the looming cognitive style and generalized anxiety disorder
TRANSCRIPT
CONSTRUCTING A SCALE TO MEASURE THE
EFFECTIVENESS OF FMCG DISTRIBUTION CHANNELS
IN RURAL MARKETS IN MAHARASHTRA
Submitted by
Pravin Kumar Bhoyar
For the degree of
Doctor of Philosophy
(Faculty of Management)
Symbiosis International (Deemed University)
PUNE
In
October, 2010
Under the guidance of
Dr (Mrs) Asha Nagendra
Director
Symbiosis Centre for Management Studies (UG)
Noida
Introduction
The rural market offers a big attraction to marketers, it would be naïve to think that any
company can enter the market without facing any problems and walk away with a sizable
share. Unfortunately, it is not possible to transplant successful urban marketing strategies
to rural markets, namely, deep and intensive retailing and continuous customer-pull
generation through advertising and promotions. Distribution is the most important
variable in the marketing plans of most consumer goods manufacturers. It is estimated
that there are over a million market intermediaries – distributors, super-stockists,
wholesalers, stockists, transporters and retailers – who are involved in the distribution of
a variety of consumer goods all over the country. Marketers use this network to access
nearly 5,100 cities and towns and over half a million villages. The distribution network in
India is characterized by a predominance of family-owned proprietary concerns. Urban
areas have a variety of distribution outlets, ranging from large supermarkets and
superstores to the smaller neighborhood retail stores. In contrast, in villages, small shops
alone are the backbone of the local retail network.
There is a need to access retailers in towns and larger villages and promote products
there, so that the products that are purchased locally can reach smaller retail outlets in
villages. Consumer royalty can be to the brand or to the retailer. It follows that the type of
consumer loyalty exhibited by the target group has implications for the marketer. The
influence of the retailer is perceived to be high in the rural market.
The aims and objectives of the present research
1. To identify conventional approaches to reach Rural Maharashtra.
2. To find the problems perceived by channel members in distribution of Fast
Moving Consumer Goods to Rural Market in Maharashtra.
3. To assess the level of satisfaction of rural consumers with regard to Fast Moving
Consumer Goods distribution system.
4. To construct a scale to measure the effectiveness of rural FMCG distribution
channels.
Review of Literature
Sastry et al18
have studied the pertinent issues in rural market such as uniqueness of the
rural consumer, uniqueness of the structure of rural markets and the peculiarities of
distribution infrastructure in rural areas. These are special to rural markets and hence,
require unique handling. Practically in every aspect of marketing, rural markets pose
certain special problems, but the following are found to be important form the marketing
point of view: Distribution logistics, storage, transport and handling, Location and degree
of concentration of demands, dealers’ attitude and motivation, consumer motivation and
buying behaviour, Transmission media, their reach and impact, & organizational
alternatives. Thus, the rural market bristles with many problems and to achieve a firm
footing, a marketer has to grasp these problems and provide innovative solutions to them.
The impact of spurious brands in rural market and how it chokes the market for authentic
items was studied by Bhattacharya2. The color and almost identical cover graphics are
used for passing off spurious products as original. Even the names may sound similar.
Many distinctive features between the original and fake versions can not usually be
detected by the unwary and average customer anywhere in the market. Blockages - at
present, most products reach the rural customers generally through wholesale channels.
These intermediaries are not sufficiently under the control of manufacturing firms, which
intend to enter the rural market in a big way. Skewed Distribution of Outlets - not
surprising therefore, 76% of the estimated 3.7 million rural outlets are concentrated in
seven states. They have all sprouted in relatively sizeable and well-off villages where
sufficient consumer demand exists to sustain them. Then again, there are about 60,000
villages which do not have even a shop each. Poor infrastructure for most villages in most
areas which chronically suffer from lack of periodic supply of goods, poor availability of
credit and capital and low purchasing power of patrons.
The FMCG companies change the track of distribution to attract customers as studied by
Bhattacharya3. Several FMCG companies have taken to unconventional modes of
distribution. CavinKare Pvt. Ltd. has created two separate brands - Chinni for smaller
pack sizes and Priya for larger packs - And instead of using the conventional distribution
route, they have created a `sachet' sales force that sells only sachet packs to small
retailers, including cigarette and pan shops. Emami Ltd. tied up with the Post and
Telegraph Department to place its products across 5,000 post offices. Wipro Consumer
Care and Lighting (WCCL) have been using the Andhra Pradesh Government's e-seva
project, which aims at enhancing the common man's interface with the Government.
