10

CHAPTER 2 – REVIEW OF LITERATURE

This chapter is discussed under the following heads:

2.1 The Challenge and Dilemma in the rural market

2.2 Coverage status in the rural market

2.3 Behaviour of the channel members

2.4 Channel Conflict

2.5 Consumer Behaviour

The purpose of the review of literature is to explain the work that has been reported

on a topic. Literature reviews form a central component of research reports and for an

important reason - the research report is expected to fill or help fill a gap in what is

known about a topic and how it fits within existing studies. It aims to review the

critical points of current knowledge including substantive findings as well as

theoretical and methodological contributions to a particular topic. Literature reviews

are secondary sources and do not report any new or original experimental work.

2.1 The Challenge and Dilemma in Rural Market

Balakrishna et al7 have given ‘4A-Approach’ to meet the challenges in the rural

market in the following ways:

Availability: The first challenge is to ensure availability of the product or service.

India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may

live in rural areas, finding them is not easy. However, given the poor state of roads, it

is an even greater challenge to regularly reach products to the far-flung villages. Any

serious marketer must strive to reach at least 13,113 villages with a population of

more than 5,000. To service remote village, stockists use auto rickshaws, bullock-

carts and even boats in the backwaters of Kerala. To ensure full loads, the company

depot supplies, twice a week, large distributors which who act as hubs.

Affordability: The second challenge is to ensure affordability of the product or

service. With low disposable incomes, products need to be affordable to the rural

11

consumers; most of them are on daily wages. Some companies have addressed the

affordability problem by introducing small unit packs.

Acceptability: The third challenge is to gain acceptability for the product or service.

Therefore, there is a need to offer products that suit the rural market. The rural

consumer expressions differ from his urban counterpart. Consumption of branded

products is treated as a special treat or indulgence.

Awareness: Stockists reach out to customers by organizing promotional events at the

local level. Some companies use radio to push their brands into the interior areas, to

reach the local people in their language. Some companies use a combination of TV,

cinema and radio to reach 53.6 per cent of rural households.

Sastry et al105

have studied the pertinent issues in rural market such as uniqueness of

the rural consumer, uniqueness of the structure of rural markets and the peculiarities

of distribution infrastructure in rural areas. These are special to rural markets and

hence, require unique handling. Practically in every aspect of marketing, rural

markets pose certain special problems, but the following are found to be important

form the marketing point of view: Distribution logistics, storage, transport and

handling, Location and degree of concentration of demands, dealers’ attitude and

motivation, consumer motivation and buying behaviour, Transmission media, their

reach and impact, & organizational alternatives. Thus, the rural market bristles with

many problems and to achieve a firm footing, a marketer has to grasp these problems

and provide innovative solutions to them.

Rural marketing problem is majorly a distribution problem. Considering the vastness

of the rural markets – about 5,75,000 villages spread over the length and breadth of

the country – it has been stated by experienced marketers that the delay and

distribution costs to serve rural markets tend to be high due to a number of factors

like poor communication facilities, less off-take and highly scattered distribution

outlets. It is worth mentioning here the observation made by the Rural Credit Survey

12

that “the cooperative is the only medium through which the last man in the last

village can be reached.”

Thakur115

has given the most important channel trends identified in their study:

• Wholesaler-distributors will continue play an important role in marketing channels

and supply chains. Wholesale distribution remains an important force in market-

oriented economic systems. In the United States, wholesale distribution contributes 7

percent of U.S. national income and accounts for one in every 20 US jobs.

• Customers will adopt new e-business technologies when it benefits them and limit

technology usage when the technology does not help them. The authors found that the

percentage of orders received on-line will grow substantially, but not overtake more

traditional methods within the next five years.

• The distribution sales force will be under increasing pressure. As customers begin to

educate themselves by relying on the manufacturer for product information, the value

of a distributor’s sales force is being reduced in the eyes of customers. They will

bypass sales channels and directly gather product specifications, warranty and rebate

information, material safety data sheets, and potential suppliers.

• Manufacturers will explore new distribution options. Third-party logistics providers,

who have traditionally been package-handling enterprises, are moving “inside the

box” by offering product-handling services such as warehouse management, order

processing, pick/pack/ship, just-in-time parts delivery, and many other “wholesale

distribution” functions.

• Manufacturer-Distributor relationships will evolve. Manufacturers and distributors

continue to rely on each other’s actions and resources. Simultaneously, each side

struggles to maintain autonomy and control over its own operations in this era of

dynamic uncertainty.

13

Saxena106

studied how changing retail landscape in the country has compelled FMCG

companies to re-look at their sales and distribution models. FMCG majors tweak their

point-of-purchase presence in modern retail, where their brands enjoy higher off-take.

They have categorized their sales and distribution channels into finer segments, such

as key grocers, mass grocers, chemist, wholesale, small outlet and modern trade.

They conduct programme to address specific needs and expectations of each channel

in the areas such as, trade activation programmes, trade promotion programmes,

brand/SKU focus, merchandising and managing channel conflict.

The impact of spurious brands in rural market and how it chokes the market for

authentic items was studied by Bhattacharya10

. The color and almost identical cover

graphics are used for passing off spurious products as original. Even the names may

sound similar. Many distinctive features between the original and fake versions can

not usually be detected by the unwary and average customer anywhere in the market.

Blockages - at present, most products reach the rural customers generally through

wholesale channels. These intermediaries are not sufficiently under the control of

manufacturing firms, which intend to enter the rural market in a big way. Skewed

Distribution of Outlets - not surprising therefore, 76% of the estimated 3.7 million

rural outlets are concentrated in seven states. They have all sprouted in relatively

sizeable and well-off villages where sufficient consumer demand exists to sustain

them. Then again, there are about 60,000 villages which do not have even a shop

each. Poor infrastructure for most villages in most areas which chronically suffer

from lack of periodic supply of goods, poor availability of credit and capital and low

purchasing power of patrons.

The Indian retail industry suffered a total loss of staggering Rs 9,691 crore due to

shoplifting and waste in 2007 as reported by Nottinngham78

. He found that the

average shrinkage rate (stock loss from crime or waste expressed as a percentage of

retail sales) for India is 2.90 per cent of sales. The results from the 32 countries

surveyed show that global retail shrinkage cost retailers a whopping Rs 4,01,647

crore and that for the Indian retailers, the costs of retail crime (the cost of theft by

customers, disloyal employees, and suppliers and vendors, plus the cost of loss

14

prevention) were Rs 8160 crore. The study points out that the retailers have

apprehended almost 6 million store thieves during this year, and 87.5 per cent of these

thieves were customers. Indian retailers apprehended 74,540 retail thieves and 93.3

per cent of them were customers. The study also threw some interesting facts about

the nature of shoplifters and their interests across continents.

Kannan42

conducted a study which revealed that FMCG industry loses around 2500

crores annually to counterfeits and pass-off products. The fake products are affecting

the sales of leading brands to the extent of 20 to 30 percent. Top brands in India are

estimated to lose up to 30 percent of their business to fake products. Besides the loss

of revenue, the leading companies also face the loss in the damage to brand image

and brand loyalty of consumers. It has been found out that fake chocolates and toffees

are available in more number of petty shops for the leading brands.

