Page 179 - DMGT509_RURAL MARKETING

Rural Marketing

Notes For low quality product a low or penetrating price would place the product at lower end of the
market segment, increase market share and become a price barrier for entry of new players.
In rural markets this pricing policy will pay dividends.

Hence, considering the quality of the product, its position in the life cycle, and market share, a
pricing strategy has to be evolved by the firm. Firms must understand the price-demand pattern
for the product based on the selected market segment. The demand and price ratio varies with
products; in some the demand remains inelastic irrespective of price while for some products
even a slight change in product price changes the demand pattern drastically. The change in
demand is also dependent on the market segment being catered to, by the product.
It can be seen that the demand of high end products like Mercedes car, air travel in the first class,
five star hotel rooms and some of the essential items of daily needs like food, the demand
remains near constant with price changes as given below.

For consumer durables products like refrigerators, ovens, fans the price is a major factor in
purchase decisions.
Products, which can show unique features, have not many known substitutes, and which have
low maintenance costs are less price sensitive.
As cost of manufacture does affect the final price, let us discuss what the cost is made of. There are
fixed costs, the overheads and variable costs, which constitute the total manufacturing cost.
Fixed costs remain unchanged with the volume of production, like the interest the firm pays the
salaries, power, and telephone and rental bills. In fact even if there is no manufacturing these
payments have to be made. Variable costs depend on the volume of production like the cost of
material, labour, etc.

9.2 Pricing Strategies

1. Low cost/ cheap products: This follows from the product strategy. The price can be kept
low by low unit packaging like paisa pack of tea, shampoo sachets, vicks 5 grams tin, etc.
this is a common strategy widely adopted by many manufacturing and marketing concerns.
2. Refill packs / Reusable packaging: In urban areas most of the health drinks are available.
The containers can be put to multipurpose uses. Such measures can a significant impact in
the rural market. For example, the rural people can efficiently reuse the plastic bottle of
hair oil. Similarly the packages of edible oil, tea, coffee, ghee, etc., can be reused. Pet jars
free with the Hasmukh Rai and Co Tea, Ariel Super Compact.

3. Application of value engineering: In food industry, Soya protein is being used instead of
milk protein. Milk protein is expensive while Soya protein is cheaper, but the nutrition
content of both is the same. The basic aim is to reduce the value of the product, so that a
larger segment can afford it, thus, expanding the market.
4. Large volume-low margins (Rapid or slow penetration strategy): Marketers have to focus
on generating large volumes and not big profit margins on individual products. If they
price their product at a level which can lead to good volumes, then they can still generate
good returns on the capital employed.
5. Overall efficiency & passing on benefits to consumers: For rural products, the strategy
should be to cut down the production, distribution and advertising costs and passing on
these benefits to the customers to further increase the turnover. Most often, it has been
observed that advertising has less to do with product sales in the rural areas. If an
organization gets the price point right, then it can work in rural market.

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