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Social entrepreneurship series: Product distribution in Rural India

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TiE Bangalore
TiE Bangalore

In this workshop, Vernie explored various product distribution models for Rural markets. He discussed ways of building a last mile distribution network, managing relationships & partnerships, training and cultivating the supply chain up to providing comprehensive after sales service. While presenting the roadblocks and challenges that can (and have) upset this kind of distribution, he pointed out the ‘low hanging fruits’ that can be leveraged. He discussed alternative models through market segmentation and targeted distribution and also highlighted the role of the end consumer in the distribution chain. Presentation by Vernie Sannoo Managing Director Barefoot Power* India

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Social entrepreneurship series: Product distribution in Rural India A Tie Initiative 1
• Status & opportunities • Rural mindsets • Rural challenges & opportunities • Distribution structure • Logistics & supply chain • Service strategy • Market communication Contents 2
Low Income influenced by seasonal fluctuations - Low literacy - Price Sensitive - Influenced by Traditions - Quality Conscious - Low risk taking ability - High Brand Loyalty - Moderate aspiration levels - Resistance to change - Diverse customs, social structures and languages - If they understand the value of product or service they will go for it. Characteristics of Rural Indian Market
Rural consumers do not make brand discrimination They are highly loyal to the brand that satisfies them Rural market is growing faster than the urban market The literacy level in rural India going up according to NCAER Survey Rural India constitutes to 56% of national income About 62% of villages have a population below 1000 and only 3% of the villages above 5000, most villages with less than 500 people do not have any shops. Complex Distribution & logistics management. In rural areas banking and credit facilities are not extensive. I t is estimated that for every16 villages there is one bank. Low Affordability in rural areas. In rural areas almost 100% of villages Consists of Radio ,TV is 87%. It can also seen that about one-fifth of pharma sales occurs in Rural India. In respect of high priced durables, about one fourth of the television sales happens in rural areas. The rural population is three time that of Urban Population The share of unbranded products is higher in necessity items, mainly food items. Rural demand is more seasonal compared to urban demand. The pre dominance of agriculture in the income pattern is one main reason for this. Besides being seasonal, rural demand is somewhat irregular as well. Rural India accounts for 64% of total expenditure Opportunities Threats Rural Economy is estimated to be Rs. 18 Trillion by 2012-13 Share of rural India is 56% and is expected to grow to 60% in the near future 627,000 villages 3,768 town INDIA Strengths Weaknesses Indian Rural - SWOT
Less than 200 92,541 15.6 200 -500 127,541 21.4 501-1,000 144,817 24.4 1,001-2,000 129,662 21.9 2,001-5,000 80,313 13.5 5,001 -10,000 18,758 3.2 Figures in % POPULATION No of Villages % of Total Villages 17% of villages account for 50% of rural population and 60% of rural wealth Rural Landscape Distribution of Villages
DevelopEasyProductFinanceoptions % of profit or turnoverFinancial Goal Super distributor Segment Service Differentiation New Product Development Retail Distribution Business Drivers Distributors, dealers, DSO, VLE, Consolidate and grow: • Depth before breadth • Closer to target customers • Village-based reach and seed approach Improve productivity: Model is No of partners x productivity= sales • Robust sales management • Field working norms & processes Build service into a true differentiator: • Service within customers’ arms reach • Wide-spread, low-cost, self- sustaining business model • Integrated distributor- based sales + service model • Outsourced model for institutional • Option of product Swap in case of defect. Philosophy: • Low-cost-to- service. • Quality , sturdy & long lasting. Improve speed to market: • Core platforms to address multiple applications Offer choice to drive relevance: • Segment-wise products Core Approach Measures of Success Strategic Approach Distribution 6 People Gain foothold : • Invest in building relationships with Strategic Partners