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A DISSERTATION PROJECT REPORT

ON

RURAL MARKETING IN INDIA FOR FMCG


COMPANIES

Submitted to
MAHAMAYA TECHNICAL UNIVERSITY
Greater Noida
For the partial fulfillment of the award of Masters in
Business
Administration Degree

Under the Guidance of Submitted By:


Mrs. PRIYANKA GUPTA VINAY KUMAR YADAV

D.I.T.SCHOOL OF BUSINESS MBA IVth sem


Greater Noida (U.P.) R.No. 1029170016

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Acknowledgement

I consider my proud privilege to express deep sense of gratitude


to Mrs. PRIYANKA GUPTA her admirable and valuable guidance,
keen interest, encouragement and constructive suggestions
during the course of the project.

Last, but not the least, I sincerely thank all the


members of my department for their immense support and
assistance extended during the course of this dissertation report
and in making it a valuable experience.

(VINAY KUMAR YADAV)

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DECLARATION

I to declare that the research report entitled “ RURAL MARKETING IN INDIA


FOR FMCG COMPANIES” being submitted to the MAHAMAYA
TECHNICAL UNIVERSITY for the partial fulfillment of the requirement for the
degree of Master of Business Administration is my own endeavors and it has not
been submitted earlier to any institution/university for any degree .

Place:

Date:

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CONTENTS
PAGE
1. SYNOPSIS. 5

2 . OBJECTIVE. 8

3. RESEARCH METHODOLOGY 10

4. INTRODUCTON. 12

5. RURAL MARKET ENVIRONMENT. 15

6. THE CHANGING FACE OF FMCG MARKETING IN RURAL


SECTOR. 36

7. ADVERTISING IN RURAL SECTOR. 38

8. STRATEGIES ADOPTED BY DIFFERENT FMCG COMPANIES. 42

9. STRATEGIC ISSUES. 51

10. PROBLEMS IN RURAL MARKETING. 62

11. RURAL MARKETING-CHALLENGES AND OPPORTUNITIES. 68

12. OPPORTUNITIES FOR DIFFERENT FMCG COMPANIES. 73

13. INTERPRETATION. 78

14. RECOMMENDATION. 81

15.LIMITATIONS OF THE STUDY. 83

16. BIBLIOGRAPHY. 85

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SYNOPSIS

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SYNOPSIS

Title: -

Rural Marketing in India For FMCG Companies.

Objective:

 Rural marketing of FMCG Companies – Present and future.

 Future growth potential of rural marketing of FMCG Companies in India.

 Different Strategies adopted by different FMCG companies to increase our

rural market share.

 Challenges faced by different FMCG Companies..

 Various opportunities for FMCG Companies in the future.

Rationale: -

As now a day’s market is filled with a number of FMCG Companies; Every company want to

increase our market share. Due to lot of competition in the urban market and urban market is

saturated. Every company want to captured the wide rural market. Because about 70% of our

country population live in the rural market. Various FMCG like HLL, ITC etc implement our

strategies to captured the rural market are discussed. And what their impact and also the

problems and challenges faced by the various FMCG companies are discussed. And the

Opportunities for the FMCG Companies in the future.

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Research Methodology: -

The non-exploratory research methodology will be used for the thesis writing.

Research design:-

Overview Of Strategies Adopted By Big. FMCG Companies.

Various Opportunities for the FMCG Companies..

Comparative Data Analysis. Of Different FMCG Companies Share in Rural Market.

Research Instruments:-

The Secondary data will be collected through Internet, books and the materials published in

journals and magazines.

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OBJECTIVE

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OBJECTIVE

The over all objective of the thesis is to throw light on Scope of Rural Marketing for FMCG

Company in India.

SUB OBJECTIVE :

 Rural marketing of FMCG Companies – Present and future.

 Future growth potential of rural marketing of FMCG Companies in India.

 Different Strategies adopted by different FMCG companies to increase our


rural market share.

 Challenges faced by different FMCG Companies.

 Find out the Various opportunities for FMCG Companies in the future.

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RESEARCH
METHODOLOGY

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RESEARCH METHODOLOGY

In order to carry out any research investigation there is a need of a Systematic method and to
adopt a well defined procedure for each and every research there is also a need of methodology .
Methodology of any research constitutes the selection of representative sample of the universe
or the general population ,application of the appropriate research tools and the techniques.

There is an old saying in Spain “TO BE A BULLFIGHTER YOU MUST LEARN TO BE


BULL” means you never really understand a Person until you consider things from his point of
view . In the same way to meet and satisfy the target customer the study of customers behaviour
of crucial important because he is king. Customer behaviour studies , how individuals , groups
and organizations selected buy use and dispose of goods , services, ideas or experiences to satisfy
their needs and desires.

According to JAMES F. FUGAL, “Customers behaviour consists of the acts of individuals in


obtain and using goods and services including the decision process that precede and determine
these acts.

The research involves the following steps:-


1. DEFINE THE PROBLEM AND RESEARCH OBJECTIVE:-
If the problem is clearly defined ,it is half solved .The problem Objective here to assess the scope
of rural marketing for FMCG sector.

2. COLLECT THE INFORMATION :-


The information is collected from secondary sources- websites magazines , newspapers , and
magazines.
3. ANLAYZE THE INFORMATION :-
The next step in the marketing research process is to exact findings from the collected data .
4. PRESENT THE FINDINGS AND CONCLUSIONS :-
As the last step ,the findings and conclusion of whole research are presented in the end .
.

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INTRODUCTION

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INTRODUCTION

The rural market of India is fascinating and challenging at the same time. It offers large
scope on account of its sheer size. And, it is growing steadily. Even a modest growth
pushes up the sales of a product substantially, in view of the huge base.

It is attractive from yet another angle. Whereas the urban market is highly competitive,
the rural market is relatively quiet. In fact, for certain products, it is totally virgin market.
Simultaneously, the market also poses several problems and hurdles. The firms have to
encounter them squarely and put in a great deal of effort, if they have to get a sizeable
share of the market.

Efforts to capture the market with due thought and focus on the constraints with
streamlined strategies to overcome the same will tend to define the path ahead for rural
marketing in India.

A Hindi poet has rightly said, “ Bharat mata gram vasini” which means Mother India
lives in her villages. According to the 1991 census, India’s population was 850 million,
of which 75 percent lived in villages. This are average statistics. There are states like UP,
MP, Rajasthan, Kerala, Bihar and Orissa where the rural population varies from 80 to 90
percent. The spread of population in 4,200 cities and towns is to the extent of 25 percent,
and of the remaining 75 percent is in 5,76,000 villages. This sheer base defines the
volume and scope of rural marketing.

Marketing in India has for a long time meant urban marketing. But now rural marketing
is being widely researched and discussed. If market potential is considered, the rural
market is big with approximately 70 percent of the population still residing in rural areas
and with 40 percent the Gross National Product emanating from agriculture.

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The following transactions, (which broadly outline the landscape of rural marketing) , can
be categorized as follows:
 Marketing of agricultural inputs like fertilizers, pesticides, farm machinery etc;
 Marketing of products made in urban centers and sold to rural areas like soap,
toothpaste, television sets, etc;
 Marketing of products made in rural areas sold to urban centers like khadi cloth,
hand crafted products etc; and
 Marketing of products made and sold in rural areas like milk and milk products,
locally manufactured toothpowder, cloth etc.

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RURAL MARKETING
ENVIRONMENT

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THE RURAL MARKET ENVIRONMENT

The rural market environment need a separate examination as it varies significantly from that of
the urban market. We shall deal with the subject under the three headings :-
1. The rural consumer.
2. The rural demand.
3. Other aspects of the rural market environment.

(A)-THE RURAL CONSUMER : A Detailed Profile :-


Size of Rural Consumer Group
In numerical terms , India’s rural market is indeed a large one ; it consists of more than 740
million consumers. 73% of India’s total population is rural . The rural market consists of more
than 12 crore households, forming over 70%of the total households in the country.

Characteristics of Rural Consumer Group:-


 LOCATION PATTERN :-
Rural Market of India is a geographically scattered market. The rural population is scattered
across 5,70,000 villages . And, of them , only 6300 villages , have a population of more than
5,000 each . More than 3 lakh villages, are in the category of 500 people or less.

 SOCIO-ECONOMIC POSITION :-
Rural Consumers continue to be marked by low per capita income/ low purchasing power.
Similarly, they continue to be a traditional -bound community, with religion, culture and tradition
strongly influencing their consumption habits. Nearly 60% of rural income comes from
agriculture.
Rural Prosperity and discretionary income with rural consumers are thus linked to a sizeable
extent with agricultural prosperity.

 LITERACY LEVEL :-
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Rural India has a literacy rate of 28% compared with 55% for the whole country. The adult
literacy programmes launched in the rural areas are bound to enhance the rural literacy rates in
the years to come . The rate is certainly on the low side.

 LIFESTYLE :-
The rural consumers are marked by a conservative and tradition-bound lifestyles. But this
lifestyle of a sizeable segment of rural consumers has already changed significantly in recent
years .The changes can be attributed to several factors such as:
 Growth in income and change in income distribution .
 Growth in education.
 Enlarged media reach ( particularly television).
 Growing interaction with urban communities.
 Marketers effort to reach out the rural market.

 BUYING BEHAVIOUR :-
Buying behaviour of rural consumers have been effected by the following factors:-

INFLUENCE OF CULTURE:-
Rural consumers perception of products are strongly influenced by cultural Factors . For
example-the preference in respect of colour, size and shape is the result of cultural factors.

GEOGRAPHIC LOCATION:-
Rural consumer behaviour is also influenced by the geographical location of the consumers. For
example , nearness to feeder towns and industrial projects influenced the buying behaviour of the
consumers in respective cluster of villages.

EXPOSURE TO URBAN LIFESTYLES:-


Extent of exposures of rural consumers to urban lifestyles also influences their buying behaviour.

