PROJECT TITLE- RURAL MARKETING

'Rural markets are future battlegrounds'

UNDER THE SUPERVISION OF: SUBMITTED BY:

Ms. CHARU BHARATI (LECTURER) BINAY KUMAR

AMITY SCHOOL OF BUSINESS BBA (M&S)
AMITY UNIVERSITY ROLL NO-A-50
NOIDA ENROLLMENT NO:
A3914708027

ACKNOWLEDGEMENT

I owe much more than I can ever repay to certain people who have played a particularly
significantly role.

I am indebeted to my parents for encouraging in my determined effort.

My special thanks to Ms. Charu Bharati for giving such a knowledgeable summer project
and helping me in time to time. I am also thankful to ASB library which has given a lot of
information about the topic.

I thank to all my friend who offered useful advice and many valuable improvement and
for there much needed care and cooperation.

2
 ABSTRACT
Around 700 million people, or 70% of India's population, live in 6,27,000 villages in
rural areas. 90% of the rural population is concentrated in villages with a population of
less than 2000. Rural marketing is as old as the civilization. Surplus of agro - products are
exchanged in earlier days in the barter system. The introduction of currency, transport,
and communication has increased the scope of rural market. This paper discusses the
present scenario of rural marketing especially rural produce, and its importance, current
trends, and highlights certain problems related to rural marketing. Further it highlights the
improvements that make the rural marketing system most effective.

Rural marketing facilitate flow of goods and service from rural producers to urban
consumers at possible time with reasonable prices, and agriculture inputs/ consumer
goods from urban to rural. Marketing as a function has started much earlier when
civilization started but not recognized as marketing. All economy goods are marketed in
terms of goods and services (Barter system). Now money is being practiced as a good
exchanging medium. The market may be a street, or a small town/ metropolitan city,
Developments in infrastructure, transport, and communication facilities has increased the
scope of the rural market.

Promotion of brands in rural markets requires the special measures. Due to the social and
backward condition the personal selling efforts have a challenging role to play in this
regard. The word of mouth is an important message carrier in rural areas. Infect the
opinion leaders are the most influencing part of promotion strategy of rural promotion
efforts. The experience of agricultural input industry can act as a guideline for the
marketing efforts of consumer durable and non-durable companies. Relevance of Mass
Media is also a very important factor.

3
The Indian established Industries have the advantages, which MNC don't enjoy in this
regard. The strong Indian brands have strong brand equity, consumer demand-pull and
efficient and dedicated dealer network which have been created over a period of time.
The rural market has a grip of strong country shops, which affect the sale of various
products in rural market. The companies are trying to trigger growth in rural areas. They
are identifying the fact that rural people are now in the better position with disposable
income. The low rate finance availability has also increased the affordability of
purchasing the costly products by the rural people. Marketer should understand the price
sensitivity of a consumer in a rural area. This paper is therefore an attempt to promote the
brand image in the rural market.

4
 Table of contents
S.NO: CONTENTS PAGE NO:

01 Chapter 1: Introduction 06-

02 1.1 Objective of the study 10
03 1.2 Rural marketing concept and scope 11
04 1.3 Evolution of rural marketing 15
05 1.4 Rural Vs urban marketing 16
06 1.5 Characteristic of rural consumer 17
07 1.6 Challenges of rural marketing 20
08 1.7 Solution of problem to rural market 26
09 1.8 The 4Ps of rural market 28
10 1.9 Case study of coca cola 31
11 2.0 Product strategies 41
12 2.1 Packaging strategies 46
13 2.2 Marketing communication in rural India 49
14 2.3 New approaches in distribution 55
15 2.4 Advertising and sales promotion strategy by Godrej, 61

Lifebuoy, Fair and lovely and Colgate

16 2.5 Rural marketing information system (e-choupal,I-shakti) 69

17 CHAPTER 2: Materials and methods 75

18 CHAPTER 3: Results and discussion 76
19 CHAPTER 4: Conclusions and recommendations 78
20 CHAPTER 5: Future prospects 80
21 CHAPTER 6: Appendices 83
22 CHAPTER 7: References 87

5
INTRODUCTION

INTRODUCTION

6
India lives in her villages.
As described by Adi Godrej, Chairm an , Godrej Group” The rural
consumers is discerning and the rural market is vibrant . At the
current of growth , it will soon outstrip the urban market. The rural
m arket is no longer sleeping but we are.”

With more than 700 million people living in rural areas, in some 5,80,000 villages, about
two—third of its workforce was engaged in agriculture and allied activities with a
contribution of 29 percent of India’s Gross Domestic Product (GDP), India’s economy is
predominantly rural in character.

Till recently, the focus of marketers in India was the urban consumer and by large
number specific efforts were made to reach the rural markets. But now it is felt that with
the tempo of development accelerating in rural India, coupled with increase in purchasing
power, because of scientific agriculture, the changing life style and consumption pattern
of villagers with increase in education, social mobility, improved means of
transportations and communication and other penetrations of mass media such as
television and its various satellite channels have exposed rural India to the outside world

7
and hence their outlook to life has also changed. Because of all these factors, rural India
in now attracting more and more marketers.

Additionally, the rural economy has not been impacted by the global economic
slowdown, according to a recent study by the Rural Marketing Association of India
(RMAI).

The study found that the rural and small town economy which accounts for 60 per cent of
India’s income has remained insulated from the economic slowdown. Moreover, rural
incomes are on the rise driven largely due to continuous growth in agriculture for four
consecutive years.

According to a McKinsey survey conducted in 2007, the rural India market would grow
almost four times from its existing size in 2007, which was estimated at US$ 577 billion.

Most MNCs that came in to India after 1999 targeted India upper middle class to earn
more revenues.

According to industry estimates rural India accounts for 74% of population and 58% of
indian rural disposable income.

Rural India is also characterized by growing affluence: agricultural output increasingly to

early 215 millions tonnes in 2004 compared to 176 millions in 1991.

According to data compiled by the National Council of Applied Economic Research rural
India now accounts for the 70% of toilet soap users, and 38% of two-wheelers purchases
come from India.

Atlanta based Coca-Cola company is one of the first global majors to have spotted the
potential spin offs from the country’s rural market.

It has perfected a unique supply chain to cater to india’s vast rural markets hinterland.
The results are working and coca-cola India rural penetration increased from 13 percent
in 2001 to 25 percent in mid 2003.

8
Over this period, the numbers of company’s rural distributors increased from less than
4000 to 5500.

Breaking to this market required innovative thinking and a new strategy. Rural india
meant reaching 6,27,000 square Km; it meant getting distributors to travel 200 kms to
reach five shops with drop sizes of than a case.

A typical village retail environment consists of 4-5 kirana shops, the size of such stores
varies depending on the size and population density of village where it serves.

Thus, Indian rural markets have caught the attention of many companies, advertisers and
multinational companies. According to a recent survey conducted by the National
Council for Applied Economic Research (NCAER), the purchasing power of the rural
people has increased due to increase in productivity and better price commanded by the
agricultural products

Rural marketing has become the latest mantra of most corporate.Companies like
Hindustan Lever, Colgate Palmolive, Britannia and even Multinational Companies
(MNCs) like Pepsi, Coca Cola, L.G., Philips, Cavin Kare are all eyeing rural markets to
capture the large Indian market.

9
Coming to the frame work of Rural Marketing, Rural Marketing broadly involves
reaching the rural customer, understanding their needs and wants, supply of goods and
services to meet their requirements, carrying out after sales service that leads to customer
satisfaction and repeat purchase/sales.

Objectives of the study

"Any task without sound objectives is like Tree without roots". Similarly in case of any
research study undertaken, initially the objectives of the same are determined and
accordingly the further steps are taken on. A research study may have many objectives
but all these objectives revolve around one major objective which is the focus of the
study. In this study, the focus is on the emergence of Rural markets as the most
happening market on which every marketer has an eye. And so this study will be based
on studying the emergence of rural market in various contexts.
The following are the objectives of this research study :-
♦ To study the emergence of Rural markets in the context of India.
♦ To study the present scenario of rural marketing in India.
♦ To study the future prospects of rural markets and their scope for the MNCs and
Indian companies, in India.
♦ To study the challenges faced by rural marketers in India.
To study the reasons of popularity of rural markets in India.
♦ To measure the success of rural marketing campaign of few brands in Terms of
consumer appreciation.
♦ To study the determinants of specification factors which can decide the success the
rural promotion strategy.
♦ To evaluate the effects of adopting the specific brand ambassadors in the rural

marketing context.

10
 RURAL MARKETING
CONCEPT AND SCOPE

The Census of India defines rural as any habitation:

♦ With a population density of less than 400 per sq.km.
♦ Where at least 75% of the male working population is engaged in agriculture.
♦ Where there exist no municipality or board.

If we go by statistics, roughly around 70% of the Indian population lives in the rural
areas. That’s almost 12% of the world population.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.

FMCG

Rural consumers spend around 13 per cent of their income, the second highest after food
(35 per cent), on fast moving consumer goods (FMCG), as per a RMAI study. The
FMCG industry in India was worth around US$ 16.03 billion in August 2008 and the
rural market accounted for a robust 57 per cent share of the total FMCG market in India.

Moreover, according to an ASSOCHAM study, FMCG sector in rural areas is expected

to grow by 40 per cent as against 25 per cent in urban areas.

Most FMCG companies are now working on increasing their distribution in smaller
towns and focussing on marketing and operations programme for semi-urban and rural
markets. Industry analysts state that the increased consumption is also the result of a
growing middle class base in these markets. The total number of rural household is

11
expected to rise to 153 million in 2009-10 from 135 million in 2001-02, suggesting a
huge market.

Retail : The rural retail market is currently estimated at US$112 billion, or around 40
per cent of the US$ 280 billion retail market. Major domestic retailers like AV Birla,
ITC, Godrej, Reliance and many others have already set up farm linkages. Hariyali Kisan
Bazaars (DCM) and Aadhars (Pantaloon-Godrej JV), Choupal Sagars (ITC), Kisan
Sansars (Tata), Reliance Fresh, Project Shakti (Hindustan Unilever) and Naya Yug
Bazaar are established rural retail hubs.

Telecommunication : A Gartner forecast revealed that Indian cellular services

revenue will grow at a compound annual growth rate (CAGR) of 18.4 per cent to touch
US$ 25.6 billion by 2011, with most of the growth coming from rural markets. Also, a
joint Confederation of Indian Industries (CII) and Ernst & Young report reveals that of
the next 250 million Indian wireless users, approximately 100 million (40 per cent) are
likely to be from rural areas, and by 2012, rural users will account for over 60 per cent of
the total telecom subscriber base in India.

Mobile phones in rural India also grew by close to 13.72 per cent to reach 70.83 million
in April-June 2008. CII also estimates the number of subscriber addition in rural areas to
exceed the additions in metros by 2012 as about 120 million new users are expected to
adopt wireless telephony in rural areas as compared to about 62 million in the metros.

Automobiles

12
Passenger car and two-wheeler companies are driving on rural roads to push sales. While
growth in urban markets has been flat or negative, the rural markets are booming,
insulated from economic downturn. Rural markets' share in Maruti's overall sales during
April-January 2009 has gone up to 8.5 per cent from 3.5 per cent in the same period last
year.

Mahindra & Mahindra is also bullish on the rural and semi-urban markets, with its utility
vehicle, Scorpio clocking 60-65 per cent sales from the rural markets as against 20 per
cent earlier. TVS Motor also registered around 50 per cent of its sales from the rural and
semi-urban markets.

Consumer durables

A survey carried out by RMAI has revealed that 59 per cent of durables sales come from
rural markets.

Many leading consumer durable companies are now increasing their presence in rural
India. Recently, LG has set up 45 area offices and 59 rural and remote-area offices.
Samsung has also rolled out its 'Dream Home' road show which was to visit 48 small
towns in 100 days in an effort to increase brand awareness of its products.

