200-499 500-999 1000-1999 2000-4999 5000-9999 10000 and above Total

1. Bottom Heavy Cluster among Villages

68 % of the villages in India are below the 1000 Popln - Marketers overlooking the same - Reaching out to these villages critical to exponential growth - Bottom Cluster with greater than 2000 Popl slowly saturating.

Number of Villages % of Total

114267 155123 159400 125758 69135 11618 3064 638365 18% 24.30% 25.00% 19.70% 10.80% 1.80% 0.50% 100%

2. Logistics The 3rd Generation Challenge

The Top tier villagers walk , talk & Think like any other man. - Servicing him is an absolute mandate - Beefing up the supply chain critical to reaching out to these masses. - Rural centric pdt and sound communication essential.

Source : NCAER

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Rural BPL Trend Over the Years

1. Rural BPL Decreasing

10 % improvement in 10 Yrs. - Rural Fast Catching up with Urban - Has a rippling effect on the overall BPL of India - Rural overall fairing better than Urban India

Source : NCAER

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Rural Vs Urban Penetration 05

Criteria Car / jeep / van Two-wheelers Colour television sets Refrigerators Washing machines Room air-conditioners Fans Bicycles TV (B/W or colour) Gas stoves Pressure cookers Rural % PEN HH'000 1603 1% 16195 11% 18152 11014 1870 76 63025 80533 48573 27390 37883 Urban % PEN HH'000 7241 12% 25813 42% Ttl % PEN HH'000 8844 4% 42008 20% 56724 40529 16317 3012 110327 117368 94973 68354 83075 106909 74622 34634 207388 1060740 27% 20% 8% 1% 53% 57% 46% 33% 40% 52% 36% 17% 100%

12% 38572 63% 8% 29515 48% 1% 14447 24% 0% 2936 5% 43% 55% 33% 19% 26% 47302 36835 46400 40964 45192 77% 60% 76% 67% 74%

1. Life style definers

1. Very Poor Rural Penetration

2. Necessity

2. Higher Rural Penetration when compared to Life style

Has electricity connection 59928 41% 46981 77% Drinking water in the household 39549 27% 35073 57% Fuel used is LPG / electricity / biogas 8544 6% 26090 43% TOTAL HOUSEHOLDS'000 146192 100% 61196 100% TOTAL Population base 877152 183588
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4. Basic Infra

4. Basic Infra fast improving in Rural HH

Source : FK Urban Rural Index 2005

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Rural Vs Urban Penetration 06 PC & Mobile

2006

2006

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Source : Dept of Elec Eng , IIT MUM

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Untapped Rural Potential

600,000 villages with 700 mn people >50% of total GDP from rural India Nearly 50% of Very rich + Well off households in rural India
No. of Households (mn) Demographic Classification Very Rich ( Greater than 10 L P.Annum) Well off ( Greater than 5 L P Annum ) Total % of Total Urban 4.84 29.45 34.29 54% Rural 1.32 27.36 28.68 46% Total 6.16 56.81 62.97 100%

Hardly any Gap between Rural & Urban India in terms of the Rich

Ministry of Communications & Information Technology , India

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Rural India

The Challenge
Electricity Shortage Sporadic Power Supply Acute Water Shortage. Poor Transportation availability. Consumer Finance Options Can we make energy saving products?? Can we give him a washing machine which consumes less water?? Can we give him access to buying products near by his location??
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The Solution

Set up of a Life style Research Team which would analyze the needs & preferences of the consumer , Indepth.. Understand at length his comfort levels in terms of what he wants and what he would spend for what he wants.. Make products and service available for him to suit his needs & Preferences.. Have a deep pocket network to make products Drive 3Q.. Achieve 555 LGEIL/ Fast Execution available for him at a close proximity from where he

Rural Market is the key to survival in India Rural Market is the key to survival in India

The Road Map 4 Point Mantra

Regional Marketing Approach Deep Channel Penetration Sophisticated & Deep After sales Service Rural Centric Marketing Promotions
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1. Market Demand Regional approach in marketing is required.

Purchasing power by Region 1. Market is different Consumer Behavior - S/W : Shift to Mid-High Segment Split A/C, FTV, F/L W/M - N/E : Conservative, Low End Win.A/C, 2Tub W/M, 1Dr Ref 2. Different culture, life style Diversity in lifestyle - Food Habits / Clothing - Language :18 official - Customs/Religion 3. Distribution Channel
SOUTH U$ 759 Market 29% LG 28%

NORTH U$ 731 Market 37% LG 39%

Traditional Agriculture base Extreme Temp.