THE WAY THE CONSUMER USES THE PRODUCT:-

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The situation in which the consumers utilize their the product also their buying behaviour.For
example – Lack of electricity automatically increase the purchase of batteries by rural
consumers.: since the rural consumers cannot use washing powders /detergents powders that
much, as they wash their clothes in streams or ponds , they go is more for washing bars and
detergents cakes.

PLACE OF PURCHASE:-
Different segments of rural buyers buy their requirements from different places \ outlets. Some
buy from the village , shopkeepers; some from village markets/ meals; other buy from the town
that serves as the feeder to the rural area.

MARKETERS’ EFFORT TO REACH OUT THE RURAL


MARKET :-

Many corporate have been trying hard to develop a market their products in rural areas ,
investing substainlly in these areas. Developmental marketing has created discriminating buyers
demand in the rural market. This has brought about some change in the way buyers purchase
different product.

(B)- THE RURAL DEMAND :A Detailed Profile :-


Steady growth
Rural demand has grown steadily over the years. Not only has the market grown in quantitative
terms , but qualitative terms too it has undergone a significant change.

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Change in the composition of Rural Demand
The composition of rural demand has also been changing significantly in recent years Many new
products have entered the consumption basket of the rural consumers. and the relative shares of
the different categories of products in the consumption basket .The upper segments, in particular
, have started buying and using a variety of modern consumer products, which were till recently
unknown in the rural market.

Several products already well established in the rural market


Marketers cannot now assumes that rural India consumes only certain traditional/ essential
products and that its share in other product category is meager. It is perhaps well known that
products like packaged tea , bath soaps and washing products, including detergents/detergents
cakes , are popular items of consumption in rural market .Products like shampoo ,toothpaste and
talcum powder , and durables like electric irons , bicycles , mopeds, scooters and motorcycles
have joined this category in recent years. The rural demand for electric irons , mopeds and
motorcycles have note between 30 and 50 percent of the all-India demand.

In many products , rural consumption accounts for a larger share than


urban:-
In many products , rural consumption now accounts for a larger share than urban . In washing
soaps (cakes/bars ), the rural share is over 60 per cent .

In popular bath soaps , it is more than 50 per cent and in batterie4s ,it is more than 56 per cent
.similar is the case with packed tea and hair oils.
Among durable, the rural market now accounts for a larger share of the total sales in
 Sewing machines.
 Radio/ transistors.
 Tape Recorders.
 Wrist watches.
 Black and White Television sets.
 Cassette recorders.
 Bicycles.

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 Table Fans.
 Pressure Cookers.

In Many Products, the rural markets has overtaken the urban in growth rate:-
A survey by NCAER shows that the rural market is growing faster than the urban market several
products . These includes packaged tea, detergent powder , washing shop, and detergent cake.
Growth of motorcycle too has been more in the rural market than the urban market.

Position of durables
According to NCAER survey , Rural India’s market for consumer durables is estimated at Rs .
4500 crore , with an annual growth rate 8 per cent .

OWNERSHIP OF DURABLES BY RURAL CONSUMERS


Product No. of owner per 100 households
Bicycles 53
Fan (ceiling) 19
Fan (table) 13
TV(B&W) 16
Pressure cooker 13
Wristwatch(mechanical) 76

Radio/Transistors 42

It can be seen from above table that now every other other rural household has a bicycle, every
third households has a fan , every sixth has a black and white televisions set, and every seventh
a pressure cooker. Also , nearly 80 per cent of rural holds own a mechanical wrist watch and 42
per cent a radio/transistor .Rural India now purchase a third of the colour television sets, a fourth
of the mixers/ grinders and fifth of the refrigerators sold in the country.

Factors Behind the growth and Diversification in Rural Demand:-

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Variety of factors , acting in concert , have brought about the big growth and welcome changes in
the rural demand, a few of them such as growth in income , changes in income distribution ,
changes in lifestyles, and the expectation.

New income due to agricultural /rural development:-


The technological break through ,popularly known as the GREEN REVOLUTION, which took
place in Indian agriculture from the mid 1970 onwards, has added to the prosperity of rural India
considerably. Moreover, in recent years , as part of the new farm policy , high support prices are
offered for farm products. As a result , there is now more money in the hands of the owner-
farmers in the rural areas.
The expectation revolution:-
The ‘rising expectations’ of the rural people have greatly influenced the rural market
environment . It has enlarged the desire as well as awareness of the rural people ; it has
strengthen their motivation to work ,earn and consume. The rise income provide substance to the
aspiration.
Rural Demand is More Seasonal:-
Rural demand is more seasonal compared to urban demand .The pre-dominance of agriculture in
the income pattern is one main reason for this. The relatively greater influence of marriages and
festival on the purchase pattern is the another. After all, agriculture in many parts of India is still
depends on the vagaries of the monsoon.

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TAPPING THE RURAL MARKETS :-
While rural India does constitute an attractive and sizeable market, firm have to strive hard for
securing a share of it. Practically in every task of marketing , rural marketing poses some unique
problems.
The major tasks that need unique handling in rural marketing are:
 Segmentation and targeting.
 Product management.
 Physical distribution.
 Channel management.
 Marketing communications.

A. SEGMENTATION AND TARGETING :-


The rural consumers are not a homogeneous lot in economic conditions, or literacy, or lifestyles,
or buying behaviour. It would, therefore, firm to assume that the rural market as a whole can be
served by a single offer or a single product -price-promotion combination. firm have to analyses
the consumers in –depth, carry out thorough market segmentation and select relevant segments
as target markets. And they have to develop a distinctive positioning and a distinctive marketing
mix for each target segment.

Geographical Segmentation:-
The rural market can be segmented geographically, using different geographical bases.

Climate and level of irrigation:-


Climate can be one of them; regions endowed with favorable climate are usually more
prosperous compared with climatically handicapped region. Level of irrigation can be another
base; irrigated areas and dry land areas pose different economic and marketing environments.

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Nearness to a feeder town:-
Firms can also segment the rural market using ‘nearness to a feeder town’ as the base.
Consumers located close to a feeder town visit it at least once a month to sell their product and/or
to buy their requirements, and in buying habits , they differ from those living in the interior
areas. It will thus be meaningful to segment the rural market in to consumers located closer to a
feeder town and consumers located away from them.
Demographic segmentation:-
The rural market can be segmented demographically too. In fact, there are many possibilities of
segmenting the rural market demographically.

 Population concentration:-
It can be one base. About 40 percent of the rural population live in 7 percent of the villages in
the country and remaining 60 percent in the other 93 per cent of the villages. Thus, the market
can be segmented on the basis of different size classes with regard to population.

 Age:-
In particular, the youth in the rural areas can be picked up as a separate market. There is a
population of more than 20 crore in the age group of 16-30 years in the rural market. Surveys
have revealed that the younger generation dominates the purchase in the rural market. The rural
youth differ from their elders in their buying behaviours .It will thus be meaningful to segment
the rural youth as a separate market.

 Literacy level:-
It can be another demographic base for segmenting the rural market. Though rural India, is
characterized by low literacy ,there are wide variations in the matter of literacy within rural India
. for example- The rural literacy rate in Kerela is 80 Per cent , that in Bihar is only 15 per cent.

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 Income:-
The rural consumers can be segmented in to different income classes. The rural consumers can
also be segmented into regular income and demand .All rural consumers are not characterized by
sesonalty of income .There is a sizeable salaried class in the rural areas . There is also a sizeable
self-employed group, consisting of shopkeepers and service providers. There is nothing seasonal
about the income of such people .Obliviously , those with regular income will differ in buying
habits compared with those whose income is seasonal.

Buying behaviour segmentation:-


Rural consumer differ in their buying behaviour from their urban counterparts as well as among
themselves. This fact too could be factored in to segmentation exercise . firms should ,however ,
generate relevant data on the rural consumers and their buying behaviour , perception and
attitudes ,and then segment them using their buying behaviour as the base.

Thompson rural index:-


Hindustan Thompson Associates have developed the ‘Thompson rural market index’ based on
26 variables , including area of the concerned district , demographic pattern occupational
pattern , agriculture –related data , rural electrification data and commercial bank data . The
index can be used in segmentation.
B. PRODUCT STRATEGY :-
The first decision to be made in product strategy in the rural context is whether the product that
is sold in the rural context is whether the Product is sold in the urban market can be supplied to
the rural market as it is , or whether it must be adapted . it depends on the situation and the
nature of the product .Basically , the firm must find out what kind of product is actually required
by the rural consumer and then decide if it should make an altogether distinct product or adapt
the existing product.

Economic and income realities of the market should certainly be considered while developing
the product strategy for the rural market . when products are designed reflecting both these
influences ,the chance of success is greater.

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Lower priced product versions do help in many cases in the rural market ,but no generalization
can be made in this regard . Many companies try to reduce the prices of their products for the
rural market by creating smaller size ,m or by decreasing the quality . The approach works
sometimes and with some products, but not all times, with all products.

Specifically – Designed Products:-


Specifically –designed product to help in many cases

TRACTOR /TRAILEIER : -
The tractor /trailer is an apt example. It is a product specifically designed for the rural market. It
is designed as a replacement for the plough as well as a vehicle for transporting both men an d
material in rural areas.

EVEREADY’S JEEVAN SATHI TORCH:-


Eveready ‘s Jeevan Sathi brass torch is another example of suucesssful rural specific product
strategy. Initially Eveready’s brass torch was not picking up well in the rural areas . Union
carbide launched a market research study for locating the reasons. The study by the ad agency
OBM found that the rural folks rejected the torch since all of its parts are not made of brass .the
design , developed abroad, had given the product certain plastic parts, like the reflector. The
Indian rural consumer felt that the plastic parts would not durable . OBM also found that the
rural people were prepared to pay high prices for the same torch if it were made ’all brass’.
Eveready then introduced for the rural market the all brass torch designed to last life long and
positioned it ‘Jeevan Sathi’ as a ‘life long ‘ companion.

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MODEL VARIANT:-
Models developed specifically for the rural market have found more takers in the market . For
instance, Motorcycles that are designed to take on the rig ours of rural roads have succeeded
more in the rural market.

