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RURAL MARKETING PROJECT ON ITC CIGARETTES

Name Enrollment No.Sourav Pramanik 09BS0002392Swarnabha Dey 09BS0002492Vivek Bhagat 09BS0002750Zoom Guha 09BS0003104

SECTION: D

IBS, KOLKATA

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RURAL MARKETING PROJECT ON ITC CIGARETTES

Name Enrollment no.Sourav Pramanik 09BS0002392Swarnabha dey 09BS0002492

Vivek Bhagat 09BS0002750Zoom Guha 09BS0003104

Marketing Management 2

IBS, Kolkata

Date of submission: 17.11.2009

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AUTHORIZATION:

The report is submitted as partial fulfillment of the requirement of MBA

Program ofIBS.

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Acknowledgements

First of all, we are immensely indebted to Mr. Ashim Ghosh, Director, IBSKolkata & Mr. Shibashis Chakraborty, Faculty Member of Marketing

management, IBS Kolkata for giving us the opportunity to work for such aninteresting project.

We like to specially acknowledge with thanks, the support of our faculty MrShibashis Chakraborty without whom, this project would have been incompleteHer intense knowledge in this subject has made this project a huge success.

We would also like to thank Mr. Anirban Sen (Area Manager of Tobacco

Sector, ITC) & Mr. Sakhawat Ali (Distributor of ITC cigarettes) withou

whom our project would have been a very difficult task.

We would be failing in our duty if we do not thank our respondents who gave their

valuable time and answered the survey questions with tremendous patience and

understanding.

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Table ofcontents:

Topic Page No.

Executive Summary 01

Introduction 02

Company profile 03

Product-line of ITC ltd. 05

Distribution channel of ITC Ltd. 07

Pricing of ITC cigarettes 08

Price point segmentation 10

Consumption Preferences 11

Sales pattern 14

4 As of Marketing 15

Conclusions 20

Attachments 21

References 22

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List ofillustrations:

Topic Page No.

Distributors Price List(table 2) 08

Demand as a % of Total Demand(fig 3) 08

Whole Salers Price List(table 3) 09

Retailer Price List(table 4) 09

Price point segmentation(table 5) 10

Customer Preferences in Urban Area(table 6) 11

Customer Preferences Pie Chart(fig 4) 11

Sales of ITC Cigarettes in Urban Area Pie Chart 14

Sales of ITC Cigarettes in Rural Area Pie Chart 14

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Executive SummaryThe Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to

ignore. With 128 million households, the rural population is nearly three times t he urban. As a result of the

growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonne

from 176 million tons in 1991, rural India has a large consuming class with 41 per cent of India's middle -clas

and 58 per cent of the total disposable income.

The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the

rural market accounts for close to 70 per cent oftoilet -soap users and 38 per cent of all two-wheelerpurchased.

The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap

blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster

than the urban.

This project that was assigned was to prepare the consumption pattern & sales distribution of a product in urban

market and rural market in and around Kolkata. The product that was chosen for this project was ITC cigarettes

Keeping in mind the four As ofmarketing, Availability, Affordability, Acceptability & Awareness, the step

for the project was taken.

Data were collected on the basis of the distribution of various products of ITC cigarettes, their sales and

consumption patterns both in rural as well as urban areas, a mongst the people of different earning status, in and

around Kolkata. After collecting the data a random sampling was done to analyze the price point variation of the

different ITC cigaretteproducts.

To collect the data we have interviewed the customers/consumers of ITC cigarette, the sellers, distributors, and the

area managerofTobacco Sector, ITC.

Along with the consumption pattern, this project has also thrown a light on the change on the consumption

pattern ofcigarette in recent days due to the awareness of the people for theirhealth.

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Introduction:The report has been prepared to understand the consumption pattern & sales distribution of ITC

cigarettes in urban market and rural market. This study also detailed information about the

Availability, Affordability, Affordability & Awareness ( As of Marketing) of the ITC

cigarettes in rural as well as in urban markets.