Sl No Original Product Fake Product

1 Dairy Milk Daily Milk

2 Kit Kat Kir Kat

3 Coffee Bite Coffee Toffee

4 Mango Bite Mangoripe and Mango Bits

5 Aasai Polo Aasha Rolo

6 Vicks Vibex

Figure 1: Original and Fake Products

Kaul56

studied counterfeiting and how FMCG companies are facing problems due to

the spurious goods entered in the distribution channels. Other than pulling down the

profits of the FMCG companies, a counterfeit product of lesser quality gives a "bad

name" to the brand. The wholesalers are the people who manufacture the counterfeits

and sell it to the retailers. For retailers it's the higher margin on the counterfeit that

does the trick.

15

Gopalkrishnan34

studied that the ingredients for successful penetration into the hearts

and wallets of village consumers include long-term commitment, cost re-engineering

and sustained innovation and specialized strategies.” He highlighted the need for the

corporates to place emphasis on going to the retailers directly rather than depending

on the wholesalers for distribution in the rural market. He also emphasized on the

need to work on economical packaging, dual pricing and special sizes of FMCG and

household products. Several myths abound the rural sector such as rural people not

buying branded goods, going for cheap products and market being a homogenous

mass. He informed that the rural people account for 80 per cent of sales for FMCGs;

they seek value for money and the rural market is fascinatingly heterogeneous.

The FMCG companies change the track of distribution to attract customers as studied

by Bhattacharya11

. Several FMCG companies have taken to unconventional modes of

distribution. CavinKare Pvt. Ltd. has created two separate brands - Chinni for smaller

pack sizes and Priya for larger packs - And instead of using the conventional

distribution route, they have created a `sachet' sales force that sells only sachet packs

to small retailers, including cigarette and pan shops. Emami Ltd. tied up with the Post

and Telegraph Department to place its products across 5,000 post offices. Wipro

Consumer Care and Lighting (WCCL) have been using the Andhra Pradesh

Government's e-seva project, which aims at enhancing the common man's interface

with the Government. Coupled with traditional distribution methods, this approach

allows WCCL to reach consumers who otherwise may not come to a retail point.

Alternative distribution channels do not offer better margins and are, at best, tools to

gain accessibility in certain areas. Also, distribution margins across these channels are

identical to those in conventional routes, so there is little cost saving. So, while

alternative distribution options are gaining acceptability, it may be some time before

these become a rage.

The study by Mehra70

revealed that the Government's loss on account of tax evasions

by unauthorized manufacturers is around Rs 600 crore. Marketing and Research

Team (MART) has undertaken an impressionistic survey to access the impact of fakes

16

on the rural market. It shows that the phenomenon is rampant and much more virulent

than in the cities. The researchers found that the absence of original branded FMCG

products was 100 per cent. The fact that duplicate products, look-alikes and spell-

alikes exist cheek by jowl with genuine products on the same shelf, are less costly and

earn the retailer higher profits was always known. The Brand Protection Committee

has put in place a four-fold strategy including a focus on enforcement and application

of laws; publicizing the negative economic impact of fake products; taking direct

action against illegal manufacturers, traders, wholesalers and retailers; and enhancing

communication among the stakeholders.

The retailers are finding it hard to clear their dues to vendors and suppliers. Banerjee

et al9 revealed that almost all organized retailers are seeking longer credit. Small

format retailers, who don’t have an extensive network and therefore the bandwidth to

negotiate with companies, are feeling the squeeze more than the big retail players.

They seem to be having difficulties in making regular payments to manufacturers.

There are various reasons, working capital crunch or their retail expansion plans

going haywire.

There were common challenges and approaches in serving bottom of the economic

pyramid customers, and that these could be articulated and refined to get better

business results. Anderson3 reported that field visits were made to China, Egypt,

India, Mexico and the Philippines, and in-depth interviews took place with companies

that had succeeded in serving customers living in poverty. Companies were identified

from the existing body of literature personal contact. Additionally, data were

collected from developing case studies on multinational corporations and local firms

that have been successful in serving low-income customers in developing markets.

The research resulted in the development of a structured framework for developing

strategies to serve low-income customers in emerging markets.

17

Rajagopal87

reported that the performance of global brands in low-profile consumer

market segments is constrained by high transaction costs and coordination problems

along the brand promotions, consumption and consumer value chain. Hence, firms

looking towards managing brands in Bottom of the Pyramid (BoP) market segments

need to reduce brand costs by increasing the volume of sales and augmenting

consumer value. Brands of BoP market segments are socially and culturally

embedded. They are co-created by consumers and firms, and positioned with the

influence of brand equity of the premium market. Unlike traditional brands, BoP

brands may be sufficiently malleable to support brand interpretations in the rural and

suburban consumer segments. The paper offers new business strategies to managers

on brand positioning and targeting in suburban and rural markets with convenience

packaging, pricing and psychodynamics.

Clarke18

revealed in his article that concerns the importance of physical distribution in

marketing. It should be of interest to a wide range of managers concerned with

purchase, marketing and distribution of products. It highlights the importance of

taking account of customers' needs to improve service and save on costs in physical

distribution.

In difficult retail trading conditions, and as price-led strategies become more

common, cost control is a very high priority for retailers. Leaver64

observed that the

problem faced by UK retailers is that many of the factors influencing the rising trend

of consumer theft are outside their control and there are some of the social and

political factors involved. Based on interviews with retailers a general security

strategy of containing consumer theft and actively driving down other “unaccounted”

stock losses emerged. However, within this general strategy each retailer adapted it to

their particular needs and capabilities.

18

In the past, manufacturers and retailers have tended to pursue their own objectives

rather too narrowly, sometimes to their own mutual disadvantage, and certainly to the

disadvantage of the consumer. Sugden112

, in his speech to the Marketing Society,

called upon manufacturers and retailers to become partners in distribution so that with

the benefits of increased understanding and more coherent planning, they can begin to

rationalize their enterprise and cut their costs.

Coelho et al19

, in their research paper, were to aim to understand the factors

influencing the magnitude of change in distribution channels. The degree of channel

change is related to: volatility in customers' needs; the sophistication of the target

customer; product sophistication; environmental conflict; volatility in competitors'

strategies; scope economies; and company size.

Kashyap et al48

have written that small retailers and retailers in the interior villages

must buy in cash, while larger retailers in feeder markets are offered credit.

When premium brands are counterfeited, which in turn gives a variety of consumers’

access to them, how consumers of the genuine items react to the erosion of

exclusivity and prestige. Commuri20

observed that an investigation involving

premium brands in Thailand and India revealed that consumers of genuine items

adopted one of the three strategies when faced with the prospect of their favorite

brands being counterfeited: flight, i.e. abandoning the brand, reclamation, i.e.

elaborating the pioneering patronage of a brand, and abranding, i.e. disguising all

brand cues. He examined these strategies in detail, revealing how the potential loss of

exclusivity and prestige can either drive genuine-item consumers away from the

brand or impel them to make strong claims to their patronage.

There are 3.5 million outlets spread over 6 lakh villages whereas there are 1.68

million outlets spread over 5000 towns and cities, i.e. there are only 6 shops per

village and 340 shops per town / city. Kashyap et al46

found that there are hardly any

shops in 2.3 lakh villages.

19

Rural markets will change with the advent of infrastructure and connectivity. The

marketer has to understand the development process of the rural market as the

aspiration is fast tracked for the rural consumer compared to the urban consumer.

Seth108

also reported that innovation, interest and insight will bring the key difference

in understanding the rural market and the 'aam aadmi'. The challenges for the rural

markets are to establish trust, creating innovative product packaging and providing

the right communication for the brand. The marketer has to create brand proposition

by building iconic images and focusing on marketing challenges rather than

penetration challenges.

