A thorough understanding of the rural markets has become an important aspect of marketing in the Indian marketing environment today. This attraction towards the rural markets is primarily due to the colossal size of the varied demands of the 230 million rural people. In fact, the rural markets are expanding in India at such a rapid pace that they have overtaken the growth in urban markets. This rate of growth of the rural market segment is however not the only factor that has driven marketing managers to go rural. The other compelling factor is the fact that the urban markets are becoming increasingly complex, competitive and saturated. The vast untapped potential of the rural markets is growing at a rapid pace. The policies of the government largely favour rural development programmes. This is clearly highlighted by the fact that the outlay for rural development has risen from Rs 14000 crores in the 7th plan to Rs 30000 crores in the 8th plan period. These figures also prove that the rural market is emerging stronger with a gradual increase in disposable income of the rural folk. In addition, better procurement prices fixed for the various crops and better yields due to many research programmes have also contributed to the strengthening of the rural markets. Thus, with the rural markets bulging in both size and volume, any marketing manager will be missing a great potential opportunity if he does not go rural. This however raises a fundamental problem of fathoming the differences between urban and rural markets in India. This is of paramount importance in the Indian marketing environment as rural and urban markets in our country are so very diverse in nature, that urban marketing programmes just cannot be successfully extended to the rural markets. The buying behavior demonstrated by the rural Indian differs tremendously when compared to the typical urban Indian. Further, the values, aspirations and needs of the rural people vastly differ from that of the urban population. Basic cultural values have not yet faded in rural India. Buying decisions are still made by the eldest male member in the rural family whereas even children influence buying decisions in urban areas. Further, buying decisions are highly influenced by social customs, traditions and beliefs in the rural markets. Many rural purchases require collective social sanction, unheard off in urban areas. Another contrasting feature is the precision in the assessment of purchasing power of the consumers. In urban markets, income levels are generally used to measure purchasing power and markets are segmented accordingly. However, this measure is not adequate for defining the purchasing power in rural areas because of the single fact that rural incomes are grossly underestimated. Farmers and rural artisans are paid in cash as well as in kind. However, while reporting their incomes, they report only cash earnings, which then affect the calculation of their purchasing power. This is the reason why marketers are often surprised to find that their products are sometimes consumed by people who, according to their surveys and estimates do not have the purchasing power to do so. Every marketing manager must therefore make an attempt to understand the rural International School Of Business & Media 1

consumer better so that he can plan his strategies in such a manner that they produce the desired results. Unfortunately, most marketers of today try to extend marketing plans that they use in urban areas to the rural markets and face, on many occasions failure. They should adopt a strategy that appeals individually to the rural audience and formulate separate annual plans and sales targets for the rural segment. Changes must be made in the marketing mix elements such as price, place, product and promotion. Corporate marketers should refrain from designing goods for the urban markets and subsequently pushing them in the rural areas. 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. For most companies wanting to enter the rural markets, distribution poses a serious problem. Distribution costs and non availability of retail outlets are major problems faced by the marketers. But if one takes a closer look at the characteristic features of the rural market, it will be clear that distribution in fact, is no problem at all. In rural India, annual Melas organized with a religious or festive significance are quite popular and provide a very good platform for distribution. Rural markets come alive at these melas and people visit them to make several purchases. According to the Indian Market Research Bureau, around 8000 such melas are held in rural India every year. Besides these melas, rural markets have the practice of fixing specific days in a week as Market Days when exchange of goods and services are carried out. This is another potential low cost distribution channel available to the marketers. Also, every region consisting of several villages is generally served by one satellite town where people prefer to go to buy their durable commodities. If marketing managers use these feeder towns they will easily be able to cover a large section of the rural population. While planning promotional strategies in rural markets, marketers must be very careful in choosing the vehicle to be used for communication. They must remember that only 16% of the rural population has access to a vernacular newspaper. Although television is undoubtedly a powerful medium, the audio visuals must be planned to convey a right message to the rural folk. The marketers must try and rely on the rich, traditional media forms like folk dances, puppet shows, etc with which the rural consumers are familiar and comfortable, for high impact product campaigns. Thus, 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.

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Various CMIE and NCEAR reports have shown a decline in rural poverty levels and an increase in rural incomes, but despite everything, rural markets have remained an anathema for most marketers. The reasons are not far to seek. Most corporate have treated rural markets as adjuncts to their urban strongholds and rural consumers as a homogeneous mass without segmenting them into target markets and positioning brands appropriately. The companies should not treat rural markets as a dumping ground for lower end products designed for an urban audience. Instead they should use their technological expertise to create specific products for the rural economy. The companies that have done this (e.g. Hindustan Levers and Nestle) have benefited tremendously. Also, while launching products, it is of paramount importance to understand the dynamics of culture and society of the rural audience. The classic example that can be cited here is of the CTV segment wherein corporate found that their carefully drafted rural marketing went awry. Models developed and priced specifically for the rural markets found more takers in the urban markets. At the same time, rural consumers purchased the premium models designed for urban markets and also made cash down payments. The reason is not the fact that they are richer than their urban counterparts, but the fact that the joint family system prevalent in rural areas called for wider screens (as a larger number of people were watching) Along with the cultural dynamics, the needs and latent feelings of the rural people also need to be well understood. Marketers would do well to first understand this and then design and launch products accordingly. For example, Cadburys has launched ChocoBix, a chocolate flavored biscuit – the launch is on the basis of the understanding that rural mothers opt for biscuits rather than chocolates for their children. Another very important factor that needs to be looked at is the proliferation of spurious products. Rural masses are primarily illiterate and identify a product by its packaging. Brands such as "Bonds Talcum", "Funny & Lovely" etc., which are doing the rounds of rural markets, eat into the demand for the genuine products. Companies would also do well to have a proper distribution network and make sure that the prices of products are not pushed up because of a channel of middlemen who are neither required nor add any value to the product. A very significant step for change could be an effort to directly tap the haats. Companies also need to change the profile of their brand managers. Their brand managers are usually urban-bred management offerings who do not relate themselves to the rural markets. A step in this direction could probably go a long way in improving the situation. International School Of Business & Media 3

but in distribution strategies. According to Prahlad. and the strong belief that it can cure all worries. corporate India is discovering the huge market waiting in rural India. Management guru C K Prahlad’s message for Indian companies has always been to concentrate on the economic needs of the society they operate in. as proven by the successful efforts of FMCG companies like HLL. but even then they do not get the required quality.To conclude. The rural income distribution is a debatable issue as there are no structural accounting methods used. At the just concluded Delhi Sustainable Development Summit organised by Teri. “FDI is smart money.” says Prahlad. it can be said that the shape of rural income distribution and their consumption pattern needs to be carefully looked into. Corporates will have to try hard to get a clear picture. People are ready to pay. maintenance and pricing strategies. So. global standards of production. the world renowned expert spoke about corporates’ increasing role in fulfilling the needs of the poor. Once the homework is done. it has been happening. So radical innovation is a must. amply proved by the fact that people pay exorbitant sums for private water tankers. we see it in the mobile phone in the hands of the fishermen in the backwaters. But we have to accept that one single solution cannot cover everybody.” he adds. and not just in product innovation. We have to learn to grow in stages. The trick is to combine global standards. International School Of Business & Media 4 . Prahlad says that while FDI does help in ensuring global standards. The problem in case of utilities like water and energy is that there is no real price — distortions in subsidies have paid put to that. “Look at the Micro Finance Schemes — there are 2000 micro finance schemes covering 6 million women in Andhra Pradesh alone. Talking about FDI. A small start somewhere can yield results down the line. It is happening on the ground.” says the Harvey C Fruehauf Professor of Business Administration at the University of Michigan. It is good in the sense that it brings good governance. more and more companies are now turning to address the needs of the rural poor. how do we wed together a commercial approach and needs of the poor for utilities like water and energy? “The fundamental question that we have to address is how to reduce costs. it cannot drive growth. CK PRAHALAD ON RURAL MARKETS He believes in ‘fortune at the bottom of the pyramid’. While business innovation is not so easy. affordable prices and make it available to the consumer. But the objective should not only be to bring the world to India. The private sector and NGOs are delivering results. We see it in FMCG companies directing their energies to rural India. the mirage will surely transform into concrete reality. “Slowly and in fragments.

foreign investment in these sectors has not only ensured better products. Comparing the two economies. he says. We have to remember that development in the short term will be asymmetric. Prahlad believes that a lot of work is yet to be done on that front. The development process is market driven and only in the long run can it cover all sections of society.” He is concerned about India’s policies. all of which are necessary to ensure not only higher rates of growth. “Our policies are not pro-poor. We have the checks and balances. therefore.but to make Indian companies of global standard. unlike that of China. but all round development. it has also raised the standards of our home grown companies. becoming competitive both locally and globally. FDI. I believe India’s system is better. but that is in the number game.” he says. though. increases our capability to compete. transparency and entrepreneurship. I would say being an open market is good. as it requires the same capabilities. “China has been doing better than India. Look at the auto sector and the wireless sector.” International School Of Business & Media 5 .

EVOLUTION OF RURAL MARKETING PHASE I Before the 1960’s • More of food grains.RURAL MARKETS: INTRODUCTION:  The future lies with those companies who see the “poor” as their customers. CK Prahalad to Indian CEO's.  To get rich. pots . farm equipment. sell to the “poor”. Pradeep Kashyap. Jan 2000. leather (Semi-organised) of handicrafts/village RURAL MARKET ARRIVAL:   742 million people Rural consumption is bigger than urban  FMCG's 53%  Durables 59% International School Of Business & Media 6 . handloom. pans etc. • Unorganized PHASE II 1960’s TO 1990’s • Green Revolution – modern equipment/practices • Organized companies enter above • Cooperatives/Commissions formed and promotion industries • Growing wealth – FMCGs discover rural PHASE III-Beyond the 1990’s U Branded consumables and durables(organised) R Farm/non farm goods and services (unorganized) Handicrafts.

