Rural Marketing Project (Praveer Saini, Dileep Singh, Shyam Modi)

8/9/2019 Rural Marketing Project (Praveer Saini, Dileep Singh, Shyam Modi)

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Rural Marketing Comprehensive Project

Submitted To: - Submitted by:-

Ms.Kavita Sukla Dileep Singh Kansana

Praveer Saini

Shyam Modi


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TABLE OF CONTENT

PARTICULAR PAGE NO.

An Executive Summary

Statement of Purpose for the Plan 3

Objectives and Academic Rationale 4

Organization Structure 4

The Market 5

Competition and Competitive Edges 11

Strengths and Weaknesses of the Programme 13

Marketing Mechanisms 14

Selling and Pricing 18

Resources 19

Timescales 20

Costing and Cash Flow 21


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EXECUTIVE SUMMARY

The main goal of our company is to provide, in a sustainable manner, lighting for

the poor rural communities that are currently off the grid. We are going to set a

company near the villages in the towns and for the raw material we will deal with

the local suppliers so we can get the raw material easily and at economical rate.

In India, there are lots of villages still facing an electricity problem. Jharkhand,

Bihar, Uttar Pradesh, Orissa, Uttaranchal, Madhya Pradesh etc are some of the

states where significant number (more than 10%) of villages are yet to be

electrified.

The opportunity lies in providing an LED light product to non-electrified

households. Rural non-electrified households have a variety of lighting needs that

our LED lamps will fulfill.

STATEMENT OF PURPOSE FOR THE PLAN

To establish business of LED lamps and distribution of these lamps in the rural

areas those are still un-electrified like villages of Uttar Pradesh, Orissa,

Uttaranchal, and Madhya Pradesh and provide a better option and substitutes to

augment candles and kerosene lamps for lighting the home


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OBJECTIVES AND ACADEMIC RATIONALE

1. More energy-efficient lighting for use outside the home.2. More indoors lighting.3. Safety and health concerns: fumes from burning candles or kerosene.4. More quality light for social activities inside and outside the home.5. Make a store between 10-15 villages which are about 50-60 KM from the

town.

6. To spread awareness about the benefits of using LED lamps among thevillagers.

ORGANIZATION STRUCTURE

Our company will be incorporated as a for-profit company that operates out invillages and in urban areas also. It will be a free standing manufacturing and

sales organization whose job it is to find the means to market and distribute

the goods and light up the World Global design, create, and produce. The main

goal of the organization is to figure out how to create a sustainable company

that can provide lighting for the poor. In order to do this the company needs

to:

Understand the target customers, their needs, and desires. Successfully market the product to end users. Build a brand users recognize and can trust.


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Sell the products in urban markets to create pull from rural users. Build relationships with rural shop owners. Sell the product to local distributors who can place the product in a large

network of stores.

THE MARKET

Our main end-user is a household that is off the main electricity grid and is using

candles, flashlights, or kerosene (or a combination) to light up their house at

night. However, the value proposition of a more energy efficient flashlight will

make the LED product attractive to urban consumers. Taking advantage of this

will target urban consumers to improve financial results.

The following table outlines the key needs of the end-user in a low-light setting

and how these are met by the offering:

Need Result from Usage Scenario

More light Enable the end-user to better conduct

household activities in the

early morning and at night

More time for household

activities

Enables end-user to extend the

workday if desired and also to

continue or begin educational activities

for household adults and/or

children


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Safety and health No more fumes from biomass, candles,

or kerosene and no more

potential for fire or injuries due to

contact with flame

Social activities Enables end-user to participate in social

activities inside or outside

the house where darkness had

previously prevented it from

happening

State wise un-electrified villages (as on 12.12.2008)

Sl.

No.

