hul project shakti distribution channel ppt
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TRANSCRIPT
Project ShaktiMarketing FMCG to Rural Consumer
Introduction• Unilever, the world's largest Fast Moving Consumer Goods (FMCG)
company with a worldwide revenue of $55 billion
• It's Indian subsidiary, the Hindustan Lever Limited (HLL) is the country's largest FMCG company with combined volumes of about 4 million tonnes and revenues $2.43 billion and 6.4 million retail outlets
• HLL was an established brand in India, largely successful in urban regions
Market ScenarioCompetitor Analysis
• Low Price Segment – Local Players• Operating in small geographies• Little investment in brand building• Low selling price & High trade margin• Nirma – Laundry business, Personal wash category
• High Price Segment – National Brands• Colgate Palmolive - market leader in oral-care category• P&G - hair care, Fabric wash, Feminine hygiene categories• Godrej & TOMCO
Sales & Distribution System
HLL
CFA
RS
Wholesaler Retailer
Consumer
• Limitations : • Not appropriate for small
markets• Ill equipped for modern
trade
Redesigned system : Channel Approach• Top End of Diamond :• Represented modern trade encompassed self service stores and retail
chains• Accounted for 10% of the overall FMCG market
• Middle Part of Diamond• Largest part of the diamond• Profit-center-based sales teams to cultivate, penetrate and grow markets
• Bottom End of Diamond• Direct distribution in rural markets• Accounted for 20% of HLL’s business
HLL’s Rural Distribution Matrix• Following HLL, some competitors were adopting Streamline
Strategy, hence HLL focused on a complete new market which had Low Business Potential and was an Inaccessible Market.
• A + B + C = 220 million population reach• Project Shakti = Rest 500 million
Market/Business Potential
Low Business Potential
High Business Potential
Accessible Markets
Indirect Coverage (25%) - A
Direct Coverage (40%) - B
Inaccessible Markets
Streamline (35%) - CProject Shakti
Project Shakti: Strength & Empowerment• Born in December 2000, in Nalgonda district of Andhra
Pradesh• An ambitious venture by HLL to spur growth and penetration
of its products in rural India while changing lives and boosting incomes.• Sales and Distribution initiative – delivers growth• Communication initiative – build brand• Micro-enterprise initiative – creates livelihoods• Social initiative – improve standard of living in rural India
Objectives• Business objective: • To extend HLL's reach into untapped markets and to develop its brands through local influencers.• To reach 100 million consumers by 2006
• Social objective: • To provide sustainable livelihood opportunities for underprivileged rural
women.• To scale up the number of Shakti entrepreneurs from 12000 (2004) to
25000 (2006)
Political
Government Co-operation
Support of district
administration
Economic
Low income group
Micro credit
Socio- Cultural
- Social awareness programs-Language
Barriers
-Women as salespersons
was a new idea.-To cash on women as influencers
Technological
iShakti
Sachets, an innovative packaging solution
PEST ANALYSIS
Strengths
• Local knowledge of markets through Self-Help Groups (SHGs)
• Technology necessary to operationalize the model
Weakness
• Skepticism in the minds of local people
• Untrained women entrepreneurs
Opportunities
• Ever increasing demand due to untapped rural market
• Increasing self awareness for hygiene, beauty ,etc. which would lead to high turnover over long run
• Create a channel for brand communication • Integrating business with social
responsibility
Threats
• Time taken by the project to break even
• Competitor’s entry into rural market following the same model
SWOT Analysis
Channel Design Decisions
Analyze customer needs & wants
Establishing Objectives & Constraints
Identify channel alternatives
Evaluate channel alternatives
• Lot size – The number of units the channel permits a user to purchase
• Waiting & delivery time – average time customers wait for receipt of goods
• Spatial convenience – degree to which marketing channel makes it easy for customer to purchase their product
• Product variety – Refers to the assortment provided by the marketing channel
• Service backup – add on services (credit, delivery etc)
• Objectives:• To extend HLL’s reach into untapped markets• To develop the brand through local influencers
• Constraints:• Rural market scattered over large areas• Low per capita consumption• Connectivity from urban to rural areas
• Different channels like sales forces, distributors, dealers etc. have unique strengths and weaknesses.
• Channel alternatives differ in three ways – • Types of Intermediaries, No. of intermediaries, Terms &
Responsibilities of channel members• Available alternatives for HLL
• Profit center based sales and distribution model, Diamond Model, Project Shakti
• Economic Criteria• Control and Adaptive Criteria
Evaluating Different Channels• Each channel alternative is evaluated against:
• Economic criteria• Control Criteria• Adaptive Criteria
• Profit center based model:• Was based on geographies and product categories• Not appropriate for small markets since potential business was small and assigning
one stockist exclusively for each profit center was not economical.