Purpose & Scopes:

The Purpose of this report is to list out the different brands of ITC cigarettes which are consumed in the

urban market & that in the rural market. Although the sampling has been carried out only in few

selective cities, the generalStock Keeping Units (SKUs) are more or less the same all over cities.

The same applies for the villages also where we have conducted th e surveys.

Sources and Methods:

Data collected is predominantly Primary data. In preparing this report, we have interviewed

Shopkeepers, Paanwalas, Wholesellers, Distributors, Company persons & Customers at severa

places in Kolkata & Howrah which include Saltlake City, Garia, Patuli, Haatibagan, Shyambazar

Khanna, Ultatanga, Beleghata & Panchanantala (Howrah) , Bandhaghat (Howrah). Among th

villages we had chosen Krishnanagar, Barrackpore, Ranaghat & Shantipur for conducting our

surveys.

Report Organization:

The report reviews the different kinds of brands consumed in urban and rural market, analyses the

different trends in their consumption pattern, and summarizes them at the end.

Limitations:

There was time constraint as the research had to be done in a short time & we had to cover cities as

well as villages. Cost constraints were faced. Scarcity of resources was a problem. Only a limited

number of shop-keepers & Customers could be interactedwith.

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Company Profile:

ITC Limited which previously stood for Imperial Tobacco Company of India Limited is an

I n d i a n c o n g lo me r a t e with a t u rn o v er of US $ billion. It ranks third in p r e - t a x p r o fi t among

India's private sector corporations. The company has its registered office in Kolkata.

The company is currently headed byY og e s h C h a n d e r D e v e s h w a r . It employs over 20,000 people amore than 60 locations across India and is listed on Fo r b es 2 0 0 0. The Training Centre of thecompany is in Munger, Bihar.ITC is also known as "Chatkal" (especially in Munger).

List of products & brands:

ITC has a diversified presence in different sectors. They are mentioned below-

TABLE-1

Sectors Brands/ Companies/ ProductsCigarettes W i ll s, G o ld F la k e,Navy Cut,Insignia,India Kings, Classic Verve, Classic,Silk

Cut,Scissors, Capstan,Berkeley,BristolandFlake.

H o t e l s I T C W e lc o mg r o up H o t e ls, P a l a c e s a n d R e s o r t s is India's second largest hotechain with over 80 hotels. Based out of Hotels Division Headquarters at theITC Green Centre in Gurgaon, ITC Welcomgroup is also the exclusivefranchisee of The Luxury Collection brand of Starwood Hotels and Resorts inIndia .

P a p e r b o a r ds &S p ec i a ltyPapers

ITC Bhadrachalam Paperboards Limited & ITC Tribeni Tissues Division arenowunder one roof --> Paper Boards and Specialty Papers Division. There are4 Units under one umbrella - Bhadrachalam, Tribeni, Bollarum and Kovai. I T C

P S P DP a c ka g i n g &P r i n t i n g B u s i n e s s

India's Largest Packaging Solution provider with In -house film manufacturingcapability. Multi-locational manufacturing facilities to cater to domestic andexport requirements. Product Range includes Cartons (Folding & Fluted)Flexibles (Reels & Pouches), Shoulder Box, HL's & CBO, Printed Cork TippingGay wraps. I T C P P B .

A g r i cu lt u r a lI n du s t ry

Agri-Business, Leaf Tobacco, Gold Ribbon, Blue Ribbon, Aqua Kings, AquaBay,Aqua FeastandPeninsular.

P a c ka g ed F oo ds &C o n f ec t i o n e r y

Kitchens of India,A a s h i r v a ad,Sunfeast,Mint-O, Candyman,Bingo Snacks .

