Non-Electric Appliances for Tomorrow

AN INTEGRATED MARKETING COMMUNICATIONS PROJECT ON A CONSUMER DURABLES MANUFACTURING COMPANY

BY GROUP 1 YASHRAJ KOTIAN 30 AMIT KAMTHE - 135 IMRAN SAYED - 171 POOJA SINGH - 113 MADHU KAIMAL - 140 SANJIV TIWARI - 177

EXECUTIVE SUMMARY
NEAT Co. Ltd. (Non-Electric Appliances for Tomorrow) is a consumer durables manufacturing company that specializes in manufacturing products that require either no electricity or an alternate current (AC) system through rechargeable batteries and inverter systems. The company has a range of product that is compact in size and low on price. The products are ideally suited for the rural markets as they face a huge energy crisis and have low disposable income. The products fulfill the basic wants of entertainment and comfort for the rural customers, who are made deprived because of the difficulties faced due to the infrastructural problems. This project outlines the information about NEATs product, price, distribution and promotion strategies that would enable them to capture as much market share as possible. NEAT has to overcome several resistances and barriers in face of competition, location disadvantages and human resources issues to do so. They have to come up with an effective and efficient integrated marketing communications strategy that would aid them penetrate the rural markets and make them a household name in the consumer durables market.

PRODUCT RANGE
NEAT has a product range divided in to three categories. They are appliances that require: 1) No Electricity and no alternate current 2) Recharge Batteries (Nickel-Cadmium Batteries & Li-ion Batteries) 3) In-built inverters The following figure outlines the various products in these categories: NEAT PRODUCTS ZERO POWER WATER PURIFIER BATTERY OPERATED MUSIC SYSTEM 9-14 TV HANDHELD FAN TABLE FAN PORTABLE LIGHTS MINI-FRIDGE MIXER INVERTER-BASED 21 FLAT TV AIR COOLER

PRODUCT USES
1) ZERO POWER PRODUCTS: These products require no power source and NEAT has just one product in this category: a. NEAT WATER PURIFIER: The water purifier requires absolutely no source of power. The customer just needs to pour in water through the inlet. The water then passes through filtering in to the next container that provides the outlet. It is easy to use and can prove beneficial in curbing many water-borne diseases in the rural area. EXPECTED MRP: Rs.1000/2) BATTERY-OPERATED PRODUCTS: These products run on rechargable batteries. The products come with a charger and the batteries can be charged whenever electricity is available. The batteries come in two variants: Nickel-Cadmium batteries and Li-ion batteries. Products that require higher voltage would use the Ni-Cd batteries and the Liion batteries would be used for products that require comparatively lower voltage. The batteries can run for an average time of 12 hours, if charged for 2 hours. The products in this category as as follows: a. NEAT MUSIC SYSTEM: The music system in a 1500W cassette, radio & CD player. It can run on both AC/DC current and requires Li-ion batteries. EXPECTED MRP: Rs.2500/-.

b. NEAT SMALL SCREEN TVS: The small screen televisions come in screen sizes of 9, 11 & 14. The televisions run on NiCd rechargeable batteries and display full colour pictures. EXPECTED MRP: Rs.1500 Rs.3000/c. NEAT FANS: The fans are in two variants: Handheld & Table Fans. The handheld fans use the Li-ion batteries and the Table Fans use the Ni-Cd batteries. The table fans can be used on direct current as well. EXPECTED MRP: Rs.250 Rs.1000/d. PORTABLE LIGHT SYSTEM: The portable tube-lights and lamps are handy tools in places where electricity is not available. The lamps run on rechargable Li-ion batteries. EXPECTED MRP: Rs.500/e. KITCHEN APPLIANCES: Kitchen appliances like the mini-fridge and mixer run on Li-ion batteries as well as on direct current. EXPECTED MRP: Rs.500 to Rs.1500/3) INVERTER-BASED APPLIANCES: These products have an in-built inverter that gets charged automatically whenever electricity is available. These are larger appliances that require a better power source: a. 21 TV: The 21-inches flat panel colour TV has an in-built inverter that can enable the TV to operate for 12 hours. EXPECTED MRP: Rs.5000/b. AIR COOLER: The air cooler just requires water and some hours of electricity to run for 12 hours. The compact size air cooler has an inbuilt inverter to power it without electricity. EXPECTED MRP: Rs.2500/-.

