De La Salle University

Ramon V. Del Rosario College of Business

Master of Business Administration

Submitted in Partial Fulfillment

of the requirements in Marketing Management

1st Term, A.Y. 2015-2016

Tiu, Anthony Albert

Marketing Strategy on Product

Mr. Rey Lugtu

MKT535M GMC
Contents

Synopsis.........................................................................................Error! Bookmark not defined.

Statement of the Problem/s..............................................................................................................3
Objectives........................................................................................................................................4
Areas of Considerations and Major Assumptions...........................................................................4
Theoretical Frameworks and Analysis............................................................................................7
Price Matrix...............................................................................Error! Bookmark not defined.
Segment, Target, and Positioning....................................................................................................9
Alternative Courses of Action.......................................................................................................10
Recommendation...........................................................................................................................12
Hog market.................................................................................Error! Bookmark not defined.
Action Plan....................................................................................................................................15
References and Bibliography.........................................................................................................18

2
Background and Case Facts

Synopsis

Sam Goldman founded d.light Design in New Delhi, India in December 2009. According
to Ned Tozun, “Our mission is to eradicate the use of kerosene” – rooted from a Stanford
Graduate School of Business course Design for Extreme Affordability. The course was inspired
by Dr. Paul Polak’s concept of using modern product design and development techniques into an
emerging market context. As such, Tozun and Goldman founded d.light with the vision of being
a for-profit social enterprise, with success measured both through profits and through lives
positively affected.

Case Facts

 Since 70% of Indian Citizens still lived in Rural Areas, majority still use kerosene which
can be prone to accidents. (Urban Vs. Rural Geographies)
 The majority of Indians in rural areas earned their livings through agricultural work
therefore having below income level. Consequently, it follows that majority of rural
households were found to have outstanding debts including local financing organization,
multiple parties, friends and family and local shopkeepers. (Household Income and debt)
 Household and businesses that were electrified faced frequent blackouts with many
facing energy losses of fifteen or more hours per day (Electrification in India)
 Literacy and media exposure in Rural is low compared to Urban specifically for women
(Literacy and media exposure).

Statement of the Problem/s

The main problem the d.light founders must address is how to design the best marketing channel
strategy? Should the company employ a single or a multi-channel strategy? Below are key
consideration areas that should be tackled:
1. Create demand for solar lamps
2. Create trust in the brand
3. Achieve affordability and easier access for d.light products
4. Choosing to distribute products to retailers and/or consumers.

3
Objectives

Goldman and Tozun decided that the economic and ethnographic evidence pointed to a clear
latent demand among Indian consumers for reliable, affordable light and power solutions.

In response, d.light would like to set the following objectives aligned with their marketing –
channel strategy:

1.) Identify ways on how to create demand for solar lamps.

2.) Determine ways on how to build trust with unknown brand to customer.
3.) Understand ways on how to set price aligned of providing product access to different
market segments
4.) Define ways on how to distribute d. light products to different marketing channel
specifically for retailers and consumers.

In addition, the marketing channel strategy should be aligned to the desire of the founders to
manage d.light as a for-profit social enterprise – reconciling money and mission.

Areas of Considerations and Major Assumptions

Our team assumes the following:

1. The team has limited resources, therefore has limitations on adapting all distribution
channel.
2. As stated in the case’s synopsis, it is in the best interest of the founders to reconcile both
money and mission – they must choose the best marketing channel strategy that allows
them to profit while at the same time helping a particular segment. The ideal is to profit
by helping a particular segment solve their social problems.

Our areas of consideration per objective to be met:

Objective Areas for Consideration

Create demand for solar lamps
Create trust in the brand
 Need to stimulate trial
 Consumers not actively looking, though there is huge
latent demand
 Consider partnering with institutions who can educate
people how to use product
 Trust is hard to earn given plethora of fake and poor-
quality brands
 Consider partnering with institutions that consumers
already trust, and halo from them, as long as the
institutions are aligned with d.light’s mission.

4
Objective
Achieve affordability and
easier access for d.light
products
Choosing to distribute products
to retailers and/or consumers.
Areas for Consideration
 Favorable economics for middle to high quintile
segments
 Prices are still not accessible to the poorest consumers
of rural India – lowest quintile

Below also is a preliminary SWOT analysis to better explore areas of considerations.

SWOT Analysis

Strength of Product:
 The advantage of using d. light product compared to kerosene users has been proven to
greatly improve family conditions.
 The product has been reported to be dependable especially to unreliable electric
connection.

