Infinity Retail plans Expansion
The Tata owned Croma Stores plan to have over 100 outlets by 2011. Expansion will be mainly in tier 2 and tier 3 towns. There are currently 32 Croma stores spread over Delhi, Mumbai, Pune, Hydrabad and other cities, The company plans to invest Rs 50 crores on its expansion plans. On an average , the company invests Rs 1.80 crores in a small format store and Rs 3.00 crores on a large format store. This is a 100% subsidiary of Tata Sons. Croma stores sell electronic goods and have over 200 brands.
Thursday, June 25, 2009
Friday, June 19, 2009
Rural India Prospects
This informative article on rural India appeared in Knowledge@wharton ( Link given below). This is of interest to everyone involved in rural India
Why Companies See Bright Prospects in Rural India
Published: June 18, 2009 in India Knowledge@Wharton
In late May, when India's GDP numbers were released, many were happily surprised. In the fourth quarter of the fiscal year (January-March 2009), the economy grew 5.8% against expectations of less than 5%. For the year, growth was 6.7%, less than the 9% recorded in 2007-2008, but still very respectable during a global downturn. Multinational banks and brokerage houses rushed back to their spreadsheets to raise their growth forecasts for 2009-2010.
But why were the estimates so pessimistic in the first place? A possible explanation is that most analysts work in cities, and their views are colored by what is happening around them and in the corporate world. That picture has been bleak: During the last quarter of 2008-2009, manufacturing shrank 1.4%. In contrast, agriculture grew 2.7%. The feel-good factor in urban India is returning only now with a new, stable government and a sharp jump in the Bombay Stock Exchange Sensitive Index (Sensex).
In the villages and small towns, it has been a very different picture. "The rural market is insulated from the global meltdown," says Harish Bijoor, CEO of brand and business strategy consultants Harish Bijoor Consults. "The rural part of our economy has been untouched by credit cards and mortgages as known in the West."
"The slowdown experienced by India on account of the IT (information technology), real estate, financial services and automobile sectors was an urban phenomenon," says Ajay Gupta, founder and CEO of ruralnaukri.com, which focuses on jobs in the rural sector. (See "ruralnaukri.com's Ajay Gupta: 'Rural Jobs Can Provide Momentum to the Wheel of the Economy'"). "However, the negative impact of all this on urban India has been more than offset by encouraging performance in rural areas. The rural economy has provided a cushion. Overall sentiment in the country was different from other parts of the world where each household had at least one person with a pink slip."
"Several factors have led to an increase in rural purchasing power," says Pankaj Gupta, practice head, consumer & retail, Tata Strategic Management Group. "The increase in procurement prices [the government sets the minimum support price -- MSP -- for many farm products] has contributed to a rise in rural demand. A series of good harvests on the back of several good monsoons boosted rural employment in agricultural and allied activities. Government schemes like NREGS [National Rural Employment Guarantee Scheme, which guarantees 100 days of employment to one member of every rural household] reduced rural underemployment and raised wages. Also, farmers benefited from loan waivers [introduced in the last Union Budget]. The increase in rural purchasing power is reflected in rural growth across a number of categories. For example, in the financial year 2009 [April-March], FMCG [fast moving consumer goods] rural volume growth is estimated to be 5% to 12% higher than urban growth across a number of categories."
A Short-lived Renaissance?
Some academics agree with these upbeat views of a rural resurgence. "Policy measures like the waiver of agricultural loans to the tune of US$13.9 billion and the NREGS have really put cheer into the rural economy," says Devi Singh, director of the Indian institute of Management Lucknow (IIML). "The Bharat Nirman program with an outlay of US$34.84 billion for improving rural infrastructure is another step that has helped the rural economy. To some extent, the growth of organized retail can also be held responsible for the rural economy's growth, as this has ensured that farmers get a better price for agricultural produce. The MSP set by the government has been rising further, fuelling rural growth by putting more money into the hands of the rural population."
Singh adds a caveat, however. "While the statement that the Indian economy has been saved from the slowdown due to rural growth is true to a certain extent, this is not the only factor," he says. "India's growth has been fuelled more by domestic demand than exports. Also Indian spending and saving habits differ from other parts of the world. Indians by their very nature always save for their future and this holds them in good stead during times of crisis. The Indian buyer is more finance conscious than his global peer. The Indian banking system, due to the so-called non-reforms, is actually more resilient and the level of delinquencies is far lower than in other parts of the world."
Some observers are skeptical about the durability of rural demand. "There is a worrying groundswell of optimism that rural consumers will come to the rescue of an Indian economy which is in the midst of a sharp slowdown. This optimism may be misplaced," suggest consumer behavior expert Rama Bijapurkar and Rajesh Shukla, a senior fellow at the National Council for Applied Economic Research. Writing in business daily Mint, they continue: "Hearing phrases such as 'rural renaissance' or 'rural India to the rescue' makes us nervous. Such talk bears overtones of the 'Great Indian Middle Class' story of the 1990s, where we declared victory at least a decade before we should have." Their question: How sustainable, stable and volatility-free is the growth in income and consumption?
Bijapurkar and Shukla note that "periodically, India has seen a consumption spurt because of a one-time burst of a combination of events. This recent spurt seems no different. Over the past four years, the monsoon has been good; the support prices for crops have grown at 10% to 15% CAGR [compounded annual growth rate] in 2005-2008 compared with 2.5% to 4% in 2002-2005. In addition to a healthy flow of farm credit, there has been a one-time loan write-off of US$13.9 billion as well as a sizeable cash outlay from the NREGS. This doesn't show intrinsic growth in rural India: This growth is, instead, owing to a combination of acts of God and acts of government. What we must never do is make the same mistake with rural India that Western multinationals make with India as a whole -- assume that it will evolve the same way with a 10-year lag. The rural Indian market and consumer call for sophisticated new marketing strategies and paradigms, not a transplant of old ideas."
What Rural Means
Even as this debate continues, the term "rural" is being re-defined. "'Rural' is difficult to define any more," says Bijoor of Bijoor Consults. "Typically, from an Indian census point of view, rural has been defined with a 'deprivation' orientation, rural being a landmass without access to continuous electricity, water, the stock market. There has been a correction in this view, however. Marketers today define rural as people living a different lifestyle as opposed to that of those who have settled in the bigger cities and towns. Rural is defined as pastoral in nature and as a mass of people who relate their income closely to the lands they till or use to raise their cattle and livestock. I, personally, define rural differently. I believe rural is a mindset. Those who possess it are rural and those who do not are urban. To that extent, in Bangalore city, just off the old airport road, are a whole set of people who live by farming on their lands. If you visit their homes, their lifestyles are totally rural. Similarly, there are people who live in villages, who have access to the best of it all. These are urban folk. Rural is not a geography; it is a mindset."
