CHAPTER- 1.

INTRODUCTION TO
RURAL MARKETING
Definition:Rural marketing can be defined as a function which manages all those activities in
asserting, stimulating and converting the purchasing power of rural people into an
effective demand for specific products and services and there by achieving the
goals of the organisation.

Rural areas:Rural areas are large and isolated areas of an open country with low population
density a country side refers to rural areas that are open.

Meaning of Rural marketing:Rural marketing is promotion of a companys products in the rural markets
by using strategies which differ from that of urban market. The rural market
more price sensitive but it has preference quantity.

Nature of Rural market:1. Large, diverse and scattered market:Rural marketing in India is large, and scattered into a number of
regions. There may be less number of shops available to market
products.
2. Major income of rural consumers is from agriculture:Rural prosperity is tied with agriculture prosperity. In the event of
crop failure, the incomes of masses is directly affected.
3. Traditional outlook:Villages develop slowly and have a traditional outlook. Change is a
continuous process but 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.
4. 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 savings etc. Today the rural customers
spends money to get value and is aware of the happening around him.
5. Rising literary levels:It is documented that approximately 45% of rural Indians are literate.
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Hence awareness has increase and the formats are well informed about
the world around them. They are also educating themselves on the new
technology for a better life style.
6. Diverse socio economic background:Due to differences in geographical areas and uneven land fertility, rural
people have different socio economic background, which ultimately affects
the rural markets.

7. Infrastructure facilities:The infrastructure facilities like warehouses, communications systems

and financial facilities (or) inadequate in rural areas physical distribution
is a challenge to marketers who has found innovative ways to market
their products.

Scope of marketing:1. Large population:According to 2011 census, rural population is 72% of total population
and it is scattered over a wide range of geographic area.
2. Rising rural prosperity:Average income level has unproved due to modern farming practices,
contract farming industrialisation, migration to urban areas etc.
3. Growth in consumption:There is a growth in purchasing power of rural consumers. The
average per capita house hold expenditure is 382 Rs
4. Change in life style:Life style of rural consumer changed
considerably. 5. Market growth rate higher
than urban:The growth rate of fast moving consumer goods [FMCG] market and
durable market is high in rural areas. The rural market share is more than
50% for products like cooking oil, hair oil etc.
6. Life cycle advantage:The products which have attain the maturity stage in urban market is
still in growth stage in rural market.
7. Rural marketing is not expensive:To promote consumer durable inside a state costs 1 croreRs while in
urban areas it will costs in millions.

Meaning of rural market:2 | Page

On account of green revolution, the rural areas are consuming a large quality
of industrial and urban manufactured products. In this context a special
marketing strategy namely rural marketing has emerged. But often rural
marketing is confused with agricultural marketing The letter denotes
marketing of produce of rural areas to the urban consumers or industrial
consumers, were as rural marketing involves delivering manufactured or
processed inputs or services to rural producers of consumers.

Importance of rural market:1. Large market:Approximately 75% of Indians population resides around 6,38,365
villages of India spread over 32,00,000 Sq. kilometre 41% of Indians
middle class resides in rural areas. The Indian rural consumer leaves in
6,00,000 villages across the country and they account for over 70% of
population of the country. For several product categories, rural markets
account for over 60% of the national demand.
2. Higher purchasing capacity:According to NCAER[National Council for Applied Economic
Research]. As per NCAER study there are many middle income and
above households in the rural areas. As there are in the urban areas there
are almost twice as many lower middle income households in rural areas
as in the urban areas. Because of this purchasing power of power of rural
people is on rise.
3. Market growth:Hariyali kissan bajar was set up by sri ram consolidated limited to
facilitates scale of agriculture inputs such as fertilizers, pesticides
forming equipment, seeds etc. Shakti- though the state governments and
GOS involved in microfinance women entrepreneurs in villages are
identified to act as local distribution and sales point for HUL products.
4. ITC:Itcs internet enabled rural interface to help scale of agricultural outputs
is presently operational in 6 states market is growing at a rate of 3-4%
p.a.

Size of rural market in India

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Ans: According to the census of India village with clear surveyed boundaries not
having a municipality, corporation or board, with density of population not more
than 400 Sq.km and with at least 75% of the male working population engaged in
agriculture activities would quality as rural.

According to this definition there are 6,38,000 villages in the country of

these 0.5% has a population about 10,000 and 2% have population between
5,000 and 10,000 around 50% has a population less than 200.
Interestingly, the FMCG and consumer durable companies, any territory that has
more than 20,000 &50,000 population respectively in rural market so for them it
is not rural India which is rural.
According to the census of India 2001, there are more than 4000 towns in the
country. It has classified them into 6 categories around 400 class-I to towns with
1,00,000 and above population, 498 class-II towns with 50,000-99,999
population, 1368 class-III towns with 20,000-50,000 population, 1560 class IV
towns with 10,000-19,999 population
It is mainly the class-II & class-III towns that markets term as rural.

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Demographical details of Indian rural market

About 285 millions live in urban India where as 742 millions reside in
rural areas.
The No. of middle income & high income households in rural India is
expected to grow from 46 millions to 59 millions.
Size of rural market is estimated to be 42 millions household and rural
market has been going at 5 times the growth of the urban market.
More government, rural development programs.
Increase in agricultural productivity leading to growth of rural disposable
income.
Lowering of difference between taste of urban and rural customers.

The Indian rural market with its vast size and demand offers great opportunity to
marketers. Our national is classified in around 450 districts & approx. 6, 30,000
village which can be stored in different parameters such as literacy level,
accessibility income levels, distance from nearest town etc.
The rural market accounts for half of the total market for Tv sets, fans
pressure cookers, bicycles, washing soap, tea salt & tooth powder, what is
more, the rural market for FMCG product is growing much faster than the urban
market.

Distinction between rural market & urban market

Definition:Rural marketing is similar as simply marketing. Rural marketing differs only in
terms of buyers here, target market consists of customers living in rural areas.Thus
rural marketing is application of marketing fundamentals {concepts, principles,
theories etc} to rural marketers.

Rural marketing is a process of developing, pricing , promoting and

distributing rural specific goods and services leading to desired exchange with
rural customers to satisfy their needs and wants, and also to achieve
organisational objectives.

Differences between rural marketing & urban marketing:Although rural marketing offer immense potential marketers used to
recognise the fact that there are considerable differences in many aspects
including the nature, characteristics, buying patterns & behaviours of rural
consumer when compared with their urban counter parts.
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While the urban economy thrives mainly on secondary and territory activities
such as manufacturing &service, the rural economy is driven mainly by primary
activities such as agriculture, fishing & forestry.
The consumer demand and consumption patterns also differ across rural and
urban areas, in many products rural consumption now accounts for a large share
then urban. In in washing soaps the rural share is over 60%. In popular both
soaps it is more than 50% and in batteries it is more than 56% similarly is the
case with packed tea & hair oils

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Aspect

Urban

Philosophy

Marketing &social concepts

& relationship market

Demand

Rural
Marketing & social concepts
development
marketing

High
Among units in organized
sector

Low

Consumers:
Location
Literacy
Income
Expenditure
Needs
Innovations
Product awareness
Concept
Positioning

Concentrated
High
High
Planned &even
High level
Faster
High
Known
Easy

Widely spread
Low
Low
Seasonal &variations
Low level
Slow
Low
Less known

Usage method

Easy grasped

Quality preference

Good

Difficult to grasp
Moderate

Price sensitive

Yes
Whole seller, retailers,
supermarkets, speciality
stores, authorised store
rooms

Very much in rural

Good
High
Print, audio, visual media,
outdoors, exhibitions etc

Moderate
Limited

Doortodoor

Occasionally

Competition

Distribution channels
Transport facility
Product availability
Advertising
Personal selling
Sales promotion

Contest, gifts, price discount

Publicity

Good opportunity

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Among unorganised sector

Difficult

Village shops

T.v, radio, print media to some extent

Gifts & price discount

Less opportunity

Problems of rural marketing

th

The problems of rural marketing are continuing in spite of efforts to improve in a 9

five year plan. The position is improving but slowly the rural marketer has many
challenges. But the vast & expanding markets call for good marketing strangers to
create win situations to all parties in the chain of rural marketing.

The problems of rural marketing are as follows:-

Under developed people

Under developed market
Improper communication facilities
Many languages
Vastness & uneven spread
Low per capita income
Poor infrastructure facilities
Seasonal demand
Less distribution channel

1. Under developed people:Rural society is found by tradition, old customs, practices etc. The
impact of modern science & technology has made very less impact of the
old beliefs are still continuing.
2. Under developed market:Rural markets are not developing because of inadequate banking &
credit facilities. Rural market needs banks to enable remittance, to
transact on credit basis and to obtained credit support from the bank. At
th
present every 48 village in India only has bank.
3. Poor or improper communication facilities:Most villages even today largely depends on telegrams and phones for
their communication needs print media and visual media[Television
cinema] etc reaches only about 20% of rural Indians.
4. Many languages:India is a country of many languages. Language becomes a barrier in
effective communication in the marketing efforts. The languages vary
from state to state, place to place, district to district there are now 18
schedule national languages.
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5. Vastness & unevenly spread:India is a vast time & major approximately 3214km from North to
South &2933km from East to West.
Rural market consists of approximately 75 cores rural consumers
spread across approximately 6,38,365 villages. Despite the urban
migration, the rural areas continue to be the place of living for a vast
majority Indians.