States/UT Total No. of Inhabited

Villages as per 2001

census

Total No.

of Villages

Electrified

No. of un-

electrified

villages

1 Andhra Pradesh 26613 26565 48

2. Arunachal

Pradesh

3863 2335 1528

3. Assam 25124 19081 6043

4. Bihar 39015 19251 19764

5. Jharkhand 29354 7641 21713

6. Goa 347 347 Nil

7. Gujarat 18066 17940 126

8. Haryana 6764 6759 5

9. Himachal 17495 16891 604


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Pradesh

10. J&K 6417 6301 116

11. Karnataka 27481 26771 710

12. Kerala 1364 1384 Nil

13. Madhya Pradesh 52117 50474 1643

14. Chhatisgarh 19744 18532 1212

15. Maharashtra 41095 40351 744

16. Manipur 2315 2043 272

17. Meghalaya 5782 3016 2766

18. Mizoram 707 691 16

19. Nagaland 1278 1216 62

20. Orissa 47529 37663 9866

21. Punjab 12278 12228 Nil

22. Rajasthan 39753 37276 2477

23. Sikkim 450 405 4524. Tamil Nadu 15400 15400 Nil

25. Tripura 858 818 40

26. Uttar Pradesh 97942 57042 40900

27. Uttaranchal 15761 13131 2630

28. West Bengal 37945 31705 6240

Total (States) 592857 473287 119570

Total (UTs) 875 875 Nil

Total (All India) 593732 4745162 119570


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The following table is a breakdown of all customer segments:

Characteristics Rural Non-

Electrified

households

Rural Vendors Lower-Income

Urban

Electrified

Households

Other

Urban

Electrified

Households

Ability to Pay Low Medium Low/Medium High

Demographics Mainly

indigenous,

agricultural

Permanent

stores

in towns;

weekly

markets

Shanty-towns

bordering

large

urban areas

All other

electrified

households

Ease of

Distribution

Low Very Low Medium Medium/High

Mission

Alignment

High Medium Medium Low

Promotion Medium High Medium Medium

Customer

Need

High Medium Medium Medium

Previous Light Flashlights,

Biomass,

Candles,PV systems

Gasoline

generators

Grid,

flashlights

Grid,

flashlights

Overall

Attractiveness

High Medium Low/Medium Medium/High


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The following table lists current end-user options for lighting up a household in

India:

Light Source Regional use Advantages Drawbacks

Candles Rural; off-grid Familiar

technology

Safety hazard

Short life

Incandescent

Flashlight

Rural/ Urban;

on and off-grid

Portable Widely used

and accepted

Replacingbatteries

expensive

Battery charge-8 hrs

Incandescent

Bulb 40-W

Urban/Rural;

grid

Highest lumensoutput

Long life

Unit is fragile Inefficient use

of energy

Need gridaccess

CFL 5-W Urban; grid Better lightoutput per cost

Long life

Difficult tomake unit small

Unit is fragileKerosene

lamp

Rural; off-grid Portable Produces fumes Safety hazard Kerosene

expensive

Short life


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Target End-User Segments

LED lamps have chosen to target rural non-electrified households as well as more

affluent urban households as its main customer segments.

1) Rural Non-Electrified Households: The highest concentrations of non-

electrified households are located in rural areas. These end-users do not have

access to the electricity grid and rely mainly on candles and flashlights to provide

lighting for household activities. They are the end-users most likely to benefit

from the savings in batteries and the improved and more useful light.

2) Other Electrified Urban Households: This customer segment, while not directly

aligned with the Foundations main mission to bring light to those that dont have

it, is an important source of revenues that will help subsidize losses incurred with

the LED product rollout on an ongoing basis. Large retail stores are located in all

the states in which we are rolling out the LED lamp.

Other potential customer segments:

Although we initially considered two more segments, rural vendors and lower-

income electrified urban households, we discarded them for the following

reasons:

Lower-Income Electrified Urban Households: This end-user segment is not

attractive mainly because lower-income urban households often connect

themselves to the grid illegally and dont generally need flashlights to venture

outside their homes. Even homes that are connected legally to the grid do not

spend a substantial amount of money in electricity.


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Rural Vendors: Many lower-income segments go once a week or more to shops

located at a short or medium distance from their communities. These shops stock

basic goods and other household item such as batteries. Although this segment

provides fast marketing of our product, we did not choose them as a main target

segment because most of these shops are already electrified through either solar

home systems or generators.

COMPETITION AND COMPETITIVE EDGES

There is not much competition for us in the market because the existing players

are in same business but they are not concentrating in rural areas, in which we

will distribute the LED lamps.