"Definitions for rural India abound while the most convenient remains, 'anything that is not urban'," says Gupta of ruralnaukri.com. Singh of IIML adds: "Rural India comprises all places that are not urban." This definition by exclusion for what is the much larger part of the country has its roots in the government's own approach. "The Census of India defines urban India," says Gupta of TSMG. "Urban India constitutes places with a population of more than 5,000, a population density above 400 per square kilometer, all statutory towns, that is, all places with a municipal corporation, municipal board, cantonment board, notified area council, etc. and with 75% of the male working population engaged in non-agricultural employment. All non-urban is rural."
Such definitions leave marketers cold. "The traditional definition of rural may be of little use to marketers in terms of providing consumer insights," says S. Ramesh Kumar, professor of marketing at the Indian Institute of Management, Bangalore (IIMB). "Given the diversity of culture and lifestyle/aspirational changes that are taking place across non-metro consumers, the non-metro areas need to be segmented into tiers of varying urban orientation using psychographic and lifestyle analysis along with demographics. The digital 1 or 0 type of urban and rural definitions is unlikely to yield consumer behavior nuances. For example, district headquarters [towns] in Tamil Nadu are likely to be significantly different from those in Karnataka or Maharashtra."
Many others agree that census-style definitions are no longer enough. "My understanding of rural India is a less developed countryside where the infrastructure is primitive, houses are of mud or brick but rarely painted well, the primary source of livelihood is agriculture, employment opportunities in the organized sector are negligible, eating choices are restricted to home-cooked, simple food, schools are far away, health facilities are rudimentary and -- importantly -- the youth, while energetic and ambitious, are to be seen playing cards the whole day," says Gupta of ruralnaukri.com.
"We recognize rural India by certain characteristics," says B.N. Garudachar, general manager, corporate communication and investor relations at Voltas, a Tata group company in air-conditioning and engineering services. "These are: low population numbers, low median income, poor infrastructure [roads, electricity, communications], and agrarian rather than industrial activity. Such rural areas are within the sphere of influence of neighboring cities and metros. This influence determines their aspiration levels and their viability as markets."
Massive Market
View it as you may, few people dispute that the rural market is massive. According to Singh, 12.2% of the world's consumers live in India. "Rural households form 72% of the total households. This puts the rural market at roughly 720 million customers." Gupta of TSMG extrapolates the Census 2001 numbers and comes up with an estimate of 790 million. "Total income in rural India (about 43% of total national income) is expected to increase from around US$220 billion in 2004-2005 to US$425 billion by 2010-2011, a CAGR of 12%," he says.
Bijoor explains that this is entirely disposable income unlike what it would be in urban India. "If a farmer in rural Holenarsipura earns US$1, all of it is his to dispose off as he pleases. The same income in the hands of an urban person, who is possibly a tech worker, is actually not US$1 of disposable income. It is most likely 67 cents; the rest goes as tax. The farm economy, with zero-tax on farm income, creates far more disposable income. Buying power in the hands of the rural rich is higher than the buying power of the urban rich."
Gupta of ruralnaukri.com provides some telling statistics. "The purchasing power of rural India is more than half for fast moving consumer goods [US$17 billion]," he says. "The durables and automobile sectors contribute US$2.5 billion each, and agri-inputs (including tractors) about US$1 billion. Some 42 million rural households [use] banking services against 27 million urban households. There are 41 million Kisan credit cardholders [credit cards issued to farmers for purchase of agricultural goods] against some 22 million card users in urban markets. Be it automobile, telecom, insurance, retail, real estate or banking, the future drivers of growth are rural. No marketer can afford to ignore the possibilities of rural India."
Bijoor adds some growth numbers. "Our rural folk have bought a lot more of FMCG; this part of the market has grown at a robust rate of 23% [last year]," he says. "As durables shrink in urban India, the rural market is witnessing a 15% growth rate. Some 60% of the durables market lies in rural India. Telecom in rural India is growing at 31%." It depends on the product, of course. "Just the sheer population numbers don't mean very much from a marketing point of view," says Garudachar of Voltas.
Across product categories, however, there seems to be a lot of action. Media -- particularly TV -- has been a great leveler. Even in small villages, people who have seen the urban lifestyle on television seem to want similar goods and services. Companies have realized this and are going all out to tap this latent demand.
Consider some examples:
The State Bank of India (SBI) has started a zero-balance bank account program for villagers. Called the SBI Tiny account, there are no physical branches or officials, just a paid volunteer who is equipped with a small box and a cellphone. The box enables biometric measurements (fingerprints), at the time of opening the account to confirm the account holder's identity. The cellphone enables communication with the zonal office to check on available balance. Payments under programs such as the NREGS and pensions are made directly to these accounts. The advantage for the villagers is that they can withdraw money from their accounts at any time of the day or night. (Withdrawals are never more than a few dollars.) SBI hopes to cover 100,000 villages by 2012. The bank has tied up with India Post for some services.
India Post, the public sector postal network, has its own plans. It has been hard hit in urban areas because of the more efficient (though more expensive) private sector courier services. Now it is looking at consolidating its hold on the rural areas. Project Arrow has been launched to IT-enable post offices in the hinterland. A pilot project involving 500 post offices -- the country has more than 150,000 -- has been kicked off. It will focus on banking, money remittance, and transmission and delivery of information.
Products for Rural Markets
Maruti Suzuki, India's leading automobile manufacturer, today sells 5% of its vehicles in the rural markets. The company expects this number to rise to 15% in the next two years. "This is not just our wish, but reflects market demand," says director (marketing & sales) Shuji Oishi.
In telecom, service providers are making a beeline for the villages. That's where the growth in what is now the world's fastest growing mobile market lies. According to industry estimates, 70% of all new subscribers will come from rural areas. (See NTT DoCoMo's Tata Deal: Why Global Telecom Firms Want to Dial India.)
