new product development

NEW PRODUCT DEVELOPMENT

MODULE - 5

• Given the rising interest of the companies in the rural market, developing new products suitable for the rural market has become an imperative

NPD Process

• Idea Generation• Concept testing• Product Development• Test Marketing

New Products

• 5 kg gas cylinder by HPCL• Jolly battery operated colour television• Free Power Radio• Jugaad the rural public transport• Kisan Credit Card

Failure of Products

• The product is not fit with the rural lifestyle and environment

• Therefore, it is important :• To conceive of a product idea and build a

product concept in the rural environment by gaining a first hand understanding of consumer lifestyles and behaviour patterns through consumer surveys

Rural Product Design• MAX GAS LPG CYLINDER• Rural consumers reluctant to switch to LPG for

cooking because they worry the cylinder would burst automatically and there is no way to check the quality of the gas

• Max gas, a private player, developed a cylinder with the following features:– Auto cut off regulator, which shuts off the gas

supply in case of leakage– Double sealed cylinder to ensure the correct weight

• Special steel braided hose pipe, which is rat resistant

• Wider base of cylinder to ensure stability even on uneven rural kitchen floors

HPCL 5 kg GAS CYLINDER

• New connection – Rs. 1600• Refilling – 270

• Small cylinders new connection – Rs. 800• Refilling – Rs. 99• Can be used for both cooking and lighting• Innovative credit schemes using the kisan

credit card and self help groups

Concept Testing

• Need to be done in different regions depending upon the characteristics of that area

• A concept of a low cost dry toilet promoted by UNICEF was appreciated in water scarce regions of Rajasthan, but was opposed in other regions where water availability is not a problem

Test Marketing

• Water purifier – Jalshodhak• DCM Shriram decided to develop a low cost

water purifier specifically for rural areas.• Test market the product in Nalgonda district of

AP with SHG • But project called off as it was not able to

purify the fluoride content of the water

Eicher Tractors Idea

• To generate electricity through its tractor• With the use of generator powered by tractor

engine• Failed to address the rural consumers need for

power for agricultural purposes, it was only found suitable for domestic purposes

IMPORTANT

• Sensitizing the marketers to the ground realities in rural markets and the need to develop products that can address the needs of villagers in the best possible manner

CONSUMER ADOPTION PROCESS

• Low adoption of new products and services• Due to poor awareness of new products

because of low media access• Resistance to try new products in the absence

of demonstrations• The sarpanch, school teachers, salaried people

become early adopters

• International Development Enterprise launched a low cost foot operated treadle pump for drawing water from ground, merely display didn’t help the company

• But when a bore was made in the haat and the pump mounted on the pipe for live demonstrations, farmers started operating the pump and this led them to purchase the product

PRODUCT LIFE CYCLE

• Earlier urban products were pushed into the rural areas

• Recent years companies have started developing rural market specific products

• PLC in rural market is longer than it is in the urban areas

• Products without proper planning fail like HLL’s aim toothpaste, ruf n tuf ready to stitch jeans

• The strategies during the different stages of PLC remain similar in both rural and urban market, but the length of each stage depends on consumer acceptance, innovativeness, price propositions and the nature of the product

• Most companies are trying hard to grow the market

• This is forcing to re-engineer their products (free power radio)

• Introduce low price packs (sachets, chota pepsi)• Change consumption pattern by educating the

villagers (increasing soap usage frequency from weekly to daily)

• Adopting alternate channels to reach deeper (HUL’s Project Shakti, haats, mandis) to grow the market

PRODUCT MIX

• Simple unlike urban markets• Only few companies like HUL, Dabur hav e

more than one product available in the rural product basket

• Sometimes product and pack size both are pushed by the retailers

RURAL PACKAGING

• Has significant role in rural areas as it is associated with:

• Affordability• Ability to recognize• Convenience of usage• Product appeal

• Packaging for rural areas need specific because of the following problems:

• Poor transport system• Difficulties of safe storage• Poor facilities (erratic power supply)

• Packaging in rural areas should have:• Have a longer shelf life• Able to withstand extreme weather conditions• Able to withstand jerks and sudden

movements on dusty roads• Alternate storage arrangements (ice box for

cold drinks)

• Marketers need to consider the following factors in packaging:

• Packaging material• Pack size and convenience• Packaging aesthetics

Pack size and Convenience

• Chick Shampoo• Rasna sachet at Rs.5• Close up toothpaste and fair and lovely with a

cap• Parachute oil bottles in Re.1 plastic bottles

BRANDING IN RURAL INDIA

• The Concept of branding has been a late entrant in rural markets.

