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2. Acknowledgement At the outset I would like to take the privilege to convey my gratitude to all those who co-operated, supported, helped and suggested me as to how the project could be completed. This project bears imprint of advices, from many people who were either directly or indirectly involved in it. The Internet has been a veritable treasure throve of information, the websites and the information they contained helped me to do the project in a much easier and better manner. I am also desirous of placing on record profound indebtness to my guide Prof. Vijaya Krishna, Tolani College of Commerce , Andheri for her valuable advices, guidance, precious time and support that she lent to me. I would also like to thank Mr. Shubhankar Bhattacharya, Sales Training Manager of HLL, for his time and valuable inputs in the course of my research. 3. DECLARATION I Shruti Bhatter of Tolani College of Commerce of TYBMS (Sem V) hereby declare that I have completed this project on Rural Marketing Strategies (Context:- HLL) , for the Academic Year 2005 2006. The information submitted is true and original to the best of my knowledge. Place: MUMBAI Shruti Bhatter Date: 4. CERTIFICATE I Prof. Vijaya Krishna hereby certify that Shruti Bhatter of Tolani College of commerce of TYBMS (Sem V) has completed its project tittled Rural Marketing Strategies (Context:- HLL) in the academic year 2005 - 2006. The information submitted is true and original to the best of my knowledge. Prof. Vijaya Krishna Dr. A. Rashid Dr. Sheela Purohit (Project Guide) (BMS Co-ordinator) (Principal) 5. Table of Contents Topic No. TOPICS Page No. 1. Executive Summary 1-2 2. Introduction to Rural markets. 3 3. History. 4 6 4. Features of Indian Rural markets. 7 5. Profile of Rural consumer. 8-9 6. Evolution of Rural marketing. 10 7. Current scenario of Rural Markets. 11-12 8. Why Companies Go Rural? 13-14 9. Problems in Rural marketing. 14-16 10. Rural product strategies. 17-20 11. Rural Pricing strategies. 21-22 12. Rural Promotion strategies. 23-26 13. Rural Distribution strategies. 27-37 14. Introduction of Hindustan Lever Limited. 38-42 15. Highlights of HLL Marketing Strategy. 43-66 16. Challenges faced by HLL. 66-68 17. Questionnaire. 68-70 18. Case on Wheel Strategies. 71-74 19. Relationship Marketing Case: HLL 75-76 20. Smarter than one Imagines. 77-79 21. Conclusion. 80 22. Recommendations. 81 23. Bibliography. 82 6. EXECUTIVE SUMMARY The topic that was taken up for detailed study is Rural Marketing Strategies. The procedure, not only varies in different sectors but also in different companies. The marketing strategies that companies adopt to launch their various new products keep changing with time and the prevailing market situations. This study was undertaken to get a deep insight into the marketing strategies adopted in rural areas. Companies have to use different combinations of Marketing mix variable for Rural Markets. Product Strategy. In the rural market, the consumer is utility oriented. The quality of the product is always given a very high preference as compared to the brand name of the product. The product has to have good purchase value in order for it to be purchased i.e. the product has to offer value for money. The product has to be affordable and has to satisfy rural needs. Pricing Strategy The pricing of the product should be designed in such a way that it contributes to the objectives of the marketers and needs of the consumers. The product cost has to be low in order for the product to be successful in the rural market. Distribution Strategy. Whilst formulating specific strategies for distribution in rural areas the characteristics of the product whether it is consumable or durable, the life of the product and other factors has to be kept in mind. 1 7. Distribution Strategies formulated for the rural areas could consider the use of satellite distribution, private village shops etc and various channels of distribution and physical distribution facilities in Rural markets. Due to very regular occurrence, shandies/haats/melas are of great importance keeping the distribution strategy in mind. Promotion strategy. Promotion strategies should be cost effective. Word-of-Mouth and Opinion Leaders are of great significance in a promotion strategy. Another important attribute in promotion strategy is Mass Media i.e. Television, Cinema, Radio, Print Media, etc. To understand the marketing strategy and marketing mix used by companies in rural markets, the strategies of HLL the major FMCG which was successful in penetrating in rural market has been discussed and its few cases are mentioned in the project. 