TERM PAPER

OFRURAL MARKETING

TOPIC: TO PREPARE MARKETING PLAN FOR A.C IN ANDHRA PRADESH

Submitted by: Submitted to: MOHIT SHUKLA Mr. Pratish ShrivastavSEC: S1803,B32REG. ID: 10810287

ACKNOWLEDGEMENT

It is immense pleasure for me to put on record my profound gratitude to the persons who

has supported me in substantial ways for the successful submission of this dissertation.

I wholly confess that the credit of this report is not only my treasure as I have merely

brought together the teaching, guidelines, knowledge, tips and notes from different

members of the institutes.

May I also, in the same breath, express my gratefulness to my honourable teacher and my

project guide Mr. Pratish Shrivastav for enlightening and guiding me at every step of the

completion of this project and for acquainting me with the work environment and providing

productive suggestion to handle problems.

Last but not the least, my sincere thanks to my parents and my friends for supporting me.

CONSUMER DURABLE INDUSTRY IN INDIA

With the increase in income levels, easy availability of finance, increase in consumer

awareness, and introduction of new models, the demand for consumer durables has

increased significantly. Products like washing machines, air conditioners, microwave ovens,

color televisions (CTVs) are no longer considered luxury items. However, there are still

very few players in categories like vacuum cleaners, and dishwashers. Consumer durables

sector is characterized by the emergence of MNCs, exchange offers, discounts, and intense

competition. The market share of MNCs in consumer durables sector is 65%. MNC's major

target is the growing middle class of India. MNCs offer superior technology to the

consumers, whereas the Indian companies compete on the basis of firm grasp of the local

market, their well-acknowledged brands, and hold over wide distribution network.

However, the penetration level of the consumer durables is still low in India. An important

factor behind low penetration is poor government spending on infrastructure. For example,

the government spending is very less on electrification programs in rural areas. This factor

discourages the consumer durables companies to market their products in rural areas

Growth in 2008-09

Consumer Durables Growth

Air Conditioner 20-25%

Refrigerator 5-10%

Microwave Ovens 25%

Washing Machines 5-10%

Color Televisions (CTVs) 15-20%

Black & White Televisions -20%

Clock 10%

Watch 10%

VCDs 30%

Consumer Electronics (Overall) 9%

AIR-CONDITIONER INDUSTRY

The Indian AC market size is Rs 2790 crore comprising the household and commercial segments. The market is currently at a nascent stage and shows tremendous promise to grow. However, despite the reasonable growth in the last few years, the growth potential has not been entirely captured.

The key bottleneck to growth is the low affordability of ACs. This is clearly evidenced in the Chinese market where substantially low price points (less than 50% of Indian retail prices) have driven penetration of ACs.

In order to capture the growth potential, a substantial reduction in price is required. The primary cause for the high prices is the high incidence of indirect taxes, excise duties and import duties on the product category: accounting for close to 45% of the MRP. In particular, the abnormally high excise duty of 32% is a major deterrent to growth.

With government support in duty and tax rationalization, the AC market can grow very rapidly over the next 5 years to as much as Rs. 4,000 crores by 2007. Reducing excise duties, indirect taxes and import duties is a win-win-win solution for the government, players and consumers.

Current industry status

The major players in the industry are Amtrex Hitachi, Blue Star, Carrier Aircon,

Daikan Shriram, LG, Samsung, Voltas, Whirlpool etc.

The Indian AC market size is Rs 2,790 crore comprising the household and

commercial segments. The market comprises of Window ACs (Rs 1,200 crore i.e.

5,40,000 in volume terms); Mini Split ACs (Rs 730 crore i.e. 2,20,000 in volume

terms); Ducted Split and Packaged ACs (Rs 400 crore i.e. 2,16,000 tons) and Chillers

& Central Plant (Rs 460 crore i.e. 2,72,000 tons).

The market is currently at a nascent stage and shows tremendous promise to grow.

This can be validated by the fact that the penetration in India is very low at just 1% of

all households as compared to 7% for Indonesia, 20% for China, 24% for Thailand,

45% for Malaysia, 52% for Korea, 67% for Hong Kong and 70% for Taiwan.

However, despite the reasonable growth in the last few years, the growth potential has

not been entirely captured. The growth has been lower than potential, as AC still

remains a very expensive purchase even for high-income class people in India and AC is

still viewed as a luxury item in India. The key bottleneck to growth is the low

affordability of ACs.