COLOUR VARIANT :-
The rural consumer differ from their urban cousins in colour preference . in case of some
products , colour may matter vary much . firms can exploit this fact to their advantage . For
example , ASIAN PAINTS understood the substantial difference between the rural buyer in the
colour preference . Asian Paints introduced paints with bright colours for the rural markets .
Asian Paints also communicated the feature well through its communication campaigns.

Different products/ models , Different brands, packing, pricing and different


positioning:-
By and large, the rural market can be tapped better through different products / models , different
brands, different packaging and different positioning.

PACKAGE DESIGN AND PACK SIZE:-

In some case , the product can be the same , but the package and pack size may have to be
different for the rural target group. Package design and colour help identification of brands by
rural buyers . Many rural consumers are not quite conversant with various brands .All the same,
they manage to pick the brand that they want . They recognize the brands by its packaging . This
the reason why a number of local brands in rural areas imitate the packaging of big national
brands.

As regard pack size , as a general , it can be stated that smaller packs are more suited to the rural
areas . Low purchasing power and limited availability of cash for shopping force the rural
consumer to go in for smaller packs with low unit price. In some cases ,they also prefer small
packs so that they can make a beginning on small scale and after trial and satisfaction go in for
regular purchases.

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In recent years , sale of shampoo brands were priced at Re 1 or below per sachet helped the trail
and adoption. The 5-gram Vicks Vapourb tin and the small –size Lifebuoy soap are other such
examples.

HLL, has deepened coverage of many of its products in the rural market through such
combination. It has come up with a series of small pack sizes/saches that specially cater to low –
end consumers.

Logo , Symbols and Mnemonics :-


Image is far more potent the rural market , which in many cases is an uninitiated market.
Symbols, therefore , add value to brand recall and brand personality in the rural market.

Asian Paints’ Gattu:-


Asian Paints Gattu though equally well known in urban and rural market , has greater
effectiveness as an identity tool in the rural market .Actually in many rural parts of India , Asian
Paints is referred to as the bahahawala or chokrawala company.

The Nirma Girl:-


The Nirma Girl in Frock on the packs of Nirma washing powder has become the mnemonic for
effective and good value in washing powders.

The Dettol Sword and the Mortein Genie:


For the same reason , Reckitt& Colman has been focusing on the Dettol Sword and the Mortein
genie in its rural communication.

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Brand Decisions :-
Branding too needs skillful handling in the rural market. The rural consumers have already
graduated from generic products to branded products. Today, the brand name is the surest means
of conveying quality to rural consumers. In other words, brand is the key to confidence building
among the rural consumers. Besides quality, it conveys that the manufacturer is going to show
sustained interest in those products ands markets. Whether the same brand is used in both urban
and rural market, or appropriate variants of the brand must be adopted for the rural market , is a
matter for conscious decisions by the individual firms depending on the context. In quite afew
cases , the ‘same brand’ is providing right and cost effective . In some cases, however, the brand
name that is suited to the urban market may not be quite suitable to the rural market. Low priced
variants seem to work better in majority of cases in the rural market. It will, however , be
incorrect to assume that rural consumers prefer local brands to national brands.

Sell Value Brands, Not Cheap Brands;-


While brands specifically developed for the rural market and low – priced variants may work
better in many cases , the strategy should be one of selling value brands . HLL’s Lifebuoy, for
example, is a low –priced carbolic soap that is often the first choice of bath soap by a rural
consumer .HLL, however , does not sell it as a cheap soap. Instead, sell it as a hygiene brand. It
communicates the value of the brand to the target market. It also tries to enhances the value of
the offer by giving suitable ‘add-ons’ .for example, while targeting rural students for the soap , it
distributed height charts along with the soap and conveyed its concern for their health and well
being . Rural marketers would do well to add some value to their products in this fashion if they
are keen to secure the loyalty of the consumers.

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C. PHYSICAL DISTRIBUTION :-
The problems faced by the marketer in the Physical distribution in rural context are as follows:-

The Problems in Transportation and Warehousing :-


It is well known that transportation infrastructure s quite poor in rural India . Though the country
has the fourth largest railway system in the world , many parts of rural India remain outside the
rail network . As regards Road transport , nearly 50 per cent of the 570,000 – odd villages in the
country are still not connected by proper roads . While some improvement is taking place on
account of the various rural development programmes, many areas still have only KACHA
roads and most of the interiors have hardly any roads worth mentioning .As regards transport
carriers , the most common ones are delivery vans and the animal drawn carts. Because of the
difficulty in accessibility, delivery of products and services continues to be difficult in rural
areas. In warehousing too, there are special problems n rural context. Business firms find it quite
difficult to get suitable godowns in many part of rural India.

Cost –service Dilemma Becomes more Acute :-


The firms can not simply rely on ‘trickle down of stocks ‘to the rural buyers. They need a
network of clearing and forwarding (c&f) agents and distributors at strategic locations for
facilitating proper distribution of the products in the rural market. They have to commit
themselves to servicing the villages will help not only the availability of the product, but product
promotion as well.
In the matter of transportation, combining different modes can be cost –effective. Trucks for
medium distance movement and delivery vans and bullock carts for local haulage may serve the
purpose better. Water transport too has a role in specific areas Bullock carts have a special role
on rural distribution, especially in tertiary transport. They are cheaper; they are available in
plenty and are ideal for the rural roads.

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The Delivery Van ;-
The delivery van has a key role in rural distribution The companies concerned and their C & F
agents /stockist / distributors operates these vans. Companies like Hindustan lever and ITC ,
who are pioneers in rural marketing in India, have a fleet of company delivery vans for rural
distribution . The van take the products to the retail shops in every nook and corner of the rural
market . It enables the firms to establish direct contact with rural dealers and consumers. It also
help the firm in promotion . But the cost of operating such vans is quite high . Firms like HLL
and ITC had the resources as wells the wisdom to consider van as initial investment in the
market. Through the van , they were not only solving their transportation problem of the rural
market, but were also developing the market for their products.

D. Channel Management :-
Organizing marketing channels is the second part of the distribution task .

Multiple tier add to the cost :-


The distribution chain in rural context usually requires more tiers, compared with he urban
distribution chain . The distance between the production points and the rural market , and the
scattered location of the consumer make it necessary . At the minimum, the distribution chain in
the rural context need three tiers i.e. The village shopkeeper, the distributor , and the Whole
seller/ stockist/ C&F agent in the town .in addition it involves the manufactures’ branch office
operations in the territory.
Producers who can reach the customers through the shortest distribution chain can do better in
this market.

Non-Availability of Dealers :-
Firms find that availability of dealers is limited and the scope for appointment fresh / exclusive
dealers of the company is equally limited in view of the low demand and non-availability of
suitable candidates.

Poor viability of the outlets :-

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A good number of retail outlets in the rural market suffer from poor viability . A familiar paradox
in rural distribution is that on the one hand the manufacturer incurs additional expanses on
distribution and on the other hand , the retail outlets find that the business is un – remunerative
to them. The additional funds the manufacturers pumps into the system are used by the scattered
nature of the market and the multiplicity tiers in the distribution chain.

Inadequate banking and credit facilities :-


Distribution in rural markets is also capped due to the lack of adequate banking and credit
facilities. It is estimated that there is only one bank branch for every 50 villages. Rural outlets
need banking support for two important purposes:
(1)- For remittances to principals and to get fast replenishment of stocks .
(2)- For securing credit.

Firms have been in search of a low- cost system of distribution with the wholesaler serving all
the retailers , including the ones at the tail –end , and the latter servicing the consumer . This is
the strategy followed by Nirma to compete with HLL. Nirma relies on the wholesaler network .
HLL is trying to get around the problem by giving credit to the distributors.

E. Marketing Communication:-
In marketing communication and promotion too, rural markets pose many problems.

The literacy rate among the rural consumers being low, the scope for using the printed word is
rather limited. The traditional bound nature of the people and heir cultural barriers add to
difficulty of the communication task. Marketing communication in the rural areas has to be
necessarily in the local language and idiom.

Rural communication is quite expansive. Rural communication has to go through the time
consuming stages of creating awareness, altering attitudes and changing behavior. In addition, it
has to break the deep- rooted behaviour pattern.

31
Managing the communication task:-
The rural communicator will do well to choose a combination of formal and non formal media.
The possibilities are indicated in below table:-

POSSIBLE MEDIA MIX IN THE RURAL CONTEXT


Formal / organised media Non-formal /Rural -Specific Media
TV Audio-Visual/Publicity Vans
Cinema Rural specific art forms like puppet
show and HARIKHATHA.
Radio Demonstrations
Print Media-Press Meeting ,Announcements, Processions
Other Print Media Caparisoned elephants and decorated
bullock carts carrying advertisement
panels
Outdoor Music records.
POPs

Selecting The Media Mix :-

TV :-
With he increase in coverage and increase in TV ownership in rural areas , TV is gradually
becoming the prime media for rural communication .
Cinema :-
The cinema is a useful medium in rural context . most large and medium villages have one or
more cinema house. Also, more than one-third of all rural people do see cinema as a matter of
regular lifestyle. Advertisement films , short feature films, with disguised advertisement
message, and documentaries that combine knowledge and advertisements, can be employed for
rural communication.
It has been estimated that 33 per cent of the total cinema earnings in the country come from rural
India.

32
Radio:-
The radio is well -established medium in rural areas. A big expansion in broadcasting facilities
has taken place in the country over the years. The availability of radio sets has also expanded.
While radio as a medium cannot match TV in potency and effectiveness, in the existing context
,it can certainly play a significant role in rural communication.

Print media too has some scope :-


The role of print media is certainly limited in the rural context. Even the remotest rural parts
have a small group, which is literate. Moreover, while the group may be numerically small , its
member usually happen to be the opinion leaders , influencing the purchasing behaviour of the
large segment of the rural consumers. so, it would be unwise to assume that the print media has
no scope at all in the rural areas . Moreover, the younger generation in the rural areas is
comparatively more literate. With the new trend of increasing rural literacy , the scope for using
print media in rural communication will increase further.

