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SELLING TO HINTERLAND

Selling is an art and selling to rural folk is job of a maestro. People are the biggest assets of any marketing company and they are the source of competitive advantage. Ask HLL or Coca Cola what is their biggest nightmare and answer will be to lose its best salespersons. Selling is an art that is acquired over the time and there are no shortcuts. Most of the big corporate honchos started their career with sales. Is it a coincidence? May be no. Sales provide an excellent opportunity to get a first hand feel of any industry. Sales people of the company are the customer touch points. Thus it does not come as surprise that Sales people are the first one to identify any change in customer behaviour or upcoming industry trends. As Andrew S Grove rightly mentions in his book- “Only Paranoids Survive”, that any major change is first felt by the grass root level employees. And these early receivers are none but sales people. Thus sales is one of the most important functions of any company as it is the only function that materializes all strategic and tactical moves of a company.

High accolades come with high responsibility too. Job of a salesperson is that of a most dynamic, hardworking person. Challenges are abundant and competition is tough. Evaluation is immediate. Successes are generally shared by the whole marketing team and failures are bestowed upon the sales department. Above factors make the sales a high pressure job where they always need to stay on their toes. Companies recent foray into rural markets have made the scenario worse. There are new opportunities but of course along with new challenges only.

Selling to rural folk is tough thanks to erratic behviour of rural consumer that in turn comes because of irregularity of income patterns, dependence on monsoon and high influence of local retailers. Given the fact that very few companies have products exclusively designed to serve rural customer’s needs, it becomes a challenge for a rural salesperson to sell urban aspirations to a resistant rural household. In addition to above facts, high illiteracy level, need for credit and media darkness of the hinterland makes it even tough.

To break the monopoly of a rural shopkeeper and to compensate for the lower media reach, many companies have adopted direct marketing. Objective is to catch the customer at his home, demonstrate the product, convey the functional benefits and materialize the sale. Benefits of catching a customer at its home are manifold. Firstly, company is stopping the customer to go to village shopkeeper which has the tendency to push his favorite brands. Secondly, it is stopping the customer from going to urban retailer where he will be exposed to the complete set of consideration set. Thirdly, in addition to sales, targeting door-to-door by the salesperson involved, acts as an excellent promotional medium. Moreover, it also generates strong word-of-mouth publicity from the satisfied customer. Last but not the least is building of long term trust based relationship with the customer.

Channel is very promising but going for direct selling requires thorough knowledge of village culture, specialized training and above all dedication to soil your hand in rural sand storm. Below are some of the challenges those are faced during the journey.

 Timing
Timing plays a major role in success of any rural sales activity. Most of the village households are involved in agricultural activities. Thus they leave their homes early in the morning and comeback late in the evening. Thus salespersons need to reach the village early in the morning or late in the evening. This becomes virtually unfeasible for the sales person staying in the city.
 Dialect
If they don’t understand you they will not trust you and there is no sale. Thus the local dialect is the most important thing a rural salesperson should know. Dialect helps in building the trust that is prerequisite for selling to villagers.
 Culture
Culture is set of all the traditions values and beliefs a particular village has. There may exist a huge cultural variation between even two adjoining villages. In fact cultural boundaries and not the geographical lines demarcate one village from the other. Culture in a Muslim dominated village of Madhya Pradesh is totally different from its Hindu dominated counterpart. Understanding of village culture is a must have to avoid any taboos in the marketplace.
 Uncertainty
One word that universally defines rural India is uncertainty. It can be in rural income patterns, condition of roads or consumption patterns of rural customer. Thus a marketer needs to understand this uncertainty factor while estimating demand or designing a distribution channel.
 Retailer’s Resistance
As I mentioned earlier village shopkeeper is the king. It is his territory. He knows and has a strong relationship with residents of that village. He provides them with the credit and advice on brands too. Thus going for direct sales route is bound to attract resistance from him. Understanding the retailer psyche and specific problems faced by him will lessen the resistance. Taking retailer into confidence will help in new demand creation along with increasing company’s sales.