e.g. Microfinance Institutions, NGO / CSC /post offices, / DCCB/ Rural distribution co’s / CSD/ Pertol pums & cooking gas distribution outlets. • Build capability: • Service capabilities Introduce products based on customer needs Create performance- orientation: • Closer to market placement. • Local language & culture knowledge. • Working long hrs. • Adj to Inedequate boarding & lodging. • KRA setting and performance measurement • Capability building/ Training • Rewards & recognition (R&R) Build a transparent culture: • Common vision and shared goals • Transparent communications Create and leverage distribution and service reach as key customer value creators No of outlets Village coverage Suitable products Retention Productivity Productivity Reference
7 State Distributor positioning Dealer point Micro-Agents /Distributor Sales Officers positioning Service Point Service Point State Sales Head Territory sales Manager Distributor/Stockiest Distributor Sales Officers Micro- Agents Dealer Territory sales manager Territory sales manager Territory sales manager Distribution Structure Feeder Market Blocks Districts Village
Logistics & Supply chain 8 Locate the warehouse for cost effective & timely distribution - Large shipments by road cost less. - Closer to market stock points for faster deliveries & minimized the Inter state taxes . - Product packing should avoid breakages during transportation. - Comfortable packing size. - Local language product user manuals to be inserted. - Product demand forecast to be planned effectively. - Spares availability critical for service.
Carry in & Stand by unit Service Model All distributors & Partners would be involved in providing after sales service. Customer will walk in to the point of sale. After initial checks: If the need arise. The person at Point of sales wouldbe empowered to handover the stand by unit to customer. Customer Walk- in customer at Point of Sale Distributor Customer satisfied Distributor Customer State customer relations : Head Office customer relations : Register service call: - Issue service call number- guide customer to nearest point of service Company Advisor Distributor sales person Micro- franchisee SHG members BFPA BFPA BFPA BFPA DSO DSO DSO DSO MFE MFE MFE MFE Tech. Tech. Tech. Tech. Customer call attended & closed Walk In & given a stand by unitCall in customer
- Above the line advertising only if product are available in wide spread market. - Seasonal variations to be taken in account. Marketing & communication Touch points. - Haats & Melas Over 47,000 haats and 25,000 melas are held annually. - Wall Paintings - Distributor , dealer , Village level entrepreneur branding. - Bus displays. - Van campaigns - TV, Radio, SMS, Cinema campaigns - Temple site demos. - School demos - Targeting Opinion leaders - Direct call in facility for product / distributor enquiries. - Special campaigns during harvest time, festivals etc. - In case of demo based sales model, demo kits, flip folders, leaflets, posters, sales camps, audio visual aids. - Village level entrepreneur activation tools like time to time incentives, feeling of belongingness, recognition platforms, distributors certificates, distributors boards, dealer board etc Local language to be used in communication. Marketing communication
Social entrepreneurship series: Product distribution in Rural India
Rural India India is a population of over 1210.2 million with 0.83 billion living in Rural India while the rest .37 billion in the Urban India as per Indian Census 2011 153 million household are in Rural India and the rest 69 million in urban India. Rural India constitutes to 56% of total national income and accounts From 64% of total expenditure ( $67.57 billion) , rural economy is estimated to reach Rs.18 trillion by current year 2012-2013. Rural Eco-system: • 82 Regional Rural banks having 85,300 branches • Common Service Centers : 120,000 • Number of Rural Post Offices: 139,700 • 38 million active Internet users in Rural India • 298 million mobile subscribers in Rural India as compared to 256 million user s in Urban India. • 17 million retired soldiers mostly from Rural India. • 3 lakh co-operative societies like agriculture co-operatives, milk co-operatives. • Rural consumers spends averg. Rs. 4000/- per year on non-consumer items. • Distribution plan will depend on Product & Services we offer. Consumable or Durables. My experience is from Durable Product sale background. Deep Market Reach Supportive Eco-system Leverage strategy