Coupled with traditional distribution methods, this approach allows WCCL to reach
consumers who otherwise may not come to a retail point. Alternative distribution
channels do not offer better margins and are, at best, tools to gain accessibility in certain
areas. Also, distribution margins across these channels are identical to those in
conventional routes, so there is little cost saving. So, while alternative distribution
options are gaining acceptability, it may be some time before these become a rage.
Rajagopal12
reported that the performance of global brands in low-profile consumer
market segments is constrained by high transaction costs and coordination problems
along the brand promotions, consumption and consumer value chain. Hence, firms
looking towards managing brands in Bottom of the Pyramid (BoP) market segments need
to reduce brand costs by increasing the volume of sales and augmenting consumer value.
Brands of BoP market segments are socially and culturally embedded. They are co-
created by consumers and firms, and positioned with the influence of brand equity of the
premium market. Unlike traditional brands, BoP brands may be sufficiently malleable to
support brand interpretations in the rural and suburban consumer segments. The paper
offers new business strategies to managers on brand positioning and targeting in suburban
and rural markets with convenience packaging, pricing and psychodynamics.
Khicha8 studied that television and direct marketing activities help rural consumers learn
about different brands, ensuring product availability is even more critical. Marketers in
rural India claim that setting up a supply chain that reaches the remotest rural areas is
extremely arduous given the infrastructure in the country. HUL Project Shakti targeted
rural women from existing self-help groups to work as “direct-to-home” distributors for
HUL products, and helped the company break into a market they were unfamiliar with. A
“hub and spoke” model of distribution is the “future.” As he explains Dabur has
successfully adopted the hub and spoke model in India and it has worked very well. Here,
feeder towns, primarily on the highways serve as hubs, where companies can rent a
warehouse and stock their products. Spokes are comprised of ‘cyclist salesmen’ who then
distribute products to small retail outlets in nearby rural pockets.”
There are two distinct segments of consumers in the rural market. Sarangpani et al17
studied that one set of rural consumers is less educated or even illiterate. They cannot
read, write or understand with ease. They do not buy branded products. They have their
own method of identification of products and communication with the retailers. For
instance, they ask for Erra Sabbu (for Lifebuoy), Pacha Sabbu (for Nirma), Neeli Sabbu
(for Rin), etc. Rarely do they purchase branded packaged goods and values associated
with them. On the contrary, there is a different segment of consumers, the younger 18-35
years age group; they are educated, more mobile and have urban exposure. They are
brand conscious. They ask for brands of their choice. Their brand usage and recall rate is
comparable to their counterparts in the urban areas.
Methodology
Purpose of the study
There is a greater degree of rural base elite who would be going for greater consumption
of FMCG products with reference to Kolhapur and Sangli districts. It is interesting to
note that there is a greater degree of rural population much more oriented towards urban
patterns of living and life style and their preferences for FMCG are on larger scale. There
is a predominant concentration of well-to-do rural population who have recently migrated
and settled in urban areas of Sangli district, therefore their consumption pattern would
sway between rural taste and the elite urban style of preference. Some impressive facts
about Sangli and Kolhapur districts are - Sangli and Kolhapur districts11
have the highest
literacy rate in India, i.e. 77.23 and 77.19% respectively. Per capita district domestic
product11
is Rs 20,411/- and Rs 20,019/- of Kolhapur and Sangli districts respectively
which are one of the highest in the country.The prosperity and the resulting spending
prowess of Kolhapur and Sangli people5
was famously reported in a list of districts with
the highest number of Mercedes Cars in the state of Maharashtra, where Kolhapur came
second only to Mumbai. Retaining experienced channel members to cater to rural market
is a big challenge for all the marketers because the attrition of rural channel members is
double the urban counterparts. So it needs to study the various attributes such as
promotional schemes, number of assortments and their availability which decide the
channel satisfaction. Presently, there is a lot of gap between the urban and rural
distribution system and to make rural customers to visit and buy their needs from the
local shop requires in-depth analysis and suggest how to catch them hold so that the
customers regain their confidence.
