CHAPTER 1

INTRODUCTION

Increasingly, more companies are turning to rural markets to expand the scope of their

operations and also to pre-empt competition. Rural markets are tomorrow’s markets and

the marketer should know how to penetrate these markets. This is not just because 70

percent of India’s population still lives in rural areas, but because of the sweeping

changes that are occurring here.

Rural markets are today important for all consumer product companies. This is because

most urban markets are getting saturated. The intensity in competition in these markets

impacts the profitability of firms. The rural markets have also gained prominence because

of the socio-economic changes, which are sweeping rural India. The cables and satellite

television as also by the Internet and telecommunication are fueling these changes. This

has enhanced rural consumer’s awareness and aspirations. Also concerted attempts are

being made by self-help groups to generate incomes in the poor areas, which, in turn is

helping create demand for product and services.

Ten years ago, foreign consumer products were scarce in India and only available to the

affluent. Import restrictions prevented or severely hindered foreign consumer goods from

entrance to India. With the economic liberalization that ensued, foreign brands are now

prevalent across India (Luce, 2002). For the rural consumer, access to product or service

is more critical then just its ownership. Rural marketing therefore requires an innovative

approach. It involves changing the value paradigm by altering product’s price-

performance relationship. It also involves designing products that can deliver in sub

optimal condition and despite infrastructural constraints

Today, multinational corporations view emerging markets such as India as prime

opportunities for growth. According to Shanthi Kanaan, writer for The Hindu, rural

markets are growing twice as fast as the urban markets (2001). With a rural population

equal to just under 2.5 times the population of the entire United States as of the 2000

1

census, the potential consumer base is astounding. But generally speaking, success in

India’s rural markets for multinational corporations has been mediocre at best. It is from

these struggles and failures, however, that multinational corporations seeking to enter the

rural Indian market can learn how to do so more wisely.The marketer has three strategic

options, namely extension of urban strategy to rural markets and finally innovate for rural

market success. The challenge today lies in developing relationship-marketing

programme for rural buyers especially since various banks have already issued 41 million

kisan cards.

2

JUSTIFICATION OF RESEARCH

There are two schools of thoughts persists. The first school believed

that the products/services, marketing tools & strategies that are

successful in urban areas, could be transplanted with little or no more

modifications in rural areas. However, the second school saw a clear

distinction between urban & rural India, & suggested a different

approach, skills, tools & strategies to be successful in rural markets.

To have a close look over rural market scenario and marketing

strategies followed by different corporate firms and types of product

and service offered to consumers of rural market are the major

factors, which motivate us to do this research. Here we explore the

basic 4A approach which is necessary to penetrate in to the rural

market and distribution system of product delivery.

Thus, in a large rural economy like India’s, rural marketing has

emerged as an important & distinct internal sub-division within the

marketing discipline. This sub-division clearly highlights the

differences between rural marketing & mainstream marketing.

Further market could be explored on the basis of income,

infrastructural & socio-cultural factors.

.

3

CHAPTER

OBJECTIVE

Rural consumers are fundamentally different from their urban counterparts. The lower

levels of literacy and limited exposure to product and services are well-known, but there

are also differences in occupation options, with a direct impact on income levels and

income flows, and a high level of inter-dependency affecting the dynamics of rural

community behavior. All contribute to make rural consumer behavior starkly distinct

from the urban.

The main objectives of analysis of rural market are to assess

1. The present and future scenario of rural market.

2. To search for New opportunities in rural market.

3. Rural consumer insight.

4. To evaluate marketing strategy of different companies.

5. Issues and challenges related to rural market

4

CHAPTER 4

RURAL MARKETING

4.1 CONCEPT CLARIFIER

Rural marketing involves the process of developing, pricing, promoting, distributing rural

specific product and a service leading to exchange between rural and urban market which

satisfies consumer demand and also achieves organizational objectives.

It is a two-way marketing process wherein the transactions can be:

1. Urban to Rural: A major part of rural marketing falls into this category. It involves the

selling of products and services by urban marketers in rural areas. These include:

Pesticides, FMCG Products, Consumer durables, etc.

2. Rural to Urban: Transactions in this category basically fall under agricultural marketing

where a rural producer seeks to sell his produce in an urban market. An agent or a

middleman plays a crucial role in the marketing process. The following are some of the

important items sold from the rural to urban areas: seeds, fruits and vegetables, milk and

related products, forest produce, spices, etc.

3. Rural to Rural: This includes the activities that take place between two villages in close

proximity to each other. The transactions relate to the areas of expertise the particular

village has. These include selling of agricultural tools, cattle, carts and others to another

village in its proximity.

5

URBAN RURAL

RURAL URBAN

RURAL RURAL

Rural marketing requires the understanding of the complexities. Indian agricultural

industry has been growing at a tremendous pace in the last few decades. The rural areas

are consuming a large number of industrial and urban manufactured products. The rural

agricultural production and consumption process plays a predominant role in developing

the Indian economy. This has designed a new way for understanding a new process called

Rural Marketing.

The concept of rural marketing has to be distinguished from Agricultural marketing.

Marketing is the process of identifying and satisfying customers needs and providing

them with adequate after sales service. Rural marketing is different from agricultural

marketing, which signifies marketing of rural products to the urban consumer or

institutional markets. Rural marketing basically deals with delivering manufactured or

processed inputs or services to rural producers, the demand for which is basically a

derived outcome.

Rural marketing scientists also term it as developmental marketing, as the process of

rural marketing involves an urban to rural activity, which in turn is characterised by

various peculiarities in terms of nature of market, products and processes. Rural

marketing differs from agricultural or consumer products marketing in terms of the nature

of transactions, which includes participants, products, modalities, norms and outcomes.

The participants in case of Rural Marketing would also be different they include input

manufacturers, dealers, farmers, opinion makers, government agencies and traders.

Rural marketing needs to combine concerns for profit with a concern for the society,

besides being titled towards profit. Rural market for agricultural inputs is a case of

market pull and not market push. Most of the jobs of marketing and selling are left to the

local dealers and retailers.

The market for input gets interlocked with other markets like output, consumer goods,

money and labour. Rural marketing in India is not much developed there are many

hindrances in the area of market, product design and positioning, pricing, distribution and

6

promotion. Companies need to understand rural marketing in a broader manner not only

to survive and grow in their business, but also a means to the development of the rural

economy. One has to have a strategic view of the rural markets so as to know and

understand the markets well. In the context of rural marketing one has to understand the

manipulation of marketing mix has to be properly understood in terms of product usage.

Product usage is central to price, distribution, promotion, branding, company image and

more important farmer economics, thus any strategy in rural marketing should be given

due attention and importance by understanding the product usage, all elements of

marketing mix can be better organised and managed.

4.2 EVOLUTION OF RURAL MARKETING

PHAS

EORIGIN FUNCTION

MAJOR

PRODUCTS

SOURCE

MARKET

DESTINATIO

N

MARKET

I Before Mid-

1960 (from

independence

to green

revolution)

Agricultural

Marketing

Agricultural

Produce

Rural Urban

II Mid- Sixties

(Green

revolution to

Pre-

liberalization

period)

Marketing Of

Agricultural

Inputs

Agricultural

Inputs

Urban Rural

III Mid- Nineties

(Post-

liberalization

period on 20th

century)

Rural

Marketing

Consumables

And

Durables For

Consumption

& Production

Urban &

Rural

Rural

7

IV 21st century Developmental

marketing

All products &

services

Urban &

Rural

Urban &

Rural

Phase I (from Independence to Green Revolution):

Before the advent of the Green revolution, the nature of rural market was altogether

different. Rural marketing then referred to the marketing of rural products in rural &

urban products.

Phase II (Green Revolution to Pre-liberalization period):

During these times, due to the advent & spread of the Green Revolution, rural marketing

represented marketing of agriculture inputs in rural markets & marketing of rural produce

in urban areas.

Phase III (Post-liberalization period on 20th century):

The third phase of rural marketing started after the liberalization of the Indian economy.

In this period, rural marketing represented the emerging, distinct activity of attracting &

serving rural markets to fulfill the need & wants of rural households, peoples & their

occupations.

Phase IV (21st century):

Learning from its rural marketing experiences after the independence, the corporate

world has finally realized the quick-fix solutions & piecemeal approaches will deliver

only limited results in the rural markets. And, if an organization wants to tap the real

potential of the rural market, it needs to make a long-term commitment with this market.

Its approach & strategies must not focus in just selling products & services, but they

should also aim at creating an environment for this to happen.

The objective of rural marketing in the current phase is the improvement of the quality of

life by satisfying the needs & wants of the customers, not through atand-alone products

or services, but by presenting comprehensive & integrated solutions which might involve

a set of inter-related products & services.

