Term Paper On

Home Appliances for Rural Household

Submitted To Mr. Mohammad Baktiar Rana Course Instructor of MKT 523: Rural Marketing Submitted By Shakila Rahman 781 Afrin Nahar Siddiquee 783 Afra Nouare Rumi 784 Puja Pradip Roy 786 Group 3 17th Batch MBA Program

Institute of Business Administration Jahangirnagar University Savar, Dhaka.-1342

Date of Submission: January 9, 2013.

1.0 Introduction:
The majority of emerging market nations continues to have largely rural, agrarian-based economies. The economy of Bangladesh is primarily dependent on agriculture. Approximately 77 percent of the total population lives in rural areas (BBS 2003, Population Census 2001, National Report) and are directly or indirectly engaged in a wide range of agricultural activities. Delivering products and services into this market presents both unique challenges and enormous opportunities for companies. While there may be profit potential, the question remains as to how companies can successfully tap into it. The nature of rural emerging markets makes building a successful marketing channel challenging. The population is widely dispersed, transportation infrastructure is poor or non-existent, household incomes are low and sporadic, and traditional methods of creating brand trust and awareness will not work. Rural Bangladesh household livelihoods are becoming increasingly involved in the market economy as rural Bangladesh is increasingly integrated into the global economy. In many rural settings multinational and national suppliers have replaced local shops, enhancing linkages between villages and national and international markets (Toufique & Turton, 2003). Similarly, products generated in villages are being sold further away, reaching regional, national and international markets. So it is the time of targeting and segmenting the rural customers on the basis of product category to face different challenges and take opportunities.

2.0 Target market for Home Appliances for Rural Household:

In our opinion, Home Appliances for Rural Household should use a segmentation approach as general strategy to reach targeted customers. Although mass-marketing would create the largest potential market, which leads to the lowest costs and results in lower prices or higher margins, we propose segment marketing because it can create a more fine-tuned product offering and price for the target segment. Moreover, this approach enables to select more easily the best distribution and communication channels, and to have a clearer picture of the main competitors.

2.1.1 Segmenting Home Appliances markets for Rural Household: Cultural distinctions, different needs and demands of individuals, and diversities in customers buying behaviors require market segmentation of companies to satisfy their customers effectively. Thereby, the market can be divided in geographic, demographic, psychographic and behavioral segmentation variables and the company can focus on target segments which it wants to attract. The bases for segmenting consumer markets include: Demographical bases (age, family size, life cycle, occupation) Geographical bases (states, regions, countries) Behavior bases (product knowledge, usage, attitudes, responses) Psychographic bases (lifestyle, values, personality) Demographic Segmentation: In segmenting the market on demographic basis mainly considers occupation and family size of the consumer. Companies mainly target the people of middle-income level to upper income level in rural areas and design its products for mainly nuclear family in rural areas. Geographic Segmentation: Companies of home appliances producers segment the whole country in eleven zones for marketing purpose without considering rural and urban market. They are Dhaka North Zone Dhaka South Zone Dhaka South-West Zone Chittagong Zone Comilla Zone Barisal Zone Jessore Zone Sylhet Zone Bogra Zone Mymensing Rajshahi

 Psychographic Segmentation: Home appliance market for rural area is segmented by using lifestyle to segment themarket. For example Walton is marketing relatively cheaper CRT Television for lower-middle income and rural people and at the same time LCD Television for higher middle-income people. It also designs the refrigerators of different size and capacity considering the people of different lifestyle. Behavioral segmentation Home appliance market for rural area concentrates on a strong customer loyalty status in the behavioral segment

2.1.2 Home Appliances marketers in Bangladesh In the field of home appliances such as television, refrigerator, freezer, air-condition etc. some of marketers are:

Home Appliances

Television

Refrigerator

Air-Condition

Toshiba Sony

Sharp Butterfly General

LG Singer

Panasonic Whirlpool Panasonic Konka 4

Samsung My One Walton

3.0 Size of the Target Market for Home Appliances for Rural Household:
Home appliance companies mainly target the people of middle-income level to upper income level in rural areas. The companies design its products for mainly nuclear family as home appliances are durable products. As per the population census done by Bangladesh Bureau of Statistics (BSS) in year 2001, approximately 77 percent of the total population lives in rural areas. So these 77 percent people of Bangladesh are the population of rural market of Bangladesh. In Bangladesh, 41percent of the population lives on less than $1 a day and 84 percent of the population lives on less than $2 a day (UNICEF, 2009).So the main target market for home appliances in rural area are the rest 16 percent people who lives on more than $2 a day. Beside this as the customer for less priced home appliances, the companies can target the 43 percent people who lives on less than $2 but more than $1 a day. As per the Welfare Monitoring Survey (WMS) done by Bangladesh BSS in March, 2009, 40 percent people of total population have television and 37.7 percent have fan/AC. So these people can be also targeted as new buyer for more featured technological advanced home appliances.

4.0 4Ps By Marketers of Home Appliances in Rural Market:

The marketing mix is a set of marketing tools a company uses to pursue its marketing objectives in the target markets. These tools are called the 4Ps of marketing: product, price, place, and promotion. Based on the target market marketers of home appliances in rural market can use these strategies as flowed, 4.1 Product Strategies: Home appliances are electrical/mechanical machines which accomplish some household functions. It includes television, refrigerator, oven, air conditioner, fan, DVD player, fan etc. Targeting rural market and satisfying their needs for home appliances may be the most critical marketing mix issue for a marketer. The product attractive and successful in urban market may not gain the similar response from the rural market. So the marketer needs to have greater concern on following issues, -

 Design and Features of the products: Detailed market research is very important when a marketer designing the products for the rural market. Marketer cannot push the products manufactured for the urban consumers towards the rural market. For this R&D activities gaining greater attention as it permits close observation of rural people and their lifestyle indicates the significance of redesigning or modifying the products. Durability of Products: Rural people give immense importance to durability of a product. In case of home appliances this is the most important issue that rural customers give focus. Beside that rural people in general roughly handle the product; the product manufactured for rural market must be sturdy to bear the rough handling by rural people. Less complexity: Functional complexity of the product makes it difficult for rural consumers to understand the product. Sometimes too many features and options create problems of operating the product. Simpler products can be more conveniently used by the rural consumers. Easy Maintenance: To keep the maintenance cost of the product low is equally important while manufacturing the product for the rural market. Durability and ease in maintenance must go hand in hand. Servicing of the Product: The servicing of the products becomes an issue of thinking for rural consumers. If easy servicing solution is not provided by the marketer the product could lose its appeal to the rural market. So arrangements must be made to provide accessibility to after sales service. Branding Strategy: Brand differentiates the product from that of competitors. A brand name is very essential for rural consumers. It should be such that can be easily remembered. To promote brands in rural

markets, special strategies are required. Such easily memorable brand name and motto i.e. Walton branding them by Aamader Ponnyo

4.2 Pricing Strategies: As rural customers are more price sensitive then urban customers pricing strategy can be the strong weapon for the marketer in gaining the market share. Major home appliances such television, refrigerator are high in price and the price varies with quality and size, so consumers analyses different alternatives while making the buying decision. In deciding the pricing strategy marketer can do followings to attract the rural customers, Financing at Low interest: This strategy is applied by marketers in urban area and is equally suitable for rural market. Consumers purchases high priced consumer home appliances under finance schemes and make the payment usually on monthly installment basis. What the companies do in such pricing strategy is that instead of reducing the price of product, they charge lesser or zero interest. Increasing the Term of Payment of Loan: Rural customers may be worried more by the monthly installment payment then the cost (interest) associated with the payment. In such situation marketers of home appliances can increase the period of payment which will decrease amount of the monthly payment and thereby can attract the rural customers. Keeping the Product Simple: Additional features may increase the product price. So marketer should design the product in such way that satisfies the needs of rural customers in most efficient manner by keeping the price affordable.

