The Challenge for Indian MBA: Bridging the gap between Philip Kotler and Countryside India potx

The Challenge for Indian MBA: Bridging the gap between Philip Kotler and Countryside India PREPARED BY SUMIT D. GUPTA E-mail and Ph: (sumit1gupta@rediffmail.com) College: Indian Institute Of Foreign trade, B-21, Qutab Institutional Area, New Delhi. 2 Executive Summary “India’s way is not Europe’s. India is not Calcutta and Bombay. India lives in her seven hundred thousand villages.” Mahatma Gandhi, 1926 Marketing in developing countries like India have often been borrowed from the western world. Concepts like Brand identity, Customer relationship management, 4 P’s of the marketing mix, Consumer behaviour process; Segmentation, targeting and positioning etc. have often been lifted straight from the marketing intelligentsia abroad and adopted in Indian conditions, often with minimal success. Reason lies not in the fault of such concepts, but their integration with the Indian ethos and culture. The rural India offers a tremendous market potential. Nearly two-thirds of all middle- income households in the country are in rural India and represents half of India’s buying potential. Despite, the strong potential the rural markets are by and large less exploited. Consider the market, out of five lakh villages in India only one lakh have been tapped so far. According to us if the rural market has to be adequately tapped, there has to be a change in the way marketing concepts learnt in B-schools with adequate adoption according to scenarios prevalent in rural India. The paper thereby present the modified version of Philip Kotler’s famous marketing mix consisting of 4P’s. The focus is on its modification and subsequent customization to Indian rural market’s perspective. The 4 P’s have to be modified to include 1P i.e. Packaging and 1R i.e. Retailer as special focus areas. Further to ensure the sustainability of the marketing mix two E’s i.e. Education and Empowerment have to be at the core as they help in generating widespread participation from the rural clientele by enhancing their standard of living. The Products in the rural market should essentially operate at the basic and expected level of product classification. They should essentially meet the basic needs of the consumer and should be a no-frill product, as the consumer would not be valuing much any further addition to the product concept. Companies also face a daunting task in communicating about their products to the consumer due to lack of literacy and failure of traditional media to penetrate in the rural households. Hence, the advertising mix has to be more 3 towards non-conventional yet effective medium like Puppetry, Folk Theater & Song, Wall Painting, Demonstration, Posters, Agricultural Games, NGO’s network, etc. Thus overall either the product or communication or preferably both need to be customized to target the rural customer. In terms of physical distribution due to lack of infrastructure the costs are very exorbitant to reach the rural customer. Thus, mediums like rural marketing vehicles and melas and haats provide better opportunities to meet customer needs. Also the existing distribution would need a transformation to achieve the required penetration levels as success of Project Streamline of HLL has shown. Since, the value for money concept is more important rural customers, there has to be an approach of treating customer as budget seeking consumer. Here, fitting the consumer needs into an affordable price point is pursued first and then other features of product are fitted in. Similarly, packaging has to meet customer needs of better brand recall and introducing favorable price points. At the same time the importance of retailer has to be recognized where he is one of the most major influencer is customer’s decision making process. He acts as the friend and guide in this process and hence, needs to be managed effectively through promotion programmes and incentives to promote the brand of a company. In order to bridge the gap between Philip Kotler and countryside Indian what is needed the appreciation of unique features of rural India and thus, responding to them by making adequate improvements in the application of the marketing concepts learnt in the class. For achieving the desired results of capturing the rural customer a comprehensive approach to the traditional marketing concepts has to be taken. This marketing mix has to be responsive to customer’s needs and fit into his life as a tool of self-enhancement. To be successful the concept of marketing has to be taken in conjunction with its economic, psychological and social implications. 