8

Till recently, the focus of marketers in India was the urban consumer and by large

number specific efforts were made to reach the rural markets. But now it is felt that with

the tempo of development accelerating in rural India, coupled with increase in purchasing

power, because of scientific agriculture, the changing life style and consumption pattern

of villagers with increase in education, social mobility, improved means of

transportations and communication and other penetrations of mass media such as

television and its various satellite channels have exposed rural India to the outside world

and hence their outlook to life has also changed. Because of all these factors, rural India

in now attracting more and more marketers.

Increase in competition, saturated urban markets, more and move new products

demanding urban customers, made the companies to think about new potential markets.

Thus, Indian rural markets have caught the attention of many companies, advertisers and

multinational companies. According to a recent survey conducted by the National

Council for Applied Economic Research (NCAER), the purchasing power of the rural

people has increased due to increase in productivity and better price commanded by the

agricultural products. By and large this rise in purchasing power remains unexploited and

with the growing reach of the television, it is now quite easy for the marketers to capture

these markets.

Rural marketing has become the latest mantra of most corporate. Companies like

Hindustan Lever, Colgate Palmolive, Britannia and even Multinational Companies

(MNCs) like Pepsi, Coca Cola, L.G., Philips, Cavin Kare are all eyeing rural markets to

capture the large Indian market.

Coming to the frame work of Rural Marketing, Rural Marketing broadly involves

reaching the rural customer, understanding their needs and wants, supply of goods and

services to meet their requirements, carrying out after sales service that leads to customer

satisfaction and repeat purchase/sales.

9

4.3 NATURE OF RURAL MARKET

Large, Diverse and Scattered Market: Rural market in India is large, and scattered into

a number of regions. There may be less number of shops available to market products.

Major Income of Rural consumers is from Agriculture: Rural Prosperity is tied with

agriculture prosperity. In the event of a crop failure, the income of the rural masses is

directly affected.

Standard of Living and rising disposable income of the rural customers: It is known

that majority of the rural population lives below poverty line and has low literacy rate,

low per capital income, societal backwardness, low savings, etc. But the new tax

structure, good monsoon, government regulation on pricing has created disposable

incomes. Today the rural customer spends money to get value and is aware of the

happening around him.

Traditional Outlook: Villages develop slowly and have a traditional outlook. Change is

a continuous process but most rural people accept change gradually. This is gradually

changing due to literacy especially in the youth who have begun to change the outlook in

the villages.

Rising literacy levels: It is documented that approximately 45% of rural Indians are

literate. Hence awareness has increases and the farmers are well-informed about the

world around them. They are also educating themselves on the new technology around

them and aspiring for a better lifestyle.

Diverse socioeconomic background: Due to dispersion of geographical areas and

uneven land fertility, rural people have disparate socioeconomic background, which

ultimately affects the rural market.

Infrastructure Facilities: The infrastructure facilities like cemented roads, warehouses,

communication system, and financial facilities are inadequate in rural areas. Hence

physical distribution is a challenge to marketers who have found innovative ways to

market their products.

10

4.4 CLASSIFICATION OF RURAL CONSUMERS

The rural consumers are classified into the following groups based on their economic

status:

The Affluent Group: They are cash rich farmers and a very few in number. They have

affordability but not form a demand base large enough for marketing firms to depend on.

Wheat farmers in Punjab and rice merchants of Andhra Pradesh fall in this group.

The Middle Class: This is one of the largest segments for manufacturedgoods and is

fast expanding. Farmers cultivating sugar cane in UP andKarnataka fall in this

category.

The Poor: This constitutes a huge segment. Purchasing power is less,but

strength is more. They receive the grants from government and reapthe benefits of

many such schemes and may move towards the middleclass. The farmers of Bihar and

Orissa fall under this category.

11

CHAPTER 5

EFFECT OF CONSUMER BEHAVIOUR PRODUCT AND MARKETING MIX

5.1 RURAL CONSUMER   BEHAVIOUR

Consumer Buyer Behaviour refers to the buying behaviour of final consumers -

individuals and households who buy goods and services for personal consumption. All of

these final consumers combined make up the consumer market.

The consumer market in this case is Rural India. About 70% of India’s population lives in

rural areas. There are more than 600,000 villages in the country as against about 300

cities and 4600 towns. Consumers in this huge segment have displayed vast differences in

their purchase decisions and the product use. Villagers react differently to different

products, colours, sizes, etc. in different parts of India. Thus utmost care in terms of

understanding consumer psyche needs to be taken while marketing products to rural

India.

Thus, it is important to study the thought process that goes into making a purchase

decision, so that marketers can reach this huge untapped segment.

Factors influencing buying behavior

The various factors that affect buying behavior of in rural India are:

1. Environmental of the consumer - The environment or the surroundings, within which

the consumer lives, has a very strong influence on the buyer behavior, egs.

Electrification, water supply affects demand for durables.

2. Geographic influences - The geographic location in which the rural consumer is located

also speaks about the thought process of the consumer. For instance, villages in South

India accept technology quicker than in other parts of India. Thus, HMT sells more

winding watches in the north while they sell more quartz watches down south.

3. Family – it is an important buying decision making organization in consumer markets.

Family size & the roles played by family members exercise considerable influence on the

12

purchase decisions. Industry observers are increasingly realizing that at times, purchase

of durable has less to do with income, but has more to do with the size of the family &

that’s where rural India with joint family structures, becomes an attractive proposition.

4. Economic factors – The quantum of income & the earning stream are one of the major

deciding factors, which determine to a great extent, what the customer will be able to

buy. Many people in the rural market are below poverty line & for large number of

people, agriculture is the primary occupation. More than 70% of the people are in small-

scale agricultural operation. These factors affect the purchase decision.

5. Place of purchase (60% prefer HAATS due to better quality, variety & price) Companies

need to assess the influence of retailers on both consumers at village shops and at haats.

6. Creative use of product ex Godrej hair dye being used as a paint to colour horns of oxen,

Washing machine being used for churning lassi. The study of product end provides

indicators to the company on the need for education and also for new product ideas.

7. Brand preference and loyalty (80% of sale is branded items in 16 product categories)

8. Cultural factors influencing consumer behaviour

9. Cultural factors exert the broadest and deepest influence on consumer behaviour. The

marketer needs to understand the role played by the buyer’s culture. Culture is the most

basic element that shapes a person’s wants and behaviour.

10. In India, there are so many different cultures, which only goes on to make the marketer’s

job tougher. Some of the few cultural factors that influence buyer behaviour are:

Product (colour, size, design, and shape): There are many examples that support this

point.

a) For example, the Tata Sumo, which was launched in rural India in a white colour, was

not well accepted. But however, when the same Sumo was re-launched as Spacio (a

different name) and in a bright yellow colour, with a larger seating capacity and ability to

transport good, the acceptance was higher.

b) Another good example would be Philips audio systems. Urban India looks at technology

with the viewpoint of ‘the smaller the better’. However, in rural India, the viewpoint is

totally opposite. That is the main reason for the large acceptance of big audio systems.

Thus Philips makes audio systems, which are big in size and get accepted in rural India

by their sheer size.

13

Social practices : There are so many different cultures, and each culture exhibits different

social practices. For example, in a few villages they have common bath areas. Villagers

used to buy one Lifebuoy cake and cut it into smaller bars. This helped lifebuoy to

introduce smaller 75-gram soap bars, which could be used individually.

Decision-making by male head : The male in Indian culture has always been given the

designation of key decision maker. For example, the Mukhiya’s opinion (Head of the

village), in most cases, is shared with the rest of the village. Even in a house the male

head is the final decision maker. In rural areas, this trend is very prominent.

Changes in saving and investment patterns From gold, land, to tractors, VCR’s, LCV’s

5.2 SELLING IN RURAL INDIA

The Indian rural market with its vast size and demand base offers a huge opportunity that

MNCs cannot afford to ignore. TO expand the market by tapping the countryside, more

and more MNCs are foraying into India's rural markets. Among those that have made

some headway are Hindustan Lever, Coca-Cola, LG Electronics, Britannia, Standard

Life, Philips, Colgate Palmolive and the foreign-invested telecom companies.

OPPORTUNITY

The 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 the urban.

As a result of the growing affluence, fuelled by good monsoons and the increase in

agricultural output to 200 million tones from 176 million tones in 1991, rural India has a

large consuming class with 41 per cent of India's middle-class 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 of toilet-soap users and

38 per cent of all two-wheeler purchased.

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 counterpart.

14

5.3 THE 4A APPROACH:

The rural market may be alluring but it is not without its problems: Low per capita

disposable incomes that is half the urban disposable income; large number of daily wage

earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked

to harvests and festivals and special occasions; poor roads; power problems; and

inaccessibility to conventional advertising media.