13
 RURAL MARKETING

Rural marketing involves the process of developing, pricing, promoting, distributing rural
specific product and a service leading to exchange between rural and urban market which
satisfies consumer demand and also achieves organizational objectives.

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

1. Urban to Rural: It involves the selling of products and services by urban marketers
in rural areas. These include: Pesticides, FMCG Products, Consumer durables, etc.
2. Rural to Urban: Here, a rural producer (involved in agriculture) sells his produce
in urban market. This may not be direct. There generally are middlemen, agencies,
government co-operatives, etc who sell fruits, vegetables, grains, pulses and others.
3. Rural to rural: These include selling of agricultural tools, cattle, carts and others to
another village in its proximity.

MYTH REALITY
Rural people do not buy brands Branded consumption accounts for 80%
sale for FMCG
Rural consumers buy cheap products They seek value for money
Rural market is a homogeneous market It is heterogeneous

EVOLUTION OF RURAL MARKETING

14
Phase 1-(Before 1960)
Phase 2-(1960-1990)
Phase 3-(1990 to the present)

Phase 1
♦ Age of agricultural marketing.
♦ Agricultural products like food grains and industrial inputs like cotton, sugarcane,etc
were the primary product.
♦ Rural economy was in a primitive stage.
♦ Traditional farming method.
♦ Unorganized market.

Phase 2
♦ Green revolution.
♦ Scientific farming method.
♦ Poverty-striken villages turned into cash rich centers.
♦ Exponential growth of agricultutal production.
♦ Shift from agricultural marketing to marketing of agricultural inputs.
♦ Emergence of Mahindra and Mahindra,escorts,eicher,sriram fertilizers and IFFCO

Phase 3
♦ Marketing of consumables and durables.
♦ Economic reforms increased plan outlay by state and central govt.
♦ Competition

RURAL VERSUS URBAN MARKETING

15
 The Changing Scenario

A dramatic change is in progress in the villages. Villagers who used to crack open peanut
candies, eat the nut and throw away the shell are now demanding chocolate candies that
will melt in their mouths, not in their hands. The new advertisement of Perk featuring
Rani Mukerjee speaks about the demand created in rural markets for chocolates.Charcoal,
neem twigs and twigs of babool tree to cleaned teeth are replaced by Paste. Today, the
ultra bright shine of Colgate or some other international brand of toothpaste holds more
appeal than the traditional methods of cleaning teeth.

1 The rural markets are of diverse nature. There are people from diverse cultural,
linguistic and religious background. No two markets are alike and it is dispersed across
India.

2 Shift towards rural markets are mainly because of saturation and competitiveness of
urban market. Marketers do not want to neglect this huge untapped market.

3 The incomes of rural customers are also increasing. As seen earlier disposable income
of rural consumers have increased and they spend on FMCG and consumer durables.

4 Rising literacy has generated a demand of life style products. Lot of youth move out of
the village and visit surrounding cities. They come back and influence decision making.

5 Cable television has also contributed to an increase in life style. The reach has
increased and marketers are in a position to promote their products much more easily

CHARACTERISTICS OF RURAL CONSUMERS

16
IMRB (Indian Market Research Bureau) and NCAER “(National Council for Applied
Economic Research) have made available a few studies based on which rural consumers
profile can be arrived at.

• Literacy: 23% of rural Indian population is literate and people are getting added to
this list year after year. There are still some villages which are underdeveloped.

Maximum education is primary school or in some cases high school. To this group the
marketing promotional strategy to be adopted is demonstration of product features and
advantages. Print media and posters do not make any impact.

• Income: An average rural consumer has a much lower income than his urban
counterpart. The disposable income has increased in the recent years to considerable
extent. In spite of this, the common traits of rural consumers are low purchasing power,
low standard of living, low per capita income and low economic and social positions.

• Density: Rural population is scattered across 7 lakh villages. This implies that rural
demand is scattered and urban demand is concentrated.

17
• Influencers: There are many reference groups in a village. These include teacher,
doctor, panchayat members, health workers, bank manager and co-operative board
workers. These influencers need to be kept in mind when a marketer decides on rural
marketing.

• Occupation: The main occupation is agriculture. The size and ownership of land
determines the basis for differentiation and consumption patterns.

• Culture: Rural consumers are traditional in their outlook. They associate faster with
messages that match their cultural behavior.

• Language: English is not a language of rural India. Hence a marketer should aim for
communication in the local language.

• Media Habits: Television, radio, vedio and theatre are some of the traditional
media that a rural consumer identifies with. The above are some of the factors that
differentiate the rural consumer from his urban counterpart. A marketer has to decide on
all the above parameters while designing a marketing plan.

Changing profile of rural consumers

Rural consumers as studied are dependent on agriculture and were not very literate about
products and services available. This scenario is slowly changing due to increase in

18
literacy and disposable income. Not long ago, rural consumers went to a nearby city to
buy``branded products and services". Only select household consumed branded goods, be
it tea or jeans. Earlier, big companies flocked to rural markets to establish their brands.

Rural markets today are critical for every marketer - be it for a branded shampoo or a
television. Earlier marketers thought of van campaigns, cinema commercials and a few
wall paintings to entice rural folks under their folds. Today a customer in a rural area is
quite literate about myriad products that are on offer in the market place, thanks to
television. Many companies are foraying into the rural markets and educating them on
newer products and services.

The rural youth today are playing a far more significant role in influencing the purchase
decisions. They travel frequently out in the village and are the drivers of purchase
decisions regarding radios, television (black and white as well as color), automobiles and
other goods.

Even the rural woman is coming out of the closet. She is exercising her choice in
selecting categories - the choice of brands may still be with the males of the household.
The prerogative of making the final purchase decisions stills rests with the chief male. In
other words, the “chief wage earner” syndrome still applies in the rural markets.

CHALLE
NGES IN RURAL MARKETING

19
There are several roadblocks that make it difficult to progress in the rural market.
Marketers encounter a number of problems like dealing with physical distribution,
logistics, proper and effective deployment of sales force and effective marketing
communication when they enter rural markets. The major problems are listed below.

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

markets. Thus the market is also underdeveloped and marketing strategies have to be
different from those used in urban marketing.

2. Low literacy levels: The low literacy levels in rural areas leads to a problem of
communication. Print media has less utility compared to the other media of
communication.

3. Low per capita income: Agriculture is the main source of income and hence
spending capacity depends upon the agriculture produce. Demand may not be stable or
regular.

4. Transportation : Transportation is one of the biggest challenges in rural markets.

As far as road transportation is concerned, about 50% of Indian villages are connected by
roads. However, the rest of the rural markets do not even have a proper road linkage
which makes physical distribution a tough task. Many villages are located in hilly terrains

20
that make it difficult to connect them through roads. Most marketers use tractors or
bullock carts in rural areas to distribute their products.

5. Warehousing : is another major problem in rural areas, as there is hardly any

organized agency to look after the storage issue. The services rendered by central
warehousing corporation and state warehousing corporations are limited only to urban
and suburban areas.

6. Lack of communication system: Quick communication is the need of the hour

for smooth conduct of business, but it continues to be a far cry in rural areas due to lack
of communication facilities like telegraph and telecommunication systems etc. The
literacy rate in the rural areas is rather low and consumer’s behavior in these areas is
traditional, which may be a problem for effective communication. The number of
languages and dialects vary from state to state region to region This type of distribution
of population warrants appropriate strategies to decide the extent of coverage of rural
market.

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

in rural areas. A lot of spurious brands or look-alikes are available, providing a low cost
option to the rural customer. Many a time the rural customer may not be aware of the
difference due to illiteracy.

8. Availability: The first challenge in rural marketing is to ensure availability of the

product or service. India's 7, 00,000 villages are spread over 3.2 million sq km; 700
million Indians may live in rural areas, finding them is not easy. They are highly
dispersed.

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

21
service remote village, stockists use auto rickshaws, bullockcarts 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
has set up 45 area offices and 59 rural/remote area offices to cater to these potential
markets

9. Affordability: The second major 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 who are on daily wages.
A solution to this has been introduction of unit packs by some companies. This ensures
greater affordability. Most of the shampoos are available in smaller packs.
Fair and lovely was launched in a smaller pack. Colgate toothpaste launched its smaller
packs to cater to the traveling segment and the rural consumers.

Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50- gm
packs. Hindustan Lever has launched a variant of its largest selling soap brand, Lifebuoy.
Coca-Cola has addressed the affordability issue by introducing the smaller bottle priced
at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the
rural markets. A series of advertisement for this was rune showing people from diverse
backgrounds featuring Aamir Khan.

10. Acceptability: The next challenge is to gain acceptability for the product or
service. Therefore, there is a need to offer products that suit the rural market. LG
Electronics have reaped rich dividends by doing so. In 1998, it developed a customized
TV for the rural market named Sampoorna. It was a runway hit selling 100,000 sets in the
very first year. Coca-Cola provided low-cost ice boxes in the rural areas due to the lack
of electricity and refrigerators. It also provided a tin box for new outlets and thermocol

22
box for seasonal outlets. The insurance companies that have tailor-made products for the
rural market have also 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 organizations and offered reasonably-priced policies in the nature of group
insurance covers.

The initiatives of CCI in distribution and pricing were supported by extensive marketing
in the mass media as well as through outdoor advertising. The company put up hoardings
in villages and painted the name Coca Cola on the compounds of the residences in the
villages. Further, CCI also participated in the weekly mandies by setting up temporary
retail outlets, and also took part in the annual haats and fairs - major sources of business
activity and entertainment in rural India.

CCI also launched television commercials (TVCs) targeted at rural consumers. In order
to reach more rural consumers, CCI increased its ad-spend on Doordarshan

The company ensured that all its rural marketing initiatives were well-supported by
TVCs. When CCI launched Chota Coke in 2002 priced at Rs. 5, it bought out a
commercial featuring Bollywood actor Aamir Khan to communicate the message of the
price cut and the launch of 200 ml bottles to the rural consumers..

In the summer of 2003, CCI came up with a new commercial featuring Aamir Khan, to
further strengthen the Coca-Cola brand image among rural consumers. The commercial

23
aimed at making coke a generic name for ‘Thanda.'Of the reason for picking up the word
‘Thanda', Prasoon Joshi, national creative director – McCann Erickson, the creator of the
commercial, said, “Thanda is a very North India-centric phenomenon. Go to any
restaurant in the north, and attendants would promptly ask, ‘thanda ya
garam?'‘Thanda'usually means lassi or nimbu pani, ‘garam'is essentially tea. Because the
character, in itself, represented a culture, we wanted to equate Coke with ‘Thanda', since
‘Thanda'too is part of the popular dialect of the north. Thus making ‘Thanda'generic for
Coca-Cola. With the long-playing possibilities of the ‘Thanda'idea becoming evident,
‘Thanda'became the central idea. Once we decided to work on that idea, the creative mind
just opened up

Between March and September 2003, CCI launched three commercials with the ‘Thanda
Matlab Coca-Cola'tag line. All the three commercials aimed to make rural and semi-
urban consumers connect with Coca-cola. The first ad featured Aamir Khan as a
‘tapori'(street smart); in the ad he makes the association between Coca-Cola and the word
‘Thanda.'The second commercial in the series featured Aamir Khan as a ‘Hyderabadi
shop-keeper'; here again he equates the word ‘Thanda'with Coca-Cola. The third
commercial featured Aamir Khan as a ‘Punjabi farmer'who offers Coca Cola to ladies
asking for Thanda.

The three commercials showed progression in associating ‘Coke'with

‘Thanda'in a rural/semi-urban context. In the first commercial the connection of Coke
with Thanda was made, in the second one there was a subtle difference, with the
shopkeeper asking customers to ask for Thanda instead of Coke, and the third
commercial showed that when one asked for Thanda, one would get Coke.

