DISTRIBUTION STRATEGY

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INTRODUCTION

• Availability determines volume and market share

• Challenge : Reaching 6 lakh villages and feeding a retail network of over 35 lakh village shops

• 68% of rural markets still lies untapped due to inaccessibility.

• Some successful regional brands : Ghari detergent, Anchor toothpaste, Gemini Oil

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Problems faced in rural distribution:

• Large number of small markets• Dispersed population and trade• Poor road connectivity• Multiple tiers – higher costs• Poor availability of suitable dealers• Low density of shops per village, high

variation in their concentration

• Inadequate bank and credit facilities for rural retailers – poor viability of retail outlets

• Poor storage systems• Highly credit-driven market, low investment

capacity of retailers• Poor visibility and display of product• Poor communication of offers and schemes –

poor reach of media

Coverage Status in Rural Markets• Rural – any location with a population of less

than 50,000• 50% of rural population resides in 1 lakh off

large villages ( 2000+ population)• Account for 60% of rural wealth• 2.3 lakh tiny villages (<500 population) –

hardly any shops• Distribution becomes uneconomical towards

smaller towns

Channels of DistributionFive layers of distribution channels for movement of products from company depot to interior village markets:

Layer Channel Partner LocationLayer 1 Company depot/ C&FA National/State levelLayer 2 Distributor/ van operator/ super

stockist/ rural distributorDistrict level

Layer 3 Sub-distributor/ Retail stockist/ Sub-stockist/ Star seller/ Shakti dealer

Tehsil HQ, towns and large villages

Layer 4 Wholesaler Feeder towns, large villages,haats

Layer 5 Retailer Villages, haats

Rural Distribution System

• Wholesalers• Retailers• Mobile traders• Vans• Weekly haats

Wholesaling• 70% of rural market – beyond reach of direct

marketing• 50% rural consumption through wholesalers• Speculative rather than distributive - insufficient product availability

- urban areas – most concentration on retailers - wholesale distribution less-companies neglected rural markets

Rural retail system• Rural retail spread

- Rural India - 65% retail outlets in country- 35 lakh retail outlets spread over 6 lakh villages- High distribution cost

* geographical spread* low volumes per outlet

- Average monthly sale per shop < Rs. 5000- restricts variety and range of products stocked- 58% of villagers prefer to buy from haats rather than shops coz of better price, quality and variety- Availability of shops in villages is poor

Rural premises: - infrastructural constraints

* lack of sufficient space* inadequate power supply* lack of proper storage system

- financial constraints* inadequate funds* unwillingness of banks to extend loans

- low retail space per capita – <100 sq.ft area- travel and transport costs

Rural retail shelves• Filled with local and regional brands – higher margins and

longer credit periods• Less variety of brands available• Number of brands per product category decreases

towards smaller villages• Ensure visibility on shelves• Product stocking – cluttered &disorganised• Slow moving products – dust covered• Absence of proper racks, display box, stand• Strategies: provide display & storage systems

Vans

• Salesman loads van with stocks from nearest stockist or company stock point

• Works around surrounding markets• Then moves to next stock point – journey

cycle• Used for both sales & promotions• Eg.: Everyday , J.K. Diary• Effective but expensive

Mobile Traders

• Direct to home, unorganised distribution• Daily need products – mostly local brands –

detergent, cosmetics, personal care, garments, footwear

• Carry products on bicycles, mopeds, handcarts• Deep reach• Good rapport with clients• Mostly sell fakes and local brands

Haats/ Shandies• Oldest marketing channel in India• Provide opportunity to purchase consumer

goods & to sell surplus agricultural and allied products

• First contact point for villagers with the market

• Caters to needs of min of 10 to max of 50 villages

• Held on weekly basis – labourers get wages once a week

Trading System & Coverage• Haat traders – procure goods from wholesalers

in nearby large towns• Mostly on credit• Most traders participate in 4 haats per week• Remaining weekdays – replenish stocks • Coverage of haats by traders depends upon-

No. of products handled, number of villages serviced,Distance of haat from trader’s location, financial resources of the trader