700 crores resulting in tremendous liquidity. 11700 crores sales turnover is from rural markets      International School Of Business & Media 7 .000 Crores  Durables Rs 5.Source: NCAER.23.2002  Estimated annual size of the rural market  FMCG Rs 65. tractors) Rs 45.000 Crores  Agri-inputs (incl.per quintal increase in the Procurement Price for grains. Of 20 million Rediffmail signups. 60 % are from small towns.22 lakh have a Village Public Telephone (VPT) For every Re. 170 crores added to rural economy 41 million Kisan Credit Cards issued (against 40 million credit-plus-debit cards in urban) with cumulative credit of Rs 97 .000 Crores Source: Francis Kanoi. Of two million BSNL mobile connections. 5. LIC sold 55 % of its policies in rural India.6 million HHs in rural and 6.     In 2001-02. Investment in formal savings instruments: 6.7 million in urban Over 50% of HLL’s Rs. 50% in small towns/villages. Of the six lakh villages. 50% transactions from these towns on Rediff online shopping site 42 million rural HHs availing banking services in comparison to 27 million urban HHs. 2002  SOME IMPRESSIVE FACTS ABOUT THE RURAL SECTOR.1/.000 Crores  Total Rs 1. Rs.000 Crores  2 / 4 wheelers Rs 8.


• Rural Annual Per Capita Income is Rs. 19407 in Urban • Highest Rural Per Capita Income is Punjab (Rs. Rs. 9481 vs. 5704) SPLIT OF RURAL INCOMES RURAL INCOMES AGRICULTURE 53% NON-AGRIC. 47% SELF EMPLOYED 43% WAGE EARNER 10% FORMAL 31% INFORMAL 16% International School Of Business & Media 9 . 27256) • Lowest Rural Per capita Income is Orissa (Rs.

000 Below 31.5 Consuming Rs Class 215.00113. 27% AGRICULTURE 6855 SELF EMPLOYED 10150 WAGE EARNER 2860 FORMAL 19514 INFORMAL 12595 RURAL INCOME DISPERSAL PROJECTION: Consumer Class Very Rich Annual Income 1995-96 2006-07 0.45.000 Climbers Aspirants Destitute Total Rs 22.0 International School Of Business & Media 10 .0 14.0 49. NON-AGRIC.3 45.9 25.000 31.001.PER CAPITA INCOME RURAL POPN 9941.0000.6 Rs 16.1 100.2 & 23.0 11.4 100.001 22.0 Above Rs 215.000 Rs 16.

Punjab 6%) MYTH 2: Disposable Income Is Low REALITY  Number of middle class HHs (annual income Rs in urban between 197071 and 1993-94 Source: ETIG. education & health  SOME MYTHS ABOUT RURAL MARKETS MYTH 1: Rural Market Is a Homogeneous Mass REALITY    Heterogeneous population.2% GDP Growth  Consuming class households in rural nearly equal to urban. shelter. Bihar 44%)  Population below poverty line (Orissa 48%. Rural Purchasing Power higher due to lower expenses on food. 2003-04   International School Of Business & Media 11 .000) Rural 27. 16 languages.481 Urban Rs 19.95% compared to 10.15.4 million Urban 29.128 Source: NCAER. 2004 Rural incomes CAGR was 10.5 million Per Capita Annual Income (not Purchasing Power) Rural Rs 9. Projections Based on 7. 800+ dialects State wise variations in rural demographics  Literacy (Kerela 90%.407 Total Rs 12.

in next 10 years another 30%. decider. and buyer. every 1000+ pop is connected by STD.  International School Of Business & Media 12 . More than 90 % villages electrified. though only 44% rural homes have electric connections.influencer. one who pays can all be different.MYTH 3: Individuals Decide About Purchases REALITY   Decision making process is collective Purchase process. Rural telephone density has gone up by 300% in the last 10 years. So marketers must address brand message at several levels Rural youth brings brand knowledge to HH  INFRASTRUCTURE IMPROVING RAPIDLY   In 50 years only 40% villages connected by road.

R3 can be reached through mass media. R2. 70 53 41 14 21 26 Satellite TV Press TV International School Of Business & Media 13 .MEDIA REACH IMPROVING RAPIDLY  70% of R1.

MARKETING OPPORTUNITIES: Low penetration rates in rural rural HH % of Durables CTV Refrigerator Urban 30.2 55.6 Source: NCAER 2002      R1 R2 R3 R4 - 4% 11% 37% 48% Low rural consumption in FMCGs (rich HHs) Urban  Annual consumption Rural Rs 13.4 33.5 4.2 Rural 35.8 3.5 Rural 12.3 82.000 Rs 9.2 44.9 Total 44.400  Rural consumption volumes (R1+R2+R3)  Toothpaste 88%  Toothpowder 79%  Shampoo 88% International School Of Business & Media 14 .0 Total FMCG Shampoo Toothpaste Urban 66.1 12.



DISCOUNTS. but very much scattered geographically.TRANSPORT FACILITIES PRODUCT AVAILABILITY PROMOTION: ADVERTISING PERSONAL SELLING SALES PROMOTION PUBLICITY GOOD HIGH AVERAGE LIMITED TV. MULTI -LINGUAL DOOR 2 DOOR OCCASSIONALLY & FREQUENTLY ALL GIFTS. RADIO. Apparently in terms of the number of people. International School Of Business & Media 17 . DEMO GOOD OPPORTUNITIES LOW ALL ANALYSIS OF THE RURAL MARKET IN INDIA Rural market of India consists of about 80% of the population of the country. This market is not only large. the Indian rural market is almost twice as large as the entire market of USA or Russia. It is also as diverse as it is scattered. It exhibits linguistic.

Green revolution and the resultant prosperity is confined to a few select areas in the country. The rural buyers in India provide a tremendous range of contradictions and paradoxes which baffles the urban-based marketing people and.. In spite of the increasing rate of growth in urban population through migration and other channels and the consequent increase in their purchasing power. 'Go Rural' seems to be the latest slogan. it can easily be considered as more complex than the market of a continent as a whole. clearly highlighted the emerging importance of this sector. the sheer size of the rural population will serve as a large potential demand base for a variety of products: The new agricultural strategy of applying science and technology to farming will increasingly trigger off a chain reaction of increased generation of wealth. This change has been possible because of new employment opportunities and new sources of income made available through rural development programmes which have resulted in green and white revolutions and a revolution in rising expectations of rural masses. the foreign observers. The rural market scene has undergone a steady and encouraging change over the last three decades. productivity income and consumption. and hence. the rural market still offers opportunities which are vast and yet relatively untapped. which provide the key for the emerging rural demand.e.regional and cultural diversities and economic disparities. It has been noted that the rural consumer is discerning and the rural market vibrant. it is largely agriculture oriented. Another important feature of the rural market is that at least in the present context. In short. Surveys and audits for a number of consumer products and services have. the growth has not only been quantitative. the market for consumption goods and the market for agricultural inputs. over the years. but also qualitative. Rural consumers are far less homogeneous than their urban counterparts and differ from region to region. the effective demand for consumer items has not spread all over rural India. As a result. Rural consumption of all products is growing by leaps and bounds. The rural market is not sleeping any longer. Inspite of several barriers to faster growth. The rural markets are by and large less exploited. even more so. At the current rate of growth it will soon outstrip urban market. The rural market is made up of two broad components i. Income generated from the money sent by the members of their families employed in towns and abroad also helped the rural people to spend more on consumer goods. International School Of Business & Media 18 . since the urban market has reached near saturation levels in a number of categories.

before starting a rural venture. The total size of the rural market for FMCG products is Rs 41. while similarly Rs 64. The rural middle class has also been steadily growing. rural retailing as a segment is yet to develop in India. Similarly. expanding TV networks. they found that though ethnic clothing sells well in the rural markets. it is importance for retailers to analyse the market.2002. emphasis on rural markets by companies. retailers must consider the following: Merchandising Mix Merchandise requirements of a rural customer are far too different from that of an urban customer.FACTORS CONTRIBUTING TO RURAL BOOM: The marketing boom in the rural areas is caused by such factors as increased discretionary income. unproved infrastructure. Likewise. like vegetables and eggs. Thus. For example. The middle to high income households in rural India are now 17 per cent of the total rural population and are growing at 7 per cent. 50 per cent are in rural India. making generalizations or extrapolation of preferences and habits based on urban experiences may not prove to be a success. LIC sold about 55 per cent of its policies in rural India. As they wish to dress up like an urban customer. understand the local tastes and preferences and so on. changing life styles in the rural areas. in 2001. However. This is because of the aspirational levels of a rural consumer is high. out of 2 million BSNL mobile connections. While in the service industry. packaging revolution and. In the same way. When ITC conducted its research before setting up their rural venture. new cadre of entrepreneurship. out of 20 million rediffmail signups 60 per cent are from smaller towns. liberalized Government policies for rural development. An analysis of the rural market shares for about 35 FMCG and consumer durables product shows that the rural market share is higher in about 20 of them.550 crore as compared to Rs 37. The billing per mobile in small towns in Andhra Pradesh is higher than in Hyderabad.130 crore in urban India. there is a hidden desire for modern clothing. the 24 million Kisan Credit Cards (KCC) issued in the rural markets exceed the 18 million mark issued in the urban market. The rural market share for consumer durables market is 59 per cent of the total market. rural development schemes. increased retailing and retailers. The desi touch The rural market in India is beginning to emerge as an important consumption area. Thus. a sensible generalization would be to assume that ethnic clothing would sell higher than modern clothing. The rural consumer is now more aware and is open to experiment with new products. The rural market in the case of key product categories such as FMCG and consumer durables is larger than the urban market in terms of its sales value. competitive and creative sales promotion.000 crore was disbursed under KCC. increased awareness with information explosion. Similarly an urban merchandiser International School Of Business & Media 19 . marketable surplus of product. Though rural retailing has a huge potential.

