Product Strategy

1
 The Product Concept

• The first and central decision in the marketing mix

• Confirms acceptability

• Points for taking products to rural markets

• Appropriate for the rural environment

 Simple to operate
 Visually identifiable
 Affordable

• Products include physical goods, services, places, ideas,

persons, organizations, etc.
The Levels of a Product

•Each level adds value

• Being in touch to mobile phones to

voice clarity, longer battery life

• Augmented product would include

in-built radio, camera, flashlight

• Potential product would be mobile

with battery which is charged with
solar energy\
Five Product Levels
• How to ensure product
acceptability ?
Rural Product Classification

Fast-
moving Consumer
Consumer Durables
Goods

Agricultural
Services
Goods
 Rural Products
Services
• Major services – Healthcare,
telecommunication,
information communication
technology, banking insurance
and education
• Major players – LIC, SBI,
BSNL, Airtel, Reliance
Communications, ITC’s e-
Choupal and ICICI
Agricultural
goods
• Inputs – Seeds,
fertilizers, pesticides and
insecticides
• Implements – Tractors,
tillers, threshers,
harvesters, pump sets
• Animal feeds, dairy,
poultry and fishery
equipment
 Individual Product Decisions

Design and
Quality Features
style
• Rural people • Based on • Take into
set their own perceived account
emotional value add and environmental
specifications cost addition conditions,
for judgement functionality
on quality and ease of
operation
Product Line and Mix Decisions

Product
Product Mix
Line
• A group of closely • Set of all product lines
related products priced and items offered by a
within a certain range company
• May consist of different • Generally simple in rural
brands or a single family due to limitations on
brand investment and
dominance of retailer
Product Line and Mix Decisions

Product Mix and Product Line Length for Hindustan Unilever Limited
Rural Product Design strategies

1. Participatory product designing ….. Using conjoint analysis

(Dufhues, T., Heidhues, F., & Buchenrieder, G. (2004). Participatory product design by using Conjoint Analysis in the rural
financial market of Northern Vietnam. Asian Economic Journal, 18(1), 81-114.)

2. Value based product designing

(Hirmer, S., & Cruickshank, H. (2014). The user-value of rural electrification: An analysis and adoption of
existing models and theories. Renewable and Sustainable Energy Reviews, 34, 145-154.)
Product value theories

1. Value in exchange .
(2) Value in use
(3) Value in experience .
(4) Value in sign .
Product use value types
Hierarchical structure of functional value
 Product Lifecycle Strategies
•Four Stages
 Introductory

 Growth

 Maturity

 Decline

•Lifecycle in rural longer than urban

•Rural markets can be categorized as:

Developed

Developing

Under-developed
•Strategies for penetration:

 Re-engineering of products and / or

pack sizes
 Consumer education
 Adoption of alternative channels
 Product Branding in Rural
Markets
• Rural consumers’ brand association with colours, numbers
and visuals

• Retailers play significant role in brand promotion

• First mover brands have become generic brands causing

problems for followers
 Product Branding in Rural
Markets
Building brands in rural markets
• Developing a brand name
• Creating a brand identity
• Building a brand image

Brand loyalty versus brand stickiness

• Rural consumers prefer tried and tested brands
• They are more “brand sticky” rather than brand loyal
• Companies need to work beyond the tipping point
• “Word of Mouth” very important in rural
• “Brand stickiness” higher amongst older people
• Brands need to cater to local tastes to increase “stickiness”
 Fake Brands

•Rampant in rural due to low penetration and poor availability

of branded products

•Fake market can be categorized as:

√Look-alikes
√Spell-alikes
√Duplicates

•Strategies to counter fakes

√Upgraded packaging
√Use of sales force
√Raids and legal recourse (with resultant problems)
√Deeper penetration (the long-term solution)
 Packaging for Rural Markets

Special focus because of:

• Poor road conditions
• Difficulties of safe storage
• Poor facilities such as erratic power supply

A product for rural market should:

• Have a longer shelf life than urban
• Be able to withstand extreme weather conditions
• Be able to withstand problems of dusty roads
• Have alternate storage arrangements
 Packaging for Rural Markets

Packaging Pack size and Packaging

material convenience aesthetics
• Shift to plastic • Small unit packs • Rural consumers
which is and sachets appreciate
waterproof, addresses the brighter colours
sunlight issue of • Distinct
resistant and affordability lettering, use of
light • Sachet phase local languages
followed by on the pack
coinage pack • Use of images
and see through or symbols that
packs convey product
benefits
 Product Warranty and After-sales
Service

• Rural consumers attach great value to warranty

• Service centres not easily accessible to rural consumers

• Organization of service camps essential for bridging this

gap

• Need to extend service to smaller towns

25
New Product Development in Rural
Markets
Idea generation
Understand rural environment through rural immersion programmes

Concept testing
Needs to be done in different regions due to heterogeneity

Product development
Reverse innovation or frugal engineering

Market testing
Costs insignificant compared to total project costs
 Pricing in Rural India

• Affordability a major issue in rural India

• Growing purchasing power raising aspiration levels

• Premium brands making inroads into rural markets

• How do companies price?

 Rural consumers look at value for money

• Consumer psychology and pricing

 Good quality at cheap price
 Fancy features not appreciated
 Compare prices to a reference price
Setting the Price for Rural Products
and Services

Internal External
Factors Factors
• Cost • Price sensitivity
• Pricing objectives of customers
of the company • Channel costs
• Competition
• Environment
 Internal Factors

Cost

• Fixed and variable

Cost of marketing mix in rural markets

• Promotional costs which can be brought down by use of

collective platforms like haats, melas and mandis.

• Distribution costs due to vastness of market and large

number of intermediaries. ITC’s e-Choupal
 Internal Factors
Pricing objectives of the company
• Profit maximization in the long run through penetrative
pricing.

• Minimum returns on sales turnover basically to recover

costs.

• Deeper penetration of the market for faster market

expansion.

• Keeping up with the competition especially regional and local

• Increasing sales volume and market share through

investments in the marketing mix.
 External Factors
• Price sensitivity of customers who want “value for money”
and are reluctant to try new products

• Channel costs due to more levels and need for credit at

village level

• Competition and the “price standard”

• Environment
 Preference to small scale sector
 Vagaries of weather
 Innovative technologies for cutting costs
Price Setting Strategies

Market Product
entry mix pricing
strategies strategies

Rural-
Price
specific
adjustment
pricing
strategies
strategies
 Market Entry Strategies

Penetration
Skimming Pricing
Pricing
• Create the image • To gain wide
of a superior market acceptance
product • Reduction in
production and
distribution costs
• Suitable for
products where
demand is elastic
 Product Mix Pricing Strategies
• Optional product pricing
Pricing of optional or accessory products along with the
main product.

• Captive product pricing

Setting of price for products that must be used along with
the main product.

• Product bundle pricing

Offering a bundle of products at reduced prices

• Price adjustment strategies

• Rural-specific pricing strategies

 Price Adjustment Strategies

Discounts and allowance

•Cash and quantity
pricing
Freebies along with the
•Problem of lack of awareness of such schemes in rural
purchase of a product.

Special event pricing •During harvest, wedding season or during festivals

Economy pricing •No frills low price

Value pricing •During economic recession

Psychological pricing

Discriminatory pricing
 Discriminatory Pricing

Customer Product form

Location pricing
segment pricing pricing
• Different sets • Different • At nearby
of customers versions of towns
charged products • At haats
different prices charged at • By village
different rates retailer
Rural-specific Pricing Strategies
• Low price points through smaller pack sizes

 Encourages trial

 Maintain freshness

 Variety options

• Low cost packaging which is durable and aesthetic

• Refillable/reusable packs

• Highlight value not price

• Coinage pricing for convenience of consumers and retailers.

• Product-sharing services: HPCL Rasoi Ghar