Profile of Haat visitors & Purchase Behaviour

• 81% of buyers are regular visitors• 58% visit haats to buy specific products• Prefer to buy from haats rather than village shops –

better quality & lower price• Bargainers• Often cheat poor, illiterate consumers on price and

weight• Prices vary greatly & fluctuate considerably for

perishables- highest in morning, drop by end of the end

Takeaway for marketers• Larger haats – bigger villages – better road and

transport connections – higher purchasing power• 4,300 haats held in 5000+ population villages• 10,300 haats in 2,000-4,999 population villages• 50% of rural population – by targeting 14,600

distribution points• Turn haats into replenishment points for retailers

Public Distribution System (PDS)• Distribution of essential commodities – large

no. of people • Through network of Fair Prices Shops (FPS) /

ration shops• Commodities – wheat, rice, sugar, edible oil,

kerosene• Protect consumers from fluctuating and

escalating price syndrome• Poverty-eradication strategy• Huge infrastructure base

Cooperative Societies• India – largest network of cooperatives in the

world• 4 Lakh cooperatives spread across the country• Eg: Warna Bazar, Farmers’ Services

Cooperative Societies (FSCS)• Consumables, household durables,

agricultural products sold at economical and reasonable price

• Credit facilities to customers• Pricing by channel• Reason for stocking a product / brand• Seasonal pattern of stocking• Information source and influence on retailer• Purchase source for the retailer• Purchasing cycle• Channel promotion

BEHAVIOUR OF CHANNEL

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PREVALENT DISTRIBUTION MODELS

RURAL MARKET

VAN/SUBSTOCKISTFEEDER TOWNS

WHOLESALE AND RETAIL

RETAIL WHOLESALE

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MARKETING

DISTRIBUTOR (URBAN)

WHOLESALER

WHOLESALER

RETAILER (LOCAL)

RETAILER (SATELLITE

MKT)

RETAILER (URBAN)

RETAILER (URBAN)

RETAILER (RURAL)

COMPANY

C&FA

DISTRIBUTOR (RURAL)

SUB-DISTRIBUTOR

DISTRIBUTION MODEL 1

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CHARATERISTICS• Rural distribution separated from urban distribution• Company appoint a sub distributor(SD)under rural

distributor(RD)• Owing to poor road networks & low volume per outlet, RD

covers a large area• DM1 model focuses more on RD’s & SD’s rather than the

wholesale channel and has large no. of points appointed in the rural areas as locations are scattered. This ensures that companies products reach maximum no. of areas

• Advantages include better monitoring, price discipline and control over the sale and distribution of products

• Companies prepare PJP’s (Permanent Journey Plan) – six working days. Outlets are covered only fortnightly

• No. of outlets covered in a day is 30 – 40 of which 15 – 20 are productive Eg. HLL

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DISTRIBUTION MODEL 2

WHOLESALER

RETAILER (LOCAL)

COMPANY

C&FA / DEPOT

DISTRIBUTOR

RETAILER

DISTRIBUTION MODEL 2

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CHARATERISTICS

• There is no separate channel for rural distribution• Minimises distribution costs, allowing companies to

offer better margins to distributors and other channel partners (fewer)

• Companies with limited no. of SKUs and high sales volume adopt this model

• It is also preferred by new entrants who lack infrastructure required to have wide distribution network

• Example: Priyagold biscuit, Nirma (Shakti detergent, Nirma soaps, Camay & other toiletries)

Issues:• Coverage, No SD to cover interior parts

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NIRMA DISTRIBUTION SYSTEM

SUB DISTRIBUTOR/BIG WHOLESALER

WHOLESALER

NIRMA

DEPOT

DIRECT DISTRIBUTOR

RETAILER WHOLESALER RETAILER

NIRMA DISTRIBUTION SYSTEM

Ahmedabad

Hyderabad, Kolkata, Kanpur

At district level

At Tehsil level Covers 300-400 outlets directly

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NEW RURAL DISTRICT OFFICE

LG

DEPOT

MULTIPLE DEALERSEXCLUSIVE DEALERS

CONSUMER

DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 1

C&F AGENTS WAREHOUSE

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MARKETING

CONSUMER

RETAILER (RURAL)

RETAILER (URBAN)

PHILIPS

DEPOT

DISTRIBUTOR (URBAN)

DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 2

STOCKIST (RURAL)

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Retail outlets are not able to sell more durables because:

• They lack variety• Transport costs increase the prices (The net landed cost

of a 21-inch Color TV is Rs. 1000 more compared to the price offered by a dealer in the city)

Rural buyers prefer to buy from city stores because:• More choices are available• It is possible to get competitive prices through

bargaining• Rural buyer can see many options, visit several shops

and check different pricesProblem:• To generate volumes, companies give huge discounts to

the big city dealers, which results in price differences and put the rural retailer at disadvantage