Statement of Hypothesis
For the present study, the following hypotheses were formulated:
Existing FMCG channels of distribution in rural Maharashtra serve the customers
well
Channel members are satisfied with the distribution of FMCG in rural market
Selection of sample
Two companies - Hindustan Unilever Limited (HUL) and Godrej Consumer Products
Limited (GODREJ) which are pioneers in Fast Moving Consumer Goods (FMCG) in the
rural market were selected to study their distribution channels in rural districts of
Maharashtra. The researcher wanted to focus on two rural districts of Maharashtra to
study the FMCG distribution channels. Sangli and Kolhapur districts rural market were
found to have all types of channel levels. In the initial stages, details of only one
distributor who caters to the Kolhapur urban market was obtained from the Pune based
HUL distributor. There are only three HUL distributors in one district. After meeting
with him personally, the details of one rural distributor of HUL who covers three
Taluquas in Kolhapur district were sought. After establishing rapport with him and
gaining his confidence, a comprehensive list of other members from different levels were
sought. The distribution levels identified were- Distributors, Super-stockist, Wholesalers,
Stockists, and Retailers.
Once the questionnaires were finalized, the researcher started establishing contact with
distributors of HUL and Super-stockist of GODREJ who then provided a comprehensive
list of wholesalers, stockists and retailers with their contacts. Side by side, the researcher
began tele-calling and fixing appointments explaining the objectives of the present study,
after which questionnaires were administered. The researcher was often required to meet
them personally and assure them that all the information sought would be kept strictly
confidential and would be used exclusively for the research study. With the prior
permission from retailers, the questionnaire for rural consumers was administered which
was a surprise for them. Interestingly, a few literate customers (contacts suggested by
retailers) were contacted immediately to ascertain the authenticity of their responses and
followed up with them promptly. Many of them evinced keen interest to offer additional
information and discussed certain points out of the topic.
In all, 16 distributors/stockists, 1 super-stockist and 48 wholesalers were interviewed but
the researcher was able to get the responses from only 11 distributors/stockists and 40
wholesalers. The remaining 6 questionnaires for distributors/stockists and 8
questionnaires for wholesalers were found to be invalid. Similarly, the researcher
attempted to cover 10–12 retailers under wholesalers and distributors from randomly
selected 45 villages, but again only 60 were found to be valid. 3 customers at each retail
shop were interviewed, i.e. a total of 170–180 rural customers but again only 100 fully
filled up questionnaires were finally selected for the research analysis since the remaining
were incomplete in many respects and hence were discarded from the final research. The
non-probability purposive/judgmental sampling technique was used. The researcher
chose the sample based on common trait of interest that would be appropriate for the
study. The research study being conducted with a purpose in mind, the sample was
selected to include people who evinced interest and excluded those who did not suit the
purpose.
Validation of hypotheses
To validate hypotheses, researcher used the statistical tools like Spearman’s Rank
Correlation and Chi-square Test.
Constructing a scale to measure the effectiveness of FMCG distribution channels in
rural Maharashtra
The main purpose of the researcher was to construct a scale so that it can come out as a
benchmark for companies to measure satisfaction of consumers regarding nine fast
moving consumer goods. To do this, the researcher thought Multivariate Linear
Regression Analysis (MVLRA) was the most appropriate tool to analyze the data.
Results and Discussion
Table: Extent of Satisfaction for Action Taken Against Channels’ Complaints
Extent of Satisfaction Distributors (N=11) Wholesalers (N=40) Retailers (N=60)
X F1 XF1 F2 XF2 F3 XF3
Delighted 1 0 0 4 4 9 9
More Than Satisfied 2 0 0 16 32 10 20
Satisfied 3 0 0 10 30 32 96
Less Than Satisfied 4 5 20 10 40 9 36
Disgusted 5 6 30 0 0 0 0
∑F1=11 ∑XF1=50 ∑F2=40 ∑XF2=106 ∑F3=60 ∑XF3=161
Mean=4.55;Mode=5 Mean=2.65;Mode=3 Mean=2.69;Mode=3
a. Distributors: The values of median and mode indicate high degree of dissatisfaction
in regard to “actions taken against channels’ complaints” and also the value of mean is
4.55; it was apparent that 45% of the respondents were less than satisfied and also 55%
were disgusted. So the question of more than satisfied or delighted in regard to system
did not arise at all. On the whole, response to distributors’ satisfaction with “actions taken
against channels’ complaints” was quite significant. Territory jumping by the urban
counterpart was not allowed as per memorandum of understanding and such complaints
remained unresolved. There was a big conflict between both urban and rural distributors.