activating the brand in the rural market through activities. Hence advertising that is rooted in urban sensitivities didn't touch the hearts and minds of the rural consumer. Time and again marketing practitioners have waxed eloquent about the potential of the rural market. with their Aamir Khan ad campaign succeeded in providing just that. Life Insurance Corporation. Colgate. BSNL. 100 per cent agricultural products) of the total ad pie of Rs 120 billion.6 per cent of the total share. So clearly there seems to be a long way ahead. While it is true that the rural customers are more price Now for some facts and figures. Britannia and Hero Honda to name a few.might be wrong in assuming that all lower end products of urban stores would sell well in rural stores. is what sums up HLL's agenda as far as the rural market is concerned informs MindShare Fulcrum general manager R Gowthaman. While. the process is slow. Some of the other corporates that are slowly making headway in this area are Coca Cola India. 59 per cent durables sale. this is definitely changing. Khaitan fans' ad on a horse cart • Wheel's wall painting We can safely say that until some years ago. LG Electronics. Hindustan Lever Limited (HLL) is top of the mind with their successful rural marketing projects like 'Project Shakti' and 'Operation Bharat'. which are in line with the brand itself. the agenda being to take a short-cut route by pushing urban communication to the rural market by merely transliterating the ad copy. Furthermore. International School Of Business & Media 20 . thus claiming 6. Coca Cola. Amul is another case in point of aggressive rural marketing. the rural market was being given a step-motherly treatment by many companies and advertising to rural consumers was usually a hit and miss affair. a mere handful names come to mind. But when one zeroes in on the companies that focus on the rural market.FMCG sector. The lynchpin of HLL's strategy has been to focus on penetrating the market down the line and focusing on price point. The greatest challenge for advertisers and marketers continues to be in finding the right mix that will have a pan-Indian rural appeal. Philips. The Indian rural market today accounts for only about Rs 8 billion (53 per cent . More often than not. Cavin Kare. Eveready Batteries.

telecommunication etc and lower levels of literacy In 2000. The company. Rural Relations.." McCann Erickson's ads Coca-Cola India tapped the rural with Aamir Khan created universal appeal for market in a big way when it Coca Cola introduced bottles priced at Rs 5 and backed it with the Aamir Khan ads. Of Business & Media International School ITC's Echoupal was the result of this initiative. which reiterates the fact that this multinational has realised the potential of the rural market is going strength to strength to tap the same. the first four agencies mentioned above have come together to form The Rural Network. "Reaching your product to remote locations spread over 600. ITC took an initiative to develop direct contact with farmers who lived in far-flung villages in Madhya Pradesh. "All the data provided by various agencies like NCAER..Corporates are still apprehensive to "Go Rural. Clearly the main challenge that one faces while dealing with rural marketing is the basic understanding of the rural consumer who is very different from his urban counterpart." A few agencies that are trying to create awareness about the rural market and its importance are Anugrah Madison. MART. on its behalf. the rural market is growing at a far greater speed than its urban counterpart. durables boasts of 59 per cent market share. has also been investing steadily to build their infrastructure to meet the growing needs of the rural market. O&M Outreach. "Yaara da Tashan. Also. Also distribution remains to be the single largest problem marketers face today when it comes to going rural. The paramount objective of the Network is to get clients who are looking for a national strategy in rural marketing and help them in executing it across different regions. Sampark Marketing and Advertising Solutions Pvt Ltd. 21 . Interestingly. The share of FMCG products in rural markets is 53 per cent. Linterland and RC&M." says Sampark Marketing and Advertising Solutions Pvt Ltd managing director R A Patankar.000 villages and poor infrastructure roads. to name a few. Francis Kanoi etc shows Lifebuoy's wall painting in that rural India rural markets are growing faster than urban markets in certain product categories at least. Therefore one can claim that rural markets are growing faster than urban markets.

which generates almost 40 per cent of the rural wealth. There was a time when market predictions were made on the basis of the state of the monsoon but this trend has changed over the years. "Although the melting of the urban . which is turning into a consumerism society. you will not be able to spend disproportionate monies in the rural market. there is a large non farming sector. Fulcrum's Gowthaman says. the future no doubt lies in the rural markets.rural divide will take a while. custom and values that are difficult to shed. Citing other challenges in rural marketing. the rural consumer will always remain driven by his needs first and will therefore be cost conscious and thrifty in his spending habits. Therefore a thorough knowledge of the nuances of language. which has its own logic. dialects and familiarity with prevailing customs in the regions that you want to work for is essential. hence the video van is one of the very effective means of reaching out physically to the rural consumers. "The biggest impending factor or deterrent on rural monies going up is that there is a general sense Satellite dish antennas reach rural India of trying to benchmark cost per contact (CPC). Hence the growth in the rural markets will be sustained to a large extent by this class in addition to the farmer who will always be the mainstay of the rural economy. "Decision-making is still conscious and deliberated among the rural community. But nevertheless. The television CPC is going to anyways be cheaper to rural CPC and unless and until the volume .value equation turns the other way round. this is not for want of the availability of the means but for want of the rural consumer's mindset to change. "Campaigns have to be tailor made for each product category and each of the regions where the campaign is to be executed.are a few hinges that come in the way of marketers to reach the rural market. since the size of the rural market is growing at a good pace." The fact of the matter remains that when compared to the Indian urban society." International School Of Business & Media 22 . Patankar says. The other challenge is the reach and the available means of reaching out to these markets. which is driven by tradition." says MART managing director Pradeep Kashyap.

"Till the time that volume ." So the fact remains that the rural market in India has great potential. Generating effective demand for manufactured foods International School Of Business & Media 23 . Anugrah Madison's chairman and managing director RV Rajan sums up. thanks to the demands of the rural marketers. the CPC is preventing anybody to look at rural at a large scale activation programme. a one rupee or a five rupee sachet or the Kutti Hamam (the small Hamam) helps in giving the consumers a trial opportunity.specialists like Event Managers. but there seems to be a long way for marketers to go in order to derive and reap maximum benefits. rural India is not as poor as it used to be a decade or so back. High initial market development expenditure 3. audio visual production houses.value equation is managed better. Ultimately. I also see great scope for regional specialists in the areas of rural marketing . "There is better scope for language writers who understands the rural and regional pulse better. High distribution costs 2.For HLL. Moreover. takes up the challenge of selling products and concepts through innovative Typical shop in rural India stocked with media design and more importantly sachets. which is just waiting to be tapped. It's all about how one approaches the market. etc interactivity. Things are sure a changing! MAJOR PROBLEMS IN TAPPING THE RURAL MARKET: 1. In fact all those people who have specialized knowledge of a region are bound to do well. Inability of the small retailer to carry stock without adequate credit facility 4. Wall painters. Progress has been made in this area by some. folk artists. While it does help in generate volume but not in terms of values." reiterates Gowthaman. the ball lies in the court of rural marketers.

Opportunities & Strategies: Concept: In recent years. In rural marketing. often it is not promotion of a brand that is crucial. namely. Market research problems 10. rural markets have acquired significance. whereas rural marketing involves delivering manufactured or processed inputs or services to rural producers or consumers. In this context. a special marketing strategy. fertilizers and pesticides. rural marketing has emerged. as the overall growth of the economy has resulted into substantial increase in the purchasing power of the rural communities. the rural areas are consuming a large quantity of industrial and urban manufactured products. Cultural gap between urban based marketers and rural consumers. RURAL MARKETING: Challenges. Management and sales managing problems 9. Inadequate infrastructure facilities (lack of physical distribution. Wholesale and dealer network problems 6. Highly dispersed and thinly populated markets 12. On account of green revolution. But often. economic and cultural backwardness of the rural masses 13. rural marketing is confused with agricultural marketing – the latter denotes marketing of produce of the rural areas to the urban consumers or industrial consumers. Low per capita and poor standards of living.5. Mass communication and promotion problems 7. Low level of exposure to different product categories and product brands 14. Banking and credit problems 8. The development of the rural market will involve additional cost both in terms of promotion and distribution. for instance. International School Of Business & Media 24 . social. roads warehouses and media availability) 11. but creating an awareness concerning a particular product field.

Firms should refrain from designing goods for the urban markets and subsequently pushing them in the rural areas. To effectively tap the rural market a brand must associate it with the same things the rural folks do. which should have been successful. The unique consumption patterns. Strategies to be followed: • Marketing Strategy: Marketers need to understand the psyche of the rural consumers and then act accordingly. festivals. as part of any economy. Rural marketing involves more intensive personal selling efforts compared to urban marketing. The concept of rural markets in India is still in evolving shape. The success of a brand in the Indian rural market is as unpredictable as rain. Therefore. marketers need to understand the social dynamics and attitude variations within each village though nationally it follows a consistent pattern. and needs of the rural consumers should be analyzed at the product planning stage so that they match the needs of the rural people. “melas” and other activities where they assemble. have untapped potential. This can be done by utilizing the various rural folk media to reach them in their own language and in large numbers so that the brand can be associated with the myriad rituals. most firms try to extend marketing plans that they use in urban areas to the rural markets. have failed miserably. Many brands. Distribution costs and non availability of retail outlets are major problems faced by the marketers.Why Different Strategies? Rural markets. International School Of Business & Media 25 . and similarly rural marketing strategies are also significantly different from the marketing strategies aimed at an urban or industrial consumer. tastes. and the sector poses a variety of challenges. There are several difficulties confronting the effort to fully explore rural markets. The main problems in rural marketing are: • Understanding the rural consumer • Poor infrastructure • Physical Distribution • Channel Management • Promotion and Marketing Communication Dynamics of rural markets differ from other market types. celebrations. This is because.

every region consisting of several villages is generally served by one satellite town (termed as “Mandis” or Agri-markets) where people prefer to go to buy their durable commodities.• Distribution Strategy: One of the ways could be using company delivery vans which can serve two purposes.V or press advertisements rather concentrated on focused approach depending on geographical and market parameters like fares. Also. the audio visuals must be planned to convey a right message to the rural folk. • Promotional Strategy: Firms must be very careful in choosing the vehicle to be used for communication. The companies with relatively fewer resources can go in for syndicated distribution where a tie-up between non-competitive marketers can be established to facilitate distribution. Only 16% of the rural population has access to a vernacular newspaper. If marketing managers use these feeder towns they will easily be able to cover a large section of the rural population. Rural markets have the practice of fixing specific days in a week as Market Days (often called “Haats’) when exchange of goods and services are carried out. they achieved whopping sales of 95000 vehicles annually.  HLL started ‘Operation Bharat’ to tap the rural markets.it can take the products to the customers in every nook and corner of the market and it also enables the firm to establish direct contact with them and thereby facilitate sales promotion. The rich. International School Of Business & Media 26 . Looking at the ‘kuchha’ roads of village they positioned their bike as tough vehicle. around 8000 such melas are held in rural India every year. etc with which the rural consumers are familiar and comfortable. fairness cream. According to the India n Market Research Bureau. puppet shows. Some Live Examples:  One very fine example can be quoted of Escorts where they focused on deeper penetration. Their advertisements showed Dharmendra riding Escort with the punch line ‘Jandar Sawari. melas etc. and Ponds cream to twenty million households. Annual “melas” organized are quite popular and provide a very good platform for distribution because people visit them to make several purchases. This is another potential low cost distribution channel available to the marketers. Shandar Sawari’. can be used for high impact product campaigns. traditional media forms like folk dances. So. Under this operation it passed out low–priced sample packets of its toothpaste. However. They did not rely on T. Thus. Clinic plus shampoo. only the bigwigs can adopt this channel.