Mobile device manufacturers are also tailoring their products to this market. Nokia had earlier launched a basic handset with a torch (large parts of rural India don't have electricity) and an alarm clock. (see How Did Nokia Succeed in the Indian Mobile Market, While Its Rivals Got Hung Up?) In December 2008, it went one step further with the launch of Nokia Life Tools. "Nokia Life Tools is a range of agriculture, education and entertainment services designed especially for the consumers in small towns and rural areas of emerging markets," says the company. "Aimed at providing timely and relevant information customized to the user's location and personal preferences directly on their mobile devices, Nokia Life Tools is the first step towards bridging the digital divide."
The mobile phone is a new-age product; gold jewelry is as old as the hills. Here, too, there has been a rural move. According to World Gold Council figures, 60% of India's US$15 billion annual consumption of gold and gold jewelry is from rural and semi-urban areas. The Tatas have launched a mass-market jewelry brand -- GoldPlus. The Tatas train unemployed youth and send them to the villages as brand ambassadors. The problem with gold in India is that it is often adulterated. In rural areas, gold jewelry is not for ornamentation; it is a safety net for emergency situations. Thus, the Tata seal of good housekeeping is taking the brand places. "GoldPlus is an interesting example of the brand addressing the non-metro jewelry culture with its ethnic touch with regard to its designs and retailing," says Ramesh Kumar of IIMB.
"There is substantial scope to create products that are oriented towards non-urban sectors," notes Kumar. "These can be in terms of functional appeal or cultural aspects or both. Chik shampoo created the jasmine variant [in tune with the culture of women using jasmine flowers to style their hair in a few parts of the country]. TVS mopeds created functional value in tune with the 'all purpose' vehicle culture existing in several parts of the non-metro areas. Philips is moving forward with the creation of gas stoves and lanterns that will be useful to such markets."
Singh of IIML talks about pricing successes: The Chik shampoo sachets sells for 2 cents, the Parle G Tikki biscuit packs at 4 cents and the Coca-Cola 200 ml glass bottle for 10 cents. Singh notes that successes in rural areas can be transplanted to urban areas also. "The shampoo in sachets created a new product segment," he says. "All shampoo manufacturers today retail in sachets, and the demand from urban India for this category is very strong."
The sachet is as much a packaging (product) strategy as a price strategy. But, asks Garudachar of Voltas, have companies done enough about the core product? The shampoo sachet is a case in point. "Villages in India have hard water," he says. "But the shampoo that you get in sachets sold in villages is the same that you get in towns. Manufacturers should have tailored the products to suit the environment."
It doesn't apply across the board, of course, particularly as manufacturers have moved away from the mindset that along with cutting price, you can cut quality. "Product re-engineering was an issue five years ago," says Bijoor. "I do not believe this is an issue at all today. The quality on offer needs to be the same all over. One company tried to pass off inferior quality tea leaves in rural markets and superior quality grades for urban markets under the same brandname. This fell flat."
But re-engineering is necessary in a different sense. According to Bijoor, "Companies are realizing that the urban and rural want is largely the same. However, the rural person is savvier and demands real value for money. To offer this, marketers are re-engineering products. Look at the auto segment. The urban man wants a car as does the rural man. Both have the same amount of money. The rural person, however, believes spending US$12,000 on a car is a sin. He wants it at US$3,000. The Nano is a solution. Every category needs to operate on the Nano paradigm. The needs are all the same, across rural and urban. The solutions have to be different."
Distribution and promotional channels also need to be different for rural markets. Companies are getting their act together here, too. Private sector companies like ITC have set up the IT-enabled eChoupal network, and Hindustan Unilever has project Shakti, under which women's self-help groups act as the last link of the retail chain. (See Marketing to Rural India: Making the Ends Meet.) As mentioned earlier, India Post wants to convert itself into a retail chain for a variety of products. Even fair-price shops, which form part of the government's rationing system, are trying to expand beyond supplying just basic foods like rice and wheat.
In the area of promotion, television has invaded rural India. TV reaches even very small villages through community sets. But advertising on national channels is wasteful if you are trying to target rural areas. Garudachar of Voltas says his company is trying to sell air conditioners to the rural rich. "Difficulties in penetration are due to the widespread and scattered nature of the territory," he says. "At one time, basic conservatism and diehard thrift would also have been factors, but exposure to TV has changed all that, and created aspirations where once there was resistance to change."
From Four P's to Four A's
Gupta of TSMG notes that the traditional four P's of marketing -- product, price, place and promotion, as outlined above -- have been replaced by a different framework for analysis. "A number of companies have worked on various elements of the marketing mix to improve the four A's -- affordability, awareness, availability and acceptability -- for rural markets," he says. "FMCG companies innovated on package sizes to introduce low price points. They have customized promotional strategies for rural markets using local language and talent. Some FMCG players continue to expand rural penetration [HUL's Project Shakti, Tata Tea's Gaon Chalo]. Coca-Cola's Parivartan program has trained more than 6,000 retailers to display and stock products. Dabur has created a training module ASTRA [advanced sales training for retail ascendance] in several regional languages. A number of auto companies have launched rural-specific campaigns."
Gupta of ruralnaukri.com offers more examples:
•Affordability -- Godrej introduced three brands of Cinthol, Fair Glow and Godrej (soap) in 50-gram packs, priced at 10 cents; Adidas and Reebok increased their sales by 50% in rural markets by reducing prices.
• Size and design changes -- Videocon introduced a washing machine without a drier for US$60; Philips launched a low-cost smokeless chulha (stove); DCM Shriram developed a low-cost water purifier especially for rural areas.
•Improving product acceptance -- LG Electronics developed a customized TV (cheap and capable of picking up low-intensity signals) for the rural markets and christened it Sampoorna. It sold 100,000 sets in the first year; Coca-Cola provided low-cost iceboxes as regular power outages meant families could not depend on refrigerators.
Perhaps the ultimate sign that rural India has arrived is in the allocation of talent. "In the old days, the weakest people in organizations, the ones without a star career path, held the reins of the rural marketing divisions," says Bijoor. "Today, things have changed. Sharper and sharper brains from within the organization are being diverted to rural strategy formulation." When the whiz kids go to villages, you know the cows have come home
http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4386
Why Companies See Bright Prospects in Rural India
Published: June 18, 2009 in India Knowledge@Wharton
In late May, when India's GDP numbers were released, many were happily surprised. In the fourth quarter of the fiscal year (January-March 2009), the economy grew 5.8% against expectations of less than 5%. For the year, growth was 6.7%, less than the 9% recorded in 2007-2008, but still very respectable during a global downturn. Multinational banks and brokerage houses rushed back to their spreadsheets to raise their growth forecasts for 2009-2010.