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6. Low per capital income:Most farmers has small lands and many villages are brought prone,
this result in low per capita income.
Low per capita income Results in low consumption pattern as
compared to the urban population.
The marketers faces challenges in rural marketing to decide about
quantities, frequency of distributions, package size etc due to the low
per capita income of the rural people.
7. Poor infrastructure facilities:Infrastructural facilities like roads, ware houses, powers etc are
inadequate in rural areas. Infrastructural cost are very high and impact
adversely in the rural market activities.
8. Seasonal demand:Rural economic is seasonal, rural people have two seasonal namely
khariff&rabi. Villages have money mostly in these seasons. As village
incomes are seasonal demands are also.

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CHAPTER- 2 . RURAL MARKETING

ENVIRONMENT
Introduction:
An environment is that which surrounds an organization. It was sum total of
external factors and made up of tangible and intangible factors /both
controllable and uncontrollable. Rural marketing is basically focused marketing
activity of a organization. The environment out lines threats and opportunities of
the market.
The Rural marketing environment is complex and is changing
continuously. The marketing organization should foresee and adopt strategies to
change in requirements in the market. One which doesnt change perishes. An
adaptive organization can stand competition or have a modest growth. An
organization which makes its effective marketing plans and its own strategies or a
creative one will prosper and creates opportunities in the change in environment.
Rural marketing environment changes will be in the area of

a)
b)
c)
d)
e)
f)

Social changes
Economic changes
Ethical changes
Political changes
Physical changes
Technological changes

SOCIAL
Sociological
factors

ECONOMIC
Psychological
Factors

Price

Competition

Product &
Packaging
Consumer

Anthropological
Factors
Marketing

Price

Organisation

Promotio
n

Technological

Ethical
Place

Physical

Political

1.SOCIAL CHANGES:-

The social factor consists of three factors,

1) Sociological factor:Consumer society or the community is

important. The consumer life style is influenced by the social setup. The
social constitution and changes influence customer habits, taste, and
lifestyles.
2) Anthropological factors:The reasonable cultures and subcultures and
living patterns influence advertising sales promotion, selling strategies
and packing. The consumers in east India have different taste.
3) Psychological factors:Consumer behavior attitudes personality and
mental make ups are unique. The study of behavior is vital to evolve
marketing mix.

2. Economic factors:1) Competition:A good and healthy competition brings in good and
overall improvement in economic activities. It also brings good quality,
good quantity and price.
2) Consumers:The consumer today is quite knowledgeable and
choosy. His progress and well being should be the aim of any economic
activity.
3) Price:Pricing is a delicate issue where it should be market
friendly, not too high or to little. The marketers has to keep in mind to
get descent returns on investment and effects of producers and
marketers.
4) Ethical forces:Business minus ethical values brings degeneration. In
the long run it brings problems. No standardization, exploitation and
falsification are main ethical values in such organization.
5) Political forces:The government polices towards trade and commerce,
internal taxation and preferential treatments have a influence on the
marketing strategies. The marketing environment has to meet the
political frame work in which a government is made to work.
6) Physical forces:The infrastructure availability for movement and storage
of goods play an important role in the physical distribution of goods and
reaching the consumers. Efficient and cheaper logistics helps the market

in a big way.
7) Technological force:The fast changing science and technology gives a cutting
edge to the marketing of products. The changes warrant changes in
marketing , inputs and

strategies. Faster and efficient communication and transport systems

have speeded up marketer. The capital is made to work faster and
harder .So in the case with the marketer, He has to use these new
marketing tools and facilities in designing and implementing his
marketing strategies which are adaptive to the change in
environment and ensure success.
Factors influencing rural consumer behavior
ANS:- The various factors that affect buying behaviour of in rural India are:

1) Environment of the consumer:- the environment or the

surroundings in which the consumer leaves has a very strong
influence on the buyer behavior. E.g.:-electrification, water supply
effects demand for durables.
2) Geographic influence:- 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 in the south.

3) Influence of occupation:- The land owners and service can buy

more of category2 & category3 durables than agricultural laborers.
4) Place of purchase:- Companys need to access the influence of
retailer on both consumers at village shops.

5) Creative use of product:- The study of product and provides

indicators to the company on the need for education and also for new
product ideas.
E.g.:- godrej hair dye being used as a pain to the color horns of ox.
Washing machine being used for making lassie.
6) Brand preference and loyalty:- the people in rural market will not
give preference for brand products but they give importance for loyalty of
the product. 80% of the sale is branded items in 16 product category.
Q3) what are the factors influencing Rural marketing operations?
ANS: - All business operations revolve around understanding customer
needs, desires likes and preference and offering products and services that
will give desired satisfaction to the consumers.

FACTORS INFLUENCING OR CONTRIBUTING CONSUMER

BEHAVIOUR:-

a)
c)
d)
e)
f)

Environmental
Cultural
Social
Personal
Psychological

a) Environmental :I. Economic factors:The agricultural and rural development has

enabled our country to achieve self sufficiency in food
production and we are now exporting a variety of agricultural
commodities to foreign countries. Favorable monsoons during
the last 10 years have let to increase in crop yields and rural
income. In addition, diversification of a agriculture, development
of village industries, migration of rural people into cities,
remittance of money, family members settled abroad have
increased income level and buying power of villagers.
II. Political factors:The government have taken initiative for
economic development of rural areas and have invested heavily
in agriculture, irrigation, electricity, khadi and village industries
and infra structure facilities such as roads, communication,
hospitals, school, and banking. The initiatives certainly let to
rural prosperity and opportunities for the marketers.
III.

IV.

Technological development:The rapid expansion of telecommunication facilities

and mobile phone has provided opportunities for rural people to
keep in touch with men and markets. Development of TV
networks and reasonable channels has enabled the marketers to
pass on message about product and services to rural people. In
rural areas especially in large villagers and villagers near to
towns and cities, children and youth have accused to information
such as job opportunities, national news, weather conditions,
bank loans etc..IT and internet are sure to spread up exchange of
information in rural india though at a slower rate compare to
urban market
Legal :The government has come out with legislative
measures to protect the interest of consumers some of the

important ones are:-

a. Money lenders:The money lenders advance long term loans against

security of land over period of time manipulate the records and seize the
land. The government protects the assets of farmers from money
lenders.

b. Consumer protection act:Consumer protection act provides protecting the

rights and interest of consumers and we have a quasi judicial machinery
operating at 3 levels i.e. district forum, state and national forum.
V. Cultural factors:a) Culture and sub culture :Culture represents an overall heritage a distinctive
form of environmental adaption by whole society of people culture is a
system of shared beliefs and customs that influence the behavior of
consumers. Traditional life, traditional occupation, traditional beliefs are
the features of rural life.
Culture provides people with a sense of identity and
an acceptable behavior with in a society. Technological advances
education and travel have considerable influence on culture and change
the rural life style. Culture offers direction and guidance to the members
of a society in all facets of life. It provides methods of satisfying
physiological, personal and social needs.
b) Sub culture:It exists within the dominant culture, with its own set
of values, beliefs and attitudes and behavior pattern. The pattern of
behavior would vary between north and south even in rural areas.
c) Social class:Consumer behavior is determine by social class to
which they belong and is determine by a combination of factors like
education, occupation, income and assets. It is seen that over a period of
10years there has been considerable reduction in the per culture of
destitute and increase in other social classes in rural areas. This is a
positive indication of the growing rural market in our country.
VI. Social
factors:-a)
Family:Family is a group of persons related by blood, marriage or
adoption who reside together. It is basic social group and consists of
rd

individual known as members. The 3 generation family is very

common in rural areas. The head of the family provides economic
security to family members. The members of family play different roles
such as influencer decider and purchaser is the buying process. Personal

values, attitudes and buying habits have been shaped by family

influences. Family life cycle also influences.
b) Reference group:It includes family and friends with whom an
individual interacts on a face to face basis. Word of mouth
communication is a process by which the messages are passed within
group from one member to another member. The consumer develops
positive opinion towards a product or service based on admiration
(cricket players), aspiration (film stars) or empathy. The consumer thinks
that if he uses it, it must be good if use it, I will be like him.
VII. Personal factors:a) Age and life
cycle:Life cycle of a person began with child birth, move to
infancy, teenage, adult, middle age, old, and then ends with death. Under
each stage buying behavior is different.
b) Occupation:About 500 millions of population depends upon agriculture
for a living. Income from agriculture is a seasonal and therefore demand
particularly consumer durables is high during post harvested period and
festivals. Many farmers have diversified into fish culture and small scale
industries in order to reduce their dependence on forming and to ensure
regular income. This leads to increase the demand for consumer
durables.
c) Economic circumstance:-Rural income is seasonal compare to an urban consumer
who receives regular income regarding saving habits, traditionally rural
people prefer to invest in jewelry and fixed deposits in banks and posts
offices. A farmer would like to invest these funds for development of
agriculture and buying lands. Another interesting observation is that for
the same income level, a rural consumer has relatively high disposable
income.
d) Life style:Life style studies how people spend their money and time in
day to day activities. The life style dimensions are activities and
demographic features such as age, gender, occupation, education, and
income. Rural consumes prefer to spend, spare time, in activities. Such
as visiting meals i.e. commodity and religious fairs, companys can use
such meeting places for product promotion.
e) Personality and self concept:Personality is a unique combination of different
individual characteristics. We find that many individuals are similar in
terms of one or more characteristics, but they are not alike in all
characteristics. Personality is a combination of factors such as
sociability, self confidence and dominance. Personality influences in
many ways.