Br a n d e dApparel Wills Lifestyle,John Players,MissPlayers

T o i l e t r i es Essenza Di Wills,Fiama Di Wills,Superia, Vivel Di Wills, VivelE duc a t i o n &S t a t i o n e r y Products

Expressions,Classmate,Paperkraft

I n f o r m a t i o nT ec h n o log y

I T CInfoTech

S af e tyMatches iKno, Mangaldeep, VaxLit, Delite(Discontinued) and Aim Brands acquiredfrom Wimco (Western India Match Company): Ship , Homelite (S w e d i s hM a t c h e s)

I n ce n s e Sticks Mangaldeep,Spriha,Yantra

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http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Net_profithttp://en.wikipedia.org/wiki/Yogesh_Chander_Deveshwarhttp://en.wikipedia.org/wiki/Forbes_2000http://en.wikipedia.org/wiki/W._D._%26_H._O._Willshttp://en.wikipedia.org/wiki/W._D._%26_H._O._Willshttp://en.wikipedia.org/wiki/W._D._%26_H._O._Willshttp://en.wikipedia.org/wiki/W._D._%26_H._O._Willshttp://en.wikipedia.org/wiki/Hospitality_industryhttp://en.wikipedia.org/wiki/ITC_Welcomgroup_Hotels,_Palaces_and_Resortshttp://en.wikipedia.org/wiki/ITC_Welcomgroup_Hotels,_Palaces_and_Resortshttp://en.wikipedia.org/wiki/ITC_Welcomgroup_Hotels,_Palaces_and_Resortshttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://en.wikipedia.org/wiki/Pulp_and_paper_industryhttp://www.itcpspd.com/http://www.itcpspd.com/http://en.wikipedia.org/wiki/Packaginghttp://en.wikipedia.org/wiki/Packaginghttp://en.wikipedia.org/wiki/Packaginghttp://en.wikipedia.org/wiki/Packaginghttp://www.itcportal.com/sets/packaging_frameset.htmhttp://www.itcportal.com/sets/packaging_frameset.htmhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Food_processinghttp://en.wikipedia.org/wiki/Food_processinghttp://en.wikipedia.org/wiki/Food_processinghttp://en.wikipedia.org/wiki/Confectioneryhttp://en.wikipedia.org/wiki/Aashirvaadhttp://en.wikipedia.org/wiki/Aashirvaadhttp://en.wikipedia.org/wiki/Aashirvaadhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Garment_Industryhttp://en.wikipedia.org/wiki/Toiletrieshttp://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Education_%26_Stationery_Products&action=edit&redlink=1http://en.wikipedia.org/wiki/Information_technology_consultinghttp://en.wikipedia.org/wiki/Information_technology_consultinghttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org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While ITC continues in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is gaining market share in its nascent businesses of Packaged Foods & Confectionery, Branded

Apparel and GreetingCards.

ITC's wholly owned Information Technology subsidiary, I T C I n f o t ech India Limited, is pursuingemerging opportunities in providing end-to-end I T s o lu t i o n s, including e-enabled services and

b u s i n e s s process outsourcing.

Product -mix of ITC Ltd:

P

IT

ITCLtd.

FMCG HotelsPaper boards& Packaging

IT Agri-Business

CigarettesPaper Boards

LeafTobacco

Foods

LifestyleRetailing

Packing Agri-Commodities

E-Choupal

Education& Stationary

Safety Matches

FIG.-1
http://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/IT-enabled_serviceshttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/ITC_Infotechhttp://en.wikipedia.org/wiki/IT-enabled_serviceshttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcing


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Incent SticksPage 10 of26


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ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it has a leadership

position in every segment of the market. It's highly popular portfolio of brands includes Insignia, India

Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors,

Capstan, Berkeley, Bristol and Flake.

The Company has been able to build on its leadership position

because of its single minded focus on value creation for the

consumer through significant investments in product design,

innovation, manufacturing technology, quality, marketing anddistribution.

All initiatives are therefore worked upon with the intent to fortify

market standing in the long term. This in turns aids in designing

products which are contemporary and relevant to the changing

attitudes and evolving socio economic profile of the country. This

strategic focus on the consumer haspaid ITC handsome dividends.