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NIRMA DISTRIBUTION SYSTEM

HAAT

RETAILER

MANUFACTURER

WHOLESALER IN BIG CITY

WHOLESALER IN SMALL TOWN/KASBA

VILLAGE RETAILER

MOBILE TRADER

DISTRIBUTION OF FAKE PRODUCTS

CUSTOMER

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Channels of distribution:Channel 1: Manufacturers to wholesaler/retailer in big city or

small town, or directly to customerChannel 2: Wholesaler in big city to wholesaler in small

town/kasba

Channel 3: Wholesaler in small town /kasba to village retailer/mobile trader/haat

Fakes reach consumers through the following channels:

• Small kirana shops located within the village• Big shops generally located on the main road• Door-to-door visits by salesmen who pose as company

representatives• Salesmen in local trains and buses• Mobile traders• Haats 33

EMERGING DISTRIBUTION MODELS.

Marketers are innovating new cost effective approaches to reach markets.

Objectives:Maximize existing infrastructure.

Ensuring participation and economic sustainability of all stakeholders

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CORPORATE- SHG LINKAGE

• 10-15 women organized by govt bodies.• To boost the self worth among women.• Loan assistance from rural banks for setting up

of income generating enterprises.

• Rapid Growth provided an opportunity to establish a path breaking distribution model through the linkage of the groups for marketers.

• 10-15 women organized by govt bodies.• To boost the self worth among women.• Loan assistance from rural banks for setting up

of income generating enterprises.

• Rapid Growth provided an opportunity to establish a path breaking distribution model through the linkage of the groups for marketers.

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TTK PRESTIGE PRESSURE COOKER CASE

• Stagnating Sales and declining returns.• Company saw SHG women as an opportunity

to enter to the rural market.• Meetings were organized with the group .• Interested women were chosen as dealers and

demo cookers were given to present at the SHG meetings.

• Women dealers also visited other potential buyers and booked orders.

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Satellite Distribution Model.(HUB & SPOKE SYSTEM).

Stockists are appointed in major towns and feeder towns.Retailers in feeder towns get attached to these stockists.Manufacturer supplies goods to stockists.Functions performed by stockists include Financing, Ware housing, Sub distribution.Volume done by retailers varies due to location, capacity etc.Over a period of time some retailers will be elevated to stockists points. 37

Pioneers in Satellite Distribution model

COKE & PEPSI

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SYNDICATED DISTRIBUTION

Distribution is posing a major problem for a new company to penetrate to Rural market.

Two or more companies come together to form a syndicated trading organization to jointly distribute a collective group of household products by sharing costs.Small company should not deal in the same products that the big company deals

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JK Diary Case

• JK diary launched a WHITENER DIARY TOP in 50 gm. sachets priced at 6.50 Rs targeting at Rural customers.

• To cover the interiors a van was hired(125 Km *25 Days) @6Rs Per Km.

• Since JK diary has only a single product they shared the travelling expense with three other companies targeting at rural customers.

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Problems with syndicated Distribution.

• Markets for the coverage of two companies are different.

• Terms of Payment are different.(Cash by one company & credit by other company).

• Salesman of only one company accompanies the van: ( Pushes his companies products & does not make serious efforts to collect the payments of other companies).

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ITC’s DISTRIBUTION MODEL.

• Reached Rural Consumers through its e- Choupal model for backward and forward linkages for its agri related business

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NYKS Haat DISTRIBUTION MODEL• Nehru Yuva Kendra Sangathan.• Hires young people as National Service

Volunteers (NSV) for 2 years with 2000Rs stipend.• NSV is assigned with 15-20 villages :organize

events and create good rapport and credibility with villagers.

• After 2 years Existing NSV retire to give way to fresh NSV’s.

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PROJECT DISHA- CASE.

• MART selected500 ex volunteers to promote company Brands(COLGATE).

• Volunteers will be provided with all facilities( bicycles, umbrellas, storage boxes, T-shirts,etc).

• Volunteers buy stock from nearby sub stockists and sells at near by Haats and village Shops on the way.

• Average sales of 1000Rs Per day.

• Result is that Company got benefited from this .

• MART selected500 ex volunteers to promote company Brands(COLGATE).

• Volunteers will be provided with all facilities( bicycles, umbrellas, storage boxes, T-shirts,etc).

• Volunteers buy stock from nearby sub stockists and sells at near by Haats and village Shops on the way.

• Average sales of 1000Rs Per day.

• Result is that Company got benefited from this .44

AGRICULTURE INPUT DEALERS.

• 2,62,000 fertilizer dealers in country.• Fertilizer companies have retail outlets within

a range of 5 Km.• Marketers found the possibility of selling their

products through these outlets.