But if we look at overall distribution of LED lamps in the city then our main

competitor are as follows.

Sunmax Energy Systemss Private Limited Petece Enviro Engineers Indosol Energy Private Limited Gem Optical Instruments Industries FIEM Industries Limited

The key strategic advantages of the LED product are higher energy efficiency,

simplicity of operation, durability, varied functionality, cost, and safety.

Energy efficiency: LEDs consume 6 to 10 times less energy thanincandescent bulbs.
http://www.indiamart.com/sunmaxenergy/solar-energy-product.htmlhttp://www.indiamart.com/peteceenviroengineers/http://www.indiamart.com/indosolenergy/http://www.gemopticals.com/http://www.indiamart.com/fiemindustries/automotive-lamps-components.htmlhttp://www.indiamart.com/fiemindustries/automotive-lamps-components.htmlhttp://www.gemopticals.com/http://www.indiamart.com/indosolenergy/http://www.indiamart.com/peteceenviroengineers/http://www.indiamart.com/sunmaxenergy/solar-energy-product.html


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More light: Incandescent flashlights have a lumens output of 16-20, whilethe LED of our lamp has an output of 40.

Simplicity of operation: The LED product is very similar in design toproducts already used by our target customer segments. If they are

convinced by our value proposition, they do not have to deal with the

uncertainty in adopting and using an unfamiliar, new technology.

Durability: LEDs are ideally suited to the harsh conditions that can exist inthe developing world. With no delicate glass or filaments, LEDs can

withstand severe shock and vibration, - a common cause of premature

failure with traditional light sources such as incandescent bulbs and CFLs.

Varied functionality: Given its design, the LED product can be placed on thewall, be hanging from the ceiling and used as a regular flashlight. This gives

the end-user a variety of task/ambient light functionalities that fit the

various user scenarios of our customer segments.

Cost: The LED lamp will cost $9.95, and we believe that the consumer willbe able to recover this investment in 2 months, thanks to savings in battery

consumption.

Safety: LED technology produces no fumes and has no hazardouscomponents. It is solid-state technology and is nearly indestructible.


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STRENGTHS AND WEAKNESSES OF THE PROGRAMME

Strengths:

LED technology: LED technology is solid state, very durable, and runs onlow voltage (2.5- 3V). It has a long life in comparison to an incandescent

bulb (more than 50,000 hours), and uses 5% 4 of the energy of a regular

incandescent bulb.

Flashlight functionality: Enables to end-user to utilize the product as both aflashlight and as a light fixture to be hung from the ceiling/wall or be placed

in any part of the room as a source of light. In rural areas it is often

necessary to go outside for household/social activities.

Adjustable stand: An adjustable stand allows the product to be oriented asa task or ambient lighting system and gives it the flexibility to be placed on

a variety of household surfaces.

Lightweight/portable: Portability is important as it allows the end-user totake it outside the household and also the flexibility to change from

task/ambient capability.

Uses commonly available batteries: Our end-users, even if accepting ofnew technologies, are more likely to accept the LED product if several

aspects of its design and use are familiar to them. In addition, most rural

households in Mexico have small flashlights and purchase batteries on a

weekly or bi-weekly basis.

Ambient light: Even though it can be used as a flashlight, its main intendeduse is as a source of ambient light.


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Weaknesses:

Given the low cost of candles and kerosene relative to flashlights, it is notpossible to derive savings from using our lamp as a substitute of these

lighting tools.

To Fear that existing manufacturer in led lamps would be also looking toenter in rural market.

Availability and continuity of electricity for charging Batteries in rural areas. Initially costly Repairing problems in rural areas.

MARKETING MECHANISMS

Our business model consists of selling a lamp that works with two D batteries and

one LED (Light Emitting Diode). It can be used as a flashlight for outdoors work as

well as an indoors light for ambient purposes. Our lamp will initially have the

following purposes:

It replaces current flashlights It replaces candles and kerosene lamps used indoors It is an additional light to the existing ones

Our main value proposition is the fact that our lamp is a money saver.

MARKETING PLAN

Overall Marketing Strategy

Our companys product will have to be priced a little lower than its competition.