 Positioning of the product: Positioning refers to creating favorable image in the mind of customers regarding the product or service. Even in case where the price of home appliances are kept high by the marketer, positioning the product as value for money and relating the price with the quality can justify the price of the product and can increase the sales. Income Flow and Consumption pricing: Generally a farmer has a pool of money after harvesting of crops and generally goes for the purchase of their needed goods those are higher in price. Pricing is thus, determined not only by the level of income of the target consumers but also influenced by the time when consumer has surplus income. Psychological pricing- A common pricing strategyPsychological pricing the trick with consumers psychology by pricing the product example television priced as BDT 9999. In rural market this pricing strategy can still be adopted as people there are still not much aware about the tactic that works behind this kind of pricing.

4.3. Place Strategies: Place refers to availability of products and reach the products to the desired customers. It is one of the most important variables in the marketing plans as such massive sales and distribution network managing is a huge task. As Chopra and Meindl write in their book Supply Chain Management, An inappropriate network can have significant negative effects on the profitability of the firm. While a company operating in a developed market needs to carefully consider its distribution network design in order to achieve profitability on the other hand companies operating in rural emerging market face particular challenges because of the low density of the population and poorly developed transportation infrastructure. More over challenges like lack of education of the customers, after-sale services particularly in case of home appliances make it more challenging for marketers. As a consequence of the low population density companies may be faced with continuously escalating inventory holding and transportation costs as they are forced to stock and manage
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sales points in thousands of villages to meet customer expectations for product availability. It is important to bear in mind that no matter what type of product or service a company is selling, the distribution network must be tailored to meet the needs of the business and its customers besides maintaining relationship with rural entrepreneurs (RE s). Here are some placement of distribution channels that can be used in case of home appliance products and services. Large Towns and Cities: Rural consumers prefer to buy consumer durables in large towns and cities because of the better prices they receive, and because of the better product variety that is available. Central Purchasing Location: Consumer durables have lower and more varied demand and in order to handle the higher variation in consumer durable sales, but also meet the customer`s expectation of being able to see and trial the product, demand from a larger population of customers can be aggregated into a central purchasing location. Companies can consider selling their products in weekly haats which attract a large number of consumers at a time from multiple nearby villages.

But in these above two cases while many consumer durables can be easily picked up by customers in a central location, some products require technical installation onsite. In this case it may make sense to have some selling locations more geographically dispersed to facilitate the response time that customers expect when they buy the product or companies may use its own agent or employee to help the customer for installation.

Rural hypermarts: These large-format stores are located in rural areas, they provide many products and services and cater to a large number of consumers in the surrounding towns and villages by establishing it in major rural roads.

 Custom distribution network: If the company already had ensured product demand in the market, it would be able to build out a custom distribution network with relatively low risk with vans, warehouses to reach the local retail outlets. However, if a company does not have a product and brand that already enjoys immense pull from the market, it is risky to build out an expensive custom distribution system before the first product has been sold. Hiring existing distributors and logistics companies: When the producing companies will likely be highly unorganized and inefficient and may have little opportunity for recourse, so they can hire the distributors to renege on their contracted promises. But the distributor has a proven distribution network that reaches deep into rural areas, the distributor has a long-term interest in allowing the rider to piggyback on its distribution network and the distributor uses a distribution model that will be effective for the type of product the rider is providing. This can be done in three forms Corporate Partnership: Entering company can partner with a corporation that has an existing distribution network in the targeted geography. Local Non-Profit Organizations: Engaging with numerous formal and informal local non-profit organizations that reach active networks of rural consumers. Business-to-Business Sales: A company seeking to distribute its products in a rural emerging market can initiate a large sale of its products to another company, non-profit organization, or government, once the carrier is in possession of the products, they can distribute them in the rural areas as they see fit.