• Consumers have graduated from unbranded to branded products with the increased affordability as a result of increasing rural incomes in recent years.

• Branded consumption now accounts for 80% of total sales in as many as 18 product categories,

• Brands may be national , regional or local

• The Unusual Trend– The brand association is mainly with colours, numbers

and visuals and not necessarily with the name of the brand

• Colors : Lal dant Manjan, Lal sabun (Lifebuoy), red Battery (everady)

• Numbers: 555 detergent bar, 502 Pataka Chai• Visuals: Ghari detergent, Rath Vanaspati, Bagh

Bakri Tea, 3 Roses Tea,

• Retailers play a major role in brand promotion in rural areas

• Due to the strong bonding between customers and retailers, coupled with low brand awareness, consumers often do not ask for the product by brand but instead will request the retailer , “Paanch rupayue waali chai dena”

• And now its up to the retailer to push the brand that he chooses

• The first mover brands have become generic brands .

• Clinic Plus, Lifebuoy, Katchua Chaap, Dalda

Brand Building in Rural Areas

• Brand Name Development– Name that appeals and easy to remember– Sampoorna TV, Babool, Ajanta, Sansar sewing

machines• Creating a Brand Identity– Need to relate the brand to the rural lifestyle– Tata steel corrugated sheets – Tata Shakti,

Britannia Tiger Biscuits

• Building a Brand Image– Brand connection should establish– It should emote, empathize and talk to its

consumers– Mahindra & Mahindra – Bhumiputra series of

Tractors and Sarpanch Series

Brand Spectrum in India

• Brand choices in rural areas are often limited due to the small market size

• Limited investment capacity available with the rural retailer

• Some of the biggest urban brands such as Parle-G, Lifebuoy Active and Lux are also big draws in rural areas

Brand Loyalty Vs Stickiness

• Low levels of literacy and awareness make rural people less likely to switch brands as they do not have the required knowledge or information to exercise a choice

• They feel more comfortable in purchasing tried and tested brands

• They are therefore, brand sticky rather than brand loyals

• Rural Areas suffer from the problems of low penetration and poor availability of branded products

• Although there exists a huge demand for branded products, there are no distribution channels to make the product to reach the customer

• This has led to the growth of spurious brands to fill this gap in the demand

Fake Brands

• An ORG MARG retail audit found that for every 100 strips of genuine Vicks Action 500, there were 54 counterfeit strips sold in the market

• Bond’s for Pond’s• Fair and Lonely to Fair and Lovely• Likeboy for Lifebuoy• Clamic for clinic plus shampoo• Fighter for Tiger Biscuits

The Fakes Market

• The entire range of products available into three distinct categories:

• LOOKALIKES• SPELLALIKES• DUPLICATES

LOOKALIKES

• The colour scheme on the packaging material closely resembles that of a popular brand but pack carries a different name

SPELL ALIKES

• Fakes of original brands packaged in colors' and designs similar to those of the originals but have names that are subtly and cleverly misspell for example

• Paracute for Parachute• Fare & Lovely for Fair & Lovely• Pomes for Pond’s

DUPLICATES

• Exact replicas of original brands• The colour, design and name on the package

are the same as those of the original brands

Strategy to Counter Fake

• Several companies have taken recourse to legal action, many have found that this strategy brings them negative publicity as well, with consumers avoiding the brand in question as it could be a fake

Structure of Competition in Rural India

• Is very complex and non-uniform• The competition dynamics change from one

village to another, visible in form of a new local or regional brand on the shelf competing with the national brands

• Classification of Competition:– Other Urban national branded products

• Proliferation of national brands

– Regional Urban Branded Products• Regional or brands of unorganized sectors like detergent

powder, talcs

– Local Urban Products• Washing products, confectionery items, ribbons, bangles

– Local Village Products• Manufactured in village itself- hardware, ropes, fooditems

– Substitute products or indirect competition