Analysts said that all the three commercials succeeded in make rural consumers connect
to Coke and increased awareness of the brand among them. Along with TVCs, CCI also
launched print advertisements in several regional newspapers

24
11. Awareness: A large part of rural India is inaccessible to conventional advertising
media. Only 41 per cent rural households have access to TV. Building awareness is
another challenge in rural marketing. A common factor between the rural and the urban
consumer is the interest for movies and music. Family is the key unit of identity for both
the urban and rural consumer. However, the rural consumer expressions differ from his
urban counterpart. For a rural consumer, outing is confined to local fairs and festivals and
TV viewing is confined to the state-owned Doordarshan. Consumption of branded
products is treated as a special treat or indulgence. Hindustan Lever has its own
company-organized media. These are promotional events organized 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 the 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 8 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.

Also, in India, the retailers are highly fragmented, highly dispersed. At the same time,
each of these regions serves a large population. The media penetration in rural areas is
only about 57%. It has been seen that, two out of five Indians are unreached by any
media TV, Press, Radio and Cinema put together. Haats, mandis and melas are
opportunities.

25
 SOLUTION TO PROBLEM OF RURAL MARKET

To solve the problems of rural markets in India, the following suggestions can be used by
marketers.

1. Regarding the problems of physical distribution, the marketer may have a joint
network of stockist/ clearing-cum-forwarding (C&F) agents at strategic location for
facilitation of physical distribution for its products in the rural market. The main
advantage of this scheme is that the costs of physical distribution can be shared by the
companies and stockists. The combination of different modes of transport based on
availability of tracks will be beneficial to the companies. Presently, bullock-cart plays a
very vital role in rural distribution where the roads are not available. Some of the leading
companies use delivery vans in rural areas for resolving the distribution problems in rural
market. The delivery van takes the products to the retail shops in every corner of the rural
market and it enables the company to establish direct sales contact with majority of the
rural consumers which helps in sales promotion.

2. The rural market is composed of a number of retail sales outlets along with fair price
shops under the public distribution system. It is suggested that the government should
encourage private shopkeepers and cooperative stores to come forward and establish their
business in rural areas instead of the weekly market known as weekly bazaar. Fertilizer
companies have opened their outlets for proper distribution of fertilizer among the
farmers. Similarly, the companies dealing in consumer goods can apply this model. The
company may also appoint a number of retailers in and around the feeder towns and
attach them to the stockist who distributes the goods to the retailers as per the potential of
the market. This system has the benefit of penetrating into the interior areas of the rural
markets.

26
3. To solve the problems of sales force management, it is suggested that the company
takes due care in the recruitment and selection of sales people because the traits they
require are different from urban and suburban sales persons. For the rural markets, only
those sales people should be preferred for selection who is willing to work in rural areas.
They must be aware of the local language and must have the patience to deal with rural
customers and can discharge the duties of a bare-footed salesman. Administration of such
a large and scattered sales force, supervising and supporting them in sales calls, guiding
them, attending to their official and personal problems, and motivating them for better
results should be an exacting task for the sales manager. Thus, the people operating in
rural areas should invariably be from the rural background and should have a missionary
zeal to serve the rural masses.

4. With reference to marketing communication in rural areas, the company should use
organized media-mix like TV, Radio, cinema and POP (point of purchase) advertising.
Television is gaining popularity in the rural areas but due to poor supply of electricity,
radio is performing significantly better. Since, the rural people need demonstration, short-
feature films with disguised advertisement messages, direct advertisement films and
documentaries that combine knowledge and advertisements will perform better rural
marketing communication. Here the companies may also use audiovisual publicity vans,
which may sell the products with promotion campaign. To attract the rural consumers,
companies can organize village fairs, dance and drama shows, group meetings to
convince the rural consumers about the products and services. In most Indian villages,
there are some opinion leaders. For the rural markets, only those sales people should be
preferred for selection who is willing to work in rural areas like Sarpanch, Pradhan and
other elderly persons. They can be approached by the marketers to propagate their
messages; these persons can prove to be effective communicators within the rural masses.

27
 The 4Ps of Rural Marketing
Most of the companies treat rural market as a dumping ground for the lower end products
designed for an urban audience. But, this scenario is slowly changing and importance is
given to the need of the rural consumer. Hence it is important to understand the 4Ps of
rural marketing with respect to a rural consumer.

1. Product
They identify FMCG by three things:
1. Color,
2. Visuals of animals and birds and
3. Numbers.

So a 555, 777, hara goli, pila hathi, lal saboon, saphed dantmanjan are the kind of terms
with which they identify brands. Hence it is very important for us to understand that a lot
needs to be done in terms of communications, media, marketing and branding. There are
a number of cases which suggest that to sell brands in the rural market, it is necessary to
simultaneously educate the consumers. If you have to create brand communication,
marketing efforts must be supported by education.

The following have to be kept in mind while the marketer makes a decision on
the product.

1. The product for the rural markets has to be simple, easy to use and provide after sales
service or maintenance.
2. The product has to be packed for low price and convenient usage.
3. The pack has to be easily understood by the rural consumer. The information on the
pack is preferred in local language communicating the functional benefit of the product.

28
2. Pricing
A rural customer is price sensitive and shops for value. This is mainly because of his
lower income levels than his urban counterparts. Hence the marketer has to find ways of
making the product affordable to the rural consumer. Banks offer loans for tractors, pump
sets, television sets and so on to make the product affordable to a rural consumer. Smaller
unit packs are preferred in the case of FMCG products to offer at lower prices. The
product packaging and presentation offers scope for keeping the price low. Reusable
packs or refills are also preferred and are seen as value addition.

3. Placement or Distribution
Distribution of products is one of the biggest challenges of rural marketing. There are
CWC (Central Warehousing Corporation) and SWCS (State Warehousing Corporations)
set up in rural areas to store and distribute products. A three tier rural warehousing setup
exists:
• CWC/SWCs
• Co-operatives
• Rural Godowns

CWC and SWCs reach up to the district levels. The co-operatives are at the mandi level.
The Rural Godowns are at the village level wherein they are owned by panchayat heads.
All these tiers provide warehousing facilities only to their own members. Hence it is a big
problem for a company to store its goods in rural areas.

There are some problems of rural distribution:

• Transportation has not been fully developed.
• Lack of proper channels of communication like telephone, postal services, and so on
pose a lot of problem to marketer to service the retailer as it is difficult to the retailers to
place order for goods.
• Storage of goods in rural areas is also a problem for the marketers.

29
• Multiple tiers push up the costs and channel management is a major problem for
marketers due to lot of middlemen in the process.
• Availability of suitable dealers
• Poor viability of rural outlets
• There are a lot of private shops in the rural sector.

4. Promotion
Communication to rural consumer is through organized media. More number of rural
consumer (~70%) listen to radio and many go to cinema.Rural communication can be
through Conventional media or through a nonconventional media. The most common
conventional media include: Print, Cinema,
Television and Print. The Non-conventional
media include: Theatre,Posters, Haats and
Melas.The conventional media have
excellent reach, less expensive and create a
better impact. But at the same time, it is not
customized to each village and also offers
unnecessary coverage at times. Low
literacy rates, culture, traditions, rural
reach, attitudes and behavior are the other problems in rural communication. An effective
promotion should plan for a proper mix of media. This is very important to create a mind
share in the rural consumers. Hence, talking to the customer in a language known to him,
advertising the functional benefits and demonstrating the product go a long way in
capturing the rural market.

Hindustan Lever is the first company that comes to mind while thinking of rural
marketing. Amul is another case in point of aggressive rural marketing. Some of the other
corporates that are slowly making headway in this area are Coca Cola India, Colgate,
Eveready Batteries, LG Electronics, Philips, BSNL, Life Insurance Corporation, Cavin
Kare, Britannia and Hero Honda to name a few.

30
 CASE STUDY – COCA COLA IN INDIA

Coca-Cola was the leading soft drink brand in India until 1977 when it left rather than
reveal its formula to the government and reduce its equity stake as required under the
Foreign Exchange Regulation Act (FERA) which governed the operations of foreign
companies in India.

After a 16-year absence, Coca-Cola returned to India in 1993, cementing its presence
with a deal that gave Coca-Cola ownership of the nation's top soft-drink brands and
bottling network.

Coke’s acquisition of local popular Indian brands including Thums Up (the most trusted
brand in India21), Limca, Maaza, Citra and Gold Spot provided not only physical
manufacturing, bottling, and distribution assets but also strong consumer preference.

Leading Indian brands joined the Company's international family of brands, including
Coca-Cola, diet Coke, Sprite and Fanta, plus the Schweppes product range.

In 2000, the company launched the Kinley water brand and in 2001, Shock energy drink
and the powdered concentrate Sunfill hit the market.

Coca-Cola India achieved 39% volume growth in 2002 while the industry grew 23%
nationally and the Company reached breakeven profitability in the region for the first
time. Coca-Cola India produced its beverages with 7,000 local employees at its twenty-
seven wholly-owned bottling operations supplemented by seventeen franchisee-owned

31
bottling operations and a network of twenty-nine contract-packers to manufacture a range
of products for the company.

Coke and Pepsi dominated the market and together had a consolidated market share
above 95%. While soft drinks were once considered products only for the affluent, by
2003 91% of sales were made to the lower, middle and upper middle classes. Soft drink
sales in India grew 76% between 1998 and 2002, from 5,670 million bottles to over
10,000 million and were expected to grow at least 10% per year through 2012.

In spite of this growth, annual per capita consumption was only 6 bottles versus 17 in
Pakistan, 73 in Thailand, 173 in the Philippines and 800 in the United States.

With its large population and low consumption, the rural market represented a significant
opportunity for penetration and a critical battleground for market dominance.

In 2001,Coca-Cola recognized that to compete with traditional refreshments including

lemon water, green coconut water, fruit juices, tea, and lassi, competitive pricing was
essential.

Coke
Rural Initiatives

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

32
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.

“ Thanda” Goes Rural

In early 2002, CCI launched a new advertisement campaign featuring leading Bollywood
star Aamir Khan. The advertisement with tagline- ‘Thanda matlab Coca- Cola’ was
targeted at rural semi urban consumers. The idea was to position Coca-Cola as a generic
brand for cold drinks. The campaign was launched to supports CCI’s rural initiatives.

CCI began focusing on the rural market in the early 2000s in order to increase volumes.
The decision was not surprising, given the huge size of the untapped rural india. In an
effort to make the price point of Coke within reach of this high-potential market, Coca-
Cola launched the Accessibility Campaign, introducing a new 200ml bottle, smaller than
the traditional 300ml bottle found in urban markets, and concurrently cutting the price in
half, Rs. 5. This pricing strategy closed the gap between Coke and basic refreshments like
lemonade and tea, making soft drinks truly accessible for the first time. Coke invested in
distribution infrastructure to effectively serve a disbursed population and doubled the
number of retail outlets in rural areas from 80,000 in 2001 to 160,000 in 2003, increasing
market penetration from 13 to 25%. However, the poor rural infrastructure and
consumption habits that are very different from those of urban people were two major
obstacles to cracking the rural market for CCI. Because of the erratic power supply most
grocers in rural areas did not stock cold drinks.

33
 Brand Localization Strategy: The Two Indias

India A: “Life ho to aisi”

“ India A,” the designation Coca-Cola gave to the market segment including metropolitan
areas and large towns, represented 4% of the country’s population.

This segment sought social bonding as a need and responded to aspirational messages,
celebrating the benefits of their increasing social and economic freedoms.

“ Life ho to aisi ,” (life as it should be) was the successful and relevant tagline found in
Coca-Cola’s advertising to this audience.

India B: “Thanda Matlab Coca-Cola”

Coca-Cola India believed that the first brand to offer communication targeted to the
smaller towns would own the rural market and went after that objective with a
comprehensive strategy. “ India B” included small towns and rural areas, comprising the
other 96% of the nation’s population.