4.5 Promotion Strategies: The various components of promotion include personal selling, publicity, sales promotion and advertising. The purpose of this strategy is to aware the customers about the product available to met their needs, grow interest on them and finally persuade of buying the product
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offered by the marketer. Components of promotion those can be used by marketer in rural market are discussed below, Advertising: Advertising is form of communication used by the marketers to persuade the target customers to take certain actions in response. It is the most powerful component of promotion and has the greater impact over consumer mind. Marketers of home appliances in rural market can use following types of advertising, Television Advertising: Though it is expensive but has greater coverage. Marketers can advertise their home appliances by famous cinema and TV stars who are treated as icon by the rural peoples. Radio Advertising: FM radio is a name of modern sensation over the rural area of Bangladesh. Even in mobile phones rural people can listen to radio programs. This is a relatively low cost way of advertising with a better coverage. Press Advertising: Home appliance marketers can advertise their products in both national and local news papers. Posters and Van: In rural markets or gathering places posters of home appliances products can be given. Again van covering with product posters can go through the remote rural areas to create consumer awareness. Personal selling It is the face to face interaction between the salesman and the prospective customers. Through a proper training, a salesman can be an effective medium between the marketer and the prospective customer. A good salesman is the one who has the thorough knowledge about
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the companys product and tries to strike a match between the product and the customer needs. In rural area personal selling following things are needed to be present in his salesman It is important for the salesman to have knowledge about rural area which he is supposed to cover. Better understanding and Fluency in the local or the regional language If salesman belongs to the particular rural district, his/her job becomes easy and chances of success in achieving his sales target increases. A salesman needs to remove the doubts of the prospective customer and persuade him to purchase the product. But approach shouldnt be too pushy.

Publicity/ public relations: Public relations in case of marketing in rural areas are highly important so as to nurture the relationship with the newly acquired customers. Also, dissemination of information concerning the welfare of the rural folk is possible only through the building of effective public relations.

Sales Promotion: It is the short term tool adopted by the marketer to increase the sales of the particular product. Types of sales promotions those can be used by marketers of home appliances in rural market are, Point of Purchase Display: Display materials like banners, sign boards, neon lights etc. Are distributed among dealers to attract and inform the customers about the products.

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 Demonstrations of Product: Free demonstration at dealers shops to inform the rural consumers about the functions and handling of the product. Incentives to Dealers: To increase the sales marketers can offer incentives to the dealers such gifts in festivals, increased commission, best dealer award etc. Freebies: Free gifts can be distributed among the rural customers when the purchase a home appliance. For example movie DVD can be given as gift when customer buys a DVD player. Discount on Occasions: Discount Refers to cut backing the price of the product. On the festive seasons marketer can offer 5% discount on the home appliances prices to pull up the sales. Fairs: Fairs are the integral part of rural peoples life. For the rural people, they are the source of entertainment and for the marketers a good opportunity to launch their products in the rural market. Customers can be attracted by using the folk media like organizing folk songs competition, folk dances, magic shows, puppet shows etc. Sponsoring Sports and Events: Marketers can sponsor games, tournaments, programs of rural areas such mela and thereby can develop the brand image on the rural consumers mind which will increase the sales return in long run.

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5.0 Conclusion:
Rural markets in Bangladesh are very viable targets for marketers as a young population; rising income and low penetration of many consumer durables imply that they are a strong source of demand. Moreover, the consumption pattern in rural areas is witnessing a shift from necessities to discretionary products. Rural people are attracted to products that are more in urbanized character and make life easier and give them comfort. They also prefer products that give them urbanized image among others, which is also a matter of prestige and differentiate their lifestyles from others. Marketing of home appliances in rural area at first seem to a difficult task but with proper product design customized pricing for rural customer, delivering products to the doorsteps to rural customers and by promoting products with marketing tools familiar with rural culture can make this initiative easier.

Bibliography
1. Bangladesh Bureau of Statistics. (2002). National Report on Population Census-2001. Dhaka: Author. 2. Bangladesh Bureau of Statistics. (2010). Report on Welfare Monitoring Survey-2009. Dhaka: Author. 3. Khan, A.R., Talukdar, R.K., Sohail, M. and Roy, D.K. (2005). The Quarterly Journal of the Bangladesh Institute of Development Studies, XXXI (September-December 2005). 4. Neuwirth, B. (2012). Marketing Channel Strategies in Rural Emerging Markets: Unlocking Business Potential. Vanstone: Press of Kellogg School of Management. 5. Toufique, K.A. and Turton, C. (2003). Hands not Land: How Livelihoods are Changing in Rural Bangladesh. Dhaka: Bangladesh Institute of Development Studies. 6. United Nations Children's Fund (UNICEF). (2009). Bangladesh: Overview. Retrieved January 03, 2013, from http://www.unicef.org/bangladesh/overview_4840.htm

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