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 4 As)

Availability

The first challenge is to ensure availability of the product or service. India's 627,000

villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas,

finding them is not easy. However, given the poor state of roads, it is an even greater

challenge to regularly reach products to the far-flung villages. Any serious marketer must

strive to reach at least 13,113 villages with a population of more than 5,000. Marketers

must trade off the distribution cost with incremental market penetration. Over the years,

India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong

distribution system, which helps its brands reach the interiors of the rural market. To

service remote village, stockiest use auto rickshaws, bullock-carts and even boats in the

backwaters of Kerala. Coca-Cola, which considers rural India as a future growth driver,

has evolved a hub and spoke distribution model to reach the villages. To ensure full

loads, the company depot supplies, twice a week, large distributors which who act as

hubs. These distributors appoint and supply, once a week, smaller distributors in

adjoining areas. LG Electronics defines all cities and towns other than the seven metros

cities as rural and semi-urban market. To tap these unexplored country markets, LG has

set up 45 area offices and 59 rural/remote area offices.

15

Affordability

The second challenge is to ensure affordability of the product or service. With low

disposable incomes, products need to be affordable to the rural consumer, most of whom

are on daily wages. Some companies have addressed the affordability problem by

introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair

Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya

Pradesh, Bihar and Uttar Pradesh — the so-called `Bimaru' States.

Hindustan Lever, among the first MNCs to realize the potential of India's rural market,

has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The

move is mainly targeted at the rural market. Coca-Cola has addressed the affordability

issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has

paid off: Eighty per cent of new drinkers now come from the rural markets. Coca-Cola

has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-

mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve

sachet of 200 gm priced at Rs 15.

Acceptability

The third challenge is to gain acceptability for the product or service. Therefore, there is a

need to offer products that suit the rural market. One company, which has reaped rich

dividends by doing so, is LG Electronics. In 1998, it developed a customised TV for the

rural market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the

very first year. Because of the lack of electricity and refrigerators in the rural areas, Coca-

Cola provides low-cost ice boxes — a tin box for new outlets and thermocol box for

seasonal outlets.

The insurance companies that have tailor-made products for the rural market have

performed well. HDFC Standard LIFE topped private insurers by selling policies worth

Rs 3.5 crore in total premium. The company tied up with non-governmental organizations

and offered reasonably priced policies in the nature of group insurance covers. With large

parts of rural India inaccessible to conventional advertising media — only 41 per cent

16

rural households have access to TV — building awareness is another challenge.

Fortunately, however, the rural consumer has the same likes as the urban consumer —

movies and music — and for both the urban and rural consumer, the family is the key

unit of identity. However, the rural consumer expressions differ from his urban

counterpart. Outing for the former is confined to local fairs and festivals and TV viewing

is confined to the state-owned Doordarshan. Consumption of branded products is treated

as a special treat or indulgence.

Hindustan Lever relies heavily on its own company-organised media. These are

promotional events organized by stockiest. Godrej Consumer Products, which is trying to

push its soap brands into the interior areas, uses radio to reach the local people in their

language.

Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of

rural households. It doubled its spend on advertising on Doordarshan, which alone

reached 41 per cent of rural households. It has also used banners, posters and tapped all

the local forms of entertainment. Since price is a key issue in the rural areas, Coca-Cola

advertising stressed its `magical' price point of Rs 5 per bottle in all media. LG

Electronics uses vans and road shows to reach rural customers. The company uses local

language advertising. Philips India uses wall writing and radio advertising to drive its

growth in rural areas.

The key dilemma for MNCs eager to tap the large and fast-growing rural market

is whether they can do so without hurting the company's profit margins. Mr. Carlo

Donati, Chairman and Managing-Director, Nestle, while admitting that his company's

product portfolio is essentially designed for urban consumers, cautions companies from

plunging headlong into the rural market as capturing rural consumers can be expensive.

"Any generalisation" says Mr. Donate, "about rural India could be wrong and one should

focus on high GDP growth areas, be it urban, semi-urban or rural."

5.4 NEW MARKETING MIX FOR SELLING TO RURAL INDIANS

12.2% of the world lives in Rural India. Put in a different context, this works out to 1 in 8

people on Earth. Being able to successfully tap this growing market is every marketer’s

dream. However, myths abound. India’s rural markets are often misunderstood. A clear

17

distinction needs to be made with regard to the reality versus the image of rural India. If

such a distinction is not made, we will be unable to distinguish between the serpent and

the rope and the rope and the serpent.

The rural market is not homogeneous. Though the aggregate size is very large, individual

subsets of this market tend to be rather small and disparate. Geographical,

demographical, statistical, logistical differences are very apparent. Positioning and

realities regarding the potential of each of these market segments differ and lie at the very

core of forming the strategy for the rural markets.

The face of Indian agriculture is changing from dry land and irrigated agriculture into

high-tech and low-tech agriculture. Farmers in states like Maharashtra and Andhra

Pradesh have reaped the benefits of adopting new age farming practices, including green

house cultivation, fert-irrigation and hydroponics. This has radically changed the

economics of farming, with the investment in these systems lowering the cost of

cultivation, increasing yields due to integrated crop management practices and reducing

the dependence on rainfall. As a result, disposable income has grown sharply. The

aspirants are becoming climbers showing a sustained economic upturn as purchasing

power is increasing in the rural markets. The proportion of very rich has increased five-

fold. The growing incomes have modified demand patterns and buyer behaviour.

Moreover, the need for a product or service is now adequately backed up with the

capacity, ability and willingness to pay.

However, the market still remains largely unexploited. At most times, potential markets

need tobe found and at times, even created. Such creation of demand needs efficient

management of thesupply chain. To increase market share, behavioural change needs to

be at the forefront of anystrategy. Further, due to the diversity of this market, marketers

need to think, plan and act locally.It is therefore essential to develop an accurate

Marketing Mix for selling to rural Indians.

18

Product

The Rural market is not a homogenous set of customers with preferences frozen in time.

When developing products in any category, marketers must identify the typical rural

specific needs. Urban products cannot be dumped onto rural markets without

modifications. Tailor-made products are better received by the rural audience as the

consumers feel empowered and tend to dentify with the offering.

For instance, shampoos or soaps with distinctive, strong rose or jasmine perfumes are

very popular with the rural women in South India. The urban women do not identify as

strongly with these perfumes. Sachetization is also a distinctly rural-driven phenomenon.

As demand in several categories is being created, intensity of use is quite low. On

average, rural folk would use a shampoo only once a week. Habits take time to change

and making unit sachet packs affordable is the key to inducing trial and

purchase.Systematic, in-depth research that can help understand the depths of the mind of

the villagers, their buying criteria, purchase patterns and purchasing power are an

essential input while developing rural specific products or services.

A common error has been to launch a completely stripped down version of the urban

product in the rural market, with the objective of offering the lowest possible price. This

is not what a rural consumer wants. What is required is to introduce a product with

‘essential’ features, whose needs are recognized and for which the consumer is willing to

pay (value-adding features). Product developers should aim at eliminating all the cost-

adding features, i.e., features which a consumer is unwilling to pay for as he sees no

obvious utility. This would “redefine value” in the minds of the consumer and

tremendously increase product acceptability.

Product development is severely constrained by legislation in the case of agricultural

inputs like fertilizers, insecticides and pesticides. In the case of fertilizers for instance,

though levels of deficiency of nutrients have increased significantly over the past decade,

no significant changes in formulations notified under the Fertilizer Control Order have

19

taken place. This has severely restricted the availability of cost effective specialty

fertilizers of global standards to Indian farmers. Technological know-how for

manufacture of such fertilizers exists within the country. However, farmers using modern

farming practices are unable to get an assured supply of such farm inputs due to

draconian legislation. A move to liberalize the sector could perhaps consider the accepted

worldwide norm of allowing manufacturers with a strong R&D base to decide their own

formulations with the government machinery conducting checks on market samples of

finished products to ensure that they live up to the labelled specifications. This would be

a major policy initiative that would give a huge impetus to innovative product

development in the farm sector.

Product life cycles as are becoming shorter and these are having their impact on company

life cycles. Thus for any company wishing to develop its product portfolio, allegiance to

the classic American P-A-L Principle of Partnership - Alliances - Linkages is a basis for

survival.

Pricing

Every marketer must realize that the rural consumer is not a miser. He is not simply

looking for the cheapest product in every category. He understands and demands value

for money in every purchase that he makes. Pricing therefore is a direct function of

factors including cost-benefit advantage and opportunity cost. Pricing offered to

consumers should be for value offerings that are affordable. Price sensitivity is extremely

high and comparison with competitive prices is common. Consumers seem to create

narrow psychological price bands in their minds for product groups and price elasticity

beyond the extreme price points is very high. The perceived utility or value of the product

or service is the ultimate decision making factor.

It is certain however, that buying cheap is not the primary objective. Rather, it is “buying

smart”. A study revealed that the average rural consumer takes approximately 2 years to

decide on buying a watch! He will not do so unless he is totally convinced that he is

getting value for Money. Impulse buys and purchases for conspicuous consumption are

20

also extremely few and far Between considering the “value for money” factor that reigns

supreme in most rural purchase decisions.