This means company needs to clearly articulate its benefits to consumers in order

to attract purchase intent although companys primary target market will be rural


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households that do not have electricity, company plans to sell its products in both

rural and urban areas. This is being done for three reasons:

Rural families perceive products that are sold exclusively in rural areas aslower quality goods- goods that were not high quality enough to be sold in

the city, and so companies have no choice but to offload them in rural

areas. Conversely they perceive goods that are popular in urban areas,

especially if they are found in large chains like Wal-Mart, to be of high

quality. As company wants its brand to be perceived as high quality we

believe it is imperative that we distribute our product in urban areas in

order to get that association.

As most rural people travel to urban areas at least once every quarter,there is a good chance our target consumer will either learn about a

product or purchase a product while in an urban area. By placing its

products in urban centers company not only increase its ability to sell

products to rural customers, but it may also create pull for the product,

whereby rural customers are asking their local Shopkeeper if they have our

product. This pull can help expand our distribution network.

Companys target market is small and dispersed. It would be very difficultand costly to create a distribution network that reaches only our target

market and still reach enough economies of scale to make the company

sustainable. In order to be sustainable, company needs to thus create a

product that is accessible to the entire population, and allow urban sales to

help subsidize company growth.


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Product Differentiation

In order to differentiate companys product from others in the marketplace,

company will focus on innovation. Packaging and other marketing

communications need to stress the state of the art technology this light of the

future uses. As consumers have indicated that other company products represent

both high quality and technologically innovative products, companys products

should make it clear that the product was designed or developed after lot of R&D.

Brand Management

Company will position itself as a company that cares. Although few rural

consumers may make in store purchase decisions based upon the fact that

companys goal is to provide sufficient lighting to homes that do not have

electricity, this goal provides a wonderful publicity vehicle for the brand that can

create great buzz and free marketing. The end goal oflighting up the world can

lead to media coverage, nonprofit, government, or socially minded (i.e. The Body

Shop) corporations seeking out the product in large quantities, as well as general

consumer brand recognition. Also as rural consumers currently have somewhat

negative associations with corporate rural, clearly articulating our goal of lighting

up the world will not only differentiates our corporation, but it also may help win

the trust and minds of consumers.

Geographical Location of Manufacturing

Company plans to manufacture its product in towns (NCR regions) those are near

to villages. Manufacturing and assembly capabilities in towns are very high and it

is believed that due to both the small lot sizes and the expenses that shipping the

product nationally would incur, that manufacturing would be cheaper in towns.


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Manufacturing

Company will partner with a low cost, high quality manufacturer of LED in towns

or from cities to create its lamps. In India manufacturing is amongst the highest

quality most affordable manufacturing in the world and it is believed that few

cost benefits and economies of scale would be realized by manufacturing the

product outside of villages. Company will contact with the manufacturer of the

light casing and circuit board. We will assemble the light and be responsible for

the packaging as well as any literature that will accompany the light. After

assembling the light the company will ship the light initially to distributors or even

retailer but as quantities sold and production runs increase we will cut the

intermarries between the distributions or can take the orders directly from

households.

Company

We will maintain a warehouse/storage facility where it will stockpile its inventory

of lights. Company will also be able to negotiate with its manufacturers to hold

inventory on their premises. As sales and production numbers become more

settled, it will be easier to time and manage production runs and inventory-

carrying costs can be reduced. We will ship inventory to distributors, retailers, and

nonprofit partnerships.

Distribution

Distributors will receive shipments directly from the company. If the distributor

times the order around production runs, it can get a cheaper price for the product

and direct shipment. If the distributors order does not line up with the

production runs, then it will receive its shipment from companys warehouse. The


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distributor will order lights in lots of 400 and will responsible for its own inventory

management.

Rural Retailers

The origin of shipment will depend upon both the timing of the order and the

relationship that has been established. For example, non-profit or government

entities may develop a relationship with company where they can time their

orders and order them in large enough lots that for them it makes sense to get

the product sourced directly from the manufacturer. Smaller rural retailers would

receive the product through their relationship with their distributor.