ANDHRA PRADESH

Andhra Pradesh is India's fourth largest state by area and fifth largest by population. Its capital and largest city is Hyderabad. The State has the second longest coastline (972 km) among all the States in India.[1] Andhra Pradesh is historically called the "Rice Bowl of India". More than 77% of its crop is rice; Andhra Pradesh produced 17,796,000 tonnes of rice in 2006.[2] Two major rivers, the Godavari and the Krishna run across the state.

Demographics

Telugu is the official language of the state, spoken by 80.5% of the population. Telugu is the second most widely spoken language in India, after Hindi[21] The major linguistic minority groups in the state include the speakers of Urdu (8.63%) and Hindi (1.63%), Kannada (1.8%) and Tamil (1.91%).[22] The Indian government designated Telugu as a classical and ancient language on 1 November 2008.[23]

Population Trend

Census Pop.  %±

1961 35,983,000 —

1971 43,503,00020.9%

1981 53,550,00023.1%

1991 66,508,00024.2%

2001 75,727,00013.9%

Source:Census of India

Other languages spoken in Andhra Pradesh by less than 1% each are Marathi (0.84%), Oriya (0.42%), Gondi (0.21%) and Malayalam (0.1%). Languages spoken by less than 0.1% are the states residents include Gujarati (0.09%), Savara (0.09%), Koya (0.08%), Jatapu (0.04%), Punjabi (0.04%), Kolami (0.03%), Konda (0.03%), Gadaba (0.02%), Sindhi (0.02%), Gorkhali/Nepali (0.01%) and Khond/Kondh (0.01%).

The main ethnic group of Andhra Pradesh is the Telugu people who primarily are Dravidians.

Andra Pradesh ranks tenth compared to all Indian States in the Human Development Index scores[24] with a score of 0.416.

National Council of Applied Economic Research district-wise analysis in 2001 reveals that Khammam, Krishna, West Godavari, Chittoor and Medak are the five districts with highest Human Development Index scores in ascending order in rural AP. Mahbubnagar, East Godavari, Warangal, Visakhapatanam and Guntur are the districts with lowest Human Development Index. The data show that the poor make up 16.3 per cent of the total population in rural AP and expenditure on consumption is around 13.5 per cent of the total consumption expenditure. The female literacy rate is 0.66 compared to male literacy rate in rural AP. The district-wise variations for poverty ratio are high and low for ratio of female/male literacy rate.

Economy

Agriculture has been the chief source of income for the state's economy. Four important rivers of India, the Godavari, Krishna, Penna and Thungabhadra flow through the state, providing irrigation. Rice, sugarcane, cotton, mirchi (chilli pepper), mango and tobacco are the local crops. Recently, crops used for vegetable oil production such as sunflower and peanuts have gained favour. There are many multi-state irrigation projects in development, including Godavari River Basin Irrigation Projects and Nagarjuna Sagar Dam, the world's highest masonry dam.

The state has also started to focus on the fields of information technology and biotechnology. In 2004–2005, Andhra Pradesh was at the fifth position in the list of top IT exporting states of India. The IT exports from the State were Rs.82,700 million in 2004–2005 ($1.8 billion).[28]

The IT sector is expanding at a rate of 52.3% every year. The IT exports reached Rs.190,000 million ($4.5 billion) in 2006–2007, contributed to 14 per cent of total IT exports of the nation and ranked fourth in India. The service sector of the state already accounts for 43% of the gross state domestic product (GSDP) and employs 20% of the work force. The state capital, Hyderabad is considered to be bulk drug capital of the country. 50% of the top 10 companies in Pharmaceutical field are from the state. The state also commands a very prominent place in the infrastructure space, with many companies from the state being up there at the fore-front.

Andhra Pradesh ranks second in India in terms of mineral wealth. The state has about one third of India's limestone reserves, estimated at about 30 billion tonnes. The Krishna Godavari Basin has huge reserves of natural gas, and petroleum. The state is also is blessed with a large amount of coal reserves. The state ranks first nationwide in hydro electricity generation with a national market share of over 11%.

Andhra Pradesh's GSDP for 2005 was estimated at $62 billion in current prices. This is a chart of trend of GSDP of Andhra Pradesh at market prices estimated by Ministry of Statistics and Programme Implementation with figures in millions of Indian Rupees. Accordingly, the state ranks fourth in terms of overall GSDP, and fourth in per capita GSDP among the major states of India. According to another metric, the state ranks third in terms of Gross State Product among all the states of the Indian Union.

