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Rural Marketing exist in India, they are mostly focused on the Most other FMCG companies initially use a wholesale trickle
Brand management aspects in Rural Marketing. The Academic model to get in rural markets. The rural retailer goes to a
books sometimes have a chapter or a few pages on rural wholesaler located in a nearby feeder town and buys stocks from
distribution methods but there are hardly any scholarly articles there. However, such a model is uncontrollable and the numeric
on rural distribution. Since there is so little material on rural distribution achieved through wholesale model fluctuates from
distribution & this paper aims to develop scholarly material on month to month. A diagrammatic sketch of wholesale model is
rural distribution. shown below:
The position of distribution in rural marketing is aptly explained Factory CFA Distributor
by the following diagram:
Figure 2: Classification of Rural Marketing This research used an Exploratory Research followed by a
Conclusive Research Process. The data used for research and
To development of the choice model was garnered from the Primary
Rural Urban research done as well as from secondary organizational sources.
Unorganized Agricultural The research also involved a pure analysis of organizational data
Sector Marketing, on a national level in order to draw further conclusions before
Rural framing a Model. Following diagram denotes the research
(Farm & Non- Artisan Products,
Farm) Cottage Industry process in a lucid format:
From
FMCG Figure 5: Three-Step Research Process Followed
Not in the Realm
Distribution Step I: Initial Step II:
Urban of Rural
(Scope of this Exploratory Conclusive
Marketing
paper) Research Research
Distribution Models of FMCG Companies Figure 8: Rural Direct distribution for Premium Products
Following are some of the distribution models followed by Factory CFA Distributor
FMCG companies for Rural India:
Factory CFA Superstockist/ Direct distribution in rural areas is used in case of premium
Hub products with a relatively higher Rs/unit e.g. in case of United
Breweries, Seagram’s, Officer’s Choice, Dove Shampoo, Ponds
White Beauty, Tropicana, Gatorade, Lipton Ice Tea, Quaker Oats.
Consumer Rural Supervised
Retailer Substockist/ Figure 9: Rural Wholesale Distribution for Smaller FMCG
Spoke players or lesser volume products within
larger FMCG Companies
Cola, Pepsi, 7 Up, Sprite, Mirinda, Fanta, Mountain Dew, Limca, Figure 11: Sampling Design
Nimbooz etc.
Stage I:Judgemental Stage II: Stratified
Qualitative Research: Sampling used to select a Random Sampling
Factors Determining Choice of Model state (West Bengal) used to select Villages
Qualitative Research brought out the following factors Stage III: Quota
determining the choice of rural distribution model: Sampling to select Rural
Outlets in the Villages
I. The expected volume of the product in rural markets. Lower
volume product may render a dedicated distribution
channel unviable and in such cases wholesale channel may Each Strata (District) is proportionately represented to ensure a
be the best option. statistically valid sample. Eg if District X has 100 villages (as per
II. The Sales & Distribution Margin available. A higher Census) and WB has 1000 villages; then if we want a sample of 50
distribution margin (upward of 8-9%) allows setting up of a villages, we will randomly select 5 villages from District X.
Hub & Spoke network (explained below).
III. Is there any reverse logistics e.g. return of glass bottles in SPSS software package has been used to analyze the Primary and
case of beverages, return of expiries in case of food products? secondary data. Cross Tabulations have been done and tested for
If a return logistics is involved, the cost of distribution goes significance of association using the Pearson Chi-Square test
up and channels like wholesale is unusable e.g. Beverage (since we are testing ordinal data) using SPSS. A Significance
distribution is not possible through wholesale channel level of 90% has been used to ascertain the correlation.
IV. Premium value of the product as measured in Rs/kg or
Rs/Liter. Premium products have lesser rural penetration The statistical analysis (Canonical Correlation Analysis) resulted
aspirations and can even manage with an urban model of in identification of specific factors which determine which model
direct distribution replicated in rural is to be used. These factors have been listed down in the factorial
V. Credit requirement for selling the product. A product which grid given. These factors were then conceptualized as a flowchart
requires a higher credit requires a local distribution entity to decipher all causal relationships between dependent and
like a Substockist. A party located beyond a 10km radius will independent variables since this research problem is a fairly
find it difficult extending credit and trusting a rural retailer complex one. This procedure is akin to the procedure of “Path
with his money. Direct distribution and wholesale Analysis” propounded by Sewall Wright in 1934 in connection
distribution is not a feasible solution in such a situation. with decomposing the total correlation between any two
