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Rural Marketing in Pakistan
Rural marketing in pakistan  mirza shakeel
i am
Rural marketing in pakistan  mirza shakeel
Why
  Rural
 Pakistan
    Is
Important
   ???
68% Population   32% Population
Thanks to TV




               Awareness in Rural
                     Has
                  Increased
Exponential Growth

30% plus
Organic Growth (2o10)
Around

35%            S
         …of major companies
         comes from Rural Pakistan
Changing Market Place
                         Modern Trade




                           Wholesale

   Wholesale


                         Family Grocers



     Retail
                        Pharmacy/Mass Retail




                               Rural
In the world
 2.5 Billion people
earn 1500$ plus per year




                             …and remaining
                           4 Billion people
                       Earn less than 1500$
Majority of these
4 Billion people
  Lives in Rural
Rural marketing in pakistan  mirza shakeel
Key Factors
      In
Rural Marketing
1. Awareness
Rural marketing in pakistan  mirza shakeel
2. Availability
Vast Geographical Spread




                       Trade Off Between
                           Distribution Cost
                                  &
                     Incremental Penetration
3. Affordability
Low Disposable Income




                       Avg. Monthly
                   Consumption Rs.8945/-
                               Vs.
                        Income Rs.10,929/-
Dependent Upon
Vagaries Of Monsoon
4. Acceptability
Customization
      Vs.
Standardization




                   Low Price
                      &
                  Low Margins
Shopkeepers At Rural




                 Divided into
                 Wholesalers
                      &
                   Retailer
Assortments Carried



                                         Karyana Items



                      Smaller SKU’s of
                       Branded Items




 Unrelated Items
Vegetables, Ice etc
Ideas For Effective
 Rural Marketing
1. Product Offering
Smaller SKUs
    Single Serving
(per capita or per time period)
Distinctive
Packaging


           Brands are
          identified &
         differentiated
           on basis of
              color


               Mainly due to illiteracy
2. Price
Attractive Price Points


                          Rs.10 sachet contributes
                          around 50% in surf sales




                             Rs.10 sachet major
                             growth driver for
                              powder creamer




                             Rs.10 sachet rapidly
                          growing despite challenges
                              from smuggled tea
Per Gram Costing



        Brand             Large SKU        Sachet
        Surf Excel           0.20           0.17
  Everyday Tea Whitener      0.43           0.40
    Sunsilk Shampoo          0.78           0.60




                                    Cheaper Small SKUs
                                    enhances consumer
                                        acceptance
Attractive Retail Margins




                            For Retail Penetration
                                       &
                                  Advocacy
Retail Margins




        Brand             Large SKU    Sachet
        Surf Excel          4.7%        5.5%
      Supreme Tea           5.1%       11.1%
  Everyday Tea Whitener      8%          8%
    Sunsilk Shampoo         9.7%        9.7%




                             Better Retail Margins on
                            Small SKUs improves retail
                                   penetration
Credit to Retailers improves
    Trade Relationship
             &
   Product Penetration
3. Promotion
Connect in More Understandable Way




                         Use local dialects to engage
                                 consumers
Use Customized
     Media
Trade Engagement Activities




                                                P&G Golden Stores
                                                 2% for Displays


                        Sachet Display Drives




  Unilever Project
Interface paying 6-7%
 & Perfect Shops for
     small stores
Contribute Towards the Society




                           CSR Activities creates a
                        positive brand/company image
4. Distribution
Wholesale Channel
Playing Dominant Role


      Distributor




     Wholesellers




                    These wholesalers supplies product to rural
       Retailers    retailers. Products supplied included branded &
                    loose (unbranded items)




    Traditional Rural Distribution System
Direct Distribution to
   Rural Retailers


      Distributor




     Wholesellers




       Retailers    Product directly distributed to rural retailers
                    ensuing product availability & minimizing the
                    influence of wholesale




        Direct Rural Distribution System
Major Hurdle in
Direct Distribution




             Cost of Distribution
…which is overcome by
subsidizing rural distributions




               Subsidy varies from 50% t0 100%
                         of expenses
Rural Sales Van Costing