2 8. Introduction to rural markets. The rise of rural markets has been the most important phenomenon of the 1990s, providing volume growth to all leading companies. Many corporates have been trying to get a grip on rural market. But challenges are many: how to make the product affordable, how to penetrate villages with small populations, connectivity, communications, language barriers, spurious brands, etc. Marketers and manufacturers are increasingly aware of the burgeoning purchasing power, vast size and demand base of the once neglected Indian hinterland. Efforts are now on to understand the attitude of rural consumers, and to walk their walk and talk their talk. The marketing mix of many companies is now being tailored to rural tastes and lifestyles. Government agencies like IRDA (Insurance Regulatory and Development Authority) and NCAER (National Council for Applied Economic Research) define rural as villages with a population of less than 5000, with 75% of the male population engaged in agriculture, etc. Two-third of the countrys consumer (more than 700 million) live in rural areas and almost 26% of the national income is generated there. And 10 consecutive good monsoons have lead to improved returns from agriculture (which is Indias largest economic sector and accounts for 26% of GDP, increasing the spending power in India s rural areas. India is divided into 597 districts, and has 638,667 villages, of which 32% can be reached and are connected by pucca roads. However, 68% of the rural market lies untapped due to various reasons ranging from inaccessibility to lack of awareness. In all, there are more than 3.8 million retail outlets in rural India, 5.8 shops per village (the term shop refers to any type of premises haats, stalls, shacks-that sell goods). Overall, the rural market has been growing at 3-4%per annum, adding more than 1 million new consumers every year, and now accounts for close to 50% of the volume of consumption of fast-moving consumer goods (FMCG) in India. 3 9. As a result, it is becoming an important part of the market development strategies of all FMCG companies, including multinational ones, as well as consumer durables business and services companies as well. Further, the vast untapped potential of the rural markets is growing at a rapid pace. The policies of the government largely favour rural development programmes. This is clearly highlighted by the fact that the outlay for rural development has risen from Rs 14000 crores in the 7th plan to Rs 30000 crores in the 8th plan period. Thus, with the rural markets bulging in both size and volume, any marketing manager will be missing a great potential opportunity if he does not go rural. History. At the time of independence in 1947, the rural markets were practically non-existent. They consumed what they produced. What they bought as manufactured goods (products) used to be only some salt, tea , tobacco, kerosene, gold and silver ornaments etc. For shelter they depended on the construction material available in the village; for agricultural implements, the blacksmith; for clothes, the weaver; for vessels, the potter. They went to local quacks and vaids for medicine and maternity. For fuel, fertilizer transport and ploughing, there was the cox and oxen. For water, either the pond or well or the wayward monsoons. In the post Independence period considerable thinking has been laid by the Indian planners in developing the rural areas by giving substantial emphasis on promoting the social and economic status of rural people. The need for overall development in rural areas has been stressed in India planning all through the years. The era of rural development started with the Second Five Year Plan which emphasized the implementation of various community development projects in different sectors through the Panchayat Raj Institutions (PRIs). 4 10. Even in 1940s and 1950s many manufacturers invested in rural markets. They were mainly consumer product manufacturers as Levers with Sunlight and Dalda; Geoffrey manners with Anacin; Union carbide with Eveready batteries and few others. By the 1960s there was a flood of other manufacturers in rural markets. The green revolution was started in 1960. With green revolution many companies like Siemens with a package of products for water drilling; marketers of fertilizers, pesticides, seeds, bicycles, motor cycles etc. took their products to rural consumers. Later, in 1969, the government formulated schemes with direct intervention to assist the rural poor. In the subsequent years many programmes and schemes have been designed and floated in rural areas assessing the local needs and programme objective at micro level. Many of these development programmes have undergone considerable changes in implementation process observing setbacks at different levels of functionaries. In late seventies, reviewing the efforts made to uplift the rural economy through various development programmes in successive five year plans, the policy on rural development has largely stressed on achieving the susta