b. Wholesalers: The values of median and mode indicate high degree of satisfaction in
regard to “actions taken against channels’ complaints” and also the value of mean is 2.65;
it was apparent that 40% of the respondents were more than satisfied and 25% and 10%
were satisfied and delighted respectively. Only 25% were less than satisfied with the
system. On the whole, response to wholesalers’ satisfaction with “actions taken against
channels’ complaints” was quite significant. Wholesalers’ complaint was in the form of
spurious products entering the supply chain.
c. Retailers: The values of median and mode indicate high degree of satisfaction in
regard to “actions taken against channels’ complaints” and also the value of mean is 2.69;
it was apparent that 54% of the respondents were satisfied, over and above 17% were
more than satisfied and 15% were delighted with the system. On the whole, response to
retailers’ satisfaction with “actions taken against channels’ complaints” was quite
significant. Treatment meted out to the rural retailers was far inferior as compared to
urban retailers.
These observations are in agreement with that of Brown et al4 who found that the impact
of manifest conflict was found to be mediated by the degree of channel member
satisfaction. In other words, channel member satisfaction and manifest conflict within the
channel were both antecedents and consequences of each other.
Problems perceived by channel members in distribution of FMCG
During the discussion and interview with distribution channel members, it was learnt that
there were many problems perceived by them in distribution of Fast Moving Consumer
Goods (FMCG) in rural markets of Sangli and Kolhapur districts in Maharashtra which
are discussed below:
1. Immovable products
Distributors had to spend more on immovable products due to their large turnover as they
were the suppliers to wholesalers. Wholesalers spent lesser as compared to distributors
due to fewer turnovers and retailers spent the least in immovable products. Overall all
channel members spent considerable amount on immovable products and the main reason
was the damage of products in transit. Many times such immovable products were sold at
discount prices or returned to the manufacturers. These results are partly in agreement
with those of Thakur19
who found that the commodities which have fixed life, pose
special problems to retailers and distributors as these have to be sold before their shelf-
life. Retailers offer discounts on perishable products nearing their shelf-lives to
encourage consumers to buy and studied how many units of the commodity they should
stock on the shelf to maximize their expected profit.
2. Dumping of goods
There was a scheduled dumping of the goods by the Carrying and Forwarding Agencies
who were appointed by the marketers irrespective of the requirements in a particular
month at distributors’ level so it was creating so many inventories which blocks the
money. The frequency of coverage was less for the channels that were located far away
from the feeder village, taking cost factor into consideration. Therefore all channel
members felt that it was very important to address such issues. These results are not
totally in agreement with those of Sangameshwaran15
observed that to remove the
conflict between the manufacturer and its distributors, the consumer goods giant
Hindustan Unilever (HUL) has tied up with a third-party logistics service provider to
manage the entire back-end distribution chain to streamline distribution.
3. Payment terms
It was quite disturbing to note that majority of the distributors had problems of mode of
payment. The reason behind this was that advanced cheques were issued to the
manufacturers; very same day of delivery it was to be cleared; distributors had to give 8-
10 days credit period to their wholesalers and retailers, obviously had to have overdraft
facility with banks which was very costly so they felt it needed to be addressed by the
manufacturers either by raising their margins or allowing credit period. These results are
not in agreement with those of Banerjee et al1 who observed that working capital crunch
or expansion plans of channel members going haywire has become the cause of payment
issue.
4. Excessive costs
Many of the channel members expressed their grievance over cost incurred in their
businesses. Shrinkage cost was the biggest threat distributors were facing in Sangli and
Kolhapur rural market; one distributor lost approximately Rs 22 – 24 lakhs in previous
years. The fuel consumption and cost of recovery of credit was more. The rural retailers
could not run their business without credit. These results are in agreement with those of
Nottingham10
who reported that the Indian retail industry suffered a total loss of
staggering Rs 9,691 cr due to shoplifting and waste in 2007. The study found that the
average shrinkage rate (stock loss from crime or waste expressed as a percentage of retail
sales) for India is 2.90 per cent of sales.