4 Unique features of rural marketing in India Marketing according to a leading management theories Peter Drucker can be put in this way “The aim of marketing is to know and understand the customer so well that the product or service fits him and sell itself." We feel that the above quote is the gist of marketing, be it in rural areas or urban areas, western world or developing world. Marketing in nothing but creating customers and thus its concepts remain the same. But, due to the differences in the needs, buying behaviour, values and aspirations of the customers the marketing concepts have to be modified to be successful. The unique features of rural India which call for special attention and thus, subsequent changes in the application of marketing concepts are as follows: a) Traditional Outlook: The rural consumer values old customs and tradition. Basic cultural values have not yet faded in rural India. Buying decisions are highly influenced by social customs, traditions and beliefs in the rural markets. b) Levels of Literacy: - The literacy rate is low in rural areas as compared to urban areas. This comes in way of the marketer in promoting the product. Advertising is very expensive making it difficult to communicate with the target audience. c) Lack of Proper Communication and infrastructure facilities: - Nearly fifty percent of the villages in the country do not have all weather roads. The Infrastructure Facilities like roads, warehouses, communication system, financial facilities are inadequate in rural areas making physical distribution becomes costly. d) Many Languages and Dialects: - The number of languages and dialects vary widely from state to state region to region and probably from district to district. Even though the numbers of recognized languages are only 16, the dialects are estimated to be around 850. e) Low Per Capita Income: - Even though about 33-35% of gross domestic product is generated in the rural areas it is shared by 74% of the population. Hence the per capita 5 incomes are low compared to the urban areas. Normally the rural consumers spent a majority of their income in basic necessities, which makes them very price sensitive. The above points indicate the need for subsequent adoption of ‘Marketing principles’ as propounded by Kotler and other management thinkers, with requisite changes suiting the Indian Market. The marketing mix in the case of Indian rural markets consists of 4P’s i.e. Product, Price, Promotion, Place combined with 1 P that is Packaging and one R i.e. Retailer as special focus areas. However, at the base of this marketing mix will be 2 E’s of Education and Empowerment. The traditional marketing hypothesis tends to ignore the requirement of a developing country’s rural needs. The concept of marketing has to be taken in conjunction with economic, psychological and social implications. Hence, the concept of Mega-Marketing where all such factors are taken into consideration while developing the Marketing Mix is more relevant to succeed and build enduring brands. In rural India’s case the two most important considerations are Education and Empowerment opportunities which Product, Place, Price and Promotion Packaging Retailer CUSTOMISATION EDUCATION EMPOWEREMENT The Marketing Mix for Rural India 6 traditional approaches of marketing fail to acknowledge. Then only the opportunity provided by the rural market can be fully tapped. (SEE APPENDIX 1) 1. Product “Authentic marketing is the art of identifying and understanding customer needs and creating solutions that deliver satisfaction to the customers, profits to the producers and benefits for the stakeholders.” Philip Kotler The product offerings have to be not only customized but also at a different plane altogether in case of rural markets. The various product levels as outlined by Philips Kotler, namely Core Benefit, Basic Product, Expected product, augmented product and Potential Product should be adequately taken into consideration and the product offerings should be henceforth customized according to the needs. Most of the times in the urban market the product is offered at the augmented product level where the objective of the product offering is to exceed the customer expectation. But in the rural markets of India which have been till date characterized by the absence of the choice, sub-standard products and cheap clones of their urban counterparts; the Core Benefit Basic Product Expected Product Augmented Product Potential Product 7 immediate level to be operated is the Expected product where his expectations are met. Also, due to the low level of incomes and literacy levels, it is imperative that the basic needs of the consumer are met. For e.g. Today, in India, 70 percent of the shampoo market is in sachets. Forty percent of rural workers are daily wage earners and have a daily purchase habit and could do so because of low unit price packs. In real terms because of these packs, shampoos cost less than 14 years ago. Here the product is meeting the basic level of need and providing the benefit of convenience and economy without enthralling or overtly exceeding his expectation. In case of durable goods the rural customers essentially look for a product that is frill- free, sturdy and long lasting and in case of consumer goods he looks for products that operate at the basic level and can provide additional benefits in synchronization with their habits and lifestyle. For e.g. success of HLL in the soap category indicate the need to new product development after listening to customer’s needs and not blindly applying the urban solutions to rural problems. (SEE APPENDIX 2) 2. Promotion: Effective Communication “If you're trying to persuade people to do something, or buy something, it seems to me you should use their language, the language in which they think.”