ITC's pursuit of international competitiveness is reflected in its initiatives in the overseas markets. In the

extremely competitive US market, ITC offers high-quality, value-priced cigarettes and Roll-your-own solutions. In

West Asia, ITC hasbecome a key player in the GCC markets through growing volumes of itsbrands.

ITC's cigarettes are produced in its state-of-the-art factories at Bengaluru, Munger, Saharanpur and Kolkata

These factories are known for their high levels of quality, contemporary technology and workenvironment.

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DISTRIBUTION CHANNEL OF ITC Ltd.

GODOWN (AREAMANAGER)

At the point of delivery distributors

need to pay cash and collect stock.

DISTRIBUTORS

Distributors give

maximum of 1 month

credit to its

wholesalers

. Distributors distribute

its stock to hawkers via

cycles. A hawker gets

one day credit.

Retailers dont get

any credit from

wholesalers; they

need

to purchase incash

WHOLESALERS HAWKERS

RETAILERSHAWKERS

CUSTOMERS

FIG-2

In the distribution channel the price of cigarettes changes from distributors to wholesalers to retailers to

hawkers. The several details regarding pricing are discussed in the nextpart.


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Pricing Of ITC Cigarettes:

DISTRIBUTORS PRICE LIST:

TABLE-2

Brands Purchasing Demand (as a

percentage of totalIndia Kings 3836.2 0.76

Insignia 3950. 0.50

Classic Mild 3791.0

Ultra Mild 3791.0 5.06

Menthol 3791.0

Gold Flake King 3527.2

Light 3527.2 43.03

Honey Dew 2363.2

Navy Cut King 3650.0

Regular 3100.0 22.15Small 2136.0

Flake 1543.2 18.98

Silk Cut 1640.2 9.52

Demand(as apercentage of total

demand)

InsigniaSilk Cut

India kings0.50%

9.52% 0.76%Classic

Flake18.98%

GoldFlake43.03

%

C O M M E N TS : -

FIG-3

Distributors earns a profit margin of 1.8% after charging VAT of12.5%.

The distributors can achieve approximately 75% of their target i.e.; if company asks

the distributor to sell 100 packs he is only able to sell 75 packs. We can conclude

the overall consumption went down to

25%.


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Combining both the markets (Urban & Rural), there exists maximum demand for

Gold Flake in the market. Gold Flake contributes to 43.03% of the total demand for

ITC cigarettes.

WHOLESALERS P RICE LIST : TABLE-3

Brands Purchasing Price/10 sticks Selling Price/10 sticks (Rs.)

India Kings 43.5 43.7

Insignia 45.0 50.5

Classic Mild 42.5 43.0

Ultra Mild 42.5 43.0

Menthol 42.5 43.0

Gold Flake King 39.5 40.0

Light 39.5 40.0

Honey Dew 26.6 26.8

Navy Cut King 36.5 37.0

Regular 31.0 31.2

Small 21.3 21.5Flake 17.3 17.5

Silk Cut 17.3 17.50

C O MM E N TS : -

Wholesalers earns a commission per 1000 packets and even gain on the

margin amount, i.e. the difference between their purchasing price and their

selling price.

*Price of Silk Cut varies by 0.10 per unit based on demand for the product.

RETAILER'S PRICE LIST: TABLE-4

Brands Purchasing Selling Price/ 10sticks

SellingPrice/ stic

India Kings 43.7 47.5 5.0

Insignia 50.5 55.5 6.0

Classic Mild 43.0 47.0 5.0

Ultra Mild 43.0 47.0 5.0

Menthol 43.0 47.0 5.0

Gold Flake King 40.0 44.0 4.0Light 40.0 44.0 4.0

Honey Dew 26.8 29.0 3.0

Navy Cut King 37.0 40.0 4.0

Regular 31.2 34.0 3.5

Small 21.5 24.0 2.5

Flake 17.5 19.0 2.0

Silk Cut 17.5 20.0 2.0

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C O MM E N TS : -

Price of India Kings varies because of location and their purchasing price. Though purchasing price of

Navy Cut and Navy Cut King varies but selling price does not change because of negligible variation.

