Marketing Channel Strategies in Rural India: Lessons From d.

light
Design

By Benjamin Neuwirth, Kellogg School of

Agenda

 Background on d.light Design

 Framework for Marketing Channel Success in Rural India

 My Internship: Enabling a New Marketing Channel

Base of the Pyramid Markets
If we stop thinking of the poor as
victims or as a burden and start
recognizing them as resilient and
creative entrepreneurs and value-
conscious consumers, a whole
new world of opportunity will
open up.
- C.K. Prahalad 2006
Affordable Products to Alleviate Poverty

Affordable devices like treadle

pumps and drop irrigation combined
with a last mile supply chain has
helped 20 Million people move out
of poverty as a result of IDE’s work
alone.
- Paul Polak 2011
d.Light Design’s Founding

Product Solution
Inspiration
 Many people in rural
Africa and India do not
have access to grid
electricity

Kerosene is expensive,
dangerous, unhealthy,  Affordable, bright lights for rural
and provides weak light consumers to promote health and
livliehood
 Founder’s burned hand
in rural Africa  Founded out of the Stanford
d.school by Sam Goldman and Ned
Tozun
d.Light Products

S250
• Powerful spotlight
• Mobile phone charger
• $35 USD

S10
• Great performance for cost
• Perfect to light a room at night
• $15 USD

S1
• Ultra-portable and ultra-affordable
• Designed to appeal to children
• $9 USD
 d.Light Products for Health and Livelihood
Benefits of d.light products for rural Indian
consumers
• Safer cooking
• More effective studying
• Increased time for business activities
Central Question for d.light

How can a company attempting to enter a rural region in

an emerging market with a new product or service and an
unknown brand create a sustainable business?
Agenda

 Background on d.light Design

 Framework for Marketing Channel Success in Rural India

 My Internship: Enabling a New Marketing Channel

Framework for Marketing Channel Strategy in Rural
India
Delivering Products

Distribution Network Design

Maintaining Customers
Distribution Network Logistics

After-Sales Service

Customer Product Purchase

Activating Customers

Affordability Education

Brand Trust
Framework for Marketing Channel Strategy in Rural
India
Delivering Products

Distribution Network Design

Maintaining Customers
Distribution Network Logistics

After-Sales Service

Customer Product Purchase

Activating Customers

Affordability Education

Brand Trust
Distribution Network Design

Challenges Solutions
• Low Density of Demand Leads • Aggregate Consumer Demand
to Slow Inventory Turnover to a Point Required by the
Product
Distribution Network Design: Example

Aggregating Consumer Demand

Consumer Durables: Aggregate demand in cities FMCG Products: Aggregate

and hypermarts demand in villages
Distribution Network Design
Challenges
• Low Density of Demand Leads
to Slow Inventory Turnover
• Poor Transportation
Infrastructure Raises
Transportation Costs
Solutions
• Aggregate Consumer Demand
to a Point Required by the
Product
• Use Hub-and-Spoke
Transportation and Rural
Entrepreneurs
Distribution Network Design: Example

Hub-and-Spoke Model

Coca-Cola

Hub

Independent Entrepreneurs

Autorickshaw Delivering Coca-Cola

in an Indian Village

Small
Distribution Network Design
Challenges
• Low Density of Demand Leads
to Slow Inventory Turnover
• Poor Transportation
Infrastructure Raises
Transportation Costs
• Consumer Expectations for
Availability and Variety
Solutions
• Aggregate Consumer Demand
to a Point Required by the
Product
• Use Hub-and-Spoke
Transportation and Rural
Entrepreneurs
• Gain Insight Into Consumers
to Meet Their Product
Delivery Expectations
Distribution Network Logistics

Challenges
• High CapEx/OpEx required to set up a distribution network in
rural India
• Fragmented distribution and logistics
industries
• Potentially low chance of legal recourse if partner contracts are
violated