But why were the estimates so pessimistic in the first place? A possible explanation is that most analysts work in cities, and their views are colored by what is happening around them and in the corporate world. That picture has been bleak: During the last quarter of 2008-2009, manufacturing shrank 1.4%. In contrast, agriculture grew 2.7%. The feel-good factor in urban India is returning only now with a new, stable government and a sharp jump in the Bombay Stock Exchange Sensitive Index (Sensex).
In the villages and small towns, it has been a very different picture. "The rural market is insulated from the global meltdown," says Harish Bijoor, CEO of brand and business strategy consultants Harish Bijoor Consults. "The rural part of our economy has been untouched by credit cards and mortgages as known in the West."
"The slowdown experienced by India on account of the IT (information technology), real estate, financial services and automobile sectors was an urban phenomenon," says Ajay Gupta, founder and CEO of ruralnaukri.com, which focuses on jobs in the rural sector. (See "ruralnaukri.com's Ajay Gupta: 'Rural Jobs Can Provide Momentum to the Wheel of the Economy'"). "However, the negative impact of all this on urban India has been more than offset by encouraging performance in rural areas. The rural economy has provided a cushion. Overall sentiment in the country was different from other parts of the world where each household had at least one person with a pink slip."
"Several factors have led to an increase in rural purchasing power," says Pankaj Gupta, practice head, consumer & retail, Tata Strategic Management Group. "The increase in procurement prices [the government sets the minimum support price -- MSP -- for many farm products] has contributed to a rise in rural demand. A series of good harvests on the back of several good monsoons boosted rural employment in agricultural and allied activities. Government schemes like NREGS [National Rural Employment Guarantee Scheme, which guarantees 100 days of employment to one member of every rural household] reduced rural underemployment and raised wages. Also, farmers benefited from loan waivers [introduced in the last Union Budget]. The increase in rural purchasing power is reflected in rural growth across a number of categories. For example, in the financial year 2009 [April-March], FMCG [fast moving consumer goods] rural volume growth is estimated to be 5% to 12% higher than urban growth across a number of categories."
A Short-lived Renaissance?
Some academics agree with these upbeat views of a rural resurgence. "Policy measures like the waiver of agricultural loans to the tune of US$13.9 billion and the NREGS have really put cheer into the rural economy," says Devi Singh, director of the Indian institute of Management Lucknow (IIML). "The Bharat Nirman program with an outlay of US$34.84 billion for improving rural infrastructure is another step that has helped the rural economy. To some extent, the growth of organized retail can also be held responsible for the rural economy's growth, as this has ensured that farmers get a better price for agricultural produce. The MSP set by the government has been rising further, fuelling rural growth by putting more money into the hands of the rural population."
Singh adds a caveat, however. "While the statement that the Indian economy has been saved from the slowdown due to rural growth is true to a certain extent, this is not the only factor," he says. "India's growth has been fuelled more by domestic demand than exports. Also Indian spending and saving habits differ from other parts of the world. Indians by their very nature always save for their future and this holds them in good stead during times of crisis. The Indian buyer is more finance conscious than his global peer. The Indian banking system, due to the so-called non-reforms, is actually more resilient and the level of delinquencies is far lower than in other parts of the world."
Some observers are skeptical about the durability of rural demand. "There is a worrying groundswell of optimism that rural consumers will come to the rescue of an Indian economy which is in the midst of a sharp slowdown. This optimism may be misplaced," suggest consumer behavior expert Rama Bijapurkar and Rajesh Shukla, a senior fellow at the National Council for Applied Economic Research. Writing in business daily Mint, they continue: "Hearing phrases such as 'rural renaissance' or 'rural India to the rescue' makes us nervous. Such talk bears overtones of the 'Great Indian Middle Class' story of the 1990s, where we declared victory at least a decade before we should have." Their question: How sustainable, stable and volatility-free is the growth in income and consumption?
Bijapurkar and Shukla note that "periodically, India has seen a consumption spurt because of a one-time burst of a combination of events. This recent spurt seems no different. Over the past four years, the monsoon has been good; the support prices for crops have grown at 10% to 15% CAGR [compounded annual growth rate] in 2005-2008 compared with 2.5% to 4% in 2002-2005. In addition to a healthy flow of farm credit, there has been a one-time loan write-off of US$13.9 billion as well as a sizeable cash outlay from the NREGS. This doesn't show intrinsic growth in rural India: This growth is, instead, owing to a combination of acts of God and acts of government. What we must never do is make the same mistake with rural India that Western multinationals make with India as a whole -- assume that it will evolve the same way with a 10-year lag. The rural Indian market and consumer call for sophisticated new marketing strategies and paradigms, not a transplant of old ideas."
What Rural Means
Even as this debate continues, the term "rural" is being re-defined. "'Rural' is difficult to define any more," says Bijoor of Bijoor Consults. "Typically, from an Indian census point of view, rural has been defined with a 'deprivation' orientation, rural being a landmass without access to continuous electricity, water, the stock market. There has been a correction in this view, however. Marketers today define rural as people living a different lifestyle as opposed to that of those who have settled in the bigger cities and towns. Rural is defined as pastoral in nature and as a mass of people who relate their income closely to the lands they till or use to raise their cattle and livestock. I, personally, define rural differently. I believe rural is a mindset. Those who possess it are rural and those who do not are urban. To that extent, in Bangalore city, just off the old airport road, are a whole set of people who live by farming on their lands. If you visit their homes, their lifestyles are totally rural. Similarly, there are people who live in villages, who have access to the best of it all. These are urban folk. Rural is not a geography; it is a mindset."
"Definitions for rural India abound while the most convenient remains, 'anything that is not urban'," says Gupta of ruralnaukri.com. Singh of IIML adds: "Rural India comprises all places that are not urban." This definition by exclusion for what is the much larger part of the country has its roots in the government's own approach. "The Census of India defines urban India," says Gupta of TSMG. "Urban India constitutes places with a population of more than 5,000, a population density above 400 per square kilometer, all statutory towns, that is, all places with a municipal corporation, municipal board, cantonment board, notified area council, etc. and with 75% of the male working population engaged in non-agricultural employment. All non-urban is rural."
