Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / How Unilever Reaches Rural Consumers in Emerging Markets Vijay Mahajan December 14, 2016   Consumer markets in the developing world are an enormous but still-untapped opportunity for companies seeking new sources of growth

How Unilever Reaches Rural Consumers in Emerging Markets Vijay Mahajan December 14, 2016   Consumer markets in the developing world are an enormous but still-untapped opportunity for companies seeking new sources of growth

Management

How Unilever Reaches Rural Consumers in Emerging Markets

Vijay Mahajan

December 14, 2016

 

Consumer markets in the developing world are an enormous but still-untapped opportunity for companies seeking new sources of growth. Within that group is an even more overlooked opportunity: the rural consumer.

By its sheer size, it has huge potential. Worldwide, there are 3.4 billion rural consumers and about 3 billion of them live in developing countries in Asia and Africa. They are not all poor; in many countries, a rural middle class is emerging or expanding. Technology is making it easier to connect with rural consumers in so-called media dark areas.

The challenges – market development, product design, logistics, communication — deter many companies from even considering rural markets in developing countries. But some companies have what I call rural DNA – the ability to recognize the rural opportunity and to develop innovations to tap those markets along with their urban markets.

While researching my new book, Rise of Rural Consumers in Developing Countries, I conducted interviews with executives at both multinational and local firms, and talked with and observed rural consumers in the 10 countries with the largest rural populations. Seven of these are in Asia (India, China, Bangladesh, Indonesia, Pakistan, the Philippines, Vietnam) and three are in Africa (Ethiopia, Nigeria and Egypt). I also visited Thailand, Myanmar, and Bhutan, which also have considerable rural populations.

One of the standouts was Unilever. Particularly in Asia, Unilever has pioneered a number of innovations that it has exported to other regions in its focus on addressing rural market opportunities.

Tap women to power sales

With its Shakti initiative, Hindustan Unilever Limited (HUL) pioneered the concept of training local women as rural sales agents who sell Unilever products door to door in their communities. As of 2015, the initiative had grown to 70,000 sales agents serving 165,000 Indian villages, and HUL had equipped them with smartphone apps to help them manage inventory and other aspects of their business. The company has created variations in Bangladesh, Vietnam, Sri Lanka, Egypt, and other countries.

In Pakistan, Unilever took the concept to a new level, training hundreds of village women as beauticians, working out of their homes. During a three-month program, the women, called GuddiBajis, or “good sisters,” learn to apply makeup, shampoo hair, and provide other beauty services, as well as how to sell Unilever products to their customers. They charge for their services and earn commissions on those sales as well as points toward incentives such as salon tables or mirrors.

Ehsan Malik, former chairman and CEO of Unilever Pakistan told me that underlying the initiative is research showing that rural women have a high interest in beauty but little access to advice or products. The GuddiBajis provide that access and become brand ambassadors for Unilever products. The initiative also provides incomes for women who have few opportunities to make money and cannot freely travel outside of their homes. The market potential is significant: 4.5 million women in 5,000 villages, Unilever told me.

Find grassroots distribution strategies

The Philippines is a nation of small retailers. About 95% of the 1 million retail locations are small variety shops, called sari-sari stores. Despite their small size, some of the stores sell as many as 200 different items. Nielsen has estimated they account for 36% of the country’s fast-moving consumer goods sales.

Distributing goods to these mom-and-pop operations would be complicated and expensive, so about six years ago, Unilever landed on an idea: recruit some of the larger stores to do double duty as sub-distributors. At one such store I visited in Rizal province, southeast of Manila, the owner had purchased two motorized tricycles to make deliveries. In another, the store was a distribution point for sari-sari shopkeepers from a nearby island.

Owners of the superstores, as they are called, get discounts on Unilever products, while the sari-sari stores get better access to more Unilever brands. The superstores also serve as venues for activations, called fiestas, which combine product demonstrations and giveaways with games and entertainment. Unilever organizes about 500 fiestas a year, and said sales of highlighted brands typically jump 30-80% during fiesta weeks.

Unilever told me that the initiative had doubled its rural coverage in the Philippines while also reducing distribution costs. They use other direct-distribution models in other countries, including Pakistan, Bangladesh and India to increase the rural reach of its brands.