Price point segmentation:

On the basis of MRP of cigarettes & customers affordability in different areas, the total Cigarette line ofITC

Ltd. can be divided into three major segments. Those are mentionedbelow-

TABLE-5

Price Brands MRP/10 sticks (Rs.) Price/sticks (Rs.)

Above Rs.40/pack

India Kings 47.5 5.0

Insignia 50.0 6.0

Classic Mild 47.0 5.0

Ultra Mild 47.0 5.0

Menthol 47.0 5.0Gold Flake King 44.0 4.5

Light 44.0 4.5

Rs. 20-40/pack

Navy Cut King 40.0 4.0

Regular 34.0 3.5

Small 24.0 2.5

Gold Flake Honey dew 29.0 3.0

Below Rs.20/pack

Flake 19.0 2.0

Silk Cut 20 2.0

There exist mainly three Price-bands- 1. Above Rs.40/pack

2. Rs. 20-40/pack

3. Below Rs. 20/pack.

The first price band is for the higher end of the market.

The second price band is for the upper middle & middle class customers existing in the market. This price band has

a largershare in the market.

The third price band is for the lower end of the market.

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TABLE-7

OBSERVATIONS:

In urban area consumers tend to have

liking for the Gold Flake more in comparison with

other ITC brands. Flake is cheaper cost wise and

satisfies customer needs.

Navy Cut is more preferable in Higher Incomegroup

Flake is preferred by people of low incomegroup.

Some people having an income level below

Rs. 5,000 consume Beedi and/or Flake.

Customers preference in

rural area

Customer preference

Gold

Flak

Flake

Navy

Cut

India

king

Clasic

Silk Cut

Beediiiiiiiiiiiiii

Consumption preferences:

Customer- Preference in URBAN AREA: TABLE-6

Income group Composition Brand

Name of the Brands Percentage ofpeople

Below Rs.10,000/ month 41.50% Gold Flake 16.20

Flake 18.19

Silk Cut 1.11

Beedi 6.00

Rs. 10,000- 30,000/month

34.33% Navy Cut 8.06

Classic 0.03

Gold Flake 17.60

Flake 8.64

Rs. 30-000- 50,000/Month

15.07% Navy Cut 8.46

Classic 1.01

Gold Flake 3.50

India Kings 2.10

Above Rs. 50,000/ month 9.10%

Navy cut 6.46

Classic 1.15

India Kings 1.49

Gold Flake = King + Light + Honey Dew

Navy Cut = King + Regular + Small FIG-4

Classic = Mild + Ultra mild + Menthol

Brandname

Customer Preference(%)

Gold Flake 16.20 + 17.60 + 3.50 =37.30

Flake 19.30 + 8.64 = 33.94

Navy Cut 8.06 + 8.46 + 6.46 =22.98

India kings 2.10 + 1.49 = 3.59

Classic 0.03 + 1.01 + 1.15 =2.19

Silk Cut 1.11

Beedi 6.00


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The customers of rural market are not exactly same as that of urban market. There is a significant difference in

demographic, psychographic & social environment between the two class of people. So it is importan t fo

marketers to segment the rural market using appropriate variablesnmto decide on their marketing strategies

Marketers of rural area use alternative segmentation scheme to segment the rural market.

One of the useful segmentation schemes for rural area s used in India is the Socio-economic Classfication

(SEC), using two variables, namely occupation of the chief wage earner & the type of house that they live in.

The scheme classifes rural consumers into four classes, R1, R2, R3 & R4.

SEC R1:

The charecteristics of each class are mentioned below- Landlord farmers, educated, exposed to urban

environment with their children studying in nearby towns, exhibit a lifestyle close to urban areas, adopt modern

technology, own consumer-durable products such as tractors, refrigerators, two-wheelers & sometimes even

four-wheelers.