CONSUMER PROFILE
As per the latest census, 76% of Indias total population is rural. If we consider the state-level picture, in several states like Uttar Pradesh, Madhya Pradesh, Rajasthan and Kerela, the rural population constitutes more than 80% of the total population. And there are also states like Bihar and Orissa where as much as 90% of the total population is rural. Coming to consumer characteristics, it can be seen that in general sense, low purchasing power, low standard of living, low per capita income, low literacy level and overall low economic and social position are the traits of the rural consumers. By and large, the rural consumers of India are a tradition bound community; religion, culture and evensuperstition strongly influence their consumption habits. It is estimated that rural India has a 23% literacy rate compared with 36% of the total country. The adult literacy program launched by the government in the rural areas are bound to enhance the rural literacy rate in the years to come. Two aspects need to be specially emphasized: (1) In absolute numbers, there are 11.5 crore of literate people inrural India compared with 12 crore in urban India, and (2). Every year 60 lakh is getting added to the literate population of Rural India. An analysis of the rural income pattern reveals that nearly 60% of the rural income is from agriculture. Evidently, rural prosperity and the discretionary income with the rural consumer is directly tied up with agricultural prosperity. Anything that contributes to agricultural prosperity will directly result in increase income for the rural population and the consequent increase in their spending capacity. The predominance of agriculture in the income pattern has one more significance i.e.- rural demand is more seasonal. Statistics reveal that in recent years, rural consumers have been drawn into the saving habit in a big way. The commercial banks and the co-operative have been marketing the saving habits in rural areas for quite some years. Today, as much as 70% of the rural house hold are saving a part of their income. The habit is particularly widespread among the salaried and self employed nonfarmers. While the rural market of India certainly offers a big attraction to marketers, it would be totally naive to think that any firm can easily enter the market and walk away with a sizeable share of it. A firm seeking a share of this market has to work for it, as the market bristles away with a variety of problems. The enterprise has to grapple with these problems and find innovative solutions to them. In fact, only because a few pioneering firms correctly understand these problems and came up with innovative solutions to them, that we now see a wonderful trend of growth in rural markets.

MARKET SIZE & SEGMENTATION:

As said earlier, 76% of Indias population is rural. Whereas the urban population of India is concentrated in 3,200 cities and towns, the rural population is scattered over 5,70,000 villages. Statistics show that out of 5,70,000 villages only 6,300 have a population of more than 5,000 people each. More than 3 lakh villages or more than 55% of the total number of villages are in the category of 500 people or less and more than 1.5 lakh villages or 25% of the total are in the category of 200 people or less. The inference is clear; rural demand is scattered over a large area, unlike the urban demand, which is highly concentrated. NEATs segmentation strategy is as follows: 1) Geographic: NEAT is targeting villages with a population of 2000 and above. To start with, NEAT is concentrating on villages located in the West-South coastal states of India, i.e. Rajasthan, Gujarat, Maharashtra, Karnataka & Kerala. It will have two centers of operations in each state that will deal with several clusters of villages. 2) Demographic: The products of NEAT are suitable for all age groups and for varied income class customers. NEAT is aware that the disposable income of rural customers is low, but the aspirations to own a luxury product is high. The variety in the product range enables NEAT to cater to a wide range of customers. It has compact size TVs for a low income joint family belonging to the lower strata of the society and also has larger screen TVs for a higher income literate family belonging to the upper strata of the society. The handheld fans can be a boon to the aged customers, while the air coolers can be a useful appliance for a higherincome earning individual. 3) Behavioral: Due to the inadequate infrastructural facilities in the villages, the electric appliances lie dormant in the households. Customers who can afford these appliances have to purchase generators to keep them running. NEAT products give them an option of running the appliances without the need of electricity. Therefore, the readiness to purchase these products will be high, if the products are rightly communicated to them. The rural customer is attracted towards such luxury products and is heavy user of products like radio. Therefore, there is a need for products like that of NEATs and the company can greatly exploit these conditions to its advantage. 4) Psychographic: The rural population may have low income, but their aspirations to own a luxury product is high. Products like Television, Music System, Air Coolers can become a sign of status symbol for several households. People who own such products become a center of attraction amongst the households who dont. NEAT is providing such products at lower rates with the benefits that they run without the need of electricity. The added benefits will make NEAT a major player in the rural consumer durables market.