It must be remembered that the rural consumer does not have a budget problem. He has a

cash flow problem. This is because the village folk receive funds only twice a year. At

these times, he is capable of making high volume purchases. At all times, however, the

unit price is critical and so is the pack size. Because of this, in the lean season when there

is a cash flow crunch, marketers need to provide financial products, schemes or solutions

that suit the needs of the rural population.

Promotions & Advertising

There are a lot of barriers that militate against homogenous media and message delivery.

These barriers stem from the fact that rural markets vary immensely in terms of tastes,

habits and preferences leading to different expectations of every segment of the

population.

However, one fact is certain across all areas. The rural consumer likes to touch and feel a

product before making a choice. Demonstrations are undoubtedly the most effective

promotional tool that shapes purchase decisions of the rural population. Demonstrations

establish the credentials of any new technology used in developing the product.

In today’s information era, it is very important for companies to wise-up on emerging

technologies. It has in fact become a medium to attract larger audiences for a product

demonstration. Technology must be used to prepare a database of customers and their

requirements. The use of video using mobile vans and even large screen video walls at

events should be arranged.

The classic conundrums of reach and coverage of the media are shattered. Several

creative communication media have been used by various companies to tackle the

problem of having to use visual communication and non-verbal communication to reach

the rural audience. This is required because a large proportion of the rural population

21

cannot read or write. Alliances with cottage industries, dharmsalas, panchayats, post

offices and police stations for advertising have also helped immensely. More importantly,

in rural India, experience has proved time and time again that word of mouth is the key

influencer.

Intermediaries are the foundation to rural distribution. If the intermediary understands

and is constantly reminded about your product, then the end user will not be allowed to

forget. The companies must reinforce this highly effective medium and use all their

innovation and money tom develop more dramatic point of sale and point of contact

material. This becomes all the more important when in rural India, more often than not,

the overlap between the product categories sold in a single outlet in tremendous. For

instance, a store may call itself as a grocery store but will stock everything from groceries

to vegetables to fertilizers and may at times even stock medicines. In such cases, the

point at which the customer actually comes in contact with a product may not be the point

at which the sale is affected.

The re-use capacity and colour of the container in which the product is packed is also a

crucial factor. In fact, reusable packaging is considered a major aid in promoting sales for

products in the rural market.Consumer and Trade schemes that Incentivise Spending

using discount coupons, off season discounts, free samples, etc. encourage spending.

Lucky draws and gift schemes are a major hit in most states.

The use of local idioms and colloquial expressions are an excellent way to strike a

rapport with the rural consumer and must be borne in mind when developing media plans

and public relations programmes. No high voltage publicity is required. The rural

consumer is very down to earth but equally discerning and marketers need to step into the

shoes of the rural folk while creating product promotion campaigns.

Another unique feature of rural markets is that the Decision making process is collective.

The persons involved in the purchase process - influencer, decider, buyer, one who pays

can all be different. So marketers must address brand messages in their campaigns at

22

several levels. Apart from regular household goods, several agribusiness companies have

also started providing gift schemes with offers for free jewellery that influences the ladies

to pressure the farmers to purchase agricultural inputs from select companies. This

promotion strategy thus makes women influence purchase decisions that they would

ordinarily not be involved in.

Youth power is becoming increasingly evident in villages. Rural youth bring brand

knowledge to the households. This has forced several companies to change the focus and

positioning of their products and services towards this segment that is growing in

absolute number and relative influence.

There are other attributes in the promotion strategy which are explained as under:

1. Mass media: In the present world mass media is a powerful medium of

communication. The following are the mass media generally used:

Television.

Cinema

Radio

Print media: Handbills and Booklets, posters, stickers, banners, etc.

2. Personal selling and opinion leaders: In personal selling it is required that the

potential users are identified and awareness is created among them about the product, its

features, uses and benefits. This can be achieved only by personal selling by highly

motivated sales person. In fact the word of mouth information holds lot validity in rural

areas even today. This is the reason why opinion leaders and word of mouth are thriving

among rural consumers. An opinion leader in rural areas can be defined as a person who

is considered to be knowledgeable and is consulted by others and his advice is normally

followed. The opinion leaders may be big landlords or politicians or progressive farmers.

3. Special campaigns: During crop harvest and marketing seasons it is beneficial to take

up special promotion campaigns in rural areas. Tractor owners (tone) conducted by MRF

23

Limited is one such example. Brooks Bond carries out marches in rural areas with band,

music and caparisoned elephants to promote their brand of tea.  

4. Mandi and Mela magic

At last count, India witnessed over 50,000 melas. Of these 25,000 meals are held to

signify religious, cultural festivals as well as local fairs and events. On an average,

visitors at these melas spend between Rs. 5,000 to Rs. 50,000 a day. For example, 3 lakh

people visited the annual mela at Navchadi which lasts for 7 days in Meerut. The largest

such mela is the Maha Kumbh Mela which is visited by an average of 12 crore people.

There is however, a caveat when an organization is considering using mela for marketing

their products. Is the audience at this mela fit for promotion of the product at hand? What

are the psychographics of this audience? What is the motivational and behavioural

impetus that brings visitors to each of these melas. On considering these questions, it has

been observed that melas are fit to generate product exposure, package familiarity, brand

reminder and word of mouth. However, for products that need concept marketing and

those that have high prices, such melas are not suitable promotion media. This is because

the time and the mood of the people that visit these melas are not right to digest technical

information or for making large purchases. People come to melas to have a good time and

are not reminded of such high technology or high priced products when they return home.

In the words of Mr. Neville Gomes, Managing Director of Multimedia Aquarius,

promotion at melas is like a “one night stand”. There will be no reminder later. Thus, a

large amount of qualitative judgment is indeed in planning promotions at melas by media

planners.

Place

place is the major reason behind the evolution of rural marketing as a distinct discipline.

A village as a place for promotion, distribution & consumption is very different from a

town or city, thus the general marketing theories can’t be applied directly in rural

markets.

24

Reaching the right place is the toughest part in today’s rural marketing, as most of the

products reach up to the nearest townships of any village, but due to higher distribution

costs, these products fails to reach the village as the distribution channel fails to put in the

required efforts. Most of the times, the rural retailers themselves go to the urban areas to

procure these goods. Rural markets imply complex logistical challenges that show up as

high distribution costs.

Significance of Distribution

No matter how well devised a company’s product, pricing or promotion strategy, the

most crucial link in ensuring the success of rural marketing efforts is distribution.

Distribution must be strengthened and this would raise investment cost barriers for new

entrants.

In Rural India, the selection and use of distribution channels is a nightmare. The reason

for this is very clear when we consider that on an average, Urban and Rural India both

have approximately 3 million retail outlets. However, Urban India has only 4,000 towns

where these outlets are located. On the other hand, Rural India’s 3 million outlets are

located in 6.3 lakh villages. Thus, marketers are faced with the problem of feeding 3

million shops located in vastly diverse areas each of which records an average sale of

only Rs.5,000 per outlet. Further compounding this problem is the fact that even this

meagre sale is mostly on credit. The diversity in the distribution of shops is the self-

limiting factor in terms of servicing the rural distribution network.

25

The distribution of outlets however shows that a marketer need not be present in all

markets at all times. Being present in 6 lakh villages is virtually impossible for an

organization of any size. Rural wealth and demand is concentrated typically at satellite

towns, district headquarters, assembly markets and such central locations. Rural

distribution has a rigid hierarchy of markets that make channel decisions relatively

structured.

26

It is essential for rural marketing companies to understand this hierarchy. Rural folk are

habituated to travelling once a week for their weekly purchases to a satellite town. They

do not expect such items to be present in every village. For durables where the outlay

involved is typically large, the purchase would be made in an assembly market for

reasons of choice and availability of adequate cash flow. This is due to the fact that it is at

assembly markets that auction yards are present where the farmers congregate to sell their

output. After such sale of produce, they are cash rich and can afford to make such

purchases. It is therefore not necessary for a marketer of TV sets to take their distribution

channel all the way down to the village shop. A TV will not be sold there as the cash flow

does not exist at that point in the hierarchy of markets. A television distributor must be

present at assembly markets which are much smaller in number, more controllable, easier

to reach and service. Keeping the hierarchy in mind will help decide the optimum level of

penetration required to reach a critical mass of rural consumers.

Haats

Haats are the nerve centre of Rural India. They are a readymade distribution network

embedded in the fabric of rural society for over 1000 years. They have been held on a

regular basis across the length and breadth of the country for over 1000 years. Right from

the time of Chandragupta Maurya, Haats are seen as a place for social, cultural and

economic interchange.