No consumer goods company today can afford to forget that the rural market is a very

big part of the Indian consumer market. Raju90

also added that one can't build a

presence for a brand in India unless they have a strategy for reaching the villages.

2.2 Coverage Status in the Rural Market

Khicha57

studied that television and direct marketing activities help rural consumers

learn about different brands, ensuring product availability is even more critical.

Marketers in rural India claim that setting up a supply chain that reaches the remotest

rural areas is extremely arduous given the infrastructure in the country. HUL Project

Shakti targeted rural women from existing self-help groups to work as “direct-to-

home” distributors for HUL products, and helped the company break into a market

they were unfamiliar with. A “hub and spoke” model of distribution is the “future.”

As he explains Dabur has successfully adopted the hub and spoke model in India and

it has worked very well. Here, feeder towns, primarily on the highways serve as hubs,

where companies can rent a warehouse and stock their products. Spokes are

comprised of ‘cyclist salesmen’ who then distribute products to small retail outlets in

nearby rural pockets.”

On an average, the number of product categories stocked by a rural and an urban store

do not vary significantly (19 vs. 27). What does vary, though, is the number of

20

companies (42 vs. 92). Dobhal27

observed that urban store stocks more and is

therefore serviced by more than double the number of companies than a rural store.

Obviously, availability is not a substitute for creating purchasing power or driving

preference. But it is certainly the first step towards testing it. As the rural market

evolves, those companies that overlook the 'chicken and egg' questions and set their

eyes on the long term will benefit the most. Ghari, which managed to displace Nirma

in the list of top five brands in rural India, increased its distribution from 13 per cent

in 2002 to 19 per cent in 2004. As a result, its share grew from 23 per cent to 29 per

cent during the same time. Washing powder is a relatively low-involvement category

and therefore brands are easily substitutable.

There are following seven practical ways in which consumer products can be

conveyed to rural markets through Self Help Groups (SHGs) as studied by

Ramanathan et al92

.

• The SHGs which have direct contact with the manufacturers and can directly

procure the saleable products from the manufacturing premises may be added as

channel partners. Here, the SHGs may be used as first-level channel partners.

• The manufactures who want to make the SHGs as the exclusive rural stockists can

add them simply as the promoters of products to rural retailers.

• The SHGs may be used as a second-level channel to promote the consumer products

in the rural market.

• The consumer product manufacturers who want the presence of the urban retail

networks can add the SHGs to simply push the products to the doorsteps of rural

consumers. Here, the SHGs can be utilized as product pushers rather than channels

members. The SHGs and their relation with the local retailers may enhance the supply

chain network.

• The rural markets, which include more number of surrounding villages, may be

covered by the manufacturers by appointing the SHGs as second level stockists who

act as sub-stockists for the main stockist in respective rural retailers circumscribes

and the rural retailers obtain the products from the SHGs.

21

• When the manufacturers want the presence of both urban and rural retailers in the

channel network, there the SHGs may be used as the agent for rural retailers in the

form of consortium / local commission agent to push the products onto the doorsteps

of rural consumers.

• The manufacturers who want to have a strong and established rural marketing

network can use the SHGs as second-level channel partners with respect to exclusive

rural network. Here, the SHGs simply act as selling agents for the rural retailers.

Jaiswal et al40

have carried out an in-depth study about how HUL Net has been

connected with their network of distribution and observed that it has uniquely

extended its ERP system to establish transactional and relationship-oriented Business

Network System (BNS) and has achieved significant improvement in business

performance for all partners in the network. It has achieved significant reductions in

inventory, improvements in cash management and a negative working capital due to

Manufacturers

Wholesalers

Urban Retailers

SHGs SHGs SHGs Rural

Retailers

Rural

Retailers

Rural

Retailers

Rural

Retailers

SHGs SHGs

Rural Markets

Figure 2: Model for Using SHGs as Channel Partners in Rural

Markets

22

improved information flows across the network and the implementation of policies

such as Vendor Managed Inventory (VMI). Simultaneously it has improved its

telecoms infrastructure and redesigned its inter-organizational processes to support

these information flows. This paper examines how the adoption of enterprise systems

across the network, along with a redesign of BNS, can improve and contribute

significantly to value to end consumers.

The paper written by Rajan88

argued that corporate efforts to serve subsistence

economies must be integrated rather than disparate. Focusing on the efforts of

Unilever's Indian subsidiary, the paper draws out four key lessons for businesses in

low-income regions – availability, branding, convergence, and development. Four

Unilever case studies are used to demonstrate how Unilever built on existing

strengths, integrating diverse interventions to create Shakti, a unique pro-poor

business model. The paper then analyzes the impact of the business intervention on

the poor, calling for a wider convergence and cooperation between the private and the

development sectors.

2.3 Behaviour of the Channel Members

The small retailers do not have the resources to get heavily involved in supply chain

management, nor will it be cost-effective for them to do so. Ramanathan93

found that

the opportunities for them to collaborate with suppliers are severely limited. Periodic

review is a simple but an effective stock control system appropriate for small and

medium sized rural retailers, where items sold have a relatively predictable demand

pattern. The emergence of satellite channels – as a source of promotional

advertisements – in rural markets has made the FMCGs prefer mass media

advertisements. The retailers prefer to promote particular brands available in their

assortments which provide them a decent and constituent profit margin. Therefore, all

the FMCG promoters try to attract the rural retailers by offering them a sizeable and

lucrative margin. The rural retailers are educated to manage the cost of retailing their

products, and manage their inventories and the cost associated with it.

23

Ramesh94

studied that the emergence of modern trade is currently the biggest

challenge facing FMCG manufacturers, who could see increasing pressure on sales

margins as a result. Today, manufacturers have been giving 13 per cent margin.

Modern trade won't settle for anything less than 20 per cent. While the emergence of

modern trade could hurt margins, dealing with the traditional format is not cost-

effective either. The cost of coverage is increasing. Super-stockists, who cater to

smaller towns, are offered higher margins than normal stockists. Companies will

move from a geographic segmentation to customer-type segmentation in terms of

selling efforts. This recognizes the need for specific skill sets to handle modern trade

and the different types of outlets. In addition, the traditional stockist of today will

give way to a "professional distributor," there will be a stronger foray into the rural

markets, and the sales function will emerge as a strategic business driver.

Today the question is less about what type of logistical system the marketer can build

and more about what type of distribution system the consumer wants to access. Thus,

Dev et al26

pointed out that the issue is no longer about place, but about how the

marketer can provide the fastest, easiest, least expensive access to the product or

service – alone or in combination with others – even including erstwhile competitors.

It’s not just about opening and closing channels, but about making sure the solution

gets in customers’ hands, wherever they happen to be. It’s about getting the solution

there when the customer is ready to buy, not just when the seller is ready to sell. This

then helps us think of non-traditional ways to provide customers with greater access

to products or services. P&G alliance with Coca-Cola was more about access than

about distribution, e.g. giving people access to P&G brands by putting them within

arms’ reach using Coke’s awesome distribution system.

The channels are not merely as pipelines between you and your customers, but also as

value-creating relationships that can generate competitive advantage. Gordon35

emphasized has prescribed following three disciplines:

• Mapping – It identifies how and why different customer segments buy, the

capabilities and costs of existing channels, which has channel power, how the

24

distribution of power is changing, and the nature of the competition at each level of

the channels and competitors use.