SEC R2:

Rich farmers, with about 5 acres of land, may not be educated, but want their children to be educated, aspire to

have social status, own some of the consumer-durable products like television, tractor & two-wheelers.

SEC R3:

Landhoding size between 2 & 5 acres, with childrenstudying in village schools,conservative in technology

adoption, ownsome consumer-durableproducts.

SEC R4:

Agricultural or non-agricultural labor with a low income, utilize subsidized food-grains & other products

distributed through the public distribution system.

Tobacco consumption of these clases vary depending on their affordability, taste & preferences.the brand

preferences ofseveral socio-economic classes are discussed below in detais.

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BrandName

CustomerPreference

Flake 10.82 + 10.06 =20.88

Gold Flake 7.96 + 9.78 = 19.54

Navy Cut 0.27

Beedi 5.15 + 23.46 +32.50 =

61.11111

TABLE-8

Socialeconomicclass (SEC)

Average

MonthlyIncome

Compositio Brand Preference

Name of theBrands

Percentageof

SEC R1 RS. 30,000 - 50,000 8.23% Gold Flake 7.96

Navy Cut 0.27

SEC R2 RS. 10,000 30,000 25.75% Gold Flake 9.78

Flake 10.82

Beedi 5.15

SEC R3 Rs. 5,000 10,000 33.52% Flake 10.06

Beedi 23.46

SEC R4 Below Rs. 5,000 32.50% Beedi 32.50

FIG-5 Table-9

Customer Preference

Flake

20.88%

Beedi61.11%

GoldFlake

19.54%

Navy Cut0.27%

O b s e r v a t ion s :

*other brands are not available in Rural Market.

In rural area customer prefers beedi over cigarettes because of their low income.

But when we consider cigarette sector as a whole consumer wants to have Flake in

comparison with others.

People belonging to SEC R4 do not consume any ITC cigarettes, they consume beedionly.

People belonging to SEC R3 generally consume beedi. But within a week after

getting the wages or after selling oftheir vegetables they prefer to consume Flake.


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Villagers mainly prefer Flake due to its low price.

Page 18 of26


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Page 19 of26222

Brand name Monthly sales(as apercentage

Of totalmonthly

Gold Flake 36.66%

Navy Cut 24.71%

Flake 27.11%

India kings 3.23%

Classic 2.33%

SilkCut 4.77%

Insignia 1.19%

Brand Name Monthlysales(as apercentage

Flake 48.3%

Gold Flake 28.67%

Navy Cut 13.97%

Other ITC brands 9.06%

Sales Pattern:

Sales of ITC cigarettes in Urban area:-

Classic2%

SalesInsignia

India Kings3%

Flake27%

SilkCut5%

GoldFlake

37

%

Navy Cuit25%

Observations:

Gold flake is occupying the highest market share in the cigarette sector. The reason behind this may be cited as

its high affordability as per urban peoples income & its high availability in every shop.

Sales of ITC cigarettes in rural area:

Navy

13.97%

OtherITCBrands

Sales

Gold Flake28.67%

Flake48.30%


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Observations:

High demand of Flake in rural sector makes it the market leader. Consumers in rural area can easily

afford Flake because of its low price and availability at every common store. Other product which is

highly consumed in rural areaisbeedi.

4 A s of m arke tin g :-The rural market may be appealing but it is not without its problems: Low per capita disposable

incomes that is halfthe urban disposable income; large number of daily wage earners, acutedependence on the vagaries ofthemonsoon; seasonal consumption linked to harvests and festivals

and special occasions; poor roads; powerproblems; and inaccessibility to conventional advertisingmedia.

However, the rural consumer is not unlike his urban counterpart in many ways.

The more daring MNCs are meeting the consequent challenges of availability, affordability,

acceptability and awareness (the so-called 4As).