- David Ogilvy Companies cannot rely on conventional advertising techniques in India’s rural areas where only one in every three households owns a television set and more than half of all villagers are illiterate. Instead, companies need to turn to more innovative methods of advertising to reach their potential customer base. Also what appeals to the urban customer may not appeal to the rural customer due to varying lifestyles. So again, even if the media reaches him, there might not be an impact as it may fail to attract him as fails to connect to it due to the lifestyles being different. Few of the available options in the traditional media are  Puppetry,  Folk Theater & Song,  Wall Painting, 8  Demonstration, Posters,  Agricultural Games,  NGO’s network The need for innovative means of communication in rural area can be appreciated by the case study (SEE APPENDIX 3) where advertisement on hand pumps and ponds helped in selling more soaps to rural customers. Customization: Combining the above two points we would like to stress the need to concentrate on both product development and communication in order to win the mind space of the average rural Indian. Again a concept touted by the marketing gurus regarding product and promotion strategies in International markets (analogy extendable to domestic companies moving from urban to rural areas as well) can be used. In order to achieve success company should avoid straight extension. Rather some form of adaptation be it in preferably product or communication or both. In case of deep pockets, product inventions suited for Indian conditions would be able to generate more returns rather then a simple copied strategy from abroad or urban markets. Product Do not change Adapt Develop new Product Product Product Do not change Promotion Promotion Adapt Promotion Straight Extension Product Adaptation Product Invention Communication Adaptation Dual Adaptation 9 3. Place: Physical Distribution and Channel Management For most companies wanting to enter the rural markets, distribution poses a serious problem. Distribution costs and non availability of retail outlets are major problems faced by the marketers. The various options in distribution in the rural markets, which will be out of the ambit proposed traditionally by the marketing gurus would be:- a.) Rural Marketing Vehicle (RMV) Marketers need to make more on- ground contact with their target audience as well as make demonstration of products as consumers in rural markets rely on the 'touch and feel' experience. One of the ways could be using company delivery vans which can serve both the purposes. b.) Melas and Haats:- According to the Indian Market Research Bureau, around 8000 melas are held in rural India every year and annual sales at melas amount to Rs.3,500 crore. Besides these melas, rural markets have the practice of fixing specific days in a week as Market Days when exchange of goods and services are carried out. Also, every region consisting of several villages is generally served by one satellite town where people prefer to go to buy their durable commodities. Marketing managers can use these feeder towns they will easily be able to cover a large section of the rural population. The need for innovative distribution techniques to reengineer the existing distribution processes can be appreciated by studying the Project streamline as used by HLL in increasing its reach by adding sub-stockists in its existing distribution (SEE APPENDIX 4). 4. Pricing the product A significant portion of the rural population is paid in daily wages. Daily wage earners tend to have little stock of money, and therefore tend to make purchases only to meet their daily needs. The implication is that pack sizes and price points are critical to sales, and importantly, that rural consumers view the purchase-tradeoff dilemma across a much wider range of product categories. As a result, the nature of competition is much greater; a beverage manufacturer is not only competing with other manufacturers in its category, 10 but also other products that consumers may consider one-off luxury purchases such as shampoo. So marketer will have to examine method by which he can make the product more affordable. In the case of consumer durable one way is to work through rural bank and offer higher purchase terms to consumer. In short, the Value for money is the most important concept that will differentiate the successful brand from the rest. As explained above in the diagram, a budget seeking consumer in the rural India, takes into consideration first of all the budget available to him and then warranty and after sales service before settling on the brand name and model. Thus, the concept of the product fitting into one’s budget is most important consideration while making a purchase decision. 