1. By Benjamin Neuwirth, Kellogg School of Management
Marketing Channel Strategies in Rural India: Lessons From d.light Design
By Benjamin Neuwirth, Kellogg School of Management

2. Agenda Background on d.light Design
Framework for Marketing Channel Success in Rural India
My Internship: Enabling a New Marketing Channel

3. 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 value-conscious consumers, a whole new world of opportunity will open up.
- C.K. Prahalad 2006

4. 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

5. Product Solution Inspiration
d.Light Design’s Founding
Product Solution
Inspiration
Affordable, bright lights for rural consumers to promote health and livliehood
Founded out of the Stanford d.school by Sam Goldman and Ned Tozun
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

6. d.Light Products S250 Powerful spotlight Mobile phone charger $35 USD
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

7. 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

8. 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?

9. Agenda Background on d.light Design
Framework for Marketing Channel Success in Rural India
My Internship: Enabling a New Marketing Channel

10. Distribution Network Design Distribution Network Logistics
Framework for Marketing Channel Strategy in Rural India
Delivering Products
Distribution Network Design
Maintaining Customers
Distribution Network Logistics
After-Sales Service
Customer
Product Purchase
Activating Customers
Affordability
Education
Brand Trust

11. Distribution Network Design Distribution Network Logistics
Framework for Marketing Channel Strategy in Rural India
Delivering Products
Distribution Network Design
Maintaining Customers
Distribution Network Logistics
After-Sales Service
Customer
Product Purchase
Activating Customers
Affordability
Education
Brand Trust

12. Distribution Network Design
Challenges
Solutions
Aggregate Consumer Demand to a Point Required by the Product
Low Density of Demand Leads to Slow Inventory Turnover

13. Aggregating Consumer Demand
Distribution Network Design: Example
Aggregating Consumer Demand
Consumer Durables: Aggregate demand in cities and hypermarts
FMCG Products: Aggregate demand in villages

14. 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

15. Autorickshaw Delivering Coca-Cola in an Indian Village
Distribution Network Design: Example
Hub-and-Spoke Model
Coca-Cola
Hub
Independent Entrepreneurs
Autorickshaw Delivering Coca-Cola in an Indian Village
Small Villages

16. 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

17. Solution: Distribution Network Piggybacking
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
Challenge: stocking inventory
Whirlpool and Sony in Japan
Corporate Partnerships

18. 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.

19. Solution: Distribution Network Piggybacking
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
Challenge: stocking inventory
Whirlpool and Sony in Japan
Corporate Partnerships
Local Non-Profit Organizations

20. 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

21. Solution: Distribution Network Piggybacking
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
Challenge: stocking inventory
Whirlpool and Sony in Japan
Corporate Partnerships
Local Non-Profit Organizations
Business-to-Business Sales

22. Business-to-Business Sales
Distribution Network Logistics: Example
Business-to-Business Sales
Distribution
Carrier Company
Rider Company
Sales
Pros
Bulk Sales to carrier company
Manage fewer relationships
Cons
Low visibility into end customer sales and product reception

23. Agenda Background on d.light Design
Framework for Marketing Channel Success in Rural India
My Internship: Enabling a New Distribution Channel

24. 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

25. d.light’s New Distribution Partner:
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
Mention that previous distribution channel through small retailers failed

26. Analysis of BPCL Distribution Network
Mention that previous distribution channel through small retailers failed
BPCL has 281 cooking gas retail stores in Uttar Pradesh. Each stores serves thousands of consumers, effectively aggregating demand for d.light.

27. 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.

28. Mention that previous distribution channel through small retailers failed
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.

29. 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.

30. 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.

31. 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