MARKET SHARE & COMPETITION

Growth is coming in a big way from the smaller towns and rural markets and is expected to be the next growth opportunity for the consumer durables market. In the last year ~30-35% of the total sales of consumer durables was from the rural market. This is expected to grow by 40-45% in the near future. The rural durables market has been growing by ~30% annually, mainly due to the growing affordability of products as well as the general buoyancy in the economy. Rural poverty is expected to decline to 26 per cent by 2025. Products like mobile phones, televisions and music systems are the ones which have witnessed high growth among the rural market. To further cater to this market many manufacturers have started using local languages while offering products to the rural crowd.

NEATs decision to enter the rural markets is due to the growth strategy it has adopted. NEAT has adopted a BOTTOM-UP approach to grow and expand, where it would start with the rural markets and then expand in to the Tier-II & Tier-I cities and finally deciding to export its product in international market. Its growth depends on how it functions in its base market, i.e. the villages of India.

NEAT will have to overcome the following challenges to emerge as a major player in the rural market: a) Big giants like Videocon, Bajaj, Philips, LG, Samsung, etc. have entered the rural market with products that specifically caters to the needs of the rural customers. They have the financial backing and distribution strength to create strong entry barriers for a new player or cause an exit of a firm. NEAT will have to bank on its USPs and have to create a strong marketing communications strategy to stand out of the crowd. b) The small & local players like T-Series, Mitashi, Hyundai, etc. who sell products at cheap dirt prices will be a hassle for NEAT. NEAT will have to operate on thin margins initially to match up with the prices offered by these manufacturers. c) The Chinese products that are similar technologically can be a major competition for NEAT. NEAT has to build a brand image in the minds of the customer as a superior brand that would keep the Chinese products at bay. d) Any technology is easily replicated. If NEAT products do well in the market, the other giants can bring out better products to reduce the market share of NEAT. NEAT will have to innovate continuously and come up with better offerings regularly. Also, how NEAT connects with the customers in terms of their marketing communications and after sales services will contribute to its success or failure.

With the novelty that the NEAT products offer and with the kind of strategies formulated by them, NEAT should aim at achieving at least 10-15% of the rural consumer durables market share in the next 3-5 years of operations.

DISTRIBUTION STRATEGY
NEATs manufacturing plant is located at Ranjangaon, Maharashtra, which is 55 kms away from Pune. This plant is ISO 14000 and ISO 9001 certified, and is equipped with the most sophisticated, computer control state-of-the-art machineries. The location is central to its target states and gives a logistic advantage. NEAT will first sell its products in the western belt, specifically in villages in Rajasthan, Gujarat, Maharashtra, Karnataka and Kerala. Initially two Tier 2 or tier 3 cities will be chosen as the location for warehouse. The cities chosen would be such that it would be surrounded by 10 or more villages with population more than 2000 in each village. The cities chosen in Maharashtra, Rajasthan and Gujarat would be in the eastern zone and western zone, since it will be more convenient as far as logistics is concerned and also since the warehouses are more spread out, it would more convenient for other villages to go to the warehouses to make some purchase. In case of Karnataka and Kerala, the warehouse would be located in the northern and the southern zone. The warehouse locations in each state are as follows: Rajasthan: Jaisalmer (west zone) and Alwar (east zone) Gujarat: Jamnagar (west zone) and Surat (east zone) Maharashtra: Nagpur (west zone) and Nasik (east zone) Karnataka: Belgaum (North zone) and Mysore (South Zone) Kerala: Kozhikode (North zone) and Kollam (South Zone)

DISTRIBUTION CHANNEL
Distribution of the products would not be through the conventional retail outlets, since NEAT is focusing on personal selling. NEAT would be selling the products directly through warehouses and the stalls.

The hierarchy of the Sales & Marketing team would be as follows:

Regional Sales Manager

Area Sales Manager(A)

Area Sales Manager (B)

Area Sales Manager(C)

SE1 SE2

SE3

SE4

SE1 SE2

SE3 SE4

SE1 SE2 SE3

SE4

*(SE - Sales Executive) The Regional Sales Manager (RSM) would be posted at each of the warehouse. They would be responsible for all the logistics and accountability involved through each of the warehouse.