Outdoor:-
The outdoors , which include hoardings, wall paintings, illumination and other displays, also
lend well for rural communication . In fact , many companies are using the outdoors in the rural
communication mix.

POPs( print of purchase) :-


The POPs – Point of purchase promotional tools- are also quite useful in the rural markets. The
POPs meant for the rural market should be specially designed to suit the rural requirements.
Symbols, Pictures, and colours must be liberally in POPs meant for the rural market. Colour is of
particular significance . As a general rule ,the rural people love bright colours. The effective
Communicator utilize such cues.

Audio-visual / publicity vans :-


The AV unit or the publicity van is very useful for the rural communication .The van is a
comprehensive mobile promotion station at the exclusive command of the concerned firm. The
firm can exhibit its films and other audio-visual presentations, such as slide shows, sound and
sight presentations, puppet shows etc. from the instant promotion station. A potable shamiana or
33
Platform often forms a part of the van. Even public meeting can be organised using the potable
shamiana . The van can also be used for the sale campaign. It can also be used for Product
demonstration.

Naturally, the AV vans are quite popular with rural marketing firms’ .Practically all firms in the
agri – inputs business have their own AV vans followed by those marketing consumer durables.

Colgate-Palmolive has supply vans that offer the free samples and screen video films on oral
hygiene. It has an on – going rural van programme, which cover on an average 80 million rural
consumers per year. Vans are supplemented with bicycle vendors, who go to villages not
accessible by the vans.

Godrej has vans that play music and announce free gifts in the village square. The van than goes
to few shops in the villages to sell the product.

Syndicated AV vans :-
In recent years, rural AV vans have become a sharable service. Firms which can not afford to
operate vans of their own, utilize syndicated AV van service offered by independent agencies.

34
Multi-purpose vans: Jain TV’s Video -on-wheels :-
Recent years have witnessed the emergence of tools that are more innovative than the AV van.
Jan TV‘s Video – on- wheels is one of them.

Puppet shows, Harikhatha :-


Popular entertainment programmes like puppet show , dance, dramas, and Harikathas , specially
developed for the product- promotion purpose , are now being used in rural markets. The
traditional art forms readily render for communication with rural society . Village fairs , festivals
and melas are ideal venues for projecting these programmes. In certain cases , public meeting too
many be used for rural promotion.

Music Cassettes :-
Music cassettes are another effective medium for rural communication. It can be reached is an
appealing and a comparatively inexpensive medium. Different language groups can be reached
with low budget. They can be played in cinema houses or in other places where rural people
assemble.

HLL rural specific communication for Surf :-


For propagating ‘Surf’, Hindustan Lever brought out separate advertisement films for the urban
and rural audience. In the film meant for the rural audience, the company took particular care to
demonstrate step-by-step the method to be adopted in washing with surf for getting the best
whitening effect. The company knew that an elaborate demonstration was essential for the rural
audience.

35
THE CHANGING FACE
OF FMCG MARKETING
IN RURAL SECTOR

36
The Changing Face Of FMCG Marketing in rural sector

FMCG (Fast Moving Consumer Goods) marketing is no more going to be the same again! The
changing consumer mindset thanks to more knowledgeable and discerning customers coupled
with changing competition and saturated market is giving a tough time to the FMCG marketers.
The changed scenario not only demands a new game plan with a sharp and decisive strategy but
also a lot of creativity and insight. Some of the players in Indian FMCG industry have already
taken a lead and are smartly moving to chart a success story for their brands. Some brands that
reaped magnificent dividend from adopting a new strategy are Fairever, Ujala, Ghadi detergent,
Chik, and Dandi namak.

The greatest challenge for managers is to visualize an active market when what exists is abject
poverty. These successful brands are just doing that- focusing on untapped markets. Take the
example of Dandi namak. Who would have advised them to enter the branded salt market when
Tata and HLL virtually share the whole market among them? But they entered this category
when conventional wisdom said no. And they became a success story overnight. .They entered
the market not to compete with Tata and HLL, but with the focus to take branded salt to rural and
semi-urban areas. With this narrow focus, they not only captured a large rural and semi-urban
market but also got some share of the urban market due to rub off effect.

Moreover, these small players fully realize that in today’s world, marketing needs money. So
they don’t shy away from investing in marketing. Again take the example of Dandi namak. They
splashed out money on their lengthy TV commercials to ensure that the message gets ingrained
in the mind of the prospect. Fairever and Ujala adopted the same strategy. Of course they don’t
spend as much as the MNCs do but they do spend enough to get attraction.

One of the important aspects of the strategy being adopted is effective communication about
product. . Take the case of Dandi namak. The TV advertisement was bland and uninteresting.
However, without any glitz, it was able to connect to its target customers because it talked in the
language of its target customers. These brands send a powerful message to their target customers
that they are made for each other.

37
ADVERTISING IN
RURAL INDIA

Advertising in Rural India: -

A dramatic change is in progress. Villagers who used to crack open peanut M & M candies, eat
the nut and throw away the shell are now demanding chocolate candies that will melt in their

38
mouths, not in their hands. Charcoal-cleaned teeth are a rare sight; so is the case with twigs of
niim (neem) and babul (babool) tree. Today, the ultra bright shine of Colgate or some other
international brand of toothpaste holds more appeal than the traditional methods of cleaning
teeth. Even the native expressions of cleaning teeth, such as daatun karnaa and musaag
lagaanaa, are endangered to being replaced by new expressions such as paste karnaa, 'to brush
teeth with paste'.

The book under review is an attempt to explore the various facts of rural marketing and rural
advertising in India. The development and evolution at rural marketing can be understood by
keeping in mind the various phases and shifts in rural advertising and marketing. This attempt
has been made to illustrate, how different manifestation of rural advertising (TV, print, wall
advertising etc.) affect interaction between the buyers and the sellers, the consumers association
with different media modalities, the nature of information structure and the impact on the
processing effictiveness and acceptability of a message. This makes rethinkening the role and
importance at rural communication in India today. Rural marketing is rapidly gaining importance
in the post liberalization period in India.
Rural advertising involves products and issues that are pertinent to rural India. The term
‘advertising’ had covered both social and commercial senders of messages.

The evolution of rural media has a long history of evolution. Within this tradition of wall
painting may be traced to the Indian rocks art painting that go back to 4000 Bc. According to
Dube(1992), there is a relationship between the mobilary art, the wall painting in the houses of
contemporary tribes, and the older rock art in the panchamashi Shelters. This form gained more
prominence during the rule at Ashoka, the Great, who systematically used it to reach the remotest
corners of his empire. The most vibrant and colourful wall painting can still be witnessed in the
rural households of Rajasthan. Painteel on the wet lime plaster in mineral colours and these
paintings depicts day-to-day scenes of life. And these were the advertisement of the ancient times
and it also uses for communication at that time.

The tenesis of the book lies on a major part of the rural places in India. The author said how to
reach the unreachable? The easiest solution would be to reach rural India by means of
conventional electronic meida (Radio, TV).

TV is beyond the reach of rural India and electricity is not yet accessible to many. The
reach of TV is still limited.

But radio has the maximum reach, but it is still under government control and the programme
options are limited but it has no visual content. Print media is one of the most important in the

39
filed of advertising and marketing in Rural India. It’s low level of literacy and lack at availability
at the right time and place are still the major problem.

The author has also depicted the place of advertising and marketing in the rural India for its
present and future. The economic liberalization, globalization and growing economic power have
led to the development of rural India in the last two decades. It explores the various facts of rural
media and integrated marketing communication. The rural advertising provides a rich range of
communications such as madari, streetplayers dancers, story tellers etc. influences in the
conventional advertising and many more.

The author attempted to show in the CELM model, that the message has to target a particular
group of audience. In case of the rural audience, if the message is not coded by the audience, it
won’t motivate them to get involved in the message. The author has also highlighted the verbal
and non-verbal salient features of the various modalities of rural advertising; hybridity is
identified as one of the most distinctive colorful features of rural advertising and marketing.

This book presents a brief history and survey of facts about India to highlight the multicultural
heritage of the counting that leads to differences and similarities in modes of communication.
The vast emerging rural market calls for a need to look at rural India and its relationship to
advertising. Rural India has much to offer in communicative need assessment and its execution
must be naturalistic in nature.

Villages and small towns, which were once inconsequential dots on maps, are now getting the
attention of global marketing giants and media planners. Thanks to globalization, economic
liberalization, IT revolution, Indian female power, and improving infrastructure, middle class
rural India today has more disposable income than urban India. Rural marketing is gaining new
heights in addition to rural advertising because of the following reason:-

 Various rural media (conventional and non-conventional) and


integrated marketing communication. In addition to rural market discourse,
media forms such as wall paintings, calendar advertising, outdoor
advertising, print, radio and television advertising

40
 In particular, uniquely Indian media forms such as video van technology, which has
changed the face of not only marketing but also political campaigning. Rural markets (haat)
which are the mobile McDonald's or Walmarts of India.
 Targeting women and religious groups in addition to rural population.
 Marketing taboo products such as 'bidi', cigarettes, sanitary supplies, and other such
products
 Globalization and its effects on product naming, product monitoring, rural discourse and
media forms.
 Creativity and deception, together with guidelines for advertisers and marketers.
 Information structures and logic of rural ads.
 Ads as a social barometer of changing relationships and value
systems.

41
STRATEGIES ADOPTED
BY DIFFERENT FMCG
COMPANIES IN RURAL
MARKETING

Strategies adopted for rural marketing by different FMCG Companies

ITC's e-choupal :-
42
ITC's e-choupal initiative is changing the lives of farmers on a scale no other venture has ever
done. The company is entering more than 30 new villages a day, every single day of the week,
365 days a year.

. Take a remote village. Go to the smallest farmer there. Educate him in the best farming
techniques. Inform him of daily weather conditions and price movements in the market. Make
available to him at his doorsteps the best possible seeds, pesticides and fertilizers at the most
competitive prices. And when his crop is ready, help him find the best buyer.

