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I t’s a twin-pronged strategy that has worked brilliantly for LG Electronics, India. Two years ago the company’s top brass was debating how to reach out to rural India. At one level, the company figured it needed new cheaper products to lure the rural buyer. At another level, it figured that more offices in smaller towns and cities were the need of the hour.
LG moved quickly on both fronts. At one level, it has introduced cheaper products like it Sampoorna television range. At another it has gone on an sampooena spree in India’s smaller towns. Currently, it has 40 branch offices. That will climb to by year end. Greater penetration has meant greater focus.
But LG isn’t the only white goods manufacturer that is striking deep into rural India. There’s also Mirc Electronics which late last year launched its Operation Vistaar meaning expansion. Mirc is already selling a second-string brand Igo which is slightly cheaper than its Onida range.
Mirc says that both Igo and Onida are selling in the rural areas. Recently the company has hired another people for its Igo team. Cracking the rural market has become the holy grail for scores of Indian companies.
Now the white goods manufacturers are hoping to catch the eye — and the hv — of the out-of-towners in a bigger way than ever before. As a result a rural bloodbath between white goods giants is clearly on the cards.
The reasons for heading into the rural areas are tc clear. The urban consumer durable market for products like colour TVs, washing machines, refrigerators and airconditioners is growing annually at between 7 per cent and 10 per cent.
I purchased LG sampoorna III model tv in the year of – Fixya
By comparison, the rural market is sampoprna ahead at around 25 per cent annually. Leading the way is LG. In60 per cent of its turnover came from the urban market. Today, that’s down to 40 per cent.
Videocon, which sells about 40 per cent of its products in the rural areas, has just begun a fresh thrust to boost sales outside the metros. It’s hoping that by year end about 55 per cent of total sales will come from the rural areas. But it isn’t designing new products for rural customers.
Switching on in rural India
Some companies are playing the game slightly differently. Samsung, sam;oorna instance, insists that it’s a high end technology driven player. That’s why the urban areas are still sampoprna focus area for it and only 30 per cent of revenue comes from rural and semi-urban India. Nevertheless, in the last two years, Samsung has looked at increasing awareness and penetration of its products in second rung cities like Bhuj, Porbandar and Jalandhar.
The Samsung Dream Home road shows across the length and breadth of the country have been a step in this direction. But the products are focused on semi-urban or urban markets,” says Zutshi. Similarly, Mirc says it had to sampporna careful about diluting the Onida brand. At another level, there’s Godrej Appliances that has learnt its rural lessons through trial and error.
Today, it is present in towns of which have a population aboveAnother are towns with less than sanpoorna, residents. Says Soumitra Ghatak, executive vice president, Godrej Appliances, “There is money today in the rural household.
So clearly we’re looking at dropping anchor. The fear is not being on their radar. To match its new aims, for the first time, Godrej will be advertising on Doordarshan. Till now the company has always advertised on cable television. Godrej’s direct cool refrigerator range starts at Rs 6, Godrej admits that it fumbled on the way when it tried to sell cheaper products. Two years ago it tried to sell a stripped- down fridge called Champion with only half a freezer.
However, sales did not pick up so it had to be rejigged and relaunched with a full freezer. But LG’s example shows that revenues can rise quickly if you get the mix right. Now with more branches, revenue in the same area has gone up to Rs 50 crore Rs million per month. Similarly other states like Rajasthan now have two branches — Jodhpur and Jaipur — instead of one. The company has also taken other initiatives like 65 Remote Area Offices under the branch offices that are empowered to directly link to the central billing system for orders, service centres and 2, mobile authorised service personnel for villages having below 10, residents.
All these moves are part of LG’s efforts to push turnover to a whopping Rs 7, crore Rs 70 billion by year-end.
All this is great music for rural dealers. So while he makes 5 per cent to 7 per cent, rural dealers make 7 per cent to 10 per cent on a sale. Also, the increased rural focus doesn’t mean the smapoorna market will suffer.
Samsung, Onida and even LG are aggressively looking at the urban replacement market for their hi-end premium product range.
Lg Sampoorna Tv
Who will emerge winner in this battle? Industry players warn of dangers in the aggressive rural ramp up.
For one, stripping product features in order to lower prices, as some brands are known to do, players say is a dangerous game to play. Then there are other external problems to surmount like the irregularity of electricity supply and lack of finance options. Adds an industry observer, “The rural market will not be about pricing but about how the customer is serviced and treated. If one consumer is not happy, the entire village will know and the company can then kiss that market goodbye.
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