This segment’s primary need was out-of-home thirst-quenching and the soft drink
category was undifferentiated in the minds of rural consumers. Additionally, with an
average Coke costing Rs. 10 and an average day’s wages around Rs. 100, Coke was
perceived as a luxary that few could effort.

Coca cola india marketing strategy

CCI’s rural marketing strategy was based on three A’s – Availability, Affordability and
Acceptability. The first ‘A’ – Availability emphasized on the availability of the product
to the customer. The second ‘A’ - Affordability focused on product pricing. The third
‘A’- Acceptability focused on convincing the customer to buy the product.

34
 Availability

Once CCI entered the rural market, it focused on strengthening its distribution network
there. It realized that the centralized distribution system used by the company in the
urban areas would not be suitable for rural areas. In the centralized distribution system,
the product was transported directly from the bottling plants to retailers.

However, CCI realized that this distribution system would not work in rural markets, as
taking stock directly from bottling plants to retail stores would be very costly due to the
long distances to be covered.

For transporting stock from spokes to village retailers the company utilized auto
rickshaws and cycles. Commenting on the transportation of stock in rural markets, a
company spokesperson said, “We use all possible means of transport that range from
trucks, auto rickshaws, cycle rickshaws and hand carts to even camel carts in Rajasthan
and mules in the hilly areas, to cart our products from the nearest hub.

The company instead opted for a hub and spoke distribution system, Under the hub and
spoke distribution system, stock was transported from the bottling plants to hubs and then
from hubs, the stock was transported to spokes which were situated in small towns.

CCI not only changed its distribution model, it also changed the type of vehicles used for
transportation. The company used large trucks for transporting stock from bottling plants
to hubs and medium commercial vehicles transported the stock from the hubs to spokes.

Affordability

A survey conducted by CCI in 2001 revealed that 300 ml bottles were not popular with
rural and semi-urban residents where two persons often shared a 300 ml bottle. It was
also found that the price of Rs10/- per bottle was considered too high by rural consumers.

35
For these reasons, CCI decided to make some changes in the size of its bottles and
pricing to win over consumers in the rural market. In 2002, CCI launched 200 ml bottles
(Chota Coke) priced at Rs 5. CCI announced that it would push the 200 ml bottles more
in rural areas, as the rural market was very price-sensitive. It was widely felt that the 200
ml bottles priced at Rs. 5 would increase the rate of consumption in rural India. Reports
put the annual per capita consumption of bottled beverages in rural areas at one bottle as
compared to 6 bottles in urban areas.

Acceptability

The initiatives of CCI in distribution and pricing were supported by extensive marketing
in the mass media as well as through outdoor advertising.

The company put up hoardings in villages and painted the name Coca Cola on the
compounds of the residences in the villages. Further, CCI also participated in the weekly
mandies by setting up temporary retail outlets, and also took part in the annual haats and
fairs - major sources of business activity and entertainment in rural India.

Distribution Strategy

To reach out to rural India, Coke started out by drawing up a hit list of high potential
villages from various districts. To ensure full loads, large distributors (Hubs) were
appointed, and they were supplied from the company's depot in large towns and cities.

36
Full load supplies were offered twice weekly against payment by demand draft. On their
part,the hubs appointed smaller distributors (Spokes) in adjoining areas.

The smaller distributors undertook fixed journey plans on a weekly basis and supplied
against cash. The distributors also hired rickshaws (cycle operated vans) that travelled to
villages daily.

Advertising Strategy

Coke realised that the communication media used in cities and urban areas would not
work in villages because of low penetration of conventional media.

Coke has estimated that TV access is 78.5 per cent in urban India but only 41per cent in
rural India Similarly, Cable & Satellite access in urban India is 51 per cent in urban India
but only 14 per cent I rural India. Coke considered alternative options, and decided to
concentrate on 47,000 haats (weekly markets) & 25,000 melas (fairs) held annually in
various parts of the country.

CCI also launched television commercials (TVCs) targeted at rural consumers. In order
to reach more rural consumers, CCI increased its ad-spend on Doordarshan. The
company ensured that all its rural marketing initiatives were well-supported by TVCs.

When CCI launched Chota Coke in 2002 priced at Rs. 5, it bought out a commercial
featuring Bollywood actor Aamir Khan to communicate the message of the price cut and
the launch of 200 ml bottles to the rural consumers. The commercial was shot in a rural
setting.

In the summer of 2003, CCI came up with a new commercial featuring Aamir Khan, to
further strengthen the Coca-Cola brand image among rural consumers.

37
The commercial aimed at making coke a generic name for ‘Thanda.’ Of the reason for
picking up the word ‘Thanda’, Prasoon Joshi, national creative director – McCann
Erickson, the creator of the commercial, said, “Thanda is a very North India-centric
phenomenon. Go to any restaurant in the north, and attendants would promptly ask,
‘thanda ya garam?’

Between March and September 2003, CCI launched three commercials with the ‘Thanda
Matlab Coca-Cola’ tag line.All the three commercials aimed to make rural and semi-
urban consumers connect with Coca-cola.

The first ad featured Aamir Khan as a ‘tapori’ (street smart); in the ad he makes the
association between Coca-Cola and the word ‘Thanda

’ The second commercial in the series featured Aamir Khan as a ‘Hyderabadi shop-
keeper’; here again he equates the word ‘Thanda’ with Coca-Cola.The third commercial
featured Aamir Khan as a ‘Punjabi farmer’ who offers Coca Cola to ladies asking for
Thanda.‘ Thanda’ usually means lassi or nimbu pani, ‘garam’ is essentially tea. Because
the character, in itself, represented a culture, They wanted to equate Coke with ‘Thanda’,
since ‘Thanda’ too is part of the popular dialect of the north.

Thus making ‘Thanda’ generic for Coca-Cola. With the long-playing possibilities of the
‘Thanda’ idea becoming evident, ‘Thanda’ became the central idea. Once we decided to
work on that idea, the creative mind just opened up.”

38
 Rural Success

Comprising 74% of the country's population, 41% of its middle class, and 58% of its
disposable income, the rural market was an attractive target and it delivered results.

Coke experienced 37% growth in 2003 in this segment versus the 24% growth seen in
urban areas.

Driven by the launch of the new Rs. 5 product, per capita consumption doubled between
2001-2003.

This market accounted for 80% of India’s new Coke drinkers, 30% of 2002 volume, and
was expected to account for 50% of the company’s sales in 2003.

Pepsi Vs Coke

The main competitor and rivalry of Coke is Pepsi, but in rural market, there are some
major regional players like Campa- Cola and others.

39
When Coke launched ‘Thanda matlab Coca-Cola’, suddenly Pepsi came up with
‘Thanda- Chelaga Kya’.

PepsiCo too had started focusing on the rural market, due to the flat volumes in urban
areas.

Like CCI, PepsiCo too launched 200 ml bottles priced at Rs. 5. Going one step ahead,
PepsiCo slashed the price of its 300 ml bottles to Rs 6/- to boost volumes in urban areas.

Future Prospects

CCI claimed all its marketing initiatives were very successful, and as a result, its rural
penetration increased from 9% in 2001 to 25% in 2003.

CCI also said that volumes from rural markets had increased to 35% in 2003.

The company said that it would focus on adding more villages to its distribution network.

For the year 2003, CCI had a target of reaching 0.1 million more villages. Analysts
pointed out that stiff competition from archrival PepsiCo would make it increasingly
difficult for CCI to garner more market share.

In early 2003, CCI announced that it was dropping plans to venture into other beverage
businesses.

Company sources said that increasing volumes of cola drinks had made the company
rethink its plans of launching juice and milk-based beverages.

In 2002, CCI had announced plans to launch beverages such as nimbu paani (lemon
juice), fruit juice, cold coffee, and iced tea in collaboration with Nestle India.

40
Though CCI was upbeat on account of its early success in its drive to capture the rural
market, the question was whether the company would be able to take this success further.

PRODUCT STRATEGY

Different Product strategies adopted by various companies

Rajdoot 223
Escorts launched: Rajdoot 223 priced at Rs. 33300 to meet the needs and expectations of
the rural market. It is cheaper than most motorbikes and is preferred over mopeds and
scooters because of its sturdiness and its weight carrying capability Moreover rural folks
know that it is easy to maintain (spares are easily available). Today Escorts has about
2000 authorised service points To tackle the young village . Escorts launched: ‘Ace” with
175 cc engine. It is much sleeker and priced just marginally high at As. 37560. Though
not many models are seen in the urban areas, it has done quits well in the rural market
demanding 15 per cent of the production capacity of Rajdoot.

Mahindra and Mahindra

Mahindra & Mahindra is busy developing the prototype of what it calls a ‘Rural
Transporter’—basically a hybrid between a tractor and a rural transport vehicle. The
product at 20-25HP will be targeted at those who cannot afford a normal tractor and
would also fulfill the need of a family transporter that could take in the rural roughs but

41
would be much more comfortable and safer than the conventional tractor-trolley.

Sampoorna TV
LG Electronics, the Japanese firm has re-jigged the TV to appeal to local needs. It spent
$50,000 (Rs. 21 lakhs) to develop a set that would have on-screen displays in the
vernacular languages of Hindi, Tamil and Bengali. The logic, rural consumers unfamiliar
with English would still be able to use the TV without being intimidated.

Hero Cycles
It is modifying its cycles to meet different needs in different regions. It has. as such, a
special orientation towards rural needs.

Titan Watches
A recent NCAER study revealed that there is a great potential for watches in rural areas.
In fact, it is considered to be a high priority item. Impressed by this the company is
launching a pilot project for low—priced models.

Green Cards
Andhra Bank and Allahabad Bank issued credit cards known as ‘Green
Cards’ to the farmers. The cards issued by Allahabad banks are:

42
Damond Card (for farmers having more than 9 acre land)
Gold Card (for farmers having 7-9 acre land)
Silver Card (for farmers having 5-7 acre land)

Spurious goods strategy

Corporate marketer, often finds the competition from copy cats as a big menace and
debates on the ways of mitigating it. Spurious products, generally marketed by the
unorganized,low—end entrepreneurs, somehow, make their way into the market and eat
away the large chunk of corporate marketer’s profits. The imitations will have
resemblances that dupe the gullible consumer. Look at these examples:
Lifebuoy Loveboy, New Lime Buoy, Nimba buoy
Tata Teta
Colgate College
Nirma Wheel Neerbha, Nima, Narima
Fair & lovely Fairever, Friends & Lovely
They use similar pack designs and pack sizes. In case of bottled products, the company
logo is embossed.

SPURIOUS PRODUCT - Loosely defined, spurious products are look-alike products

with similarity in packaging and minor alterations in the name. The primary motive is to
capitalize on the trust built by established brands. The marketer of spurious products has
less experience and limited resources. As such, he seeks to benefit from the images of the
popular brands and low prices of his brands.

43
 Marketing strategy of spurious product

The four Ps of the marketers are:

(1) Product resemblances: The copy cats resemble the original in many Ways.
Brand: Phonetics: To woo the largely illiterate customer, the names usually have a
close phonetic resemblance to the original—Loveboy for Lifebuoy, Nirbha for Nirma,
Teta for Tata.
Package: Visuals: Similar pack designs and pack sizes are adopted.Colours bear close
resemblance to the original. Bottled products have the company logo embossed.Generally
empties of the original are collected and retailed by these entrepreneurs.
Quality. Intangible: Generally inferior in quality. However, consumer can not gauge it
before using it. As such, consumer relies on retailer opinion largely to decide the buy.
(2) Low prices: Lower end consumer prices are fixed attracting price sensitive, value
for-money consumers.

44
(3) Silent Promotion: As higher margins are given to retailers, they advocate
consumers to buy these products. Retailer push goes a long way to induce fist time trials.
(4) Limited and anonymous distribution: The copycat seller keeps his identity
unknown. He prefers distribution in the local areas where he can establish secret links
with retailers. This is necessary to avoid future litigations.