Many companies have gained success by custom tailoring the direct selling route to overcome the above mentioned challenges. These are the companies those are writing their success story in rural India by taking the villagers along with them and sharing the reward. HLL eg has made the process more participatory by taking help from poor women from Self Help Groups who have the knowledge of dialect, culture and consumption pattern of people in their village. Even timing is no more a problem with these women staying in the village itself. Similarly Emami has started using mobile traders commonly known as “Pheri Waalas” to reach to the rural customers. These companies are building a platform for sustainable competitive advantage in these markets.

As I mentioned earlier success in hinterland requires a long term focus, dedication and openness to change. Theses markets offer completely new challenges that sometimes require radical changes in the strategy. Thus companies should be ready to change track once in a while to have a share of the rural pie.

Farmer's Brand

Branding Agricultural Commodities

Branding by its own definition branding makes a company able to charge a premium for its products. In today’s era we are listening about popular concept of commoditisation of brands thanks to faster imitation of technology and product design innovations. Mineral water, toothpastes, soaps are few examples those are being treated as commodities nearly. Thus what do we get from the discussion that it is increasingly becoming difficult for organizations to maintain the uniqueness of their brands.

What if some one talks about branding of agricultural commodities those do not have any or little visible differentiation. Seems too far fetched? Wait for a minute. Let’s have a look at some of the agricultural commodities that have been attempted for branding, successfully or unsuccessfully.

1. Atta -Pillsbury, Knorr annapurna, Ashirwaad
Status-Fairly Succesful
2. Salt - Tata, Captain Cook, Annapurna, Ashirwaad
Status-Success
3. Sugar- Sugar Cube, Sugar Free, Pyar-Dular-Sanskar
Status- Uncertain
4. Edible Oils - Saffola, Sunflower, Dhara
Status-Success
5. Spices - MDH, Catch
Status-Limited Success

All above mentioned examples share one thing in common i.e. all these products are Processed/Semi processed commodities. Value has been added to these products during processing operations which has made these products visibly distinct and capable of charging premium over their commodity counterparts. But when we talk about branding agricultural commodities, we are going one step further.

Agricultural commodity branding can be defined as “Process by which any organization or individual adds value to a agricultural commodity prior to any treatment/ processing operation that makes its sensory attributes differentiable and capable of fetching premium is Agricultural commodity branding.” ACB can be done with respect to following attributes.

Sources of Differentiation

1. Inherent superiority of basic material e.g. Virus free potato, Transgenics
2. Regional/Geographical advantage e.g. Bird's Eye Chillies from north east
3. Uniqueness of cultivation operations-Organics
4. Time utility e.g. Early season fruits

Concept is of particular relevance in the case agricultural commodities are directly used for consumption and where quality is the important parameter.
We will discuss in detail the issues involved in ACB in details in next post.

Not So Sweet

Challenges in Branding Sugar

After Salt, atta, edible oils, spices and water, it is SUGAR that is being a focus area for ‘Commodity Branding League’. Many have tried their hands but only few have been successful.

Success Stories

Mawana Sugar company was first to enter the branded sugar market with its brand ‘Mawana’ in 1994. The product commands a price premium and is the largest selling branded sugar in the market. Total branded sales accounted for 4% of the total sales in 2003-04. With stress on advertising initiatives by the company, it expects the branded sales to increase at a fast pace.

EID Parry (India) Limited, the pioneer of sugar production in India, has for the first time launched its branded 'Parry's Pure' refined sugar in Chennai in Nov 2004. Priced at Rs 24.75, the product is available in attractive one kg pouches and Pet jars and is stocked at several leading outlets in the city. Hygienically processed from the first grade cane, the refined sugar is of the highest degree of purity. An advanced phospho-floatation process with international technology ensures that this free flowing sugar is devoid of any dust, impurities and foreign particles promising a longer shelf life. The company has technical collaboration and strategic alliances with international partners to provide superior quality products in tune with the emerging consumer requirements. Company is initially targeting the household segment before it expands its focus to institutional segment. Over a period of time, the company plans to launch several value-added sugar products. The branded sugar is made at the company's Nellikuppam factory, one of the country's oldest sugar plants.