• Building and editing a channel value chain – He has suggested three principles

and first one is to start with the customer (the demand chain), second one is

benchmark against key competition and third one is to realize that some innovations

don’t start with the customer, but with a channel capability.

• Aligning and influencing the channel value chain – Channels that include

intermediaries can be complex economically, technically, and politically. If

successful channels are the ones that create the most value for participants as well as

end users, then raw power isn’t the only force that drives channel organization. The

author indicates that channel stewards aren’t just the participants that exert the most

power, but also those that keep all the participants focused on how the channel serves

customers and creates value.

There is a big complexity in creating big pricing challenges for manufacturers, as well

as for the channels themselves. Wyner124

vividly addressed the issues in channel

proliferation that some channels such as retailers are independent of manufacturers

and control the direct relationship with the end consumer. This means they control or

at least influence the price charged at the point of sale. By understanding the needs,

preferences, and price sensitivities of consumers for these different situations, its

possible to determine who the target consumer segments are, how much they overlap

channels, and what each path to the market offers in terms of overall business

potential. From this holistic viewpoint of strategic pricing options, the most profitable

alternatives can be chosen with the appropriate level of targeting and tailoring to the

segments of interest.

The current distribution structure in India is actually in favor of the manufacturers

who leverage over retailers. Kumar63

observed that these manufactures have built the

massive distribution network over the years to penetrate the highly fragmented

market. However serious attempts have still not been made to change the supply

chain structure for distribution services. Retailers are dependent on the distributors for

25

getting products, and only a few retailers and store chains are powerful enough to

effect meaningful changes in the supply chain. FMCG giants have accepted that it is

time to radically overhaul its age-old distribution system to bring it in line with what

new breed of retailers want. Now the company began piloting a new distribution

structure in which distributors are selected to cater to the needs of modern trade

outlets. These distributors will no longer be rewarded just on the basis of how much

they sell. Instead, their compensation will depend on the width of the merchandise

stocked and their prominence. It is expected that over next five years or so, we will

probably be left with half the number of distributors that we have today because most

distributors are traditional people used to working and thinking in a particular way.

Due to changing business scenario, a few distributors are taking on multiple

distributorship to push more products through the same pipeline.

The retailers face considerable risk in introducing new products because of high

failure rates. Kaufman et al55

examined the role of buyer-salesperson and firm-firm

relationships using data collected in the context of actual new product selection by

retail buyers at two large grocery retailers in United States. The findings indicate that

buyer-salesperson and firm-firm relationships have a greater influence on new

product acceptance when a new product’s attractiveness is modest than when the new

product is very unattractive or very attractive. At modest levels of product

attractiveness, the likelihood of new product acceptance can increase by as much as

60% when the buyer has a strong relationship with the salesperson. The study

provides insights into the complex interplay of marketing relationships and product

attractiveness in retail buyers’ selection of new products. Relationships matter in the

context of moderately attractive products because they have a higher probability of

failure than clearly attractive products. Retailers know that if a product is accepted

despite its modest appeal and performs modestly as well, suppliers and salespeople

with whom they have strong relationships will help mitigate their losses. This belief

also enhances the likelihood of the use of relationships as a heuristic in new product

decisions.

26

Figure 3: Acceptance Rates for Moderate Product Attractiveness by Level of

Relationship

In future, big retail chains will manage to control what patrons are at the outlets, and

acquire. Memon72

observed that the producers will have to buckle under pressure of

pricing by the retailers. Everybody agrees that the producer’s brand clout will

diminish. Classically, FMCG companies will have to split powers with retailers in

various ways. A better share of rupee sponsorship funds of producers will go towards

merchandising within the store. More margins will have to be shared with retailers, as

in the developed sector, like automobiles and others. Categories where new retail set-

ups turn dominant will inflict a huge force on the brand owner’s margins. Retail

expansion will lead to confront like copy with newer values and price equations,

providing equality, affordability and worth. Producers will also have to face rivalry

from retailers’ private brands. The manifestation of retailers may unlock new

possibilities for private label invention and permit small makers to inflate their

markets. Thus, the entry for smaller producers will increase and big retailers may not

provide them shelf space.

45

50

55

60

65

70

75

80

Low Medium High

X – Axis: Strength of Relationship

Y – Axis: Acceptance Rate

Salesperson

Manufacturer

27

The ethical standards in distribution can meet the needs of consumers and achieve

sustainable growth as examined by Dutta31

. Sales executives are evaluated based on

their performance directly related to the sales target. Because of this, the tendency is

that sales executives often force customers or dealers to buy more quantity than what

they actually require and also sometimes compel customers to buy products which

they don’t require. Putting pressure on the vendors to give less space to competitors’

products is another unethical practice. Providing abnormally high commission to

vendors to stock one’s products is another common practice in marketing. Making

false promise of delivery, knowing that it is not possible to do so within the stipulated

time-frame also amounts to unethical practice. Such practices, in fact, send wrong

signals to customers regarding the integrity of the marketing executives and tarnish

the image of the firms.

Kumar61

observed how marketers and CEOs respond to new distribution channels.

Seeking relief from declining distribution networks, senior executives cannot

overlook innovative channels that reach new market segments while significantly

cutting costs. But rather than haphazardly reacting to new channels, he argues in this

chapter that CEOs should evaluate their own distribution models to be proactive in

setting the new competitive standards. Channel migration strategies are included to

help executives exploit current innovations while developing new ones.

No matter how much inventory a wholesaler carries, when a customer places a rush

order, the essential item is often out of stock. No matter how many services a dealer

provides, what a customer needs is often one that the dealer has never supplied. And

no matter how hard a distributor tries to beef up its capabilities, when a customer has

an emergency, the distributor often lacks the skills to respond. Narus et al76

reported

that many companies are experimenting with ways to make their distribution channels

more flexible and responsive. They have realized that by sharing resources in novel

ways, they can take advantage of opportunities that they could not exploit alone.

28

Rangan96

presented a framework and a method for addressing the new product

channel choice decision. He offered a six-step method that involves:

• Disaggregating and prioritizing a distribution channel by customers' channel

function requirements;

• Obtaining and combining customers' evaluations of the channel functions;

• Benchmarking existing channels, own as well as competitors';

• Identifying and constructing effective channel alternatives;

• Quantifying the short-term and long-term benefits and costs of each alternative;

• Selecting the appropriate channel by trading off the opportunities versus constraints

posed by existing channel networks.

Traditionally, distribution channels have been viewed as vertical marketing systems

where responsibility was transferred from one layer to the next, like passing a baton

in a relay race as reported by Rangan97

on how the distribution channels trend is

changing.. Distribution channels in the future are likely to look more like horizontal

alliances of suppliers and intermediaries, all with the aim of efficiently and

effectively addressing customers' real needs. These transitions, driven by an

underlying change in the economics of production and distribution, are leading to

distinct trends in the distribution industry. This note focuses on three primary trends:

hybrid channels, multiple channels, and shorter channels. After exploring the

challenges managers face as they reorient their distribution, highlights the effects of

such changes on supplier-intermediary relationships.

Despite new technologies that have streamlined many transactions and processes, a

general lack of leadership combined with flawed and deeply ingrained structures

make distribution channels exceedingly difficult to change. What companies need,

Rangan et al95

observed, is a new approach to going to market channel stewardship

that simultaneously addresses customers' best interests and drives profits for all

channel partners. In transforming Go-to-Market Strategy, Rangan shows how any

member of a distribution channel can adopt this role and learn how to shape an

effective, constantly evolving, and mutually beneficial channel strategy. This book

29

outlines three disciplines that companies must master to navigate the complex

distribution environment successfully: map the industry channel, build and edit one's

own channel continuously to best serve customers, and align and influence one's

channel value chain to ensure that all parties reap appropriate rewards.

