Session 1 & 2

1. How do we understand rural / subsistence markets

-

Markets are seen as a whole and individuals

Both sociological and psychological factors influence functioning of markets

Visible characteristics of subsistence marketplaces are:

Severe constraints on traditional economic resources, leading to
uncertainty & lack of control for consumers over day-to-day life

1-to-1 relationships between buyers and sellers & among individuals in

general

Interdependence in marketplace interactions are forced by resource h

constraints

Empathetic Marketplace Dealings: In cases where buyers and sellers

come from same economic background

Offerings are customised (price, quantity & quality): BUT opportunistic

sellers may exploit using high interest rate or deceiving quantities

Buyers also use their WoM to spread Ve word about opportunistic sellers

Social relationships are a community owned resource that might be

harnessed to add value for that community through market exchanges.

2. Interlocking of markets
Governments Decisions

Land

Land Lease

Output sale
Market Structure

Agriculture, Industry, etc

Labour

Input purchase

Credit
Financial Institutions

3. Influence of individual characteristics in subsistence marketplace

-

Concrete thinking: Difficulty experienced by functionally illiterate

consumers when faced with abstractions1

Pictorial thinking: The tendency to view (i) brand names and prices as
images in a scene rather than symbols and (i) picturing product quantities
than using symbolic information.

Maintaining self-esteem: Central to their marketplace interactions is a need

to maintain self-esteem in public settings that could expose their low literacy.

Fear of interactions: Due to above reasons people fear interaction and Q&A

Coping mechanism:
Avoid unknown products and unfamiliar pricing schemes
Express futility of making inquiries or demands
Accept product as is
Pattern matching / Depend on a child to count
Short term orientation: Low literacy, low income & other difficulties

13. Market Research in Subsistence Marketplaces

-

Tools used for researching resource rich, and literate contexts are unlikely to be
as effective in subsistence contexts

Attributes based approach: Is relied upon to design products in conventional

market wisdom

Products are seen holistically: So low-literate consumers find it difficult to

express their preference based on attributes
o Customer-ready prototypes help experience the product & develop
preference

Product testing: Take into account (i) concrete thinking & pictographic
thinking and (ii) their lack of experience as research participants.

Personally administered methods (card sorting etc.) may alleviate test taking
anxiety

1 Quality of dealing with ideas / Freedom from representational qualities

Session 3
Challenges in marketing socially useful goods to poor consumers
Low income consumers represent a very large percentage of markets.
Saturating urban-higher income markets forcing marketers to look at low income consumers.
BoP strategies are presented as way to tap into the low income consumer market.
1. BoP strategies suggest that companies need to rethink their way of business by
Price performance / low cost

Product development

Distribution

Performance

Views of Quality

Creation of robust products for harsh

conditions

Sustainability

Reduction in resource intensity

Recyclability

Renewable energy

Profitability

Investment intensity

Margins

Volume

2. Four interconnected factors for commercial infrastructure at BoP

Creating buying power: Through credit & income generation

Shaping aspirations: Consumer education

Tailoring local solutions: Innovation & product development

Improving access: Distribution & communication

3. What is common across all cases?
-

The companies took huge challenge and are interested in capturing complete market

All companies focussed on need but not on demand

Essilors estimated vans (1000) to cover 6lakh villages

Essilor priced its lenses at Rs.200 but still made less sales

P&G launched PuR for 10 cents but could not sell more of it

P&G later decided to sell PuR at 4 cents to non-profit organisations

GDFL: Healthy and wholesome food to the poorest everyday

GDFL: Urban sales are 80% and rural are only 20%, only 1 more unit opened

Respondents should relate to tasks & understand purpose of research

Research language & procedures: To be comfortable to these respondents

See subsistence market respondents as collection rather than individuals

Understand context: In which subsistence individuals survive, buy ad

consumer products.

4. What are market based solutions?

Private for-profit solutions to public problems, usually intend to avoid government
intervention or regulation.
e.g. voluntary emission standards

5. Is there compatibility between social business and market based solutions for
poverty?
Social businesses do not contribute to economic profits [Whereas]
Market based solutions are supposed to generate economic profit
Economic profit = Accounting profit opportunity cost of capital
Accounting profit is the monetary costs a firm pays out and the revenue a firm
receives. It is the bookkeeping profit, and it is higher than economic profit.
Accounting profit = total monetary revenue- total costs.
Economic profit is the monetary costs and opportunity costs a firm pays and the
revenue a firm receives.