Weakness of Product:
 The lack of education and information access in rural India meant that companies often
had to educate consumers (before initiating sales). Because consumers are not seeking
alternatives to kerosene lamps.
 Company product lack brand recognition and trust in rural India would be a significant
barrier to consumer adoption of its products.
 Purchasing power of rural household was diminished not only by low incomes but also
by the unpredictability of income streams.
 Problem with the distribution and placement of product due to lack of well-developed
transportation & infrastructure on the country.
 D. Light was a startup and had limited access to financial capital, therefore it is sensitive
to potential cost on different distribution channels available.

Opportunities:
 It can eradicate the use of kerosene in a safe and cost efficient manner
 Generate inclined growth and demand for D. light product
 Increase marketing channel may possess the possibility to reduce cost
 Increase operations efficiency and effectivity if the distribution channel are properly
allocated
 Limited access to electricity being solved by the product

5
 Threats
 Social culture may have resistance to change
 Entrants of future competitors
 Literacy and media limitations especially in the rural segment
 Aversion of consumers in products they do not understand or they do not actively seek

6
Theoretical Frameworks

Given the breadth of scope the case covers, we deem it necessary to apply various frameworks
across different perspectives or areas of consideration.

Perspective Primary Objective Tackled Supporting Frameworks

Value  (1) Create demand for solar lamps  Value Proposition
proposition  (2) Create trust in the brand Design Framework
design (Osterwalder and
Pigneur)
Marketing  (3) Achieve affordability and  Marketing channel
channel design easier access for d.light products design and
 (4) Choosing to distribute products implementation
to retailers and/or consumers (Coughlan et al., 2014)
Business model  (1) Create demand for solar lamps  Business Model Canvas
design  (2) Create trust in the brand (Osterwalder and
(integrating)  (3) Achieve affordability and Pigneur)
easier access for d.light products  Social Business Model
 (4) Choosing to distribute products (Yunus et al., 2010)
to retailers and/or consumers  Scaling Framework
(Rey Lugtu)

Value Proposition Design

Osterwalder and Pigneur developed the Value Proposition Design framework, which
visually shows product-market fit between concepts and the needs of customers. The left side
shows the product designed to meet customer needs, while the right side shows observations of
what the customers really need to do, together with the obstacles they face.

7
 Marketing Channel Design and Implementation Framework

This framework by Coughlan et al. (2014) provides steps in designing and implementing
marketing channels. From segmenting to deciding the appropriate channel structure, the
framework aims to align marketing channels to the value proposition being offered by the firm.

Business Model Design

8
 Osterwalder and Pigneur (2010) developed the business model canvas as a tool for
enterprises to visualize how they operate. Basically, the canvas is a snapshot of how the
company creates value and delivers them to target customers, while managing cost structures and
revenue streams. This framework emphasizes the importance of being synchronized across the
‘nine building blocks’ – being able to optimize the proper activities that is congruent with the
enterprise’s desired value proposition.

The four components of a social business model (Yunus et al, 2010).

In the social entrepreneurship field, scholars and practitioners have developed ‘social
business models’ (Yunus et al., 2010). The four component is in line with the business model
canvas, but highlights the social profit equation (social impact) and value constellation (internal
value chain, external value chain integrating social impact).

Segment, Target, and Positioning

Segmenting  Primary: Rural groups

 In the future (once brand is built and target social impact
is beginning to stabilize): Urban groups
Targeting  Rural members divided into two groups
1) Social profit maximizers, the lowest to the middle fifth
rural members;
2) Commercial profit optimizers, the middle to the highest
fifth members
Positioning 1) Social profit maximizers – “d.light increases your
productivity, safety, and income opportunities at the
best price possible”
2) Commercial profit optimizers – “d.light increases your
productivity, safety, and savings while contributing to
your health and the environment”

