A

Presentation
on
Rural
Marketing

Submitted to,
Prof. Kamal K. Gupta

Submitted
by,
 Bulbul
Sharma
Tanvi Gupta

Table of Contents

 Meaning of Rural Marketing

 Reasons For Rural Market Attractiveness

o Rural Population
o Expansion of middle class
o Improvement in social indicators
o Improvement in infrastructure
o Low penetration rate

 Myths about Rural Market

 Challenges and strategies

o Availability
o Affordability
o Acceptability
o Awareness
  Case studies
o LG
o ITC e-Choupal

 Conclusion

Gone are the days when a rural consumer went to a nearby city to buy``branded products
and services". Time was when only a select household consumed branded goods, be it tea
or jeans. There were days when big companies flocked to rural markets to establish their
brands. Today, rural markets are critical for every marketer - be it for a branded shampoo
or an automobile. Time was when marketers thought van campaigns, cinema
commercials and a few wall paintings would suffice to entice rural folks under their folds.
Thanks to television, today a customer in a rural area is quite literate about myriad
products that are on offer in the market place.

What is Rural marketing?

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

What makes Rural Market Attractive?

 Rural Population:

The Indian rural consumer lives in over 600,000 villages across the country
and they account for over 70% of the population of the country. For several
product categories, rural markets account for well over 60 per cent of the
national demand.

 Expansion of middle Income household:

As per NCAER projections, the number of middle and high income households in rural
India is expected to grow from 80 million to 111 million by 2007. In urban India, the
same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural
India is expected to be double that of urban India. According to a National Council for
Applied Economic Research (NCAER) study, there are as many 'middle income and
above' households in the rural areas as there are in the urban areas. There are almost
twice as many 'lower middle income' households in rural areas as in the urban areas. At
the highest income level there are 2.3 million urban households as against 1.6 million
households in rural areas.

 Improvement in Social indicators

Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses halved (41%
to 23%) and the Percentage of BPL families declined from 46% to 27%. Rural literacy
level improved from 36% to 59% from 1981 to 2001.

 Improvement in Infrastructure:

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

 Low penetration rate:

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

Durables Urban Rural Total (% of Rural HH)

CTV 30.4 4.8 12.1
Refrigerator 33.5 3.5 12.0

FMCGs Urban Rural Total (% of Rural HH)

Shampoo 66.3 35.2 44.2
Toothpaste 82.2 44.9 55.6
Myths about Rural Market:

Myths1: Rural Market is a Homogeneous Mass

Reality: It's a heterogeneous population. Various Tiers are present depending on the
incomes like Big Landlords; Traders; Small Farmers; Marginal Farmers: Labourers;
Artisans. State wise variations in rural demographics are present viz. literacy (Kerala
90%, Bihar 44%) and population below poverty line (Orissa 48%, Punjab 6%).

Myth2: Disposable Income is Low

Reality: Number of middle class HHs (annual income Rs. 45,000 - 2,15,000) for rural
sector is 27.4 million as compared to the figure of 29.5 million for urban sector. Rural
incomes CAGR was 10.95% compared to 10.74% in urban between 1970-71 and 1993-
94.

Myth3: Individuals Decide About Purchases

Reality: Decision making process is collective. Purchase process - influencer, decider,
buyer, one who pays - can all be different. So marketers must address brand message at
several levels. Rural youth brings brand knowledge to Households (HH).

Challenges and Strategies for Rural Marketing:

Rural markets, as part of any economy, have untapped potential. There are several
difficulties confronting the effort to fully explore rural markets. The concept of rural
markets in India is still in evolving shape, and the sector poses a variety of challenges.
Distribution costs and non-availability of retail outlets are major problems faced by the
marketers. The success of a brand in the Indian rural market is as unpredictable as rain.
Many brands, which should have been successful, have failed miserably. This is because
most firms try to extend marketing plans that they use in urban areas to the rural markets.
The unique consumption patterns, tastes, and needs of the rural consumers should be
analyzed at the product planning stage so that they match the needs of the rural people.
Therefore, marketers need to understand the social dynamics and attitude variations
within each village though nationally it follows a consistent pattern.

The more daring MNCs are meeting the consequent challenges of availability,
affordability, acceptability and awareness (the so-called 4 As)

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

Affordability

The second challenge is to ensure affordability of the product or service. With low
disposable incomes, products need to be affordable to the rural consumer, most of whom
are on daily wages. Some companies have addressed the affordability problem by
introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair
Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya
Pradesh, Bihar and Uttar Pradesh — the so-called `Bimaru' States.

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

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

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

Awareness

Brand awareness is another challenge. Fortunately, however, the rural consumer has the
same likes as the urban consumer — movies and music — and for both the urban and
rural consumer, the family is the key unit of identity. However, the rural consumer
expressions differ from his urban counterpart. Outing for the former is confined to local
fairs and festivals and TV viewing is confined to the state-owned Doordarshan.
Consumption of branded products is treated as a special treat or indulgence.

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

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

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

LG

Established in 1997, LG Electronics India Pvt. Ltd., is a wholly owned

subsidiary of LG Electronics, South Korea. In India for a decade now, LG is the market
leader in consumer durables and recognized as a leading technology innovator in the
information technology and mobile communications business .
LG found the untapped potential in the rural market in India and to encash the
opportunity it comes with rural marketing strategy. The company's top brass was debating
how to reach out to rural India. At one level, the company figured it needed new cheaper
products to lure the rural buyer. At another level, it figured that more offices in smaller
towns and cities were the need of the hour. LG moved quickly on both fronts.

