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Targeting Rural Yoghurt Market: A Way Forward Students need to...
Targeting Rural Yoghurt Market: A Way Forward
Students need to analyze the case's issues critically, and answers the questions that are reported at the bottom of the case study.
Company Background and Yoghurt Market
Mali started its
...[Show More]
Question
Answered step-by-step
Asked by ConstableGuanaco2376
Targeting Rural Yoghurt Market: A Way Forward Students need to...
Targeting Rural Yoghurt Market: A Way Forward
Students need to analyze the case's issues critically, and answers the questions that are reported at the bottom of the case study.
Company Background and Yoghurt Market
Mali started its business in late 1990s with milk sachets,1 an innovative product which targeted the children and had a significant demand. The price of the milk sachets was fairly low compared with bottled milk and targeted low-income people. With the success of the milk sachets, Mali decided to expand the product line into yoghurt. At present Mali is in a leading position in the yoghurt market having a share of 30 per cent in the yoghurt market. Being situated in rural areas, the company has the advantage of addressing the rural market basically and touching the semi-urban consumer. The taste and thickness of yoghurt has been slightly changed to suit the rural market. Thus, the taste of the yoghurt is sweeter and the yoghurt is thicker compared to other yoghurt brands. Mali basically targets rural customers, as it offers a large untapped market for yoghurt products. The rural market is not captured by big yoghurt manufacturers yet. Mali has succeeded in taping the needs of the rural market in southern part of the country. This particular segment shows a different consumption behavior for yoghurt product, as they have unique lifestyle practices shaped by cultural and social impacts. Culture influences consumer behavior in a big way as different cultures imply different mental programming. Almost all the target consumers in this rural market are agricultural workers.
Yoghurt Industry in Sri Lanka
Yoghurt is relatively simple to manufacture, requires small amount of capital and there is a good demand for yoghurt in Sri Lankan market. Thus, yoghurt business has been one of the popular small-scale enterprises in Sri Lanka. According to Achyut Reddy, Managing Director, Fonterra, 'the Sri Lankan yoghurt
market has experienced double digit growth in the past five years and consumers now eat more than 12,000 metric tons of yoghurt annually' (Lanka Business Online, 2008). There is an increasing trend towards the production of yoghurt in Sri Lanka (Weerasekara, Karunarathne & Prathapsinghe, 2010). Many people, who cannot bear up or tolerate milk, due to protein allergy or lactose issues, can enjoy yogurt. The culturing process which is used in yoghurt production process breaks down the milk sugar lactose into glucose and galactose, two sugars which can be more easily absorbed by the human system. There are many different yogurt types available in the Sri Lankan market. These include flavoured yogurts, such as vanilla yogurt, strawberry yogurt, treacle yogurt, fresh fruit yogurt, chocolate flavoured yogurt and jelly yogurt. The market is comprised of five or six major players and dozens of small players.
Mali's Marketing Strategic Base
Mali has considered the following key areas as significant in marketing decisions. These bases have had huge impact in marketing decision-making at Mali (refer to Figure 1).
Nature and Size of the Target Markets (What and How Many)
Mostly, the target market is agricultural workers. Their culture (values, beliefs and attitudes); behavioural and lifestyle patterns; their income levels, savings and investment orientation; and education and exposure to media are among the aspects that have been considered in defining target market of Mali yoghurt. The company has estimated that it has about 200,000 to 300,000 customers.
Product Positioning (What to Keep in Consumer's Mind)
A product should be congruent with the society and culture of the target market. The positioning of the products should be in accordance with target consumer needs and wants. Mali yogurt wants its customers to see its product as a natural and healthy dessert/supplement.
Product Distribution (Where and How Many)
The company has established five distribution outlets in the province to cover the target markets. For example, Wellawaya outlet is used to distribute in Wellawaya area. Mostly, the distribution is done by agents through their vehicles used as means of transportation. It is a cost-effective means to distribute the products, and the agents have a clear idea about the area. Agents are handpicked by Nimal depending on their expertise and coverage. Selection process is fairly informal. Nimal says:
When I go out for various business pursuits, I talk to a lot of people. That is how I come to know people, get a chance to select my agents. I am a people-person. I get this feeling which comes to me when I meet the right person.
This process of selection has worked and has been a success till now.
