De La Salle University

Ramon V. Del Rosario College of Business

Master of Business Administration

Submitted in Partial Fulfillment

of the requirements in Marketing Management

1st Term, A.Y. 2015-2016

Tiu, Anthony Albert

Marketing Strategy on Product

Mr. Rey Lugtu

MKT535M GMC
Contents

Synopsis .........................................................................................Error! Bookmark not defined.

Statement of the Problem/s ............................................................................................................. 3
Objectives ....................................................................................................................................... 4
Areas of Considerations and Major Assumptions .......................................................................... 4
Theoretical Frameworks and Analysis............................................................................................ 7
Price Matrix ...............................................................................Error! Bookmark not defined.
Segment, Target, and Positioning ................................................................................................... 9
Alternative Courses of Action ...................................................................................................... 10
Recommendation .......................................................................................................................... 12
Hog market.................................................................................Error! Bookmark not defined.
Action Plan.................................................................................................................................... 15
References and Bibliography ........................................................................................................ 17

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Background and Case Facts

Synopsis

Sam Goldman founded d.light Design in New Delhi, India in December 2009. According
to Ned Tozun, “Our mission is to eradicate the use of kerosene” – rooted from a Stanford
Graduate School of Business course Design for Extreme Affordability. The course was inspired
by Dr. Paul Polak’s concept of using modern product design and development techniques into an
emerging market context. As such, Tozun and Goldman founded d.light with the vision of being
a for-profit social enterprise, with success measured both through profits and through lives
positively affected.

Case Facts

 Since 70% of Indian Citizens still lived in Rural Areas, majority still use kerosene which
can be prone to accidents. (Urban Vs. Rural Geographies)
 The majority of Indians in rural areas earned their livings through agricultural work
therefore having below income level. Consequently, it follows that majority of rural
households were found to have outstanding debts including local financing organization,
multiple parties, friends and family and local shopkeepers. (Household Income and debt)
 Household and businesses that were electrified faced frequent blackouts with many
facing energy losses of fifteen or more hours per day (Electrification in India)
 Literacy and media exposure in Rural is low compared to Urban specifically for women
(Literacy and media exposure).

Statement of the Problem/s

The main problem the d.light founders must address is how to design the best marketing channel
strategy? Should the company employ a single or a multi-channel strategy? Below are key
consideration areas that should be tackled:
1. Create demand for solar lamps
2. Create trust in the brand
3. Achieve affordability and easier access for d.light products
4. Choosing to distribute products to retailers and/or consumers.

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Objectives

Goldman and Tozun decided that the economic and ethnographic evidence pointed to a clear
latent demand among Indian consumers for reliable, affordable light and power solutions.

In response, d.light would like to set the following objectives aligned with their marketing –
channel strategy:

1.) Identify ways on how tocreate demand for solar lamps.

2.) Determine ways on how to build trust with unknown brand to customer.
3.) Understand ways on how to set price aligned of providing product access to different
market segments
4.) Define ways on how to distribute d. light products to different marketing channel
specifically for retailers and consumers.

In addition, the marketing channel strategy should be aligned to the desire of the founders to
manage d.light as a for-profit social enterprise – reconciling money and mission.

Areas of Considerations and Major Assumptions

Our team assumes the following:

1. The team has limited resources, therefore has limitations on adapting all distribution
channel.
2. As stated in the case’s synopsis, it is in the best interest of the founders to reconcile both
money and mission – they must choose the best marketing channel strategy that allows
them to profit while at the same time helping a particular segment. The ideal is to profit
by helping a particular segment solve their social problems.

Our areas of consideration per objective to be met:

Objective Areas for Consideration

Create demand for solar lamps
Create trust in the brand
 Need to stimulate trial
 Consumers not actively looking, though there is huge latent
demand
 Consider partnering with institutions who can educate
people how to use product
 Trust is hard to earn given plethora of fake and poor-quality
brands
 Consider partnering with institutions that consumers already
trust, and halo from them, as long as the institutions are
aligned with d.light’s mission.

Achieve affordability and easier  Favorable economics for middle to high quintile segments
access for d.light products

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Objective
Choosing to distribute products to
retailers and/or consumers.
Areas for Consideration
 Prices are still not accessible to the poorest consumers of
rural India – lowest quintile

Below also is a preliminary SWOT analysis to better explore areas of considerations.

SWOT Analysis

Strength of Product:
 The advantage of using d. light product compared to kerosene users has been proven to
greatly improve family conditions.
 The product has been reported to be dependable especially to unreliable electric
connection.