Consequences: As a consequence of operations of the spurious product marketers,

corporates loose in two ways.
 L oss in sales, and
Spoiled image of the brand as well as the company.The most affected products are
personal care products. A rural marketer believes in value—for- money and would not
compromise on quality say, in the case of a tractor or a torch

The Encounter Strategy

Corporate marketers may analyse the situation and embark on an offensive strategy to
push out the imitators. The formulation of encounter strategy requires an intelligent
understanding of consumer needs and wants, their perceptions of products and weak
points. The strategy components are:

(a) Complicated packaging: Packaging could be made more difficult to replicate.

Liquid soaps in tetra packs with design patterns as complicated as currency notes with a
hologram thrown in for a measure—expensive but unique—could settle for a test for
differentiation.

(b) Products at low end: A range of products targeted for the rural consumer could
be launched with low price and low quality to counter the spurious products. This can be
done by developing franchisee units to manufacture low-end products with a highly
localized

45
(c) Rural pull promotion: Rural sales schemes to reach consumers and enlist
support of retailers should be envisaged.

(d) Promoting quality consciousness: Local promotion in individual village

markets could be an effective route to educate them. Area specific examples, of the harm
spurious products can have, could be communicated.

Example: Bindis, which have an adhesive coating, are hawked by many tiny units in the
north. On sustained usage, the spurious ones discolour skin, at times triggering allergies.

PACKAGING STRATEGIES

Packaging is defining new paradigms in rural marketing, making it perhaps the most vital
component in the marketing mix. According to the survey of National Council for
Applied Economics and Research (NCAER) in 1998, it is the low-income group which
now comprises an overwhelming majority of consumers for mass consumption products.
The study indicated that almost 90 per cent of goods surveyed were purchased by people
earning less than Rs. 18,000 per annum. Marketers have realised, “To enter the rural
market, it is necessary to offer products at the lowest unit price”. At the same time,
innovative packages are necessary to add value to the premium products. Particularly,
innovations, which help lower the price, are desirable. Small packs and combi-packs have
become a major attraction in rural India.

(a) Small packs: The reasons for high preference to small pack low unit prices are:

46
(1) Affordability: The income of rural consumers is unsteady. The sources of income
as well as the size of income earned per day vary. They cannot hence make planned
purchases and large purchases. Small pack sizes help the rural consumer pick the
product at a price that he can afford.

(ii) Usage: Certain products like detergent and paste are bought in larger quantities,
whereas shampoos, toilet soaps, eatables are bought in small pack sizes. The reason for
this is: ‘The products that are common to family members are bought in large pack sizes
whereas individual—use products are preferred in small packs’.

(iii) Storability: The storage life of a product also has a bearing on this decision.
Edibles, for example, cannot last long unless preserved and kept under ideal conditions.
Further, the shelf space of rural consumers is also limited as they live in small huts or
semi-pucca houses.

47
(iv) Benefits to Retailer: The small pack sizes are convenient to the retailer to do his
business and promote the national brands. The shelf space of rural retailers is less. He
cannot afford big premises. Small pack sizes do not demand shelf space.

(v) Display: Smaller sizes are easy to display. They increase the visual appeal they
carry compared to large ones, the colours on the smaller packs are looked at with more
interest.
Examples:
Many companies have become participants in the package revolution that is sweeping the
rural side and the economy strata in the urban area.
JK Dairy came up with a 50 gm sachet of Dairy Whitener at Rs.6.50.
P & C introduced Vicks VapoRub in a tiny 5 gm tin and Tide detergent in 30 gm
sachets priced at Rs.3.
Marico Industries launched low prices sachets of hair oil.
.

(b) Combi-packs: Another packaging innovation is ‘combi-packs’. When related

products are racked together and sold at economy prices, the consumer finds it a better
option to buy. The Combi-Pack may become an ‘assortment’ when more than two
products are packed together. Johnson & Johnson’s baby care assortment package priced
around Rs. 175 consists of a powder, soap, shampoo, hair oil and cream.

(c) See-through packs: Many companies are coming up with new packages

48
that are attractive as all as economical.The transparent packing of new Palmolive
Naturals is not lust a matter of aesthetics The see through wrappers, which are a first of
its kind in India enable Colgate Palmolive to offer a :premium product at a competitive
price of rRs 17 for 100gm pack.

MARKETING COMMUNICATION IN RURAL INDIA

In the evolution of a proper mix of marketing communications, there are two major
problem areas: 1. Appropriate media mix, 2. Nature of rural consumer. Let us deal with
these problems.

Communication media: It is a fact that a high degree of illiteracy is still

existing in rural India. We have hardly 40 per cent male literates and 25 per cent female
literates in rural India. Hence, press and other print media is playing a very minor role in
our rural markets. TV and radio are ideal media with the rural consumers. But they are
only partially available for use in the rural regions.Hardly 20 percent of the rural
consumers can be tapped by the print media of advertisement. Cinema is relatively acting
as a better medium of communication in rural markets. 35 per cent of total cinema
income in India is emanating from rural viewers.

Nature of Rural Consumer: Marketer cannot use printed word or message as a means of
communication. In addition to low literacy, we have diverse cultural backgrounds,

49
different languages changing from region to region, varied customs, and traditions,
economic backwardness. As we cannot use Hindi and English languages for marketing
communication, the problem of rural communications becomes quite formidable. About
200 million of the rural population have the purchasing power but hardly 100 million
adults in the rural areas are the target consumers. There are less than 15 newspapers for
every 1000 people. 50 per cent of the total circulation of newspapers is confined only to
the four metros and hardly 2 percent of the copies of newspapers circulate in rural India.
Thus, marketer encounters a great difficulty in the formulation of appropriate media mix
to establish effective rural communication to a target rural market.

Important Media

1.Film Advertising: It has a wide appeal. It can overcome language barriers.Audio

visual (sound and sight) technique has maximum impact on audiences.Sound and sight
both are employed for communicating our message. Repeat advertising is possible.
However, both cost of production as well as cost of distribution of slides and films are
quite high.

2.Radio Advertisement: Of all the media, radio has the shortest closing times:Radio
uses only an audio (sound) signal. It has a very wide appeal. It is suitable even for
illiterate people. Repeat message is quite common. Spoken word has greater impact than
written word. With the entry of FM radio programme ranging from all-talk to Indian and
Western Music, certain target markets can be easily approached.

50
3.Television Advertisement: Television uses both video (sight) and audio (sound)
signals. It is a unique combination of vision, motion and sound. Products can be
demonstrated and also described. We have best sales presentation. Television reaches
the audience almost like personal face-to-face contact. To that extent it is just like
personal salesmanship. Full opportunity exists for product demonstration and the
amplification of selling points with audio presentation. It is really a wonderful means of
mass communication for creating market. We can have short commercials as well as
sponsored programmes combining entertainment with advertisement.

4.Transit Advertising: Transit advertising consists of card advertising, which is

located within buses, subways, railways and outside displays, which appear on the fronts,
sides, and backs of buses or other public transport and at transportation terminals. Transit
advertising is the lowest-cost media. It gives geographic selectivity and seasonal
selectivity. It has high readership. It can reach pedestrains and travelling public.

5.

Advertising Specialities: These include a wide variety of items, such as calendars,

books, matches, pens, pencils, knives, key rings, diaries, cigarette lighters, blotters, paper
weights, electronic clocks, purses, rainhats and so on. They are given to advertising
targets without cost or obligation. Advertiser's name, address, phone number, and a short
sales message are imprinted on the item. The advertiser can choose from among 5,000
specialities in the market. Advertising specialities are reminder type of promotion

51
6. Point-of-Purchase Advertising: It really represents sales promotion devices. It
covers the display material used in advertising programme. Such point-of-purchase
material may include advertising on the package, window banners, shelf-talkers,
merchandise tags, package stuffers, information folders and booklets and such other
displaying materials.

7. Farm to Farm / House to House:

• Many LIC agents and companies dealing with high value consumer durables have
tried this approach with success in rich rural areas.ACC representatives retailers make
house-to house visit and give information about product stability.

8. Opinion Leaders:

• Asian Paints promoted its Utasv brand of paint by painting the village Sarpanch’s
house a few months prior to the launch to demonstrate that the paint does not peel off
and is an ideal replacement of chuna. The health development assistant of HUL
regularly meets school teachers to promote Lifebuoy soap in Villages.

9. The Melas:

( It is estimated that over 20,000 melas are conducted every year)

• Paint companies supporting Pola fair in Maharashtra by painting the horns of the
bulls.
• Sonepur Mela, Vaisakh Purnima Mela( Bihar).
• Navaratri Fair, Ambaji (Gujarat)
• Naucahndi Mela, Ramlila Mela(UP)

52
• Kartik Mela, Gawlier Trade Fair( MP).

10. Haats:

( On certain days of the week , both the sellers and buyers meet in the village to buy and
sell goods and services).Parachut Oil, Nirma washing powder and tiger brand biscuits
have been promoted through haats.About 40,000 Haats are held in rural areas in our
country, highest number haats in U.P (10,000).

11. Wall painting:

W all Paintings are an effective and economical medium for advertising in rural areas. wall painting
stays as long as the weather allows it to. Retailer normally welcomes paintings of their shops,
walls, and name boards. Since it makes the shop look cleaner and better. Their shops look alluring
and stand out among other outlets. Besides rural households shopkeepers and panchayats do not
except any payment, for their wall to be painted with product messages. To get one's wall painted

53
with the product messages is seemed as a status symbol.

The greatest advantage of the medium is the power of the picture completed with its local touch.
The images used have a strong emotional association with the surrounding, a feat impossible for
even a moving visual medium like television which must use general image to cater to greatest
number of viewers.A good wall painting must meet some criteria to generate awareness and remind
consumer about the brand.

12. Video van:

54
The video van is a medium that reaches the target segment and has his/her undivided attention and
more so provides an opportunity for 2 way communications. An opportunity to create a multi media
blitz for the product and highly focused advertising targeted at the interior village consumer.
A Video van covers 2 /3 villages in a day to cover up to 22 to 78 villages in one route cycle of 26
operating days. 2/3 shows are screened on each operating day. One shows in the day time and one
show after undown through 21” colour TV or projection on 100” screen. Each show is one hour in
duration consisting of film songs, dialogs & dharmik serials interspersed with advertising
time.Hoarding space available on sides of the video vans is utilized to paint your advertising
message or product visual

NEW APPROACHES IN DISTRIBUTION

The rural markets have become a great opportunity for many companies to expand sales.
However, many of them back out as they find distribution as a major problem. Used to
the developed distribution network in the urban markets, they try the same tricks in rural
markets, namely, extensive retailing and sustained pull generation through mass media
advertising. As a result they fail and place the blame on the less developed infrastructure
of the rural markets. Creative companies like HLL, have been experimenting to find
innovative ways of reaching the rural consumers.

Problems in rural distribution

(i) Difficulty in reaching rural consumers:

55
The major problems are:
 L ack of adequate transport facilities,
Large distances between villages,
Lack of pucca roads connecting villages to nearest townships,
Lack of proper retail out lets, and

There are about 576,000 villages in India, 79 per cent of them with a population less than
1,000. Almost 80 per cent of the villages do not have all weather roads. Rural consumers
are also far less homogenous than their urban counterparts and differ from region to
region. Therefore, it is not possible to merely extend urban production to rural markets.
The low density of population and inaccessibility makes the problem of servicing these
villages individually difficult and often uneconomical. Direct delivery of goods to even
the top one per cent of villages costs twice as much as servicing urban markets.
Therefore, in the initial stage, it may be better to concentrate only on the larger villages,
and towns with large agricultural hinterlands that act as foci for distribution. The semi-
wholesalers and retailers servicing smaller villages can obtain stocks from these places or
the villagers themselves can buy the necessary items.Studies conducted by the Marketing
Research Department of Hindustan Level showed that about 20 per cent of the farmers
visit the nearest town at least once a month to sell their produce and purchase their
requirements. In other words, the towns with large agricultural hinterlands can became
the gateways for entry into the rural market.