Imagine doing all of this in 30,000 villages across six states season after
season, year after year. Doing it at no cost to the farmer and yet making money for yourself.
Impossible, would be the most obvious verdict to such a proposal.

Yogesh Chander Deveshwar, chairman of Rs 12,000 crore ITC, said when S. Sivakumar, chief
executive of its agri-business, approached him with an equally ambitious idea in 2000. Knowing
that he was asking for the moon, Sivakumar initially requested Rs 50 lakh to test the idea among
soya farmers in Madhya Pradesh. Deveshwar granted him Rs 10 crore. The rest, as they say, is
history. ITC's e-choupal network has already reached 3.1 million farmers, and is expanding into
30 new villages a day-making it corporate India's most ambitious rural initiative ever. Partnering
ITC in the network are 37 companies, NGOs and state governments, together creating a new
ecosystem for villages and establishing a direct link between what consumers eat and what
farmers grow.

43
THE POWER OF 'e'

The e-choupal redefines choupal, the Hindi word for village square where elders meet to discuss
matters of importance. The all-important letter in the word is "e". It stands for a computer with
an Internet connection for farmers to gather around and interact not just among themselves but
with people anywhere in the country and even beyond. It begins with ITC installing a computer
with solar-charged batteries for power and a VSAT Internet connection in selected villages. The
computer's functioning is freed from the notorious power and telecom facilities at the village
level. A local farmer called sanchalak (conductor) operates the computer on behalf of ITC, but
exclusively for farmers. The e-choupal offers farmers and the village community five distinct
services.
Farming methods specific to each crop and region, soil testing, expert advice-mostly sourced
from agriculture universities-all for free.
Purchase: Farmers can buy seeds, fertilisers, pesticides and a host of other products and services
ranging from cycles and tractors to insurance policies. Over 35 companies have become partners
in the e-choupal to sell their products through the network.
Sales: Farmers can sell their crops to the ITC centres or the local market, after checking the
prices on the Net.
Development work: NGOs working for cattle breed improvement and water harvesting, and
women self-help groups are also reaching villages through e-choupal. In some states farmers can
even access their land records online, sitting in their village. Access to health and education
services through e-choupal begins next month.
In many villages e-choupals have become the axis around which the local community revolves.
Be it for accessing newspapers online in the mornings (many villagers have discontinued their
newspaper subscriptions) or checking the supply of products they ordered on the Net, or
watching movies on farming techniques in the evenings, farmers frequent e-choupal at all times
of the day. Each e-choupal covers between five and six villages.

EMPOWERING THE SMALLEST


Indian farmers typically buy at retail prices and sell their produce at wholesale prices, losing out
on both ends of the deal. By virtually aggregating them, e-choupal brings the power of scale to
the smallest of farmers. ITC ensures that there are at least two suppliers of all products sold
through the e-choupal. Farmers can pool their demand, compare prices and place orders on the
44
Net. Bargain and choice-two key virtues of competition-are delivered to the farmers right on
their doorstep.
When it is time to sell the produce, e-choupal helps the farmers by breaking the
monopoly of local markets that are controlled by trade cartels. In most mandis, farmers are
cheated at several stages-arbitrary pricing, under weighing, delayed payments. In Uttar Pradesh,
farmers lose between 10 and 30 per cent of their income to such malpractices. ITC is setting up
its own purchase centres in the six states covered by e-choupals. The farmers' response has been
overwhelming. In 2001-2, the company purchased 60,000 metric tonnes of crop through e-
choupal. By 2003-4 the purchase increased to 2,10,000 tonnes and in four months of 2004-5, the
company picked up 1,80,000 tonnes of farm produce.
For farmers it is a win-win situation. Sitting in their village, they can check the prevailing
purchase price at the mandi and the ITC centre through e-choupal and sell wherever they wish to.
ITC's entry into crop purchase invariably means a rise in mandi rates too, benefiting even those
farmers who can't sell to ITC. In places where ITC rates aren't higher than the mandi rates,
farmers are drawn to ITC centres because the company uses electronic weighing, better quality
testing and ensures spot payment.

45
ITC'S E- choupal achievement
It's achievement :-
(1)- 5,050 choupals, 29,500 villages, 3.1 million farmers.

(2)- Using e-choupal to source a range of farm produce (foodgrains, oilseeds, coffee, shrimps).

(3)- Marketing a variety of goods and services though e-choupal(agri-inputs, consumer goods,
insurance, market research).

(4)-Transactions:$100 in (2003).

STRATEGY ADOPTED BY HLL

Hindustan Lever to expand Project Shakti reachthe rural market:-


FMCG major Hindustan Lever will take its Project Shakti, the rural direct-to-home distributor
model, national and reach out to 100 million people in four years' time. The project is at present
on in Andhra Pradesh but will be soon be rolled out to other remote villages across the nation.
The target is to establish access with 100 million people in 3-4 years' time.The importance of the
project is rural economy had immense potential and they were the consumers of tomorrow.
Supported by micro-credit, the women from self-help groups were HLL's rural direct-to-home
distributors.
The idea behind Project Shakti was to help the company reach, penetrate and communicate with
rural consumers. The initiative benefited women in more than 4,750 villages.
VISION OF THE PROJECT:-
The vision was to change the lives of women in 100,000 villages by making them Shakti dealers.
This would provide economic opportunities for the underprivileged while creating a distribution
and communication channel for brands to access untapped rural markets with a consumer base of
100 million rural Indians.

46
STRATEGY ADOPTED BY COCO-COLA

Coca-Cola India doubled the number of outlets in rural areas from 80,000 in 2001 to 160,000 in
2003, which increased market penetration from 13 per cent to 25 per cent.

It brought down the average price of its products from Rs 10 to Rs 5, thereby bridging the gap
between soft drinks and other local options like tea, butter milk or lemon water.

It doubled the spend on Doordarshan, increased price compliance from 30 per cent to 50 per cent
in rural markets and reduced overall costs by 40 per cent.

It also tapped local forms of entertainment like annual haats and fairs and made huge
investments in infrastructure for distribution and marketing.

Result: the rural market accounts for 80 per cent of new Coke drinkers and 30 per cent of its
volumes.

The rural market for Coca-Cola grew at 37 per cent over the last year, against a 24 per cent
growth in urban areas. Per capita consumption in rural areas has doubled in the last two years.

The launch of the Rs 5 pack has reaped rich dividends in terms of sales and the bottles are
expected to account for 50 per cent of the company's sales in 2003.

Coca-Cola is just one example. A lot of fast-moving consumer goods and consumer electronic
companies are aggressively targeting rural consumers. The necessity arose because the growth
rates of consumer products were slowing down not because the markets were getting saturated in
terms of penetration.

While overall volumes continue to grow reasonably well, there are too many players eating into
each other's market share.

The companies, therefore, reduce prices in urban areas and invest heavily in
sales promotion, intensifying the battle for market share.

47
The companies, therefore, reduce prices in urban areas and invest heavily in sales promotion,
intensifying the battle for market share.

Operating margins come under pressure and new growth markets have to be explored. This is
where the rural markets play an important role.

The rural market was tempting since it comprised 74 per cent of the country's population, 41 per
cent of its middle class, 58 per cent of its disposable income and a large consuming class, Coca-
Cola India CEO Sanjiv Gupta said.

Today, real growth is taking place in the rural-urban markets, or in the 13,113 villages with a
population of more than 5,000.

Of these, 9,988 villages are in seven states -- Uttar Pradesh, Bihar, West Bengal, Maharashtra,
Andhra Pradesh, Kerala and Tamil Nadu.

For manufacturers of consumer goods, these are the markets to look out for. While the 1980s saw
a boom in Class I towns with the spread of television, the Class II towns showed strong growth
in the 90s propelled by reforms.

According to the National Council for Applied Economic Research, the millennium belongs to
the Class III and IV rural-urban towns.

It estimates that an average rural Indian household will have five major consumer appliances by
2006, almost double of what it had five years ago.

In order to efficiently and cost-effectively target the rural markets, the companies will have to
cover many independent retailers since in these areas, the retailer influences purchase decisions
and stock a single brand in a product category.

In such an environment, being first on the shelf and developing a privileged relationship with the
retailer is a source of competitive advantage to consumer good companies.

48
Most of the companies have started tinkering with pack sizes and creating new price points in
order to reach out to rural consumers since a significant portion of the rural population are daily
wage workers.

Thus, sachets and miniature packs, as in the case of shampoo sachets priced at Re 1 and Rs 2 or
toothpaste at Rs 10, have become the order of the day in hinterland India and help improve
market penetration.

Yet, driving consumption of goods in rural areas is not just about lowering prices and increasing
volumes but also about product innovation and developing indigenous products to cater to their
demands.

For example, soap makers use advanced technology to coat one side of the soap bar with plastic
to prevent it from wearing out quickly.

Also, the companies need to turn to innovative methods of advertising like fairs or haats to reach
their potential customer base.

Two years ago, many companies congregated at the Ganges river for the Kumbh Mela festival,
where about 30 million people, mostly from rural areas, were expected to come over the span of
a month.

The companies provided 'touch and feel' demonstrations and distributed free samples. This
proved to be extremely effective in advertising to the rural market.

STRATEGY ADOPTED BY TATA SKY

The case discusses the marketing strategies of Tata Sky Limited (Tata Sky), India-based 'Direct
to Home' (DTH) service provider. Tata Sky was formed as a joint venture between the Tata

49
Group and the STAR Network in 2004. The company emphasized on all aspects of marketing
mix including product, price, place and promotion. It offered more than 170 channels along with
different interactive services. Tata Sky offered different channel packages so that consumers
could choose their favorite channels and pay only for those they wanted to watch. The company
had also built a wide distribution network to reach every household in India. It also entered into
agreements with ITC's e-Choupal, Godrej's Aadhar and Indian Oil Corporation to extend its
reach to the rural consumers. Tata Sky had also set up sales and service dealers (SSDs) across
semi-urban and rural markets of India. The company adopted aggressive promotional strategies
including television commercials (TVCs), outdoor, radio and Internet advertising.

