Price and Place in Rural Marketing

Product strategy and pricing strategies are inextricably intertwined. Products must be cheap or economical to meet the requirements of the rural consumer, who is mostly dependent on daily earnings and hence a limited disposable income. To address the affordability issue, small unit packs have been introduced by several companies.

Product size, packaging, varieties and other factors all have a role in determining how to reduce the product’s price. Size changes, offering a basic packaging without glitter or sparks, and offering a limited number of product versions – all of these can all help to cut the product’s price. In this chapter, let us study about the pricing strategies adopted by companies to cater to the rural markets.

Customers are in the center of every marketing decision. Pricing strategies are prepared keeping the following customer goals in mind:

• To win confidence of customers: Customers must be served. To gain the trust of the target market, the company establishes and practices pricing policies. Customers’ confidence in the price charged for a product can be established, maintained, or even strengthened by a company’s right pricing strategies. Customers are given the impression that they are not being taken advantage of.
  
  
• To satisfy customers: The primary goal of all marketing operations is to keep customers satisfied. It’s no different when it comes to pricing. To please its target customers, the company establishes, modifies and readjusts its pricing.

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Pricing Objectives

Pricing is the process of determining a suitable exchange price for a product or service. At first glance, it appears to be a simple price at which the seller is willing to sell and the buyer is willing to buy, but in reality there is a lot more to it.

It entails a variety of decisions and steps connected with pricing the product. Pricing policies are designed to achieve a variety of goals. The company has a number of goals that it hopes to fulfil through its products’ pricing policies and strategies. Pricing considerations are made based on the goals that must be met.

• Profit-related objectives: Profit has remained a dominant objective of business activities.
  
  • Maximise current profit: Pricing has several goals one of which is to maximise present earnings. The goal of this is to make as much money as possible. The company seeks to fix its price so that it can generate greater present earnings. The company, on the other hand, cannot set its price higher than the limit. However, it is focused on maximising profits.
    
    
  • Target return on investment: Target return is calculated as the money invested in a venture, plus the profit that the investor wants to see in return, adjusted for the time value of money (TVM). Most companies want to earn a reasonable rate of return on investment.
    
    
• Sales-related objectives: The main sales-related objectives of Sales volume, profitability, market share and rivalry are all examples of objectives. pricing may include:
  
  
  • Sales growth: The goal of the company is to price the product such that it leads to growth in sales volume. It sets its price in such a way that it may attain an increasing number of sales. As a result, pricing selection is made in order to increase sales volume. Setting a price, changing a price and changing pricing policies are all aimed at increasing sales.
    
    
  • Target market share: A company’s pricing plans are designed to help it achieve or maintain its intended market share. Pricing selections are made in such a way that the organisation may obtain the market share it desires. A specified volume of sales measured in relation to overall sales in an industry is known as market share.
    
    
  • Increase in market share: Pricing is sometimes used as a technique to increase market share. When a company believes its market share is lower than the projected one, it can increase it through appropriate pricing, pricing is designed to increase market share.
    
    
  • Market penetration: This goal entails going deep into the market in order to acquire the greatest number of customers. To win price-sensitive buyers, this goal necessitates charging the lowest possible price.
    
    
• Competition-related objectives: The impact of competition on marketing performance is significant. Every business seeks to respond to competition by implementing relevant business strategies.
  
  
  • To face competition: Faced with competition, pricing is a major challenge. The current market is characterised by fierce competition. The company establishes and changes its pricing policy in order to respond aggressively to competitors.
    
    
  • To keep competitors away: One of the primary goals of pricing can be to deter competitors from entering the market. The phrase “prevention is better than cure” applies here as well. There is no need to fight with competitors if they are kept at bay.
    
    
• Other objectives: There are some objectives that companies seek to achieve through price, in addition to the ones mentioned so far.
  
  
  • Promoting a new product: To successfully promote a new product, the corporation sets a low price for its items initially to encourage trial and repeat purchases. The company’s price strategy can aid in the effective launch of a new product.  
    
    
  • Maintaining image and reputation in the market: Pricing plans that are effective have a favorable impact on the company’s image and reputation in the market. Companies can develop a positive image and reputation in the minds of their target customers by charging a reasonable price, stabilising price or maintaining a constant price.