(ii) Multiple Tiers, Higher Costs and Administrative Problems:

In the first place, the rural distribution chain requires a larger number of tiers, compared
to the urban one. The long distances to be covered from the product points and the
scattered locations of the consuming households cause this situation. At the minimum,
the rural distribution chain needs the villagel evel shopkeeper, the mandi-level distributor
and the wholesaler/stockiest in the town. And on top of them are the manufacturers’ own
warehouses/branch office operations at selected centers in the marketing territory. Such

56
multiple tiers and scattered outfits push up costs and make channel management a major
problem.The scope for manufacturers’ direct outlets such as show rooms or depots is
quite limited in the rural market unlike in urban areas. Lit become expensive as well as
unmanageable. The dependence of the firm on intermediaries is much greater in rural
areas as direct outlets are ruled out. But controlling such a vast network of intermediaries
is a difficult task. Control is mostly indirect. And because of these factors the firm has to
be more careful while selecting channel members in rural areas.

(iii) Non-availability of Dealers:

Another problem is the availability of dealers. Many firms find that there are a limited
number of suitable dealers. Even if the firm is willing to start from scratch and try out
rank newcomers, the choice of candidates is really limited.

(iv) Poor Viability of Retail Outlets:

Retail sales outlets in the rural market suffer from poor viability. A familiar paradox in
rural distribution is that the manufacturer incurs additional expenses on distribution; still
the retail outlets find that the business is un remunerative. The scattered nature of the
market and the multiplicity of tiers in the chain use up the additional funds the
manufacturer is prepared to part with.And no additional money comes to any of the
groups. Moreover, the business volume is not enough to sustain the profitability of all the
groups and the retail outlet suffers the most.

(v) Inadequate Bank Facilities:

Distribution in rural markets is also handicapped due to lack of adequate banking and
credit facilities. Rural outlets need banking support for three important purposes:
-- To facilitate remittances to principals and to get fast replenishment of stocks.

57
-- To receive supplies ‘through bank’ (retiring documents with the bank).
-- To facilitate credit from banks.
As banking facilities are inadequate in rural areas, rural dealers are handicapped in all
these aspects. It is estimated that there is only one bank branch for every fifth village.

(vi) Inadequate Credit Facilities:

Inadequacy of institutional/bank credit is another constraint. Rural outlets are unable to

carry adequate stocks due to lack of credit facilities. They are unable to extend credit to
their customers. Thus there is a vicious circle of lack of credit facilities leading to
inadequate stocking and loss of business,finally resulting in poor viability of outlets.

Need for an Intelligent Approach

There are wide regional variations in the prosperity levels of the districts and hence in
their market potential. These need to be analyzed and understood sectorally in order to
determine the methods for approaching them. A socio-economic survey undertaken in
four progressive districts, one from each part of the country—Tanjore, Ludhiana,
Burdwan and Kolhapur—revealed a healthy per capita income growth of 5 per cent per
annum among big and small farmer against a nation average of 1.5 per cent. This has
come about through improved use of land coupled with a reduction in family size.
Further if one takes a closer look at the characteristic features of rural market, it will be
clear that distribution in fact, is no problem at all. The perceived problem is only a
misconception of the old timers who are not aware of the changing scenario in rural areas
and the potential of the existing selling outlets. Under the rural road construction
programme, the Government plans to link villages with a population of 1,5000 or above
withal-weather roads.Progress in this has been somewhat tardy. The end of 1985 would

58
link at least 20,000 such villages. If this project succeeds the entire complexion of the
rural market could change.

The New Players

Selling in rural India followed a pattern, till recently. But with the entry of new players,
and the surge in rural demand, the structure and dynamics are altering.

(1) Unofficial Channels:

Consider Hero Honda Motors. Its 360 dealers allover the country has reported the
emergence of an unofficial channel of distribution –village mechanics, local real estate
agents, shopkeepers who sell non-durables and so on. These people are taking
motorcycles from the official dealers-usually in twos and threes—
displaying them outside their premises and closing a sale. The paper work, though, is left
to the dealer to complete.Such instances are facilitating as well as forcing companies to
review their distribution set-ups to ensure that they are present even in the smallest
villages.

(2) Public Distribution System (PDS):

The fair price shops run by government can be utilized to sell consumables and low value
durables.

(3)Petrol Bunks:
Petrol bunks have become multi-purpose distribution centers at some places. Such a
concept can be effectively promoted.

(4) Agricultural Input Dealers:

59
Fertilizer companies have retail outlets within a range of 5 km to any village. They offer
a scope for marketers.

(5) NGOs:
Non government organizations (NGOs), can reach interiors of villages.Most NGOs have
progrms focusing on sustainable development through providing avenue for income
generation. They command substantial influence in the villages covered by them.
Companies may join hands with them to mutual benefit. With NGOs undertaking
distribution, companies realize benefits accruing from infrastructure and grass roots level
networking. Also organization security would provide a buffer against delayed retail
collections. From the NGOs standpoint, such association with companies could yield
employment opportunities for local residents.

(6) Barefoot Salesmen:

One useful option is to train sons –of-the soil to operate as barefoot salesmen. The
important requirements like fluency in the local dialect and familiarity with persons and
terrain will be the advantage in hire the persons form villages. A barefoot salesman,
operating on a retailer-cum-commission basis, could book orders from retailers in
villages with in a limited radius of his village. When orders are aggregated and served
there will be economies in distribution.

(7) Syndicated distribution:

A new alternative approach is syndicated distribution. Under this approach, marketers of

household products could group together and consider the formation of a syndicated
trading organization, which could jointly distribute collective group of household
products in the rural market and enjoy shared economies.

60
(8) (Direct-to-Home selling:

Companies are embarking on ’Direct-to-Home selling’(DTH) even in rural area. It

provides one-to-one communication as well as sales without reliance on retailers.

ADVERTISEMENT & SALES PROMOTION STRATEGY

BY FEW COMPANY

What is Sales Promotion?

Sales promotion is referred to the promotional activities other than personal

salesmanship, advertising and publicity, which stimulate consumer purchasing and dealer
effectiveness, e.g., displays, exhibitions and showrooms, demonstrations, free samples,

61
coupons, premiums, contests and various other non-recurrent selling efforts not in the
ordinary routine.

Brooke Bond Lipton India Ltd (BBLIL)

Brooke Bond Lipton India Ltd (BBLIL) markets its rural brands through magic shows
and skits. Reckitt and Colemen uses NGO's in rural areas to educate customers about
product benefits which establishes one to one communication channels.

HLL's ‘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. Today, these brands have a flourishing
market in rural India

PHILIPS INDIA LTD. -ELECTRONIC ENTERTAINMENT

EQUIPMENT

Objective - promote Phillips Electronic Entertainment products among the rural

population of Tamil Nadu.

62
'Philips Super Shows' were conducted in five district headquarters with the intention of
motivating dealers as well as opinion leaders to generate word-of mouth publicity, as a
first step. This was followed by extensive van operation in 5000+ population areas with
audience participation techniques for mouthing the brand, supported by mass media
campaign in regional press (district wise edition), rural cinemas, radio, wall painting and
intensive merchandising activities.

Marico Industries - Parachute Coconut Oil Pouches

With the objective of creating awareness for Parachute Coconut Oil pouches and in
order to convert loose oil buyers into Parachute pouch customers, Marico Industries
launched a van campaign. The communication Strategy focused on getting women out of
their homes to participate in the van campaign, which was aimed exclusively for them
and for the first time conducted by women.

Result - A study by Marico showed a 25per cent conversion from loose coconut oil
usage to Parachute Pouch Pack, post van campaign and a substantial increase in sales
from the campaign areas.

Why Use Sales Promotion?

Sales promotion and publicity, when combined with advertising and personal selling
programmes, really add up to more than the sum of the parts. Sales promotion is that
"something extra" (2 + 2 = 5). It can arouse enthusiasm, create a buying mood or spark an
immediate reaction from consumers, dealers and the firm's salesperson.

Godrej Consumer product ltd.

63
• GCPL is a major player in the Indian FMCG market with a leadership in personal,
hair, household and fabric care segments.

• The company employs 950 people and has three state-of-the-art manufacturing
facilities at Malanpur (M.P.) Guwahati (Assam) and Baddi (H.P).

GCPL Product Portfolio

• Soap – Cinthol – Evita – Godrej No. 1 – Fair Glow

• Toiletries – Cinthol Talc – Godrej No. 1 Talc
• Fair Glow cream
• Godrej shaving cream
• Cinthol perfumes
• Hair care – Godrej hair color dye – Renew woman hair dye – Nupur hair dye – Color
soft hair color.

64
 LIFEBUOY

The world’s largest selling soap.Launched in the year 1895

• In 2002 Lifebuoy was relaunched, marking a new turning point in its history
• Lifebuoy is no longer a carbolic soap with cresylic perfume. It is now milled toilet
soap with a new health fragrance.

Lets see the 4 P’s of marketing of lifebuoy in rural India…..

REPOSITIONING

• It is the single largest soap brand — with 20 lac soaps sold every day and an
estimated value of Rs 500 crore (600 million users annually).
• The relaunch of the 107-year-old Lifebuoy has been done in a bid to drive growth in a
sluggish soap market.
• HLL challenged everything that Lifebuoy stood for - perfume,
formulation, size and shape.

PROMOTION

65
• TV and print campaigns, focused attention on the family health themes.
• Conducted consumer education exercise using "Germ tests“.
• Explored the communication options during World Health Day.
• Created The Lifebuoy Swashthya Chetana.
• HLL used Mahakumbh mela as an opportunity to change hand-washing and bathing
habits in rural India.
• Cinema van operations

PRICE

• Hindustan Lever Ltd (HLL) currently on a price discount includes 150 gm Lifebuoy
Gold (Rs 3 off),
• Lifebuoy, HLL's largest selling soap brand, recently introduced a Rs 2 SKU (stock
keeping unit) of 18 gm targeted at the rural market in the Bimaru States.

PLACE

• 70% of India's population resides in villages

• HLL has established a single distribution channel by consolidating categories

FAIR AND LOVELY

Most used face cream in rural Iindia.

Fair and lovely sachet costs Rs.10

66
Brand extension – “active sunblock” lotion costs ( Rs.30 for 25ml & Rs.60 for 50ml)

COLGATE-(GROWING STRONG IN RURAL INDIA)

Several European and US companies have been making inroads into rural India for years.
Among the U.S. firms, Colgate is one such company that has made considerable headway
The company has been long known to dukaandaars and merchants in rural India.

Colgate is one of the leading providers of scientifically proven oral care products in India
including toothpastes, toothpowder and toothbrushes. The company is spending on
advertising according to its market share and leadership position it enjoys and is
conscious about what it costs.

For marketing to rural consumers, you need to persuade them to try and adopt products
that they may have not used before. A company like Colgate has to convince people to
change to toothpaste instead of using neem twigs to clean their teeth, which was the
traditional practice. This is difficult to do and requires patience and investment by the
company. It's not like getting someone to switch brands.

Rural India presents huge opportunity for the company to grow its market. Therefore,
Colgate continues to focus on expanding its rural distribution. They keep conducting

67
various programmes with massive rural sampling and seeding exercise for Colgate,
targeted at non-users and infrequent users of dentifrices.

In rural areas, people use neem and other substances for cleaning their teeth. Even after
keeping the products low priced, people were not willing to use the toothpaste. Hence,
Colgate conducted a research to show that neem sticks don’t do much for oral health as
they only massage the gums, which even a toothbrush can do. For upgrading these users
to use toothpaste, which also generates demand for toothbrushes and to penetrate deeper
into rural households, Colgate is constantly conducting oral care awareness programmes.
It also actively participates in local festivals.