Such definitions leave marketers cold. "The traditional definition of rural may be of little use to marketers in terms of providing consumer insights," says S. Ramesh Kumar, professor of marketing at the Indian Institute of Management, Bangalore (IIMB). "Given the diversity of culture and lifestyle/aspirational changes that are taking place across non-metro consumers, the non-metro areas need to be segmented into tiers of varying urban orientation using psychographic and lifestyle analysis along with demographics. The digital 1 or 0 type of urban and rural definitions is unlikely to yield consumer behavior nuances. For example, district headquarters [towns] in Tamil Nadu are likely to be significantly different from those in Karnataka or Maharashtra."
Many others agree that census-style definitions are no longer enough. "My understanding of rural India is a less developed countryside where the infrastructure is primitive, houses are of mud or brick but rarely painted well, the primary source of livelihood is agriculture, employment opportunities in the organized sector are negligible, eating choices are restricted to home-cooked, simple food, schools are far away, health facilities are rudimentary and -- importantly -- the youth, while energetic and ambitious, are to be seen playing cards the whole day," says Gupta of ruralnaukri.com.
"We recognize rural India by certain characteristics," says B.N. Garudachar, general manager, corporate communication and investor relations at Voltas, a Tata group company in air-conditioning and engineering services. "These are: low population numbers, low median income, poor infrastructure [roads, electricity, communications], and agrarian rather than industrial activity. Such rural areas are within the sphere of influence of neighboring cities and metros. This influence determines their aspiration levels and their viability as markets."
Massive Market
View it as you may, few people dispute that the rural market is massive. According to Singh, 12.2% of the world's consumers live in India. "Rural households form 72% of the total households. This puts the rural market at roughly 720 million customers." Gupta of TSMG extrapolates the Census 2001 numbers and comes up with an estimate of 790 million. "Total income in rural India (about 43% of total national income) is expected to increase from around US$220 billion in 2004-2005 to US$425 billion by 2010-2011, a CAGR of 12%," he says.
Bijoor explains that this is entirely disposable income unlike what it would be in urban India. "If a farmer in rural Holenarsipura earns US$1, all of it is his to dispose off as he pleases. The same income in the hands of an urban person, who is possibly a tech worker, is actually not US$1 of disposable income. It is most likely 67 cents; the rest goes as tax. The farm economy, with zero-tax on farm income, creates far more disposable income. Buying power in the hands of the rural rich is higher than the buying power of the urban rich."
Gupta of ruralnaukri.com provides some telling statistics. "The purchasing power of rural India is more than half for fast moving consumer goods [US$17 billion]," he says. "The durables and automobile sectors contribute US$2.5 billion each, and agri-inputs (including tractors) about US$1 billion. Some 42 million rural households [use] banking services against 27 million urban households. There are 41 million Kisan credit cardholders [credit cards issued to farmers for purchase of agricultural goods] against some 22 million card users in urban markets. Be it automobile, telecom, insurance, retail, real estate or banking, the future drivers of growth are rural. No marketer can afford to ignore the possibilities of rural India."
Bijoor adds some growth numbers. "Our rural folk have bought a lot more of FMCG; this part of the market has grown at a robust rate of 23% [last year]," he says. "As durables shrink in urban India, the rural market is witnessing a 15% growth rate. Some 60% of the durables market lies in rural India. Telecom in rural India is growing at 31%." It depends on the product, of course. "Just the sheer population numbers don't mean very much from a marketing point of view," says Garudachar of Voltas.
Across product categories, however, there seems to be a lot of action. Media -- particularly TV -- has been a great leveler. Even in small villages, people who have seen the urban lifestyle on television seem to want similar goods and services. Companies have realized this and are going all out to tap this latent demand.
Consider some examples:
The State Bank of India (SBI) has started a zero-balance bank account program for villagers. Called the SBI Tiny account, there are no physical branches or officials, just a paid volunteer who is equipped with a small box and a cellphone. The box enables biometric measurements (fingerprints), at the time of opening the account to confirm the account holder's identity. The cellphone enables communication with the zonal office to check on available balance. Payments under programs such as the NREGS and pensions are made directly to these accounts. The advantage for the villagers is that they can withdraw money from their accounts at any time of the day or night. (Withdrawals are never more than a few dollars.) SBI hopes to cover 100,000 villages by 2012. The bank has tied up with India Post for some services.
India Post, the public sector postal network, has its own plans. It has been hard hit in urban areas because of the more efficient (though more expensive) private sector courier services. Now it is looking at consolidating its hold on the rural areas. Project Arrow has been launched to IT-enable post offices in the hinterland. A pilot project involving 500 post offices -- the country has more than 150,000 -- has been kicked off. It will focus on banking, money remittance, and transmission and delivery of information.
Products for Rural Markets
Maruti Suzuki, India's leading automobile manufacturer, today sells 5% of its vehicles in the rural markets. The company expects this number to rise to 15% in the next two years. "This is not just our wish, but reflects market demand," says director (marketing & sales) Shuji Oishi.
In telecom, service providers are making a beeline for the villages. That's where the growth in what is now the world's fastest growing mobile market lies. According to industry estimates, 70% of all new subscribers will come from rural areas. (See NTT DoCoMo's Tata Deal: Why Global Telecom Firms Want to Dial India.)
Mobile device manufacturers are also tailoring their products to this market. Nokia had earlier launched a basic handset with a torch (large parts of rural India don't have electricity) and an alarm clock. (see How Did Nokia Succeed in the Indian Mobile Market, While Its Rivals Got Hung Up?) In December 2008, it went one step further with the launch of Nokia Life Tools. "Nokia Life Tools is a range of agriculture, education and entertainment services designed especially for the consumers in small towns and rural areas of emerging markets," says the company. "Aimed at providing timely and relevant information customized to the user's location and personal preferences directly on their mobile devices, Nokia Life Tools is the first step towards bridging the digital divide."