27

One in every five villages with a population of over 2000 has a haat. In villages with less

than 2000 people this figure reduces to 1 in 20 villages. Typically, an average haat will

have close to 300 stalls. A haat usually serves around 5000 visitors. Considering that the

average population of an Indian village is approximately 1000, each haat serves 5

villages. A study estimates that 47,000 haats are conducted in rural India. These rural

super markets are much larger than all the world's K-marts and Wal-marts put together.

A lot of re-distribution also occurs through haats. This is because, a large number of

retailers and sub-wholesalers buy from haats for their village stores. What is most

attractive to marketers is that 90% + of sales in haats are on cash basis. Traditionally, in

village shops a lot of credit sales occur due to the fact that in a small geographic area of a

village, everybody knows everybody. Considering that over 5000 visit a haat from 5

villages, the system gets derelationalised. Apart from the 90% cash sale, 5 to 7% is

conducted on barter system and the rest 3 to 5% is on credit. Also attractive to companies

wishing to use the system is the low selling overheads. Participation fees at haats are a

flat Re.1 to Rs.5 per stall and this rate is common to a giant like Hindustan Lever and the

smallest local seller.

Distribution costs must be reduced through optimum utilization of the network. Thus,

incorporating haats in the distribution strategy of a rural marketing organization selling

consumer goods and FMCG products (typically once a week purchase items) is a

tremendous opportunity.

Perhaps the other most important factor to consider while developing rural distribution

strategy is that the move from transactional marketing to relationship marketing is most

evident in the village market. A strong bond needs to be created with every consumer

even in the remotest village and the smallest town. Marketing in Rural India is

undoubtedly a long-haul exercise and one that involves great expense. Only those with a

strong mind, a tough heart and stiff hands survive.

28

There is also a need to realise that the dealer is the company's "unpaid" sales force. It is

essentialto educate and involve him as he is the local company representative and is the

only member inthe channel of distribution that is in direct contact with the final

consumer. The dealers' feedback needs to be obtained as the direction for future strategy

emanates here.

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CHAPTER 6

POTENTIAL OF RURAL CONSUMER

6.1 THE PARADIGM SHIFT

In most of the rural areas in different parts of the country, there is considerable

awareness on various latest products that are available in the market. This has

been possible due to the penetration of cable and satellite channels that have

brought down the world at the fingertips of the common man. The media

influenced the mindset of the rural consumer to such an extent that people who

had money started purchasing the products unmindful of the costs, just to satisfy

their needs as well as their ego. But, the growth of rural market could be

attributed to many other reasons that in one way increased the sales as well as the

profits of the companies. Some of the important causes for the growth of rural

markets are –

* The rise in disposable income of the rural families

* The economic boom

* Timely rains

* Rural population involved themselves in business other than agriculture

* Increase white-collar jobs in nearby towns

* Commercialization of agriculture

* Saturation of the urban markets

* Media penetration in rural areas (particularly satellite channels)

* Globalization

* Economic liberalization

* Revolution in the Information Technology

* Women empowerment

* Improving infrastructure

However, there was a significant role of the corporate enterprises simultaneously in the

development of rural market. Their timely intervention into the rural areas, their

appropriate planning, their perception and identification about the growth of rural

markets and the use of marketing strategies all have equally contributed for the progress

30

of rural markets. Even though corporate houses were hedged with so many problems in

the rural areas, they saw a galore of opportunities in the rural market and converted all

the pessimistic characteristics of the rural market into affirmative attributes. They

satisfied themselves with the availability of limited infrastructure, saw a sign of

prosperity rather than fear during the entry of competitors into the rural markets, showed

excitement at the availability of satellite channels in the rural households, visualized their

cash bells ringing with the increase in purchasing power of the rural masses that came

equivalent to their urban counterparts. They traced a constant rise in the demand for those

products that were once confined mostly to the urban houses. But, blame it on the kind of

awareness created by the companies – people started using the products for other

purposes as seen earlier.

In many villages, one can see today the alternate use of the products other than for their

actual purpose. People in the state of Bihar feed the cattle with Horlicks as a health drink

to fatten them! Similarly, people in Punjab use washing machine not for washing clothes

but to make frothy lassi in huge quantities! Animals are rubbed with Iodex on their skins

to relieve them from muscular pains after a day's hard work. Paints meant for houses are

used on the horns of cattle for easy identification and theft prevention! The weavers in

North India wear condoms on their fingers as gloves to weave fine threads while its

lubrication allows them fine control on threads and protect their sensitive fingers! If

companies felt happy with their increased sales and profits through this means and

thought that they captured the rural markets, then it is time for them to review their

marketing strategies. They should understand that these results do not coincide with the

application of the marketing tools and the technical expertise that are generally used to

satisfy the customers as well as the company objectives. The implications of 4 Ps of

marketing mix or the use of 4 As for successful rural marketing have produced wrong

results.

All companies usually claim that they provide the right product at the right place at right

price with right kind of promotion. Then why did the rural consumer used for different

purpose accept a right product? Why did he afford to spend either much or less on the

product that has not derived him the kind of benefit as claimed by the manufacturer?

31

Why did the place of offer differ than to where and to whom it actually was supposed to

be available? Why the right promotion has created wrong awareness in the minds of the

target customers?

There was something missing in the marketing strategies of the companies while serving

the rural markets. Otherwise, the results should have been more astonishing where the

sales turnover or the balance sheet would have shown much more than what is presently

achieved. Though, only the consumers in this way used few products, that use might be

the result of the accidental or wrongful application by the rural consumers. The

marketer's planning about the product and the communication with the target customers

should be perfect that produces the desired results.

6.2 RURAL INDIA-HUB OF POTENTIAL CONSUMERS

India's consumer and household product companies will probably sell more goods in the

country's villages and towns as rural incomes increase, a survey said.

Demand for products such as toothpaste, instant coffee and deodorants in the nation's

villages and small towns will increase by 60 percent by 2012, said the Associated

Chambers of Commerce and Industry of India, a New Delhi-based association of

companies.

``The per capita income of rural and semi-urban populace will increase as the economic

activities grow there due to government focus on their industrialization,'' the association

said.

About 70 percent of India's more than 1.1 billion people live in rural areas. The

government is spending more to build roads to connect villages, expand irrigation

networks and supply electricity to improve productivity and raise incomes.

The country's consumer and household products market will expand to 1.23 trillion

rupees ($27.6 billion) by 2012 from about 700 billion rupees now, the association said.

About 60 percent of all household products will be consumed in villages and small

towns, it said.Companies such as the local unit of Unilever and the country's biggest

cigarette maker, ITC. LTD, are expanding their reach in the 638,000 villages and 3,784

32

towns with less than 100,000 people.

Expanding Consumer Market India's economy has grown at an average of more than 8

percent in the past three years. Finance Minister P. Chidambaram said on Dec. 21 the

countries gross domestic product may grow at about 9 percent in the year ending March

31. Last year, Prime Minister Manmohan Singh unveiled the Bharat Nirman, or

Building India, project with a plan to spend 1.76 trillion rupees by 2009 to build roads,

provide electricity to 100,000 villages, extend irrigation to an additional 10 million

hectares (24.7 million acres) and build 6 million houses.

The country has 235 million farmers and agriculture accounts for about a fifth of the

$775 billion economy.

Kolkata-based ITC, a cigarette maker that has diversified in the past six years into retail

store networks to sell cookies, garments, incense sticks and matches, plans to set up 54

retail stores called Choupal Fresh in the next three years to sell fresh fruits and

vegetables. It also plans to expand the number of its rural supermarkets called Choupal

Sagars to 700 by 2013 from 11 currently.

HLL, the Mumbai-based local unit of Unilever, sells its products through 6.3 million

shops, reaching eight out of 10 households in India.

``There is so much potential for penetration and increased consumption in rural markets,’

HARISH MANWANI, chairman of Hindustan Lever, said last month. ``Seventy percent

of India is still in rural markets. In the longer term, rural markets will trend upward.''

While there is a general tendency to equate rural India to BoP market, here are some of

the consumption numbers that will blow your mind

46% of the soft drinks sales happen in the rural areas.

Rural India accounts for 49% of motorcycle sales.

Rural India accounts for 59% of Cigarettes sales.

53% of FMCG sales happen at Rural India. Rural India Opportunities

Talcum powder is used by more than 25% of rural India.

Lipsticks are used by more than 11% of the rural women and less than 22% of the urban

33

women.

Close to 10% of Maruti Suzuki’s sales come from the rural market.

Hero Honda, on its part, had 50% of its sales coming from rural market in FY’09.

Rural India has a large consuming class with 41% of India’s middle-class and 58% of the

total disposable income accounting for consumption.

By 2010 rural India will consume 60% of the goods produced in the country.

In 20 years, rural Indian Market will be larger than the total consumer markets in

countries such as South Korea or Canada today, & almost 4 times the size of today’s

urban Indian market.

200% growth in consumption of washing machines, TV.

9% increase in the rural consumer expenditure since 2002.

INR 500billion market of consumer durables.

INR 6500billion market of FMCG.