VIII. Psychological
factors:-a)
Motivation:When a buyer purchases a product or service, he has a
reason. Motive is a strong felling, desire or emotion that makes the
buyer to take decision to buy every human activity is a result of
motivation. Each person is motivated by his needs and satisfaction of
one need shows that rural consumers are satisfied by meeting the 2needs
i.e. physical and security need, where as urban consumers would like to
satisfy social and needs .
Motives can be also classified as psychological and psychogenic
motives. In rural areas there exits large population consisting of
agricultural laborer, small and marginal farmers, petty traders
who have very limited income and their needs are very basic i.e.
food clothing and shelter.
b) Perception:All consumers are not alike; they see the world in
their own special ways. For instance, all the members of the
family have viewed a particular advertisement in different ways.
This is because needs, wants, values attitudes and personal
experience vary from person to person. Similarly, consumers
perception means what he thinks about the product, producer or
the brand. Consumers action, buying habits, consumption habits
are based on perception and therefore the motor should have
good understanding of perception of consumers.
c) Learning:It is a process of acquiring knowledge about
products, product benefits, method of usage and maintenance and
also disposal of the products considering low literacy, low
awareness, the marketers have to educate the consumers through
rural- specific promotion media and methods.
d) Belies and attitudes:In general attitude is a state of mind or feeling.
Attitude indicates our feeling about a product, service, brand and
shop whether we are positively or negatively disposed towards
the object or class of objects. Consumer attitudes or composed of
beliefs, feelings and behavior intentions towards a product, brand
or store.
Belief may be positive, negative or neutral. The
belief that consumer hold need not be correct. Consumers also
hold certain feelings towards product and these feelings are based
on the beliefs.
Examples:-

1) Many rural consumers belief that cool drinks are harmful and they prefer
lime juice, butter milk etc.. Change of attitudes and beliefs is very low in

the case of rural consumers. Once he is convinced, he will continue to

use the product and become a loyal consumer.
2) Majority of lower and middle income group continue to use lifeboy and
soap and about 70% of the sales of the life boy is in rural and semi urban
areas.

CHAPTER-3. RURAL MARKET

SEGMENTATION
Market segmentation means dividing heterogeneous market into homogeneous
sub units into homogenous sub units here heterogeneous means consider the
market as a whole and refers mass marketing. Homogeneous sub units means
which have similar tastes and preferences but not the same tastes and
preferences.
Rural market segmentation is mainly based on demographic factors. The
division is based on the premises the different people have different preferences.
The following are the basic market preferences:-

Homogeneous preferences where consumers have roughly the same

preferences.
Diffused preferences where consumers are scattered throughout the
market by their preferences.
Clustered preferences were consumers are found in distinct preference
groups.

Degree of segmentation:The segmentation is considered as a process with two polar points from zero
to complete, four distinct segment approaches are identifiable as follows
o.s
Type

Zero
Mass marketing

Approach Considers
people
as a bunch

Segment
marketing
all Identitys people
as a differing
group

Niche
marketing
Serves very few
groups
of
people

Micro marketing
Focus
individuals
are very
groups

Mass marketing:th

In the early period of the 20 century many companies practiced mass

production and mass distribution as economics evolved as economy evolved and
societies became civilised, consumer choice and requirements came into focus
until now the rural market was considered as homogeneous mass as worse the
Indian market till some 20 years ago. Some companies depend on mass
marketing while many do not.

Segment marketing:The principle of segment marketing rests on the realisation that buyers differ
in their needs, wants, demands and behaviours. The need for segment marketing

on
small

arises when

Consumers have become more diverse, sophistically and choosy.

Competition has become tuff.

Niche marketing:A niche is very small group with a different set of traits, who seek a special
combination of benefits. Niche marketing identifies special sub groups within
larger segments and offers different products and services.

Micro marketing:Micro marketing involves tailoring products and programs to suet the taste of
specific locations and individuals. It includes local marketing and individual
marketing.

Local marketing:- It involves in the programs to suit the taste of specific

locations and wants of local groups on a geographical bases.
Individual marketing:- Individual market is customized marketing or one
to one marketing. Tailoring unitshotels, tourist operators provide
individualised services for example building contractors builds houses of
flats to specific requirements of customers.

Types of rural market segmentation:Demographic factors:Demographic factors are taken into detailed consideration for market
segmentation of consumer goods and fast moving consumer goods (FMCG). In
case of rural marketing i.e. to sell outside goods in rural areas, demography
came into the picture. However the categories are much reduced. Some of the
segmentations are as below.

Occupational segmentation(or)sociological segmentation:This segmentation is based on economy vice categorisation. This reflects the
purchasing power of a farmer and therefore the purchase power of his family
they are

Artisans, farm labourers

Small farmers
Tenant farmers
Medium level farmers
Large farmers
Very large farmers, zamindars

Artisans and others

This covers carpenters, blacksmiths, handy-crafts, people are unemployed.

Tenant farmers

Working on rented land to share the crops with owners of the land.

Small farmers
Who own small farms are jointly owned farms for getting food.

Medium level farmers

Who own small farms are jointly owned farms for getting food.

Large farmers(or)rich farmers

Who have large lands and all local leaders they spend types in urban areas
and doing other occupation.

Very large farmers, land lords(or)zamindars

Zamindars, rich money lenders and business men who owned big size lands and
maintain large size farm labour. Normally they spend time in nearby urban areas
with politicians.
From the above the small farmers and tenant farmers will struggle for basic
needs but the medium level farmers struggle for comforts. But the large farmers
will not struggle for basic needs and comforts.
So the marketers target only large farmers and very large farmers for
segmenting the market.

Thomson rural market index(TRMI)segmentation

Hindustan Thomson associates ltd developed a guide to market segmentation
in 1972 and revised it in 1986. They collected data in 335 districts based on 26
variables finally they arrived on 10 selected variables having strong co-relation
to rural market potential.

Agricultural labourers
Gross cropped area
Gross irrigated area
Area under non-food crops
pump sets.

Fertilisers consumption

Tractors
Rural credit
Rural deposits
& village electrified.
Based on these factors, the districts are classified as A,B,C,D&E. Which

are in order of high potential market to low potential market.

LINQUEST
This method is software developed by initiative media on data along
the following parameters

Demographic
Agriculture
Income.
Literacy &
Civic amends.

As per the product to be launched, the marketer would be interested in

certain parameters like literacy levels, income levels, bank deposits,
accessibility (rail, road, and schools etc). in the software the marketer can give
weighted average to different factors for Eg:- To launch new audio cassette
recorders, parameters could be villages above 1000 population and monthly
income 2000 and distance from nearest towns within 30kms.

CHAPTER- 4. PRODCUT
STRETEGY
PRODCUT STRETEGY FOR RURAL MARKETS
1. Small Unit Packaging
Small packs are preferred due to the following reasons:
1. Small packs help the rural consumer to pick the product at affordable
price.
2. Individual use products like shampoo; toilet soaps, etc. are bought in
smaller size.
3. Small packs are easy to display and they increase the visual appeal.
4. Small packs are convenient to retailer to do his business.
Example:
1. Cavin Kare introduced shampoo in 4 ml sachets at 0.50 paise.
2. Rasna is now available in sachet at Re. 1
3. Ponds introduced 20 gm talcum powder
4. Tiger biscuit is available in four biscuits pack at Re. 1
2. New Product Design
The products are designed as per the rural lifestyle.
Example:
1. PVC shoes and chappals are designed to work in adverse conditions.
2. LG electronics launched Sampoorna TV that can withstand power
fluctuations.
3. Philips introduced small refrigerators especially for rural consumers.
3. Sturdy Products
Sturdiness of a product is an important factor for rural consumers. The rural
consumers believe that heavier the, higher he power and durability.
Example:
1. Bullet motorcycle is popular in village due to its ruggedness.
2. Escorts has positioned their motorcycle Rajdoot as a tough vehicle.
3. Rural consumer prefer dry battery cell, which are heavy.
4. Utility Oriented Products
Rural consumers are more concerned with the utility of the product and its
appearance.
Example:

1. Philips introduced low cost radio Bahadur with only medium wave
receiver, which was failed and fund that rural consumer purchase
radio not only for news but also for entertainment.
5. Brand Name
Rural consumers are more brand loyalists than urban consumer. The brand
name should instantly be understood by the rural consumers. Rural
consumers are unfamiliar with English and absurd names. More preferably
rural brand is a symbol, logo or color.
Example:
1. Everyday battery with a cat symbol rural consumers remember it as
billi wali battery.
2. Lifebuoy soap rural consumers remember it as lal saboon
3. Mahindra tractors brand Bhumiputra
4. Slogan of Red Label Tea jiyo mere lal proved very effective to
promote sale.
DUPLICATE AND COUNTERFEIT PRODUCTS IN RURAL
MARKET
Spurious products are the copy of established brand name at a cost of few
thousand rupees and sold it in the rural market. This duplication takes place
in all sectors and especially in FMCG, food items and medicines.
Counterfeiting is a kind of duplication where the fake products bear the
identical name of the original product, its packaging, graphics, color pattern,
design and even same name and address as the genuine manufacturer. A
pass-off product is one that comes with a few minor changes from the
original product. The slight changes are made to avoid legal problems.
Example:
Head and Shower Head and Shoulder
Pantane Pantene
Sunmilk Sunsilk
Lifebuoy Loveboy
Climik Plus Clinic Plus
Parla G Parle G
Vikas Vicks