There are three essential purposes of distribution channels as reported by Pitt et al83

:

to support economies of scope, to routinize transactions, and to search for information

essential to both producer and consumer. A matrix model of these developments,

arrayed versus distribution channel functions, provides a guide to identifying which

traditional channels will either undergo transformation or perish and where new

channels will emerge. The matrix model suggests how existing firms and

entrepreneurs can perform their distribution functions more efficiently. It enables

identification of competitors poised to use the media to change the rules of the

marketplace.

If company's products are excellent, they are in demand, and the business opportunity

is too good to pass up. Cottrill22

vividly expressed the importance of third party

vendor in fragmented market. They just don't have any big customers - product sells

to thousands of independent retailers. It is often difficult for any one player to justify

the investment needed to build and maintain a national distribution network in a

fragmented market. But a group of players with a large combined volume can create

economies of scale by using a shared industry platform - a third party vendor that

aggregates the needs of multiple companies to provide more efficient supply chain-

related services.

Arnold5 explained about the expectations of channel members by the multinational

organizations. A multinational entering a new market in a developing country knows

that on its own, it cannot master local business practices, meet regulatory

requirements, hire and manage local personnel, and gain access to potential

customers. So it partners with a local distributor. At first, sales take off, revenues

grow, and the entry seems like a smart move. But when sales plateau, the corporation

30

begins blaming the distributor for not investing sufficiently in business growth or

expanding markets, and the distributor claims that it hasn't received enough support

and that the corporation's expectations are too high. The key to solving such problems

lies in recognizing that the phases are predictable and can be planned for. As a new

business grows in an emerging market, its marketing strategy needs to evolve, and

each sequential phase requires different skills, financial investments, and

management resources.

The company should choose a channel arrangement based on sound design principles

that recognize that the distribution strategy must contribute to the business overall

objectives as suggested by Anderson et al2. Three forces are changing the customary

rules of distribution channel management: proliferating customer needs, shifts in the

balance of power in channels, and changing strategic priorities. The authors propose a

strategic approach to planning for future channel configurations, control of the

channel, and resource commitment. The channel must address customer needs, ensure

that the customer sees the value in the company's offering, be cost efficient, and

handle any new products and services that emerge. The authors suggest that a

company first assess its current distribution channels, each channel's profitability, its

market coverage, and the cost of each channel function.

Vachani et al118

identified how socially responsible distribution can be achieved by

strategies that reduce costs, reinvent the distribution channel, or incorporate a long-

term approach to investment. It offers guidelines for setting up distribution channels

that integrate the rural bottom of the pyramid and identifies the payoffs from adopting

them. "The bottom of the pyramid" consumers reside in hundreds of thousands of

villages located beyond most multinationals' distribution networks. Their access to

essential goods is limited not just by high prices, but also by inadequate rural

distribution. The term "socially responsible distribution" describes initiatives that

provide poor producers and consumers with market access for goods and services that

they can benefit from by either buying or selling, thus neutralizing the disadvantages

31

they suffer due to inadequate physical links to markets, information asymmetries, and

weak bargaining power.

The channel performance is a key marketing and organizational issue, given the

potential and actual impact in the accomplishment of organizational goals. Filipe et

al32

observed that the recent trend in distribution strategy has been the increasing

utilization of multiple channels across sectors. Because of the newness of these

channel systems, it is important to understand how they influence key channel

performance indicators. With this purpose, a study was conducted in a sample of 62

UK financial services organizations. The research considered several indicators of

channel performance, which were statistically reduced to two broad dimensions: sales

and profitability. The results show that multiple channels are associated with higher

sales performance and lower channel profitability. However, the statistical

significance of the results was observed to depend on the extent to which multiple

channels were being used. In addition, this article analyses the relationship between

the number of channels and company size and product type.

The urban Bottom of the Pyramid (BoP) market is more profitable for large firms

than the rural BoP due to its density of wealth, proximity, homogeneity and

modernity. John41

observed that while recommended tactics for BoP marketing like

rock bottom pricing, innovative products and sachets never produced market leaders,

multilevel channels and inclusive pricing led to dramatic BoP sales growth for

respected middle-class products.

Bulent et al13

observed that the extent of relational behaviors displayed by

independent partners in channels of distribution is a critical determinant of the

efficiency and effectiveness of distribution operations. In line with the main study

thesis, the results suggest that the relative effects of dependence on and trust in the

supplier differ across dealer flexibility, information exchange, and solidarity

displayed toward the supplier firms.

32

The distributors share higher amounts of both external strategic information (ESI) and

internal strategic information (ISI) with their suppliers when dependence asymmetry

is in their favor and when each firm’s transaction-specific investments are high. Gary

et al33

inferred that distributor trust facilitates the sharing of ISI, and high distributor

product-market familiarity enhances the sharing of ESI.

Sislain110

reported that many times distributors are willing to share market related

information with suppliers, but some information may be sensitive in nature and, if

shared could place the distributor at risk of opportunistic exploitation which results in

hiding information.

Day et al25

studied that the firm’s capability to compete largely depends on its ability

to obtain information about customer preferences, competitor actions, and channel

member behaviour.

The suppliers heavily rely on distributors for information because of their direct

contact with both competitors and end customers. Coughlan et al23

observed that the

distributors possess information that is difficult, if not impossible, for suppliers to

obtain otherwise.

Rajiv et al89

examined how co-operation among distribution channel members can be

fostered through the use of participative, supportive and directive leadership styles

foster channel member co-operation and assesses the relationship between co-

operation and channel member performance. Develops a conceptual model and

empirically tests the linkages among the variables on data drawn from a survey of key

informants in a sample of dealerships. Shows that participative, supportive and

directive leadership styles are directly related to channel member co-operation,

which, in turn, is positively associated with channel member performance.

The distribution channel structures decisions are made by examining the company’s

degree of commitment and risk, and are not only difficult to change but initial wrong

decisions may lead to poor results. Therefore, channel satisfaction is higher when

33

channel structure is appropriate for the market. Yongkyu125

also examined factors

leading to a firm’s satisfaction with marketing channels. It builds on existing studies

about consumer satisfaction and distribution channel structures. A transaction cost

factor and the discrepancy model are important to examine the determinants of

satisfaction. It shows that a firm’s relative performance and control variables provide

significant explanations for channel satisfaction.

In recent years, the efficient-consumer-response has replaced prior management fads

and rules of the competitive landscape in the field of grocery trade. Tuominen117

stated that this initiative thrives on creating value for the final customers through an

efficient supply chain value system, and simultaneously appropriate value for the

channel members involved. The results indicated a strong positive association

between channel collaboration and firm value proposition, and further that the

relationship has a contingency specific profile. In managerial terms, business

executives must carefully design a match between the strategic channel posture the

firm possesses and its value creating and appropriating capability profile in managing

collaborative channel relationships.

Park81

observed that promotional support, as a push strategy, that manufacturers use

to encourage retailers to carry their products needs retailers' cooperation. This study

investigates the effects of retailers' fashion and price orientations on manufacturers'

offerings of and retailers' cooperation with promotional support. A factor analysis

determined four factors: sales support, ad/display materials, monetary support, and

selling aid samples are important in pushing manufacturers’ products in the market.