Maintenance and repair

Shop owners will be responsible for maintenance or repair of the lights. Shop

owners will have a 90 day warranty on the product from the date of a shipments

arrival at a shopkeepers store. If the product is defective or breaks within these

90 days, company will replace the light at no cost. Company will also provide

information to shopkeepers and local electricians on how to repair LED lights so

that people feel more comfort in repairing to lights.

SELLING AND PRICING

Selling:

The company will need to sell to a variety of different distributors and retailers at

the same time. The initial goal for the pilot program is to get 4 rural

distributors/retailers signed for a 1-month test run of the product. The initial

strategy is to target large rural distributors. The company sales team would pitch

them the product leveraging our products quality as well as innovation and if

appropriate our companys social mission. If this test run proves successful, the


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idea is to expand to a greater number of retailers by either increasing the number

of distributors or increasing our reach within those distributor networks. After the

pilot test, company will make a greater push to sell its product in urban stores

also.

Pricing:

It is estimated that the product will cost around 80 Rs to make. Given a 25%

distributor margin, transportation costs, taxes, and a retailer mark-up, the end

price rises to 100 Rs. In order for the product to be affordable it needs to be less

than 200, so we will do whatever we can to keep the product under the 200 Rs

level.

Although company foresees itself moving forward with a single pricing schema, it

is worth noting that as the target customer and distribution channels are different

in rural and urban areas, there lies potential to perform some price discrimination

and charge urban customers a higher price. Urban customers have in general

more disposable income and would see a price over 200 as less of a barrier. That

being said, more research needs to be done to understand the effects of a dual

pricing strategy before one could be implemented.

RESOURCESBasic resources for production-

We will purchase LED, circuits board and light cases from the local orremote suppliers.

Agreements with the distributers and the retailers. To provide the batteries in villages at low cost by agreements with the local

suppliers.


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Financial resources-

Our initial capital 3 lakh will be utilized in following functions:

To set up a small manufacturing unit in towns. To hire employees. To purchase equipment for assembling the LED, cases and circuits. To set up a small store (Room) in villages. Logistics cost for the transportation

TIMESCALES

The initial 1-year strategy will be a four-phase process:

Phase 1 Phase 2 Phase 3 Phase 4

Development Pilot Program Initial Rollout Southern

Expansion

Manufacturingagreements

Request for quotes Design, marketing

agreements

Distributoragreements

Small roll-out

Location:Villages of

Uttar

Pradesh

Potentialrural

market

Jharkhand,

Bihar, Uttar

Pradesh,

Uttaranchal,

Madhya

Pradesh

Potentialrural

Orissa

Tamil nadu

A.P.

Kerala

Duration: 1 months Duration: 3 months Duration: 4 months Duration: 4 months


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COSTING AND CASH FLOW

A-Purchasing the raw material

-We will purchase LED, circuits board and light cases from the local or remote

suppliers = 50000 per month initially

B-Salary of employees

-2 persons (experts) for giving information to electrician about repairing the LED

lamps in village = 12 thousand per month

-2 person for creating awareness about the LED lamps benefits = 10 thousand per

month

-5 person for operating the whole process like, manufacturing, procurement,

distribution, warehousing, sales and marketing = 10 thousand each = 50000

-1 person for store in town = 6 thousand

-1 person for store in near village = 5 thousand

-labors on daily wage basis = 50000 per month

C-cost involved in making hub.

-Rent of room (store) in village = 1000 per month

-Rent of space in town = 10000 per month

-Cost in purchasing equipment = 40 thousand

D-cost involved in outsourcing logistics

Depends upon the frequency of transportation of material and size and weight of

baskets but approximately = 50000 per month

Net expenditure- 2, 84, 000 Rs


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Profit-

The market price of the LED lamps would be of 150/160 around.

Profit margin per 1 piece 50 to 60 Rs

Target for selling numbers of Lamps 10,000 or more in initial period Phase 2

Operating cost of Battery:

For our LED lamp, we considered batteries as our power source.

Power

Generation

Startup

Cost

Ongoing

Cost

Advantages Drawbacks

Batteries-

2 D-cell

Low(20 30

RS)

Low Widelyavailable

Relativelycheap

Need

constant

replacing

Rural Marketing Project (Praveer Saini, Dileep Singh, Shyam Modi)

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