CHAPTER 5. PRICING STRATEGY

PRICING
1. Low Cost Products
Rural customer is price conscious manly because of low income. The price
can be kept low, by low unit packaging. This is a common strategy adopted

by many companies marketing in rural areas. Example same as of small

unit packs.
2. Application of Value Engineering
The aim of value engineering is to reduce the value of the product so that a
larger segment of population can afford it to buy.
Example:
1. Soya protein can be used instead of milk protein, nutrition content of
both is same but the soya protein is cheaper then milk protein.
3. Refill / Reusable Packaging
Refill packs benefits the rural consumers in terms of price and also the
packaging material should be reusable in rural areas.
Example Many farmers demand for fertilizers packed in LDPE or HDPE
sacks. They feel that they get sacks free of cost by purchasing fertilizers.
4. Discounts
In order to motivate the rural retailer to sell more, a discount of 5-10% is
given on the MRP particularly in case of FMC goods.
5. Promotional Schemes
Rural consumer normally buys household articles during festivals like Eid,
Diwali, and Pongal etc. special promotional schemes could be introduced on
such occasions like exchange offers, special discounts, etc.
RURAL PRICING OBJECTIVES
1. Deeper penetration of market: Basically rural markets are adopted
for deeper penetration and expansion because of its size. Hence the
pricing objectives are different for rural and urban markets. E.g. VIM
washing bar is Rs. 15 (400 gm) in the urban market but it is offered
for Rs. 4 (200 gm) in rural markets.
2. Long run profit maximisation: A company enters in rural market
should wait for success in long run. Hence penetration-pricing
strategy is the best option.
3. Recover distribution cost: The pricing objective of a rural marketer
should recover the costs involved in distribution alongwith
production cost and dealer margin.
4. Competing pricing: Rural marketer should study the pricing strategy
of its competitors and accordingly fix its prices.
5. Increaser sales and market share: The pricing objectives should be
such that it boosts the sales in rural markets. E.g. Anchor white
toothpaste launched with much lower price than the leading brands
and captured the market.
CONSUMER CATEGORIES
1. Quality Conscious Consumers They are very rich and are mainly
concerned with quality of the products and services
Pricing Methods:

1. Discriminatory Pricing charging different customer groups

differently.
2. Skimming pricing Charging high prices at initial level, E.g. P&G
launched Tide detergent at high price and then reduced it lower than
other brands.
1. Value Conscious Customers They are of middle class and are
mainly concerned with functional benefits and value for money
Pricing Methods:
1. Penetration Pricing Charging low prices at initial level then
increasing gradually when brand name has been established. E.g.
Maggie noodles, Vicks, Rin detergent.
2. Value Pricing Setting the price reasonably lower than the
competitors price.
1. Price Conscious Customers They are climbers, aspirants and
destitutes. They watch for promotional offers and purchase cheap or
fake products.
Pricing Methods:
1. Psychological Pricing Psychological pricing is one that ends in an
odd number e.g. Rs. 99.95. It conveys two notions to consumer that
there is a discount or bargain and it belongs to lower price category.
2. Promotional Pricing It includes mini packs, price-off, special
discounts, credit facilities etc.

CHAPTER. 6 PROMOTIONAL
STRATEGIES
Qualities Required for a Rural Sales Person
1. Knowledge of local language
2. Willingness to get located in villages
3. Cultural Congruence: Rural salesman must have proper
acquaintance with the cultural pattern of rural life.
4. Attitudes: Rural salesman must have patience as their customers are
traditional and conscious, it will not be possible to clinch the sales
quickly. He may have to spend lot of time with customer and make
several visits to gain favourable response.

5. Capacity to handle number of products lines: Rural salesman

usually does not generate economic value of business if he handles
few products. He is required to handle much large number of
products lines as compared to urban salesman.
6. Greater Creativity: Rural marketing involves greater creativity. If the
product is very new in the rural context, He has to introduce it using
consumption pioneers and opinion leaders.
ALTERNATIVE MEDIA FOR RURAL COMMUNICATION
A] Formal Organised Media
1. Newspapers and Magazines: Local language newspapers and
magazines are popular among educated rural families. E.g. Dina
Thanthi in Tamilnadu, Punjab Kesri in North and Loksatta in
Maharashtra.
2. TV: About 77% of villages receive TV transmission and 27% of rural
people actually watch TV. Regional channel is very popular like SUN
TV in Tamilnadu and Asianet in Kerala.
3. Cinema: About 29% of rural people watch cinema as regular
lifestyle. Short feature films with advertisement message, Ad-films
and documentaries that combine knowledge and advertisement are
useful for rural communication.
4. Radio: It is a well-established medium in rural areas. Radio reaches
large rural population at low cost.
5. * Point Of Purchase: Point of purchase or point of sale is popular
promotional tool used in rural market. POPs should be especially
designed to suit rural requirements. POPs. Colors, symbols and
pictures should be used more than the written words.
6. Outdoors: Outdoors such as hoardings, wall paintings, illuminations
and other displays are also now being used for rural communication.
B] Rural Specific Media
1. Music Records: It is an inexpensive medium. On complete language
group can be reached on a low budget through cassettes that can be
played in the place where rural people gathered.
2. *Puppetry: Puppetry is the indigenous theatre of India; it has been
mot popular form of entertainment available to the village people.
The performer uses puppets as a medium to communicate, ideas,
values and social messages. Example:
1. Sounds and drama division of the government of India used
puppets to promote various government projects.
2. LIC used puppets to educate rural masses about jeevan
beema in Lucknow.
Types of Puppet Theatre in India
States
Rajasthan

Type of Puppet
Kathputli

Content
Prithvi Raj Chauhan, Amar Singh

Orissa
Bengal
Chennai & Andhra Pradesh
Orissa, Kerala, Karnataka

String Puppet
Rod Puppet
String/Rod Puppet
Shadow Puppet

Rathod
Radha Krishna
Mahabharat, Radha Krishna
Lathakali
Ramayana

1. Folk Theater: Folk theatre is mainly short and rhythmic in form. It

has been used as an effective medium for social protest against
injustice and exploitation.
2. Interpersonal Media: In many cases, rural people prefer face-to-face
communication than mass communication. A firm can contact with
audience through fairs & festivals, folk, etc.
3. Group Meeting: It is a component of interpersonal media. Salesman
can effectively convey the product message at these meetings.
Demonstration of products can also be carried out.
4. House-to-House Campaign: In these campaigns, promotional staff
makes house-to-house visits in rural areas. This is different from
door-to-door selling campaigns. Promotion staff does not sell the
products, they only propagate the products.
5. *Field Demonstrations:
6. *AV Vans: AV van is a comprehensive mobile promotion station. The
van can be used for sales campaign in addition to promotion
campaigns. AV van exhibits films, audiovisual presentations, slide
shows etc. It is very popular with rural marketing firms particularly
agro business firms. AV van is very effective tool in rural
communication but its cost is very high as the target population is
very high.
7. *Syndicated AV Vans: It is an AV van publicity service provided by
the independent agencies. Firms, which cannot afford to have their
own publicity van, can utilise the syndicate van services.
8. Stalls, Haats, Meals: These are useful media of rural communication
to spread the message and to induce brand trials.
9. Wall Paintings: The speech or the film comes to an end but the
paintings stay as long as whether allows it to stay. The retailer usually
paints its shops wall and name board which acts as a status symbol
10. Use of Logos and Symbols: Illiterate villagers would remember
brands only by picture, symbols more than the name.
11. Use of Information Technology: ITC developed a web portal in
regional languages to provide information to the farmers about the
products and services which they need in order to enhance farm
productivity, information on whether, scientific practices, market
prices etc.
12. Focus on Reference Groups: They are the opinion leaders and are
the key persons of the village e.g. Sir Punch, Gram Sevak, Teachers,

Doctors etc. These people should be taken into consideration while

chalking the rural communication.
Constraints in Rural Communication
1. Low Literacy Rate: Due to low literacy level, the written words have
limited use in rural communication.
2. Low Spending Capacity: Due to low disposable income, they cannot
buy radio & TV
3. Joint Families and Strong Kinship Ties: Rural people live in joint
families where females depend on their males for information
regarding various products. So it becomes difficult to reach female
consumers directly.
4. Linguistic and Socio-cultural Differences: Number of languages
and different cultural and social norms creating problems for
marketers in designing the messages, as mass media in one particular
language doesnt work for entire rural population.
5. Unique Media Habits: Media habits of villagers are such that the
newspapers are found mostly at groceries shop, tea stall etc.
Magazines are not read at all. The household press subscription is
almost absent.
6. Situation Based Leisure Time Activities: Farmers has to work during
nighttime and odd hours also. It is difficult to find the leisure time for
communication.
7. Expensive Communication: For rural communication to be effective,
repeat exposure is a must otherwise the message loss its effect during
gap periods. This makes rural communication more expensive.
8. Poor Infrastructure: Due to the lack of roads and telecom facilities
reaching rural audience is very difficult. TV viewer-ship is affected
by uncertain supply of electricity.
9. Lack of Research Data: Decisions regarding messages and media
mix for rural communication depends only on sales force and
distributors, which is insufficient.
10. Selective Attention: Rural people select the messages that are have in
their interest and ignore others.

