Posts Tagged ‘SHG’
The rural consumer behaviour exhibits certain behaviour unique to rural settings and this makes it important for marketers to understand rural consumers through appropriate research. Rural consumers, for example, tend to lead a more relaxed lifestyle compared to the urban counterparts and exhibit little urgency. Consumers in rural markets tend to have greater trust in products and services endorsed by the government and its agencies. They tend to be more brand loyal, as habits once formed are difficult to change and they tend to feel a pride in getting a good deal rather than paying premium prices for products and services.
The cultural values and norms have a strong influence in determining buying and consumption behaviour in the rural areas. There are restrictions on the type of food and the type of intoxicants that can be consumed in the villages. Similarly, women occupy a more traditional place in rural areas and therefore western apparel may not be accepted in the rural markets. However, the rural youth are open to any new ideas, and influenced by the urban consumption patterns.
Rural communities tend to be closer than urban societies and reference groups have a greater importance. Relatives and people from the same caste are important reference groups. Joint families still exists in villages although the trend is towards the nuclear families. In rural areas, the consumption is driven to a large degree by the occupation and income of the consumers. Low income levels and inadequacy of credit facilities also affect the consumption patterns. Another important factor that affects demand patterns in rural areas is the instability of the income of the farmers, which is linked to the seasonality of agricultural production as well as to the unpredictability of the harvest. Similarly, the landless labourers and daily wage earners get their remuneration on a day-to-day basis and therefore they purchase in smaller quantities of products at a time, mostly on a daily basis.
As compared to the urban counterparts, the rural consumers have different interpretations of colors, symbols, and social activities. As the exposure to mass media and information technology is increasing, rural consumers are being more informed about products and services and their dependence on traditional reference groups is waning.
Hindustan Lever Limited (HLL) is the largest detergent manufacturer in India. HLL is one of the few companies that targeted and delivered to the bottom-of-the-pyramid (BOP) markets very effectively. One of the key strengths of HLL is their distribution and marketing penetration in the BOP markets. HLL products are manufactured at around 100 locations around India and distributed via depots to almost 7500 distribution centers. HLL has the reach to all villages with atleast 2000 people.
Pricing for the BOP markets
HLL is known as the company that comes up with innovative products for which the poor are willing to pay for. In fact they base their product on peoples’ willingness to pay for the product. For example, let us consider the case of Lifebuoy. HLL does some initial market research and comes up with the requirement that the Indian rural population need germ kill soap. Now, HLL experts immediately don’t go to the laboratory and come up with the most sophisticated germ kill soap. Rather, they have a bottom-up approach which works well for the mass markets. HLL does market research to understand how much are people willing to pay for a benefit like germ killer. Considering the price to be the retail price, it evaluates its target margins it gives a challenge cost. Then it comes up with a business model which delivers that challenge cost.
Marketing and Communications Strategies
Everything seems good on paper, but how does HLL manage its competitors. The key strengths of HLL is its distribution channels available to deliver Lifebuoy at the price the market dictated. The sales and marketing strategies of HLL are based upon microfinance institutions, micro-credit lending, and rural entrepreneurship. One such project is the Project Shakti which started in Andhra Pradesh and expanded to 12 states in India.
HLL tied up with the Self-Help Groups (SHGs) and offered them products which are relevant to the rural population. A member of an SHG is selected as a Shakti entrepreneur, also called ‘Shakti Amma’ will receive stocks from HLL rural distributor. With some training from HLL, the Shakti entrepreneur sold those goods directly to the local village population. HLL witnessed 15% increase in sales from the villages of AP, which accounted for 50% of total sales of HLL products in AP.
An important reason for the success of this integrated marketing strategy for rural India is the consistencies of goals between HLL, the government units, and the NGOs. As Lifebuoy is targeted for socially desirable improved health goal, the other parties are happy to cooperate with HLL. This kind of integrated positioning, targeting, sales, marketing, and distribution strategy has given HLL a real edge over its competitors.
India is currently considered the largest emerging market for microfinance institutions (MFIs). Commonly described as the bank for the poor, MFIs offer three basic services: savings, credit and insurance. Setting up an MFI is not a Herculean task – provided your priorities are clear.
Before setting up a microfinance institution, it is imperative to come to a decision about one basic premise: do you want your MFI to be a non-profit or a for-profit institution?
Non-profit MFIs are set up as trusts or societies with the aid of grants and donations, registered under the Societies Registration Act, 1860, or the Indian Trust Acts, 1882. In fact, most such MFIs started out as NGOs.
If you decide to setup a for-profit MFI, there are two models to choose from: a non-banking financial company(NBFC) or a co-operative. Unlike an NBFC, a co-operative is entitled to take on savings accounts. A co-operative brings with it ownership, your customers are also owners.
Get a License from RBI
If you are setting up an NBFC, the Reserve bank of India (RBI) is the only authorized body that’s registered to grant youo a license. For this, you will need to raise Rs. 2 crore in capital. The process usually takes three to four months. You can also buy existing licenses of defunct companies from the RBI. This should cost you onwards of Rs. 25 lakh. Check http://www.rbi.org.in for more information. To obtain a license for a co-operative, contact the Registrar of Companies.
Decide your operational model
Most MFIs use groups for the intermediary financial transactions. But there are different way in which you can work with these groups. MFIs are broadly classified into two models: Self Help Groups (SHGs) and the Grameens. You must also decide the financial and non-financial services that you will be willing to offer. To better understand your customers, conduct a market survey. Also, it is advisable to run a pilot program for around 1 year, which will help you build the cohesion and helps you better tailor your products and services to your clientele.
- You may require 5-6 field workers, people who actually meet and interact with the target customers. It is advisable to choose the field workers with ethnic profile from your customer base.
- You may require few people to look after the accounts, and manage the MSME.
Get a bank loan
MFIs fall under the ‘priority sector‘ identified by the Government of India. The pilot program helps to gain the bank’s trust and put you at an advantage as you approach the banks. As always in business, it is advisable to source your funds from two to three different banks. Below are a few links that may be useful:
This post will be followed up with more details about the operational models of MFI.