Cost Innovation for Tier 2 / 3 Market
penetration.
A case study…
Rural Market – The Growth Story..
Rural India is getting bigger day by day- triggered by growth in the hinterland
& smaller cities.
No company can afford to ignore rural India for its tremendous potential.
Eg:
 In last 2 years, Consumer durables & electronics witnessed a growth of
30 % in rural vs. 10% in urban markets.
 Mobile penetration of over 800 million with over 53 % in rural India.
 FMCG Giant HUL- 40 % products are consumed in rural markets.
Moreover Rural markets are less affected by macro economic
situations ; as they operate in their small eco system.
Rural Market Drivers
 Rising Government investments thru various schemes like MGNREGA.
 Schemes under NABARD–support to agriculture & village industries.
 Retail chain & companies–guide farmers on sustainable agriculture practices.
 Higher Minimum Support Prices (MSP) – ensure better returns to farmers.
 In urban-rural clusters– big farmers dispose of portions of their lands to
have enough liquidity & higher standard of living.
 Special focus by government on education & skill building Increasing technology awareness among youth.
 Skills for Job opportunities in BPOs, hospitality & Service sector.
Today Rural India aspire for the same products as used by their Urban
counterpart.
Rural Market – Challenges Vs Opportunities
Rural markets are dispersed.
Companies need to develop the understanding of their prospective
customers.
Marketers need to understand:
Their local needs & develop appropriate products and
services to meet those requirements.
 Develop a unparalleled distribution channel to make these
products and services available to them at an affordable cost.
How it is done in Maruti Suzuki?
Case study -Maruti Suzuki India Ltd.
As a Passenger Car Manufacturer, Maruti Suzuki provides total mobility
related solution to its customers– Not only the vehicle but






Finance to buy the car.
Insurance
Extended warranty
Accessories
Service
Spares
….and all at the most affordable price.
To ensure this, during the entire ownership cycle, we had to build a
responsive channel network.
Cost vs. benefit
But building a network involves :
 Capital Cost.
 Operating Cost.
Promise to our customers - “Lowest Cost of ownership”
Distribution verticals for the Supply Chain
Distribution
Suppliers
Maruti
Channel
There are 3 verticals to ensure :
 Sales to ensure reach to the prospective Car buyers.
 Service to ensure reach & accessibility for Car owners.
 Parts to ensure reach & availability of Genuine parts.
Car Owner
Distribution verticals for the Supply Chain
Channel
Sales
Sales
showroom
E Outlets
Parts
Service
Dealer
3S/2S
E-Outlet
W/S
MASSs
Dealer
Workshop
MGP
Distributors
Retail Outlets
Sales Operations
Sales Network
Sales showroom
E Outlets
 Locations : Urban Cities
 Locations : Rural pockets
Total area: Over 1- 2 acres.
Total area : Few hundred sq feets.
Display the entire range of cars.
 Space enough to display 2-3 cars
– the focus model.
 One stop shop for all customer’s
needs.
 Nearest touch point for rural
customers. Basic facilities of Test
drive, finance & Insurance..
Sales Operations - network
 Sales network as on1st Apr, 2012
 More than 1100 sales outlets
covering 801 cities.
 Concept of E Outlets – to reach in rural pockets.
 Resident Dealer Sales Executives (RDSEs)
 Posted in rural pockets covered by E outlets.
 Resident of same village–Well versed with the geography &
people.
 Known face in the village.
 Takes pride in representing the brand Maruti.
 Operating cost low.
 Operates from home.
Service Operations.
Message to customers –
“ Wherever you go, you are not far away from a Maruti workshop”
Building a Service facility involves Cost…
Service Operations- network.
Service network
3S Outlet
E Outlet W/S
 Location : Base City.
 Location- E Outlet
 Large workshops.
 Small set up.
 As high as 30-40 bays.
 2-3 bay workshop.
 Service & Body shop.
 Free & paid service.
 High capital &
equipment cost
 Minimum tools.
MASSs
 Location-Rural pockets
with no dealer reach /
Cities with high load.
 A/B/C categories on
basis on facilities.
 Low on investments.
Service Operations- network
 Service network as on 31st Jul, 2012




1345 Dealer workshops covering 817 Cities.
1650 MASS workshops in 1097 locations.
601 Cities exclusively served by MASSs.
2995 service workshops covering 1418 cities.
 In FY1112-

 Inaugurated high altitude MASS at Kaza – Spiti Motors
(altitude of 3740 Mtrs (12270 ft) above sea level).
 Activated the most remote and farthest
workshop Andaman and Nicobar Island
Spare Parts Operations.
“If a car owner in Hubli which is about 2800 kms from Gurgaon asks
for a Oil Filter for his M800 at his favorite workshop, immediately
and at a price he is ready to pay for it.
Right part
Right quantity
Right place
Right time
Right Price
Right Customer
:
:
:
:
:
:
M800 Oil filter
The quantity I asked for.
Favourite workshop in Hubli
Immediately.
At a price commensurate to the value provided.
Deliver to me only.
How to make it possible?
Distribution Channel innovation
Spare Parts Operations.
Car Service option for customers
Authorised
Un-authorised
Dealer workshop
Local garages
(1345)
(Over 40000* nos)
MASSs
(1650)
* As per SIAM.
Channel Pre 2004
Parts & Accessories Division.
Single
Channel
Dealer workshop
MASS
Retailers
Garage
Inhouse Workshop
After market - End customer- Car service
Channel Post 2004
Parts & Accessories Division
Dealer
workshop
Two
Channels
MGP Distributors
MASSs
Retailers
Garage
In house workshop
After market- End customer- car service
Concept of Retail Outlets
To expand further to potential pockets, retail outlets opened.
 Air conditioned Outlets
 Unique Buying experience.
 Dedicated helpdesk.
 Retail outlets in over 170 locations
Concept of Express Outlets
To penetrate market further - Require more touch points.
Challenge : Cost
Solution : Express outlets -Trimmed down version of retail outlet.
Benefits :
End customer
 Attractive displays.
Distributor –
 Low investments.
 Early start of operations.
 Early paybacks.
 Low operating cost.
Cost Innovation in the distribution channel only does not
suffice.
There has to be innovations across the chain…
Innovations across Supply Chain
Suppliers
Maruti
Channel
Car Owner
 Low Inventory holding cost : Just In time (JIT) model
Through Technology enabled seamless integration of ERP interfaces.
 Automatic replenishment model for channel.
 E-enabled procurement model for suppliers.
 Low working capital for channel: Reduction of lead time.
 Increasing touch points – near to customer.
 Regional stock yards – Low transit time & optimised logistics cost.