Colgate resorted to keep their products low priced than its arch-rival, Hindustan Lever.
As a result, Colgate Gel, Total, etc. are priced marginally lower than similar offerings
from HLL. Colgate's dominant position in toothpowder and lower-priced products has
helped in increasing sales. This is significant as rural market growth rates for FMCG
products have been higher than urban market over the past years.

Colgate has been also quite active on the new products front. The company launched
Cibaca Top and Colgate Herbal, two low-priced brands targeted at the semi-urban
market. Colgate's low price offers have also helped to enhance usage levels. The shift in
consumer preference from gel-based to white toothpastes, has also worked in Colgate's
favour, since the company has traditionally been the market leader in this segment.

68
Colgate’s commitment to deliver superior quality products and their aggressive
investments in brand building has been well received. To be continually rated as one of
the top brand in an increasingly competitive environment, is a reaffirmation of the trust,
loyalty and confidence reposed in Colgate by millions of consumers across India. Today,
every second user of toothpastes uses Colgate and one out of every three toothbrush
user’s brushes with a Colgate toothbrush.

With rapidly evolving consumer preferences, Colgate has been spearheading changes
across different product categories through a series of product innovations. The company
has launched a series of superior quality oral care products with trend-setting innovations
at affordable prices. It includes technologically advanced toothpastes, a herbal
toothpowder and a series of specialty designed toothbrushes. All these products are
having strong consumer acceptance.

Today, Colgate has become an essential part of daily oral hygiene and therapeutic oral
care. It is one of the most widely used and recommended brands by dentists.

RURAL MARKETING INFORMATION SYSTEM

ITC – eChoupals

69
Another innovator in rural distribution -- the $3.6 billion, Calcutta-based tobacco-to
hotels conglomerate ITC -- has also been trying to build a platform that others can use.
ITC is setting up eChoupals across the agricultural belt in India to offer the farmers of
India all the information, products and services they need to enhance farm productivity,
improve farm-gate price realization and cut transaction costs. Farmers can access latest
local and global information on weather, scientific farming practices as well as market
prices at the village itself through this web portal - all in Hindi. Choupal also facilitates
supply of high quality farm inputs as well as purchase of commodities at their doorstep.
This has been done in a phased approach:

In Phase I, the business goal was to create a physical infrastructure of eChoupals at the
village level and create local level ownerships through the identified Sanchalaks. At this
stage the business goal was supported by creating a local language portal, which provided
the required information to farmers such as local weather, market prices and best
practices.

In Phase II, the business goal was to get the farmer registered and transacting by selling
directly to ITC Ltd. through the virtual market. This goal was supported by creating a
B2B site, which integrated the transactions directly to the back-end ERP and ensured that
there was no latency in processing any of the procurement by the processing units.

70
In Phase III, the business goal was to create a full fledged meta-market.In this phase, the
market would facilitate other operators like inputs providers and rural distributors to work
effectively through the eChoupal to deliver and procure goods from every participating
village.The technology road map to support this phase was to have a secure,consolidated
Farmers database with all information pertaining to their holdings and credit worthiness
to be available online. This database, along with identification provided by smart cards
would enable support for online transactions through the eChoupal leading to integration
with participating financial institutions such as banks, insurance and credit agencies
.Transaction costs are also minimized for the farmer by buying output at the
farmers' doorstep, and through transparent pricing and weighing practices. A substantial
quantity has already been procured through this channel, resulting in overall savings. The
savings are shared between buyer (ITC) and seller (farmer).On the marketing front, ITC
is able to maintain and grow the trust of its farmers by enhancing their productivity and
wealth. ITC leverages this position of trust among farmers, as well as its distribution
capabilities, to market its own consumer good brands and those of partner companies
offering products and services that ITC does not. Sales of consumer goods through the e-
Choupals have been particularly successful because the cost-savings associated with
dealing directly with the manufacturer allow Sanchalaks to offer goods at lower prices
than other village-level traders or retailers can afford to do.

The following have been some of the initiatives of e-choupal

ITC began the silent e-volution of rural India with soya growers in the villages of
Madhya Pradesh. For the first time, the stereotype image of the farmer on his bullock cart
made way for the e-farmer, browsing the e-Choupal website. Farmers now log on to the
site through Internet in their villages to order high quality agri-inputs, get information
on best farming practices, prevailing market prices for their crops at home and abroad
and the weather forecast – all in the local language. In the very first full season of e
Choupal operations in Madhya Pradesh,soya farmers sold nearly 50,000 tons of their
produce through the e-Choupal Internet platform, which has more than doubled since

71
then. The result marks the beginning of a transparent and cost-effective marketing
channel. No doubt, this brought prosperity to the farmers' doorstep.

Farmers grow wheat across several agro-climatic zones, producing grains of varying
grades. Though these grades had the potential to meet diverse consumer preferences, the
benefit never trickled down to the farmers, because all varieties were aggregated as one
average quality in the mandis. ITC's e-Choupal intervention helped the farmers discover
the best price for their quality at the village itself. The site also provides farmers with
specialised knowledge for customising their produce to the right consumer segments. The
new storage and handling system preserves the identity of different varieties right through
the 'farm-gate to dinner-plate' supply chain encouraging the farmers to raise their quality
standards and attract higher prices.

ITC’s Aqua Care Centre in Kakinada, Andhra Pradesh, has revolutionized the concept
of shrimp seed testing. Its sophisticated laboratory detects the deadly White Spot virus in
the shrimp seed and advises farmers on appropriate remedial action.
echoupal.com has become popular among coffee growers as an effective platform for
global trade. Coffee planters in India have for years been tossed between the highs and
lows of the international coffee market.The information needed to manage risks in the
volatile global coffee market, price updates and prevalent trends in coffee trading were

72
just not available to them. Launch of e-Choupal.com has equipped India's coffee planters
with appropriate knowledge base and risk management tools.

Empowering Women Consumers I-Shakti

Hindustan Lever, whose 2006 revenues were $2.8 billion, has been learning these lessons
for nearly a decade. The company's Project Shakti (its name means "strength") was born
out of this realization, and it has become a case study for business schools and evolved
beyond its original goals. "The objectives of Project Shakti are to create income-
generating capabilities for underprivileged rural women by providing a small-scale
enterprise opportunity, and to improve rural living standards with greater awareness of
health and hygiene," says Dalip Sehgal, executive director of the Shakti initiative.

Hindustan Lever's drive into rural India was prompted in part by growing competition.
When the Indian economy opened up in early 1990s, multinationals such as Procter &
Gamble stepped up their activities, forcing Hindustan Lever to seek higher revenues and
growth by reaching into villages with 1,000 or fewer residents. Launched in 2001, Project
Shakti was an important part of this strategy. It involved working with rural self-help
groups (SHGs) to educate rural women, while also making them part of the company's
marketing network. "Women from SHGs become Shakti entrepreneurs -- direct-to-home
distributors [of Hindustan Lever products] in rural markets," says Sehgal. "This micro-
enterprise offers low risks and high returns. The products distributed include a range of

73
mass-market items especially relevant to rural consumers," such as soap, toothpaste,
shampoo and detergent.

The Shakti website features a video profile of Rojamma, a young woman from the state
of Andhra Pradesh in Southern India, as an example of a typical Shakti distributor. A
mother of two who was left to fend for herself and two daughters after her husband
abandoned the family, Rojamma initially made ends meet by working in her parents'
fields. She then joined the Shakti project and became a distributor of Hindustan Lever
products, speaking in village after village to impoverished and often illiterate women
about the need to bathe their children and wash their clothes regularly and also selling
them soap and detergent. The commission Rojamma earned on her sales helped provide
for her family. "Today she is a proud entrepreneur and enjoys not only the money she
earns from the project but also the respect of society," says Sehgal. "The lives of
thousands of women have changed because of Shakti."

A typical Shakti distributor sells products worth Rs 10,000-15,000 (around $250) a

month, which provides an income of Rs 700-1,000 (around $25) a month on a sustainable
basis. While this may not seem to be a high income, it makes an enormous difference to
women who live in remote villages in dire poverty. In many cases, earnings from Shakti
help them double their household income. Much of the additional income goes to
educating children, and also to purchasing consumer durables such as television sets,
which further expands the rural market for such products. Some Shakti distributors --
whom the company calls "entrepreneurs" -- invest the extra money in buying vehicles
such as motor scooters that allow them to go into more villages.

Indeed, with help from Shakti distributors, Hindustan Lever has been able to reach rural
consumers in thousands of remote Indian villages. According to media reports, Shakti
distributors now account for 15% of the company's sales in rural India. Meanwhile, the
potential for growth is enormous, since studies have shown that just 15% of Indian
consumers use products such as shampoo. According to Wharton's Raju, there are
behavioural reasons why rural consumers represent a sound bet for companies that are
willing to invest in reaching them. "Affluent consumers demonstrate that they have

74
'arrived' by buying bigger houses or cars. People at lower income levels do so by buying
premium brands. This means brand loyalty is very high among less affluent consumers.
That is why the rural market is critical for companies. The first-mover advantage is
significant."

The Shakti model was piloted in 50 villages of the Nalgonda district in Andhra Pradesh.
It has now spread to more than a dozen states, creating 26,000 women distributors
covering 80,000 villages. By 2010, the goal is to recruit 100,000 Shakti distributors
covering 500,000 of India's more than 600,000 villages. "This initiative has been
extremely successful," says Ajay Gupta, CEO of www.ruralnaukri.com, a job site for the
rural market.

In addition to the distribution network, the Shakti project includes Shakti Vani (or voice),
a social awareness program, and iShakti, a community portal. "Desktop computers are set
up in the homes of Shakti entrepreneurs," says a Hindustan Lever spokesperson. "These
computers are equipped with software developed by Unilever through which users can
access content in categories including education, employment, agriculture, health and
entertainment. They can also ask questions on any of these subjects and have them
answered by experts."

iShakti is in its early days; it was launched in November 2004. The Vani project,
however, is operational in more than 20,000 villages in states like Madhya Pradesh,
Karnataka, Chattisgarh and Andhra Pradesh. Hindustan Lever has also tied up with
partners such as Tata Consultancy Services, India's largest software firm, which is
actively involved with the iShakti portal, and ICICI, a financial services institution that is
involved with providing micro-credit loans. With the network now in place, other
companies want to hop on to the Shakti bandwagon. One service that is likely to be added
soon is insurance.

MATERIALS AND METHODS

75
The research methodology for this work is based on the survey techniques and data are
also collected from journals, magazines and websites to under stand the current scenario
about rural marketing and to find out the details about the various option available
currently.

T he people were organized in a group and were asked about their views on following
advertisement actions.
1) In case of Coca-Cola how does the role of Aamir Khan affect the rural consumers?
2) In case of lifebuoy how does it gave the impression of health related soap?
3) How does the advertisement of Asian Paints with the Slogan "Sunil Babu" influence
the rural consumers.

The research design applied for this purpose is experimental with descriptive. The
experimental design was suitable as the rural consumers fell interest about it and
descriptive design depends on the explanation part about the campaign of these Brands.

RESULTS AND DISCUSSIONS

76
The field exercise has given the various inputs about the rural consumers. This
experience was unique from a marketer's point of view that the companies must have a
proper understanding of rural marketing environment at a region wise basis. The data has
tabulated in following manner. Advertisement of Coca-Cola (Acceptability pattern).

Contents Favor Non-Favor No Comment

Language and content of Ad. 72% 20% 8%
Back ground effect of Ad. 50% 20% 30%
expressions and communication styles of 85% 15% -
Aamir Khan

The Ad plays an important role for giving boost to rural consumers feeling. The feeling
plays very important role. The Language and content (72%) and expression style of
Aamir Khan (85%) play significant role.

