RURAL PRODUCT AND PRICING STRATEGY

UNIT 3

RURAL PRODUCT AND PRICING STRATEGY

The term "rural product" typically refers to goods or products that originate from rural
areas. Rural areas are characterized by a lower population density, and economic activities in
these regions often differ from those in urban areas. Rural products can encompass a wide range
of items that are produced or cultivated in rural area, including agricultural products, handicrafts,
traditional arts, and other locally sourced goods.

Inother words, A rural product is a tangible or intangible good or service that is

specifically designed, produced, marketed, and sold to meet the needs and preferences of rural
consumers. Rural products encompass a wide range of categories, including:

Agricultural products: fruits, vegetables, meat, dairy products, and eggs.

Natural Resources: Rural areas may be rich in natural resources such as timber, minerals, or
water, and products derived from these resources can be considered rural products.

Traditional Foods and Beverages: Many rural areas have unique culinary traditions, and local
food and beverage products can be considered rural specialties.

CLASSIFICATION OF RURAL PRODUCT

1. FMCG

Fast moving consumers goods are popularly named as consumer-packaged goods. Items
in this category include all consumables people buy at regular intervals. The most common in the
list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe Polish, packaged
foodstuffs, and household accessories.

Major players are HUL, Dabur, Colgate Palmolive, Nirma etc.

2. Agricultural Products: Product produced under agriculture activities. It includes

Fruits, vegetables, meat, milk, Dairy Products: Milk, cheese, butter, and other dairy
items.

3. Handicrafts and Artisanal Goods: Handicrafts and artisanal goodsare goods

predominantly made by hand even though some tools or machinery may also have been
used in the process. It includes, Handwoven fabrics, traditional clothing, and accessories,
Textiles, furniture, and crafts
4. Natural Resources and Extractive Products: produts extracted from natural
resoueces. It includes, Wood and wood products, mineral product, and watered product.

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5. Traditional Foods and Beverages:

 Local and Traditional Cuisine: Specialty foods and dishes unique to the rural region.
 Beverages: Locally produced drinks, including herbal teas, fruit juices, and traditional
brews.
6. Cottage Industries:
 Handmade Products: Various items crafted by individuals or small groups, such as
candles, soaps, and personal care products.
7. Services:
 Rural Tourism: Services related to tourism and hospitality in rural areas.

MEANING OF PRODUCT LIFE CYCLE

 The product life cycle is a concept that describes the stages a product goes through
over its lifespan in the market.

 It provides a framework for understanding and managing the evolution of a product

from its introduction to its eventual decline.

 The product life cycle is typically divided into several stages, and each stage is
associated with different challenges, opportunities, and strategies.

 In other words, The Product Life Cycle is a management tool that makes it possible to
analyze how a product behaves from its development to its withdrawal from the
market. It covers every stage of growth, from launch through to adoption, and sales
maturity.

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STAGES OF PRODUCT LIFE CYCLE

1. Introduction Once a product has been developed, it begins the introduction stage of the PLC.
In this stage, the product is released into the market for the first time. During the introduction
stage, marketing and promotion are at a high, and the company often invests quite a bit of effort
and capital in promoting the product and getting it into the hands of consumers.

2. Growth: During the growth stage, consumers start taking to the product and buying it. The
product concept is proven as it becomes more popular, and sales increase. If competition for the
product is especially high, the company may still heavily invest in advertising and promotion of
the product to beat out competitors.
3. Maturity Stage:
When the product enters the maturity stage the rate of growth of its sales declines, though the
volume of sales keeps on increasing. This is so because most of the persons needing the product-
had; already adopted it during the growth stage and now when the product enters its maturity
stage, it faces a small and declining number of potential buyers. Consequently, the firm has to
spend relatively increasing amount of sales promotion. At this point, companies begin to reduce
their prices so they can stay competitive amongst the growing competition.

4. Saturation Stage: At this stage, the sales volume of the product ceases to grow. The only
additional demand for the product happens to be its replacement demand.

5. Decline
During the decline stage, the product's sales and profitability begin to decline. This is primarily
because other innovative or substitute products that meet customer needs better than the current
product have entered the market. Several strategies can be used during the decline stage in order
to increase the sales.

NEW PRODUCT DEVELOPMENT

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 New Product Development (NPD) is the process of conceiving, designing, and bringing
a completely new product or service in to the market.
 It involves all the activities and steps a company undertakes from the initial idea
generation to the product's introduction and beyond.
 The goal of new product development is to meet market needs, stay competitive, and
drive business growth.
 This process often involves cross-functional collaboration among various departments,
including research and development, marketing, finance, and manufacturing.