CHAPTER 7 - DITRIBUTION STRATEGY

METHODS OF DISTRIBUTION
1. Stockists Van / Company Owned Vehicles: In this system, a
salesman loads the van with stocks and from the company stock point
and distribute in the surrounding market. Then he moves the next
stock point and covers all surrounding markets. In this way he moves
from one stock point to another and returns to companys stock point.
It is the best but an expensive method.
2. Hired Vehicles: In this system, the salesman hire a public carrier like
a taxi or a truck. The disadvantage of this system is that the salesman
has to spend lot of time in organizing transport.
3. Working by Independent Stockist: In this system, inspite of having
salesman, company gives this job to the stockist. Each stockist is
asked to cover his surrounding market. It is useful only to companies
with high volume turnover.
4. Selling Through Bullock Cart / Camel: This is used to market in
remote villages with no motorable roads. In this system the number
of outlets covered is limited because of slow transportation.
5. Appointment of Primary Dealers: Here a big retailer in a village is
appointed as a primary dealer ad is asked to purchase the goods from
nearby stockist with a special discount.
6. Using Urban Wholesalers: Company can ask the urban wholesaler to
recommend and sell its products through their rural retailers. In
return, company gives them 1% incentives on actual sales made.
PROBLEMS OF RURAL DITRIBUTION
1. Transportation Problems: (from Constraints in Rural Marketing)

2. Warehousing Problems: (from Constraints in Rural Marketing)

3. Communication Problems: (from Constraints in Rural Marketing)
4. Non-Availability of Dealers: (from Constraints in Rural Marketing)
5. Greater Dependence on Dealers: Scope of manufacturers direct
outlets in rural market is limited; it is expensive as well as
unmanageable. Thus firms have to depend on large network of
intermediaries, controlling of which is a difficult task.
6. Higher Cost and Administrative Problems: Distribution chain in the
rural context requires large number of tires including village level
shopkeeper, mandi level distributor and wholesaler in town. Such
multiple tiers and scattered outfits increase the costs and make
channel management difficult.
7. Poor Viability of Retail Outlets: Retail outlets suffer from poor
viability because the business volume is not adequate enough to
sustain the profitability.
RURAL RETAILER BEHAVIOUR
1. Seasonal Pattern: There is particular seasonal pattern in stock
holding of rural retailer. During the harvest he stocks variety of
consumer goods, because the main buying season in rural areas is
during harvest.
2. Transfer of Capital: When the harvest is over and cash is realized,
the retailers invest in inventories for his shop.
3. Credit Pattern: Credits offered to consumers by retailers is different
from area to area. Normally consumers have a running credit with a
part of outstanding is paid every month and the balance is paid during
the harvest.
4. Purchasing Cycle: In high turnover feeder villages, the retailers
make purchases 3 to 4 times a week from urban wholesaler. In other
villages they buy once a week or fortnightly.
Multiplier Effect of Rural Demand
Once a product gains acceptance in rural markets, the rural retailer put this
item on his shopping list when visiting the wholesaler in the nearby town.
This action by the rural retailer starts a chain reaction with the urban
wholesaler; once the urban wholesaler knows that for such a product a rural
demand is possible, he will start stocking this product and will recommend
and push this product to other rural retailers. These rural retailers will in turn,
sell to smaller retailers of smaller villages. In this way a multiplier effect
create in rural demand.

CHAPTER 8- BRANDING
Branding is a practise of giving specified name the specified name creates
individuality in the product and it can be easily recognised from rival product
the term brand is broadly applied to all identifying such as trade names,
trademarks trade symbols etc e.g.:- pepsi, lifeboy are brand names it is
recognisable by sight but hes not normally pronounceable.
The rural consumer likes to stick to brands that give value for money

Importance of branding
1. Branded product can be easily recognised by the customer in the retail
shop it offers protection to the consumer as it identifies the firm behind
the product.
2. Branding enables the firm assured control over market. It creates an
exclusive market for the product.
3. If a firm has one or more lines of branded goods it can had a new item to
its list easily & the new item can enjoy all the advantages of branding
immediately.

Characteristic of branding
Attributes &benefits:Brands of a product plays an important role to attract the rural customers
because they mostly believe in the brands, just by seeing branded products they
will purchase assuming that they will be satisfied by product.

Values :By seeing the brand the customers will consider the performance of the
product and the safety of the product some customers felt that prestige while
purchasing the branded products.

Culture:By seeing the brand the customer assumes the product is efficient and they
also assumes high quality.

Personality:The person who is using that product

Types of brands
1. Individual brand name
Each product has a special and unique brand name the manufacturer
has to promote each individual brand in the market separately this
creates a practical difficulty in promotion otherwise it is best marketing
strategy eg:- surf, cinthol, chik shampoo etc.

2. Family brand name

Family name is limited to one line of a product i.e. products which
complete same cycles family brand name can help combined advertising
and sales promotion however if one member of the family brand is
rejected by the consumers or customers the prestige of all under the
family brand may be adversely affected. The manufacturers have to take
extraordinary care to guard against the danger family brand name
enables creation of strong shelf. It helps to secure quick popularity it is
preferable to have separate brands for each product for eg:-amul for
milk products, pounds for cosmetics etc

3. Umbrella brand name

We may all products such as chemicals, engineering goods,
automobiles etc. Manufactured by the Tata concerns will have the Tata
as one umbrella brand such a device will also obtain low promotion cost
and minimise however experience in any of the line of products, a
solitary failure may be very dangerous to the rest of the products sold by
a particular business house under umbrella brand.

4. Combination device
Data house is using combination device each product has individual
name to indicate the business house producing the product eg:- Tata
Indica, side by side with the product image we have the image of the
organisation also many companies use this device profitably.

5. Private or middlemans brand

Branding can be done by manufacturers or distributors such as
wholesalers, large retailers. In India this practise is popular in the
wooden, sport goods and searches other industries it helps small
manufacturers who have to rely on the middlemen for marketing. It is
also used by big manufacturers the manufacturer merely produce goods
as per specifications and requirements of distributors and he need not
worry about marketing. Manufacturers make both national and private
or middleman brands. Consumers of the private or dealers brand.

Some of the brand names that have created lasting impact on rural consumers
are as follows:

Every day batteries:Battery with cat as a symbol

Lifeboy
Asian paints mascot
Dabur chawan prakash
Parle
Parachute
Amul
Zandubalm
Tata salt
Nirma
Textile:Chermas, Kumar shirts.

Brand awareness in rural marketing

Product development:
The rural market is a fast growing one and
has a huge population with a great level of disposable income to encase this;
products have to be specifically developed to meet the creeds of rural market
sometimes existing products might have to be modified to suit these markets too
accordingly.
Rural product development has a strong edifice
on a great deal of research like feasibility, studies, rural aspiration and soon.
This paves way for a great deal of infra structure and expertise in this area.

Rural branding:Rural branding bears quit different from urban branding. The
first step towards rural branding is to search and gain insight into the working of
rural markets. Based on this communication campaigns products have to be
developed with a lot of rural sensitivity.

Rural market research:rural market behave most differently from urban

markets. While many marketers have tried to market their products in rural
areas. Just a hand full of sum only has succeeded. A strong insight into rural
consumer behaviour and sensitivity to their values and beliefs is essential to
upgrade the rural market research not just gathering data but analyzing them and
linking the findings to promoting their products. Rural communication
campaigns communication for rural markets calls for a different kind of outlook.
There must be a strong ascent on helping the target relate to message. The entire
communication and media strategy has to device a system based on research
findings. These have to be developed in the regional languages and set in the

local culture for easier acceptance and reach to the customers. Besides mass and
outdoor media rural

extravaganza (cultures) like temple, festival, melas, and other events where the
villagers come together can be used for promotions.

Rural events: Inthe rural context, one of the best ways to capture the attention of
the audience is through event management. Since rural areas have limited venues for
entertainment, conducting an event in rural areas can bring a good response..

Rural direct marketing campaigns: Direct marketing is one of the most

powerful ways to meet the targets and build product awareness as well as promotion.
The success of any direct marketing campaigns depends on the field workers and their
sensitivity and emotional connectivity to rural markets.

Data base creation and management:Marketing branding and promotional

activities in rural context can be highly effective and thereafter have to create a
database of prospects. This data is essential for marketers to reach their target
accurately and helps marketing plan and communication strategies.

CHAPTER 9- MARKETING OF
CONSUMER DURABLES AND
NON-DURABLES
Introduction
India is the second largest consumer market in the world. With over 1
billion potential customers, it comes as no surprise why consumer goods
companies see India as fertile ground for expansion and growth. The National
Council for Applied Economic Research (NCAER) published a study on
consumer behaviour and purchasing power in India. The NCAER classified
Indian consumers by their propensity to consume. At the lower end of the scale
(the destitute and aspirants) are consumers who are in the market for
manufactured essential consumables and basic durables. At the top end of the
scale (the Very Rich) is a relatively small but rapidly growing segment for
branded international products ranging from automobiles and electronics to
cosmetics and garments, often at international prices. The middle segment
(majority of the consumers and the climbers) is highly differentiated, and price
sensitive, requiring a targeted approach to product design and pricing. Over the
years, the bottom layer is expected to narrow further while the top level is
expected to expand.
Structural attractiveness is more for rural markets compared to urban
due to following reasons:

Market growth rate is faster

Low product penetration

Increasing purchasing power

It is unsaturated

A. Rural market growth rate is high as compared to urban market

B. Purchasing power of the rural masses is continuously increasing due to
various reasons like better irrigation facilities, use of fertilizers, and
conversion of baron land into fertile one etc. All these factors leads to
increase in yields resulting in the increase of more disposable income with
farmers hence more purchasing power.
C. Saturation of urban market: Due to intense competition into urban sector it
is observed that in most of the product categories have reached saturation
levels. To survive, company has to switch to new markets. Rural market is

an opportunity for these companies. According to one study the penetration

level of consumer product is very less in rural areas. Companies should
take this as a marketing opportunity. For example, only three out of 10
people in rural areas of India use toothpaste or talcum powder; or shampoo
and skin care products; and only six use washing powder. Even in
categories with high penetration, such as soaps, consumption is one per
five bathing occasions. Till 1999, HLL was able to reach 13 million village
households. To succeed in India, consumer goods companies will need to
effectively market to the large and currently under penetrated rural
population.
The Indian rural market with its vast size and demand base, offers a
huge opportunity that companies 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 successive good monsoons and the increase
in agricultural output to 200 m
million tonnes in 1991, rural India has a large consuming base with 41 per cent
of Indias 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-wheelers purchased.
One third of the premium luxury goods are now sold in the rural
market. Two thirds of the middle-income households are now in the rural
market. According to one study, if the rural income in India goes up by 1%,
there would be a corresponding increase of about Rs. 10,000 crores in the
buying power.
VALUE EQUATION

Perceived value =

Core benefit delivered by the product

Product price

As per above equation the companies can increase value by two

methods one by increasing the product benefit and charging some premium
on price, but it is observed that particularly in urban market as the competition
is intense customers can switch to alternative cheap products that will affect
the margins. Many companies now-a-days are adopting second strategy i.e.
cutting down the product prices, the question of volume can be solved by
targeting the rural market where the product penetration is very low. So in the
long run the margin of the product may be affected but that can be
compensated by
BEING INNOVATIVE FOR FASTER PENETRATION
Though rural market growth rate is high and backed by low level of
product penetration, yet the companies have to adopt innovative marketing

strategies for faster market penetration. Secondly, as the rural customers are
different in their behaviour than their urban counterpart, companies have to
adopt innovative strategies. Companies who adopted same strategies as
adopted in the urban market, miserably failed in the rural market.