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Social entrepreneurship series: Product distribution in Rural India

  • 1. Social entrepreneurship series: Product distribution in Rural India A Tie Initiative 1
  • 2. • Status & opportunities • Rural mindsets • Rural challenges & opportunities • Distribution structure • Logistics & supply chain • Service strategy • Market communication Contents 2
  • 3. Low Income influenced by seasonal fluctuations - Low literacy - Price Sensitive - Influenced by Traditions - Quality Conscious - Low risk taking ability - High Brand Loyalty - Moderate aspiration levels - Resistance to change - Diverse customs, social structures and languages - If they understand the value of product or service they will go for it. Characteristics of Rural Indian Market
  • 4. Rural consumers do not make brand discrimination They are highly loyal to the brand that satisfies them Rural market is growing faster than the urban market The literacy level in rural India going up according to NCAER Survey Rural India constitutes to 56% of national income About 62% of villages have a population below 1000 and only 3% of the villages above 5000, most villages with less than 500 people do not have any shops. Complex Distribution & logistics management. In rural areas banking and credit facilities are not extensive. I t is estimated that for every16 villages there is one bank. Low Affordability in rural areas. In rural areas almost 100% of villages Consists of Radio ,TV is 87%. It can also seen that about one-fifth of pharma sales occurs in Rural India. In respect of high priced durables, about one fourth of the television sales happens in rural areas. The rural population is three time that of Urban Population The share of unbranded products is higher in necessity items, mainly food items. Rural demand is more seasonal compared to urban demand. The pre dominance of agriculture in the income pattern is one main reason for this. Besides being seasonal, rural demand is somewhat irregular as well. Rural India accounts for 64% of total expenditure Opportunities Threats Rural Economy is estimated to be Rs. 18 Trillion by 2012-13 Share of rural India is 56% and is expected to grow to 60% in the near future 627,000 villages 3,768 town INDIA Strengths Weaknesses Indian Rural - SWOT
  • 5. Less than 200 92,541 15.6 200 -500 127,541 21.4 501-1,000 144,817 24.4 1,001-2,000 129,662 21.9 2,001-5,000 80,313 13.5 5,001 -10,000 18,758 3.2 Figures in % POPULATION No of Villages % of Total Villages 17% of villages account for 50% of rural population and 60% of rural wealth Rural Landscape Distribution of Villages
  • 6. DevelopEasyProductFinanceoptions % of profit or turnoverFinancial Goal Super distributor Segment Service Differentiation New Product Development Retail Distribution Business Drivers Distributors, dealers, DSO, VLE, Consolidate and grow: • Depth before breadth • Closer to target customers • Village-based reach and seed approach Improve productivity: Model is No of partners x productivity= sales • Robust sales management • Field working norms & processes Build service into a true differentiator: • Service within customers’ arms reach • Wide-spread, low-cost, self- sustaining business model • Integrated distributor- based sales + service model • Outsourced model for institutional • Option of product Swap in case of defect. Philosophy: • Low-cost-to- service. • Quality , sturdy & long lasting. Improve speed to market: • Core platforms to address multiple applications Offer choice to drive relevance: • Segment-wise products Core Approach Measures of Success Strategic Approach Distribution 6 People Gain foothold : • Invest in building relationships with Strategic Partners e.g. Microfinance Institutions, NGO / CSC /post offices, / DCCB/ Rural distribution co’s / CSD/ Pertol pums & cooking gas distribution outlets. • Build capability: • Service capabilities Introduce products based on customer needs Create performance- orientation: • Closer to market placement. • Local language & culture knowledge. • Working long hrs. • Adj to Inedequate boarding & lodging. • KRA setting and performance measurement • Capability building/ Training • Rewards & recognition (R&R) Build a transparent culture: • Common vision and shared goals • Transparent communications Create and leverage distribution and service reach as key customer value creators No of outlets Village coverage Suitable products Retention Productivity Productivity Reference
  • 7. 7 State Distributor positioning Dealer point Micro-Agents /Distributor Sales Officers positioning Service Point Service Point State Sales Head Territory sales Manager Distributor/Stockiest Distributor Sales Officers Micro- Agents Dealer Territory sales manager Territory sales manager Territory sales manager Distribution Structure Feeder Market Blocks Districts Village
  • 8. Logistics & Supply chain 8 Locate the warehouse for cost effective & timely distribution - Large shipments by road cost less. - Closer to market stock points for faster deliveries & minimized the Inter state taxes . - Product packing should avoid breakages during transportation. - Comfortable packing size. - Local language product user manuals to be inserted. - Product demand forecast to be planned effectively. - Spares availability critical for service.
  • 9. Carry in & Stand by unit Service Model All distributors & Partners would be involved in providing after sales service. Customer will walk in to the point of sale. After initial checks: If the need arise. The person at Point of sales wouldbe empowered to handover the stand by unit to customer. Customer Walk- in customer at Point of Sale Distributor Customer satisfied Distributor Customer State customer relations : Head Office customer relations : Register service call: - Issue service call number- guide customer to nearest point of service Company Advisor Distributor sales person Micro- franchisee SHG members BFPA BFPA BFPA BFPA DSO DSO DSO DSO MFE MFE MFE MFE Tech. Tech. Tech. Tech. Customer call attended & closed Walk In & given a stand by unitCall in customer
  • 10. - Above the line advertising only if product are available in wide spread market. - Seasonal variations to be taken in account. Marketing & communication Touch points. - Haats & Melas Over 47,000 haats and 25,000 melas are held annually. - Wall Paintings - Distributor , dealer , Village level entrepreneur branding. - Bus displays. - Van campaigns - TV, Radio, SMS, Cinema campaigns - Temple site demos. - School demos - Targeting Opinion leaders - Direct call in facility for product / distributor enquiries. - Special campaigns during harvest time, festivals etc. - In case of demo based sales model, demo kits, flip folders, leaflets, posters, sales camps, audio visual aids. - Village level entrepreneur activation tools like time to time incentives, feeling of belongingness, recognition platforms, distributors certificates, distributors boards, dealer board etc Local language to be used in communication. Marketing communication
  • 12. Rural India India is a population of over 1210.2 million with 0.83 billion living in Rural India while the rest .37 billion in the Urban India as per Indian Census 2011 153 million household are in Rural India and the rest 69 million in urban India. Rural India constitutes to 56% of total national income and accounts From 64% of total expenditure ( $67.57 billion) , rural economy is estimated to reach Rs.18 trillion by current year 2012-2013. Rural Eco-system: • 82 Regional Rural banks having 85,300 branches • Common Service Centers : 120,000 • Number of Rural Post Offices: 139,700 • 38 million active Internet users in Rural India • 298 million mobile subscribers in Rural India as compared to 256 million user s in Urban India. • 17 million retired soldiers mostly from Rural India. • 3 lakh co-operative societies like agriculture co-operatives, milk co-operatives. • Rural consumers spends averg. Rs. 4000/- per year on non-consumer items. • Distribution plan will depend on Product & Services we offer. Consumable or Durables. My experience is from Durable Product sale background. Deep Market Reach Supportive Eco-system Leverage strategy