Offer services rural consumers need

The blue star on the sign outside a shop in a Thai village was more than a decoration. It signaled to customers that they would be entering a “store with star quality.” That means they’d not only find attractive displays and a wide assortment of Unilever products, but extra services such as community washing machines and “food corners” for breakfast or snacks.

Unilever Thailand launched what it calls the Platinum store initiative to bring an urban shopping experience to rural customers – an alternative to typical rural stores with limited offerings. Unilever helps design the layouts, develops promotions, and brings in partner companies for services such as ATMs. The stores must meet certain requirements, including assuring high-visibility displays for Unilever products. The Platinum stores get more customer traffic and revenue.

The initiative has helped Unilever fend off rivals such as 7-Eleven, which has been expanding rapidly in urban areas. Sales at Platinum stores were expanding at triple the rate of the channel overall, managers told me during my visit.

Create new channels for advertising

One challenge in tapping the rural market is how to reach consumers in remote areas with limited electricity and little access to mass media.

In India, Hindustan Unilever has used mobile technology to create audio entertainment for rural areas, adapting a common practice among frugal cellphone users – the missed call. To conserve talk time, mobile phone users dial a number, then hang up before they are charged, although the other person can see who called. It’s a way of letting someone know you want to reach them. In 2011, HUL exploited the practice in a pilot promotion for its Active Wheel detergent in some of India’s poorest and most rural areas. People were asked to call a number that cut off after two rings, so it cost them nothing. An automatic free callback provided some comic dialogue from Bollywood star Salman Khan and ads for Wheel. In four months, HUL got 16 million calls and Wheel sales tripled in the region.

HUL expanded the concept to offer 18-minute blocks of audio entertainment interspersed with ads for Unilever brands. The cost is less than 2 cents per impression. By 2015, it had grown to 35 million subscribers and was adding 25,000 a day. Unilever was planning to create versions in Pakistan, Bangladesh and some African countries.

Design products (and set prices) for rural consumers

Years ago, HUL pioneered the use of low-cost, single-use packets to make its products affordable for lower-income consumers who often shop daily for necessities (think of a ketchup packet, but filled with soap). Now these packets are ubiquitous in developing countries around the world. HUL itself sells 27 billion sachets a year.

In the Philippines, they turned out to be the answer to increasing rural sales of the company’s Rexona deodorant.  Unilever faced a tough challenge: Only half of Filipinos buy deodorant regularly, and standard package sizes were too pricey for rural consumers. To lower the price, the company first tried a small size of Rexona in stick form. The ministicks cost 35 cents, but that was not cheap enough for rural consumers. Then Unilever developed a cream version in a single-use-sized packet that cost about 10 cents.

That was the winning formula: Even the smallest mom-and-pop shops began stocking them, and Rexona cream overtook the roll-on version as the product’s biggest seller. With a push from Rexona, deodorant penetration nationwide doubled to about 60 percent.

Help managers adopt a rural mindset

Underlying HUL’s success in rural India is a program that requires managers to spend a month during their first year living in a village. They see how rural consumers live, and get a firsthand perspective on their needs and aspirations. That personal experience gives them insights that they could never gain from reading reports or conventional market visits. Several HUL executives told me they credited their success in part to that program.

These ten countries in Asia and Africa host almost two-thirds of the world’s rural population, 2.2 billion inhabitants. Because of government interventions, remittances from rural migrants, and works of NGOs and social organizations in developing better farming and sustainable living skills, these rural markets present a huge, global opportunity. Accelerated penetration of mobile phones, internet, and satellite TV is making these rural consumers aware of the product and service options that they aspire to have for themselves and their families. Urban markets are becoming saturated – competition there is growing ever-more fierce. Forward-looking companies like Unilever cultivate an inclusive growth strategy that considers rural consumers as part of their plans for growth.

 


Read the case study and provide a written case analysis of Unilever’s strategy and identify one or more companies who may be doing something similar or would benefit from a similar strategy and explain why

 

Competencies

Problem solving/Critical thinking

Communications Professional development

Global Competency

 

Option 1

Low Cost Option
Download this past answer in few clicks

15.49 USD

PURCHASE SOLUTION

Already member?


Option 2

Custom new solution created by our subject matter experts

GET A QUOTE