poor roads.all in Hindi. the rural consumer is not unlike his urban counterpart in many ways. acute dependence on the vagaries of the monsoon. seasonal consumption linked to harvests and festivals and special occasions. A radical change in attitudes of marketers towards the vibrant and burgeoning rural markets is called for. However. so they can successfully impress on the 230 million rural consumers spread over approximately six hundred thousand villages in rural India. and inaccessibility to conventional advertising media. ITC is setting up e-Choupals which offers the farmers all the information. International School Of Business & Media 27 . large number of daily wage earners. BPCL considered low-income of rural population and therefore introduced a smaller size cylinder to reduce both the initial deposit cost as well as the recurring refill cost. Farmers can access latest local and global information on weather. Conclusion: Thus looking at the challenges and the opportunities which rural markets offer to the marketers it can be said that the future is very promising for those who can understand the dynamics of rural markets and exploit them to their best advantage. It moves from village to village and fills cylinders on the spot for the rural customers.  BPCL Introduced Rural Marketing Vehicle (RMV) as their strategy for rural marketing. THE 4A APPROACH FOR RURAL MARKETS The rural market may be alluring but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income. products and services they need to enhance farm productivity. scientific farming practices as well as market prices at the village itself through this web portal . It also facilitates supply of high quality farm inputs as well as purchase of commodities at their doorstep. improve farm-gate price realization and cut transaction costs. power problems.

the company depot supplies. To ensure full loads.000 villages are spread over 3. 700 million Indians may live in rural areas. These distributors appoint and supply. once a week. India's 627. Coca-Cola. has evolved a hub and spoke distribution model to reach the villages. acceptability and awareness (the so-called 4 As) AVAILABILITY The first challenge is to ensure availability of the product or service.The more daring MNCs are meeting the consequent challenges of availability. finding them is not easy. has built a strong distribution system which helps its brands reach the interiors of the rural market. which considers rural India as a future growth driver.113 villages with a population of more than 5. bullock-carts and even boats in the backwaters of Kerala. India's largest MNC. large distributors which who act as hubs. However. To service remote village. International School Of Business & Media 28 . LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market. Any serious marketer must strive to reach at least 13. twice a week. stockists use autorickshaws. smaller distributors in adjoining areas. Hindustan Lever. Over the years. LG has set up 45 area offices and 59 rural/remote area offices. affordability. Marketers must trade off the distribution cost with incremental market penetration.2 million sq km. To tap these unexplored country markets. a subsidiary of Unilever. given the poor state of roads.000. it is an even greater challenge to regularly reach products to the far-flung villages.

Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. among the first MNCs to realise the potential of India's rural market. The company tied up with non-governmental organisations and offered reasonably-priced policies in the nature of group insurance covers. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. The instant and ready-tomix 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. Bihar and Uttar Pradesh — the so-called `Bimaru' States. Godrej recently introduced three brands of Cinthol. However. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3. Fair Glow and Godrej in 50-gm packs. a powdered soft-drink concentrate. One company which has reaped rich dividends by doing so is LG Electronics. It was a runway hit selling 100. most of whom are on daily wages. priced at Rs 4-5 meant specifically for Madhya Pradesh. Outing for the former is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. the family is the key unit of identity. Consumption of branded products is treated as a special treat or indulgence. Therefore.5 crore in total premia.000 sets in the very first year. Because of the lack of electricity and refrigerators in the rural areas. The move is mainly targeted at the rural market. the rural consumer expressions differ from his urban counterpart. the rural consumer has the same likes as the urban consumer — movies and music — and for both the urban and rural consumer. In 1998. Some companies have addressed the affordability problem by introducing small unit packs. International School Of Business & Media 29 . ACCEPTABILITY The third challenge is to gain acceptability for the product or service. Hindustan Lever. CocaCola provides low-cost ice boxes — a tin box for new outlets and thermocol box for seasonal outlets. Lifebuoy at Rs 2 for 50 gm. With low disposable incomes. Coca-Cola has also introduced Sunfill.AFFORDABILITY The second challenge is to ensure affordability of the product or service. AWARENESS With large parts of rural India inaccessible to conventional advertising media — only 41 per cent rural households have access to TV — building awareness is another challenge. Fortunately. products need to be affordable to the rural consumer. The insurance companies that have tailor-made products for the rural market have performed well. there is a need to offer products that suit the rural market. however. it developed a customised TV for the rural market and christened it Sampoorna. has launched a variant of its largest selling soap brand.

LG Electronics uses vans and road shows to reach rural customers. These are promotional events organised by stockists. which alone reached 41 per cent of rural households. 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." International School Of Business & Media 30 . uses radio to reach the local people in their language. which is trying to push its soap brands into the interior areas. The company uses local language advertising. cautions companies from plunging headlong into the rural market as capturing rural consumers can be expensive. Mr Carlo Donati. be it urban. It doubled its spend on advertising on Doordarshan. It has also used banners. "about rural India could be wrong and one should focus on high GDP growth areas. while admitting that his company's product portfolio is essentially designed for urban consumers. Godrej Consumer Products. Since price is a key issue in the rural areas. "Any generalisation" says Mr Donati.6 per cent of rural households. Philips India uses wall writing and radio advertising to drive its growth in rural areas. Nestle.Hindustan Lever relies heavily on its own company-organised media. Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media. cinema and radio to reach 53. posters and tapped all the local forms of entertainment. Chairman and Managing-Director. Coca-Cola uses a combination of TV. semi-urban or rural.

soaps and detergents. hair care products. beauty cosmetics. Quite interestingly media stock Zee Telefilms was labelled as FMCG stock by a mutual fund. the Indian FMCG industry continues to suffer from a definitional dilemma. the sector has been in existence for quite a long time. which had Zee as its top holdings in its FMCG sector scheme at one point of time! So far. adhesives (Fevicol) too are being labeled as FMCG stocks in the stock market parlance. from looks to hygiene to palate. the journey seems to have just now begun for the players as the majority of the rural populace are yet to get access to the items of daily usage like toothpastes. Post-reforms. This has led to the industry players scrambling for greater rural penetration as a future growth vehicle. The sector touches every aspect of human life. International School Of Business & Media 31 . But. To date. and tea and beverages. Domestic companies are only beginning to make their presence felt in the industry. companies in businesses like liquors (United Breweries). Another reason which has led to rise in this trend is the saturation in urban markets in most of the consumer non-durable goods categories. among others. it has been a chequered graph for the MNCs operating in the Indian FMCG industry. Consequently. This can be further sub-divided into oral care. oral care and household products. the industry's growth has been hinging around a burgeoning rural population which has witnessed significant rise in disposable incomes. there seems to be a liberal approach towards branding of the companies/products as FMCG. Though. food and dairy-based products. FMCG refers to consumer non-durable goods required for daily or frequent use. it began to take shape only during the last fifty-odd years. It has taken tremendous consumer insight and market savviness for the FMCG players to reach where they are today. personal care. Health and Hygiene products. the industry is yet to crystallize in terms of definition and market size. Perhaps. Of late. cigarettes. In fact. paints (Asian Paints). Generally. defining an industry whose scope is so vast is not easy. the area which accounts for 70% of the total Indian households The FMCG sector consists mainly of subsegments viz. soaps and shampoos.FAST MOVING CONSUMER GOODS SECTOR BACKGROUND The FMCG sector has been the cornerstone of the Indian economy. the rural markets have been witnessing intense competition in almost all the consumer product classes.

A successful brand commands premium over non-branded products. Launch costs are known to climb as high as 100 percent of sales revenue during the first year of the launch.SUMMARY The FMCG industry is a low-margin business. However. and convert that notion finally into sales volumes. In the organized segment. Of late. the share of branded goods is high for a number of daily used products. Little surprising then that FMCG majors opt for high-decibel advertising in a bid to build and reinforce the notion of perceived superiority. FMCG players fight out in the marketplace to reach out to the masses and compete with brands in similar product categories. there has been a decline in the share of non-branded products. International School Of Business & Media 32 . Brands are the key determinants of success in the market place. the unorganized players have benefitted without spending even single penny on advertising and brand building. For new brands. Brand perception influences purchase decisions here and so building that perception is critical. According to a recent A&M-ORG-MARG study. spending more on advertising is all the more crucial. That is why the industry players puts so much emphasis on marketing and distribution. Volumes hold the key to success in this industry. Product launches entail large initial investments in advertising and sales promotion. according to the said study. the unorganized segment has continued to play spoilsport and has benefitted mainly due to their strategy of "low price. To add to the woes of the organized players. This all indicates that the coming days will witness more fierce battles for a pie in the lucrative rural market segment. Branded goods comprise of 65% of sales in villages. high volumes".