CHARACTERISTICS OF INDIAN RURAL MARKET: INDIAS

CONSUMING
CLASS
Estimated households

Structure of the Indian consumer market

by annual income

(1995-96)

Annual

Annual

Number of
households (in

income

No. of

income

(in Rs.) at

households

(in Rs.) at

1994-95

(in million)

1994-95

prices
< 25,000

million)
Urban

Rural

Total

Destitute

5.3

27.7

33.0

Aspirants

7.1

36.9

44.0

Climbers

16.8

37.3

54.1

prices
80.7

25,001-

< 16,000
16,001-

50.4
50,000

22,000

50,001-

22,00119.7

77,000

Classification

45,000

77,001-

45,0018.2

106,000

215,000

>

>
5.8

106,000

Consumers

16.6

15.9

32.5

The rich

0.8

0.4

1.2

215,000

Total no.
of
Total no.
of
househol househol
ds: 164.9 ds

46.6

118.2 164.8

million
Source: National council of applied Economic Research (NCAER). The above
presentation has been slightly modified by indiaonestop.com
The NCAER study also highlights that the key to growth lies in the
rural areas, where over 70% of Indians live. The chart above indicates that
rural consumers and climbers together, make up over 60% of total
households in India. The rise of the rural market in India has been the most
important marketing phenomenon of the nineties, providing volume growth to
all leading consumer goods companies. Higher rural incomes driven by
agricultural growth, increasing enrolment in primary education, and high
penetration of television and other mass media, have induced the propensity to
consume branded and value-added products in rural areas.
INNOVATIVE
MARKETING

MARKETING

STRATEGIES

FOR

RURAL

Strategic marketing decision (What to do?)

1. Strategies regarding product positioning: Product positioning
plays a very crucial role. Marketer has to position their products after
understanding the unique characteristics of the rural market environment in
India. These are broadly as follows:

Low per capita income

Lack of formal retail and distribution network

Relative cheapness of labour

Positioning involves three tasks-

 Identifying the differences of the offer vis--vis competitors offers.

Selecting the differences that have greater competitive advantage.
Communicating such advantages effectively to the target audience.
Companies can reposition their existing products in rural markets. For
example, refrigerator manufacturing companies can launch a refrigerator of
bigger size because most of the families in rural areas are undivided big
families and require big refrigerators having bigger storage capacity.
Secondly in India most of the villages are facing acute shortage of
water; here companies can reposition a washing machine, which require less
water than any ordinary washing machine.
Here are few examples endorsing the above view point

Escort, which repositioned the old Rajdoot motorcycle as the rugged

durable bike good for village road with actor Dharmendra endorsing
the products in TV spots.

Godrejs new toilet soap lime light was launched with an ad campaign
design to appeal to dessi tastes complete with Hindi pop singer
Alisha Chinai doing a gypsy act.

Maharaja Appliances launched Bonus, a range of appliances

especially for the rural market in 1998.

Colgates 10 gm sachets of toothpaste were designed keeping the rural consumer in

mind.

IDE designed a low cost manual pump, branded KB (Krishna Bantu) priced at
just about Rs. 400 to Rs. 500 as against a minimum of Rs. 3000 for a
diesel/electric pump. It is for up to an acre of irrigation need of marginal or
even small farmer.

PRODUCT SEGMENTATION AND TARGETING

Right segmentation and targeting policies are key to success in rural market.
Segmentation can be done with one or more variables viz., demographic, geographic,
psychographic and behavioral.
A. Geographic: As the rural market is spread over a large area companies can
divided the market area into small sectors having some geographic similarity
to consolidate their distribution network.
B. Demographic: Market can be divided on the basis of income, education,
lifestyle, gender, marital status, family size, occupation and religion. Due to
unequal distribution of income, the Indian market for detergents is structurally
shown like a pyramid (from base to top-laundry soap, low price detergent mid
priced detergent and premium powders) HLL has wheel as a laundry soap, blue
wheel power and international wheel active power at the base, Rin Shakti
powder and bar, Sunlight powder and Super 501 bar at mid-price level and
international surf excel at the top end.
C. Psychographic: Market is divided into different segments like social class, life
style and personality. E.g. in some parts of Gujarat it is reported that farmers
are smaller, typically 25 hp to 30 hp ones. The reason, on further investigation
was the compulsion to keep up with the neighbours.
D. Behavioural: Following factors play important role to segment the market;
occasions, benefit sought, user status, usage rate, loyalty status, place and
product possession category.
INNOVATIVE MARKETING STRATEGIC DECISION (HOW TO DO?)
1. Product
Product plays an important role in strategic marketing decisions. Product
innovation is in fact key to success in rural market, developing indigenous products
that cater to the needs of rural consumers who demand quality products at an
affordable cost. This requires substantial R & D and marketing research to better
understand consumer behaviour and preference.
Case of marketing of shampoo in rural areas. Hair products were introduced
to rural India in an attempt to capitalize on a culture where women take hair grooming

extremely seriously. While rural women may wear faded saris and little jewelry, few
step out without ensuring that their hair is in place. Consumer goods companies
introduced a transplanted product from developed markets, the 2-in-1
shampoo/conditioner. Companies thought that women would be attracted to this
product because it was cost-effective; however, initial sales were dismal. What
companies failed to recognize is that most rural consumers had previously never used
shampoo and did not value or understand the full benefits of conditioner.
Several years back, Hindustan Lever focused on product development
strategies for rural consumers who still did not use shampoo in India. Their research
indicated that a prevailing consumer habit in rural India was to use soap for hair and
body care. Rather than try to change instilled consumer behaviour, product developer
focused on creating an opportunity consumers wanted; a product that was convenient
and low-cost. The result was a new 2-in-1 soap, a product that cleans the hair and
body, and is targeted towards consumers in rural areas.
Offering a variety of pack sizes at different prices has been one solution.
However, unlike developed markets, consumer goods companies have to be
particularly careful in developing their pricing strategy in developing countries such as
India. While daily sachets of products are affordable to the rural consumer, if quantity
discounts (common in developed markets) are large enough, street entrepreneurs will
purchase the family pack and retail it in loose form. The result is a lack of control
over the quality of the product, brand presentation, and pricing.
Most of global products that multinationals companies manufacture are
primarily for the tier one consumers* (Ref. Fig. No.-A) of the global markets. Those
global products are then also sold to the tier 4 consumers, with least thought given
whether those products are suitable for the tire 4 consumers. Inevitably, most of such
global products fail to fulfill the needs of tier 4 consumers. Other than medication,
most branded items luxuries. They ease or provide additional comforts and
conveniences, or establish a person as belonging to a specific milieu. To be
successful, companies need to nurture local markets and provide local solutions
depending on the culture and consumer habits of a particular market.
For example, FMCG companies to sell more in the rural India, they have to be
innovative in the delivery format. In India, the tier 4 consumers, because of higher
price, earlier did not often purchase the shampoos sold by MNCs. Buying in small
quantities is also practiced by the laborers in the urban areas of India who are being
paid on a weekly or daily basis. Many of them stay in single rooms or huts with little
space. Lack of cash and space makes these people to shop every day in small
quantities and hence single served sachets have become popular. Once the
multinational companies started selling shampoos in single-served sachets priced at 50
paise/Re. 1, the sales of shampoos have increased to the extent that 30% of the
personal care products are now sold in single-served packages. Sachets are no longer
restricted to shampoos only; they have penetrated to other products such as edible oil,
tea, jam etc. also. The sachets give these buyers an option of choosing different brands
without locking too much cash.
Products that cater to local needs: Philips, which has operated in India since

1933, did well selling colour TV sets years ago, when competition was slim. Sales in
rupee terms grew 22% a year on average between 1995 and 2001. Since then, that pace
has slowed by more than half. With more competitors jumping in 18 brands
available in India today, compared with just three in 1991- Philipss market share was
withering, even in the countryside.
So in early 2001, Philips decided to devise new products just for the rural
markets, like the wind-up radio. They used one speaker, instead of two, in the TV sets
sold outside cities to make them more affordable. The size of the TV cabinets,
meanwhile, was bumped up by about 10% over units sold in the cities to make the
sets look bigger. Rural consumers might be able to afford only a 14-inch or 20-inch
screen TV set, but they want something that looks substantial to show off to their
neighbours, says Suresh Sukumaran, marketing director for television sets at Philips.
The result is that rural sales have become the new driver of growth for Philips
in India. Last year, rural TV set sales grew 45%, while audio sales grew 14% at a
time when the overall audio market declined by 7.8%.
2. Price
Income variability: Indias wide income distribution implies that there exist
multiple segments with very different levels of purchasing power. The challenges for
consumer goods companies are to develop products that capture the entire spectrum
of potential consumers.
EXHIBIT D: DISTRIBUTION OF INCOME IN INDIA
Household category share

Annual income

Population size

Low income (59%)

Upto Rs. 22, 500

590 million

Lower middle income (25%)

22,500 to 45,000

250 million

Middle income (10%)

45,000 to 62,000

100 million

Upper-middle income (4%)

62,000 to 96,000

40 million

High income (2%)

Above Rs. 96,000

20 million

Source: National center for Applied Economic Research (NCAER) in India.