The mobile phone is a new-age product; gold jewelry is as old as the hills. Here, too, there has been a rural move. According to World Gold Council figures, 60% of India's US$15 billion annual consumption of gold and gold jewelry is from rural and semi-urban areas. The Tatas have launched a mass-market jewelry brand -- GoldPlus. The Tatas train unemployed youth and send them to the villages as brand ambassadors. The problem with gold in India is that it is often adulterated. In rural areas, gold jewelry is not for ornamentation; it is a safety net for emergency situations. Thus, the Tata seal of good housekeeping is taking the brand places. "GoldPlus is an interesting example of the brand addressing the non-metro jewelry culture with its ethnic touch with regard to its designs and retailing," says Ramesh Kumar of IIMB.
"There is substantial scope to create products that are oriented towards non-urban sectors," notes Kumar. "These can be in terms of functional appeal or cultural aspects or both. Chik shampoo created the jasmine variant [in tune with the culture of women using jasmine flowers to style their hair in a few parts of the country]. TVS mopeds created functional value in tune with the 'all purpose' vehicle culture existing in several parts of the non-metro areas. Philips is moving forward with the creation of gas stoves and lanterns that will be useful to such markets."
Singh of IIML talks about pricing successes: The Chik shampoo sachets sells for 2 cents, the Parle G Tikki biscuit packs at 4 cents and the Coca-Cola 200 ml glass bottle for 10 cents. Singh notes that successes in rural areas can be transplanted to urban areas also. "The shampoo in sachets created a new product segment," he says. "All shampoo manufacturers today retail in sachets, and the demand from urban India for this category is very strong."
The sachet is as much a packaging (product) strategy as a price strategy. But, asks Garudachar of Voltas, have companies done enough about the core product? The shampoo sachet is a case in point. "Villages in India have hard water," he says. "But the shampoo that you get in sachets sold in villages is the same that you get in towns. Manufacturers should have tailored the products to suit the environment."
It doesn't apply across the board, of course, particularly as manufacturers have moved away from the mindset that along with cutting price, you can cut quality. "Product re-engineering was an issue five years ago," says Bijoor. "I do not believe this is an issue at all today. The quality on offer needs to be the same all over. One company tried to pass off inferior quality tea leaves in rural markets and superior quality grades for urban markets under the same brandname. This fell flat."
But re-engineering is necessary in a different sense. According to Bijoor, "Companies are realizing that the urban and rural want is largely the same. However, the rural person is savvier and demands real value for money. To offer this, marketers are re-engineering products. Look at the auto segment. The urban man wants a car as does the rural man. Both have the same amount of money. The rural person, however, believes spending US$12,000 on a car is a sin. He wants it at US$3,000. The Nano is a solution. Every category needs to operate on the Nano paradigm. The needs are all the same, across rural and urban. The solutions have to be different."
Distribution and promotional channels also need to be different for rural markets. Companies are getting their act together here, too. Private sector companies like ITC have set up the IT-enabled eChoupal network, and Hindustan Unilever has project Shakti, under which women's self-help groups act as the last link of the retail chain. (See Marketing to Rural India: Making the Ends Meet.) As mentioned earlier, India Post wants to convert itself into a retail chain for a variety of products. Even fair-price shops, which form part of the government's rationing system, are trying to expand beyond supplying just basic foods like rice and wheat.
In the area of promotion, television has invaded rural India. TV reaches even very small villages through community sets. But advertising on national channels is wasteful if you are trying to target rural areas. Garudachar of Voltas says his company is trying to sell air conditioners to the rural rich. "Difficulties in penetration are due to the widespread and scattered nature of the territory," he says. "At one time, basic conservatism and diehard thrift would also have been factors, but exposure to TV has changed all that, and created aspirations where once there was resistance to change."
From Four P's to Four A's
Gupta of TSMG notes that the traditional four P's of marketing -- product, price, place and promotion, as outlined above -- have been replaced by a different framework for analysis. "A number of companies have worked on various elements of the marketing mix to improve the four A's -- affordability, awareness, availability and acceptability -- for rural markets," he says. "FMCG companies innovated on package sizes to introduce low price points. They have customized promotional strategies for rural markets using local language and talent. Some FMCG players continue to expand rural penetration [HUL's Project Shakti, Tata Tea's Gaon Chalo]. Coca-Cola's Parivartan program has trained more than 6,000 retailers to display and stock products. Dabur has created a training module ASTRA [advanced sales training for retail ascendance] in several regional languages. A number of auto companies have launched rural-specific campaigns."
Gupta of ruralnaukri.com offers more examples:
•Affordability -- Godrej introduced three brands of Cinthol, Fair Glow and Godrej (soap) in 50-gram packs, priced at 10 cents; Adidas and Reebok increased their sales by 50% in rural markets by reducing prices.
• Size and design changes -- Videocon introduced a washing machine without a drier for US$60; Philips launched a low-cost smokeless chulha (stove); DCM Shriram developed a low-cost water purifier especially for rural areas.
•Improving product acceptance -- LG Electronics developed a customized TV (cheap and capable of picking up low-intensity signals) for the rural markets and christened it Sampoorna. It sold 100,000 sets in the first year; Coca-Cola provided low-cost iceboxes as regular power outages meant families could not depend on refrigerators.
Perhaps the ultimate sign that rural India has arrived is in the allocation of talent. "In the old days, the weakest people in organizations, the ones without a star career path, held the reins of the rural marketing divisions," says Bijoor. "Today, things have changed. Sharper and sharper brains from within the organization are being diverted to rural strategy formulation." When the whiz kids go to villages, you know the cows have come home
http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4386
Thursday, June 18, 2009
Range Planning for the Season
Range Planning
Before the onset of a season – winter or summer an essential component of buying is preparing a range plan.. Whereas the overall budgetary planning as well as the buying strategy would already have been defined at the senior management level . The range plan would be a combination of the elements of buying strategy and budgetary plans.
Range Plan Structure
The first step in the process of making a range plan should be the structure wherein the following components would needed to be addressed
a) Range Profile
b) Range Width
c) Average Selling Price
d) Margin Mix
e) Sales Value ( in terms of value and quantity
Range Profile
The range profile should be based on the following
GBB price assortment. The good better and best principle . Depending on the profile of the retailer outlet , the GBB split would vary. For instance in the case of an up market retailer like Lifestyle , the GBB split would probably be in the ratio of 10:20:70 whereas in the case of Haryali Kisaan Bazaar the ration would be 60:30:10. It is important to remember that the GBB split is a price assortment.