Marketing Drive Marketing assumes a significant place in the brand building process of the industry players. The sector is also characterised by high turnover to investment ratio. The entire launch process goes through a series of processes such as product development. turnover is typically five to eight times the investment made in a greenfield plant at full capacity.12% depending on the categories. companies in many cases prefer to go for contract manufacturing by third party. International School Of Business & Media 33 . The key characteristics of the Indian FMCG market are as follows: Heavy launch costs Companies incur huge costs on the launch of new products. Launch costs are as high as 50100% of revenue in the first year and these costs progressively reduce as the brand matures. besides presence of a huge unorganized market. advertisement expenditure varies from 5 . free samples and product promotions. gains consumer acceptance and turnover rises. market research. Even for an existing brand it requires constant marketing efforts to keep the demand alive and kicking. Less capital intensive The sector is not so capital intensive as majority of the product classes require very low investment in fixed assets. One of the biggest challenges facing the Indian FMCG industry is to get to the next level of innovation. In order to keep a check on costs and hence increase affordability of their products. in order to build brand awareness and develop franchise for a new brand initial expenditure is incurred on launch advertisements. This helps in reaching out to a large consumer base and fight with the existing brands.000 crore. the FMCG sector today is one of the largest in the country. test marketing. It is common to give occasional push by re-launches. For established brands. Further. All this require huge cash outflow. which involves repositioning of brands with sizable marketing support. Another reason for the sector being less capital intensive is that bulk of sales from manufacturers takes place on a cash basis. Contract Manufacturing Manufacturing of products by third party vendors is quite common.STRUCTURE: With domestic consumption close to Rs 80.

or the people living in metros. Factors like low entry barriers in terms of low capital investment. But more than their financial handicaps. FMCG players need to go in for new initiatives. fiscal incentives from government. Also in case of consumer goods it is difficult to differentiate products on technical or functional grounds. Alongside. the consumption dispersion is logically and practically broken up by the population strata i. Internet presents vast opportunities to FMCG companies in the areas of logistics interface with consumers and value chain. Presence of a large unorganized market The FMCG sector is characterized by a huge unorganized market. offering products such as packaged atta and milk that add value and convenience and protecting their human talents from poachers. providing good price points and aggressive pricing. income and changes in lifestyle. This has an effect on the retailing structure also. anti-change and anti-growth. International School Of Business & Media 34 . left domestic FMCG majors with little time for marketplace battles and strategizing. This is because consumers' purchase decisions are based on perceptions about brands and which keep on changing with fashion. unlike their foreign counterparts. investing in brand building in the form of marketing. could not take chances with new brands. Building a solid distribution network calls for massive investments. advertisements and promos. Family feuds. This mindset clouded their vision and strategy.Market Research Before the launch of any new product. low brand awareness. especially in rural areas led to the mushrooming of the unorganized sector. just in case they failed. Internet is going to change the way FMCG companies strategize and do business. Dabur has been a slow-changer to date. Now with increasing competition. The urban elite. Some of the McKinsey recommendations such as exiting from non-core businesses met with strong objections from some members of the promoter family. so typical of Indian corporates. With reasons. as the retailer varies his stocking pattern and his basket of services. The key to success in the Indian FMCG industry lies in: cutting costs. Indian FMCG players. Other features In urban areas. conducting market research to gauge the consumers' reaction is very important. the Town Class. unlike in the case of industrial products. test market it before coming out with any new product. Consider HLL for instance. it was a mindset that was responsible for the laid back attitude: they were complacent.e. consume a proportionately higher value of FMCGs. according to the needs and the purchasing habits of the consumer on the one hand and his own desire to differentiate from other such service providers on the other. which would expedite its distribution and sales efforts. The company has made it clear that Internet is going be its key delivery vehicle. there is tremendous pressure on the companies to do extensive market research. Sure.

Brand equity. wide distribution networks and scale economies of these companies deter new players from entering. Which is more a positioning than a marketing ploy. For long. therefore. Another Indian major to have reaped hefty benefits from its innovative positioning is Dabur. is an extremely important factor in FMCG industry. These companies make considerable investment in R&D to sharpen and maintain their edge in the business. Their parents' wide product portfolios ensured that new products kept hitting the Indian market. to some extent. Nirma has proved that ultimately what matters is understanding the consumer. and maintain a robust distribution network. an incredible 5 million retail outlets. There was a paradigm shift towards value-formoney products and. it might deprive the Indian arm the opportunities of leveraging P&G's global brands and high growth areas. which hit consumer spending hard. Such has been its corporate philosophy. non-existence of super markets in India. The pace of competition MNCs had both good product propositions and deep pockets to back them. and Marico at four. When practically everybody else have hiked their ad-budgets. Players such as Cadbury redefined the basic tenets of the chocolate confectionery industry. In P&G's case. They decided to introduce new products through their 100 per cent subsidiaries instead of their already existing Indian subsidiaries. etc. P&G. Diversified portfolios. One of the other most critical factors is the ability to build. Indian FMCG players have remained low-decibel advertisers. India was no different. but in fact helped to change the consumption patterns. HLL. The major issues that new MNC entrants face are low income levels. It not only launched new varieties and flavors. Consider the case of Cadbury's exercise in positioning its chocolate as a snack food. It still is. Value for money Ever since the global recession of 1991-94. though the move was aimed at shielding it from high costs of product launches and brand building. These FMCG companies embarked upon major restructuring and cost rationalization exercises as business continued to become fiercely competitive. which was a deliberate low-decibel advertiser. It was only Nirma. International School Of Business & Media 35 . Others such as Procter & Gamble (P&G) and SmithKline Beecham chose to be different. Nirma continues to gain volumes by passing on the cost-benefits to consumers. develop. towards the rural market. value-formoney has become the buzzword for FMCG companies globally.Major Indian consumer product companies (like Britannia. which had Dabur at number two. Several packaging innovations were also resorted to. It does not even figure in the 1999 top-ten list of advertisers.) have a very strong presence through their strong brands. and a typically slow moving low consumer demand resulting in dealers/retailers being reluctant to allocate their resources and time.

stepped up the gas further. nonetheless. P&G and SmithKline Beecham. even to rural wholesalers and retailers. protect those who make them. P&G. FMCG companies can come together to form e-purchasing portals and increase their purchasing power and ability to find smaller suppliers. HLL unleashed its "Operation Bharat". however. Those who could not do it on their own went piggyback on somebody else. and FMCG companies who want to ride off a shared infrastructural network to enable superior logistics and drive product communications. which are invaluable in creating loyalty and in testing products. FMCG marketers are known to be the best marketers globally and have takers in industry as distinct as telecom and cellular. is in holding on to the human talent that makes brands rather than the brands themselves. successful e-marketers can leverage the Internet to develop user-communities. With small product portfolios like theirs. are interesting cases. chose to leverage Marico's retail reach. All these call for a productive partnership between the FMCG industry and the government. the real worry of the domestic FMCG players is to protect the makers of their brands from poachers. International School Of Business & Media 36 . Economic recession hit the urban pockets badly and forced companies to train their guns on rural India. Experts see this as an emerging opportunity. which wants to drive Internet penetration into smaller towns. Sometimes. A partnership between the government. Price cuts became inevitable to keep the market share from shrinking. This would start from connections between the factory and C&F and then move on to more complex networks reaching out to key urban distributors and wholesalers. What more. Such a partnership can jointly drive the Internet network deeper into the Indian heartland. though there will be some amount of brand acquisition. an interesting trend in the Indian FMCG sector has been brand acquisitions. Britannia pushed its Tiger biscuits to every nook and corner of the country. marketed effectively and sold at the right price. Acquisitions all the way Of late. Internet can work wonders here. FMCG players can leverage Internet to extend their logistics network beyond the traditional expensive EDI-based solutions. they have been able to achieve what others could not and proved that what you need is a good product. Over time. Colgate and Britannia who already had a strong rural focus. Yes. As far as interface with consumers is concerned. the cuts touched ridiculous levels. And over time. while Colgate went about wooing the rural masses by offering low-priced products in convenient packaging.What Nirma did all these years suddenly become the buzzword for many FMCG players. Consider Internet's role in logistics. HLL has learnt it the hard way. It is not just acquiring anything and everything as it was in the past. even insurance. Companies such as HLL. This represents a growing awareness among the FMCG players are talking today more and more of product "fits" while discussing brand acquisitions. which was witnessing a major change in its aspiration and lifestyles and even had an income that translated into increasing volumes. It seems the excitement is just beginning in the Indian FMCG industry. The real challenge for all FMCG players. Forget brands. whose distribution is largely urban.

there has been a phenomenal improvement in rural incomes and rural spending power. Among the FMCG majors. All waiting to be tapped by FMCGs. Of late.000 5372 3. rural marketing holds the key to success of FMCG companies. Certainly.5 million AGENDA • States to be covered: 15 • Villages to be covered: 1.000 • Farmers to be e-empowered: 10 million International School Of Business & Media 37 . Consider this statistics: foodgrain production touched 200 million tones during fiscal 1999 against 176 million tones logged during fiscal 1991. Not just improved crop yields. With reason.00. Not just the rural population is numerically large. ColgatePalmolive and Britannia Industries are only a few of the FMCG majors who have been gung-ho about rural marketing. That should be music to FMCGs who have already hit saturation points in urban India. Rural India accounts for as much as 70 per cent of the nation’s population. it is growing richer by the day.Rural marketing has become the latest marketing mantra of most FMCG majors. COMPANIES INITIATIVES E-CHOUPAL AT A GLANCE Commencement of initiative States Covered Villages Covered e-Choupal Installations Empowered e-farmers 2000 7 31.000 • e-Choupals to be installed: 20. Not surprising that the Indian FMCG sector is busy putting in place a parallel rural marketing strategy. Successive good monsoon has led to dramatic boost in crop yields. which are desperate to find ways out to gain deeper penetration. That means rural India can bring in the much needed volumes and help FMCG companies to log in volume-driven growth. India’s agrarian economy is fundamentally strong. rural India is vast with unlimited opportunities. Hindustan Lever. True. tax-exemption on rural income too has been responsible for this enhanced rural purchasing power. Marico Industries.

variations between different agro-climatic zones. The unfortunate result is inconsistent quality and uncompetitive prices. ITC’s trail-blazing answer to these problems is the e-Choupal initiative. The immense potential of Indian agriculture is waiting to be unleashed. The eChoupal initiative also creates a direct marketing channel. Farmers now log on to the site through Internet kiosks in their villages to order high quality agri-inputs.Through the e-Choupal initiative. Enter ITC's e-Choupal intervention. Over the next decade. producing grains of varying grades. thereby better aligning farm output to market demands.000 tons of their produce through the soyachoupal Internet platform. Linking farmers to remunerative markets Farmers grow wheat across several agro-climatic zones. The endemic constraints that shackle this sector are well known – fragmented farms. prevailing market prices for their crops at home and abroad and the weather forecast – all in the local language. the e-Choupal network will cover over 100. get information on best farming practices. because all varieties were aggregated as one average quality in the mandis. e-Choupal delivers real-time information and customised knowledge to improve the farmer's decision-making ability. Enriching the farmer with knowledge. Thus enhancing its competitiveness in the global market. soya farmers sold nearly 50. representing 1/6th of rural India. securing better quality. among many others. productivity and improved price discovery. The e-Choupal site is now helping the farmers discover the best price for their quality at the village itself. The result marks the beginning of a transparent and cost-effective marketing channel. In the very first full season of e-Choupal operations in Madhya Pradesh. which has more than doubled since then. numerous intermediaries. ITC began the silent e-volution of rural India with soya growers in the villages of Madhya Pradesh. Transforming the Indian farmer into a progressive knowledge-seeking citizen.5 million farmers. For the first time. the stereotype image of the farmer on his bullock cart made way for the e-farmer. making it difficult for the farmer to sell his produce in the world market. excessive dependence on the monsoon.000 villages. These pose their own challenges to improving productivity of land and quality of crops. the single-largest information technology-based intervention by a corporate entity in rural India. weak infrastructure. The e-Choupal project is already benefiting over 3. The model helps aggregate demand in the nature of a virtual producers' co-operative. the benefit never trickled down to the farmers. Bringing prosperity to the farmers' doorstep. thus reducing transaction costs and making logistics efficient. The International School Of Business & Media 38 . in the process facilitating access to higher quality farm inputs at lower costs for the farmer. eliminating wasteful intermediation and multiple handling. ITC aims to confer the power of expert knowledge on even the smallest individual farmer. and create more than 10 million e-farmers. elevating him to a new order of empowerment. browsing the e-Choupal website. Though these grades had the potential to meet diverse consumer preferences.