          Heads                      Unilever          Unilever (Retail Extension
                                  (50% sharing)         program 100% sharing)

 Rentals (Rs. 700/day @ 25            17,500                     17,500
           days)
                                                                                       Unilever Subsidizing its
                                                                                       rural distributors
Fuel (Rs. 5/km cost & avg. 50         6,250                       6,250
           km/day)


      Salesman Salary                 7,500                       7,500                   This subsidy varies from
                                                                                                    50% to 100% in
       Loader Salary                  4,500                       4,500
                                                                                        (Retail Extension Program)
         Total Cost                   35,750                     35,750
Breakeven Sales (assuming           1,021,428                  1,021,428
  3.5% avg. dist. margin)
 Estimated sub-dist margin            35,000                     35,000                This subsidy helps in
   ( at 3.5% net margin )       (assuming Rs.40,000   (assuming Rs.45,000 sales/day)   improving distributors ROI
                                     sales/day)
                                                                                       & numeric expansion
     Company Sharing            17,875 (50% cost      35,750 (100% cost sharing)       resulting in overall rural
                                    sharing)
                                                                                       stronghold
      Net Dist Margin             17,125 (1.7%)              35,000 (3.4%)



       An Example Of How Subsidy Helps
Through Subsidy…




        …make distribution infrastructure
               Self Sustaining
But…

       Major Challenge
2010
21%

                            Shrinking consumer disposable
                            income


                              Maintaing price points becoming
                                       difficult for companies
          2009
          24%

                     2008
                      8%    Increasing Distribution cost &
                            struggling ROIs of distributors




  Consumer Price Index




                              Inflation
Attractive Price Points
                                 Surf Excel
                                 promoting
                                 Rs. 15 SKU



                          Rs.10 sachet contributes
                           50% plus in surf sales




                                 Decreasing
                                  weight




                             Rs.10 sachet major
                             growth driver for
                              powder creamer




                                  Decreasing
                                   weight




                             Rs.10 sachet rapidly
                          growing despite challenges
                              from smuggled tea
Pressure on Purchasing
        Power
So Companies Need to be
       very ….
In Short…                         Smaller
                                    Affordable
     Inflationary                         SKUs
      pressures                                  Customized
                                                       Media

                     Right
                        Price
                         Points
          Rural
         Marketing                               Collaborative
            …                                        Distribution
                              Better
                                Retail
                                 Margins
So
Rural Marketing
      Is…
Rural marketing in pakistan  mirza shakeel
Provided
You Move
  With
Rural marketing in pakistan  mirza shakeel
Rural marketing in pakistan  mirza shakeel
Rural marketing in pakistan  mirza shakeel
Sources
 www.statpak.gov.pk
   www.flickr.com
  www.google.com
www.research.nestle.com
HUL CDM Sanjiv Kakkar

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Rural marketing in pakistan mirza shakeel