A). Availability – Place

LG Electronics defines all cities and towns other than the seven metros cities as rural and
semi-urban market. To tap these unexplored country markets.
The company has also taken initiatives like

A) 65 Remote Area Offices under the branch offices that are empowered to directly link
to the central billing system for orders.
B) 230 service centers.
C) 2,600 mobile authorized service personnel for villages having below10,000 residents.
All these moves are part of LG's efforts to push turnover to a whopping Rs7,000crore
(Rs70 billion) by year-end.

B). Affordability – Price

LG India has taken full advantage of a booming demand for colour TVs in rural India by
launching Sampoorna, a color TV whose operations booklet was in the Devnagari script.
For this model, LG also introduced technology that provided better a reception in low
signal locations—which is a common problem in rural areas. Today, LG claims that
Sampoorna series accounts for about 30 per cent of its color TV volumes. In 1998, LG
launched its first low priced TV for rural consumers
➢ Sampoorna- Rs.3000
➢ Cineplus- RS 4900

C). Acceptability – Product

LG Electronics. In1998, it developed a customized TV for the rural market and christened
it Sampoorna. It was a runway hit selling 100,000 sets in the very first year.
1. Product localization is the key strategy used by the LG
2. LG came out with Hindi and regional language menus on its TVs.
3. Introduced the low-priced “Cineplus” and “sampooma” for the rural market.
4. LG was the first brand to introduce gaming in TVs in continuations of its
association with cricket LG introduce cricket game in CTVs

D). Awareness- promotion

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 nondurable companies. Relevance of Mass Media is also
a very important factor. Some of promotional strategies used were Exhibitions, road
shows, Mobile Vans.

ITC e-Choupal
ITC is one of India's foremost private sector companies with a market capitalization of
over US $14 billion and a turnover of US $3 billion. ITC has diversified presence in
Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged
Foods & Confectionery, Branded Apparel, Greeting Cards and other FMCG products. Its
International Business Division (ITC IBD) was created in 1990 as an agricultural trading
company; it now generates US $150 million in revenues annually.
In 1998, after competition forced ITC to explore the options of sale, merger, and closure
of IBD, ITC ultimately decided to retain the business. The ITC-IBD has taken the
challenges to use information technology to change the rules of the game and create a
competitive business that did not need a large asset base.

Strategy

ITC followed a different media/communication strategy which is more elaborate and

extensive in rural marketing so far, which benefits both the farmers and the organization.
The strategy is use the Information Technology and bridges the information and service
gap in rural INDIA which gives an edge to market its products like seeds, fertilizers and
pesticides and other products like consumer goods. With this strategy it can also enhance
its competitiveness in global market for agri exports.

A pure trading model does not require much capital investment. The e-Choupal model, in
contrast, has required that ITC make significant investments to create and maintain its
own IT network in rural India and to identify and train a local farmer to manage each e-
Choupal.

The company has initiated an e-Choupal effort that places computers with Internet
access in rural farming villages; the e-Choupals serve as both a social gathering place
for exchange of information (choupal means gathering place in Hindi) and an e-
commerce hub. The computer, typically housed in the farmers house, is linked to the
Internet via phone lines or, increasingly, by a VSAT connection, and serves an average of
600 farmers in 10 surrounding villages within about a five kilometer radius. Each e-
Choupal costs between US $3,000 and US $6,000 to set up and about US $100 per year
to maintain. Using the system costs farmers nothing, but the host farmer, called a
sanchalak, incurs some operating costs and is obligated by a public oath to serve the
entire community; the sanchalak bene_ts from increased prestige and a commission paid
him for all e-Choupal transactions. The farmers can use the computer to access daily
closing prices on local mandis(governmentmandated markets), as well as to track global
price trends and information about new farming techniques either directly or, because
many farmers are illiterate, via the sanchalak (the village farmer who runs the e-Choupal
and acts as ITCs representative in the village). In addition they can also know about
weather forecast (local) and best practices in the world from e-Choupal website. They
also use the e-Choupal to order seed, fertilizer, and other products such as consumer good
from ITC or its partners, at prices lower than those available from village traders; the
sanchalak typically aggregates the village demand for these products and transmits the
order to an ITC representative. At harvest time, ITC offers to buy the crop directly from
any farmer at the previous days closing price; the farmer then transports his crop to an
ITC processing center, where the crop is weighed electronically and assessed for quality.
The farmer is then paid for the crop and a transport fee.

Launched in June 2000, 'e-Choupal', has already become the largest initiative among all
Internet-based interventions in rural India. 'e-Choupal' services today reach out to more
than 3.5 million farmers growing a range of crops - soyabean, wheat, rice, pulses, shrimp
- in over 31,000 villages through 5200 kiosks across six states (Madhya Pradesh,
Karnataka, Andhra Pradesh, Uttar Pradesh, Maharashtra and Rajasthan).

Conclusion

“Rural market has an untapped potential like rain but it is different from the urban
market so it requires the different marketing strategies and marketer has to meet the
challenges to be successful in rural market.”