YearState GDP (Rs. MM)

1980 81,910

1985 152,660

1990 333,360

1995 798,540

2000 1,401,190

2007 2,294,610

AIR CONDITIONER MARKET IN ANDHRA PRADESH

The penetration of A.C in rural areas of Andhra Pradesh is very low because of low per capita

income as well as due to less awareness and most important due to lack of infrastructure in

the areas of Andhra Pradesh. Only near about 10000 in number of a.c’s are possessed by

people in the rural area of Andhra Pradesh and its only about 6.1% as we compare with the

whole country. But in the urban part of the state it is not the case. Major companies are

present in various part of the state and offering various products to the people. With the

launch on the new range of air conditioners in Andhra Pradesh, Godrej Appliances aims to

increase its market share to 10% in 2009-10. Godrej Appliances, a pioneer and leading

manufacturer of consumer durables for five decades, has launched a new 5 Star Rated Range

of EON Air Conditioners. The new EON Range of Air Conditioners incorporates

ultramodern technology for high cooling and power saving, and comes in four different

capacities of 0.75, 1.0, 1.5 and 2 ton capacities in Split AC versions. At 31% growth (the

highest in the industry), Godrej Appliances has been growing at more than three times the

industry growth rate of the last three years. With the launch on the new range of air

conditioners in Andhra Pradesh, Godrej Appliances aims to increase its market share to 10%

in 2009-10. Apart from it Samsung is also eyeing on 22% of a.c market in Andhra Pradesh.

The company expects to achieve a 110 per cent growth in its AC business in Andhra Pradesh

this year.

4 A’s for Andhra Pradesh’s Rural Market

Opportunity

The Indian rural market with its vast size and demand base offers a huge opportunity that MNC’s cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban. As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in 1991, rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income. The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased. The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster than the urban.

The 4A approach

» Availability

The first challenge is to ensure availability of the product i.e the Air conditioner. Andhra pradesh’s 27,000 villages are spread over 0.2 million sq km; 40 million people live in rural areas, finding them is not easy. However, given the poor state of roads, it is an even greater challenge to regularly reach products to the far-flung villages. So a strong distribution system for the A.C’s is required. For it I will make dealers for the products and well as a strong transportation network will also follow.To service remote village, various means will be used like trucks, autorickshaws, bullock-carts and even boats in the backwaters of Andhra Pradesh.

» Affordability

The second challenge is to ensure affordability of the product. With low disposable incomes, products need to be affordable to the rural consumer, as for the a.c the target audience will be the upper middle class and upper class of rural areas so prices will be fixed according to that which will fit to the pockets the audience.

» Acceptability

The third challenge is to gain acceptability for the product. Therefore, there is a need to offer products that suit the rural market. One company which has reaped rich dividends by doing so is LG Electronics. In 1998, it developed a customized TV for the rural market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Likewise it our a.c’s will be made which will be less electricity consuming and also within the range of the people.

» Awareness

A combination of TV, cinema and radio to reach 53.6 per cent of rural households in the Andhra Pradesh will be used . Also money will be spend on advertising on Doordarshan, which alone reached 41 per cent of rural households. Also other means of promotion like banners, posters and tapped all the local forms of entertainment will be used. Promotional vans and road shows to reach rural customers will also be done. Local language advertising will also be used to spread information about the A.C’s..

The rural marketing strategy of A.C in Andhra Pradesh will follow these steps. Firstly profiling of customers will be done like for A.C potential customers will be upper class and the upper middle class people of rural A.P. Proper market research will be then conducted to know about the needs and wants of the customer from the product. STP will then follow and a good distribution network will be formed and after that promotion of the product will be done

RURAL MARKET STP

SEGMENTATION

In the rural parts of Andhra Pradesh population is very varied hence proper segmentation very essential for the success of the product. Segmentation will be done on the basis of following factors.

Geographic :

Village size: Villages with size of more than 2000 will be targeted

Climate: As a.c is for cooling so areas which are hotter will be chosen having potential customers.

Demographic

Age: As the A.C will be purchase by the main member of the family so age from 35-45 years will be the segment.

Family Size: Four or more than it.

Gender: As in rural area men are the decision maker so Male audience will be our segment.

Income: As upper class audience is targeted so families with income 15000 or more will be the segment.

Psychographics

(consists of psychological: sociology: anthropological)

Lifestyle :Families with a good lifestyle.

Personality : Authoritarian, Ambitious

TARGETING

Select Target Segment:

The target market will be the rich people living in the rural areas of Andhra Pradesh as well as the people having a good income.

Formulate Market a marketing strategy for the target market:

Marketing strategy like various promotional tools to be used, distribution channel etc then will be made for the target market.

POSITIONING

USP of the product – uniqueness of the product:

For positioning the product unique features will be added like low electricity consumption as well as price less as compared to others will be the USP of A.C

Special needs : Special needsof the customers like more electricity saving at less cost will be addressed.