Weakness of Product:
 The lack of education and information access in rural India meant that companies often
had to educate consumers (before initiating sales). Because consumers are not seeking
alternatives to kerosene lamps.
 Company product lack brand recognition and trust in rural India would be a significant
barrier to consumer adoption of its products.
 Purchasing power of rural household was diminished not only by low incomes but also
by the unpredictability of income streams.
 Problem with the distribution and placement of product due to lack of well-developed
transportation & infrastructure on the country.
 D. Light was a startup and had limited access to financial capital, therefore it is sensitive
to potential cost on different distribution channels available.

Opportunities:
 It can eradicate the use of kerosene in a safe and cost efficient manner
 Generate inclined growth and demand for D. light product
 Increase marketing channel may possess the possibility to reduce cost
 Increase operations efficiency and effectivity if the distribution channel are properly
allocated
 Limited access to electricity being solved by the product

Threats
 Social culture may have resistance to change
 Entrants of future competitors
 Literacy and media limitations especially in the rural segment
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 Aversion of consumers in products they do not understand or they do not actively seek

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Theoretical Frameworks

Given the breadth of scope the case covers, we deem it necessary to apply various frameworks
across different perspectives or areas of consideration.

Perspective Primary Objective Tackled Supporting Frameworks

Value  (1) Create demand for solar lamps  Value Proposition
proposition  (2) Create trust in the brand Design Framework
design (Osterwalder and
Pigneur)
Marketing  (3) Achieve affordability and  Marketing channel
channel design easier access for d.light products design and
 (4) Choosing to distribute products implementation
to retailers and/or consumers (Coughlan et al., 2014)
Business model  (1) Create demand for solar lamps  Business Model Canvas
design  (2) Create trust in the brand (Osterwalder and
(integrating)  (3) Achieve affordability and Pigneur)
easier access for d.light products  Social Business Model
 (4) Choosing to distribute products (Yunus et al., 2010)
to retailers and/or consumers  Scaling Framework
(Rey Lugtu)

Value Proposition Design

Osterwalder and Pigneur developed the Value Proposition Design framework, which
visually shows product-market fit between concepts and the needs of customers. The left side
shows the product designed to meet customer needs, while the right side shows observations of
what the customers really need to do, together with the obstacles they face.

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 Marketing Channel Design and Implementation Framework

This framework by Coughlan et al. (2014) provides steps in designing and implementing
marketing channels. From segmenting to deciding the appropriate channel structure, the
framework aims to align marketing channels to the value proposition being offered by the firm.

Business Model Design

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 Osterwalder and Pigneur (2010) developed the business model canvas as a tool for
enterprises to visualize how they operate. Basically, the canvas is a snapshot of how the
company creates value and delivers them to target customers, while managing cost structures and
revenue streams. This framework emphasizes the importance of being synchronized across the
‘nine building blocks’ – being able to optimize the proper activities that is congruent with the
enterprise’s desired value proposition.

The four components of a social business model (Yunus et al, 2010).

In the social entrepreneurship field, scholars and practitioners have developed ‘social
business models’ (Yunus et al., 2010). The four component is in line with the business model
canvas, but highlights the social profit equation (social impact) and value constellation (internal
value chain, external value chain integrating social impact).

Segment, Target, and Positioning

Segmenting  Primary: Rural groups

 In the future (once brand is built and target social impact is
beginning to stabilize): Urban groups
Targeting  Rural members divided into two groups
1) Social profit maximizers, the lowest to the middle fifth rural
members;
2) Commercial profit optimizers, the middle to the highest fifth
members
Positioning 1) Social profit maximizers – “d.light increases your
productivity, safety, and income opportunities at the best
price possible”
2) Commercial profit optimizers – “d.light increases your
productivity, safety, and savings while contributing to your
health and the environment”

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Alternative Courses of Actionfor Different Channels

ACA Pros Cons

A.) Choose Rural
Entrepreneurs(RE’s) :
Employ Salespeople
local Villagers using
Hub and Spoke Method
(Bicycle, motorcycle or
foot)
 Strengthen Interpersonal trust
between RE'S and consumers
especially to those who lack
information channels such as
television and newspaper.
 Transportation and
accessibility of hiring RE’s to
small villages can be effective
 Increased social impact –
empowerment of rural
entrepreneurs to become self-
sufficient
 More conducive to network
effects – patronage of rural
entrepreneurs can better
influence rural members to use
the product
 Complicated due to
network of existing
distributors and logistics
companies to reach RE’s.
 Not professionally trained
sales force often struggled
to grow sales over time;
does not respond
significantly to economic
incentives to sell more
units.
 RE's were not practiced at
handling large sums of
money , receiving
payments can add
difficulties

B.) Village  Potential Capacity to cover  Consumers desired for

Retailers: Stocking their
goods at the village level
in small shops
more than 7 million shops in
town and villages
 Shop owners are practiced at
moving both products and
money over large distances;
therefore firms were likely to
receive payments in a timely
manner.
 Shop owner’s considerable
power over villager’s product
purchases consist of personal
relationship with customer and
knowledge on product.
 Farmers can buy the product
from shop owners through
credit
greater product variety
available in larger towns
and cities.
 Many believed that the
considerable cost
associated with distributing
products to villages
increased price in rural
outlets – making it pricier
for rural members to access
the product
 Village retailers were not as
successful at selling new
durable goods which
required more explanation
and push selling – they are
more suited for FMCG
products.