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Pricing Strategies

A rural client is price sensitive due to his limited income, hence the price of a product will surely have an impact on sales in rural markets. Because the products are priced less, the rural population is tempted to try them. Despite the fact that rural incomes have risen in recent years, the average rural consumer continues to earn much less than his urban counterpart. The following are the pricing strategies used by marketers in rural areas:

• Low cost/cheap products: This corresponds to the product strategy. Low-cost unit packaging, such as paisa tea packets, shampoo sachets, tins, can help keep prices low. Many manufacturing and marketing firms employ this strategy.
  
  
• No-frills product: By employing less sophistication and focusing instead on the product’s robustness and utility, the production cost can be minimised. The bulk of health drinks are only available in major cities. The packaging of the product is purposely done in reusable containers, which can be used for a number of different things. Such policies have the potential to have a big impact on the rural market.
  
  
• Application of value engineering: The best example here is how Soya protein is being used in place of milk protein in the food industry. Milk protein is more expensive than soy protein, although both have the same nutritional value. The main goal is to lower the product’s price so that a greater portion of the market can afford it, hence growing the market.
  
  
• Large volume-low margins (rapid or slow penetration strategy): Marketers must concentrate on generating large volumes rather than large profit margins on individual items. They can still make a solid return on their investment if they price their goods at a level that leads to high volumes.
  
  
• Overall efficiency and passing on benefits to consumers: The approach for rural products should be to reduce production, distribution and advertising expenses while passing these savings on to customers to boost turnover. In most cases, advertising has been found to have little impact on product sales in rural areas. If a company gets the price point right, it can succeed in the rural market.
  
  
• Low volume-low price strategy: In this technique, package size is reduced to make it appear more reasonable and generate excellent results in rural markets for a wide range of FMCG product categories. This method is used for product categories where keeping the price point is vitally important.
  
  
• Ensuring price compliance: In most cases, rural sellers charge more than the MRP. The manufacturer must ensure price conformity either through advertising activities, as Coca-Cola did or by directly ensuring product availability at retail locations.
  
  
• Discounts: Discounts are given to merchants in order to encourage them to sell more of the company’s items. In the case of fast-moving consumer items, a 10% discount is offered on the maximum retail price.

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Market Entry Strategies and Challenges

India is ingenious with a good degree of ethnic, cultural and regional diversity. About 3/4th of the total population resides in the rural areas and majority of them are dependent upon agriculture for their subsistence. Generally, the impression is that only agricultural inputs such as seeds, fertilisers, pesticides, cattle feed and agricultural machinery have a potential for growth in the rural market.

However, in reality, there is a growing market for consumer goods now in rural areas. It has been estimated that the rural market is growing at the rate of five times its urban counterpart. Although rural markets have a huge attraction to marketers, it is not easy to enter the market and take a sizeable share of the market.

The following are the main reasons for this:

• Low literacy: There are not enough opportunities for education in rural areas. ‰‰ Communication problems: Facilities, such as telephone, television or mail, are rather poor in rural areas.
  
  
• Traditional life: Life in rural areas is still governed by customs and traditions and people do not easily adapt to new practices. For example, even rich and educated class of farmers do not wear jeans or branded shoes.
  
  
• Expensive distribution: An effective distribution system requires a lot of layers of middlemen between the company and the final consumer – right from the village level shopkeeper, the Mandal/ Taluka-level wholesaler or preferred dealer, the distributor or stockiest at district level and the company-owned depot or consignment distribution at state level.
  
  
• Buying decisions: Rural consumers are cautious in buying and decisions are slow and delayed. They want to give a trial and only after satisfying personally, they buy the product.

To overcome these challenges, marketers adopt the following strategies:

• Easy and localised communication: Most companies promote their products in local languages and dialects of the rural consumers. This helps in better connecting with customers in those areas.
  
  
• Changing pattern of rural customers: Nowadays villagers are constantly looking forward for new branded products and good services. Indian customers in rural market were never price sensitive, but they want value for money. They are ready to pay premium for the product if the product is offering some extra utility for the premium.

Best promotion and quality perception: Companies with new technology are properly capable to communicating its products and services to their customers. There is a trade-off between quality a customer perceives and a company wants to communicate. Thus, this positioning of technology is very crucial.

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Accessing Rural Markets

Accessing rural markets is difficult for marketers because they are geographically dispersed and have a big number of retail outlets. As a result, the rural retail sector is the primary means of reaching and serving rural consumers. This is accomplished through a network of almost two million local shops.