MISTAKES BY MNCs INTERESTED TO SERVE BoP MARKETS

6. Unmet needs trap
-

If we focus on the needs Size & opportunity is huge

Difference between Needs Demands (Demand is imp)

Company will sell products only if revenues exceed total costs

Problems with poor

o Lack affordability

o Lack product awareness Educating them is expensive

o Demand estimations are a problem as poor cant comprehend survey Qs
o Reaching the poor is a problem
o Lack of willingness to use even if given free
o Basic needs: Charity works than market based solutions
o Charity also has limits Govt. needs to function well
7. Affordability trap
- Aggregate buying power of poor is higher though individual income is low
-

Companies sell Existing or Adapted products to poor without sacrificing quality

Common mistake 1: Affordability

o Income is estimated using PPP exchange rate
o Product prices are calculated using financial exchange rates
o Financial exchange rates are 3-5 times higher than PPP exchange rates
o Due to this products appear cheaper

Common mistake 2: Benchmark for affordability

o 1 week of base salary in developed world imposed on developing world
o Most money goes into necessities poor cant afford even cheap products

Cost-Quality trade-off
o Reduce quality of products to make them affordable poor should accept

o Is it unethical to sell low-quality products?

Conceptualisation problems: How each Co. did it?
o Understand the problem and come up with solution
o Companys point of view Vs. Poors point of view of poverty
o What I can do? Rather than What I need to do? To address the problem

8. Distribution trap
o Companies may have to forward integrate to distribute

o This is costly and companies dont have such strength

o If they reach directly with low cost products they become their own competition
o Distributing proprietary product exclusively may not be viable
o Companies may not let channel partners to add any other products as such
products dont match the objective of BoP intervention.
o E.g. Essilor not allowing sales of non-competing items by opticians
o Essilor ventured into distributing glasses which was not its competency
o Using Shokti ladies for distribution: They have other works to do
o Using Non-profits for scale-up may be a problem
9. Multiple objectives trap: They usually are in conflict
o
o
o
o
o
o

Profitability
Generating employment
Environment sustainability
Public Health
Empowering women
Address multiple problems of customers

10. The 4Cs of Marketing to the Poor

Cell Phones
Cigarettes
Profitable to Co. Beneficial to Profitable to Co. Not Beneficial to
Customer (W-W)
Customer (W-L)
Nirma Detergent
Markets at their best
No need for intervention

Tobacco, Alcohol,
F&L Cream,
High interest consumption loans
Need for constraints on the markets:
Govt. regulations, self-regulation, social
activism

Condoms
Colas
Not Profitable to Co. Beneficial to Not Profitable to Co. Not Beneficial
Customer (L-W)
to Customer (L-L)
Clean water
Eye glasses

Ice cream
Candy

Need for govt or civil society to subsidize

Markets penalise business

Challenge: Creative business models that No need for intervention

are profitable

Session 4
Product
1. Idea Generation

Listening to subsistence consumers

Suggestions from employees and partners

2. Idea Screening

Meeting customer needs, ROI, Demand fulfilment, and Market potential

3. Concept Development & Testing

Does the subsistence consumer understand the concept?

Do they want or need it?

Start thinking about what your marketing message will be.

4. Business Analysis

Will the new product / service be profitable?

Marketing strategy with STP & marketing mix

Demand, costs, competition, break-even analysis

5. Product Development

Product design must be driven by

-

A deep understanding of consumer needs

Understanding environment in which product will be used (lacking usually)

Product functionality, aesthetics, and visual aspects are important

Team usually consist of highly specialised, relatively resource-rich individuals.

-

Immersion in the filed

Blur boundaries between engineering and marketing tests

Check existing patents for similar product & review their claims

6. Test Marketing
7. Commercialisation

Pricing and marketing plans to be finalised

Sales and distribution teams to be briefed

8. Launch

When and where to launch?

Review of market performance

Session 5
1. Marketing challenges for services
-

Most services cannot be inventoried:

o Aravind screens and brings patients

Intangible elements dominate value creation:

o Emphasis on better equipment and not on buildings

Services are often difficult to visualise and understand:

o 150 Counsellors and outpatient coordinators help here

Customers may be involved in co-production:

o There is less willingness to come forward; training them to undertake
post-operative care

People may be part of service experience:

o Recruiting and training locals to work;
o Targeting right customers from camps

Operational inputs and outputs tend to vary more widely:

o Established quality standards;
o simplified processes handled by paramedics;
o Good information sharing and complaint resolving mechanism