C.) Centralized  The distribution channel  Likely to require a relative

alleviated the high cost of explanation and

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ACA Pros
Shops and Distributors transporting goods in to small
villages.
 Larger retailers were often well
known and trusted by
consumers , products sold by
the retailer could also gain a
measure of trust with
consumers
 Haatsas promising concepts
D.) Partnering with  By leveraging these already
Non Profits existing networks, companies
could bypass the more
extensive distribution
structures yet still access rural
consumers in a cost effective
manner.
 In line with the d.light’s
mission
E.) Corporate  In these partnerships, the
Partnership: foreign manufacturers
“Piggybacking” “piggybacked” on the
distribution networks
previously established by the
local partner company thus
avoiding the cost and risk of
developing their own channel
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Cons
demonstration by retail
sales people, an investment
of personnel resources that
retailers might be hesitant
to make.
 Little incentive to
selld.light products at a
local level – more willing
to sell more lucrative
petroleum products
 May complicate channel
management since
distributing products is not
the main activity of
nonprofits.
 Local distribution did not
always have the sales
expertise needed to
effectively sell the product.
 Companies are
understandably more loyal
to their products –
potentially neglecting sales
of d.light products.
Analysis and Recommendation

Value Proposition Design

Products and Gains wanted to be achieved

Gain Creators Customer Jobs
Services related to jobs
Social profit Increased productivity, leading Customer:
maximizers – Provides needed lighting to increased income Rural, segmented
“d.light for productivity, safety
into 2 groups:
increases your and convenience inside Increased convenience
the home
productivity,  Lowest to
safety, and Increased health and safety middle fifth as
income Increases income and from usage of kerosene the Bottom of
opportunities savings
the Pyramid,
at the best Work-related; where social
price Pains or obstacles related to agriculture,
Pain Relievers profit is most
possible” jobs farming, animal
FIT maximized;
care reach self-help
Commercial groups
profit House-related;
optimizers – Unreliable electricity chores, children
Solves unreliability of  Middle to
“d.light electricity studying highest fifth,
increases your Limited time to work
where
productivity, Alleviates difficulties of commercial
safety, and Dangers of kerosene
working in dark moments profit can be
savings while of the days optimized
contributing to Unpredictability of income
your health streams due to unpredictability
and the of agricultural seasons
environment”

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 Marketing Channel Design and Implementation Framework

Channel Design

 Segmentation:
 Lowest to middle fifth as the Bottom of the Pyramid, where social profit is most
maximized; reach self-help groups
 Middle to highest fifth, where commercial profit can be optimized

 Channel structure
 Rural entrepreneurs(recruit from the lowest to middle fifth quintile)
 Local NGOs and cooperatives
 Weekly markets, or haats, where REs can participate as well while still
maintaining control and alignment to the company’s mission

 Splitting the workload

 Rural entrepreneurs targets the lowest and fourth rural quintiles
 Local NGOs and cooperatives – offers microfinancing and teaches how to use
product; works with collective self-help groups
 Weekly markets, or haats, where REs can participate as well while still
maintaining control and alignment to the company’s mission; targets the middle
to highest rural quintiles

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 Degree of commitment
 Alignment of missions with NGOs and cooperatives
 Increased income opportunities for rural entrepreneurs
 Weekly market haats stimulates products; relatively more affordable channel
versus retailers

 Gap Analysis
 Commercial proficiency of channels

Channel Implementation

 In this case, the three channels have minimal conflict and can collaborate with each other
as they serve