Making it economically much more attractive. All these factors help to neutralise the risks involved in aqua farming. wrong levels of salinity in the water or the killer White Spot virus. hygienic washing. • International School Of Business & Media 39 .site also provides farmers with specialized knowledge for customizing their produce to the right consumer segments. Encouraging the farmers to raise their quality standards and attract higher prices. • ITC’s Aqua Care Centre in Kakinada. Its sophisticated laboratory detects the deadly White Spot virus in the shrimp seed and advises farmers on appropriate remedial action. ITC provides the farmer appropriate documentation which records the quantity and quality of his output. has revolutionised the concept of shrimp seed testing. benefiting hundreds of aqua farmers. virtual helpdesks enable the farmer to find solutions to his problems through online interactions. Information on the aqua-choupal site equips farmers with comprehensive know-how to keep abreast of food safety norms to compete in the international market. Payment is instant. any of which could wipe out an entire shrimp crop. Andhra Pradesh. The new storage and handling system preserves the identity of different varieties right through the 'farm-gate to dinner-plate' supply chain. ITC has set up VSAT links to overcome connectivity problems. Until ITC's aqua-choupal site provided them the support and the know-how to cope with and manage such risks. sanitised dressing and air-tight packing. The whats and ifs in the aqua farmers' life posed daunting odds. Information includes parameters for antibiotic usage. Thereafter. ITC's mobile vans take the message of e-Choupal to new villages. They were haunted by the nightmare of contaminated soil.

grading standards. as they have for thousands of years. A typical village has no reliable electricity and has antiquated telephone lines. farmers grow soyabeans. In these villages.• In the high-risk business of shrimp farming. created by ITC. But farmers in these villages are conducting e-business through an initiative called e-Choupal.com has proved a great boon for farmers in Andhra Pradesh. wheat and coffee in small plots of land. quality policy etc. International School Of Business & Media 40 . • In addition to assisting with knowledge management through the website. “A quiet digital revolution is reshaping the lives of farmers in remote Indian villages. the wealth of information provided by aquachoupal. This success has encouraged ITC to plan its extension. The farmers are largely illiterate and have never seen a computer. one of India's largest consumer product and agribusiness companies”. ITC provides on-ground inputs to farmers on best practices.

These factory-centered activities mainly focus on training farmers. This Programme now covers 500 villages in the district. International School Of Business & Media 41 .HINDUSTAN LEVER LTD. when carefully targeted and well administered can alleviate poverty significantly A crucial lesson learnt was that rural upliftment depended not on successful infusion of credit. NGOs and government bodies have been working closely. Based on these insights. the factories that HLL continued establishing in less-developed regions of the country have been engaged in similar programmes in adjacent villages. generating alternative income. The company has acquired a wealth of experience and learning from these activities. and to improve rural living standards through health and hygiene awareness. but on its guided usage for better investment opportunities This is where HLL's Project Shakti is playing a role in creating such profitable micro enterprise opportunities for rural women. Such initiatives are successful and sustainable when linked with the company’s core business and is mutually beneficial to both the population for whom the programme is intended and for the company. HLL launched Project Shakti in the year 2001. Following the pioneering work carried out by Grameen Bank of Bangladesh. KEY LEARNINGS ON RURAL DEVELOPEMENT: The principal issue in rural development is to create income-generating opportunities for the rural population. HLL has been proactively engaged in rural development since 1976 with the initiation of the Integrated Rural Development Programme in the Etah district of Uttar Pradesh. animal husbandry. in keeping with the purpose of integrating business interests with national interests. several institutions. to establish Self Help Groups (SHGs) of rural women in villages across India. for nearly five years. health & hygiene and infrastructure development. Their experiments clearly indicate that micro-credit. by providing a sustainable micro enterprise opportunity. EMPOWERING WOMEN IN RURAL INDIA The objective of Project Shakti is to create income-generating capabilities for underprivileged rural women. in tandem with the company’s dairy operations. Subsequently.

This is a key factor in ensuring the stabilization of their fledgling businesses. Project Shakti is enabling families to live with dignity. Armed with micro-credit. with a much greater say in decision-making. with real freedom from want. The most powerful aspect about this model is that it creates a win-win partnership between HLL and the consumers. there is a marked change in the woman's status within the household. this translates into a much-needed. International School Of Business & Media 42 .CATALYSING PROSPERITY IN INDIAN VILLAGES Under the project. education of the children. and an overall betterment in living standards. PROJECT SHAKTI A typical Shakti entrepreneur conducts a steady business which gives her an income in excess of Rs. In addition to money. This results in better health and hygiene. As most of these women live below the poverty line.1. HLL imparts the necessary training to these groups on the basics of enterprise management. and hail from extremely small villages (with populations of less than 2000). sustainable income contributing towards better living and prosperity. For the SHG women. HLL is investing significantly in resources who work with the women on the field and provide them with on-the-job training and support. HLL offers a range of mass-market products to the SHGs. especially the girl child. which are relevant to rural customers.000 per month on a sustainable basis. women from SHGs become direct-to-home distributors in rural markets. this earning is very significant. some of whom will depend on the organization for their livelihood. and builds a self-sustaining cycle of growth for all. For most of these families. and almost twice the amount of their previous household income. which the women need to manage their enterprises.

000 villages. In order to achieve this goal. HLL M A R T RE-DISTRIBUTION STOCKIST MACTS SHG’S RETAILERS RURAL CONSUMER “HLL’S RURAL DISTRIBUTION MODEL” International School Of Business & Media 43 . Project Shakti plans to extend to the states of West Bengal. and touching the lives of 100 million rural people by the year 200.000 Shakti Entrepreneurs covering 100. Punjab and Rajasthan in addition to expanding operations in the eight existing states.SHAKTI: THE VISION HLL envisions the creation of 25.

all with an eye on the rural wallets. repackaging products and re-pricing them. are not able to erect entry barriers and have no ways to minimize the impact from loss of sale opportunities. at least for now. One result-oriented marketing strategy here is this: offer value-additions to existing lines to lure the urban consumer and alongside offer the rural consumer wide-ranging choices within a single product category in a bid to generate high volumes. and their attitude towards essential and luxury items. The result: FMCG minors have a limited reach. The vast and diverse rural market calls for multi-tiered distribution networks. It is more than a gamble for FMCG minors who do not have a clutch of strong brands across product segments. Success in rural marketing calls for a sound network and a thorough understanding of the rural psyche. That is why FMCG companies such as “Marico Industries” are gearing up for bigger advertisement and sales promotion campaigns aimed at the rural buyer. These FMCG minors are not able to cross-subsidize their products and go for product experimentation. Is the perception that industry majors such as Hindustan Lever are on the verge of diluting their rural focus true? Does the urban consumer featured on the cover of Hindustan Lever’s 1998 annual report reflect this shifting focus? It is a tactical shift. This makes rural marketing a gamble. What do all these portend? Rural marketing could open the doors of opportunities.KEY ISSUES It's a volume-value game. The company has clarified that the rural market is not for it. That is why most FMCG players are expected to concentrate both on rural and urban marketing: focus on urban markets for value and focus on rural markets for volumes. That is why a few FMCG companies are not putting in concerted efforts to tap the rural market. Meanwhile. International School Of Business & Media 44 . For. just a trade-off between value and volume. Another issue is the stark difference in the characteristics of the consumers. Rural income-levels are largely determined by the vagaries of monsoon and thus rural demand is not a steady horse to ride on. The consumers stand apart as two different markets as is evident from their current consumption baskets. which already finds a place among the industry’s top three. There are more problems in rural marketing. One major limitation here is this: most FMCG players just do not have the critical size for going all out for rural marketing. Concerns abound over the inability of rural markets to meet the soaring rural ambitions of the Indian FMCG majors. focusing all out on one of these markets at the cost of the other could be suicidal. although the evolution is towards a better lifestyle therefore product and brand choice is there in both these markets. Marico is trying hard to get into the premium-end hair-oil market. The company has been working constantly on extending its parallel rural sales and distribution networks. the rate of evolution is highly different. Marico’s high-pitch rural marketing exercise involves repositioning brands. Consider the case of Cadbury. In addition. Most Indian FMCG majors know this well. Rural consumer’s pricesensitivity is something the FMCG players should be alive to. but the path is paved with thorns. efficient logistics and friendly infrastructure. between the urban market and the rural market".