Failures

Balrampur Chini launched its brand 'Pyaar-Dulaar-Sanskaar' in 2003, priced slightly above the cost of loose sugar. The company justified the price on the grounds that packed sugar was cleaner and purer than loose sugar over which there was no quality control. However, with consumers giving the product the thumbs down, Balrampur Chini decided to stop marketing its products in the branded packet form.
According to company executives, Balrampur Chini's branded sugar business generated 1 per cent of the company's total turnover of Rs930 crore for the year ended March 31, 2005.
Rationale For Branding Sugar
For all branded sugar marketers the logic of marketing branded sugar lay in the fact that if commodities like atta, salt and oil could be turned into successful brands, so could sugar. The feeling was that consumers would accept the value-adds if an established company gets into branding. For instance, Parry's and Dhampure refined sugar brands are claimed to be sulphur-free and absolutely clean unlike the normal sugar available in the commodity market. This is possible, the companies say, because they use the latest technology to process sugarcane.

Challenges in Sugar Branding

Industry Specific
Ø Price Fluctuation
Ø Freight Sensitivity
Ø Small Fragmented Market Size
Ø Govt. Regulations
Ø Sugar Cycle
Ø Value Addition

Price Fluctuation

Loose Sugar 12- 20 Rs
Branded Sugar 24-29 Rs
Branding can be successful only if the product offered across price-points and sugar manufacturers should offer value-adds to commodity sugar without increasing its price since the sugar market is extremely price sensitive. In recent times the price of sugar has been hovering around Rs20 and above which takes the price of branded sugar up to Rs24 or more.

Freight Senstivity

Analysts say factors like transportation costs are loaded against the success of marketing branded commodities like sugar. Perhaps, as a result, sales have tended to be either localised or have found acceptance among institutional buyers like upper segment hotels. For instance, Parry's 'Pure refined sugar' is only available in the South as the company says sugar is a freight sensitive product.

Small Fragmented Market

According to industry experts the consumption of sugar in India is about 180 lakh tonnes annually, the highest in the world. The retail segment accounts for sales of 45-lakh tonnes, while 20 per cent of the total sugar produced is used by large industrial consumers like manufacturers of soft drinks, chocolate and confectionary, biscuits and so on. The remaining 55 per cent is consumed by unorganised bulk consumers, such as sweet shops. Hence the branded sugar market is small and is estimated to be in the region of one or two-lakh tonnes.

Govt. Regulations

Under the partial control of sugar industry followed by the Central Government, 90% of the sugar produced by sugar mills may be disposed off by them, without any restriction on price and movement. The balance 10% is to be supplied by them at prices fixed by the Central Government. However, both free sale sugar and levy sugar are subject to monthly quotas decided by the Central Government. The sugar produced in 4 to 5 months in a sugar seasons is controlled and regulated to be sold throughout the year. This release mechanism has been in place since 1942, when the Sugar and Sugar Products Control Order was first promulgated and has since been followed except for a break during 1978-79, when monthly release was given up. The reason for monthly release of sugar has been to ensure that sugar is available throughout the year at reasonable prices to consumers,

Sugar Cycle

Domestic sugar industry typically follows a 4 to 5 year cycle.

Value Addition

The biggest challenge for the branded players is to bring in more value-adds to convince the consumer of the superiority of a branded product. They say commodities like edible oil and atta incorporate a huge amount of value add-ons. Edible oil for instance needs high technology refining and hygienic packaging while atta makers offer premises of convenience and hygiene while the difference between loose sugar and branded sugar is not really visible to the naked eye.

Theses are the major challenges present at industry level those make SUGAR BRANDING not so sweet.To read detailed analysis of Balrampur Sugar Mill’s failure in branded sugar category, write to me at ravinder.grover@gmail.com

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