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 Business Model Design

Key Partners Key Activities Value Proposition Channels Target Segment

Affordable solar light Rural entrepreneurs
lamps (recruit from the lowest to middle
Continuous reduction of fifth quintile) Rural,
costs for more accessible S10 segmented into 2 groups:
prices L-M5th quintile or to Local NGOs and cooperatives –
social profit maximizers: offers microfinancing and teaches  Lowest to middle
Training of rural – “d.light increases your how to use product; works with fifth as the Bottom
Local nonprofit
entrepreneurs productivity, safety, and collective self-help groups of the Pyramid,
organizations
income opportunities at the where social profit
and
Education of rural best price possible” Weekly markets, or haats, where is most
cooperatives
members REs can participate as well maximized;
S10 and S250 collective self-help
Venture
M-H5th quinile or Network-based marketing groups of women
capitalists and
Key Resources Commercial profit Cust. Relationships
impact investors
optimizers – “d.light  Middle to highest
increases your Awareness and education fifth, where
Product materials productivity, safety, and campaigns through partner NGOs commercial profit
savings while contributing and rural entrepreneurs can be optimized
Cheaper LED and solar to your health and the
materials environment” Word of mouth based on trial and
demonstrations
Costs Revenues
Costs of production
Revenues from REs, direct sales from haats
Costs of marketing and education
Costs of distribution

Social impact:
 Empowerment of rural entrepreneurs to be self-sufficient
 Eco-system of interdependence between NGO, rural entrepreneurs, and customers
 Increasing productivity and income of rural worker
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 Summary of Recommendations

The value proposition design shows product-market fit between the target segments and
intended products to be offered. Moreover, this shows how social profit can be maximized by
targeting the lowest to the middle quintiles in the rural areas, while optimizing commercial profit
through the help of the middle to the higher quintiles.

The marketing channels allow better distribution and access to the products. Rural
entrepreneurs will be recruited with emphasis from the lowest to the middle quintile areas to
increase income opportunities for them, while serving as influencers for the whole rural
community to buy the d.light products. NGOs and cooperatives provide education and
financial help in using the products. The weekly haats serve as direct consumer touchpoints,
which rural entrepreneurs can also utilize in distributing their d.light products.

Finally, the business model canvas integrates the whole strategy of d.light, ensuring that
the operations and marketing are synchronized in targeting the 2 segments of rural communities.

Action Plan

Objective Areas for Consideration Action Plan

Create  Need to stimulate trial  Partner with nonprofits
demand for  Consumers not actively looking,  Stimulate trial and
solar lamps though there is huge latent demand demonstrations via haats
 Consider partnering with institutions  Get rural entrepreneurs
who can educate people how to use
product
Create trust in  Trust is hard to earn given plethora of  Partner with trusted nonprofits
the brand fake and poor-quality brands to educate and raise awareness
 Consider partnering with institutions  Rural entrepreneurs can
that consumers already trust, and halo become brand evangelists –
from them, as long as the institutions spreading word of mouth that
are aligned with d.light’s mission. they have indeed tried the
product, and thus now selling
it to their fellow rural members
Achieve  Favorable economics for middle to  Help provide income streams
affordability high quintile segments for the lowest quintile by
and easier  Prices are still not accessible to the recruiting and training them as
access for poorest consumers of rural India – rural entrepreneurs, with the
d.light help of nonprofits
lowest quintile
products
 Loan its product to consumers
and then collect money over
time
 Offer layaway programs in
which consumers made small
installment payments and then

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Objective Areas for Consideration Action Plan
took the product home after
they had paid the full price
 Collective purchasing power of
women’s self-help group could
also be target as a potential
revenue source.
Choosing to  Alignment to the mission  Partner with rural
distribute  Access to consumers entrepreneurs, nonprofits, and
products to cooperatives which show
retailers highest alignment with
and/or d.light’s mission yet provides
consumers. access to consumers, while
taking into consideration
important concerns.

In the future, we can use the scaling framework to grow the business in the urban areas:

 Adjacent customers –
o Higher margin products, such as the S250, or new product with more premium
positioning
o Employ other marketing channels such as centralized distribution shops and
retailers, leveraging on the brand built and success in the rural areas

References and Bibliography

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 Coughlan, A. T., Anderson, E., Stern, L. W., & El-Ansary, A. (2014). Marketing
channels (7th ed). Person Education Limited: UK.
 Kotler, P., & Keller, K. L. (2012). Marketing management (14thed.). Prentice Hall, New
Jersey.
 Osterwalder, A., &Pigneur, Y. (2010). Business model generation. NJ: John Wiley and
Sons, Inc.
 Osterwalder, A., &Pigneur, Y., Bernarda, G., & Smith, A. (2014). Value proposition
design. NJ: John Wiley and Sons, Inc.
 Polak, P., & Warwick, M. (2013). The business solution to poverty. Berrett-Koehler
Publishers, Inc: San Francisco, California, USA.
 Yunus, M., Moingeon, B., & Lehmann-Ortega, L. (2010). Building social business
models: Lessons from the grameen experience. Long Range Planning, 43(2), 308.
Retrieved from http://search.proquest.com/docview/288325167?accountid=28547

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