Product Assortment ; This would be based on the consumer preferences of the retailer target consumer. Decisions that need to be taken by the buyer would be styles in the case of lifestyle, tastes in the case of food and features and needs in the case of home products
Customer Appeal : While developing the range plan, the buyer would also need to address customer appeal of the products in terms of socio economic , age, gender etc.
Will take up the other elements in following days
Before the onset of a season – winter or summer an essential component of buying is preparing a range plan.. Whereas the overall budgetary planning as well as the buying strategy would already have been defined at the senior management level . The range plan would be a combination of the elements of buying strategy and budgetary plans.
Range Plan Structure
The first step in the process of making a range plan should be the structure wherein the following components would needed to be addressed
a) Range Profile
b) Range Width
c) Average Selling Price
d) Margin Mix
e) Sales Value ( in terms of value and quantity
Range Profile
The range profile should be based on the following
GBB price assortment. The good better and best principle . Depending on the profile of the retailer outlet , the GBB split would vary. For instance in the case of an up market retailer like Lifestyle , the GBB split would probably be in the ratio of 10:20:70 whereas in the case of Haryali Kisaan Bazaar the ration would be 60:30:10. It is important to remember that the GBB split is a price assortment.
Product Assortment ; This would be based on the consumer preferences of the retailer target consumer. Decisions that need to be taken by the buyer would be styles in the case of lifestyle, tastes in the case of food and features and needs in the case of home products
Customer Appeal : While developing the range plan, the buyer would also need to address customer appeal of the products in terms of socio economic , age, gender etc.
Will take up the other elements in following days
Tuesday, June 16, 2009
Management Champions
An interesting and very relevant writeup
Getting Senior Management on Board
by Randy Street
Here are some ways to get senior leaders to act as talent-management champions.
The biggest problems in business are not "what" problems, but "who" problems. "What" problems have to do with execution and tactics. These are important, but no business, no matter how well positioned, can succeed if it doesn't have the right people in the right roles doing the right things.
These are "who" problems.
Senior leaders want to create value for their businesses, and they want to have career and financial success. The No. 1 thing they can do to help both their companies and themselves is to solve their biggest people problems. Get the "who" right, and great things will happen.
Why should senior leaders act as talent-management champions? Here are the top five reasons:
1. "Who" mistakes are extremely costly.
One company we know hired five vice presidents of sales in the span of three years. The CEO believes his repeated hiring errors cost the company more than $100 million in top-line growth. Another company we know promoted the wrong person to lead their real-estate investment group. The gentlemen they put in charge promptly lost $80 million.
No matter how you slice it, people mistakes will cost your business. In fact, management guru Peter Drucker once estimated that 50 percent of all hiring decisions were mistakes. Half! To make matters worse, the average cost of a mis-hire is 15 times that person's base salary. Just think: Make a mistake on a single, $100,000-a-year employee and you will cost your business $1.5 million in opportunity costs, fire drills and wasted budget.
2. The "who" drives your business more than any other factor.
We conducted a survey of more than 80 successful business leaders, including more than 20 billionaires and 60 CEOs of companies ranging from entrepreneurial ventures to Global 100 companies. We asked them what drove the success of their businesses. They told us that management talent was more than half the equation (52 percent). Execution only drove 20 percent of success; strategy, 17 percent; and other factors, 11 percent. If it is important to them, we suspect it should be important to you.
3. The right "who" people are more productive.
Someone once asked George Buckley, CEO of 3M, how he felt about people.. He replied, "I want you to pause for a moment and think about the very best person you have working for you. Now I want you to think about the second-best person you have working for you. Now I would like you to think about where your organization would be without them.
"You would be terrified if you lost them. And you would love to have 10 more like them. That is how I feel about the importance of hiring the right people."
In fact, studies show that so-called "A players" are three-to-five times more productive than everybody else. Who wouldn't want to stack his or her team with people like this?
4. Enjoy your career more with the right "who."
Jack Welch used to say, "The hardest I ever worked was when I had the weakest team." We see this truth playing out all the time. Consider one COO we know who was completely burned out when we first met him. He was frustrated that the people who reported to him didn't seem to "get it."
It turned out, he was the one who didn't get it. After some coaching, he rebuilt his team and helped the CEO increase the stock price by more than 60 percent. Even better, when we asked how he was doing nine months later, he said, "You know what? I feel great! I have a fantastic team working with me now. For the first time in my career, I don't have to be the first person to arrive in the morning and the last one out at night. I'm sleeping better. I'm working out. I'm spending time with my wife. And it's all because I have a team of A players."
5. It's fun to have the right "who."
Let's face it. Who enjoys dealing with the problems and mistakes caused by weaker talent? We've evaluated and trained tens of thousands of executive and have never met an executive who enjoyed dealing with C players. Not a single one. But they universally love having A players on their team. We bet you do, too.
The single most important role of a senior leader is to ensure a team has the right "who" on board. That's what Pat Ryan, chairman and founder of Aon Insurance, believed. "I am not really smarter than the next guy," he told us. "There are lots of smart people in business. I guess the one thing that I have done over the years that is different from most people is that I am constantly on the hunt for talented people to bring into my company."
We hope you will do the same. As a result, you will have more career, financial, and personal success.
[About the Author: Randy Street is the co-author of the New York Times best-selling book Who: The A Method for Hiring. He is a partner with ghSMART, a leadership advisory firm specializing in management assessment, executive learning and coaching for CEOs and boards.]
Getting Senior Management on Board
by Randy Street
Here are some ways to get senior leaders to act as talent-management champions.
The biggest problems in business are not "what" problems, but "who" problems. "What" problems have to do with execution and tactics. These are important, but no business, no matter how well positioned, can succeed if it doesn't have the right people in the right roles doing the right things.
These are "who" problems.
Senior leaders want to create value for their businesses, and they want to have career and financial success. The No. 1 thing they can do to help both their companies and themselves is to solve their biggest people problems. Get the "who" right, and great things will happen.
Why should senior leaders act as talent-management champions? Here are the top five reasons:
1. "Who" mistakes are extremely costly.
One company we know hired five vice presidents of sales in the span of three years. The CEO believes his repeated hiring errors cost the company more than $100 million in top-line growth. Another company we know promoted the wrong person to lead their real-estate investment group. The gentlemen they put in charge promptly lost $80 million.