Time factor assumes importance:

o Most efficient doctors and system

Distribution may take place through nonphysical channels:

o Consultation with Ophthalmologist via satellite connection

Session 6
All details are discussed in class and notes provided to you

Session 7
Cavinkare case analysis as done in the class

Session 8
Marketing Channel Strategies
Channel: A marketing channel is a set of interdependent organizations involved in the
process of making a product or service available for use or consumption.
CHALLENGE 1: DISTRIBUTION NETWORK DESIGN

Low density of the population

Poorly developed transportation infrastructure

Stock and manage sales points in thousands of villages

Escalating inventory holding and transportation costs

What to do?
o Distribution network must be tailored to meet the needs of business & customers
o Aggregate consumer demand into central locations
o Use rural entrepreneurs for delivery and service
FMCG: Stock goods in more outlets

Strategy adopted by established companies

As transport costs are high its better to stock products at large number of stores
-

Unilever stocks in 6.3 million retail outlets

Nirma stocks in 2 million retail outlets

FMCG: Hub and Spoke Model

Strategy suggested for new companies yet to establish their brand name

Inventory costs being high and higher transport costs

-

Colgate used rural entrepreneurs to sell

Coca-cola used independent persons to reach

Durables: Aggregate demand

FANS: Rural accounts for 53% of sales - 4.7% came from rural outlets

CTVs: Rural accounts for 26% of sales 4.4% came from rural outlets
-

Rural consumers prefer to buy durables in towns & cities

This for better prices & product variety

Touch, feel & trail

Desire same merchandise as others in cities

Installation & Service is a major constraint in this model: SELCO 25 service centers

Establish rural hypermarts like ITC Choupal Sagar

CHALLENGE 2: DISTRIBUTION NETWORK LOGISTICS

Creating an effective distribution network on the ground

Logistics capabilities it needs may not currently exist in the market

Cos providing logistics capabilities may be highly disorganized and

ineffective

What to do?
o If demand is created then company can create custom distribution network
-

Eveready procured 1000 vans, 44 ware houses to distribute in 6 lakh retail outlets

o Build distribution system by hiring existing distributors and logistics companies

-

These can be highly unorganised and inefficient

Cipla faced retaliation from traders lobby as it tried to approach customer directly

o Piggyback on successful already built or existing in local society

-

Strong distribution and local knowledge

TERI piggybacking on existing entrepreneur network to sell solar lights

o Companies piggbacking should look for the following in their partner

-

Carrier has proven deep distribution network

Carrier has long-term interest

Carriers network is effective for the type of product

Corporate Partnerships
An entering company can partner with a corporation that has an existing distribution network.

Sara Lee partnered with Godrej to market and distribute its products

P&G formed a distribution alliance with Marcio to capitalise on its distribution

network

Local Non-Profit Organisations

Unilever Shakti initiative involving SHG women to sell products

Ekagon Delivers customised agriculture advice to farmers via cell phones by

partnering with their federation.

Business to Business Sales

Selling huge quantities to a company, NGO, government

The carrier can distribute products as they deem fit

KickStart International sells water pumps to farmers in Africa via a carrier

organisation
-

Hard to track how customers are receiving & using the products

Cant get access to market insights

KickStart cant know if the pumps are sold or given away free

CHALLENGE 3: AFFORDABILITY

Lack of substantial household income

Irregular and unpredictable incomes

Its a mistake to assume that consumers necessarily purchase cheap products

Small and Cheap

Products in sachets

Products based on coinage (Rs.5 cola)

Affordable engineering: Even if the durables are relatively inexpensive, they may still
be perceived costly

Small Payment Financing

Casas Bahia, Brazil: Customers pay in instalments to sell durables

-

Employees assess credit risk of customers

Tweak customers desires so that they dont overstretch themselves

Customers get a passbook which remind & tracks their payments

Self-help groups: People coming together to save and start income generating activities
First introduced by MYRADA, NGO in Karnataka
Helps determine creditworthiness
Encourages payment
Collecting on defaults
CEMEX, Mexico: Tapping into womens groups to sell cement

Layaway

Customer demands and pays product price in instalments.

Product is delivered once full price is paid.