50
STRATEGIC
ISSUES

51
Strategic Issues

The rural India offers a tremendous market potential. A mere one percent increase in India’s rural
income translates to a mind-boggling Rs 10,000 crore of buying power. Nearly two-thirds of all
middle-income households in the country are in rural India. And close to half of India’s buying
potential lies in its villages. Thus for the country’s marketers, small and big, rural reach is on the
rise and is fast becoming their most important route to growth. Realizing this Corporate India is
now investing a sizeable chunk of its marketing budget to target the rural consumers.

Increasing brand awareness

In the rural families, studies indicate a slow but determined shift in the use of categories. There is

a remarkable improvement in the form of products used. For instance, households are upgrading

from indigenous teeth-cleaning ingredients to tooth powder and tooth-pastes, from traditional

mosquito repellant to coils and mats. There is also a visible shift from local and unbranded

products to national brands. From low-priced brands to premium brands.

Price promotion

In an occasional effort to capture volume sale, multinational brands use price promotions that
often yield dramatic, if temporary, sales increases in the rural areas. Their large volume increases
reveal a potentially large market in the villages that remains untapped, just below the actual price
points. To penetrate this market and generate sustainable volume sales, a permanent product
entry at the lower price point is required. Failure to recognize the potentially huge market of the
villages that lies below the surface of international price points can even place the premium
branded business at risk

52
FMCG consumption
Organizations like Hindustan Lever Ltd., Nirma Chemical Works, Colgate Palmolive, Parle
foods and Malhotra Marketing have carved inroads into the heart of rural markets. Various
categories of products have been able to spread their tentacles deep into the rural market and
achieved significant recognition in the country households. And, in the process, the regional
brands, local brands and the other unbranded offerings got displaced by the leading brands.

Company House hold penetration

HLL 86%

Nirma chemical works 56%

Colgate Pamolive 33%

Parle Foods 31%

53
Category % volume of local
brands/unbranded
Washing cakes/bars 86%
Tea 55%
Salt 33%

% volume of local brands/unbranded

Washing
33%
cakes/bars
86% Tea

55% Salt

54
Of the expenditure on consumer goods in rurahousehold,approximately,
44% is on food articles such as biscuits, tea, coffee and salt, 20% on toiletries, 13% on washing
material, 10% on cosmetics, 4% on OTC products and 9% on other consumables. A number of
category products have established themselves firmly in the rural households.
It is evident that in the villages low-priced brands are well accepted and one might feel that a
larger proportion of the purchases made in rural market can be attributed to local/ unbranded
players. Surprisingly, however, the unbranded/local component contributes to a substantial
portion of the volume of only a few of the highly penetrated categories.

Category Category Penetration Brand with highest penetration


Toilet Soap 91% Lifebuoy
Washing cakes/Bars 88% Wheel
Edlble oil 84% Double Iran Mustard
Tea 77% Lipton Tazza
Washin powder / liquid 70% Nirma
Salt 64% Tata Salt

Biscuits 61% Parle G

Focus on urban categories

Though the commodity products have greater penetration, traditionally urban categories such as
skin creams and talcum powder have also made a mark. While the urban talcum powder market
suffered a de-growth, the rural talcum powder market darted ahead. Similarly, growth of rural
skin cream market was at par with that of urban skin cream market. This clearly indicated that
after being considered urban for a long time, some categories are now wearing a rural face. And,
in many a case, it is the rural market that is actually driving the growth of category.

55
Premium brands
Brand Penetration of Category users Pond’s
is the
Surf 6.20% leader in
the
Ariel 4.50% talcum
powder
Pantene 1.80% category
with a
Denim 1.80%

penetration of 65% and volume contribution of 56%. Its rivals viz. Nycil and Liril are trailing far
behind. Moreover, 60% of the Pond’s users have purchased no other brand i.e. they are 100%
brand loyal. This reflects the strength of the brand in rural bazaar

Category Household Penetration

Skin Cream 18%

Talcom Powder 15%

In the skin care category, Fair & Lovely fairness cream, with a penetration of 75%, accounts for
60% of the skin care market in rural India. It also enjoys t he undistinguished patronage of
58% of its user households. Both Pond’s and Fair & Lovely are enjoying a monopoly in the
rural markets In their respective categories.
Rural India is not averse to trying out the premium brands at high prices. A study indicated that a
majority of the premium brand users are using the brand for the first time. Similarly 0.9% of the
talcum powder-using families have started using Denim talc and 0.7% of the shampoo using
households started using Pantene. Surveys also reveal that trials are not restricted to the more
affluent echelon of the villages. The experimenting households are more-or-less evenly spread
across the various socio-economic clusters of the rural market. This should further encourage the
marketers to focus their attention on rural buyers.

56
The rural youths are more open to fresh concepts as against their elderly family members. Their
difference in choice of products/brands with the seniors of the households often leads to a “dual-
usage” of product categories. As an instance, 20% of the households using tooth powder also use
tooth paste. Similarly, many of the households using premium brands also use mass market

Penetration of Category users

1.80%
Surf
1.80% 6.20% Ariel
Pantene

4.50% Denim

brands. For example, while 15% of Surf and 12% of Ariel using families also use Nirma
detergent, 3% of Denim users use Pond’s Dreamflower talc and 18% of Pantene using
households use Clinic shampoo as well.

Income growth goes into consumption

In urban households there are a number of competing demands for ones money. In rural
households, they hardly change their house or go out on a vacation. They save only a small
fraction of his money and spend the rest. And when there is a growth in their income, the money
goes straight into consumption.
Rural media

Urban consumers shop daily and have 365 opportunities a year to switch brands while the rural
purchasers who buy their goods in weekly haats have only 54. Attempts to reach rural
consumers, even once during the purchase cycle to ensure repeat purchase, make point of
purchase advertising and trade push indispensable. This requires a significant reorientation in the
allocation of funds across media. For example, outdoor advertising accounts for over 7% of all
media expenditures in India.
57
Rural buyers living in small isolated groups distributed across vast distances have limited access
to the broadcast media. The existence of a multiplicity of languages and varying level of
illiteracy complicates the task of communication further. To overcome some of these challenges,
Unilever pioneered the concept of video vans that travel from village to village screening films
in the local language, interspersed with advertisements for Unilever’s products. The company
also provides product usage demonstrations to the captive audience because written instructions
on the pack may

Quality consciousness

It will be unjustified to think that rural consumers are less bothered about product quality. Even
the village buyers desire to buy a quality product and upgrade their quality of life. Marico, an
Indian edible oil company, has found the rural consumers in the interior of India willingly pay a
reasonable price premium for branded cooking oil, over community oil, because they are certain
of its consistent quality. Unbranded products are often considered by some of them to be
adulterated.

58
DISTRIBUTION

59
Travails in distribution

In spite of recognizing the potential of this vast market of 700 million, marketers are often
unable to cater to it because of lack of adequate infrastructure. The distances between villages,
the terrain and the lack of pucca roads connecting the places act as impediments for them to
reach their customers. But once if they overcome these hassles and reach those remote bazaars to
be first on the shelf in the product category, they develop a privileged relationship with the
retailer that offers them a tremendous competitive advantage. Rural retailers are far less
specialized than their urban counterparts and carry a wider range of products. Since frequent
delivery is not possible in their part of the world, they tend to carry only a single brand in each
product category. And, usually, the brands that are first on the rural shelves become synonymous
with product category and are difficult to dislodge. For instance, Maggi noodles, the brand that
created the category of instant noodles, reached the rural shelves before anyone else and
remained the market leader ever since. Thus, a drive down the rugged countryside, sans
electricity and other modern facilities, is, surely, torturous. But the pain is worth bearing.

Preference for Low Unit Packs (LUP)

Trial is often encouraged by Low Unit Packs (LUP) or sachets. The sachet packaging strategy
caught the popular FMCG imagination in the early 1990s and it was considered as a
breakthrough in the psyche of the rural consumers. Today, the sachets are increasingly dominant
on shelves. Shampoo, for instance, has invaded the rural households with sachets at low
affordable prices. Sachets of tea, blues and washing powder are being launched in a big way in
the village haats by leading manufacturers. Companies like HLL and Marico are making
concrete efforts to create and then meet the demand of rural consumers by launching products in
small affordable packs.

60
Channel power
The rural consumers interact directly with their retail salespersons who has a strong conviction
power and whose recommendations carry weight. The owners’ relationship with customers is
based on an understanding of their needs and buying habits and is cemented by the retailer
extending credit. Some of the successful manufacturers creatively develop new revenue activities
for the rural retailer. United Phosphorous Limited (UPL), an Indian crop protection company,
realized that in its rural markets small farmers were not applying pesticide at all, or applying it
inappropriately due to the lack of application equipment. The capital cost of the equipment
(mounted pumps and dispensers that cost up to $3000) was placed out of reach of small farmers
and most rural retailers. UPL designed a program in which it arranged for bank loans for its rural
retailers to purchase application equipment and demonstrated to their retailers the additional
revenue possibilities from renting this equipment to small farmers. The result was an added
revenue stream for rural retailers.
Wider competition for a product
Many of the rural buyers tend to have little stock of money, only a flow. Consequently, they tend
to make purchases only to meet their daily needs and have little capacity to build inventory. The
marketing implications of this are far-reaching. Not only are pack sizes and price points affected,
but in turns out that consumers have to make a selection from a much wider array of product
categories. Thus the nature of competition for any given

product is much broader. For instance, in a village haat, Coca Cola competes not just with Pepsi,
but with a broad set of purchases that the rural consumers consider as “treats”.

61
PROBLEMS IN RURAL
MARKETING

62
Problems in rural marketing

Where the rural market does offer a vast untapped potential , it should also be recognized that it
is not that easy to operate in the rural market because of several attendant problems . Rural
marketing is thus time consuming affair and requires considerable investment in terms of
evolving appropriate strategies with a view to tackle the problems .
The major problems faced by manufacturing and marketing men in rural areas are described
below:-

1. Underdeveloped people and underdeveloped market:-


The agriculture technology has tried to develop the people and market in rural areas .
unfortunately ,the impact of the technology is not felt uniformly through out the country .while
there are pockets- some districts in punjab , Haryana or western Uttar pradesh – where a rural
consumer is some what comparable to his urban counterpart , there are lager areas and groups of
people who have remained beyond the technological break thorough .