5. The 5 the ‘P’ OF MARKETING- i.e. Packaging The reason for putting packaging out of the product as a special focus area is that due to low literacy levels the importance of symbols and packaging become more important in having a high brand recall (SEE APPNDIX 5 for case on Asian Paints). Thus, after the 4 p of marketing, it is 5 th P which is packaging going to play a key role in rural markets. Also since the rural customers are usually daily wage earners and they don’t have Brand Name Model Technology Budget Image Budget Warranty After Sales Model Brand name Status-seeking Consumer Budget-conscious Consumer [...]... differs the winning companies from the rest of the pack They are in a position to view their marketing mix in the form of 4+1P and 1R, and thereby customize their offerings to the rural market Further, to ensure a wider participation the marketing mix at its base should have Education and Empowerment as its core In order to bridge the gap between Philip Kotler and countryside Indian what is needed the. .. to buy his things And there is a very strong bonding in terms of trust between the two The buying behaviour is also such that the customer doesn' ask for the things by t brand but like "paanch rupey waali chaye dena" Now it is on the retailer to push whatever brand he wants to push as they can influence the buyer very easily and very strongly on the preferences Hence, there is the need to get his... retail shelf and convincing on his side to make the customer buy the brand 11 The Core: The two biggest problems that the rural India faces are Illiteracy and Unemployment To integrate them in one’s Marketing mix ensures that the product or service offered ensures wider participation and better chances of success Hence, it gives the rise to the concept of two E’s: Education and Empowerment at the core... Iodex is rubbed into the skins of animals after a hard day' work to relieve s muscular pain 3.) Communication Adaptation: Both, washing and for taking bath - one requires water Now for rural markets there are three sources of water - wells, handpumps and ponds For the first in the history of advertising - these were branded Special stickers were put on the handpumps, the walls of the wells were lined... tiles and tinplates were put on all the trees surrounding the ponds The idea was to advertise not only at the point of purchase but also at the time of consumption This case shows that the brand was somehow relating to the consumer It was right there when the consumer wants it and responds to his needs when wanted So the customer could also see the advertising when he was bathing or washing Now, the. .. India were able to identify the brand as the ‘Ladkewala Paint’ and the brand had a high brand recall because of the mascot on its packaging 6.) Small priced packs: In India there has been a proliferation of small priced packs like shampoos, chocolate sticks, creams, cold-drinks, etc, at price points for Rs.5 and below This helps in synchronizing the expenditure of the Indian consumers with his daily... in these markets to about 37% of India' rural population from 25% in 1995 and the number s of HLL brands and SKUs stocked by village retailers has gone up significantly 5.) Packaging Case Study: Asian Paints: Asian Paints famous mascot ‘Gattu’ is one of the most famous mascots in the Indian Marketing history Its success stems from the fact that illiterate people in rural India were able to identify the. .. like the ones in the urban areas have So the packaging is in smaller units and lesser-priced packs that they can afford given their kind of income streams (SEE APPENDIX 6 for smaller priced packages) 6 Retailer: The cog in the wheel Personal & Environmental Factors RETAILER Marketing Factors Data on rural consumer buying behaviour indicates that the rural retailer influences 35% of purchase occasions Therefore,... rural India and thus, responding to them by adequate improvements in the application of the marketing concepts learnt in the class 14 APPENDIX 1 Some Facts about the rural market 70 % of India s population lives in 627000 villages in rural areas 90 % of the rural population is concentrated in villages with a population of less than 2000 According to the NCAER projections, the number of middle and high-income... to improve the life of rural Indians and thus, ensure that they actively patronize the company’s products 1.) Education: Since vast majority of rural India lacks even basic education levels and modern outlook, it is important that the company introducing a new product should look at building category and not just selling products It is important to consistently drive home the point that the customer’s . The Challenge for Indian MBA: Bridging the gap between Philip Kotler and Countryside India . bridge the gap between Philip Kotler and countryside Indian what is needed the appreciation of unique features of rural India and thus, responding to them