The company currently does not aim to approach customers through supermarkets, as there are very few established supermarket chains in the rural areas. Difficulties in managing the credit terms and realization of payments from the supermarkets also have contributed to this decision. Supermarkets (also known as modern trade in Sri Lanka) contribute about 12 per cent of the total retail sales value and with about 670 outlets (Daily News, 2010) in the island, it is a relatively new concept in Sri Lanka. The supermarkets are run by rich conglomerates or group of rich owners in diverse business, and Nimal feels that they consider small manufacturers, such as Mali, as insignificant, and therefore, tend to dictate terms on supplies and payment. Normally, supermarkets ask for three months' credit, which Mali believes will disrupt its working capital requirement. However, supermarkets are increasingly gaining in popularity especially in urban and semi-urban areas. The urban consumers wish to visit the supermarket because of its role as one place to offer a variety of consumer products and daily necessities under one roof. Mali plans to keep his products in supermarkets mainly for publicity rather than sales, as it would facilitate in approaching the semi-urban customers slowly. Mali's distribution can be illustrated as in Figure 2.
Product Promotion and Sales Team (Reaching the Target Markets)
Mali has a well-trained marketing sales force for promotion, selling and customer care led by the owner of the company. This talented, loyal and committed sales team has contributed a lot to achieve competitive edge in the market. Nimal has led the sales team towards target achievements with proper analysis of the product, market and competition. Word-of-mouth promotion is highly valued by Mali in promoting the product. Regional newspapers are used to advertise the products. In addition, Mali has used the channel of advertisements in souvenirs brought out by various organizers of cultural and sports events in the rural area.
Advertisements in newspapers or large hoardings are limited, since costly advertisements may give wrong impression to consumers of the product being highly profitable. It also attracts attention of income tax authorities for the same reason creating avoidable problems. Donations and sponsorships to the cultural and sports events in the region are also in the publicity programme. To develop and maintain relationship, the company sends greeting cards with gifts on special occasions and functions, such as birthdays and marriages, to the agents, distributors and retailers. The owner directly calls them on these occasions to wish them and maintains a small database of these days. This has been a success strategy in relationship management with parties involved in the business. In addition, sales force is recognized and awarded for their achievements. 'Below the line advertisements' messages are rarely considered as this involves high costs. Besides, the customers are hardly concerned with messages appearing 'below the line advertisements.
Nimal says:
If you give a name board to a small retailer, it normally takes about three years to cover the costs of that particular name board, before making any profits from that shop. So when one has to operate in this kind of markets you have to be very careful how you spend on promotions. TV commercials are not considered for similar reasons of high cost and the poor coverage as yet in the rural areas.
Higher sales commissions to retailers are among the major concerns of promotions. According to Mali, without sales commissions to retailers it is impossible to promote products in rural market segments. There is a big competition in offering sales commissions to retailers among the big players in the market. Mali yogurt did consider few consumer promotion activities, including providing gift vouchers and also allowing consumers to be part of contests. However, Nimal is not satisfied with the outcomes.
This aspect also has contributed to his more reliance towards push strategy.
Pricing (Value Exchange)
The pricing strategy adopted by Mali is competitive pricing. Thus, the price of the product is almost the same as the competitors in the market. Mali believes that the price of the product being similar to those of competitors is going to create an image that Mali's product has the same quality. Consumers believe that Mali yoghurt delivers the same quality as the other yoghurt bands. Although the target customers are highly price sensitive (being agricultural workers), the consumers perceive quality of the product by the price. Thus, Mali wants to ensure survival and market penetration while in a broader sense wishes to recover its cash early through its current pricing strategy. It is important to note that Mali has limited authority to set prices; for most of its products, Mali acts as a price taker.
New Product Development (Exploring New Products)
Changes in the environment cause change of needs, wants and behavioural patterns of the consumers. Research and development is a must to succeed in competitive market. Mali has expanded its yoghurt into non-fat yoghurt product. It has not been successful as the rural consumers are not much aware of this type of products. Mali is presently trying to expand the market with Triple yoghurt which is a blend of melted dates, milk and jelly. It is expected that this new taste will attract the rural market, as there is no similar product in the market. If it succeeds in the local market, the next attempt will be to introduce the product to semi-urban and urban markets. Nimal is also considering adding pineapple instead of melted dates.
Relationship Marketing (Success through Key Customers)
It is essential to develop relationship with retailers, agents, distributors, suppliers and other institutions, such as banks and insurance companies. Mali has initiated such programmes. Mali has created databases on customer preferences, behavioural patterns and changes of demographics. The customer database needs to be monitored periodically. It is important to note here that the relationship marketing is centred on the owner; he is the one with all the contacts. Every time when something goes wrong sales staff comes to him to get the problems solved.