Channels of Distribution

The term ‘distribution’ refers to the process of distributing the com- pany’s products and services to its intended consumers. As a result, the term ‘channels of distribution’ refers to mediums used in the distribution process. The path travelled by a good or service as it moves from the maker to the ultimate user is known as the channel. The term “channels of distribution” refers to the routes that a product or service must take to reach its intended consumer. The distribution route might be short or long depending on the number of intermediaries involved.

Direct Channel

Goods and services pass through several hands before reaching the hands of consumers. However, there are times when a producer sells items directly to a customer, in which case the channel is referred to as a direct channel. Door-to-door selling through catalogues in rural areas is an example of direct distribution.

Indirect Channel

It is difficult to make direct sales of items to clients when a company produces goods on a huge scale. As a result, middlemen enter the scene to ensure that commodities are available to clients. Wholesalers and retailers may be included. As a result, when a large number of intermediaries are involved in the distribution process, we can call it an indirect channel of distribution.

For example, for rural consumers, Farmers Service Co-operative Societies function like a mini supermarket, where they sell soaps, detergents, cloth, fertilisers, seeds, pesticides, etc., at economical and reasonable prices. As these societies have necessary infrastructure for storage and distribution, companies may contact these societies to sell their products.

Hybrid Channels

The hybrid channel of distribution combines direct and indirect dis- tribution channels. The hybrid channel is defined as a manufacturer’s utilisation of more than one channel to reach the final consumer. This draws in more customers and allows for more sales. For example, a seed manufacturing organisation may reach out to rural customers through door-to-door marketing or through Farmers Service Co-operative Societies.

Evolution of Rural Distribution System (RDS)

The following is a timeline of the evolution of rural distribution systems:

• Retailers, wholesalers, mobile traders, vans and weekly haats have all been part of the rural distribution system in the past.
  
  
• In the feeder markets, retailers function as wholesalers and wholesalers act as retailers to sell to small retailers from the neighboring communities.
  
  
• Some city stores dispatch salespeople to villages to take orders and sell goods to small businesses.

Wholesaling

Due to the low number of retail outlets and little off-take per retailer, most corporations overlooked rural areas. Village retailers found it simple to buy from wholesalers in feeder towns, thus they took advantage of the situation.

Because wholesalers are located in neighbor- ing feeder markets, which are frequented by village shops to restock stocks, wholesalers account for 50% of rural consumption. An Indian wholesaler is a dealer rather than a distributor, he or she is more likely to promote a brand during times of growth and remove support during times of decline. As a result, these wholesalers gained control of the market, and they frequently engaged in trade misconduct in the channel.

Public Distribution System (PDS)

The Public Distribution System (PDS) is a system that distributes essential items to a large number of people via a network of FPS (Fair Price Stores, sometimes known as “ration shops”). Rice, wheat, sugar, edible oil and kerosene are among the products. In order to safeguard customers from the shifting and growing price syndrome, PDS has been developed to reach both urban and rural populations.

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Various Distribution Models

Based on research, a product team assesses which technique makes the most strategic sense for delivering its products to customers. A product distribution plan entails all of the processes and strategies that a company uses to carry out this strategy. The type of customer targeted will be a crucial factor in determining which option is best for the product.

Companies may choose from the following strategies:

Selling Directly to Customers With an Assisted Sales Process

It’s your normal in-house (or hired) sales force, cold phoning potential clients or responding to marketing or ad campaign-generated prospect questions. For B2B items, when the product is complex and multiple meetings, possibly involving technical personnel, are required.

The corporation may decide that the high-end customer they are after would prefer to buy directly from the luxury brand rather than through a reseller.

Selling Directly to Customers With an Automated Purchase Process

With an automated buying process, you may sell straight to clients. Because internet shopping has become so common, this strategy has become the norm for businesses in a variety of industries. Even industries that used to rely on lengthy interactions with salesmen, such as car sales, have embraced the automated sales strategy.

Resale Distribution Open to All Resellers

If a product team wants to reach as many people as possible as rapidly as possible, they might welcome all resellers to sell their items. In similar circumstances, the company may determine that capturing market share is more vital than meticulously vetting each prospective reselling partner and accepting only the most respectable.