  • 5. Why Rural Pakistan Is Important ???
  • 6. 68% Population 32% Population
  • 7. Thanks to TV Awareness in Rural Has Increased
  • 9. Around 35% S …of major companies comes from Rural Pakistan
  • 10. Changing Market Place Modern Trade Wholesale Wholesale Family Grocers Retail Pharmacy/Mass Retail Rural
  • 11. In the world 2.5 Billion people earn 1500$ plus per year …and remaining 4 Billion people Earn less than 1500$
  • 12. Majority of these 4 Billion people Lives in Rural
  • 14. Key Factors In Rural Marketing
  • 18. Vast Geographical Spread Trade Off Between Distribution Cost & Incremental Penetration
  • 20. Low Disposable Income Avg. Monthly Consumption Rs.8945/- Vs. Income Rs.10,929/-
  • 23. Customization Vs. Standardization Low Price & Low Margins
  • 24. Shopkeepers At Rural Divided into Wholesalers & Retailer
  • 25. Assortments Carried Karyana Items Smaller SKU’s of Branded Items Unrelated Items Vegetables, Ice etc
  • 26. Ideas For Effective Rural Marketing
  • 28. Smaller SKUs Single Serving (per capita or per time period)
  • 29. Distinctive Packaging Brands are identified & differentiated on basis of color Mainly due to illiteracy
  • 31. Attractive Price Points Rs.10 sachet contributes around 50% in surf sales Rs.10 sachet major growth driver for powder creamer Rs.10 sachet rapidly growing despite challenges from smuggled tea
  • 32. Per Gram Costing Brand Large SKU Sachet Surf Excel 0.20 0.17 Everyday Tea Whitener 0.43 0.40 Sunsilk Shampoo 0.78 0.60 Cheaper Small SKUs enhances consumer acceptance
  • 33. Attractive Retail Margins For Retail Penetration & Advocacy
  • 34. Retail Margins Brand Large SKU Sachet Surf Excel 4.7% 5.5% Supreme Tea 5.1% 11.1% Everyday Tea Whitener 8% 8% Sunsilk Shampoo 9.7% 9.7% Better Retail Margins on Small SKUs improves retail penetration
  • 35. Credit to Retailers improves Trade Relationship & Product Penetration
  • 37. Connect in More Understandable Way Use local dialects to engage consumers
  • 38. Use Customized Media
  • 39. Trade Engagement Activities P&G Golden Stores 2% for Displays Sachet Display Drives Unilever Project Interface paying 6-7% & Perfect Shops for small stores
  • 40. Contribute Towards the Society CSR Activities creates a positive brand/company image
  • 42. Wholesale Channel Playing Dominant Role Distributor Wholesellers These wholesalers supplies product to rural Retailers retailers. Products supplied included branded & loose (unbranded items) Traditional Rural Distribution System
  • 43. Direct Distribution to Rural Retailers Distributor Wholesellers Retailers Product directly distributed to rural retailers ensuing product availability & minimizing the influence of wholesale Direct Rural Distribution System
  • 44. Major Hurdle in Direct Distribution Cost of Distribution
  • 45. …which is overcome by subsidizing rural distributions Subsidy varies from 50% t0 100% of expenses
  • 46. Rural Sales Van Costing Heads Unilever Unilever (Retail Extension (50% sharing) program 100% sharing) Rentals (Rs. 700/day @ 25 17,500 17,500 days) Unilever Subsidizing its rural distributors Fuel (Rs. 5/km cost & avg. 50 6,250 6,250 km/day) Salesman Salary 7,500 7,500 This subsidy varies from 50% to 100% in Loader Salary 4,500 4,500 (Retail Extension Program) Total Cost 35,750 35,750 Breakeven Sales (assuming 1,021,428 1,021,428 3.5% avg. dist. margin) Estimated sub-dist margin 35,000 35,000 This subsidy helps in ( at 3.5% net margin ) (assuming Rs.40,000 (assuming Rs.45,000 sales/day) improving distributors ROI sales/day) & numeric expansion Company Sharing 17,875 (50% cost 35,750 (100% cost sharing) resulting in overall rural sharing) stronghold Net Dist Margin 17,125 (1.7%) 35,000 (3.4%) An Example Of How Subsidy Helps
  • 47. Through Subsidy… …make distribution infrastructure Self Sustaining
  • 48. But… Major Challenge
  • 49. 2010 21% Shrinking consumer disposable income Maintaing price points becoming difficult for companies 2009 24% 2008 8% Increasing Distribution cost & struggling ROIs of distributors Consumer Price Index Inflation
  • 50. Attractive Price Points Surf Excel promoting Rs. 15 SKU Rs.10 sachet contributes 50% plus in surf sales Decreasing weight Rs.10 sachet major growth driver for powder creamer Decreasing weight Rs.10 sachet rapidly growing despite challenges from smuggled tea
  • 52. So Companies Need to be very ….
  • 53. In Short… Smaller Affordable Inflationary SKUs pressures Customized Media Right Price Points Rural Marketing Collaborative … Distribution Better Retail Margins
  • 60. Sources www.statpak.gov.pk www.flickr.com www.google.com www.research.nestle.com HUL CDM Sanjiv Kakkar