5. Excessive lead time
Depending upon the turnover of the distributors’ products delivery was done by CFA, but
some of the distributors faced from over dumping of products and not because of long
lead time. Whereas majority of the retailers had grievance over excessive lead time due to
lack of pucca road and hence inadequate transport facilities, therefore, their waiting
period was longer especially those who located far away from the distributors /
wholesalers. These results are in agreement with those of Kashyap et al6 who reported
that poor road connectivity - lack of all-weather roads and inadequate transport facilities
are responsible for long lead time.
6. Dearth of promotional schemes
FMCG companies categorized wholesalers in 2 – 3 types depending on their monthly
billing so extra commission was given if he achieves the levels as prescribed by the
manufacturers. There were some distributors who were closely associated with the same
manufacturers but they never got benefits and the promo-offer was given directly to
wholesalers bypassing the distributors.
7. Lack of cooperation and cohesiveness
Existing rural distributors expected to have distributorship of the same company in other
areas of rural market to cover the remotest places and smoothen the distribution system
which would help in reducing lead time and proper coordination and also would help in
long association with the same company but there was no response from company even
after discussion and assurance. These results are in agreement with those of Rajiv et al13
who found that co-operation among distribution channel members could be fostered
through the use of participative and supportive activities which helped in improving
performances of the channels and fostered the relationship between co-operation and
channel member performance.
8. Unresolved issues
As per company norms, there were different distributors for urban and rural market and
different territories and they were not supposed to jump it. Rural wholesalers were
supposed to buy goods from rural distributors, but to increase sales urban distributors
tried to jump their territory and approached the rural wholesalers giving some 3 – 4%
discount which was huge on bulk purchase. These results are partly in agreement with
those of Ramachandran et al14
who at ‘All India Distributors' Association Stir’ reported
that the distributors raised a strong protest with leading fast moving consumer goods
(FMCG) companies for bypassing them and selling their products directly to large retail
stores because making direct supplies would have a negative impact on the turnover of
distributors.
9. Lack of action
Some times urban distributors used to jump their territory and would sell their products to
the wholesalers who came under the rural distributors’ territory. Two times such violators
were caught with their delivery van and people, photos were taken, sought apology letter
and forwarded to corporate office demanding termination of contract, but till today no
action had been taken. Some wholesalers had complaint against distributors about ill
treatment due to long distance, consequently more lead time which adversely affected
their sales; after lodging complaints against such distributors no action had been taken
and subsequently they could not deliver in time to their retailers.
10. Discrimination
Manufacturers didn’t give credit period to the distributors but distributors gave some
credit period to wholesalers and because of that they had to have overdraft facility with
bank and interest was high. Rural customers normally used to buy their products on credit
so retailers couldn’t pay cash to wholesalers in turn distributors also didn’t get cash in
time. Therefore all the distributors demanded at least 5-7 days credit period from
manufacturers which they felt extremely important. But the situation in urban market was
exactly reverse. These results are in agreement with those of Banerjee et al1. Their study
revealed that almost all organized retailers are seeking longer credit. Small format
retailers, who don’t have an extensive network and therefore the bandwidth to negotiate
with companies, are feeling the squeeze more than the big retail players.
11. Menace of Fake Products
Many distributors, wholesalers were losing profit margins due to prevalence of spurious
goods with the same brand name and packing colours and many rural consumers were
becoming victims of such menace. Kaul7 also studied counterfeiting and how FMCG
companies were facing problems due to the spurious goods entered in the distribution
channels. He added that other than pulling down the profits of the FMCG companies, a
counterfeit product of lesser quality gave a "bad name" to the brand.
Levels of rural consumer satisfaction with channel members
Rural consumers were highly satisfied with the availability of food items (54%), and
satisfied with toiletries (70%) and cosmetics (67%) though the specific products / brands
not available. At least one product was available under all categories which just solved
their purpose without specific brand and they were least bothered about good / bad
quality products. These observations are in agreement with those of Sarangpani et al17
who studied that there are two distinct segments consumers in rural market. One set of
rural consumers who can not read, write and understand with ease. They do not buy
branded products. They have their own method of identification of products and
communication with the retailers. For instance, they ask for Erra Sabbu (for Lifebuoy),
Pacha Sabbu (for Nirma), Neeli Sabbu (for Rin), etc. Rarely do they purchase branded
packaged goods and values associated with them.