Lifebuoy advertisement

77
Contents Favor Non-Favor No Comment
Style of Presentation 77% 20% 3%
The concept of ad. 65% 20% 15%
Interesting and delightful Ad. 63% 17% 20%

Style of presentation plays an important role. 77% is a high figure as this affects the
whole creativity aspect of any ad. The total concept and delight fulness is a strong factor
for this ad. Different Modes of promotions in rural market.

Modes Favor Non-Favor No Comment

Haats and melas 65% 30% 5%
Wall Paintings 40% 53% 7%
T.V and radio 65% 20% 15%

Hats and Melas play a very important role in this regard. The 65% response in favor of
this is an indicator of this.

CONCLUSIONS & RECOMMENDATIONS

Indian rural market has a vast size and demand base. Rural marketing involves the
process of developing, pricing, promoting, distributing rural specific product and a

78
service leading to exchange between rural and urban market which satisfies consumer
demand and also achieves organizational objectives. As part of planned economic
development, the government is making continuous efforts towards rural development.

There are several roadblocks that make it difficult to progress in the rural market.
Marketers encounter a number of problems like dealing with physical distribution,
logistics, proper and effective deployment of sales force and effective marketing
communication when they enter rural markets.

The rural market in India is quite fascinating and challenging in spite of all the
difficulties existing. The potential is enormous. Even though, these markets have
weaknesses they also have tremendous opportunities which should be availed by the
marketers. It is well known that “Markets are created and not born”. The market so
created should be tapped effectively.

The rural youth today are playing a far more significant role in influencing the purchase
decisions. They may not be the end customers but often are the people who influence the
purchase of high value products and they decide on which brands to choose

The marketers have to come up with innovative ideas through which the villagers also get
involved in getting business from their respective villages.

E-Chou pals deliver relevant technology in the hands of the farmers, which can improve
the economic condition of the entire village

The following conclusions and suggestion can be drawn.

1) The Language and content must be according to the suitability of rural environment.
2) Admissibility of brand ambassadors plays an important role in this regard.
3) Special promotion measures are the strong applicable factors in this regard.

79
4) Rural consumer environment must be understood before the creation of ad.
5) Rural mindset accepts the brands easily, which are close to their culture.
This point must be reflected in ad for rural markets.
6) Sponsorships to the Melas and Hats must be considered in a significant manner.
7) Selection of brand ambassadors, lyrics must not be ignored in this regard. They have a
special liking for folk culture so this can be taken in an effective utilization of brand
promotions.
8)To think local we have to act local.

Considering the emerging issues and challenges, government support is necessary for the
development of marketing of agricultural produce. The government may adjust suitable
budget allocations to rural infrastructure plans, and proper supervision for effective plan
implementation. The core areas like transport, communication, roads, credit institutions,
crop insurance for better utilization of land and water at appropriate level. The rural
people and markets will definitely develop rural income and reduce poverty, on the whole
countries economy will boost at an expected level. MANAGE an extension management
institution may provide extension services to rural people in crop information, price
information, insurance and credit information by using various media. MANAGE may
recommend / advice to central and state governments on suitable infrastructure
development, current problems in rural markets and problem solving techniques.

FUTURE PROSPECTS

Gandhi, the father of modern India, believed that the country's future lay in her villages.
These days, every major business group that plans to move into the hinterland would

80
agree. However, the level of affordability in rural India is low. For consumers to buy
products, you have to first put more money in their pockets. Create a virtuous circle of
raising rural incomes which leads to increase in consumption. This new business culture I
am talking about is not charity or philanthropy. It is about doing business with social
benefits. It will help us to sustain the economy and bring in lots of human satisfaction to
all of us. You can't think of success just in financial terms. Getting goodwill and
recognition in the rural market is also not a small asset for any company

Companies have long realised that to increase sales volume they will have to reach
outside big cities. In several categories, rural India accounts for the lion's share. Rural
households form around 72% of the total households in the country. Spending in this
segment is growing rapidly and consumption patterns are closing in on those in urban
areas.

Today, no consumer goods company can afford to forget rural market which is a very big
part of the Indian consumer market. You cannot build a brand presence in India until you
have the strategy for reaching the villages. Companies that have figured this out are doing
better in villages than cities. The potential is huge for companies that develop effective
rural marketing strategies. Up-gradation of products is being witnessed on fast-emerging
consumption pattern in rural areas. Local and branded products are getting replaced by
national brands and low priced by high priced.

CCI claimed all its marketing initiatives were very successful, and as a result, its rural
penetration increased from 9% in 2001 to 25% in 2003. CCI also said that volumes from
rural markets had increased to 35% in 2003. The company said that it would focus on
adding more villages to its distribution network. For the year 2003, CCI had a target of
reaching 0.1 million more villages. Analysts pointed out that stiff competition from
archrival PepsiCo would make it increasingly difficult for CCI to garner more market
share.

PepsiCo too had started focusing on the rural market, due to the flat volumes in urban

81
areas. Like CCI, PepsiCo too launched 200 ml bottles priced at Rs. 5. Going one step
ahead, PepsiCo slashed the price of its 300 ml bottles to Rs 6/- to boost volumes in urban
areas.

In early 2003, CCI announced that it was dropping plans to venture into other beverage
businesses. Company sources said that increasing volumes of cola drinks had made the
company rethink its plans of launching juice and milk-based beverages. In 2002, CCI had
announced plans to launch beverages such as nimbu paani (lemon juice), fruit juice, cold
coffee, and iced tea in collaboration with Nestle India.

Though CCI was upbeat on account of its early success in its drive to capture the rural
market, the question was whether the company would be able to take this success further.

In present situation, our huge population is helping marketers to think new marketing
strategies. 630 Billion rural populations are greater than total consuming markets of many
countries like Canada, South Korea, etc.

Tapping the rural market is one of the most important marketing strategies followed by
various MNCs and Indian companies now-a-days.

A number of companies in FMCG, consumer durables as well as telecom sector have

adapted strategies to expand their base in rural market. Among those who have already
taken remarkable initiative in rural market are HLL, Colgate, LG Electronics, Philips,
BSNL, LIC, CavinKare, Britannia and Hero Honda. Rural Marketing in simple word is
planning and implementation of marketing function for rural areas.

Rural marketing has been defined as the process of developing, pricing, promoting,
distributing rural specific products and services leading to exchange between urban and
rural markets which satisfies consumer demands and also achieves organizational
objective

82
With many social and political groups becoming active against the cola companies in
rural areas, it remains to be seen whether CCI will be able to quench its thirst for the rural
market.

APPENDICES
Prime Minister Manmohan Singh recently talked about his vision for rural India: "My
vision of rural India is of a modern agrarian, industrial and services economy co-existing

83
side by side, where people can live in well-equipped villages and commute easily to
work, be it on the farm or in the non-farm economy. There is much that modern science
and technology can do to realise this vision. Rural incomes have to be increased. Rural
infrastructure has to be improved. Rural health and education needs have to be met.
Employment opportunities have to be created in rural areas."

'Go rural' is the slogan of marketing gurus after analyzing the socio-economic changes in
villages. The Rural population is nearly three times the urban, so that Rural consumers
have become the prime target market for consumer durable and non-durable products,
food, construction, electrical, electronics, automobiles, banks, insurance companies and
other sectors besides hundred per cent of agri-input products such as seeds, fertilizers,
pesticides and farm machinery. The Indian rural market today accounts for only about Rs
8 billion of the total ad pie of Rs 120 long way ahead. Although a lot is spoken about the
immense potential of the unexplored rural market, advertisers and companies find it
easier to vie for a share of the already divided urban pie.

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 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. A radical change in attitudes of
marketers towards the vibrant and burgeoning rural markets is called for, so they can
successfully impress on the 230 million rural consumers spread over approximately six
hundred thousand villages in rural India.

What rural market buys?

Rural India buys small packs, as they are perceived as value for money. There is brand
stickiness, where a consumer buys a brand out of habit and not really by choice. Brands

84
rarely fight for market share; they just have to be visible in the right place. Even
expensive brands, such as Close-Up, Marie biscuits and Clinic shampoo are doing well
because of deep distribution, many brands are doing well without much advertising
support — Ghadi, a big detergent brand in North India, is an example.

Reasons for improvement of business in rural area

• Socio-economic changes (lifestyle, habits and tastes, economic status)

• Literacy level (25% before independence – more than 65% in 2001)
• Infrastructure facilities (roads, electricity, media)
• Increase in income
• Increase in expectations

MART, the specialist rural marketing and rural development consultancy has found that
53 per cent of FMCG sales lie in the rural areas, as do 59 per cent of consumer durable
sales, said its head Pradeep Kashyap at the seminar. Of two million BSNL mobile
connections, 50 per cent went to small towns and villages, of 20 million Rediffmail
subscriptions, 60 per cent came from small towns, so did half the transactions on Rediff's
shopping site.

Creating brands for rural India

85
Rural markets are delicately powerful. Certain adaptations are required to cater to the
rural masses; they have unique expectation and warrant changes in all four parameters of
product, price, promotion and distribution.

A lot is already emphasized on adapting the product and price in terms of packaging,
flavouring, etc and in sachets, priced to suit the economic status of the rural India in sizes
like Rs.5 packs and Re.1 packs that are perceived to be of value for money. This is a
typical penetration strategy, that promises to convert the first time customers to repeated
customers.

The promotion strategies and distribution strategies are of paramount importance. Ad

makers have learnt to leverage the benefits of improved infrastructure and media reach.
The television airs advertisements to lure rural masses, and they are sure it reaches the
target audience, because majority of rural India possesses and is glued to TV sets!

Distributing small and medium sized packets thro poor roads, over long distances, into
deep pockets of rural India and getting the stockiest to trust the mobility is a Herculean
task. Giving the confidence those advertisements will support. Sales force is being trained
to win the confidence of opinion leaders. Opinion leaders play an important role in
popularizing the brand. They sometimes play the role of entry barriers for new products.

The method of promotion needs to be tailored to suit the expectations of the market.
Techniques that have proved to be successful are Van campaigns, edutainment films,
generating word of mouth publicity through opinion leaders, colourful wall paintings.
The Wide reach of television has exposed the other wise conservative audience to
westernization. Panchayat televisions in Tamilnadu carries message that are well received
and contribute to community development.

Dynamics of rural markets differ from other market types, and similarly rural marketing
strategies are also significantly different from the marketing strategies aimed at an urban
or industrial consumer. This, along with several other related issues, have been subject

86
matter of intense discussions and debate in countries like India and China and focus of
even international symposia organized in these countries.

Partnership for sustainability involves laying and building a foundation for continuous
and long lasting relationship.

Innovative media can be used to reach the rural customers. Radio and television are the
conventional media that are reaching the rural audience effectively. But horse cart,
bullock cart and wall writing are the other media, which can carry the message
effectively to the rural customers.

Rural marketing is an evolving concept, and as a part of any economy has untapped
potential; marketers have realized the opportunity recently. Improvement in infrastructure
and reach, promise a bright future for those intending to go rural. Rural consumers are
keen on branded goods nowadays, so the market size for products and services seems to
have burgeoned.

The rural population has shown a trend of wanting to move into a state of gradual
urbanization in terms of exposure, habits, lifestyles and lastly, consumption patterns of
goods and services. There are dangers on concentrating more on the rural customers.
Reducing the product features in order to lower prices is a dangerous game to play.

REFERENCES

87
• The Marketing Mastermind Case study HLL- Rural Marketing Initiatives ICFAI
Press, PP. 62, Feb 2003.

• Bargal Hitendra, Dr. Pithadia Vijay, Promotion of Brand in Rural Market of India;
indianmba.com/facultycolumn/articles.

• Ramanathan V, Sudhamathi S, Brand Building Exercises Adopted by Life Insurance

Companies in Indian Rural Markets; Icfai University Journal of Rural Management

• http://indianmba.com/faculty column/fc1030/fc1030.html

• www.deccanherald.com
• www.hill.com
• www.indiainfoline.com

88