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Marketing Channel Strategies in Rural India: Lessons From d.light Design
By Benjamin Neuwirth, Kellogg School of Management
Agenda
 Background on d.light Design
 Framework for Marketing Channel Success in Rural India
 My Internship: Enabling a New Marketing Channel
Base of the Pyramid Markets
If we stop thinking of the poor as
victims or as a burden and start
recognizing them as resilient and
creative entrepreneurs and valueconscious consumers, a whole new
world of opportunity will open up.
- C.K. Prahalad 2006
Affordable Products to Alleviate Poverty
Affordable devices like treadle
pumps and drop irrigation combined
with a last mile supply chain has
helped 20 Million people move out of
poverty as a result of IDE’s work
alone.
- Paul Polak 2011
d.Light Design’s Founding
Inspiration
Product Solution
 Many people in rural
Africa and India do not
have access to grid
electricity
Kerosene is expensive,
dangerous, unhealthy,
and provides weak light
 Founder’s burned hand
in rural Africa
 Affordable, bright lights for rural
consumers to promote health and
livliehood
 Founded out of the Stanford
d.school by Sam Goldman and Ned
Tozun
d.Light Products
S250
• Powerful spotlight
• Mobile phone charger
• $35 USD
S10
• Great performance for cost
• Perfect to light a room at night
• $15 USD
S1
• Ultra-portable and ultra-affordable
• Designed to appeal to children
• $9 USD
d.Light Products for Health and Livelihood
Benefits of d.light products for rural Indian consumers
Safer cooking
• More effective studying
• Increased time for business activities
•
Central Question for d.light
How can a company attempting to enter a rural region in
an emerging market with a new product or service and an
unknown brand create a sustainable business?
Agenda
 Background on d.light Design
 Framework for Marketing Channel Success in Rural India
 My Internship: Enabling a New Marketing Channel
Framework for Marketing Channel Strategy in Rural India
Delivering Products
Distribution Network Design
Maintaining Customers
Distribution Network Logistics
After-Sales Service
Product Purchase
Customer
Activating Customers
Affordability
Brand Trust
Education
Framework for Marketing Channel Strategy in Rural India
Delivering Products
Distribution Network Design
Maintaining Customers
Distribution Network Logistics
After-Sales Service
Product Purchase
Customer
Activating Customers
Affordability
Brand Trust
Education
Distribution Network Design
Challenges
• Low Density of Demand Leads
to Slow Inventory Turnover
Solutions
• Aggregate Consumer Demand
to a Point Required by the
Product
Distribution Network Design: Example
Aggregating Consumer Demand
Consumer Durables: Aggregate demand in cities
and hypermarts
FMCG Products: Aggregate
demand in villages
Distribution Network Design
Challenges
Solutions
• Low Density of Demand Leads
to Slow Inventory Turnover
• Aggregate Consumer Demand
to a Point Required by the
Product
• Poor Transportation Infrastructure
Raises Transportation Costs
• Use Hub-and-Spoke
Transportation and Rural
Entrepreneurs
Distribution Network Design: Example
Hub-and-Spoke Model
Coca-Cola
Hub
Independent Entrepreneurs
Autorickshaw Delivering Coca-Cola in
an Indian Village
Small Villages
Distribution Network Design
Challenges
Solutions
• Low Density of Demand Leads
to Slow Inventory Turnover
• Aggregate Consumer Demand
to a Point Required by the
Product
• Poor Transportation Infrastructure
Raises Transportation Costs
• Use Hub-and-Spoke
Transportation and Rural
Entrepreneurs
• Consumer Expectations for
Availability and Variety
• Gain Insight Into Consumers to
Meet Their Product Delivery
Expectations
Distribution Network Logistics
Challenges
• High CapEx/OpEx required to set up a distribution network in
rural India
• Fragmented distribution and logistics industries
• Potentially low chance of legal recourse if partner contracts are
violated
Solution: Distribution Network Piggybacking
• Corporate Partnerships
Distribution Network Logistics: Example
Corporate Partnerships
Both Sara Lee and Proctor & Gamble entered into joint ventures with
local Indian companies to more effectively distribute their products.