DEVELOPMENTAL MARKETING

Developmental marketing is a process through which awareness is created

It will be through demonstration about the product

Through presentation among the target market.

Through tie up with Bank to provide loans at lesser interest rates for buying the

product.

STRATERGIES FOR RURAL MARKET

PRODUCT STRATEGIES

The specific strategies, which can be employed to develop or modify the products to targets

the rural market, can be classified as follows:

.1.  Low cost: Given the low per capita income & purchasing habits of the rural consumers,

the prices for the a.c’s will be fixed low as compared to the competitors.

2.      New product designs: New design for the a.c’s would be made which would suit the

lifestyle of rural people of Andhra Pradesh. Keeping in view the rural life style the

manufacturer and the marketing men can think in terms of new product designs..

3.      Brand name: For identification, the rural consumers do give their own brand name on

the name of an item. We will do more and more the promotional strategy so that the people

living in Andhra pradesh can easily distinguish the brand.

PRICING STRATEGIES

1.      Low cost/ cheap products: This follows from the product strategy. The price can be

kept low by low unit packaging’s. Our product will be ranging from 5,000 to 20,000 as per

according to the size of the product. 

2. Large volume-low margins (Rapid or slow penetration strategy): Here the main

concentration is on the low cast and mass production with lower margins the rural people are

more conscious about the price of the product and size of the product rather than the quality

of the product.

3. Overall efficiency & passing on benefits to consumers: Strategy would be the benefit

marketing because our hair dye is natural and no harmful chemical is add in the hair dye that

opportunity for us in the market because no other competitor is providing such a low cost and

power efficient A.C.

DISTRIBUTION STRATEGY

The following distribution strategies formulated for the rural category. 

1.      Coverage of villages: Ideally, coverage of villages with up to 2000 and above

population could be the break-even point for a distribution setup. Various dealers will be

made so that availability of the product is there within the market.

2. Segmentation: There are number of villages in Andhra pradesh that are big & it is not

viable to contact & serve all villages directly. Therefore, our distributors can carefully

examine the market potential of different villages & target the villages that can be served in a

financially viable manner through an organized distribution effort.

3.      Use of co-operative societies: There are over 3 lacks co-operative societies operating

in rural areas for different purposes like marketing cooperatives, farmer’s service

cooperatives and other multipurpose cooperatives. These cooperatives have an arrangement

for centralized procurement and distribution through their respective state level federation.

Such state level federation can be motivated to procure and distribute consumables items and

low value durable items to the members to the society for serving to the rural consumers.

Many of the societies extend credit to the members for purchases. 

Promotion mix for rural market

The Promotion Media

Newspaper : News paper are major source for advertisements like in Andhra Pradesh there is Eenadu(A.P), Dina Thanthi ( Tamil Nadu), Punjab Kesari (North), Loksatta (Maharashtra), Anand Bazaar Patrica (West Bengal), Daink Baskar (North)

Television: Advertisements in various local channels about the A.C will be done. Sun TV (Tamilnadu), Asianet (Kerla), Eenadu( AP), Aplha Punjabi (North), Aplha Mararthi (Maharashtra

Radio: Radio reach is highest in Kerala (62%) followed by Tamil Nadu (35%) and Andhra Pradesh(32%). Example : Colgate, Jyoti Labs, Zandu Balm are some of the company using radio communication programme.So as it is a good source of coomunication and is cheaoer so it will be used.

A ten second spot in Regional station would cost only about Rs. 2000.

Cinema :1. Films on our products like of the small .75 ton ac or 1 and 1.5 ton a.c will be shown in rural cinemas halls.

For eg. LIC and Private insurance companies have been showing short movies in rural theatres to create awareness about life insurance

Outdoor Advertisement

Various Forms of otdoor media will be used which includes signboard, wall painting, hoardings, tree boards, bus boards etc. As they are cheaper and can attract a larger group of customers so it can be used for promotion.

The Melas( It is estimated that over 20,000 melas are conducted every year). Melas are a major source of entertainment in rural India and a good source of promotion too as major part of population come too see the melas. Stalls will be made exclusively for promotion at the melas.

Audio Visual Vans and exhibitions

Promotional vans would promote the products as well followed by exhibition of the various products.

(The van is a mobile promotion station having facilities for screening films, slides and mike publicity.

REFRENCES

www.iimk.ac.in/mdp/MDP08/pdf/MDP13.pdf

www.financialexpress.com/.../rural-marketing-strategies

www.indianmba.com/Faculty_Column/FC658/fc658.html

www.synergy-consultants.info/mb-mk769%20-%20event.pdf