The stages of new product development

1. Idea generation: The first stage of the NPD process is to generate new product
ideas. This can be done through a variety of methods, such as brainstorming,
market research, and customer feedback.
2. Idea screening: Once a number of product ideas have been generated, they need
to be screened to identify the most promising ones. This involves evaluating the
ideas against a set of criteria, such as market potential, feasibility, and fit with the
company's strategy.
3. Concept development and testing: Once a promising idea has been identified, it
needs to be developed into a more concrete concept. This involves creating a
detailed product description, including its features, benefits, and target market.
The concept should then be tested with potential customers to get their feedback.
4. Business analysis: Once the product concept has been tested, it needs to be
developed into a marketing strategy and business plan. This involves determining
the product's pricing, positioning, and distribution channels. It also involves
estimating the product's sales potential and profitability.
5. Product development: Once the marketing strategy and business plan have been
approved, the product can be developed. This involves creating a prototype of the
product and testing it to make sure it meets the specifications.
6. Test Marketing: The introduction of the product to a limited market to assess its
performance, gather additional feedback, and make any necessary adjustments.
7. Commercialization: Once the product has been test-marketed successfully, it can
be launched on a wider scale. This involves manufacturing the product, creating
marketing materials, and distributing the product to retailers.

WHAT IS 'BRANDS'
Definition: A brand is a name given to a product and/or service such that it takes on an identity
by itself.

A brand differentiates a product from similar other products and enables it to charge a higher
premium, in return for a clear identity and greater faith in its function.

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What is Branding
Branding is the process of creating a strong, positive perception of a company, its products or
services in the customer’s mind by combining such elements as logo, design, mission statement,
and a consistent theme throughout all marketing communications. Effective branding helps
companies differentiate themselves from their competitors and build a loyal customer base.
A branding design creates recognition of a particular product or service in the customer’s mind
through a logo, design, slogan, or symbol.
Definition:
According to Kotler and Amstrong, ‘a brand is a name, term, sign, symbol or design or a
combination of these that identifies the maker or seller of a product, or services’.

FUNCTIONS OF BRANDING
1. It helps in product identification
2. It ensures product differentiations.
3. It eliminates imitation of products.
4. It helps to crate and maintain brand loyalty to particular.
5. product It is the base for the sales promotional activities It helps in price differentiation of
products

ESSENTIALS OF GOOD BRAND NAME

1. The brand name should be short and simple.
2. It must be easy to pronounce and remember.
3. It should be easy to recognize.
4. It should be legally protectable.
5. It should have a long and stable life.
6. It should be unique and attractive.
7. It should be easy to advertise.
8. It should be original.
9. It should be suitable to market buyers.
10. It should be distinctive so that product is easily differentiated.
11. It should not used as a general or common name for all products.

SIGNIFICANCE OF BRANDING:
A. To Buyer:

1. A brand helps buyers in identifying the product that they like/dislike.

2. It identifies the marketer.

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3. It helps reduce the time needed for purchase.

4. It helps buyers evaluate quality of products, especially if they are unable to judge a product’s
characteristics.

5. It helps reduce buyers’ perceived risk of purchase.

B. To Seller:
1. A brand differentiates product offering from competitors.

2. It helps segment market by creating tailored images.

3. It identifies the companies’ products making repeat purchases easier for customers.

4. It reduces price comparisons.

5. It helps the firm introduce a new product that carries the name of one or more of its existing
products.

PRICING

"Pricing" refers to the process of determining the value of a product or service and setting
a specific monetary amount or range that customers are required to pay in exchange for that
product or service. It is a critical element of business strategy and involves considering various
factors to arrive at a price that is both attractive to customers and profitable for the business.

In other words Pricing is the process of determining the value of product or services in terms of
money before it is offered to the market. In short it is the process of determining the price of a
product.

Pricing is one of the important areas in marketing decision making. A good pricing policy is
significant for getting maximum sales revenue. Pricing is the only element that produces revenue
to the firm.