KickStart intl.: Usually it takes 1 year, but due to this method farmer buys in 2.5
months

Dont target BoP

SELCO targeting better customers helped it earn better returns

Avoid customers who may not be able to purchase even with low prices

CHALLENGE 4: LACK OF BRAND TRUST

Rural consumers are brand sticky

If entering markets with unknown brands (to rural) then piggyback on existing
known and trusted brand

There may not a suitable brand to piggyback

That brand may not solve the delivery & installation facets of brand trust

o The piggybacking brand should have substitutable product

o Carrier brand is compatible with image of rider
o Carrier has long-term commercial and social interest in the partnership
o Coca-cola purchased local brands e.g. ThumsUp, Citra, Limca to build trust
o Can piggyback on trusted corporate retailers like ITC, Choupal Sagar
Local non-profit & individual brands

ITC introduced its e-choupal initiative by piggybacking on reputed farmers

These farmers are appointed as Sanchalak (Coordinated)

Banks in India: Use SHGs to extend loans to rural communities

CHALLENGE 5: LACK OF EDUCATION

Consumer education to be used to unlocking latent need for products &

services

CavinKare educating rural consumers about shampoo

Unilever partnering with Kerala govt. to educate consumers about handwashing

WaterHleath International partnered with local NGOs to speak to rural people

about benefits of drinking treated water

TERI first speaking about health benefits of improved stove, later emphasising
on saving in time

CHALLENGE 6: AFTER-SALES SERVICE

Consumers are concerned about

Product breaking down

Time elapsed before restoration

Timeliness of service appointments

Nature of dealing with service personnel

Frequency of service call or repair failure

Challenges & Solutions

o High cost of shipping in spare parts and replacement products
o High cost of maintaining repair staff
o Company going to any lengths to solve the problem: Tecnosol, Nicaragua
o TERI training retailers to repair their products

Framework for Marketing Channel Strategy in Rural Emerging Markets

Session 9
Unlocking the Wealth in Rural Markets
1. Identifying prospective customers
Maruti Suzuki: Rural foray 2007 TN Turmeric farmers & HP Apple
farmers
Dabur: GIS tools used to identify 287 prosperous districts in 10 states. GIS
data is integrated with economic data to plan routes
Tata: 21-30 underemployed / unemployed youth, large agri families,
shopkeepers, small businesses, schools looking for local transport
2. Forging tight bonds with channel partners
Idea: Giving larger territories to distributors who earn 10K now than 4K
Coca-Cola: Teaching rural retailers how to manage shops, stocks,
customers, financials & merchandising
3. Creating durable ties with customers
Building trust through an ecosystem of stakeholders: Novartis Arogya Parivar
Helps rural women & children with 530 trained health educators.
Supplies medicines through separate sales force.
Programme broke even in 30 months and revenues of $4.8 million.
Engaging influencers: Gaining trust of respected teachers, health care
professionals, and others with high standing in community.
Tata Motors tapped local teachers, health professionals, and mechanics to
refer potential customers to its dealers.
Ashok Leyland engages truck drivers with their opinions on truck designs.
Retaining customers: Firms are providing reliable, consistent, and cost-effective
after-sales service and by investing in long-term welfare of their customers.
Idea cellular provides service through mobile vans
Ashok Leyland providing health camps for drivers & scholarships for their
children

 Mahindra Samriddhi upgraded dealer network to provide services & info on

weather, pets, crop prices, soil & irrigation water testing facilities, and farm
productivity.
UNILEVER CASE Ananlysis as explained in class

Session 11
MARKETING STRUCTURE
Marketing activities should be mindful of 1-to-1 relations in subsistence markets.
Decentralisation of marketing

Shift responsibility and power to boundary-spanning employees so that they can

attend to customer needs quickly.

Local personnel have superior access to knowledge about customer needs,

preferences, and ability to pay.

Externalized Marketing

Marketing system is highly flexible & adaptable to changing local market conditions

Partner with local people / entities that are external to the firm

Empower them to make marketing decisions independently on the firms behalf

Dont co-opt these people / entities into company as they will lose credibility
Benefits of dencetralisation / externalised marketing

Systematically increases the firms access to detailed and nuanced knowledge about
the customers and communities

Local marketing partners benefit economically from engaging in design &

manufacture of products

Facilitates a symbiotic relationship between the firm and subsistence consumers

Social capital is contributed by both parties:

-

Communities can provide access to unique network of trusted relationships

Companies can bring skills of coordination & communication to facilitate

relationships between disparate communities bridging social capital

Firms can facilitate sharing of info & tech across communities, enable the flow of
new ideas for innovation & reduce conflicts between communities

MARKETING CULTURE

Unwritten policies & guidelines that provide employees with behavioural norms for
execution
How subsistence contexts are viewed by marketing managers?