9
Alternative Courses of Action for Different Channels
ACA Pros
A.) Choose Rural  Strengthen Interpersonal
Entrepreneurs trust between RE'S and
(RE’s) : Employ consumers especially to
Salespeople local those who lack information
Villagers using Hub channels such as television
and Spoke Method and newspaper.
(Bicycle, motorcycle  Transportation and
or foot) accessibility of hiring RE’s
to small villages can be
effective
 Increased social impact –
empowerment of rural
entrepreneurs to become
self-sufficient
 More conducive to network
effects – patronage of rural
entrepreneurs can better
influence rural members to
use the product
B.) Village  Potential Capacity to cover
Retailers: Stocking more than 7 million shops
their goods at the in town and villages
village level in small  Shop owners are practiced
shops at moving both products
and money over large
distances; therefore firms
were likely to receive
payments in a timely
manner.
 Shop owner’s considerable
power over villager’s
product purchases consist
of personal relationship
with customer and
knowledge on product.
 Farmers can buy the
10
Cons
 Complicated due to
network of existing
distributors and logistics
companies to reach
RE’s.
 Not professionally
trained sales force often
struggled to grow sales
over time; does not
respond significantly to
economic incentives to
sell more units.
 RE's were not practiced
at handling large sums
of money , receiving
payments can add
difficulties
 Consumers desired for
greater product variety
available in larger towns
and cities.
 Many believed that the
considerable cost
associated with
distributing products to
villages increased price
in rural outlets – making
it pricier for rural
members to access the
product
 Village retailers were
not as successful at
selling new durable
goods which required
ACA Pros
product from shop owners
through credit
C.) Centralized  The distribution channel
Shops and alleviated the high cost of
Distributors transporting goods in to
small villages.
 Larger retailers were often
well known and trusted by
consumers , products sold
by the retailer could also
gain a measure of trust with
consumers
 Haats as promising
concepts
D.) Partnering  By leveraging these already
with Non Profits existing networks,
companies could bypass the
more extensive distribution
structures yet still access
rural consumers in a cost
effective manner.
 In line with the d.light’s
mission
E.) Corporate  In these partnerships, the
Partnership: foreign manufacturers
“Piggybacking” “piggybacked” on the
distribution networks
previously established by
the local partner company
thus avoiding the cost and
risk of developing their own
channel
11
Cons
more explanation and
push selling – they are
more suited for FMCG
products.
 Likely to require a
relative explanation and
demonstration by retail
sales people, an
investment of personnel
resources that retailers
might be hesitant to
make.
 Little incentive to sell
d.light products at a
local level – more
willing to sell more
lucrative petroleum
products
 May complicate channel
management since
distributing products is
not the main activity of
nonprofits.
 Local distribution did
not always have the
sales expertise needed to
effectively sell the
product.
 Companies are
understandably more
loyal to their products –
potentially neglecting
ACA Pros Cons
sales of d.light products.

12
Analysis and Recommendation

Value Proposition Design

Products and Gains wanted to be achieved

Gain Creators Customer Jobs
Services related to jobs
Social profit Increased productivity, Customer:
Provides needed lighting Rural, segmented
maximizers – leading to increased income
for productivity, safety into 2 groups:
“d.light
and convenience inside
increases your Increased convenience
the home  Lowest to
productivity,
safety, and Increased health and safety middle fifth
Increases income and as the Bottom
income from usage of kerosene
savings of the
opportunities
at the best Pains or obstacles related to Work-related; Pyramid,
Pain Relievers where social
price jobs agriculture,
possible” farming, animal profit is most
FIT
care maximized;
Commercial reach self-
profit Unreliable electricity House-related; help groups
optimizers – Solves unreliability of chores, children
“d.light electricity Limited time to work studying  Middle to
increases your highest fifth,
productivity, Alleviates difficulties of Dangers of kerosene where
safety, and working in dark moments commercial
savings while of the days Unpredictability of income profit can be
contributing streams due to unpredictability optimized
to your health of agricultural seasons
and the
environment”

13
 Marketing Channel Design and Implementation Framework

Channel Design

 Segmentation:
 Lowest to middle fifth as the Bottom of the Pyramid, where social profit is most
maximized; reach self-help groups
 Middle to highest fifth, where commercial profit can be optimized

 Channel structure
 Rural entrepreneurs (recruit from the lowest to middle fifth quintile)
 Local NGOs and cooperatives
 Weekly markets, or haats, where REs can participate as well while still
maintaining control and alignment to the company’s mission

 Splitting the workload

 Rural entrepreneurs targets the lowest and fourth rural quintiles
 Local NGOs and cooperatives – offers microfinancing and teaches how to use
product; works with collective self-help groups
 Weekly markets, or haats, where REs can participate as well while still
maintaining control and alignment to the company’s mission; targets the middle
to highest rural quintiles

14
 Degree of commitment
 Alignment of missions with NGOs and cooperatives
 Increased income opportunities for rural entrepreneurs
 Weekly market haats stimulates products; relatively more affordable channel
versus retailers

 Gap Analysis
 Commercial proficiency of channels

Channel Implementation

 In this case, the three channels have minimal conflict and can collaborate with each other
as they serve