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FACTORS INFLUENCING PRICING POLICES AND DECISIONS

The various factors influence the pricing decisions and polices. They are:-
1. Business Objectives: The business objectives affect pricing policy of the firm to a greater
extent so, the price of the firm should be framed only after considering the business
objectives of the firm.
2. Cost of the Product: Cost of the product is one of the most deciding factors. Generally, the
price of a product will not be less than its cost of manufacturing. So, the price of a product
will be fixed in such a way as to cover the entire cost of the product and reasonable profit to
the manufacturer
3. Elasticity of demand: If the demand for a product is inelastic or less elastic, higher price
may be fixed for that product. On the other hand if the demand for the product elastic, the
price of the product must be kept low.
4. Consumer Satisfaction: The Consumer influence the price of a product. If consumer feels
that the value of the product is worth the price, he will buy the product otherwise he will
refuse to buy.
5. Characteristics of the product: The characteristics of the product also determine the pricing
policy of a firm. Nature of the product, stage of the product life cycle. product diversification
etc. are the important characteristics of the product which affect the pricing policy.
6. Pricing policy of competitors: A manufacturers, while fixing the price for his product,
consider the prices fixed by the competitors, quality maintained by the competitors. The price
fixed by a firm should be equal or lower than prices of the competitors.
7. Distribution Channel: If a product passes through a lengthy distribution channel from the
producers to the consumers, the price fixed will be high for other hand, if the channel of
distribution for product is short the price fixed will be generally lower.
8. Government Policy: Government policy influences the pricing policy of firm. Some times
the government may announce a general policy regarding the pricing of products. In such
cases, the management should follow the government policy while fixing priced of its
products.
9. Economic Environment in the country: Pricing policy affected by the economic
environment in the country. During the period of depression, the prices are reduced so as to
maintain the sales level and during the period of boom, the prices are increased to cover the
higher cost of manufacture selling.
10. Product Differentiation: If the product differentiation is more, the firms enjoys more
freedom in fixing the product price. It can change different prices for its product for
differentiating them from those rivals.
11. Labour Unions: Labour unions play very important role in the formulation of the pricing
policy of a firm. A firm cannot fix high price for its product because if it fixes very high price
labour unions will demand to raise their wages and salaries So the firm is brand to price their
products with in limits.
12. Organizational factors: In large scale organizations the top level management enjoys the
final authority over pricing. The pricing policy are generally taken by the top l management.
These the organizational factors also affect the pricing policy

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METHODS OF PRICING OR STRATEGIES OF PRICING IN RURAL MARKET

These are several methods of pricing, they are:

1. Cost Based Pricing: These are 3 methods of cost based pricing they are:

a. Full Cost Pricing /Cost pricing: Under this method the price is set to cover costs and
pre- determined percentage of profit. The objective of this method is to cover cost.
b. Absorption Cost Pricing: Under this method pricing is based on estimated unit cost
of the product at the level of production and sales. This method uses standard costing techniques.
c. Marginal Cost Pricing: Under this method the price of a product is determined on the
basis of the marginal or variable cost. The main aim of the firm under this method is to maximize
its contribution to fixed cost and profit.

2. Based On The Price Level: On the basis of price level, Pricing policy may be divided
into 3 types.

a. Meeting Competition Price Policy: Under this price policy, the prices of a
product are reduced by the competitors, the enterprise also reduces its price.
Similarly if the prices of a product are raised by the competitors, the enterprise
also raises its price.

b. Below Competitive Level Price Policy: Under this policy an enterprise fixes the
prices of its product. below the prices fixed by its competitors. If the prices are
reduced by the competitors, the enterprise further reduces the prices of its
products.

c. Above Competitive Level Price Policy: Under this policy an enterprise fixes the
prices of its products in such a manner that its prices are always higher than the
prices of similar products of its competitors.

3. On the Basis of Flexibility: It may be classified into 2 types they are

a. One Price Policy: Under this policy no difference is made in the pride of
products for different customers. Under this policy the price once determined
continuous for a long period.

b. Flexible Price Policy: Under this policy different prices are determined for
different customers for the same product and for the same quantity.

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4. On The Basis Of Specialty: Under this policy price can be sub divided into 6 types
they are:

a. Skimming price policy: When a very high price is fixed by an enterprise for a
new product and can maximum profits at the earliest. And recover the amount of
capital invested quickly. This policy is adopted in the case of specialty goods
only.

b. Penetration Pricing Policy: Penetration pricing is just opposite of skimming

price Under this policy the price of the product is kept low in order to reach a
mass market immediately. This policy aims at maximizing profit through
maximum sales with a low margin of profit.

c. Full Line Pricing Policy: When manufacturers produces all the varieties of a
product. He can determine the price of his products according to the demand for
the product. He can fix more price for some product. Medium price for some
products and low price for some products such pricing policy is full line pricing
policy.

d. Unit Pricing Policy: If the unit price of a product is printed on its packing, it is
called unit pricing policy.

e. Psychological Pricing Policy: Some manufacturers for the prices of their

products in such a manner that it may crate in the minds of the customers the
impression that the prices are low is called psychological pricing policy.

f. Leader Pricing Policy: Leader pricing policy is a pricing policy which one firm
in the industry assumes the role of a leader in determining the price, and other
firma in the industry approximate their prices to that of the leader.

5. On The Basis Of Geographical Location: On the basis of Geographical locations of buyers

and sellers, pricing polices are classified as follows:

a. Uniform Delivery Pricing Policy: It is a policy in which the firm absorbs full
transport cost and delivery the goods to all buyers at their ends at a uniform or
single price irrespective of locations and distance.

b. Zonal Delivery Pricing Policy: It is a policy under which the whole market of a
product is divided into certain number of points, and the price of the product
remains the same in all the places of a zone. But there may be differences in the
price of a product in different zone.

c. Production Point Pricing Policy: It is a policy under which a firm quotes just
factory price and no allowance for the transport cost involved in moving the

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product from the point of production to the point of consumption. fully or partly
and determines the price which is inclusive of

d. Fright Absorption Pricing Policy: It is one in which the seller absorbs the
transportation either transportation cost absorbed by him.

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