Even today about 75 districts in county are drought prone and none technology worth the name

has percolated to in crease in the standard of living of these people in addition ,the small

agricultural land holdings have unable to take advantage of new technological breakthrough .

the number of people below below poverty line has not decreased in any appreciable manner.

Thus the rural markets ,by large number , by and large are characterized by underdeveloped

market. A vast of the rural people image old customs tradition habits , taboos and practices

63
2. Lack of proper physical communication facilities:-
Nearly 50% of the villages is the country do not have villages in the country don’t have all
weather roads . physical communication to these villages is highly expensive . even today ,most
villages is in eastern part today inaccessible during monsoon season .hence, distribution put in
by manufacturer prove expensive and some times of no consequences .to be effective the
products have to be physically moved to places of consumption or places to purchase.

3. Media for rural communication:-


Among the mass media, at some point of time ,say in late 50s or early 60s ,radio was considered
to be a potential ,medium for communication to the rural families . now the advent and
expansion of telecast network appears for easy communication with rural masses. The question is
how many people access viewing television? There is a need to examine the ownership pattern of
television sets in rural areas to judge the potential reach of this medium. Another e mass media is
cinema . it has been observed that cinema viewing is fairly satisfactory ,where available . mobile
theaters are also good medium but very expansive companies like HLL using these vans found
10 to12 times higher in rural areas than urban areas due to bad roads in areas .

64
4. Hierarchy of markets:-
Rural consumer have identified market places for different items of their requirements. So there
can not be uniform distribution pattern for all products. It has been seen that 90% of farmers
visited the nearest town , where an agricultural produces assembling market is situated at least
once a quarter for either selling the produce or for purchase of there requirements . so town/
mandi centers with large hinterland villages become the focal point thus depending upon the
purchase habit of rural people. The distribution network for different commodities has to be
different.

5. Low level of literacy:-


The literacy rate is low in rural areas as compare to urban areas. This again lead to the problem

of communication for promotion purposes. Print medium becomes in effective and to an extent

irrelevant in rural areas since its reach is poor and so is the level of literacy. The dependent

should be more on electronic media cinema, radio and television. While the excess to cinema and

radio appears to be fairly easy and common. in not so in case of television. Television advertising

is very expensive. Probable it will be prudent to take advantage of such professional rural

advertising agencies. The promotion of product along with distribution is also being resorted to

by many.

6. Seasonal demand:
The distribution of any product in rural areas either agricultural inputs , consumables or durable

should necessarily follow a seasonal pattern. Since 75% of the rural income is generated through

agricultural operation which is seasonal so the demand pattern is also seasonal. A typical

example is that of fertilizers. The demand of fertilizers is always high during the start of kharif

and rabi system the fertilizers manufacturers have evolved a distribution pattern so that the

seasonal demand can be met. Like wise the demand for consumables and durable will be high

65
during the peek crop harvesting and marketing season. . this is the time at which the rural people

have substantial cash inflows. Hence the distribution should be fairly intensive. During

harvesting season this arrangement would result in adequate sales realization vise versa in

summer months the demand will be very low festivals seasons like sankranti, poangal, vaisakhi

or depawali are also demand seasons. So the distribution of rural areas should be more and

frequent during the harvest and festival seasons as opposed to a fairly uniform demand pattern in

urban areas.

66
7. Many languases and dialects: -
Even assuming that media are avaiable for comunication or the company commit its own media

vans the large number of languages and dialects very wildly from statue to state and reason to

reason. The messages have to be delivered in local; languages and dialects. Even though the

number of recognized languages are only 16, the number of dialects are estimated to be around

850.

8. Low per capita income:


Even though about 33 to 35 percent of gross domestic product is generated by rural areas. It is
shared 75% of population hence the per capita income is low compared to urban areas. This apart
the distribution of income is highly is skewed. Since the land holding patterned itself is skewed
thus the rural population present a highly heterogeneous seen. .Given the low per capita incomes
and population spread in the villages, what will be the off take of any product by rural consumer,
say from a village shop? What should be the inventory levels to be maintained by a rural
shopkeeper and how long will it take for the rural areas shopkeeper to liquidate his stock ? If a
company opts to distribute the products up to village these aspects require very careful
consideration while evolving distribution strategies for rural markets.

67
RURAL MARKETING
-CHALLENGES AND
OPPORTUNITIES

68
RURAL MARKETING-CHALLENGES AND OPPORTUNITIES

The Indian rural market with its vast size and demand base offers great opportunities to
marketers. Two-thirds of countries consumers live in rural areas and almost half of the national
income is generated here. It is only natural that rural markets form an important part of the total
market of India. Our nation is classified in around 450 districts, and approximately 630000
villages which can be sorted in different parameters such as literacy levels, accessibility, income
levels, penetration, distances from nearest towns, etc.

The success of a brand in the Indian rural market is as unpredictable as rain. It has always been
difficult to gauge the rural market. Many brands, which should have been successful, have failed
miserably. More often than not, people attribute rural market success to luck. Therefore,
marketers need to understand the social dynamics and attitude variations within each village
though nationally it follows a consistent pattern.

While the rural market certainly offers a big attraction to marketers, it would be naive to think
that any company can easily enter the market and walk away with sizable share. Actually the
market bristles with variety of problems. The main problems in rural marketing are:

 Physical Distribution

 Channel Management

 Promotion and Marketing Communication

The problems of physical distribution and channel management adversely affect the service as
well as the cost aspect. The existent market structure consists of primary rural market and retail
sales outlet. The structure
involves stock points in feeder towns to service these retail outlets at the village levels. But it
becomes difficult maintaining the required service level in the delivery of the product at retail
level.
One of the way could be using company delivery vans which can serve two purposes- it can take
the products to the customers in every nook and corner of the market and it also enables the firm
to establish direct contact with them and thereby facilitate sales promotion. However, only the
bigwigs can adopt this channel. The companies with relatively fewer resources can go in for

69
syndicated distribution where a tie-up between non-competitive marketers can be established to
facilitate distribution.
As a general rule, rural marketing involves more intensive personal selling efforts compared to
urban marketing. Marketers need to understand the psyche of the rural consumers and then act
accordingly. To effectively tap the rural market a brand must associate itself with the same things
the rural folks do. This can be done by utilizing the various rural folk media to reach them in
their own language and in large numbers so that the brand can be associated with the myriad
rituals, celebrations, festivals, meals and other activities where they assemble.
One very fine example can be quoted of Escorts where they focused on deeper penetration .In
September-98 they established rural marketing sales. They did not rely on T.V or press
advertisements rather concentrated on focused approach depending on geographical and market
parameters like fares, melas etc. Looking at the ‘kuchha’ roads of village they positioned their
mobike as tough vehicle. Their advertisements showed Dharmendra riding Escort with the punch
line ‘Jandar Sawari, Shandar Sawari’. Thus, they achieved whopping sales of 95000 vehicles
annually.
One more example, which can be quoted in this regard, is of HLL. A year back HLL started
‘Operation Bharat’ to tap the rural markets. Under this operation it passed out low–priced sample
packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to twenty
million households.

Thus looking at the challenges and the opportunities which rural markets offer to the marketers it
can be said that the future is very promising for those who can understand the dynamics of rural
markets and exploit them to their best advantage. In recent years, rural markets have acquired
significance, as the overall growth of the economy has resulted into substantial increase in the
purchasing power of the rural communities.

On account of green revolution, the rural areas are consuming a large quantity 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
latter denotes marketing of produce of the rural areas to the urban consumers or industrial
consumers, whereas rural marketing involves delivering manufactured or processed inputs or
services to rural producers or consumers.

In 2001-02, LIC sold 55% of its policies in rural India.


70
Of two million BSNL mobile connections, 50% are in small towns / villages.

Of the 6.0 lakh villages, 5.22 lakh have a Village Public Telephone (VPT).
41 million Kisan Credit Cards have been issued (against 22 million credit-plus-debit cards in
urban), with cumulative credit of Rs. 977 billion resulting in tremendous liquidity.

Of the 20 million Rediffmail sign-ups, 60% are from small towns. 50% of transactions from
these towns are on Rediff online shopping site.
42 million rural households (HHs) are availing banking services in comparison to 27 million
urban HHs.
Investment in formal savings instruments is 6.6 million HHs in rural and 6.7 million HHs in
urban.

Opportunities
1. Infrastructure is improving rapidly -
In 50 years only, 40% villages have been connected by road, in next 10 years another 30% would
be connected.
More than 90% villages are electrified, though only 44% rural homes have electric connections.
Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected
by STD.

Social indicators have improved a lot between 1981 and 2001 -


Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses halved (41% to
23%).
Percentage of BPL families declined from 46% to 27%.
Rural literacy level improved from 36% to 59%.

Low penetration rates in rural areas, so there are many marketing opportunities -

Durables Urban Rural Total (% of Rural HH)


CTV 30.4 4.8 12.1
Refrigerator 33.5 3.5 12.0

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FMCGs Urban Rural Total (% of Rural HH)
Shampoo 66.3 35.2 44.2
Toothpaste 82.2 44.9 55.6

Marketers can make effective use of the large available infrastructure -

Post Offices 1,38,000


Haats (periodic markets) 42,000
Melas (exhibitions) 25,000
Mandis (agri markets) 7,000
Public Distribution Shops 3,80,000
Bank Branches 32,000

Proliferation of large format Rural Retail Stores, which have been successful also -
 DSCL Haryali Stores
 M & M Shubh Labh Stores
 TATA / Rallis Kisan Kendras
 Escorts Rural Stores
 Warnabazaar, Maharashtra (Annual Sale Rs. 40 crore)

72
OPPORTUNITIES FOR
DIFFERENT FMCG
COMPANIES

OPPORTUNITIES FOR DIFFERENT


FMCG MNC’s
73
The Indian rural market with its vast size and demand base offers a huge
opportunity that MNCs cannot afford to ignore :-

TO expand the market by tapping the countryside, more and more MNCs are foraying into
India's rural markets. Among those that have made some headway are Hindustan Lever, Coca-
Cola, LG Electronics, Britannia, Standard Life, Philips, Colgate Palmolive and the foreign-
invested telecom companies.