which would enable them to offer low-price and valuefor-money products. Instead. but also offer their rural prospects maximum value for money spent. a five-month old marketing initiative involving women belonging to micro-credit self-help groups (SHGs) in the Nalgonda district of Andhra Pradesh. what should the FMCG players do now? They should not only price their products competitively. Consider the case of Marico: its material cost works out to a high of 59 per cent on sales. Hindustan Lever had given shape to its rural strategy a few years ago when it perceived that its urban market was shrinking due to an industrial slowdown. The company has been able to clock in double-digit profits every three years and log in double-digit revenues every four years. there are obstacles.33 million retail outlets is an uphill task. International School Of Business & Media 45 . Certainly. But then. FMCG is a low-margin business with a high cost of raw materials. Thus. Britannia with its Tiger brand of biscuits and Colgate-Palmolive with its lowpriced and conveniently packaged products designed for the rural masses have been other pioneers in rural marketing. Its Operation Bharat that focused on personal care products made the most out of surging rural incomes. Cost of setting up a huge retail network has saw many casulaties. there is a lot of money in rural India. unflinching rural commitment and staying power can play this rural game. the notable being the P&G which abandoned its plan to fight the likes of Lever in the rural segment on its own. The biggest obstacle is that the rural consumer is still evolving. it is aiming to piggyback on the Marico Industries which has got a strong presence in these markets through its flagship brand "Parachute". Only FMCGs with deeper pockets. Britannia and Colgate-Palmolive have been able to derive more than 30 percent of their revenues from rural markets. customer-centric and market-savvy FMCG companies have always chased prospects when they perceive there is a latent demand. However. Therein lies the rural marketing paradox. So. Sure. The only way out for Indian FMCG players: put in place an aggressive cost structure. The FMCG stalwart Hindustan Lever has started its ambitious project "Project Shakti".The real test still lies ahead. The result was there for all to see. Surf and Lux are available even in India’s most obscure villages. reaching out to 3. Hindustan Lever’s Rin. For instance. One major hurdle in rural marketing is: whether an FMCG player will be able to offer the best price and aspirational values to the rural consumer who has a peculiar tendency to mimic his urban counterpart. similar to the highly successful experiment Bangladesh's Grameen Bank used in rural areas of the country. But.

a toilet soap. as a result of lifting of the QRs (Quantitative Restrictions) by the government. which want to pre-empt competitors in that space. the average expenditure per user household for low-income households is Rs. One good example is the Hindustan Lever. Another area which offers immense growth opportunities is unbranded segment. is hard to ignore for anyone. cost will again be the determining factor for success here. to propel the demand in the rural areas. However. so many variants have flooded the shelves. For a number of consumer expendables the penetration levels are extremely low. It is expected to withdraw from International School Of Business & Media 46 . especially from China. which promises to intensify in the foreseeable future. The company. Lifting of the quantitaive restrictions and dereservation of several items. HLL has recently planned to trim its product portfolio and concentrate on key brands only. In the wake of such developments. the crucial success factor will be the distribution strength a company would be able to have or develop. which were earlier reserved for SSIs. However. the markets have been seeing a veritable war over the retail shelf. Recent Bugdet hike in FMCG products like toothpastes do not bode well for the companies's efforts to focus on spreading awareness about oralcare in these areas and the increased usage of oral care products there. is also expected to give the domestic players a run for their money. 237. in some of the product categories like soaps. There has been a spurt in promotional activities. however this could also mean diluted focus. The increased inflow of imported consumer goods in the country. This has been further aggravated by brand extension strategies adopted by the companies. However. it won't be an exaggeration to say that the next FMCG war will be fought on the wired turf. issues like taxes and costs would be very crucial. However. This has made brand differentiation at the retail level extremely difficult. Godrej etc. 706 for high-income groups. And. are expected to lead to intense competition in the market place. In recent times. Internet is fast emerging as a strong distribution channel and the new players are finding it easier to launch assaults through this medium very effectively. Brand building will be another key issue. for toilet soap. while it has increased to Rs. Rural market at a staggering 122 million. but are expected to increase with the passage of time and rise in income levels. have relied heavily on brand extensions. That is why we are seeing web intiatives from market majors like HLL. This on the other hand also provides an excellent opportunity for the industry players in the form of a vastly untapped market.FUTURE OUTLOOK Domestic market is witnessing a structural shift in terms of demand with rural markets beginning to show increased demand for FMCG products. For instance. This is happening at a time when the urban market is showing signs of saturation. which has resulted in an increasing fight for the customer's attention at the point of purchase. given the cost-conscious nature of the consumers there. the low level of penetration in the rural areas is a cause of concern. In case of Lifebuoy. on part of the company and confusion for the consumers. five times the urban market. in the wired world that alone won't be enough as a entry barrier.

International School Of Business & Media 47 . as well as distribution synergies. the industry is all set for a fast-paced race ahead.the markets variants of its toothpaste brand "Close Up" such as Close Up Renew and Close Up Oxyfresh. Companies will be increasingly reviewing the quantity versus quality equation. to try and leverage for the best possible distribution at the least possible cost. relaxation of licensing restrictions and reduced dominance of unorganized sector due to creation of level playing field. The growing reach of advertising medias like satellite and cable TV too is expected to give a boost to the market penetration initiatives of the industry players. sample this: the study says that the lower income group is expected to shrink from over 60 percent (1996) to 20 per cent by 2007 and the higher income group is expected to rise by more than 100 per cent. The key factors that are expected to trigger future growth for the FMCG industry include reduction in excise duties. It looks. The results of a survey done by National Council of Applied Research (NCAER) suggest that Indian FMCG space is all set to enter a new growth phase. This could be a crucial factor in deciding the fate of players.

PILLARS OF FAST MOVING CONSUMER GOODS The Fast Moving Consumer Goods (FMCG) business is built on two pillars . MARKETING 5. The under given is the comprehensive conceptual coverage of these and other key marketing concepts 1. DISTRIBUTION 4.Brands and Distribution. MARKET SEGMENTATION AND POSITIONING 7. VALUATION OF BRANDS 3. ADVERTISING AND PROMOTIONS International School Of Business & Media 48 . BRANDING 2. MARKET RESEARCH 6.

" Manufacturers can use their own brands (known as Manufacturers’ brands) or brands of their distributors (Distributors’ brands). Successful brands generate strong cash flows. International School Of Business & Media 49 .BRANDING What is a brand ? A brand is name. This reinforces the perceived superiority of a brand. brands are just used to endow the product with unique story and character which itself can be a basis for product differentiation. term. symbol or design or a combination of them which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors’ A Trade mark is "a brand or a part of brand that is given legal protection because it is capable of exclusive appropriation. In some cases. they have special importance for FMCG products. it is difficult to differentiate a product on technical or functional grounds and therefore the consumer is reluctant to switch to an unknown brand. Why branding? Manufacturers/ distributors use brand names for a variety of reasons from simple identification purposes to having legal protection for unique features of the products from imitations and help consumers recognize certain quality parameters. Special importance of brands for FMCG products While brands can represent all types of goods or entities. sign. most of these products are personal use In many cases. Brand equities are stronger in FMCG products as the consumer is reluctant to try unknown brands/ unbranded products for the following reasons • • • • these products individually account for a small part of household spending. which enable the owner of the brand to reinvest a part of it in the form of aggressive advertisements/ promotions.

Rexona soaps etc. Nirma Shikakai soap etc. Nirma Beauty. Liril. Most successful brands are founded on a chance discovery of a new product/ process or assiduous research and development work. consumers etc) Advertisement and promotion can induce trials but for sustained loyalty. Nirma Super.How a brand is created? FMCG companies spend enormous sums on building brand equity by way of: -advertisements/publicity -Free samples -Low entry price -Promotions (schemes for dealers. For instance. Also. which becomes a major deterrent for its expansion in the premium segment. the company for the first time diverted from its strategy of umbrella branding with the launch of Nima. Hindustan Lever follows individual branding strategy and has several brands in the same category such as Lux. Consumers looking for a change are offered distinctly new brands by the same manufacturer. Major players invest in R&D on their existing brands and improve the product quality continuously to maintain their edge over competitors. there is a generic brand with association of some values. the manufacturer has to offer superior quality and value for money. Only recently. do not have negative spill over impact on other brands. Nirma is associated with popular end of products. International School Of Business & Media 50 . Competitor Nirma has mainly followed the umbrella branding strategy such as Nirma Bath. For example. each new brand does not benefit from the positive perceptions of earlier brands. In case umbrella brand. Advantages of Individual branding strategy are • • Some of the products which flop in the market. Branding strategies a) Individual brands Vs Umbrella brands Individual brand has its own identity and the corporate or common name is not used to promote its equity. But individual branding requires expensive advertisements and brand building exercises.

. Close Up Oxyfresh. fetches a price several times the value of tangible assets required to manufacture the product. expensive advertisement for creating brand names. free samples. all methods recommended for valuing brands suffer from lack of objectivity and consistency. The brand has some unique USP and there are cosmetic/ functional variations in the extensions. In case of FMCG companies. etc. there is cannibalization but overall result is greater market share. In multi branding. The intangible assets created in the form of a brand pays back in the form of repeat buying and pricing power over a long period of time. Also. Clinic All Clear. etc) in the same category ie toilet soaps. Breeze. International School Of Business & Media 51 . Inclusion of brands in assets will .reduce gearing ratio.dilute return on networth . Close Up Sensation. Rexona. assets are considerably understated as they do not include value of brands. as they do not create any tangible assets. manufacturers have advantage of • • Establishing a new product quickly with association of quality/ benefits of the mother brand (a classic case in Indian context has been Godrej). Net incremental market share is enough to justify the investment in the new brand. No need for name research. Clinic Plus hair oil or Close Up Renew. Brand extensions may be used within product categories (In some products like shampoos. b) Brand extensions Brand extensions are used for a group of products such as Clinic Plus Shampoo. There is no generally accepted methodology for valuing and accounting for brands. For instance Hindustan Lever has several brands (Lux. promotions etc are treated as revenue expenditure by accountants. There is considerable risk as expenses incurred on a unsuccessful brand has to be written off almost entirely. An established brand is a precious asset and when sold. It may also be used for different product segments (eg Sunsilk brand being extended to hair oil) c) Multi brands Marketer introduces brands mostly in large markets. which compete with each other in almost the same segment. The strategy is to build upon initial success of a brand entry by creating flanker it ems and minor variants of the basic brand.In umbrella branding. dry hair or for specific problem solving like anti-dandruff). there can be natural variants such as shampoo for normal hair. recognition and preference. But the same are paid back several times in case of successful brands. Hamam. Accounting for brand expenses Expenses incurred by way of advertisements.