No matter how you slice it, people mistakes will cost your business. In fact, management guru Peter Drucker once estimated that 50 percent of all hiring decisions were mistakes. Half! To make matters worse, the average cost of a mis-hire is 15 times that person's base salary. Just think: Make a mistake on a single, $100,000-a-year employee and you will cost your business $1.5 million in opportunity costs, fire drills and wasted budget.
2. The "who" drives your business more than any other factor.
We conducted a survey of more than 80 successful business leaders, including more than 20 billionaires and 60 CEOs of companies ranging from entrepreneurial ventures to Global 100 companies. We asked them what drove the success of their businesses. They told us that management talent was more than half the equation (52 percent). Execution only drove 20 percent of success; strategy, 17 percent; and other factors, 11 percent. If it is important to them, we suspect it should be important to you.
3. The right "who" people are more productive.
Someone once asked George Buckley, CEO of 3M, how he felt about people.. He replied, "I want you to pause for a moment and think about the very best person you have working for you. Now I want you to think about the second-best person you have working for you. Now I would like you to think about where your organization would be without them.
"You would be terrified if you lost them. And you would love to have 10 more like them. That is how I feel about the importance of hiring the right people."
In fact, studies show that so-called "A players" are three-to-five times more productive than everybody else. Who wouldn't want to stack his or her team with people like this?
4. Enjoy your career more with the right "who."
Jack Welch used to say, "The hardest I ever worked was when I had the weakest team." We see this truth playing out all the time. Consider one COO we know who was completely burned out when we first met him. He was frustrated that the people who reported to him didn't seem to "get it."
It turned out, he was the one who didn't get it. After some coaching, he rebuilt his team and helped the CEO increase the stock price by more than 60 percent. Even better, when we asked how he was doing nine months later, he said, "You know what? I feel great! I have a fantastic team working with me now. For the first time in my career, I don't have to be the first person to arrive in the morning and the last one out at night. I'm sleeping better. I'm working out. I'm spending time with my wife. And it's all because I have a team of A players."
5. It's fun to have the right "who."
Let's face it. Who enjoys dealing with the problems and mistakes caused by weaker talent? We've evaluated and trained tens of thousands of executive and have never met an executive who enjoyed dealing with C players. Not a single one. But they universally love having A players on their team. We bet you do, too.
The single most important role of a senior leader is to ensure a team has the right "who" on board. That's what Pat Ryan, chairman and founder of Aon Insurance, believed. "I am not really smarter than the next guy," he told us. "There are lots of smart people in business. I guess the one thing that I have done over the years that is different from most people is that I am constantly on the hunt for talented people to bring into my company."
We hope you will do the same. As a result, you will have more career, financial, and personal success.
[About the Author: Randy Street is the co-author of the New York Times best-selling book Who: The A Method for Hiring. He is a partner with ghSMART, a leadership advisory firm specializing in management assessment, executive learning and coaching for CEOs and boards.]
Sunday, June 14, 2009
Reail Ads - The Week that was
MOM & ME with its headline of ' One - of - a - kind store for moms and kids' is aggressively promoting its stores through large 3/4 page ads in the national dailies. Focus is on its range of national and international brands for the to be mom and kids. 'Mom & Me' stores have been introduced by Mahindra Retail and currently also have a presence in the towns of Ahmedabad, Pune, Mumbai and Ludhiana . In Delhi they are present at 2 locations. (HT-13/06)
RELIANCE DIGITAL has a half page ad celebrating its 2nd anniversary offering free gifts with all its products. Their headline ' You don't have to be lucky to win a prize' (HT-13/06 Half Page)
E ZONE of HomeTown has special discounts this week. Their headline 'Save more than just the price'. The offering - TVs, Fridges, Washing Machines, Laptops and Mobile phones. Savings from Rs 800 to Rs 9000. (HT-13/06 Half Page)
BIG BAZAAR has very aggressively launched it's 'Buy 1 Get 1 Free' campaign. The catch however is that the product offered free is not the same product that has been brought. Products offered range from food items to luggage, washing machines and wardrobes. The offer is open for a week - 13th to 21st June. ( TOI - 13/6 Full Page and HT-13/06 1/4 page)
HOME TOWN is offering a straight 40% discount on everything. They call it the ' Dream Home Week 6th -14th June'. ( HT-13/06)
CROMA has a 'Back to School' campaign on laptops and cameras. Does this campaign make sense ??? Would be interesting to know the impact of this ad. ( HT-13/06)
WESTSIDE has a 'Menswear Bonanza' this week and is offering Rs 200 off on men's formal wear. ( TOI - 13/6 Half Page)
This week has LIFESTYLE launching its 'Lifestyle Style Fest' and the offering is a Toyota car. The offering - a range of men's and women's wear ( TOI-13/06)
VISHAL MEGA MART has a full page ad with its ' Beat the heat' campaign. Aggressive pricing on a range of products ranging from food, apparel and consumer durables. ( TOI-13/06 Full Page)
RELIANCE DIGITAL has a half page ad celebrating its 2nd anniversary offering free gifts with all its products. Their headline ' You don't have to be lucky to win a prize' (HT-13/06 Half Page)
E ZONE of HomeTown has special discounts this week. Their headline 'Save more than just the price'. The offering - TVs, Fridges, Washing Machines, Laptops and Mobile phones. Savings from Rs 800 to Rs 9000. (HT-13/06 Half Page)
BIG BAZAAR has very aggressively launched it's 'Buy 1 Get 1 Free' campaign. The catch however is that the product offered free is not the same product that has been brought. Products offered range from food items to luggage, washing machines and wardrobes. The offer is open for a week - 13th to 21st June. ( TOI - 13/6 Full Page and HT-13/06 1/4 page)
HOME TOWN is offering a straight 40% discount on everything. They call it the ' Dream Home Week 6th -14th June'. ( HT-13/06)
CROMA has a 'Back to School' campaign on laptops and cameras. Does this campaign make sense ??? Would be interesting to know the impact of this ad. ( HT-13/06)
WESTSIDE has a 'Menswear Bonanza' this week and is offering Rs 200 off on men's formal wear. ( TOI - 13/6 Half Page)
This week has LIFESTYLE launching its 'Lifestyle Style Fest' and the offering is a Toyota car. The offering - a range of men's and women's wear ( TOI-13/06)
VISHAL MEGA MART has a full page ad with its ' Beat the heat' campaign. Aggressive pricing on a range of products ranging from food, apparel and consumer durables. ( TOI-13/06 Full Page)
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