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PETROL PUMPS & EXTENSION COUNTERS.

• 60% of 12000 Petrol pumps in INDIA is located on Highways close to villages.

• Selling of food Products & toiletries through these outlets.

• Exploring possibility of selling agri inputs & LPG cylinders from these outlets.

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OTHER CHANNELS.

• HERO HONDA Company reported emergence of Unofficial channel of distribution.

(Village Mechanics, Real Estate Agents & Shopkeepers).

Take the Bikes in 2’s or 3’s from company Dealers.

Display them outside dealer’s Premises and will close the sale.

Paper work left to the Dealer to complete.47

IDEAL DISTRIBUTION FOR RURAL.• Per Capita Sales=Annual Sales/Market

Population..

Rural Markets are GOLD Mines which forced marketers to come up with innovative ideas to ensure the reach of their Products in these areas

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Communication Strategy

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Introduction

• Advertising goes hand in hand with economic growth.• Scenario has changed since economic liberalization.• Influence of Electronic media is contributing to the growth of

rural aspirations.• Communicating properly to the rural customers was the main

challenge for corporate marketers.• Reaching out to the rural consumers also presented a great

challenge.• Rural Communication is not a ‘peripheral activity’.

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Challenges in Rural Communication

• Heterogeneity and Spread Natio

nal Language

s

16 Scheduled Languages

Languages with widespread Use: 47

languages used for primary education ,98 used in print

media, 71 used on radio, 13 used in

films Local Vernaculars: Over 114 recognized varieties,

216 mother tongues with more than 10000 speakers were recorded in 1991

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Key characteristics of heterogeneous rural markets

• Widespread geographical dispersion (6,38,000 villages) many of them are still beyond the reach of media.

• Vast variations in levels of literacy.

• Literacy (Kerala 90%, Bihar 44%).

• Variations in reach of electronic media (Kerala 63%, Bihar 17%) and print media (Kerala 65%, Bihar 9%)

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Therefore, the requirement is threefold

• To identify the most suitable medium to ensure maximum spatial research.

• To develop region-specific consumer profiles to understand the characteristics of the target market and

• To design the most effective and persuasive communication and promotional strategies to induce the target audience to buy the product.

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Understanding the Rural Audience

There are two distinct sets of audiences in rural India:• A growing number of educated, upwardly mobile, middle

class people with aspirations and high exposure to mass media and with considerable purchasing power, in many ways similar to their urban counterparts.

• The illiterate masses, who are poor and cannot be easily reached through the mass media.

In terms of economic progress, rural India is divided into:• Developed states (Punjab, Haryana, Kerala, Tamil Nadu,

Andhra Pradesh, Karnataka and Maharashtra)• Underdeveloped or developing states (all other states)

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A View of the Communication Process

The Communication Process Model

SENDER ENCODING MESSAGE----------------------- MEDIA

DECODING RECEIVER

FEEDBACK RESPONSE

NOISE

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The receiver may not receive the intended message due to any one of the following reasons:

• Selective attention: where the consumer may not notice the stimulus provided.

• Selective distortion: where the message is deliberately twisted so that the consumer hears what he/she wants to hear and

• Selective recall: where the consumer retains only a small fraction of the message that reaches him/her.

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Developing Effective Communication

Developing effective communication involves five steps:

1. Profiling the target audience2. Determining the communication objectives3. Designing the message and ensuring the effectiveness of

the message4. Selecting the communication channels5. Designing the promotion strategy and integrating the

communication process

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1. Profiling the target audience

The steps involved in designing an effective message for rural consumers are probing and profiling the target audience. For probing, the following questions should be asked:

• Who uses the brand?

• Who buys the brand, and why?

• Who decides which brand is to be bought?

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Probing and profiling of rural consumers is done by examining the following:

• Social classes and intentions• Consumer receptivity• Growing Brand Consciousness• Lifestyles• Buying roles• Children• Purchase needs• Community and the personal-value proposition• Value-for-money proposition

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2. Determining Communication Objectives

• Once the target market has been identified, the marketer and the communicator must decide on the desired audience response.

• The ultimate response is purchase and satisfaction.

• Communicators try to put ideas into the consumer’s mind, to change his attitude, and to get the consumer to act.

• The response-hierarchy AICDA model best summarizes this communication strategy.

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AICDA Model of Communication

. Awareness

Interest

Conviction

Desire

Action

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Thus a marketer may seek one or more of the following objectives:

• To bring about awareness among a certain percentage of the target audience.

• To improve knowledge to generate interest.

• To strengthen the liking or preference for the product.