34

2.4 The Channel Conflict

The all India Distributors' Association expressed their concern by holding the

nationwide stir to resist 'fearful situation ahead'. Ramachandran et al91

reported that

they raised a strong protest with leading fast moving consumer goods (FMCG)

companies for bypassing them and selling their products directly to large retail stores.

Making direct supplies will have a negative impact on the turnover of distributors and

all actions of these companies in destroying conventional traders should be put to an

end and the purpose was to communicate all members of their community in all states

in the country, so as to put up strong resistance to this. If the big manufacturers

supply goods directly to monopoly retail outlets, that too bringing in an unbalanced

pricing structure, small and medium traders are sure to be doomed.

Iyer39

reported that the All Kerala Distributors’ Association (AKDA) written letter to

oppose the special rates and credit terms that FMCG companies offer large retail

chains. The organization was not against retail chains. What we are against is the

undue terms and favors that the companies offer large retailers. Even when existing

distributors supply products to the retail chains, the FMCG companies instruct them

to follow special pricing and credit terms that have been worked out between the

companies and the retailers. Such practices will have a negative impact on

distributors and small traders, who have helped the companies’ growth.

The main reasons for conflict between manufacturers and retailers are that the

manufacturer is not cutting uniform deals with all retailers and is giving better deals

to international retailers who may have larger stakes in global markets and has better

deals with international retailers where there are larger stakes involved.

Vijayraghvan121

observed that the company’s conditional terms remained

unacceptable, offering fill rates (stocks on shelf) of only 65%. Such terms are unfair,

especially when they have to pay the rent for the entire shelf space to the developer.

Another reason is the company has also been insisting on payments only after an

external audit which, for retailers who buy and sell and not really stock up, is

unacceptable.

35

To remove the conflict between the manufacturer and its distributors, the consumer

goods giant Hindustan Unilever (HUL) has tied up with a third-party logistics service

provider to manage the entire back-end distribution chain on behalf of its distributors.

Sangameshwaran102

reported that the project is expected to take away a major burden

faced by several distributors i.e., managing stock positions and delivery schedules.

The initiative will help the distributor to focus on customers. At present, a lot of

distributors get constrained by factors like concentrating on the backend in areas like

finance, logistics and space management. The task is to create a distributor

organization that is customer facing rather than inward looking. HUL is encouraging

its distributors to become entrepreneurs and run the business as a professional

distribution house and take on the onus to deliver growth.

Weigand123

observed that to avoid conflicts and problems that can arise along the

channel or in the laws under which a business operates and understanding of the

various possible combinations of markets, channels and products is essential. Sellers

sending their products through both captive and independent outlets may face the

problem of discrimination during periods of supply shortages or a possible "price

squeeze". A company that uses separate channels to sell the same product to different

markets must often deal with price differentials and contracts.

In the company sales offices where the institutional and retail sales teams coexist;

they share the same go-down or C&F agent, billing system, commercial team,

delivery team and the accounting department. Zameer126

reported his practical

experience illustratively that both the teams want a priority treatment to their own

customers or channel members. They try to exert pressure on billing people and

delivery staff to execute their orders immediately even if it may result in more cost to

company by way of small delivery loads or multiple consignments towards the same

geographical area. The commercial team, always under pressure to reduce operating

costs, tries to optimize the use of space in any carrier and clubs the supplies in one

direction of the city. Obviously, this leads to some unexecuted orders at any point of

time, leading to friction in sales teams.

36

The retailers are often seen as irrelevant to the source of brand value, resulting in

manufacturers not targeting retailers to help them build stronger brands. Tran116

et al

observed that potential occurs, therefore, for some channel conflict to exist between

manufacturers and retailers. On the one hand, retailers tend to focus on building their

own, private brands to differentiate themselves from other retail competitors and to

increase their power in relation to manufacturer brands. At the same time, most

retailers still need to create a good image in the consumer marketplace by selling

famous, manufacturer-branded products. In other words, retailers often have to sell

famous brands even if they would prefer to sell other brands including their own.

Manufacturers tend to focus their brand-building efforts on the consumer market to

entice consumers to insist that retailers stock their brands, rather than placing any real

emphasis on building a strong and positive brand relationship with the retailer

directly.

Many a time conflict occurred because of role ambiguity. This was a common cause

of conflict in multi-channel system. Saxena107

reported that the automobile

components distributors bypassed the wholesalers and sold to retailers; wholesalers

revolted and started pushing competitor’s products.

2.5 Consumer Behaviour

The customer satisfaction is an important driver of firm profitability. On the basis of

longitudinal analyses of large-scale secondary data from multiple sources, Luo et al66

explained the findings by the possibility that customer satisfaction generated free

word-of-mouth advertising and saved subsequent marketing costs. In addition,

customer satisfaction had a positive influence on a company’s excellence in human

capital. Finally, the authors investigated the moderating influence of market

concentration on both relationships.

Liu65

examined the long-term impact of a loyalty program on consumers’ usage levels

and their exclusive loyalty to the firm. Using longitudinal data from a convenience

store franchise, the study shows that consumers who were heavy buyers at the

37

beginning of a loyalty program were most likely to claim their qualified rewards, but

the program did not prompt them to change their purchase behavior. In contrast,

consumers whose initial patronage levels were low or moderate gradually purchased

more and became more loyal to the firm. The findings suggest a need to consider

consumer idiosyncrasies when studying loyalty programs and illustrate consumers’

co-creation of value in the marketing process.

In Indian Marketing Summit, Pradeep85

emphasized that it would be a bigger mistake

to assume that ‘price’ is the key driver in the rural market. The consumer there often

has a higher disposable income than urbanites. Yet, if he owns less number of

durables in comparison to an urban consumer, it’s not because of price or

affordability, but due to other factors, such as infrastructure and availability of variety

of products.

The literacy rate in the villages has increased considerably and thus by bringing in a

shift of taste of the people. Unavailability of persuasive media and poor level of

literacy demands personal selling to convince consumers to buy a product in the

market. Panda79

reported that the marketer has to develop products that suit cultural

practices, identify a suitable target audience and design media and message that

reflect social behaviour, design the distribution to reach the places where the

consumer traditionally makes his purchase. Small pack sizes get acceptance in

markets, by rural buyers who can pay only a small price because of the nature of

income receipts. He buys his provisions daily and does not have a big amount to

spend. It is not true that only cheap brands sell in rural markets. In as many as 18

products categories, consumption of branded items account for 80% of sales. This

indicates the potential for national brands if they can find a way to package their

offering to compete effectively with regional brands. The attitude of the rural

consumers favors quality products and brands pricing has to take into account both

the income level and the income flow of the consumers. A group of consumers can,

can not only afford, but are also willing to buy, high priced brands.

38

There are two distinct segments of consumers in the rural market. Sarangpani et al104

studied that one set of rural consumers is less educated or even illiterate. They cannot

read, write or understand with ease. They do not buy branded products. They have

their own method of identification of products and communication with the retailers.

For instance, they ask for Erra Sabbu (for Lifebuoy), Pacha Sabbu (for Nirma), Neeli

Sabbu (for Rin), etc. Rarely do they purchase branded packaged goods and values

associated with them. On the contrary, there is a different segment of consumers, the

younger 18-35 years age group; they are educated, more mobile and have urban

exposure. They are brand conscious. They ask for brands of their choice. Their brand

usage and recall rate is comparable to their counterparts in the urban areas.