Availability: Table-10

Brands Variance(if any)

Units/pa Availabil

In Urban Market In Rural marketGold Flake Honey Dew 10 Hig Moderat

20 Hig Moderat

King 10 Hig Moderat

20 Hig Low

Light 10 Hig Moderat20 Hig Low

Flake N/A 10 Hig Hig

20 Hig Hig

Navy Cut King 10 Hig Moderat

20 Hig Low

Regular 10 Hig moderat

20 Hig Low

Small 10 Hig Hig

20 Hig Moderat

India Kings N/A 10 Low Low20 Moderate* Low

Silk Cut N/A 10 Moderat Low

20 Low** Low

Insignia N/A 10 Low Low

20 Low Low

Berkeley N/A 10 Low Low

20 Low Low

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*India kings is generally consumed by people of high income group who ge nerally preferto buy the big pack instead ofbuying the small pack.

**Silk Cut is consumed by the people of lower income group who generally purchase the

smaller pack instead of larger one.

Affordability:

Aff ord abi lit y i n ru ra l ar ea - FIG-6

INCOME

80,000

70,000

60,000

RURAL MARKET

50,000

45,000

40,00

0

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

NavyCut

Increase

GoldFlake

GoldFlake

Flake

Decrease

Flake Decrease


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BeediDecrease Beedi

Beedi

B R A ND S

In rural market, the poverty-level is quite high. Therefore, the number of people in the low income group cannoafford cigarettes, they only consume beedis. As the income level increase the amount of consumption of beed

also decreases. Same applies forFlake also which is consumed by the people of lower middle & upper-middle

income group.

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But same does not hold good for Gold flake which is generally consumed by people of higher-middle & High

income-group. It has been observed that with the increase in income the no. of sticks of cigarettes consumed per day

increases, thereby total consumption also increases. Navy Cut is only consumed by higher income group.

A ff o r d a b ilit y inurb a n a r e a -

FIG -7

Income

1,00,000

90,000

80,000

70,000

URBAN MARKET

Navy Cut Insignia Classic India Kings

60,00

0

50,000

40,000

30,000

20,000

10,000

0

Increase

Navy Cut

Decrease

Increase

GoldFlake

GoldFlake

GoldFlake

Flake

Decrease

Flake

Silk

Cut

Beedi

B R A ND S


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Beedi is only consumed by people of lower income group. In the case of urban market, consumption of Gold

flake at first increases due to positive correlation between income & cigarette consumption. But after a certain

point, that decrease due to shifting of the customers from Gold Flake to other luxury brands like Navy Cut,

Classic etc.

Navy Cut, insignia, Classic are consumed by people of very higher income group only.

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Acceptability-

Rural Urban Market Beedi is more acceptable by the

people of lower income group as it isavailable at lower prices & in greater

quantities which gives value formoney.

Beedi is preferred by those peoplewhose incomes are lesser than Rs.5,000. In urban area, Flake & Silk

Cut are two substitutes for beedi asthe price of those is very low (Rs. 2

Majority of rural customers donot think about their health whilebuying a packet of cigarette/

beedi. For this reason,they generally purchase

beedi or less costly

Urban people are more health-conscious than rural people. Forthis reason the acceptability of

beedi is less incities compared to

villages & demand for filtered

Small packs are more acceptable Small & large both packs areacceptable depending on the incomegroup

Awareness:

Creating awareness among target customers about the product is one of the most challenging jobs. Basicall y

company does awareness programmers when the target customers are unaware of theproduct.

While tobacco advertising was banned in India in 2004, the year the study began, cigarette companies are coming

up with newways to reach a relatively untapped audi ence. They do Event sponsorship and lifestyle stores centered

on tobacco products are slipping through the cracks of the law. Research has shown that most of the youngsters are

addicted to smoking. Keeping in mind ITC has launched Wills Life Style garments brand which has basically

targeted the youngsters. They actually promote theircigarettes through this brand. Such Tobacco use rose with

measures of receptivity, including having use of tobaccopromotionalitem (such as wearing a T-shirt that

advertises tobacco).