Agri inputs of INR 5400billons.

6.3 RURAL CONSUMERS LOOK FOR VALUE PRODUCTS

Savvy customers make it difficult for companies to penetrate the country's rural markets

for goods and services — estimated at over Rs 50,000 crore annually. To compound the

problem for companies, rural consumers are not swayed by successful urban marketing

strategies.

Rural consumers are clued-in to the value of a product because they are willing to

research extensively, said Mr. R.V. Rajan, Chairman and Managing Director, Anugrah &

Madison Advertising Pvt. Ltd. To illustrate the point, he gave the example of a farmer in

Meerut, near Delhi, who planned to replace tires for his bullock cart.

He examined a tire for nearly two hours. He then compared the product and price in other

shops and also asked one of his friends to test the tire’s quality. When there was another

tire buyer, the farmer watched carefully what he was doing and later tried the same. He

decided to buy the product after analyzing the product for nearly six hours.

Mr. Rajan was addressing the students of the School of Management, Bharath Institute of

34

Higher Education and Research, here on Friday, on `Rural Communications'. Companies

need to do an in-depth study of the mindset of rural consumers in each region before

developing a communication package for a product. Experience of one product category

cannot be repeated with another, he said.

Rural India, we have seen that on an average, there are 2-3 brands per product stocked.

This means that if the marketer can ensure that his brand is available in the rural shop at

the same price as that in the nearby town, he has fewer brands to compete with.

35

CHAPTER 7

CURRENT SCENARIO

7.1 ROADBLOCKS OF INDIAN RURAL MARKETS

There are several roadblocks that make it difficult to progress in the rural market.

Marketers encounter a number of problems like dealing with physical distribution,

logistics, proper and effective deployment of sales force and effective marketing

communication when they enter rural markets. The major problems are listed below.

1. Standard of living: The number of people below the poverty line is more in rural

markets. Thus the market is also underdeveloped and marketing strategies have to be

different from those used in urban marketing.

2. Low literacy levels: The low literacy levels in rural areas leads to a problem of

communication. Print media has less utility compared to the other media of

communication.

3. Low per capita income: Agriculture is the main source of income and hence spending

capacity depends upon the agriculture produce. Demand may not be stable or regular.

4. Transportation and warehousing: Transportation is one of the biggest challenges in

rural markets. As far as road transportation is concerned, about 50% of Indian villages are

connected by roads. However, the rest of the rural markets do not even have a proper

road linkage which makes physical distribution a tough task. Many villages are located in

hilly terrains that make it difficult to connect them through roads. Most marketers use

tractors or bullock carts in rural areas to distribute their products. Warehousing is another

major problem in rural areas, as there is hardly any organized agency to look after the

storage issue. The services rendered by central warehousing corporation and state

warehousing corporations are limited only to urban and suburban areas.

5. Ineffective distribution channels: The distribution chain is not very well organized and

requires a large number of intermediaries, which in turn increases the cost and creates

administrative problems. Due to lack of proper infrastructure, manufacturers are reluctant

to open outlets in these areas. They are mainly dependent on dealers, who are not easily

available for rural areas. This is a challenge to the marketers.

36

6. Many languages and diversity in culture: Factors like cultural congruence, different

behaviour and language of the respective areas make it difficult to handle the customers.

Traits among the sales force are required to match the various requirements of these

specific areas.

7. Lack of communication system: Quick communication is the need of the hour for

smooth conduct of business, but it continues to be a far cry in rural areas due to lack of

communication facilities like telegraph and telecommunication systems etc. The literacy

rate in the rural areas is rather low and consumer’s behaviour in these areas is traditional,

which may be a problem for effective communication.

8. Spurious brands: Cost is an important factor that determines purchasing decision in

rural areas. A lot of spurious brands or look-alikes are available, providing a low cost

option to the rural customer. Many a time the rural customer may not be aware of the

difference due to illiteracy.

9. Seasonal demand: Demand may be seasonal due to dependency on agricultural income.

Harvest season might see an increase in disposable income and hence more purchasing

power.

DISPERSED MARKETS: RURAL POPULATION IS HIGHLY DISPERSED AND REQUIRES A

LOT OF MARKETING EFFORTS IN TERMS OF DISTRIBUTION AND COMMUNICATION.

7.2 STRATEGIES

BY COMMUNICATING AND CHANGING QUALITY PERCEPTION

Companies are coming up with new technology and they are properly communicating it

to the customer. There is a trade-o_ between Quality a customer perceives and a company

wants to communicate. Thus, this positioning of technology is very crucial. The

perception of the Indian about the desired product is changing. Now they know the

difference between the products and the utilities derived out of it. As a rural Indian

customer always wanted value for money with the changed perception, one can notice

difference in current market scenario.

37

BY PROPER COMMUNICATION IN INDIAN LANGUAGE

The companies have realized the importance of proper communication in local language

for promoting their products. They have started selling the concept of quality with proper

communication. Their main focus is to change the Indian customer outlook about quality.

With their promotion, rural customer started asking for value for money

BY TARGET CHANGING PERCEPTION

If one go to villages they will see that villagers using Toothpaste, even when they can use

Neem or Babool sticks or Gudakhu, villagers are using soaps like Nima rose, Breeze,

Cinthol etc. even when they can use locally manufactured very low priced soaps.

Villagers are constantly looking forward for new branded products. What can one infer

from these incidents, is the paradigm changing and customer no longer price sensitive?

Indian customer was never price sensitive, but they want value for money. They are ready

to pay premium for the product if the product is offering some extra utility for

The premium.

BY UNDERSTANDING CULTURAL AND SOCIAL VALUES

Companies have recognized that social and cultural values have a very strong hold on the

people. Cultural values play major role in deciding what to buy. Moreover, rural people

are emotional and sensitive. Thus, to promote their brands, they are exploiting social and

cultural values.

BY PROVIDING WHAT CUSTOMER WANT

The customers want value for money. They do not see any value in frills associated with

the products. They aim for the basic functionality. However, if the seller provides frills

free of cost they are happy with that. They are happy with such a high technology that

can full their need. As "Motorola" has launched, seven models of Cellular Phones of high

technology but none took o_. On the other hand, "Nokia" has launched a simple product,

which has captured the market.

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BY PROMOTING PRODUCTS WITH INDIAN MODELS AND ACTORS

Companies are picking up Indian models, actors for advertisements as this helps them to

show themselves as an Indian company. Diana Hyden and Shahrukh Khan are chosen as

a brand ambassador for MNC quartz clock maker "OMEGA" even though when they

have models like Cindy Crawford.

BY ASSOCIATING THEMSELVES WITH INDIA

MNCs are associating themselves with India by talking about India, by explicitly

Saying that they are Indian. M-TV during Independence Day and Republic daytime make

their logo with Indian tri-color. Nokia has designed a new cellular phone 5110, with the

India tri-colour and a ringing tone of "Sare Jahan se achcha".

BY PROMOTING INDIAN SPORTS TEAM

Companies are promoting Indian sports teams so that they can associate themselves with

India. With this, they in uniqe Indian mindset. LG has launched a campaign "LG ki Dua,

all the best". ITC is promoting Indian cricket team for years; during world cup they have

launched a campaign "Jeeta hai jitega apna Hindustan India India India". Similarly,

Whirlpool has also launched a campaign during world cup. 2.9 BY TALKING ABOUT

A NORMAL INDIAN Companies are now talking about normal India. It is a normal

tendency of an Indian to try to associate himself/herself with the product. If he/she can

Visualize himself/herself with the product, he /she becomes loyal to it. That is why

companies like Daewoo based their advertisements on a normal Indian family.

BY DEVELOPING RURAL-SPECIFIC PRODUCTS

Many companies are developing rural-species products. Keeping into consideration the

requirements, a firm develops these products. Electrolux is working on a made-for India

fridge designed to serve basic purposes: chill drinking water, keep cooked food fresh, and

to withstand long power cuts.

39

BY GIVING INDIAN WORDS FOR BRANDS

Companies use Indian words for brands. Like LG has used India brand name

"Sampoorna" for its newly launched TV. The word is a part of the Bengali, Hindi,

Marathi and Tamil tongue. In the past one year, LG has sold one lakh 20-inch Sampoorna

TVs, all in towns with a population of around 10,000. By the end of 1999, roughly

12Thats Rs 114 crore worth of TV sets sold in the villages in a year.

BY ACQUIRING INDIAN BRANDS

As Indian brands are operating in India for a long time and they enjoy a good reputation

in India. MNCs have found that it is much easier for them to operate in India if they

acquire an Established Indian Brand. Electrolux has acquired two Indian brands

Kelvinator and Always this has gave them the well-established distribution channel. As

well as trust of people, as people believe these brands. Similarly Coke has acquired

Thumps up, Gold Spot, Citra and Limca so that they can kill these brands, but later on

they realized that to survive in the market and to compete with their competitor they have

To rejuvenate these brands.