Competition (Competing for Survival and Growth)
Mali has remained relatively cushioned from the impact of competition for some time because it has targeted rural customers who are not targeted by large dominating multinational companies. However, competitive landscape is changing rapidly mainly due to two reasons: first, Mali is considering to expand into other areas, and second, the main competitors are considering to enter into rural markets. Therefore, Mali currently is looking at possible strategies to face these new challenges. The analysis of competition is not just looking at those who produce or offer similar product.
Marketing Information (Sensing the Environment)
Mali so far has not done any systematic research. Most of the business decisions were taken using the gut feeling of the owner and so far these have proven to be effective. However, it is important to note here that owner himself collects market intelligence before making decisions. The main source of market intelligence is the information collected through ghost shopping. Information collected from retailers is also used.
Corporate Social Responsibility (Being Socially Focused)
This Samaharama has a lot of potential as a city, but currently the market there is dominated by one of my good business friend, he has helped me a lot in the past, so I do not feel like going there. Profit is not everything for me. (Nimal)
Mali always considers triple bottom line concept rather than emphasizing only on profit. Mali's recruitment policy always gives priority to the villages that live close by to the plant. More than 90 per cent of its current employees are from the village where the business is situated. Fruits which are farmed in the factory lands are only using carbonic materials, thus reducing harm to the environment. Water is used for plantation after multi levels of purification. Factory visits are always arranged for school children to learn production methods and other important things. The company reuses all the possible materials used in yogurt production. Reverse logistics is still not in place.
Cooperative Forces (Integrated Aspect of Marketing)
Cooperative forces are also vital in order to succeed in a particular market since the forces are in value creation function. So as to satisfy target consumers, the support or cooperation given by these forces are essential. Cooperation from the material, equipment and assembly parts suppliers enhances the operation functions to meet the consumer demands as per their requirements, namely, on-time delivery. The distributors, agents and wholesalers are also required to place products into the markets.
Concluding Remarks: A Way Forward
Focusing on particular target group keeps the focus of satisfying that target group: Everything is done to meet target customer satisfaction. In general, the selection of target market(s) depends on the company's goals, objectives, available and potential resources, and business scope, etc. If the company focuses on two or more target markets, the targets should be able to differentiate from each other. The needs and wants of each target market must be identified well for developing an effective marketing programme: Marketing programme focuses on needs and wants of different target consumers. Ultimately, achieving competitive edge and success of the company depends on the combination of two basic factors: industry specific and firm specific. In summary, if Mali could manage marketing programme effectively, competitive advantages can be gained and competitive edge achieved. In addition, it must be noted that it is necessary to evaluate the programme periodically since the business environment changes drastically.
Issues of the case study:
As mentioned earlier Mali does not follow any systematic research design to accumulate information that are required for marketing program. The issues to be addressed to succeed in the Mali's target segments depend on how Mali can develop effective marketing programs to address the needs of the segments. As mentioned earlier Mali does not follow any systematic research design to accumulate information that are required for marketing program. As a marketing experts, your group should consider following issues in two steps:
Step one: Marks 5%
- What are the main challenges/problems of marketing program of Mali? Identify at least three research aims for Mali. How should Mali strengthen its market in rural areas? Accordingly,
- appropriate research planning and execution phase are required to mention customers of targeted segments. For instance, customers' response for their awareness level for the Mali Yoghurt and its benefits.
- Your group should demonstrate research aims based on the research problems and suitable research design to address the problems in the first step of the assignment.
Step two: Marks 15%
- Select the suitable research design and process of data collection.
- You need to report measurement process of the variables to address the research aims. This infers, you need to develop either semi-structured interview questions or survey questionnaire or relevant questionnaire to support the adopted research design. In this stage, you must put emphasize on what research design will be appropriate for the interview guidelines or questionnaire. If you will select experimental research design, your research team must discuss the process of conducting the experiment.
- In order to enter urban market Mali Yoghurt is required to realize customers' buying intention and thus, systematic research needs appropriate sampling frame. You need to explain sample selection process that can provide worthwhile information for satisfying research aims?
- In this stage, your group must demonstrate the type of analyses are required to explore the outcome for the research aims. So, your cohesive concertation is required to select a suitable analytical approach to support data analysis process.
- What differentiating strategies can be advised to Mali to enter urban markets? Please suggest in your findings by conducting five semi-structured interviews from a desired participants.
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