Opportunity :-

The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs
cannot afford to ignore. With 128 million households, the rural population is nearly three times
the urban.

As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural
output to 200 million tonnes from 176 million tonnes in 1991, rural India has a large consuming
class with 41 per cent of India's middle-class and 58 per cent of the total disposable income.

The importance of the rural market for some FMCG and durable marketers is underlined by the
fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of
all two-wheeler purchased.

The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles,
washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG

products is growing much faster than the urban counterpart.

The 4A approach

The rural market may be alluring but it is not without its problems: Low per capita disposable
incomes that is half the urban disposable income; large number of daily wage earners, acute
dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and

74
festivals and special occasions; poor roads; power problems; and inaccessibility to conventional
advertising media. However, the rural consumer is not unlike his urban counterpart in many
ways. The more daring MNCs are meeting the consequent challenges of availability,
affordability, acceptability and awareness (the so-called 4 As)

Availability

The first challenge is to ensure availability of the product or service. India's 627,000 villages are
spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not
easy. However, given the poor state of roads, it is an even greater challenge to regularly reach
products to the far-flung villages. Any serious marketer must strive to reach at least 13,113
villages with a population of more than 5,000. Marketers must trade off the distribution cost with
incremental market penetration. Over the years, India's largest MNC, Hindustan Lever, a
subsidiary of Unilever, has built a strong distribution system which helps its brands reach the
interiors of the rural market. To service remote village, stockiest use auto rickshaws, bullock-
carts and even boats in the backwaters of Kerala. Coca-Cola, which considers rural India as a
future growth driver, has evolved a hub and spoke distribution model to reach the villages. To
ensure full loads, the company depot supplies, twice a week, large distributors which who act as
hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas.
LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-
urban market. To tap these unexplored country markets, LG has set up 45 area offices and 59
rural/remote area offices.

Affordability

The second challenge is to ensure affordability of the product or service. With low disposable
incomes, products need to be affordable to the rural consumer, most of whom are on daily wages.
Some companies have addressed the affordability problem by introducing small unit packs.
Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced

75
at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh — the so-called
`Bimaru' States.

Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has
launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is
mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by
introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty
per cent of new drinkers now come from the rural markets. Coca-Cola has also introduced
Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is available in a
single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm priced at Rs 15.

Acceptability

The third challenge is to gain acceptability for the product or service. Therefore, there is a need
to offer products that suit the rural market. One company which has reaped rich dividends by
doing so is LG Electronics. In 1998, it developed a customized TV for the rural market and
christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Because
of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice
boxes — a tin box for new outlets and thermocol box for seasonal outlets.

The insurance companies that have tailor-made products for the rural market have performed
well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crore in total
premia. The company tied up with non-governmental organisations and offered reasonably-
priced policies in the nature of group insurance covers.

Awareness:-

With large parts of rural India inaccessible to conventional advertising media — only 41 per cent
rural households have access to TV — building awareness is another challenge. Fortunately,
however, the rural consumer has the same likes as the urban consumer — movies and music —
and for both the urban and rural consumer, the family is the key unit of identity. However, the
rural consumer expressions differ from his urban counterpart. Outing for the former is confined

76
to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan.
Consumption of branded products is treated as a special treat or indulgence.

Hindustan Lever relies heavily on its own company-organised media. These are promotional
events organised by stockists. Godrej Consumer Products, which is trying to push its soap brands
into the interior areas, uses radio to reach the local people in their language.

Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural
households. It doubled its spend on advertising on Doordarshan, which alone reached 41 per cent
of rural households. It has also used banners, posters and tapped all the local forms of
entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its
`magical' price point of Rs 5 per bottle in all media.LG Electronics uses vans and road shows to
reach rural customers. The company uses local language advertising. Philips India uses wall
writing and radio advertising to drive its growth in rural areas.

The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether they
can do so without hurting the company's profit margins. Mr Carlo Donati, Chairman and
Managing-Director, Nestle, while admitting that his company's product portfolio is essentially
designed for urban consumers, cautions companies from plunging headlong into the rural market
as capturing rural consumers can be expensive. "Any generalisation" says Mr Donati, "about
rural India could be wrong and one should focus on high GDP growth areas, be it urban, semi-
urban or rural.

77
INTERPRETATION

78
INTERPRETATION

Rural Marketing Becomes Attractive To Corporate :-

A variety of factors have rendered the rural market quite attractive to corporate in recent years.

The growing opportunity in the rural market is no doubt the prime factor. The rural demand has
been growing rapidly and its composition has been changing for the better in the recent years.
The increased income/ purchasing power of the rural consumer and the improved income
distribution has enhanced rural demand for several products. Better access to many modern
products/brands has added to this growth.

The heat of competition in the urban market actually serves as the stronger driver behind the
growing interest of cooperates in the rural market. The fact that the rural market is still largely
an untapped as well as the early entrants can tap it without having to face intense competition as
in the case of the urban market, makes the rural market all the more attractive to them.

Corporate have been finding the going increasingly tough in the urban market , especially for the
products in respect of which penetration levels are already high . For example penetration level
for the toothpaste in the urban market has now reached close to 80 per cent. In contrast, it is
below 30 per cent in the rural market. Moreover in the urban market many consumers have been
using a toothpaste for quite some time and have settle
down to the brand, its flavour , and other characteristics .They can not be expected to switch their
brand very easily . In contrast, in rural markets, there a lot of first time users of toothpaste whom
the company can tap from the scratch.

Corporate find that the highly penetrated urban markets allow little room for volume growths for
most of what are called,’ necessity products’ (toothpaste, bath soap, washing products, tea etc).
Growth opportunity for many of the ‘emerging products’ (coffee, shampoo, talcum powder etc)
too is rather low in the urban market . The rural market thus becomes essential for companies
with strong aspirations. Not comprising in the rural market keep them out of about half of the

79
country’s market for the ‘necessity products’ and the one-third for the ‘emerging products’ by
value .It is but natural that in these circumstances, corporate set their sights on the rural market

Many company have already taken to the market in a Big Way :-


EXTENT OF RURAL SALES BY SELECTED COMPANIES
Company Rural Sales(% share)
HUL 50
COLGATE 50
GODREJ 33
CADBURY 25
SMITHKLINE BEECHAN 25
HEINZ 20
GLAXO 25
CIPLA 18
RANBAXY 17
HERO HONDA 40
KINETIC 30
SOURCE:Economic times

EXTENT OF RURAL SALES BY SELECT INDUSTRIES


Company Rural Sales
AUDIO 40%
REFRIGATORS 24%
CTVs 22%
PHARMA 20%
CEMENT 10-20%
PAINTS 10-12%
WASHNG MACHINES 9%
SOURCE:Economic times

Above tables shows that the extent of rural sales by select companies/Industries. Many
companies/ Industries have already taken to the rural market in a big way.
It can be shown from above table that in the FMCG Category, half of the revenue of
HINDUSTAN LEVER and Colgates Come from the rural market . In the case of another
companies too, the countryside accounts for a substantial part (25-30) per cent of the total sales.
It can also be seen that about One-Fifth of Pharma sales occur in rural India . Kinetic sells about
30 per cent of its scooters. Hero Honda 40 percent of its bikes.

80
RECOMMENDATION

81
Recommendations

1. Advertisements on rural media like radio, press media has been increased .
2. Physical Distribution channel must be made strong.
3. Awareness about the product must be increased among the peoples.
4. Profit –margin percentage of the product for the retailers should be increased.

5. The rural customers are usually daily wage earners and they don’t have monthly incomes like
the ones in the urban areas have. So the packaging is in smaller units and lesser-priced packs
that they can afford given their kind of income streams. Then a thing like the colour that attracts
him is also important.

6. A difference in the kind of media mix that is used to convey the messages to the rural customers.
We need to use different models and means to reach them as what appeals to the urban customer
may not appeal to him due to varying lifestyles. The communication and the design of it are also
different as what attracts one need not attract the other as well. So again, even if the media
reaches him, there might not be an impact as it may fail to attract him as fails to connect to it due
to the lifestyles being different.

7. Infrastructure like- road, electricity facility must be improved because most of the MNC’s
tap the rural market due to such difficulties.

8. In advertising local languages can be used to attract more and more viewers.

82
LIMITATIONS OF THE
STUDY

83
LIMITATIONS OF THE STUDY
The study is based totally on secondary data and such data relates to something of the past and
not the exact present scenario. Hence totally depending on such given data could at times be
misleading, that is no matter how good the report is one has to do certain amount of homework
before jumping to conclusions on the basis of such study.

Marketing activity is something that is never stable and is constantly changing with the changing
circumstances, ever changing rules and regulations that control these activities. Hence something
which is very up-to-date as of now might become obsolete in a very short span of time. One has
to be very cautious before taking any decision based on such data and has to think beyond what
is given. No amount of data can be accurate enough to give the desired results.

Another major drawback with respect to the study of Scope Of Rural Marketing For FMCG
Company In India is that it is something that has been here for the past few years only and hence
trying to get much information regarding it is also difficult, and whatever little that is available
has to be taken note of and believed into. Only a few studies on the topic are available and hence
very few facets of it can be seen.
A lot more can be known about it but at a later stage when it has grown in proportions and is
more frequently used by the various MNC’s for increasing their market share and lot of
competition increases among the MNC’s and the urban market is saturated.

84
BIBLIOGRAPHY

85
BIBLIOGRAPHY

Business magazines: Business Today

Internet: www.Indiainfoline.com
www.Google.com
www. Censusindia.com
www.HLL.com

Business Dailies: The Economic Times


Business Standard

Study books: Marketing Management- Philip kotler


Marketing Management- v s Ramaswamy
S Namakumari.

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