Social entrepreneurship series:

Product distribution in Rural India

A Tie Initiative

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• Status & opportunities • Rural mindsets • Rural challenges & opportunities • Distribution structure • Logistics & supply chain • Service strategy • Market communication

Contents

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Low Income influenced by seasonal fluctuations - Low literacy - Price Sensitive - Influenced by Traditions - Quality Conscious - Low risk taking ability - High Brand Loyalty - Moderate aspiration levels - Resistance to change - Diverse customs, social structures and languages - If they understand the value of product or service they will go for it.

Characteristics of Rural Indian Market

Rural consumers do not make brand discrimination They are highly loyal to the brand that satisfies them Rural market is growing faster than the urban market The literacy level in rural India going up according to NCAER Survey Rural India constitutes to 56% of national income

About 62% of villages have a population below 1000 and only 3% of the villages above 5000, most villages with less than 500 people do not have any shops. Complex Distribution & logistics management. In rural areas banking and credit facilities are not extensive. I t is estimated that for every16 villages there is one bank. Low Affordability in rural areas.

In rural areas almost 100% of villages Consists of Radio ,TV is 87%. It can also seen that about one-fifth of pharma sales occurs in Rural India. In respect of high priced durables, about one fourth of the television sales happens in rural areas. The rural population is three time that of Urban Population

The share of unbranded products is higher in

necessity items, mainly food items. Rural demand is more seasonal compared to urban demand. The pre dominance of agriculture in the income pattern is one main reason for this. Besides being seasonal, rural demand is somewhat irregular as well.

Rural India accounts for 64% of total expenditure

Opportunities Threats

Rural Economy is estimated to

be Rs. 18 Trillion by 2012-13

Share of rural India is 56% and is expected to grow to 60% in the near future

627,000 villages

3,768 town

INDIA

Strengths Weaknesses

Indian Rural - SWOT

Less than 200 92,541 15.6

200 -500 127,541 21.4

501-1,000 144,817 24.4

1,001-2,000 129,662 21.9

2,001-5,000 80,313 13.5

5,001 -10,000 18,758 3.2

Figures in % POPULATION No of Villages % of Total Villages

17% of villages account for 50% of rural population and 60% of rural wealth

Rural Landscape Distribution of Villages

Dev

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Pro

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% of profit or turnover Financial Goal

Super distributor Segment

Service Differentiation

New Product Development

Retail Distribution

Business Drivers

Distributors, dealers, DSO, VLE, Consolidate and grow: • Depth before

breadth • Closer to target

customers • Village-based

reach and seed approach

Improve productivity: Model is No of partners x productivity= sales • Robust sales

management • Field working

norms & processes

Build service into a true differentiator: • Service within

customers’ arms reach

• Wide-spread, low-cost, self-sustaining business model

• Integrated distributor-based sales + service model

• Outsourced model for institutional

• Option of product Swap in case of defect.

Philosophy: • Low-cost-to-

service. • Quality , sturdy &

long lasting. Improve speed to market: • Core platforms to

address multiple applications

Offer choice to drive relevance: • Segment-wise

products

Core Approach

Measures of Success

Strategic Approach

Distribution

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People

Gain foothold : • Invest in building

relationships with Strategic Partners e.g. Microfinance Institutions, NGO / CSC /post offices, / DCCB/ Rural distribution co’s / CSD/ Pertol pums & cooking gas distribution outlets.

• Build capability: • Service

capabilities Introduce products based on customer needs

Create performance-orientation: • Closer to market

placement. • Local language &

culture knowledge. • Working long hrs. • Adj to Inedequate

boarding & lodging. • KRA setting and

performance measurement

• Capability building/ Training

• Rewards & recognition (R&R)

Build a transparent culture: • Common vision and

shared goals • Transparent

communications

Create and leverage distribution and service reach as key customer value creators

No of outlets Village coverage Suitable products Retention Productivity Productivity Reference

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State

Distributor

positioning

Dealer point

Micro-Agents /Distributor Sales

Officers positioning

Service Point

Service Point

State Sales Head

Territory sales

Manager

Distributor/Stockiest

Distributor Sales

Officers

Micro-Agents Dealer

Territory sales

manager

Territory sales

manager

Territory sales

manager

Distribution Structure

Feeder

Market

Blocks

Districts

Village

Logistics & Supply chain

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Locate the warehouse for cost effective & timely distribution

- Large shipments by road cost less. - Closer to market stock points for

faster deliveries & minimized the Inter state taxes .

- Product packing should avoid breakages during transportation.

- Comfortable packing size. - Local language product user

manuals to be inserted. - Product demand forecast to be

planned effectively. - Spares availability critical for

service.

Carry in & Stand by unit Service Model

All distributors & Partners would be involved in providing after sales service. Customer will walk in to the point of sale. After initial checks:

If the need arise. The person at Point of sales wouldbe empowered to handover the stand by unit to customer.

Customer

Walk- in customer at

Point of Sale

Distributor

Customer

satisfied

Distributor

Customer

State customer relations : Head Office customer relations :

Register service call: - Issue service call number- guide customer to nearest point of service

Company Advisor

Distributor sales person

Micro-franchisee

SHG members

BFPA BFPA BFPA BFPA DSO DSO DSO DSO MFE MFE MFE MFE Tech. Tech. Tech. Tech.

Customer call attended & closed

Walk In & given a stand by unit Call in customer

- Above the line advertising only if product are available in wide spread market. - Seasonal variations to be taken in account. Marketing & communication Touch points. - Haats & Melas Over 47,000 haats and 25,000 melas are held annually. - Wall Paintings - Distributor , dealer , Village level entrepreneur branding. - Bus displays. - Van campaigns - TV, Radio, SMS, Cinema campaigns - Temple site demos. - School demos - Targeting Opinion leaders - Direct call in facility for product / distributor enquiries. - Special campaigns during harvest time, festivals etc. - In case of demo based sales model, demo kits, flip folders, leaflets, posters,

sales camps, audio visual aids. - Village level entrepreneur activation tools like time to time incentives, feeling

of belongingness, recognition platforms, distributors certificates, distributors boards, dealer board etc

Local language to be used in communication.

Marketing communication

Rural India India is a population of over 1210.2 million with 0.83 billion living in Rural India while the rest .37 billion in the Urban India as per Indian Census 2011 153 million household are in Rural India and the rest 69 million in urban India. Rural India constitutes to 56% of total national income and accounts From 64% of total expenditure ( $67.57 billion) , rural economy is estimated to reach Rs.18 trillion by current year 2012-2013. Rural Eco-system: • 82 Regional Rural banks having 85,300 branches • Common Service Centers : 120,000 • Number of Rural Post Offices: 139,700 • 38 million active Internet users in Rural India • 298 million mobile subscribers in Rural India as compared to 256 million user s in Urban India. • 17 million retired soldiers mostly from Rural India. • 3 lakh co-operative societies like agriculture co-operatives, milk co-operatives. • Rural consumers spends averg. Rs. 4000/- per year on non-consumer items.

• Distribution plan will depend on Product & Services we offer. Consumable or Durables. My experience is from Durable Product sale background.

Deep Market Reach Supportive Eco-system Leverage strategy