The rural FMCG market with its promise of millions of consumers is not yet touched

by the cornucopia of brands and products. Saran103

mentioned that it's true that of the

122 million households in rural India, a majority are low-income ones, dependent on

subsistence farming. The author observed that some of the biggest urban brands such

as Parle G, Lifebuoy Active and Lux are also big draws in rural India. The basket of

high-volume consumables-toilet soap, washing powder, packaged tea, biscuits and

detergent cakes - is virtually identical in urban and rural India. That in a way proves

that some brands have gone beyond the urban-rural barrier that assimilation of rural

and urban consumers is already at work for a wide variety of product categories.

Mansharamani et al68

have presented the challenges faced in purchase stages in

pictorial way. They have analyzed the reasons for the existence of unbranded /

unpackaged goods and the stage should they be most fiercely countered at:

1) Low prices – The cost of the inputs, i.e. both materials and labour make it possible

for unbranded goods to be sold at much cheaper rates than their branded counterparts.

2) Local aspect – Many unbranded goods are manufactured by regional players and

hence the products are tuned to the local preferences of the region.

3) Derived benefits – The mindset for securing quality for an extra additional price,

i.e. value consciousness has now seeped in. eg. MARICO claims that its brands of

low cholesterol oils have penetrated rural areas to a great extent.

39

4) Rural income levels – The incomes in rural areas are not as much as compared to

urban areas. Hence, many items fall out of the purchasing capacity of the rural

consumers.

5) Rural income generation – Even if rural consumers do have the aggregate

monthly income to purchase branded products, they tend not to have enough money

at one point of time to actually make the purchase of an item. This is why in areas

where branded products are available, they are often sold in loose quantities since

they fall into the purchasable range.

6) Counterfeits – Even though these counterfeit products would be branded, if a

consumer is not satisfied with the value that he is getting out of the product, his buy

in into the branded products will take a downturn.

7) Mindset for quality – It is important to realize that all brands need to reinforce a

quality mindset into the rural consumer in a concerted manner.

8) Lack of awareness – It is the lack of information about products that can add

convenience to the life of a rural consumer. This lack of awareness can be a result of

a company’s insufficient promotional efforts.

Figure 4: Purchase Stages

40

There is a definite role of word of mouth (WoM) in purchase decision. The influences

are either positive or negative for the business. Arora6 added that if positive, it helps

businesses to earn more revenue and grow. On the other hand, if it is negative, it

destroys growth and goodwill of the business. The notion of WOM remains with the

people, but the major thrust is on how to manage and control it effectively.

Figure 5: Three R’s of Quality Relationships between Salespeople and Buyers

Figure 6: Most Influencing Sources in Word of Mouth (WoM)

Relationship

Quality

Recommendation

s

Referrals Repeat Business

Most Influencing Sources in Word of Mouth (WOM)

Global consumers aged 13 plus who feel the following sources are very

trustworthy for purchase ideas or information:

People / word of mouth (net) 70%

Advertising (net) 59%

Editorial (net) 55%

Online / Internet 18%

Global consumers aged 13 plus who are influenced by word of mouth from

specific groups:

Family and friends 46%

Other people 03%

Neither 30%

Both 21%

41

There is a compressive dynamic model of customer loyalty to account for the impact

of negative critical incident (CIs) on both the nature and the magnitude of the

relationships between satisfaction and customer share, developed by Doorn et al28

.

The results indicate that CIs trigger a stronger updating of the customer relationship,

which moves customers from a business-as-usual mindset to a reconsideration of the

relationship. Depending on the relationship quality, CIs have different consequences

for customer relationships, and if relationship quality is high, a negative CI can even

have a positive impact on customer share.

Today marketers need to understand the dynamics of rural markets. To effectively tap

the rural market a brand must associate it with the same things the rural folks do, yet

giving them a feel of modern outlook and expression. Kumar et al62

clearly brought

out the quantum of impact advertisement makes on rural consumers, so the attempt

was likely to succeed; only the right approach was required. It has been noticed that

below-the-line communication like alternative and innovative ways of

communication plays a key role in building reassurance and trust, and so it is vital.

Rural consumers have a very high level of ethos so all the care should be taken not to

hurt them in any form of advertisement. The brand to be made relevant by

understanding local needs.

The key challenge that companies face in the rural market is to identify and offer

appropriate products without hampering the company’s profitability or margins.

Annapurna4 found that the companies should recognize that rural consumers are quite

discerning about their choices and customize products and services accordingly. The

products should not only be made available at the right time and right place but

should also be affordable and acceptable to the rural people. There is lack of proper

transportation facilities and logistic services, implementing appropriate marketing

communications and challenge in training the sales force to make them understand

the rural mindset and motivating them to go and work in the villages.

42

Modern-looking equipments and fixtures, physical facilities, the ambience and store

layout are required up to the mark by the retail stores. Roopa Devi100

analyzed the

consumer behaviour, their expectations and the services actually provided by retail

stores of Haryana. If the retailers of Haryana provide high quality merchandise

according to the needs and wants of the customer, then they would be able to satisfy

and retain the customers.

The retailers who undertake relationship efforts with loyal customers can positively

affect these customers' attitudes and behavioral intentions. Chiung-Ju et al15

suggested

that financial services with different attributes require different kinds and levels of

customer treatments and relationship efforts. They support the contention that the

aggregation of customer satisfaction from continuous exchange leads to trust between

the retailers and customers. They also suggest the direction of resource reallocation.

Consequently, managers and employees of retails need to be trained, motivated, and

rewarded for making relationship efforts with regular customers.

Tao et al114

conducted an exploratory study on rural and urban consumers in an

emerging market like China and he presented empirical evidence about the impacts of

economic development on consumer lifestyles. Chinese rural and urban consumers

were found to be statistically different in terms of their attitudes toward the whole

marketing mix: product price, brand names, promotions and distribution. Possibly as

a result of these disparate attitudes, rural and urban consumers were found to use

different products to reflect the improvement of their living standards. All of these

previous differences might be due to the fact that rural and urban Chinese consumers

have different needs, as indicated by the words they chose to describe their ideal

image.

There are some factors and attitudes that influence customers’ store choice decisions

and their attitudes towards their local shops. Adelina et al1 investigated the grocery

shopping habits of residents in rural communities in Western Stirlingshire, Scotland.

Findings revealed that although respondents held a positive overall view of their local

shops, less than one-third purchased a high proportion of their food shopping in local

43

shops. While it is unlikely that local traders will reverse outshoppers’ shopping

behaviours, with a re-evaluation of their overall offer, they may be able to establish

themselves as a reliable supplementary or secondary choice option, thereby

maintaining the local shop as a viable function.

To maintain the competitive edge, organizations must move quickly to identify and

then meet customer satisfaction. Mike74

examined the methods of identifying

customer satisfaction, measuring and using the results to improve the quality of

products and services. It is advised on how to identify and implement a quality

improvement programme. Complete customer satisfaction is only possible when there

is full information about customer requirements in the hands of all and everyone who

has influence on how they are met. By getting it right first time, the whole

customer/supplier chain focuses on meeting the needs of the external customer, and

providing customer satisfaction.

There is a need of customer satisfaction in the prevailing service-led economy.

Craig24

proposed five steps to greater customer satisfaction: the customer satisfaction

audit, service strategy development, employee relations, implementing tactics, and

maintenance and feedback. Customer satisfaction program requires an understanding

of the marketplace, and of the difference between minimum service requirements and

value-added services.

Many organizations feel pressure to become more responsive to their customers.