Awareness of cigarettes spread through social networking channels, which is a part of personal

communication channels. Research has proved that most of the youngsters who are addicted to using tobacco are

influenced by either by theirfamily members, neighbors or friend circles.

Example (Launching of Wills Navy Cut by ITC):-

Tobacco major ITC Ltd had launched Wills Navy Cut Regular size filer cigarettes, priced at Rs 24 a pack of 10

sticks in select markets in north and west India.

"The brand has been launched keeping in mind ITC's objective of delivering superior quality and value to, all its

consumers," the company said in an e-mailed response toNewsWire18.

The new cigarettes, which have been launched in select retail markets such as Mumbai and Pune, could be rolled

out nationally based on the response from these "test markets", ITC's distributors said. Analysts believe ITC's

move to launch the new cigarette directly through retailers instead of the companys distributor network could be

a part of a strategy to de-emphasize Wills as a tobaccobrand.

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They believe ITC could be transforming Wills into a Lifestyle brand. Another reason could be the need to plug

product gaps in the lower end of the price band. A new launch by ITC in the Rs 24 bracket is good. It may be

filling the gaps in that price range, especially after the volume loss from the non - filters segment," said Mr Anand

Shah, analyst with Angel Broking.

CONCLUSIONS:

From the above study it can be concluded that there are several differences between demographic,

psychographic, behavioral & social environment between urban & rural market. If a product is successful in

urban market, not necessarily itll be successful in rural market. The success of a product depend on the four

important factors, those are

1. Availability of the product a particularmarket

2. Acceptability of the product in a particularmarket

3. Affordability of the customers to purchase that product &

4. Awareness of theproduct.

All these parameters also vary from rural to urban market. In this study, we can see that Flake is the highest

selling cigarette ofITC Ltd. in rural market, but it does not has the highest market share in the urban market. Thereverse is true for Gold Flake. The reason main reason behind this is AFFORDABILITY of the customers

concerned. As the per capita income is low in rural areas therefore the villagers does not have the ability to

purchase luxury cigarette brands. Flake the price of which is very low gives value for money to them. Whether

in urban areas, people are more concerned with hygiene rather than price. For that reasonthey are more prone to

buy the cigarettes with high filter quality & low tobacco content. For this reason the brands like gold flake, navy

cut etc. are more popular in urban market than the rural market.

Now- a-days companies are trying to make the product & services on the basis of the needs & preferences of the

rural customers to capture the rural market with 128 million households. The rural population is nearly three times

the urban. Greater thepopulation greater is the opportunity to do abusiness.

The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford

to be ignored.

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A TTAC HM EN TS

: -Qu e s t ionn a ir e f o r c u s t o m e r s

Nam

e:

Age:

Monthly income:

A. Below Rs.2000 B. Rs. 2000- 5000 C. Rs. 5000-10000 D. Rs.10000-20000 E. Above Rs. 20

Occupation: Number of family

members: Have you ever heard the name of the following brands?

Gold flake Gold flake king Gold flake light

India kings Navy cut FlakeClassic Navy cut small Insignia

Silk cut Navy cut king Bristol

Scissor Capstan Berkeley

What are the brands that you have tasted?

Gold flake Gold flake king Gold flake light

India kings Navy cut Flake

Classic Navy cut small Insignia

Silk cut Navy cut king BristolScissor Capstan Berkeley

Which of the following statements is true?

I smoke occasionally

I smoke 1-5 times in a day



I smoke more than 15 times in a day

I used to smoke the same brand all the time.

a. Strongly agree b. Agree c. Neither agree nor disagree d. disagree e. Stronglydisagree

Do u smoke Beedi?

Ans.

Which brand of beedi you smoke?

Ans .


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REFERENCES:

The following references were used to complete the project efficiently:

Marketing Management, 12th Edition by Philip Kotler.

Rural Marketing, Pradip Kashyap.

37167311 itc cigarettes word

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