• To persuade the consumer to buy the product.

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Message Design

Formulating the message require solving five problems:•Message content (what to say)•Message structure (how to say it logically)•Message format (how to say it symbolically)•Context association (in what context)•Message source( who should say it)

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Message content

Three types of appeal:• Rational appeals: appeal to the audience’s self

interest. Eg. Messages showing product quality (Ramco

Asbestos Sheets)• Emotional appeals: stir up positive or negative

emotions to motivate purchase• Moral appeals: appeal to the audience’s sense

of what is right and proper

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• E g: There should be a difference of at least three years between two children

• With rural consumers, functional elements have stronger influence than emotional appeal.

• E g: In the case of Lux, they look for pure and mild( functional elements) and not on glamour (Aspirational element)

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• Language: should be simple, direct, designed in the local language. It should consider traditional and cultural aspects

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Message Structure

• Simple , short and self explanatory• Pictorial presentation: Muscleman logo of

MRF Tyres, ‘Plus’ symbol of Clinic Plus shampoo

• Disadvantage is that duplicate products will cheat customers

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Message Format

• Pictures, attractive expressions, short stories, strong colors have more influence on rural consumers

• Eg: Minto fresh ad

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Context Association

• Marketers need to pay attention to the rural environment dress styles, food habits and cultural preferences

• It should draw a close identification with rural audiences.

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Message Source

Messages can be categorized in to three groups• Likeable source: Amir Khan in Thanda Matlab

Coca-cola ad.• Trustworthy source: word of mouth, includes

friends relatives, neighbors. Eg (Markfed pesticides and insecticides)• Expert source: Opinion leaders are according

to the product category

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• E g: Mistri( mason) for construction related products like cement

• Villagers from an upper class will not accept the views of Sarpanch belongs to lower caste

• Women Pradhans lack mass appeal or support• Opinion leaders are rural youth, postman,

school headmaster etc

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Communication Channels

Personal channels are divided into three• Advocate channels: Consist of company sales

people. Eg: Dalmia Consumer Care has Rural Sales Promoters to promote non tobacco bidi Vardaan

• Expert channels: Masons• Social channels : friends, family,neighbors

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• Non –personal channels carry messages without personal contact. Includes mass media, atmosphere, events, haats, jatras, melas, folk media and mandis.

• An atmosphere is a packaged environment that creates the buyer’s leanings towards the product purchase.

• ( Chokhi Dhani), Shakti day

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Promotional Tools

• Advertising• Sales Promotion: Three characteristics. Communication, Incentive, Invitation E g. Discount coupon on Purchase of one Tata

Shaktee GC sheet. Sampling: Lifebuoy Value proposition• Direct Marketing : Direct mailers are the most

used tool in rural.

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E g: Videocon After Sales service-1800 mechanics and engineers visit villages twice a week to assure after sales service.

• Personal Selling : Most cost effective tool. E g: Project Bharat- covered 2.2crore homes. In 2002 HLL launched a direct contact

programme Lifebuoy Swasthya Chetna-covered 15,000 villages in 10 states

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Factors in setting the Promotion Mix

• Pull strategy: Use sales force and trade promotion to push the product through the channels. Established players like HLL, Britannia rely on Pull strategy

• Push strategy: Regional players like anchor prefer Push strategy

• Product Life cycle stage : promotional tools vary at different stages of product life cycle

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Creating Advertisements for Rural Audiences

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• Understand The Mindset of Potential Customers.

• Tricky, Clever ,Gimmicky Advertising doesn’t work with Rural Audience.

• Combining Education with Entertainment is a good method of targeting Rural Audience.

• Quickies do not register well with Rural Audience.

• Employing ‘Slice Of Life ‘ Approach.78

Scheme of Rural Advertising Production

Last-Destination Adaptation: Rural dialect, Color, and Motif

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Conventional Media

• Radio• Television• Cinema• Print

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Non-Conventional Media

• Wall Painting• Folk Media- Folk Theatre Folk Songs Folk Dances• Magic Shows• Puppet shows• Video Van

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Melas

• Important feature of Indian rural life• To commemorate important events and to

honour a deity.• 25,000 melas held annually• They have a strong commercial aspect

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Rural Marketers Rule

• Target top 100 commercial melas

• Focus should be on melas that last longer

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Mandis

• Seen in states like Punjab and Haryana

• Large network of over 7600 mandis

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Personalized Media

• POP Dispalys

• Direct Mail

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Rural Media

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Communication Strategies

• Launch of new product

• Launch of new brand

• Communication for an existing brand

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