EAST U$ 655 Market 9% LG 9%

WEST U$ 784 Market 25% LG 24%

Conservative Poor Region Humid

Cosmopolitan Commercial Modern Trade High Literacy Industrial Zone Modern Trade 3/

S/W : Modern Trade 25% N/E : Distributor 61%

Source : ORG GFK Indian Readership survey

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Network/Channel Development The key to improving Rural reach Network/Channel Development The key to improving Rural reach

Increased Channel Networking which Resulted in an increased Rural Market Reach Before 2007 NETWORK
BM-18 B.M-40 Distribu Distribu. tor-200 tor-1100 Dealer 1200 1400 SSD 650 AWD 200 Customer 2004 2005 2006 2007 Area Manager 146

Before GROWTH
Distributor/AWD1300
(No.) 1100

64% 700

900

2004 2005 2006 2007 2700 Dealer

2000

10% 1400 900

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BEST PRACTICE DISTRICT NETWORKING(Example) BEST PRACTICE DISTRICT NETWORKING(Example)

B.O (Branch Office)

Small CEO

RAO
Population - 21 Mil. 72 % Rural

Profit Centre Heading & supporting AOs. Equipped with Stock point, ERP. Equipped with Functional Manpower.

RAO (Remote Area Office)

Sales & A/R Collection

RAO

BO

BO

Enhance mkt penetration & ctr share. Enhance Relationship with TP CS & Accounting Solutions Equipped with Infrastructure & Manpower

RSO (Remote Sales Officer)

Covers Sub-Dealer Network. PR & Motivation of SD. Enhance penetration & extraction

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Sales & Service Infrastructure

Rural focus through excellent reach

TA N PA KI S
Jammu Chandigarh NE PA Dehradun L Ghaziabad

Co.s Reach Co.s Reach

Branch Off : 40 RAO : 63
Rural Sales Channel Rural Sales Channel

Jalandhar Ludhiana Kundli Gurgaon

Delhi(2) Lucknow

Patna

Guwahati

Jaipur Jodhpur Ahemedabad Surat Thane Bhopal Indore

Varanasi Ranchi

Asansol BANGLA

DESH

Dealers/SD : 9000 Distributors : 1100

Kolkata
Bhubaneshwer

SVC Channel SVC Channel

ASC SSD ASP : 1080 : 600 : 590

Mumbai
Pune

Nagpur

Raipur

Goa
Hubli

Hyderabad

Bangalore Chennai
Kozikode
ASC Authorised Svc Centers ASP -- Authorized Svc Provider SSD Sales and Svc Dealers MW - Motherware House

Logistics Logistics
MW Stock Point Br Warehouse : 5 : 46 : 36

Coimbatore

Cochin

SRI LANKA

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Service Network Development The key to improving Rural reach Service Network Development The key to improving Rural reach

ASC/SSD ASC
(No.) 37%

Before
570590 557

SVC/Engineers Before
SVC PTs. (No.)

Rural ( ASC/Resident Engineers

Before
ASC (No.)

432

1040108 13% 1027 0 957

31%

330 322

340

260

Rural SVC Deployment

07

04 05 06
31%

07

Engineers 04 05 3200 07 06

04 05 06

SSD

530

590

470 450

4200 3800 100% 3200 2100

Engineers

300 30% Res. 260 Engineers 250 230

04 05 06 07

04 05 06

07

04 05 06

07

Increased service Network which Resulted in an increased Rural Market Service Reach

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Rural Marketing - Promotion Support initiatives of LG

Mobile Van at Kasargod Exhibition

Exhibition at Rajamundry

Cookery Classes at different locations for Rural Housewives

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Rural Marketing - Promotion Support initiatives of LG

1000 In Store Demonstrators at Dealer counters in Rural Cities Road show Road Show at Satna

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Consumer Goods companies must go the Rural Way -- A case Study of LG India Consumer Goods companies must go the Rural Way A case Study of LG India

LGs Rural Foray LG India- tripled the number of its retail & distributor outlets in rural areas from 2004 to 2006 The avg. price of its Sampoorna range of CTVs came down to about the price so competitive that, thereby bridging the gap between CTVs and other local B/W TVs. It also tapped local forms of entertainment like annual haats and fairs and made huge investments in infrastructure for distribution and marketing.

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Consumer Goods companies must go the Rural Way -- A case Study of LG India Consumer Goods companies must go the Rural Way A case Study of LG India

Result
The rural market accounts for 60 per cent of new CTV buyers for LG The rural market for LG grew at 25 per cent over the last year, against a 15 per cent growth in urban areas. Sampoorna TVs sold in the Indian heartland and the semiurban belts ,enforced a strong connection with India for LG. It connected very well with down the pop strata.
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Improving the lives of the billions of people at the bottom of the economic pyramid is a noble endeavour. It can also be a lucrative one C.K Prahlad

Thank You

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