The Area Sales Manager (ASM) would be posted at the individual villages Here all the marketing and sale activities will be conducted. They would be reporting to the RSM. They would also be responsible in recruiting and operations of the sales executives and the technicians. They should make the sales target for every month They would have to find appropriate location for the mandis and haats and make the plan the events.

The Sales Executives will be responsible for the order taking, advertising, making a market study and for obtaining customer feedback. The SEs along with the technicians will be making regular field visits in the villages. They have to execute the plans laid out by the ASM They also have to arrange the mandis, and haats on a regular basis.

MARKETING STRATEGY
As a virgin company, tapping the rural market would be a difficult task because of the heavy competition and lack of infrastructure, and hence focusing on the marketing strategies for the individual products is important. Since they are penetrating the rural market, the conventional marketing strategies wouldnt have the desired effect. NEAT would be targeting only the villages having population more than 2000. NEAT has applied the following marketing strategies: Personal selling: Personal selling is one of the most efficient sources for order taking, advertising, making a market study and for obtaining customer feedback. There are several other methods of marketing the NEAT products in the rural market, but they would need the database regarding the villages which would be gathered by the sales executives. Sales executives will be doing field visits on a regular basis to increase the customer base in each assigned villages. Demonstrations/Supershows: Organizing Haats in the villages are similar to the trades expos conducted in the urban market. The surpanchs and the villagers would be invited to the haats and the company would display the products and convince the customers by displaying the benefits it provides. The Haats organized would be on a relatively larger scale depending on the number of villages invited. The location of the haats would be generally a tier 3 or tier 2 cities which would be relatively a central location to a cluster of villages. The villagers would be invited to the Haats through melas which would be organized in the individual villages, where there would be recreational activities as well as prime time plays and skits which would emphasize on the needs that would be satisfied by the NEAT products. The Haats will have stalls for all the products where NEAT employees would give live demonstrations. Opinion Leader: Convincing a Sarpanch, or anyone who is considered important in a village, to use a NEAT product would help in increasing the customer base in that village to a large extent, since the literacy level in the villages are low and they usually rely on the decisions taken by their leaders. Considering this as an important factor, NEAT will give special invitations to the sarpanchs and the panchayat members and treat them as high priority customers.

Public hoardings: Hoardings and wall paintings are most conventional form of advertising in the rural and urban markets. The cost incurred in such form of advertising will also be relatively less as compared to the urban market, but if proper images, colours and fonts are used to display the product, the attention it seeks would be admirable. Advertising would be focused majorly through wall paintings in the villages and hoardings and banners in the melas, haats and mandis. Media: There are not many platforms in media which can be exploited for advertising in the rural market due to the infrastructural deficiency. NEAT will go for a two-step approach, where in it would put advertisements in the local newspapers and then advertise through All India Radio. Demo videos and Screensavers in NEAT TV: Television is be a product which would gather a lot of crowd and villages usually dont have proper cable reception all the time, this is a factor which NEAT would try to use in marketing its own product. NEAT Television remote would have Demo button which when clicked would play a pre-loaded video of NEAT products. The TV owner can show this video to their fellow villagers when there is no cable reception. Mandis: The main source of income for villagers is agriculture. Each village has a weekly mandis in a prime location. NEAT will install stalls in such Mandis and sell specific products like table fans and portable lights, which can be carried back home. After sales services: It is important to retain the customer base, which NEAT already has, to ensure that NEAT organizes after sales service haats on a monthly basis. Individual complaints will be registered and if possible repaired through phone calls. NEAT would provide the phone numbers with the warehouse details to all the customers. These complaints will be administered by the company certified technicians who will do regular field visits with the sales executive. Also if any individual who wants to personally take his/her product to warehouse to repair it, would be entertained.

CONCLUSION
Rural market remains a gold mine for firms that are willing to take the risk of entering and taking advantage of the benefits it promises to offer. NEAT has the product range that can appeal to the rural customers. It has the right marketing strategy in place in terms of product, pricing, distribution and promotion. If it can overcome the challenges of competition, location disadvantage and varied customer profile, then it can emerge as one of the major players in the rural consumer durables market. NEAT will have to succeed in its base market to move up to effluent markets and expand globally. It is a long term plan that can only succeed if the short term goals are achieved. Therefore, achieving a hold on the rural market will be the primary goal of NEAT. The road ahead for NEAT is tough, but at the end of it only good things can happen to the company.