If the context is seen as variation of traditional markets then it leads to thinking

that solutions should be found by the firm or imported from non-subsistence
contexts

If we treat subsistence markets as individuals & communities from which to learn,

then the gained knowledge can be given back to non-subsistence contexts. Gram
Mooligai

Session 10
Business Models
It is an outcome of deliberations with 470 practitioners from 45 countries. Complied
by Alexander Osterwalder and Yves Pigneur (Book: Business Model Generation)

How do you understand a business model?

Describes rationale of how an organisation creates, delivers, & captures value
1. Customer segments: Defines different groups of people or organisations an
enterprise aims to reach or serve.
-

Customer groups represent separate segments if:

o Their needs require & justify a different offer
o Reached through different distribution channels
o Willing to pay for different aspects of the offer
o Have substantially different profitabilities

2. Value proposition: Bundle of products and services that create value for a
specific customer segment.
-

Questions to ask:
o What value are we delivering?
o What customer problems we are solving?
o Which needs are we satisfying?
o What bundles of products / services we are offering to each segment?

Some of elements of value can be:

o Newness / Performance
o Customisation / Design
o Brand / Price
o Cost & Risk reduction
o Accessibility / Convenience
o Usability

 3. Channels: How a company communicates with and reaches its customer

segments to deliver a value proposition.
-

Channel serve several functions, including:

o Create awareness about companys products / services
o Helping customers evaluate a companys value proposition
o Allowing customers to purchase specific products and services
o Delivering a value proposition to customers
o Providing post-purchase customer support

Questions to ask:
o Through which channels do our customers want to be reached?
o How are we reaching them now?
o How are our channels integrated? Which ones look best?
o Which ones are most cost-efficient?
o How are we integrating them with customer routines?

4. Customer relationships: Types of relationships a company establishes with

specific customer segments.
-

These are driven by following motivations:

o Customer acquisition
o Customer retention
o Boosting sales

Questions to ask:
o Type of relationship customer segments expect us to establish &
maintain?
o Which ones have we established?
o How costly are they?
o How are they integrated with the rest of our business model?

 5. Revenue streams: It represents cash a company generates from each

customer segment.
-

A business model can involve two different types of revenue streams:

o Transaction revenues resulting from one-time customer payments
o Recurring revenues resulting from ongoing payments resulting from
either delivering a value proposition to customers or provide postpurchase customer support.

Ways to generate revenue streams:

o Asset sale / Usage fee
o Subscription fee / Lending
o Renting / Leasing
o Licensing / Brokerage fee

Questions to ask:
o For what value are customers willing to pay?
o For what do they currently pay?
o How are they currently paying?
o How would they prefer to pay?
o How much does each revenue stream contribute to overall revenues?

6. Key resources: Most important assets required to make a business model

work. These include physical, financial, intellectual / human.
-

Questions to ask: What key resources do our value propositions require?

o Our distribution channels
o Customer relationships
o Revenue streams

7. Key activities: Most important things a company must do to make its

business model work. They include Production, Problem solving
-

Questions to ask: What key activities do our value propositions require?

o Our distribution channels
o Customer relationships

o Revenue streams
8. Key partnerships: The network of suppliers and partners that make the
business model work.
-

We can distinguish between four types of partnerships

o Strategic alliance between non-competitors
o Coopetition: strategic partnerships between competitors
o Joint ventures to develop new businesses
o Buyer supplier relationships to assure reliable supplies

Questions to ask:
o Who are our key partners?
o Who are our key suppliers?
o Which key resources are we acquiring from partners?
o Which key activities do partners perform?

9. Cost structure: Describes the most important costs incurred while operating
under a particular business model.
-

Creating and delivering value, maintaining customer relationships, and

generating revenue all incur costs.

Such costs can be calculated relatively easily after defining key resources,
key activities, and key partnerships.

Questions to ask:
o What are the most important costs inherent in our business model?
o Which key resources are most expensive?
o Which key activities are most expensive?

Figure 1 Marketing Facilitation to Improve Quality of Life / Livelihoods

Institutional
Arrangements

Government
Regulations
Grants / Subsidy

NGO

Company
Finance; Technology
Market access
Supporting Institutions

CBO
Physical facilities
Institutional facilities
Behavioural factors

Savings
Market
Interface

Investment

Expenditure
Income
Goods & Services purchased for household consumption

Production System
Markets
- Material
- Labour
- Capital
- Equipment
Goods & Services sold

Change in
Livelihoods

Source: Authors own

Livelihood Assets
Natural
,
Physical
Financial, Social
& Human capital