Focus on volume not margins
As we discussed the value equation in earlier part, the companies must
concentrate on the lower segment which is quite sizeable in number. Therefore, the
marketing strategies in rural India must be on large volumes over low margins and

thus the overall profitability can be maintained.

A significant portion of the rural population is paid daily wages. Daily wage
earners tend to have little stock of money, and, therefore, tend to make purchases only
to meet their daily needs. The implication is that pack size and price points are critical
to sales, and importantly, that rural consumers view the purchase-tradeoff dilemma
across a much wider range of product categories. As a result, the nature of competition
is much greater; a beverage manufacture is not only competing with other manufacture
in its category, but also with other products that consumers may consider one-off
luxury purchases such as shampoo.
Hindustan Lever, a subsidiary of Unilever coined the term sachet. In tiny
pillow-like plastic packets that contain about 20 millimeters of product, Unilever sells
shaving gel, dishwashing liquid and toothpaste, to name just a few items. The sachets
answer the needs of rural consumers who cannot, or are not used to, buying larger
sizes and enables them to buy on a more frequent basis. This strategy provides a viable
entry-level price for many rural consumers who want to try new products, and allows
companies to drive volume sales. Today, Hindustan Levers estimates- its shampoo
sachets are sold in around 400,000 of Indias 600,000 villages.
Lower prices: Many companies tend to bring their existing products at a much
higher price and follow marketing strategies that are not in sync with what is required
to sell to the consumer at the bottom of the pyramid. Hence, they end up serving the
high-end niche players. This is what happened to Kelloggs in India, when they
launched their breakfast cereals in the early 1990s. Only the high-end consumers with
high disposable income were able to afford Kelloggs cereals. Kelloggs never
succeeded in penetrating the Indian mass market because of its high price and the
company is losing money.
In reality, consumers in the tier 4 segment are highly price-conscious. This
gives the local or regional companies an edge over the MNCs in the tire 4 segment.
The success of Nirma is an example. In the late 1980s, Nirma started offering
detergent products and later toilet soaps for poor consumers mostly in the rural areas.
Today, the brand Nirma has become so popular among the tire 4 segments that it has
captured a market share of nearly 35% by value in the detergent segment and 20%
market share in the toilet soap segment. In cassettes, the T-series brand was extremely
successful with its low pricing and at the same time providing value with its more
songs per cassettee. Recently, Ratan Tata, Chairmen of Tata Group, has announced that
Tata is planning to manufacture a car made from different low cost components like
cycle parts, which would be priced at Rs. 100000. At such a price, it might be able to
expand the car market by attracting new customers with lower disposable income and
also by luring away some of the existent two wheeler users.
Creating buying power: For any product to sell, consumers need to have
disposable income. The consumers in tier 4 segment have desire to buy products, but
they do not have the purchasing capacity, as majority of the products are priced higher.
To meet their desires, companies need to take steps so that these customers could have
access to credit and have higher earning capacity. Many companies, however, might
argue that it is not their responsibility to increase the earning capacity of the

consumers to get access to credit. A few companies, however, proved it wrong. Way
back in 1920s, Henry ford increased the wages of his employees to increase the sales
of his Ford cars and he was successful.
Hindustan Lever Ltd. (HLL) the Indian subsidiary of unilever has started a
programme targeting villages with a population of less than 2000. Under the program,
the company provides self employment opportunities to villagers through Self-Help
groups (SHGs). SHGs operate like direct to home distributors wherein groups of 15-20
villagers who are below the poverty line (Rs. 750) are provided with an opportunity to
take micro-credit from banks. With the help of this money, villagers are able to buy
HLLs products and sell them to other villagers, thereby generating employment and
income for themselves and also increasing the reach of HLLs products.
Generally, the poor have difficulty in getting access to commercial credit, as
the traditional banking system does not normally lend money without collateral
security. However, some institutions, like the Grameen Bank in Bangladesh, are
helping the poor to access money through innovative solutions such as micro lending.
In the Grameen Bank model, one group of rural women took out a loan for as little as
$ 25 to start a business. Only when she repaid could the next woman in the group
borrow.
The success of Grameen Bank has helped to spread the idea of micro-lending
throughout the world. In Bangladesh alone, there are now around 10 million people
who have taken the help of micro-finance to start business. It is now planning to
replicate the success in rural India. The success of Grameen Bank had also led to its
offshoot, Grameen Phone, a provider of village phone service. As mentioned in the
article serving the Worlds Poor, Profitably by Prahalad C. K. and Hammond Allen,
under the Grameen Phone, a single entrepreneur in a village borrows money from
Grameen Bank to buy a mobile phone (GSM standard), which is being used by the
entire village generating an average monthly revenue of around $90 for the
entrepreneur.
3. Place
Lack of formal sales and distribution network: Developing the distribution
network in the rural market is not an easy task, due to low per capita income
compounded by the need to maintain low operating costs. In a rural market formal
sales and distribution networks are largely non-existent and difficult to obtain without
substantial capital or local guidance unlike developed market where large retail
distribution chains are commonplace. This poses a tremendous challenge to consumer
goods companies, which have traditionally used large retailers as their primary channel
of distribution. Retail chains have not flourished in rural areas of India because
economies of scale do not exist. Rural consumers live in small homes with little
storage space, lack refrigeration and do not own vehicles. As a result, daily purchases
at the neighbourhood store are frequently preferred by consumers and may be the only
avenue to buy goods in smaller rural towns.
To compete successfully with incumbents, new consumer goods companies are
forced to build an extensive distribution network to reach Indias rural population. This
distribution network relies first, on gaining shelf space in the small independently

owned stores that drive the majority of retail sales and then on establishing a
relationship with wholesalers and distributors to further expand the distribution
network.
Notwithstanding the direct sales force and working capital costs, some
companies have succeeded in building a distribution network, and in doing so, created
a substantial barrier to entry. Hindustan Lever boasts a network that reaches 800,000
stores directly and relies on wholesalers and distributors to reach another 3.5 million.
Other foreign companies have overcome the sales and distribution obstacles by
entering into joint ventures with local partners. This was an important motivation
behind Procter & Gambles decision to collaborate with the Godrej group in the early
1990s. Procter & Gamble was able to immediately tap a well established sales and
distribution network rather than spending time and money to go it alone.
Retailer Power: While independent retailers are a fragmented group, they
have a substantial amount of power in driving consumer purchases, particularly in
rural areas. Most rural stores are cramped, providing little opportunity for consumers
to browse. The consumer interacts directly with the retail salesperson (usually the
owner) and services often include informal lines of credit and home delivery in
addition to personal opinions on goods. In rural areas, retailers tend to carry only a
single brand in a product category. In such a retailing environment, being first on the
shelf and developing a privileged relationship with the retailer is extremely important
and a competitive advantage to consumer goods companies.
Relative cheapness of labour: The low cost of labour in rural areas has
implications on the consumer goods industry. Unlike developed markets where it has
been cost-efficient to replace human labour with machines, labour intensive
manufacturing and distribution remains economical in rural areas. A soft drink vending
machine, which is used extensively in urban market, may not be much effective in
rural area as the cost of supplying and maintaining an ending machine probably
outweigh the cost of employing the salespeople. Secondly it also generates the much
needed employment for rural population and results into increase in purchasing power
of the community as a whole.
The low cost of labour also explains the difficulty large chain retailers have had
in implementing their developed market strategy of replacing human labour with
capital in India. Scale economies are difficult to achieve with the higher capital cost
and often result in higher priced goods than the local owner-operated shops. For
consumer goods companies, independently owned stores in towns and villages will be
the primary form of distribution, at least for the near future.
Improving access
Many consumers in Tier 4 are in locations that make distribution extremely
difficult. To make sure that the consumers in the tire 4 segment have access to the
products, the distribution system followed by the companies should be different from
that of their existing systems. Lack of motor able roads in India makes the distribution

costs high and reach low. HLL has realized that, for improving access of its products in
rural areas, the traditional distribution channels would increase costs, which would
ultimately increase the price of the products. The company has experimented with
innovative methods to reach the rural consumer.
Under its indirect coverage (IDC) method, company vans replaced vans
belonging to redistribution stockiest, which serviced a select group of neighbouring
market. HLL also uses the services of Mobile traders. These mobile traders travel
either on foot or on cycles, thus more effective on cost and high on reach than the
conventional wholesale distribution channel. Besides, these traders target smaller
villages, those with a population of less than 2000, which conventional distribution
channel often cannot reach. There is also the crucial issue of buying behaviour. Most
rural women are reluctant to visit retail outlets on their own. Instead, the village
women rely on the mobile traders for purchasing their needs. Another company,
Perfetti India, uses candy boys to service small retailers in rural India.
The success of Legend computers in China is also attributed to its efficient
distribution system. Legend sells its low-priced PCs to smaller cities and towns where
the US and European PC companies, have not yet been able to penetrate. Legend
computers, which was once only a wholesale distributor of the US and European PC
companies, has now become the number one PC manufacturer in China with a market
share of 30% in 2002 and is also one of the worlds fastest growing computer
technology company.