There was extremely high dissatisfaction (69% food items, 80% toiletries, and 60%
cosmetics) among the rural consumers regarding range of products because product
length was too short that only 2-4 products were available under each category;
customers had no choice but to buy the available ones. These observations are in
agreement with those of Saran16
who emphasized that the rural FMCG market with its
promise of millions of rural consumers is not yet touched by the cornucopia of brands
and products.
Once the frequently-purchased products were out of shelf it took a lot of time to reach
the shelf back, min 5 days and max might be more than 10 days also. Therefore
customers were dissatisfied (69% food items, 80% toiletries, and 66% cosmetics) with
regularity of supply of products. These observations are in agreement with those of
Kucuk9 who provided clear insights into the influence of product availability, and thus
distribution on double jeopardy (DJ) patterns, for frequently-purchased products (FPP).
The distribution created behavioural brand loyalty when Frequently-purchased Products
are widely available (excessive availability) in the market.
If required products were not available at local shop then they had to look for other
shops, i.e. bigger villages or town which was far away from their villages so they
couldn’t go regularly. Therefore many customers were dissatisfied (69% food items, 80%
toiletries, and 66% cosmetics) with the proximity of retail shops. These observations are
in agreement with those of Kashyap et al6 who observed that there are 3.5 million outlets
spread over 6 lakh villages whereas there are 1.68 million outlets spread over 5000 towns
and cities, i.e. there are only 6 shops per village and 340 shops per town / city. There are
hardly any shops in 2.3 lakh villages.
Summary
The researcher studied various attributes such as mode of delivery, coverage pattern,
mode of payment, costs, number of assortments, lead time, execution of promo-offer,
display of products, understanding of channels’ requirements, communication, issues
handled, actions taken against channels’ request, responsiveness during implementation,
meetings with territory in-charge, time taken for query resolution, actions taken against
channels’ complaints, quality of sales-kit, domain knowledge with territory in-charge,
attitude of territory in-charge, and credit period for satisfaction of distributors,
wholesalers and retailers and their responses were found quite significant. Most of the
channel members were satisfied with the present system of FMCG distribution in the
rural market of Sangli and Kolhapur districts in Maharashtra.
Consumerism
It was unfortunate that very few respondents (83%) had awareness about different
consumer protection acts and also whoever knew it was difficult to recall (13%) which
had become again a serious concern for the marketers.
Major Complaints / Problems with regard to Purchase of Products
It was again an eye opening for the marketers that there was a strong presence of
duplicate brands (58%) in rural areas which was perhaps difficult for the customers to
identify and less awareness. Prices were almost same and they were charged as per MRP.
Customers Complaints & Measures
It was good that customer lodged complaint with retailers but most of them had taken
very strong measure by switching over to other shop (71%) and some of them returned
the goods and took money back (29%) in case of complaints against the goods. No legal
case filed and no replacement with the new goods.
Suggestions offered by rural consumers
Retailers to provide information on new products; retailers to give good products;
retailers to provide discount at par with their urban counterparts; producers to have check
on retailers; producers to catch retailers who not doing malpractices and prosecuted and
producers to ensure implementation of any scheme (promo-offer) in villages.
Hypotheses validation
Hypothesis I: Existing FMCG Channels of Distribution in Rural Maharashtra serve
the customers well.
Range of products at local retailers vs distance traveled by the rural customers
A negative correlation and significance level was two tailed and p value = 0.01 and 0.05
between Distance traveled by the rural consumers to buy products with Satisfaction of
rural customers with range of products at local retailers.
Inference: The rural customers were dissatisfied with the range of food items, toiletries,
and cosmetics available at the local retailers, i.e. there was a lack of product width and
depth. Only a limited range had been observed in food items, toiletries, and cosmetics.
Therefore, it implies that the rural customers have to travel away from their villages to
towns / cities to buy their desired products.
Regularity of supply of products vs distance traveled by the rural customers
A negative correlation and significance level was two tailed and p value = 0.01 and 0.05
between Distance traveled by the rural consumers to buy products with Satisfaction of
rural customers with regularity of supply of products in case of out of stock at local
retailers.