BY EFFECTIVE MEDIA COMMUNICATION

Companies are using Media Rural marketing. They can either go for

The traditional media or the modern media. The traditional media include melas,

puppetry, folk theatre etc. while the modern media includes TV, radio, e-chaupal. LIC

uses puppets to educate rural masses about its insurance policies. Govt of India uses

puppetry in its campaigns to press ahead social issues. Brook Bond Lipton India ltd used

magicians effectively for launch of Kodak Chap Tea in Etawah district. In between such

a show, the lights are switched o_ and a torch is ashed in the dark (Eveready’s tact). ITC's

e-chaupal (chaupal is the common place where villagers gather) has been the most

elaborate and extensive venture in this field so far. Conceived by ITC's international

business division and launched in 2000, the e-chaupal project has since grown to around

2,700 chaupals covering a population of around 1.2 million in states {Madhya Pradesh,

Karnataka, Andhra Pradesh, Uttar Pradesh and Maharashtra. Rural marketing requires the

40

understanding of the complexities and this article reviews some of the key issues. Indian

agricultural industry has been growing at a tremendous pace in the last few decades. The

rural areas are consuming a large number of industrial and urban manufactured products.

The rural agricultural production and consumption process plays a predominant role in

developing the Indian economy. This has designed a new way for understanding a new

process called Rural Marketing. The concept of rural marketing has to be distinguished

from Agricultural marketing. Marketing is the process of identifying and satisfying

customers needs and providing them with adequate after sales service. Rural marketing is

different from agricultural marketing, which signifes marketing of rural products to the

urban consumer or institutional markets. Rural marketing basically deals with delivering

manufactured or processed inputs or services to rural producers, the demand for which is

basically a derived outcome. Rural marketing scientists also term it as developmental

marketing, as the process of rural marketing involves an urban to rural activity, which in

turn is characterized by various peculiarities in terms of nature of market, products and

processes. Rural marketing differs from agricultural or consumer products marketing in

terms of the nature of transactions, which includes participants, products, modalities,

norms and outcomes. The participants in case of Rural Marketing would also be different

they include input manufacturers, dealers, farmers

Opinion makers, government agencies and traders. The existing approach to the rural

markets has viewed the markets as a homogeneous one, but in practice, there are

significant buyer and user divergences across regions as well as within that requires a

deferential treatment of the marketing problems. These divergences could be in terms of

the type of farmers, type of crops and other agro-climatic conditions. One has to

understand the market norms in agricultural input so as to devise good marketing

strategies and to avoid unethical practices, which distort the marketing environment.

Many of the inputs used for production process have implications for food, health and

environmental sectors. Rural marketing needs to combine concerns for port with a

concern for the society, besides being titled towards port. Rural market for agricultural

inputs is a case of market pull and not market push. Most of the jobs of marketing and

selling is left to the local dealers and retailers. The market for input gets interlocked with

41

other markets like output, consumer goods, money and labour. The importance of rural

marketing can be understood from the fact that today modern inputs i.e. diesel,

electricity, fertilizers, pesticides, seeds account for as much as 70Green Revolution areas.

Further the percentages were higher at 81of land. Strategic aspects Rural marketing in

India is not much developed there are many hindrances in the area of market, product

design and positioning, pricing, distribution and promotion. Companies need to

understand rural marketing in a broader manner not only to survive and grow in their

business, but also a means to the development of the rural economy. One has to have a

strategic view of the rural markets so as to know and understand the markets well. In the

context of rural marketing one has to understand the manipulation of marketing mix has

to be properly understood in terms of product usage. Product usage is central to price,

distribution, promotion, branding, company image and more important farmer

economics, thus any strategy in rural marketing should be given due attention and

importance by understanding the product usage, all elements of marketing mix can be

better organized and managed.

BY ADOPTING LOCALISED WAY OF DISTRIBUTING

Companies recognize proper distribution channels. The distribution channel could be a

big scale Super markets; they thought that a similar system could be grown in India.

However, they were wrong, soon they realized that to succeed in India they have to reach

the nook and the corner of the country. They have to reach the "local Paan wala, Local

Baniya" only they can succeed. MNC shoe giants, Adidas, Reebok, Nike started with

exclusive stores but soon they realized that they do not enjoy much Brand Equity in

India, and to capture the market share in India they have to go the local market shoe

sellers. They have to reach to local cities with low priced products.

BY ASSOCIATING THEMSELVES WITH INDIAN CELEBRITIES

MNCs have realized that in India celebrities enjoyed a great popularity so they now

associate themselves with Indian celebrities. Recently Luxor Writing Instruments Ltd. a

JV of Gillette and Luxor has launched 500 "Gajgamini" range of Parker Sonnet Hussain

special edition fountain pens, priced at Rs. 5000. Mr. MAKBUL FIDA HUSSAIN sighed

42

that pen. Who has created "Gajgamini" range of paintings? Companies are promoting

players like Bhaichung Bhutia, who is promoted by Reebok, so that they can associate

their name with players like him and get popularity.

MELAS

Melas are places where villagers gather once in a while for shopping. Companies take

advantage of such events to market their products. Dabur uses these events to sell

products like JANAM GHUTI (Gripe water). NCAER estimates that around half of items

sold in these melas are FMCG products.and consumer durables. Escorts also display its

products like tractors and motorcycles in such melas.

PAINTINGS

A picture is worth thousand words. The message is simple and clean. Rural people like

the sight of bright colors. COKE, PEPSI and TATA traders advertise their products

through paintings.

7.3 Myths About The Indian Rural Market

Myth no 1: In the aftermath of urban-rural convergence, rural market will be mainly an

extension of urban markets and will eventually embrace the product and brand lifestyles

of the latter, supported by higher disposable incomes, aggressive retail promotion and

advertising.

The reality: Rural markets represent a distinct dynamic in how they come into being and

make unique demands on how the product is designed and how the brand is positioned

and promoted. Greater the strategic attention to these unique demands, assure greater the

chances of product's success in the rural market.

Myth no 2: The market size can be estimated based on mere demographic interpolation

of current penetration levels and sales volumes and that even fringe presence or limited

acceptance of lifestyle consumer products in rural market would translate into future

market potential to be tapped.

43

The reality: Fringe acceptance of consumer products or brands is no indication of market

potential. It actually would only result in higher incidence of brand and product mortality

as more firms try to choke those segments with competing brands. Rural market

dynamics instead demand sustained effort at brand building and product acceptance.

Myth no 3: That rural market represents a more or less homogenous matrix of attitudes,

values and purchasing behavior across regions leading to what may be termed "one size

fits all" approach.

The reality: The Indian rural market is a complex mosaic of mind-sets, cultures, and

lifestyles. While education, employment, income, agricultural land ownership may still

be the major deciding factors accounting for social differentiation, they do not yield

reciprocal cohort behavioral patterns, with respect to consumption patterns, purchasing

decisions and priorities of product ownership.

Myth no 4: That rural markets are highly price-inelastic and only suited for 'value-for

money' products as against premium quality products.

The reality: Despite lower incidence of premium product purchases, the rural consumers

across all income segments exhibit marked propensity to spend on premium high quality

products, which are backed by strong brand values, where they correspond to their own

aspirations and quality needs. The problem really lies in market not being able to offer a

premium product in the specific context of rural demand.

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CHAPTER 8

RURAL V/S URBAN MARKET

8.1 RURAL INDIA CATCHING UP FAST WITH URBAN INDIA

Riding on economic growth, the average expenditure on consumer durables in rural India

is fast catching up with that of urban India. The National Sample Survey Organization

has stated this in its 61 round of National Sample Survey (NSS) during the July 2004-05

period. The data were collected from a

Sample of 79,298 rural households spread over 7,999 villages and 45,346 urban

households in 4,602 urban blocks.

In 2004-05, expenditure on durable goods formed 3.75 per cent (Rs 21.74 out of

Rs 579.17) of average per capita consumer expenditure in rural areas and

4.27 per cent (Rs 47.16 out of Rs 1104.60) in urban areas. In 1999-2000, their share was

2.62 per cent in rural sector and 3.61 per cent in urban areas. "As your income rises, the

share of essential items in the total expenditure, especially food items, drops

significantly. With rural income catching up with urban income, this trend is obvious,"

said chief statistician Pronab Sen.

Percentage-wise, the number of rural households having motorcycles has gone up from 2

per cent in 1993-94 to 7.7 percent in 2004-05. About 0.8 percent rural households owned

a car in 2004-05, compared with 0.2 percent in 1993-94. Around 25.6 per cent rural

households had TV sets during the same period as against 7 percent in 1993-1994.

Electric fans were found in 38 percent rural households, showing an increase of 12-

13percentage points since 1999-2000. Refrigerators were used in 4 per cent rural

households in 2004-05,compared with 1 per cent in 1993-94.