Distribution Network Logistics
Challenges
• High CapEx/OpEx required to set up a distribution network in
rural India
• Fragmented distribution and logistics industries
• Potentially low chance of legal recourse if partner contracts are
violated
Solution: Distribution Network Piggybacking
• Corporate Partnerships
• Local Non-Profit Organizations
Distribution Network Logistics: Example
Local Non-Profit Organizations
Hindustan Unilever’s Project Shakti
• Unilever uses womens’ Self Help Groups to reach small villages
deep in rural India
• The women buy the products with cash from Unilever, and then
distribute them in nearby villages
• Project Shakti currently employs over 40,000 women
entrepreneurs
A women entrepreneur delivers Unilever products in rural India
Information and picture sourced from MART internal presentation - 2005
Distribution Network Logistics
Challenges
• High CapEx/OpEx required to set up a distribution network in
rural India
• Fragmented distribution and logistics industries
• Potentially low chance of legal recourse if partner contracts are
violated
Solution: Distribution Network Piggybacking
• Corporate Partnerships
• Local Non-Profit Organizations
• Business-to-Business Sales
Distribution Network Logistics: Example
Business-to-Business Sales
Distribution
Rider
Company
Sales
Pros
• Bulk Sales to carrier company
• Manage fewer relationships
Carrier
Company
Cons
• Low visibility into end customer
sales and product reception
Agenda
 Background on d.light Design
 Framework for Marketing Channel Success in Rural India
 My Internship: Enabling a New Distribution Channel
Area of Operation: Uttar Pradesh
Location of Uttar Pradesh in India
Facts about Uttar Pradesh:
• Population of 200 Million people
• Half the size of California
• Annual per-capita GDP of $294 USD
per year
• Most residents do not have access
to grid electricity
d.light’s New Distribution Partner
2009-2010:
• d.light set up a custom distribution network in Uttar Pradesh to supply
solar lamps into small retail stores in villages.
• The network failed due to high distribution costs and low consumer
demand.
2011
• d.light forms a piggybacking relationship with Bharat Petroleum (BPCL),
the second largest oil-product distributor in India, to distribute solar
lamps in Uttar Pradesh.
My Internship
• Analyze the BPCL distribution network
• Recommend strategies for successfully selling d.light products through
the BPCL network
Analysis of BPCL Distribution Network
BPCL has 281 cooking gas retail stores in Uttar Pradesh.
Each stores serves thousands of consumers, effectively
aggregating demand for d.light.
BPCL also sells FMCG and consumer goods in its retail
stores in order to have other non-oil revenue stream.
D.light products will be sold as part of this program.
Each store is owned by an independent franchisee. While
the owners felt good about d.light, they were not highly
motivated to sell d.light products.
50% of BPCL customers come to the retail store to pick up
their cooking gas. While at the store they may buy other
products or schedule their next cooking gas pick-up.
The other 50% of BPCL customers have their cooking gas
delivered to them. The delivery men are a true last-mile
link to rural consumers in India. The delivery men are
often poorly educated and have little or no sales
experience.
Analysis and Recommendations
Analysis of the BPCL Distribution Channel
Pros
• Consolidates demand into central retail points
• Established and successful warehousing and logistics network
• BPCL is a very trusted brand with Indian consumers
Cons
• Retail store owners not motivated to sell d.light products
• BPCL end customers may not need d.light products
Recommendations
• Incentivize BPCL management and retail store owners to sell d.light products
• Piggyback off of the BPCL brand to establish the d.light brand
• Educate consumers in Uttar Pradesh who use kerosene for light about solar
lamps, and drive sales at BPCL retail stores
• Establish d.light distribution centers in Uttar Pradesh to provide for better
product restocking time