Inferences: There were limited stocks of products at village retailers, i.e. 1 to 3 products
in one category. If the products were out of stock, rural customers had to wait for 5 days /
10 days / even more. So, it compelled them to travel outside their villages to meet their
demands. Therefore, the rural consumers had to travel distance away from their villages
to taluquas or cities or towns to buy the products and hence they were not satisfied with
the regularity of supply of products at local retailers.
Proximity of retailers vs distance traveled by the rural customers
A negative correlation and significance level was two tailed and p value = 0.01 and 0.05
between Distance traveled by the rural consumers to buy products with Satisfaction of
rural customers with proximity of retailers.
Inferences: If there was no range of products available at local retailers and poor
regularity of supply of products, the rural customers had to approach other good shops
wherein the desired products were available, which were far away from their places.
They had to travel to Taluquas or towns or cities which were far away and could not be
approached regularly. Therefore the rural consumers were not satisfied with the
proximity of retailers for buying their daily needs.
Availability of products vs distance traveled by the rural customers
A positive correlation and significance level of two tailed p value = 0.01 and p value =
0.05 was seen between Distance traveled by the rural consumers to buy products with
Satisfaction of rural customers with availability of products.
Inferences: Availability means the presence of at least one product in one category of
FMCG, i.e. 1-2 products in bathing soap category, one product in washing soap category,
one product in edible oil category etc. irrespective of the brand and variants. The rural
customers are satisfied when the presence of the products at local retailers solves their
temporary purpose. At least one product was available under all categories which solved
their purpose without specific brand as they are not bothered about good/bad quality
products.
Poor quality of products vs measures initiated by the rural customers
A positive correlation and significance level was two tailed and p value = 0.01 between
Measures initiated by rural consumers – returned goods and took money back with Poor
quality with regard to purchase of products.
Duplicate brands vs measures initiated by the rural customers
A positive correlation and significance level was two tailed and p value = 0.01 between
Measures initiated by rural consumers – switched over to other brands with Higher
prevalence of duplicate brands with regard to purchase of products.
Inferences: Whenever there is poor quality in FMCG bought by rural customers they
return the goods and take money back from the rural retailers. Most of the rural
customers can now differentiate between original and duplicate brands so they switch
over to other brands if duplicate ones are found. It implied that there was either poor
quality or prevalence of duplicate brands in rural market. Therefore, rural customers were
not getting good quality and authentic brands in rural market of Sangli and Kolhapur
districts.
Hence the Hypothesis I: ‘Existing FMCG Channels of Distribution in Rural
Maharashtra serve the customers well’ is not validated.
Hypothesis II: Channel members are satisfied with the distribution of FMCG in
rural markets
There was a dependency and the two discrete variables had a strong relationship. As the
Chi-square statistic increased, the likelihood that a relationship existed between two
variables, i.e. the type of FMCG channels and attributes increased.
The researcher interpreted the results by observing the difference between the observed
and expected counts. In this case, the level of significance was 0.001. There was a
significant difference.
Result: X2 (2) = 28.369, p < 0.001
Hence Hypothesis II: ‘Channel members are satisfied with the distribution of
FMCG in rural market’ is validated.
Constructing a scale to measure effectiveness of FMCG distribution channels
The researcher intended to develop a statistical model to predict customer satisfaction for
a product which was dependent on different parameters. The researcher believed firmly
that apart from the psychological factor, the following eight factors – Quality, Size, Price,
Packaging, Availability of products, Range of products, Regularity of supply of products,
and Proximity of retail shops, would be predictors to predict dependent variable customer
satisfaction for that product. In order to develop the statistical model to measure customer
satisfaction, the researcher thought Multivariate Linear Regression Analysis (MVLRA)
was the best tool which can be used only under the assumptions of normal distribution.
Ordinal regression and log linear regression are the tools that can be used when the
measurement of variable is on an ordinal scale. The researcher developed the statistical
models (scale) for each of the following products – Edible oil, Tea and coffee, Biscuits,
Bathing soap, Washing soap, Washing powder, Face powder, Face cream and Shampoo.