8.2 RURAL VS URBAN MARKETING-SUMMARY

NO. ASPECT URBAN RURAL

1 PHILOSOPHY Marketing & Societal

Concepts &

Marketing & Societal

Concepts,

45

Relationship

Marketing

Development

Marketing &

Relationship

Marketing

2 A) MARKET

B) DEMAND High Low

C) COMPETITION Among Units In

Organized Sector

Mostly From

Unorganized Units

CONSUMERS

LOCATION Concentrated Widely Spread

LITERACY High Low

INCOME High Low

EXPENDITURE Planned, Even Seasonal, Variation

NEEDS High Level Low Level

INNOVATION/ADOPTION Faster Slow

3 PRODUCT

AWARENESS High Low

CONCEPT Known Less Known

POSITIONING Easy Difficult

USAGE METHOD Easily Grasped Difficult To Grasp

QUALITY PREFERENCE Good Moderate

4 PRICE

SENSITIVE Yes Very much

LEVEL DESIRED Medium-high Medium-low

5 DISTRIBUTION

CHANNELS

Wholesalers, stockiest,

retailer, supermarket,

specialty stores, &

authorized showrooms

Village shops,

“Haats”

TRANSPORT FACILITIES Good Average

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PRODUCT AVAILABILITY High Limited

6 PROMOTION

ADVERTISING

Print, audio visual

media, outdoors,

exhibitions etc. few

languages

TV, radio, print media

to some extent. More

languages

PERSONAL SELLINGDoor-to-door,

frequently

Occasionally

SALES PROMOTIONContests, gifts, price

discount

Gifts, price discounts

PUBLICITY Good opportunities Less opportunities

8.3 RURAL RETAILING

The Indian rural market with its vast size and demand base offers great opportunities to

marketers. Two-thirds of countries consumers live in rural areas and almost half of the

national income is generated here. It is only natural that rural markets form an important

part of the total market of India. Our nation is classified in around 450 districts, and

approximately 630000 villages, which can be sorted in different parameters such as

literacy levels, accessibility, income levels, penetration, distances from nearest towns,

etc.

Few Facts

70 % of India's population lives in 627000 villages in rural areas. According to the

NCAER study, there are almost twice as many 'lower middle income' households in rural

areas as in the urban areas.

1. At the highest income level there are 2.3 million urban households as against 1.6 million

households in rural areas.

2. Middle and high-income households in rural India is expected to grow from 80 million to

111 million by 2007.

3. In urban India, the same is expected to grow from 46 million to 59 million. Thus, the

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absolute size of rural India is expected to be double that of urban India.

CASE STUDY: ITC E-CHOUPAL

Rural Malls: Chaupal Sagar

Chaupal Sagar is one of the first organized retail forays into the hinterland. It was soft-

launched on 15 August. It is actually a warehouse for storing the farm produce that ITC

buys through its e-chaupals. The mall has come up in one part of this warehouse. It has

been set up by the international business division of tobacco major ITC. It has been

initiated as rural shopping-cum-information centres in Madhya Pradesh. The first rural

mall has come up 40-odd kilometers journey from Bhopal towards Sehore. ITC Spent 3

years and Rs.80 crores on research and development of this concept including

investments in E-choupal.

Objective

ITC describes the establishment as a set to create a high-quality, low-cost fulfillment

channel for rural India. However, any organization is driven by the profit motive which

are served through this initiative:

Reap benefits from the market they have created

Creating an entry barrier for other prospective players ITC has very effectively integrated

its profit and social motives.

Concept

KSA Technical - "It is definitely a pioneering venture because no other Indian company

has yet entered rural retailing with the all-under-one-roof concept."

Malls stocking wide variety of products with floor space of 7000 sq.ft, plus a trading

zone and information centre. It is a Hub cum Supermarket, which has been set up in a

section of the ITC rural warehouses.

Facilities

Spread over 5 acres of land at Sehore in Madhya Pradesh: -

1. Rural shopping malls will be open from 6 am to 9 pm.

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2. Features and facilities at these ITC malls can overshadow those in the metros. The ITC

store sells everything that a rural consumer may ask for - sarees to kurta-pyjamas to shirts

(in the range of Rs 99-500), footwear, groceries, electronic durable from TVs to

microwaves, cosmetics and other accessories, farm consumption products like seeds,

fertilizers, pumps, generators and even tractors, motorcycles and scooters.

3. Banking and automated teller machines will be standard at the malls.

4. Insurance products for farmers.

5. Entertainment facilities, restaurants, public facilities and parking space will also be

available.

6. There is even a fuel pump in tie-up with BPCL and a cafeteria.

7. Parking lot for 160 tractors.

8. There will be a primary healthcare facility to be serviced by a private healthcare service

provider.

9. Information centres: The company will create the facility for providing online

information on commodity rates and weather.

10. Shopping malls will have a training facility on modern farm techniques.

11. Farmers can come and log on to the Internet and check the pricing and sell their

commodities.

12. There will also be godowns for storing the wheat and soybean and also for stocking

products retailed at the mall.

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OPERATIONAL COST IN COMPARISION TO MANDIS

QuickTime™ and a decompressor

are needed to see this picture.

Risk analysis & challenges

Radical shifts in computing access will break community-based business models. The

sanchalaks are ITCs partners in the community, and as their

power and numbers increase, there is a threat of unionization and

rent extraction. The scope of the operation: the diversity of activities required of every

operative and the speed of expansion create real threats to efficient management. If ITC

fails to full the aspirations of farmers, they will look elsewhere for satisfaction.

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CHAPTER 9

CONCLUSION

With an approximate population of 700 million people, the rural Indian market is

important for multinational corporations to tap. Although rural Indians need to purchase

consumer goods just as their urban counterparts do, rural Indian consumers have a

different set of needs that must be met by both package and product. Spending time

researching the rural Indian consumer as well as the market before diving in can help to

prevent unnecessary struggles and failures. If the opportunity exists, partnering with an

existing Indian company upon market entry can provide several key advantages to a

company. Understanding the available distribution networks in rural India is crucial to

making a successful entry into the rural Indian market

SOME GROWTH AVENUES ARE

FMCGFICCI says that in a clear defiance of the economic slowdown of the past 12

months, India's Fast Moving Consumer Goods (FMCG) sector has grown consistently

during the last three to four years, reaching a size of  US $ 25 billion (Rs. 120,000 crore)

Rural consumers spend around 13 per cent of their income, the second highest after food

(35 per cent), on fast moving consumer goods (FMCG), as per a RMAI study.

Retail the rural retail market is currently estimated at US$112 billion, or around 40 per

cent of the US$ 280 billion retail market. Major domestic retailers like AV Birla, ITC,

Godrej, Reliance and many others have already set up farm linkages. Hariyali Kisan

Bazaars (DCM) and Aadhars (Pantaloon-Godrej JV), Choupal Sagars (ITC), Kisan

Sansars (Tata), Reliance Fresh, Project Shakti (Hindustan Unilever) and Naya Yug

Bazaar are established rural retail hubs.

PharmaceuticalsAccording to a report by McKinsey, the rural and tier-2 pharma market

will account for almost half of the growth till 2015. The tier-2 market will grow to 44 per

cent by 2015, amounting to US$ 8.8 billion.

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Telecommunication A Gartner forecast revealed that Indian cellular services revenue

will grow at a compound annual growth rate (CAGR) of 18.4 per cent to touch US$ 25.6

billion by 2011, with most of the growth coming from rural markets. Also, a joint

Confederation of Indian Industries (CII) and Ernst & Young report reveals that of the

next 250 million Indian wireless users, approximately 100 million (40 per cent) are likely

to be from rural areas, and by 2012,

Automobiles: Passenger car and two-wheeler companies are driving on rural roads to

push sales. While growth in urban markets has been flat or negative, the rural markets are

booming, insulated from economic downturn. Rural markets' share in Maruti's overall

sales during April-January 2009 has gone up to 8.5 per cent from 3.5 per cent in the same

period last year.

Consumer durables A survey carried out by RMAI has revealed that 59 per cent of

durables sales come from rural markets. According to FICCI, Consumer goods segment

were also observed to post negative growth of 3% during February 2009 compared to

positive 11.7% in the corresponding month of previous year. The growth in total

consumer goods is seen to erode due to fall in the growth of consumer non-durables

category.

With urban markets getting saturated for several categories of consumer goods and with

rising rural incomes, marketing executives are fanning out and discovering the strengths

of the large rural markets as they try to enlarge their

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LIMITATIONS

Information collected is secondary in nature due to that chances of little deviation in

analyzing the opportunities in rural market might be possible.

On the basis Certain Parameters comparison is made between rural and urban market but

scope is limited to north India only.

Brand loyalty and perception of rural consumers towards any brand is not considered

here.

Rural consumers are not segregated on the basis of the income levels as upper or middle

class and comparisons are not made between two.

53