• Diamond Model:• A three layered channel consisting of:• Self service stores and retail stores : synergy across profit centers• For cultivation, penetration and growing new markets : Profit center based
model was applied.• Direct distribution in rural market which focused on economies of scale
• Project Shakti Model (Shakti entrepreneur)
• A direct distribution channel for rural market penetration• Shakti entrepreneurs directly sold to retailers as well as consumers• Initial reduction in profit margin but overall an increase in sales led to
increase in profits• High control over the distribution channels.• Aimed at building consumers for life
Evaluating Different Channels
Project Shakti: Consumer Marketing Channel
HLL (Manufacturer)
SHG
Retailers
Consumers
• Integrated Multichannel System
Shakti Entrepreneurs
• Advantages: • Access to untapped market
• Drawback:• Income Generated very small• No sense of belongingness
• Advantages: • Responsibility was not shared among many• Income was not shared
Channel Conflict• Channel Conflict :
• Generated when one channel member’s action prevent another channel from achieving its goal
• Types :• Horizontal Channel Conflict • Occurs between channel members at same level
• Vertical Channel Conflict• Occurs between channel members at different level
• Multichannel Conflict• Exists when the manufacturer has established multiple channels that cater to the
same market• Occurs when member of one channel gets a lower price or works with low margin
Channel Conflict and Cooperation
Channel Conflict• HLL sold its products to Shakti
entrepreneurs at some discount relative to general trade.
• Entrepreneurs selling to a local outlet which in turn sells to consumers
• Have to sell at the price which can enable the outlet to earn a viable retail margin
• Limited the amount that the Shakti entrepreneur can earn, which is nothing but Channel conflict
Cooperation• Shakti entrepreneur can sell direct
to the consumers
• This allowed Shakti entrepreneurs to earn more by retaining the retail margin
• HLL can control the discount offered to them to manage channel conflict
Channel Management Decisions
SELECT TRAIN MOTIVATE EVALUATE MODIFY
• Villages with a population of 2000 – 3000 are targeted.• Personnel from HLL approach SHG’s• The representative of the company meets panchayat/village head and
identifies who would be suitable as Shahti amma.• One shakti entrepreneur (shakti amma) is appointed for 1 village &
villages that are 2 kms from her village
• To train the Shakti entrepreneur, RSP system was introduced.• Incentive programmes for newly appointed entrepreneurs.• Rewarding them in cash for visiting a specified no. of homes,
irrespective of the amount sold.• Additional incentives on sales of specific brand popular in a region.
• Shakti amma’s evaluated on sales growth and improvement in the sales techniques.
• No channel strategy remains effective over the whole product life cycle.• Customer data on low income rural income group is very limited. HUL
designed a GPS and density mapping technology to design its rural supply chains and sales networks.
• Population density helps in determining the no. of recruits, volume of product that supply chain needs to handle.
• With seasonal migration a common occurrence in rural India, the ability to continue to map population density quickly is a key competitive advantage, and a critical factor in building a flexible supply chain.
Shakti Vani: The Communicator
• Branded social communication program targeted at the rural community• Program implemented by Ogilvy Outreach, the rural activation unit of
advertising agency Ogilvy & Mather
• Structure:• To communicate best practices in the area of personal health • Local woman appointed as Vani, trained and positioned as health and hygiene expert• Cover cluster of villages, organize school-contact programs, SHG meetings & other
social occasions
• Advantages:• Stable HLL brands cost 10-15 % of sales in promotion, while this program cost 3-5 % • Primary awareness about personal health would benefit HLL by growing the market for
its products in long run
iShakti : The Portal• Initiative to extend the benefits of information technology to rural India
and to empower the rural community by creating access to information
• Structure:• Dialogue-interactive software installed in the desktop• Registers user can log on to the site and get various information free of cost
• Advantage:• Communication channel of HLL, which other media failed to reach
Source: http://www.managementexchange.com/story/doing-well-doing-good-changing-lives-rural-india
Sustainable Competitive Advantage• Low Pricing (LUPs)• Brand Recognition (also Shakti Vani - HLL popularity due to
Project Shakti)• Distribution and Information Systems• Community Development – iShakti, NGOs and SHGs• Women Empowerment – Shakti Entrepreneur• Customer Service• Consumer for life
Conclusion• Delivers growth with its sales and distribution initiative • Builds brands of HLL in the consumers’ mind • Extends HLL’s reach into untapped markets• Provides sustainable livelihood opportunities for underprivileged
rural women• Improves standard of living in rural India
References• http://
www.hul.co.in/sustainable-living/casestudies/Casecategory/Project-Shakti.aspx
• http://www.managementexchange.com/story/doing-well-doing-good-changing-lives-rural-india
Thank YouGroup - 1
Katib Ali A005
Siddhartha Biswal A012
Archisman Chaterjee A013
Kumar Rohan A042
Sameer Sehgal A047
Karan Shah A050
Ravneet Singh A052
Jinesh Vora A056