VI. Number of SKU’s (Stock Keeping Units) sold through a variables in a causal system.
channel. A dedicated channel helps in selling a large number
of SKU’s Figure 12: Retailers surveyed (Stratified Random Sampling)
VII. The number of company personnel supervising each district
e.g. since Tropicana has only 2-3 Sales Officers supervising Total Villages
each state, they possibly cannot manage a very large Districts in >3K No of No of Rural
network of superstockists and substockists. West Bengal Population Villages Retailers
VIII.The time horizon of a product. If a product is not for a very Bankura 96 1 10
long term or if there is uncertainty regarding the time Barddhaman 363 3 30
horizon of the product, then wholesale channel is a good Birbhum 165 1 10
option. Dinajpur 189 2 20
IX. Experimental launches generally prefer the wholesale
Darjiling 101 1 10
channel to test out the demand
Haora 264 2 20
Hugli 280 2 20
Quantitative Research:
Jalpaiguri 343 3 30
Factors Determining Choice of Model Koch Bihar 211 2 20
Maldah 292 2 20
The Sampling design used is Multi Stage Sampling in order to
Medinipur 443 4 40
obtain the right balance between Cost considerations and the
Murshidabad 530 4 40
requirement of correct Frame validity. A Multi Stage Sampling is
Nadia 413 3 30
considered the modality of choice in case of big enquiries
N24 Pgns 445 4 40
extending to a considerably large geographical area, say, the
entire country. Puruliya 90 1 10
S 24 Pgns 674 6 60
Grand Total 4899 40 400
Conceptual Framework for designing a Rural Distribution Model for FMCG products in India: A Situational Guide 77
Figure 13: Sample question from the questionnaire (entire Model Contd…. Credit to Experimental/ Time
questionnaire could not be presented here for lack of space) - The retailers Horizon
actual questions were asked in Bengali with examples of each Supervised Hub Average Long Term for both
kind of distribution model & Spoke (100%) product & rural
(93%)
Model of Supervised Non- Direct
Non-Supervised Nil Medium Term Or
Distribution Hub & Supervised
Spoke Hub &
Hub & Spoke (100%) uncertain for product
Spoke (92%)
Number of High □ High □ High □ Direct Varies Uncertain for rural
Medium □ Medium □ Medium □
SKU’s (Brand- Low □ Low □ Low □ (100%) penetration
pack Single □ Single □ Single □ (92%)
combinations) Wholesale Fat Dealer Wholesale Nil Experimental/
that this High □ High □
channel Medium □ Medium □ (100%) Uncertain for product
Low □ Low □ (95%)
supplies to you Single □ Single □
satisfactorily Fat Dealer Average Long Term for both
(100%) product & rural
Figure 14: Cross-Tab Factorial Grid of Models from Statistical (97%)
Analysis (The option best describing each channel as chosen by
the highest number of rural retailers surveyed has been
mentioned in the cells below. The percentage of rural retailers Conceptual Model & Decision Framework
who chose the option mentioned in the cell is mentioned below
the popular option) The factors which have strong correlation with each rural
distribution model, as identified through statistical analysis and
listed in the factorial grid above, have been arranged in a
Popular Option Supervision No of Reverse flowchart format (Figure 15 on next page) to help a decision-
(%) SKU’s Logistics maker choose the right model as per his own situation
Supervised Hub High High Low (combination of organizational and product factors). This is to
& Spoke (92%) (95%) (96%) provide a Conceptual Framework for designing a Rural
Non-Supervised Low Low None Distribution Model for FMCG products in India. A practicing
Hub & Spoke (91%) (90%) (96%) manager or a decision maker has to just follow the framework-
Direct High High No flow-chart and keep making the logic choices in order to decide
(93%) (90%) Correlation upon the best possible rural distribution network. This is a
Wholesale Very Low Low None seminal work in rural distribution decision theory.
(94%) (91%) (100%)
Fat Dealer Very High High High
(92%) (90%) (97%)
E.g. the top left hand corner cell says “High (85%)” which means
that 85% of the respondents have said that a Supervised Hub and
Spoke Model (as explained by the surveyor through the example
of FritoLay distribution or HUL distribution) need a high
supervision.
Yes Premium No
Value
High
Yes
Manpower
High
Yes Available
Manpower
Available Volume No
High
No No
A Yes
No of
SKU’s high Yes
+ S&D
costs >
10% SKU’s high + No of
S&D cost > 20% No
SKU’s
Long + Long Term
No Low
Time Product
Horizon
A No
Yes
S&D Costs
B >10%
Can Try these: Yes High reverse No
logistics
i. Increase S&D
costs No IV. Use Yes
Wholesale
Yes
Channel
V. Make Non-
I. Make Rural II. Make Rural III. Make Supervised Supervised Hub
Direct Channel Fat Dealer Model Rural Hub & Spoke & Spoke
Conclusions References
As we saw from the preceding discussions, the rural distribution 1. S.W. Bhave, & A. Markale, “Definitional Issues of Rural & Rural
model to be chosen for any kind of Rural channel reengineering Marketing Environment”, Conference on Marketing to Rural
has to be a thought out process and cannot be a patchwork of Consumers, Indian Institute of Management, Kozhikode,
hasty and gut-feel decisions made by the operating managers. 3rd,4th,5th April, 2008.
The “Availability” Challenge and the “Place” tool has to be as per 2. Census of India, 2010-11, Office of The Registrar General &
a pre-decided decision model as provided in this paper. This Census Commissioner, India, New Delhi.
rural distribution framework is applicable for all FMCG 3. M. Jha, “Rural Marketing: Some Conceptual Issues”, Economic &
companies operating in India. Political Weekly, Vol. 23, No. 9, Feb. 27, 1988.
4. Kashyap, P. and Raut, S., The Rural Marketing Book, 1E,
Dreamtech Press, New Delhi, 2005.