For edible oil
Y=0.012 + 0.106 X1 + 0.102 X2 + 0.132 X3 + 0.129 X4 + 0.269 X5 + 0.108 X6 + 0.144 X7
For tea & coffee
Y=0.026 + 0.068 X1 + 0.122 X2 + 0.131 X3 + 0.118 X4 + 0.289 X5 + 0.107 X6 + 0.139 X7
For biscuits
Y=0.042 + 0.123 X1 + 0.097 X2 + 0.074 X3 + 0.130 X4 + 0.136 X5 + 0.130 X6 + 0.102 X7
+ 0.175 X8
For bathing soap
Y=0.024 + 0.095 X1 + 0.106 X2 + 0.096 X3 + 0.125 X4 + 0.299 X5 + 0.111 X6 + 0.143 X7
For washing soap
Y=0.043 + 0.143 X1 + 0.101 X2 + 0.098 X3 + 0.097 X4 + 0.270 X5 + 0.122 X6 + 0.134 X7
For washing powder
Y=0.027 + 0.151 X1 + 0.109 X2 + 0.091 X3 + 0.113 X4 + 0.283 X5 + 0.100 X6 + 0.130 X7
For face powder
Y=0.013 + 0.093 X1 + 0.113 X2 + 0.099 X3 + 0.131 X4 + 0.145 X5 + 0.147 X6 + 0.112 X7
+ 0.149 X8
For face cream
Y=0.008 + 0.117 X1 + 0.138 X2 + 0.086 X3 + 0.115 X4 + 0.133 X5 + 0.140 X6 + 0.110 X7
+ 0.153 X8
For shampoo
Y=0.028 + 0.086 X1 + 0.125 X2 + 0.132 X3 + 0.115 X4 + 0.135 X5 + 0.132 X6 + 0.103 X7
+ 0.147 X8
Where, Y = Customer Satisfaction for products (edible oil, tea & coffee, biscuits,
bathing soap, washing soap, washing powder, face powder, face cream
and shampoo)
X1 = Quality,
X2 = Size,
X3 = Price,
X4 = Packaging
X5 = Availability of Products,
X6 = Range of Products,
X7 = Regularity of supply of Products, and
X8 = Proximity of retail shop for buying products.
Conclusions
Channel conflict was there among the rural and urban distributors over the jumping of
territories allotted by the companies. There is discrimination as distributors didn’t get
credit from companies but they had to give some credit period to wholesalers and
retailers. There is a prevalence of spurious goods with the same brand name and packing
colours and many rural consumers were becoming victims of such menace. It was
heartening to see that youngsters between the age group of 18 to 30 years and that too the
married ones had emerged as decision makers in the family who could communicate
well. Less educated people did not buy branded products and became victims of duplicate
products. The researcher felt elated to note that the majority of the families had less
members in family. The majority of the rural consumers had no investment at all. Many
major brands of FMCG were available in rural area. The good behaviour and courtesy of
the retailers had great influence on rural customers. If required brand was not available
rural consumers postponed buying. FMCG shopping was still dominated by male. The
rural customers traveled more distance outside the village to purchase goods.
The reasons to buy outside the village were the variety, the high quality goods of their
choice which they did not find in their villages and reasonable prices and there was not a
single customer who traveled for better product services. The reason for changing the
existing brands was that new brand was of better quality and quantity. Many rural
consumers wanted to test the new brand and not the new brand was cheaper. Traders had
incredible influence on purchase by rural customers. In all purchase he had small or
greater role and customers’ family members were also asked for their preferences. The
purchase decision was not limited to one person from family but it was a collective
decision. Peer group had almost no role in their purchase decision. Neighbors and friends
did not have predominant role in purchase decision. Once the frequently-purchased
products were out of shelf it took a lot of time to reach the shelf back. Very few rural
consumers had awareness about different consumer protection acts and also whoever
knew it was difficult to recall which had become again a serious concern for the
marketers.
Recommendations for further research
1. The present research study was limited to Sangli and Kolhapur rural markets. The
study can be extended further by identifying other districts in Maharashtra.
2. An in-depth study can be done on the consumer durable goods industry in rural
markets as this has become one of the fastest growing sectors in the rural market.
3. There are some unorganized distribution channels in rural markets i.e., mandi and
weekly markets. These can be studied to analyze their impact on sales of branded
products.
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