LG India—Approach To Rural Markets

Summary

From the few years, consumer electronic manufactures have started focusing on the rural markets for their growth and expansion. The major reasons include saturation of urban growth rate and increased contribution and higher growth rate in markets. Increase in disposable incomes due to good agricultural output, increase in easy financial options by banks and financial institutions, increased media penetration and electrification of rural areas are influencing the growth of marketing in rural areas.

In this light situation, India’s learning consumer electronics manufacturer LG Electronics India Pvt. Ltd. (LGEIL) began concentrating on rural marketing. To mark its presence and to increase sales, LGEIL designed a different marketing strategy for rural areas. It made changes in its products to suit needs of rural customers. For example, LG removed ‘golden eye’ technology in models sold in rural market. Keeping in mind about the rural customers, LG carried out campaigns in various regional channels like Lashkara, Alpha Punjabi, and Gujarati.

LGEIL adopted a unique distribution strategy for rural markets to increase its presence and sale of its other products. The company designed a pyramidal sales structure by decentralizing its distributing network. The company fragmented the distribution network with branch offices operating from big cities and many Remote Area Officers (RAOs) working under each branch office. These RAOs were further fragmented with Regional Sales Officers (RSOs) working under the supervision of each RAO. By 2005, company had 51 branch offices and 78 RAOs.

Each RAO was given charge of the territory with an independent accounts, sales, servicing and marketing team. To assist RAOs in there endeavour; the offices were computerised and connected with branches officers and the corporate office’s ERP system through Very Small Aperture Terminal (V-SAT) and an Intranet network. This enabled the RAOs to have up-to-date data on important aspects such as inventory, payment status of the dealers, etc. The RAOs overseeing the territories were given independent decision-making powers to the extent of developing their own marketing and promotional strategies in their territories.

This setup helped the company in not just improving sales but also in penetration deep into the market. The distribution setup also enables the company to establish relationship whit the sub-dealers who are not been contacted by the company representatives. Better servicing of the sub-dealers helped in increasing their sales. But analysts pointed out that such a distribution strategy was not unique and had been many of its competitors. For example Samsung and Electrolux Kelvinator followed the same strategies.

Questions for Discussion

A company needs to be careful in its approach while taking decisions regarding territory management. Discuss the territory management followed by LGEIL for its rural markets. Answer: Territory management develops and implements a strategy for directing selling activities toward customers in a sales territory aimed at maintaining the lines of communications, improving sales coverage, and minimizing wasted time. It includes the allocation of sales calls to customers and the planning, routing, and scheduling of the calls. LGEIL designed a different marketing strategy for rural areas.

It made changes in its products to suit needs of rural customers. Keeping in mind about the rural customers, LG carried out campaigns in various regional channels like Lashkara, Alpha Punjabi, and Gujarati. The company designed a pyramidal sales structure by decentralizing its distributing network. The company fragmented the distribution network with branch offices operating from big cities and many Remote Area Officers (RAOs) working under each branch office. These RAOs were further fragmented with Regional Sales Officers (RSOs) working under the supervision of each RAO.

Each RAO was given charge of the territory with an independent accounts, sales, servicing and marketing team. To assist RAOs in there endeavour; the offices were computerised and connected with branches officers and the corporate office’s ERP system through Very Small Aperture Terminal (V-SAT) and an Intranet network. This enabled the RAOs to have up-to-date data on important aspects such as inventory, payment status of the dealers, etc. The RAOs overseeing the territories were given independent decision-making powers to the extent of developing their own marketing and promotional strategies in their territories.

This setup helped the company in not just improving sales but also in penetration deep into the market. The distribution setup also enables the company to establish relationship whit the sub-dealers who are not been contacted by the company representatives. Better servicing of the sub-dealers helped in increasing their sales. 2. LGEIL followed a new sales structured to market its products in the rural markets, different from the one used in urban market. Discuss the advantages and disadvantages of LGEIL’s rural sales structure

Answer

Advantages

• * Better market coverage.
• Effective distribution of work load.
• Evaluate sales people.
• Control on direct and indirect costs.
• Optimum utilization of sales time.
• Helps manager better control and monitor sales and evaluate programms.

Disadvantages

• Sales achieved through personal relationships
• Sale of technical and sophisticated products.
• Customers spread over vast geographic area.
• Service expectations and product deliveries is at multiple places; so geographic division will not help.