15
 Business Model Design

Key Partners Key Activities Value Proposition Channels Target Segment

Affordable solar light Rural entrepreneurs
lamps (recruit from the lowest to middle
Continuous reduction of fifth quintile) Rural,
costs for more accessible S10 segmented into 2 groups:
prices L-M5th quintile or to Local NGOs and cooperatives –
social profit maximizers: offers microfinancing and teaches  Lowest to middle
Training of rural – “d.light increases your how to use product; works with fifth as the Bottom
Local nonprofit
entrepreneurs productivity, safety, and collective self-help groups of the Pyramid,
organizations
income opportunities at the where social profit
and
Education of rural best price possible” Weekly markets, or haats, where is most
cooperatives
members REs can participate as well maximized;
S10 and S250 collective self-help
Venture
M-H5th quinile or Network-based marketing groups of women
capitalists and
Key Resources Commercial profit Cust. Relationships
impact investors
optimizers – “d.light  Middle to highest
increases your Awareness and education fifth, where
Product materials productivity, safety, and campaigns through partner NGOs commercial profit
savings while contributing and rural entrepreneurs can be optimized
Cheaper LED and solar to your health and the
materials environment” Word of mouth based on trial and
demonstrations
Costs Revenues
Costs of production
Revenues from REs, direct sales from haats
Costs of marketing and education
Costs of distribution

Social impact:
 Empowerment of rural entrepreneurs to be self-sufficient
 Eco-system of interdependence between NGO, rural entrepreneurs, and customers

16
 Increasing productivity and income of rural worker

17
 Summary of Recommendations

The value proposition design shows product-market fit between the target segments and
intended products to be offered. Moreover, this shows how social profit can be maximized by
targeting the lowest to the middle quintiles in the rural areas, while optimizing commercial profit
through the help of the middle to the higher quintiles.

The marketing channels allow better distribution and access to the products. Rural
entrepreneurs will be recruited with emphasis from the lowest to the middle quintile areas to
increase income opportunities for them, while serving as influencers for the whole rural
community to buy the d.light products. NGOs and cooperatives provide education and
financial help in using the products. The weekly haats serve as direct consumer touchpoints,
which rural entrepreneurs can also utilize in distributing their d.light products.

Finally, the business model canvas integrates the whole strategy of d.light, ensuring that
the operations and marketing are synchronized in targeting the 2 segments of rural communities.

Action Plan

Objective Areas for Consideration Action Plan

Create  Need to stimulate trial
demand for  Consumers not actively looking,
solar lamps though there is huge latent demand
 Consider partnering with
institutions who can educate
people how to use product
Create trust  Trust is hard to earn given plethora
in the brand of fake and poor-quality brands
 Consider partnering with
institutions that consumers already
trust, and halo from them, as long
as the institutions are aligned with
d.light’s mission.
Achieve  Favorable economics for middle to
affordability high quintile segments
and easier  Prices are still not accessible to the
access for poorest consumers of rural India –
d.light
lowest quintile
products
 Partner with nonprofits
 Stimulate trial and
demonstrations via haats
 Get rural entrepreneurs
 Partner with trusted
nonprofits to educate and
raise awareness
 Rural entrepreneurs can
become brand evangelists –
spreading word of mouth
that they have indeed tried
the product, and thus now
selling it to their fellow rural
members
 Help provide income
streams for the lowest
quintile by recruiting and
training them as rural
entrepreneurs, with the help
of nonprofits
 Loan its product to

18
Objective Areas for Consideration Action Plan
consumers and then collect
money over time
 Offer layaway programs in
which consumers made
small installment payments
and then took the product
home after they had paid the
full price
 Collective purchasing power
of women’s self-help group
could also be target as a
potential revenue source.
Choosing to  Alignment to the mission  Partner with rural
distribute  Access to consumers entrepreneurs, nonprofits,
products to and cooperatives which
retailers show highest alignment with
and/or d.light’s mission yet
consumers. provides access to
consumers, while taking
into consideration important
concerns.

In the future, we can use the scaling framework to grow the business in the urban areas:

19
  Adjacent customers –
o Higher margin products, such as the S250, or new product with more premium
positioning
o Employ other marketing channels such as centralized distribution shops and
retailers, leveraging on the brand built and success in the rural areas

References and Bibliography

 Coughlan, A. T., Anderson, E., Stern, L. W., & El-Ansary, A. (2014). Marketing
channels (7th ed). Person Education Limited: UK.
 Kotler, P., & Keller, K. L. (2012). Marketing management (14th ed.). Prentice Hall, New
Jersey.
 Osterwalder, A., & Pigneur, Y. (2010). Business model generation. NJ: John Wiley and
Sons, Inc.
 Osterwalder, A., & Pigneur, Y., Bernarda, G., & Smith, A. (2014). Value proposition
design. NJ: John Wiley and Sons, Inc.
 Polak, P., & Warwick, M. (2013). The business solution to poverty. Berrett-Koehler
Publishers, Inc: San Francisco, California, USA.
 Yunus, M., Moingeon, B., & Lehmann-Ortega, L. (2010). Building social business
models: Lessons from the grameen experience. Long Range Planning, 43(2), 308.
Retrieved from http://search.proquest.com/docview/288325167?accountid=28547

20