This content relates to : EMERGING ECONOMY – INDIA
Success in BOP markets requires attention to the 4As: affordability, acceptability, awareness, and availability.
Innovative marketing strategies can ensure superior performance across the 4As.
Such innovative strategies can also create new markets out of non and infrequent product users.
Anand Kumar Jaiswal
Indian Institute of Management Ahmedabad
CavinKare, a South India based domestic company, is a key player in the fast moving consumer goods (FMCG) market in India. It has a dominant position in the shampoo category in rural markets; it also has a significant presence nationally in various product categories such as skin creams, deodorants, talcum powder, and food and dairy products. The company was started by C. K. Ranganathan with very limited capital in 1983. It achieved sales of INR 0.5 million in 1984 which grew to INR 17 billion in 2021. The company is credited with several marketing strategy innovations to attract low-income consumers, which itself is an innovative strategy. While other brands only focused on higher income segments, C.K. Ranganathan’s father, R. Chinnikrishnan, believed that “whatever the rich man enjoys, the common man should be able to afford.”1 This low-income segment is now commonly referred to as the bottom of the pyramid (BOP) consumer segment; they constitute a large segment, primarily living in rural and semi-urban parts of the country. Some of the key innovations are discussed below:
Packaging Innovation – The ‘Sachet Revolution’: CavinKare is known for offering shampoos in low unit packs (LUPs), commonly known as sachets. Management realised that poor consumers in rural parts don’t have enough money to buy larger sized shampoo bottles due to the budgetary constraints they face every day in their life. However, they could spend one or two rupees to buy a shampoo sachet for single usage. The company also offers single use packs for other products such as perfumes and pickles. R. Chinnikrishnan, pioneered the satchet, later popularized by CavinKare, which has now become a key BOP marketing mantra that is prominently mentioned in the BOP literature.
Pricing Innovation: The company also realised that product affordability is the most critical requirement for BOP consumers and it greatly affects their buying and consumption decisions. Marketing research provided the insight that if the monthly consumption price for shampoo could be brought down to INR 2, consumers would be able to buy a new shampoo on a regular basis. Armed with this insight, the company launched Chik – a 50 paisa (INR 0.50) shampoo – in 1999, and it became a big hit in the rural markets. As a result of this, Chik’s market share increased from 5.61% in 1999 to 23% in 2003.
Distribution Channel innovation: Rural India comprises a vast number of villages with a small population. These villages are geographically scattered and, at times, are not connected by roads. Often companies have no or poor distribution networks to cater to these markets. Consumers do not have convenient access to retail stores and often need to travel several kilometres or go to nearby bigger villages or towns for shopping. The company adopted the innovative strategy of tapping periodic markets such as the weekly markets known as ‘Haats’ and fairs referred to as ‘Melas’. In Haats, consumers assemble and do their weekly shopping, and therefore, per capita spending is very high. The company started making available its product in these markets, thereby enhancing consumer accessibility of its products in rural areas.
Product innovation: CavinKare also followed a strategy of designing and developing products for the unique needs of BOP consumers. This was contrary to the prevailing practices of MNCs, who were offering the same products they had for consumers in urban markets to BOP consumers in rural markets. For example, CavinKare found that rural consumers want an intense and strong fragrance in shampoo, unlike affluent urban consumers who prefer a subtle fragrance. Based on this insight, it decided to use a French perfume in its formulation, which significantly enhanced consumers’ willingness to buy the product and use it.
Communication Innovation: As part of its communication strategy, the company initially used regional media like local radio stations heavily. It felt that national media like television would be too expensive for a small company like CavinKare to use. Further, in the southern part of India, it roped in local film stars who had very high appeal. This helped create brand awareness and a ‘pull’ for its products in the market.
Through an innovation-led strategy, CavinKare showed superior performance across the 4As: affordability, acceptability, awareness, and availability. Through its packaging and pricing innovations, it enhanced the affordability of its products to BOP consumers. Its product development approach increased the acceptability of its products. Awareness of its products was increased greatly due to its strategy of using relatively lost cost regional media and leveraging the appeal of movie stars. Product availability was increased due to its strategy of developing a strong distribution network in rural India and tapping periodic markets like haats and melas. Through these innovative marketing strategies, it successfully adopted a market creation approach. Thus, it created an entirely new market out of non-users and infrequent users of products like shampoo and established its strong presence in the Indian FMCG market.
Anand Kumar Jaiswal
Professor of Marketing, Indian Institute of Management Ahmedabad
To learn more, read:
Angeli, Federica and Jaiswal, Anand K. (2015). “Competitive Dynamics between MNCs and Domestic Companies at the BoP: An Institutional Perspective,” Long Range Planning, 48 (3), 182-199.
Anand Kumar Jaiswal (2007), CavinKare Private Limited (A): Challenges of Sustaining Growth and Expanding Business, Harvard Business Publishing.
1Company website https://cavinkare.com/cavin-cares/csr/innovationawards/