A company can either wait for income to grow on a much broader basis, or
get in there now, like Hyundai, and start seeding the market, says Michael Fernandes,
a principal at McKinsey and Co. in Bombay who focuses on the consumer sector.
Companies are applying the lessons they are learning in India to other emerging
markets such as China. The Indian unit of south Koreas Hyundai Motor Co., for
example, plans to replicate the rural road show strategy it honed in India in China and
other emerging markets, says Lee Bong Guo, executive director for marketing and
sales of Hyundai Motor India. Hyundai has grabbed a 20% share of the booming
Indian auto market since it came here in 1997, largely through its low-priced Santro
compact car, which sells for as little as $ 7,000.
4. Promotion
According to one source, only ten percent of Indian villages are connected by
Cable and satellite (C & S)- the rest watch only Doordarshan. Also, in India, the
retailers are highly fragmented, highly dispersed. Companies have to think for
innovative ways of reaching the rural consumer (haats, melas etc.), because media as
we perceive it is not covering as much as 43% of rural India.
When it comes to the rural market, two out of five Indians are unreached by
any media- TV, Press, Radio and Cinema put together. So haats, mandis and melas are
opportunities.

Innovative advertising programs: Consumer good companies cannot rely on

conventional advertising techniques; particularly in Indias rural areas where only one
in every three households owns a television set and more than half of all villagers are
illiterate. Instead, companies need to turn to more innovative methods of advertising to
reach their potential customer base.
In this kind of a scenario some companies are using consumer video vans,
which carry infomercials to rural villages. A marketer invites people to the van to view
the infomercial, which incorporates the new product into an aspect of daily life. These
potential customers are subsequently given a demonstration of the product, for
example, toothpaste and toothbrush, and then provided free samples. The van returns
the following month to reinforce the sales pitch and to make sales.
Another strategy consumer goods companies have used to reach the rural
mass-market is to market at large festivals. Few years ago, many companies
congregated at the Ganges River for the Kumbh Mela festival where approximately 30
million people were expected to attend over the span of a month. Companies provided
touch and fell demonstrations and free sample for consumers, the majority of which
were from rural areas. Colgate-Palmolive distributed free tubes of herbal toothpaste at
the festival to villagers who traditionally used a neem tree branch to clean their teeth.
Hindustan Lever marketed its Lifebuoy soap and handed out glasses of Brooke Bond
tea. This marketing strategy proved to be extremely effective in advertising to the
mass rural market.
In many villages, people might not see ads that appear in newspapers or on TV.
So dealers drive vans filled with products from village to village, and set up stands at
weekly town markets. Others equip their cars with loudspeakers and cruise through
larger towns, toutin their products and stores. Philips also looked for new ways to
extend its reach into every nook and corner of India, driving its distributors to locate a
slew of new retailers to carry their products, including scores of one-stop shops in tiny
hamlets like Jabli, a village of terraced fruit and vegetable farms cut into the mountain
along the Shimla highway in Himachal Pradesh, set in the foot hills of the Himalayas.
Role of a leader (Mukhia)
The local or a group leader plays a crucial role in the promotion of a product
because these leaders act as an opinion builder or act as a role model for them. Here
we want to quote an interesting example:
A team of Hyundai car salesmen takes his van into a tiny towns dusty primary
school, and turns it into a temporary car dealership. While a group of village men
dressed in turbans and loose kurta pajamas gathers around a big television set in the
back of the van to watch Hyundai advertisements, the chief sales rep talks with village
headman, the Hyundai folks were here the previous night, giving a local community
head an exclusive test drive and arranging this village visit.
A village headman is an opinion leader, whose advice is sought on everything
from marriages to crops. In the past few years, villagers have started to ask what TV
set or car to buy, too. Four years ago, there were just 15 TV sets in this village; now,

there are 150, he says. Four people even have mobile phones. If I tell them I like a
particular brand, theyll go out and get it.
Shaping aspirations
As already mentioned, the consumers at the bottom of the pyramid are mostly
uneducated and illiterate; the companies need to spend time and resources to educate
the consumers.
HLL, under its Project Bharat, visits villages where company sales
representatives explain to the rural people the benefits of HLLs products with the help
of video shows. This creates awareness of HLLs product categories and addresses the
issues of attitude and habits of the rural people.
In 2002, ITC, one of Indias largest consumer product and agri-business
companies, launched Project Symphony, under which e-choupals are launched in
villages in some Indian states. Through these e-coupals, farmers could use computers
and access the internet to conduct their business. Normally, the illiterate and gullible
agri-farmers in India are also forced to sell their produce at low prices to the traders,
who act as middlemen and cite the reasons of poor quality or weak demand for low
price. The farmers also face the problems of small regional markets and no standard
grading systems for their produce. The lack of storage, handling and transport facilities
aggravates the situation resulting in huge wastage (8-11%) and low processing yields.
With e-choupals, farmers access the daily market prices of their crops in addition to
information on best practices in farming and weather forecasts. The farmers then sell
their produce at collection centers taken on lease by ITC, at a higher price than they
used to get before and at the same time, the transaction costs involved in selling farm
produce are also reduced.

5. People: (Role of Youth)

It is a fact that unlike a few years ago, the rural youth today are playing a far
more significant role in influencing the purchases of radios, television (black and
white as well as colour). Penetration levels of consumer durables in the rural sector
have risen dramatically in the last decade or so. It is observed that rural women are out
of the closet completelybut unlike ten years ago (when she had probably an
insignificant or no role to play) today, she is exercising her choice in select categoriesthe choice of brands may still be with the males of the household. But yes, in this
context the youth have certainly begun to play a role in selecting a brand in certain
product categories.
Here it is often observed that there is a tendency to follow the trends of nearest
metro. Just like so many youth in Mumbai aspire to be in U.S.A., the rural youth aspire
to be in Mumbai, Chennai or Calcutta and so on. This is like a yardstick- the city plays

the yardstick in terms of the development in the village.

Studies suggest that the rural youth are playing an increasingly important role
in purchase decisions. They are ones who actually travel out in the village frequently.
So they are the real drivers of the rural market. They may not be the final customers
(those who pay money) but often they are the people who influence the purchase of
high value products and they decide which brands to choose.
The motivators for purchase of a rural consumer are different from those in the
urban consumer. Therefore we are talking about rural youth. But when we talk about
youth, we refer to the age group of 15 to 25. In rural India; it is the age group between
8 and 15 that influence most purchases-more than any other group. This is largely
because they tend to retain messages and often play back these messages to others too.
Just to give an example: Recently fair and Lovely soap in a village in Bihar. Its TV
commercial (chaand ka tukda) had debuted on prime time TV. The village kids played
back the whole commercial word by word with the product benefits, the product
promise and so on. The company team was quite surprised as they were targeting the
rural women and they observed kids who played back the commercial. So its the 8 to
15 age group that has assumed importance. Even HLL and Colgate have begun
targeting this age group in their commercials.
Also, another typical rural phenomenon is that kids are sent by their mothers to
purchase something without specifying a brand. So kids tend to ask for products they
have seen or heard on radio or TV. So to a large extent, kids are driving this change as
much as youth.
THE ROLE OF TECHNOLOGY
From times immemorial, technology has played a very important role in
serving mankind. Be it the telephone to communicate or the cars to transport goods
cheaply between places. With the help of technology, it is possible to spur microenterprise and economic developments and empower consumers in the Tier 4 segment.
Technology for renewable energy such as solar power has helped to expand the
market for various products. The advent of internet and advancement of information
and communication technologies has not only reduced the problems but also became a
powerful source of economic leverage for the consumers in tier 4. For companies, the
technological advances have become an inexpensive way to establish marketing and
distribution channels in the tier 4 segment. ITCs success with e-choupal demonstrates
the importance of technology in serving the poor farmers in remote Indian villages.
Indias second-largest consumer bank, ICICI Ltd., is selling life insurance to
farmers through internet kiosks set up in villages by the agricultural-trading farm of
conglomerate ITC Ltd. Philips has revamped its line of home electronics for folks in
the countryside, offering a wind-up radio that doesnt need hard-to-get batteries and a
back-to-basics inexpensive television set. Sales of all these products are up. A digital
rural market covering 6000 villages.
ITC, the diversified Indian corporate is growing a digitally networked rural

market, titled e-Choupal. Choupal is a villages traditional central meeting place

where villagers exchange notes. E-Choupal is however an intranet connecting villages.
To overcome issues of literacy and computer skills, theres a trained interpretertechnician called a sanchalak at each eChoupal. Beyond the splash page
echoupal.com is Hindi-only.
Originally a tobacco giant, ITC [-it was Imperial Tobacco Co., then Indian
Tobacco Co. and now just, ITC] has over the last two decades diversified into
consumer goods and commodities among other things. With tobacco industry on the
back foot, ITC probably wants to develop newer interests. But the urban consumer
market is a pretty crowded scene. Hence ITCs rural initiative.
It began with 6 eChoupals in June 2000 to prove the idea. ITC says it now has
1200 such kiosks covering 6000 villages mainly in UP, MP, AP and Karnataka. Thrusts
into Kerala, Bengal, Maharashtra and Rajasthan are planned. Each e-Choupal- which
is a desktop with Internet access, reallycosts between Rs. 1-3 lakhs to set up.
Through the network ITC buys from villages as well as sell to them. It also claims to
offer the best gate prices for all products bought for re-marketing. From Kerala it
expects to buy spices, from Maharashtra horticultural produce, from Bengal
aquaculture products and Rajasthan wheat and oil-seed. In turn, eChoupals sell
branded oil, salt, flour- and insurance products.
ITCs agribusiness is Rs. 1000 crores and expected to grow 60% this year. How
much of that will be put through eChoupals is not clear, but the growth in the numbers
and future plans would indicate that the initiative has been a success. ITC Chairman
YC Deveswar says eChoupals will arrive in 100,000 villages within a decade.
Information technology tends to squeeze out middle men, farmers long
squeezed by them will like that.