Solution: Distribution Network Piggybacking

• Corporate Partnerships
Distribution Network Logistics: Example

Corporate Partnerships

Both Sara Lee and Proctor & Gamble entered into joint ventures
with local Indian companies to more effectively distribute their
products.
Distribution Network Logistics

Challenges
• High CapEx/OpEx required to set up a distribution network in
rural India
• Fragmented distribution and logistics
industries
• Potentially low chance of legal recourse if partner contracts are
violated

Solution: Distribution Network Piggybacking

• Corporate Partnerships

• Local Non-Profit
Organizations
Distribution Network Logistics: Example

Local Non-Profit Organizations

Hindustan Unilever’s Project Shakti
• Unilever uses womens’ Self Help Groups to reach small villages
deep in rural India
• The women buy the products with cash from Unilever, and then
distribute them in nearby villages
• Project Shakti currently employs over 40,000 women
entrepreneurs

A women entrepreneur delivers Unilever products in rural India

Information and picture sourced from MART internal presentation -
Distribution Network Logistics

Challenges
• High CapEx/OpEx required to set up a distribution network in
rural India
• Fragmented distribution and logistics
industries
• Potentially low chance of legal recourse if partner contracts are
violated

Solution: Distribution Network Piggybacking

• Corporate Partnerships

• Local Non-Profit
Organizations
• Business-to-Business
Sales
Distribution Network Logistics: Example

Business-to-Business Sales
Distributio
n

Carrier
Rider
Company Sales Company

Pros Cons
• Bulk Sales to carrier company • Low visibility into end customer
• Manage fewer relationships sales and product reception
Agenda

 Background on d.light Design

 Framework for Marketing Channel Success in Rural India

 My Internship: Enabling a New Distribution Channel

Area of Operation: Uttar Pradesh

Location of Uttar Pradesh in India

Facts about Uttar Pradesh:

• Population of 200 Million people

• Half the size of California

• Annual per-capita GDP of $294

USD per year

• Most residents do not have access

to grid electricity
d.light’s New Distribution Partner

2009-2010:
• d.light set up a custom distribution network in Uttar Pradesh to supply
solar lamps into small retail stores in villages.
• The network failed due to high distribution costs and low consumer
demand.

2011
• d.light forms a piggybacking relationship with Bharat Petroleum
(BPCL), the second largest oil-product distributor in India, to distribute
solar lamps in Uttar Pradesh.

My Internship
• Analyze the BPCL distribution network
• Recommend strategies for successfully selling d.light products through
the BPCL network
 Analysis of BPCL Distribution Network

BPCL has 281 cooking gas retail stores in Uttar Pradesh.

Each stores serves thousands of consumers, effectively
aggregating demand for d.light.
BPCL also sells FMCG and consumer goods in its retail
stores in order to have other non-oil revenue stream.
D.light products will be sold as part of this program.
Each store is owned by an independent franchisee. While
the owners felt good about d.light, they were not highly
motivated to sell d.light products.
50% of BPCL customers come to the retail store to pick
up their cooking gas. While at the store they may buy
other products or schedule their next cooking gas pick-
up.
The other 50% of BPCL customers have their cooking
gas delivered to them. The delivery men are a true last-
mile link to rural consumers in India. The delivery men
are often poorly educated and have little or no sales
experience.
Analysis and Recommendations
Analysis of the BPCL Distribution Channel
Pros
• Consolidates demand into central retail points
• Established and successful warehousing and logistics network
• BPCL is a very trusted brand with Indian consumers
Cons
• Retail store owners not motivated to sell d.light products
• BPCL end customers may not need d.light products

Recommendations
• Incentivize BPCL management and retail store owners to sell d.light
products
• Piggyback off of the BPCL brand to establish the d.light brand
• Educate consumers in Uttar Pradesh who use kerosene for light about solar
lamps, and drive sales at BPCL retail stores
• Establish d.light distribution centers in Uttar Pradesh to provide for better
product restocking time