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This presentation briefly describes considerations for design of strategy for success in rural pharmaceutical market of India. This an updated version of earlier presentation
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Market Potential of Rural India
1% increase in rural income
Buying Power ofRs.10,000 Crore
~ Two-third of Middle-income
households
Live in ruralIndia
~ 50% India’sBuying Potential
Lies in Villages
ZENITH International Journal of Multidisciplinary Research Vol.1 Issue 6, October 2011, ISSN 2231 5780
Growing rural market presents a good growth lever for players
• 73% of population lives in rural India ~ 720 million customers
• Rural population accounts for 12% of the world's population – as large as the market of USA or Russia
• 25% of all villages account for 65% of the total rural population
• 60% of India's US$15 billion annual consumption of gold and gold jewelry is from rural and semi-urban areas
• India rural market is growing at a rate than largest emerging markets: rural spend increased to $ 69 billion from 2009 to 2012
• $12 billion consumer goods market (2014) is expected to hit $100 billion by 2025
Reference: Unlocking the Wealth in Rural Markets, HBR , June 2014
Economic indicators suggests sustainability of higher growth rate of rural market
• Rural Consumption is growing at 1.5 times the rate in urban areas
• Branded & Expensive products are replacing entry- level version in “Consideration Set”
• Per Capita GDP Growth of rural market is higher than urban market
•Government initiatives and schemes•Infrastructure development•Industry projects in rural India•Emphasis on local-employability
Growth Propellers
Reference: Unlocking the Wealth in Rural Markets, HBR , June 2014
Disposable household income levels set to rise significantly in rural markets
Source: Mckinsey Global Institute- The Bird of Gold: The Rise of India’s Consumer Market
Disposable Income = The amount of money that
households have available for spending and saving after
income taxes have been accounted for.
Rural markets contribute to one fourth of pharmaceutical market
Improving Socio-economic profile provides further impetus for the growing market
2
3 3.4 3.94.4
5.4
2.3
2.72.8
3.2
MAT 04/2006 MAT 04/2007 MAT 04/2008 MAT 04/2009 MAT 04/2010
Metro + Class I ($ bn) Class II to VI and Rural ($ bn)
(16%)
(4%)
(15%)
*Source : ORG ims SSA Audit MAT April 2010
(17%)
( ) value growth for Class II to
VI and Rural
1 USD : 49.5 INR
Market with a size of > $ 3 BillionExtra urban = Tier 2 + Rural Rural Market
Apr MAT 2011:
18.8%
Accessibility: A growth driver growth for extra-urban market
Source: McKinsey Global Institute-The Bird of Gold: The Rise of India’s Consumer Market
Extra urban = Tier 2 + Rural
* Based on share of wallet spend on healthcare in each income class and average
spend of 16% on Pharma within healthcare across classes
+ The empanelled list includes Private hospitals
Company % Contribution in Sales
Asian Paints 60%Dabur 40%Videocon 40%Colgate 50%HLL > 50%
FMCGs have successfully captured the rural market potential
What differentiates Rural market from Urban market?
1.Reach2.Living Standards 3.Economic gap 4.Product awareness5.Education6.Channel of Communication7.Channel of distribution8.High importance to “Value for money” than Brand9.Heterogenic market nature
Players have adopted varied strategies to leverage the rural opportunity
Products, Pricing and Packaging
Re-Engineering
1. Godrej has introduced Chotukool refrigerator
2. Vortex has launched low cost ATMs
3. Nokia has developed Life tools - a mobile application that provides access to agricultural, educational and entertainment
content.
SBI deployed 545 ATMs across semi-urban and rural India
Sold by Village girls For Rs.150/- margin
Reported user base1.5 million
Players have adopted varied strategies to leverage the rural opportunity
Communication and distribution channels
1. Tata Tea's 'Gaon Chalo'
2. HUL's Project Shakti
3. ITC e-choupal
In One year added 20,000 retailers, 500 new rural distributors in 10,000 villages in UP
Rural Women became direct-to-consumer sales distributors for Hindustan Lever’s soaps and shampoos. More than 45 000 Shakti entrepreneurs covering 3 million homes in 100 000 villages in 15 states .
Re-Engineering
Strategy must address the differences between urban and rural market to succeed
Aspect Urban Rural
1 PhilosophyMarketing & Social
Concept
Development &
Relationship marketing
2 Competition Organized Sector Unorganized Sector
3 Literacy High Low
4 Income High Low
5 Adoption Faster Slow
6 Quality Good Moderate
7 Transportation Good Average
8 AdvertisingPrint, audio visual,
outdoors.
TV, Radio, print media in
many languages
P+A : Formula for Success in Rural market
4 AAWARENESSACCEPTABILITYAVAILABILITY AFFORDABILITY
4 PPRODUCTPACKINGPLACEPRICE
Rural
Markets
Players must address “rural market Challenges” to gain from growing market
Reference: Unlocking the Wealth in Rural Markets, HBR , June 2014
Dispersed Customers
Undeveloped transportation infrastructure
Unreliable Telecommunications
and electricity services
Inadequate distribution networks
Lack of reliable partners for sales & service networks
Scale & Profitability of rural operations are inversely proportional to Length of ‘Convergence Curve’
16
Pla
yer Rural
PhysicianSales
Representative
diagnostic services
Patient
Wholesaler
Semi-Wholesaler
RuralWholesaler
RuralPharmacy
Rx
Length of Convergence
17
Thank you
DISCLAIMER:The author is currently working for a leading global pharmaceutical player. This presentation is developed as a guidance to executives/ students to understand the basics of rural market dynamics . The views expressed in this presentation does not necessarily reflect the opinion of the employer.