Managing the business to deliver superior value to targeted customers may provide a

strong avenue to improved performance. Robert et al99

observed that the value based

strategies have the most direct impact on performance with customers in the form of

customer satisfaction, word of mouth and loyalty. Successful customer performance

should translate into higher market performance, as evidenced by a supplier’s higher

customer retention rates and sales.

Most of the strategies performed by small-town independent retailers did not meet

their local consumers' expectations. Specially, merchandise assortment and

44

availability, such as offering a unique and large selection of products, showed the

largest discrepancy between respondents' expectations and retailers' performance,

indicating that independent retailers are not meeting their consumers' needs in these

areas. Seung-Eun et al109

observed that the participants who were satisfied with their

independent retailers, shopped locally, were strongly attached to their communities,

and were willing to support their local independent retailers.

Dr Kim et al29

studied the factors contributing to rural consumers’ in-shopping

behaviour. The objectives of this research were to examine how shopping behavior of

rural consumers is affected by perceptions of local retailers’ social norm based

activities and task oriented actions and social capital within the community. The

findings of the study revealed significant relationships between

Institutional action and legitimacy,

Legitimacy and support, and

Value and support.

The moderating effect of social capital on the relationships between

Institutional action and legitimacy,

Legitimacy and support, and

Value and support were significant.

Viswanathan122

examined the marketplace activities of subsistence customers in

South India and presented a picture of the day-to-day behaviors and interactions of

subsistence customers in terms of the products they purchase and their interactions

with sellers and outlets. The method involved observations and in-depth interviews of

a variety of buyers and sellers over several years in urban and rural South India.

Needs, products, and market interactions, as well as typical budgets in subsistence

contexts are described. These descriptions are used to derive broader characteristics

45

of product and market interactions in terms of uncertainty, complexity, and lack of

control; one-on-one interactions; transactional fluidity; and make or buy decisions.

Retailers have been struggling with considerable out-of-stocks for decades – with

little evidence of improvement. Corsten et al21

conducted a major, worldwide study of

the extent, causes, and consumer responses to out-of-stocks in the fast-moving

consumer goods industry believed that retail out-of-stocks have gone down over the

last ten years is wrong. A similar wrong belief is that shoppers are also still unwilling

to accept low service levels. In fact, increasingly, consumers switch brands when they

do not find the brand they wanted. But retailers must be wary, because the results of

our research show that increasingly shoppers switch stores quickly and may never

come back. In this article, we report these findings and provide insight to solving this

chronic industry problem.

Sullivan P et al113

presented results of a study on outshopping grocery patterns of

rural shoppers. The researchers mailed a questionnaire to residents in a rural Vermont

area, asking them to record their grocery expenditures for one week. The

questionnaire solicited information about respondents’ store patronage,

psychographic behaviour and socio-economic status. Results indicated that each

consumer had different store patronage practices, psychographic profiles, and income

levels, suggesting that grocery retailers should work with communities to organize

retail mixes that appeal to different shopping groups.

The retail brand equity varies with customer satisfaction. For department stores, each

consumer-based retailer equity dimension varied according to customer satisfaction

with the retailer as indicated by Pappu et al80

. However, for specialty stores, only

three of the consumer-based retailer equity dimensions, namely retailer awareness,

retailer associations and retailer perceived quality, varied according to customer

satisfaction level with the retailer.

46

As age increases older consumers' retail buying and food-related behaviour changes.

A decline in patronage of multiple retailers is evident as age increases; as is

consumers' perceived value of multi-purchase promotions and nutritional confidence.

Meneely et al73

observed that alongside increasing age there is an apparent increase

in the use of local shops, the enjoyment gained from shopping, the difficulty

experienced in accessing food retail sites and the problems experienced when

cooking.

Customer patronage to grocery stores is positively related to location, helpful,

trustworthy salespeople, home shopping, cleanliness, offers, quality, and negatively

related to travel convenience. Goswami et al36

carried out study across four Indian

cities- two major and two smaller cities with around 100 respondents from each city

to find out whether customer patronage differs for different grocery store attributes

and customer perceptions of grocery store attributes differ for kirana stores and

organized retailers. Kiranas do well on location but poorly on cleanliness, offers,

quality, and helpful trustworthy salespeople. The converse is true for organized

retailers.

Choe et al16

investigated the impact of retail customers’ attitudes towards local retail

establishments and their impact on local retail trading behaviour. Heads of 206

households were interviewed by telephone in two separate Indian towns, each located

approximately 55 miles from a major metropolitan trading area. Findings indicate

there is strong positive correlation between the attitudes of consumers and local

economic performances. Poor attitudes of consumers towards local business resulted

in a higher percentage of income spent outside the community, which may reduce the

growth of local business and employment opportunity. The unemployment rate of the

community with positive attitudes was 2.2 per cent compared to 7.5 per cent of the

community with negative attitudes. They further suggest that small businesses and

local retailers should have a concept of competition and provide service and

satisfaction to the customer, instead of sitting back and being complacent.

47

The businesses must follow three principles for consumer marketing – deep

understanding of subsistence consumer psychology, social embeddedness, and

entrepreneurial empowerment. Sridharan et al111

studied the innovative consumer

marketing approaches for simultaneous business success and social empowerment at

the bottom of the pyramid (BoP) or in subsistence marketplaces.

Verbeke et al120

studied to gauge brand loyalty. To do this, a brand loyalty acid test

was used, which involved an out-of-stock (OOS) experiment where the complete

product line of a brand was removed from several stores in order to estimate the OOS

responses of consumers. Three types of OOS responses were identified: switching

brands; switching stores to get one’s favorite brand; and postponing purchase of a

specific brand. The present study revealed that the brand loyalty of the consumers

participating in the OOS experiment was substantial, as a large percentage of them

switched stores or postponed purchase. The study also showed that neither

competitive conditions of the retailer nor assortment change had any effect on

consumers’ OOS responses. The most potent variables that affected OOS responses

were the way consumers organized their shopping trips: store loyalist more than

others switched stores by OOS; and consumers with a small purchase amount per

shopping trip were less likely to switch stores and more likely to postpone purchase.

There also was a slight tendency for the consumer to spend less in the store during the

OOS period. This paper suggests the implications of these findings for retailers and

manufacturers.

The specific consumer characteristics are associated with interpersonal differences in

store brand demand. Store brand preferences derive from a broader evaluation

process, in which quality has the most significant role. Baltas et al8 found that the

changing image of store brands, the endorsement of such products by consumers of

higher socio-economic status, and lead to important implications for both retailers and

manufacturers of consumer products.

48

There are some important strategies in order to maximize the efficiency of retailers'

stocking decisions and manufacturers' branding efforts. Kucuk60

provided clear

insights into the influence of product availability, and thus distribution on double

jeopardy (DJ) patterns, for frequently-purchased products (FPP). He provided an in-

depth literature review of DJ, distribution, out-of-stock and consumer behavioural

brand loyalty in many marketing and supply chain decisions. The results indicated

that distribution might explain DJ patterns. In addition, distribution might create

behavioural brand loyalty when FPP are widely available (excessive availability) in

the market.

Prahalad86

observed that in many products, because the unit packs are small, and even

expenditures are small, if people are not satisfied, they can now switch brands.

They’ll switch either if they’re not satisfied or better value is available. A lot of poor

consumers are willing to pay for quality. Therefore, companies have to learn that

quality is a critical component of the brand promise. That is a big shift in India for the

last 7-8 years.