It can be argued that high return on networth shown by established companies is overstated as assets (ie Brands) are understated. Similarly, in case of companies in investment phase, making extensive investment in new brands, would exhibit depressed return on networth as investment in brands is being written off, pulling down the profits. Some companies defer writing off a part of the expenditure for brand building. The expenditure not written off in the year is treated as deferred revenue expenditure.

Some case studies on brand valuation, acquisitions and transfers Brand valuation 1. Infosys brand valuation Brand takeovers 1. Cibaca takeover by Colgate 2. Lakme takeover by Hindustan Lever 3. Captain Cook and Tarla Dalal by International Bestfoods Brand transfers 1. Marico 2. Navneet

Distribution channels and network Marketing or Distribution channel refers to the set of marketing intermediaries which manufacturers link together to reach their products to the ultimate consumers. Depending on the product, nature of market and manufacturers’ resources/strategy, there can be one or more links between the manufacturer and consumer. a. Manufacturer - Retailers b. Manufacturer - Wholesalers - Retailers c. Manufacturer - Stockists - Wholesalers - Retailers .

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Why use distribution channels There are several benefits for a manufacturer particularly in case of consumer goods to rely on these marketing intermediaries rather than develop one’s own distribution network.

• •

Efficiency in performing the basic marketing task by these intermediaries who through their experience, specialization, knowledge of local conditions, contacts and scale, offer services which manufacturers can scarcely do on their own. Cost advantage most of these intermediaries in India are family owned outfits. Their cost of operations and overheads are substantially lower. Focus : Manufacturers can concentrate on their core activity and optimize return on assets.

In India, there are over 5 million retail outlets dispersed all over the country. The retailing industry provides employment to over 18mn people. 1 out of every 25 families in India is engaged in the business of retailing. Ownership and management are predominantly family controlled. However in sharp contrast to developed countries, unit average size of a retail outlet in India is very small. Organized retailing, however, has been a recent phenomenon and is relatively undeveloped. There are no large super market chains/ shopping malls. Consumers are unwilling to pay a premium for convenience shopping as their counterparts in the western countries do. While small chain stores called Apna Bazaars and Sahakari Bhandaars, which offer products at reasonable prices have been fairly popular, Department Stores and Food Stores are slowly gaining popularity. A large number of corporates have recently ventured into retailing. The retail outlet in India can be broadly categorized as follows: • • • • • • • Grocery Stores General Purpose Stores Food Stores Pan/Bidi Stores Chemist/Drug Stores Cold Chains Others

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The relative share of grocers dropped from over 50% in the early 90's to 35% in the late 90's. Chemist outlets on the other hand, have been expanding their product range to include high margin FMCG products from shampoos to ketchup. Panwallas are also emerging as full fledged consumer product outlets. Table : Growth in retail outlets (m nos) Year 1978 1984 1990 1996 Urban 0.58 0.75 0.94 1.80 Rural 1.76 2.02 2.42 3.33 Total 2.35 2.77 3.36 5.13

Composition of urban outlets Grocers Cosmetic stores Chemist Food Stores General Stores Pan + stores Others Composition of rural outlets Grocers General stores Chemist Others 55.6% 13.5% 3.3% 27.6% 34.7% 4.0% 6.3% 6.6% 14.4% 17.0% 17.0%

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fresh breath. Broadly markets can be segmented on the following basis : Geographic : location. equipment. family life cycle. and desire/ willingness to purchase. family size. organizations with purchasing power. marital status. For instance. rural. Market segmentation Markets comprise of heterogeneous segments of consumers. religion. popular and premium categories. Psychographic variables such as lifestyles. services from producers Consumer market : refers to market where end consumer buys the products for personal or household use. buying motivation. white teeth. nations. there can be further segmentation such as a market segmented along geographic areas can be further segmented on the basis on income and so on. Most FMCG products are also segmented along the target consumer segments in economy. social class. The non-durable products are also known as fast moving consumer goods. Each segment is targeted by the marketeer with a distinct marketing mix. benefits could be decay prevention. in case of toothpastes. urban areas etc Demographic variables such as age. good taste. supplies. Market segmentation refers to process of identifying a group of buyers with similar buying desires and requirements. product knowledge. Consumers can be broadly divided into low income. Reseller market trade in finished goods. machines etc. Within a segment. education. Consumer market can be bifurcated into durables and non-durables markets. states.MARKET SEGMENTATION AND POSITIONING A market is defined as individuals. income. Price differential between popular and premium products is significantly higher than what would be warranted by International School Of Business & Media 55 . sex. nationality. Markets can be categorized based on the buyers as follows : Producers market trade in raw material. personality. Benefits segmentation divides the market along buying motives. middle income and high income group. low price etc. cities. occupation. Income segmentation Income segmentation is one of the most popular and convenient way of segmenting the market.

players try out to carve separate niche which leads to greater segmentation of the market. the plethora of brands become unmanageable. As each brand needs significant investment for launch as well to sustain equities. Segmentation and consolidation With increasing competition.manufacturing cost differentials. The process of restructuring and cost engineering results in consolidation and phasing out of weaker brands and thereby reducing the market segmentation. International School Of Business & Media 56 . Marketeers create product differentiations with focussed advertisement/ promotions and superior packaging also.

discount coupons. Relevance of Mass Media is also a very important factor. message and mode of presentation. display schemes etc for retailers. They are identifying the fact that rural people are now in the better position with disposable income. RURAL PROMOTION STRATEGIES: “Promotion” of brands in rural markets requires the special measures. sports etc to promote corporate/ brand image. The companies are trying to trigger growth in rural areas. Infect the opinion leaders are the most influencing part of promotion strategy of rural promotion efforts.ADVERTISING AND PROMOTION Advertising consists of non-personal form of communications. Players have to decide on overall advertisement budget. The strong Indian brands have strong brand equity. There are several forms of promotion such as distributing free samples. timing etc. which affect the sale of various products in rural market. 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. arouse demand for the product and emphasize on superior features of the advertised product over others. The Indian established Industries have the advantages. Promotions are of two types viz pull promotions where consumers are incentivized and push promotion where dealers/ retailers are incentivized. Marketeers also sponsor charity programmes. The low rate finance availability has also increased the affordability of purchasing the costly products by the rural people. type of media. The experience of agricultural input industry can act as a guideline for the marketing efforts of consumer durable and non-durable companies. Advertising aims at providing information about the product. Introduction Indian Marketers on rural marketing have two understanding (I) The urban metro products and marketing products can be implemented in rural markets with some or no change. The Marketers have following facilities to make them believe in accepting the truth that rural markets are different in so many terms. which MNC don't enjoy in this regard. consumer demand-pull and efficient and dedicated dealer network which have been created over a period of time. The communication is conducted through trade media under player sponsorships. This paper is therefore an attempt to promote the brand image in the rural market. (ii) The rural marketing required the separate skills and techniques from its urban counter part. The rural market has a grip of strong country shops. They invariably do post audit of advertising efficacy. Marketer should understand the price sensitivity of a consumer in a rural area. gift offers for consumers and target based incentives. International School Of Business & Media 57 .

radio and other urban centric media exposure. film. There are almost twice as many' lower middle income' households in rural areas as in the urban areas. there are as many 'middle income and above' households in the rural areas as there are in the urban areas. According to the NCAER projections. Thus. (ii) Low priced products can be more successful in rural markets because the low purchasing.3 million urban households as against 1. 90% of the rural population us concentrated in villages with a population of less than 2000. purchasing powers in rural markets. (iv) The rural markets can be worked with the different media environment as opposed to press. As per the National Council for Applied Economic Research (NCAER) study. can be either specific or universally applicable. This brings a boon in disguise for the FMCG Company who has already reached the plateau of their business urban India. How does reality affects the planning of marketers? Do villagers have same attitude like urban consumers? The question arises for the management of rural marketing effects in a significant manner so than companies can enter in the rural market with the definite goals and targets but not for a short term period but for longer duration. economic conditions and problems.driven growth. The strategy. (iii) Rural consumers have mostly homogeneous group with similar needs. At the highest income level there are 2. International School Of Business & Media 58 . the number of middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. The Research paper will discuss the role of regard. Realities before the Marketers 70% of India's population lives in 627000 villages in rural areas. In urban India.6 million households in rural areas. with agriculture being the main business.needed volume. which will be presented in the paper. the same is expected to grow from 46 million to 59 million. This simply shows the great potentiality rural India has to bring the much . the absolute size India is expected to be doubles that of urban India.(i) The rural market has the opportunity for.

The small sachet packs are the examples of price sensitivity. making the rural markets bullish. The Gram Panchayat areas have been selected on random basis from the list of available Gram Panchayat. in also expected to drive consumption. personal wash and beverages are in rural areas. The low rate finance availability has also increased the affordability of purchasing the costly products by the rural people. the price drop in personal products. And we see a future in going rural in a major way". which MNC don't enjoy in this strong brand equity. which affect the sale of various The companies are trying to trigger growth in rural areas. Few brands like Coca-Cola." says an analyst. They are identifying the fact that rural people are now in the better position with disposable income. HLL has planned a rural marketing program that is expected to result in a marked growth in the consumption of the company's products in the rural market. The improved agricultural growth is expected to boost rural demand. "Better agricultural yields will give farmers more spending power. sizes and awareness campaigns for its detergents and soaps segment to augment rural growth. BPL. The respondents were organized in a group and asked about their views on following advertisement actions and theme: 1) In case of Coca-Cola how does the role of Aamir Khan affect the rural consumers? 2) In case of BPL Television how does Amitabh Bachchan give the impression about BPL Brand International School Of Business & Media 59 . consumer demand-pull and which have been created over a period of time. As a result. after the recent excise duty reductions.HLL chairman MS Banga Says. The four-Gram Panchayat have been short-listed and 60 respondents have been selected in each Gram Panchayat so the total sample size N = 240. through not at too sizzling a rate. "This exercise may not pay in the immediate future. Moreover. country shops. HLL will adopt three-pronged marketing strategy. but will definitely give long-term dividends. The Indian established Industries have regard. The strong Indian brands have efficient and dedicated dealer network The rural market has a grip of strong products in rural market. Asian Paints have been chosen to conduct the research work. over 50 percent of the sales of HLL's fabric wash.new price points. Marketer should understand the price sensitivity of a consumer in a rural area. Research Modus Operandi and Design: The research methodology for this research work is based on the survey technique. the advantages. Colgate has done this experiment with launching of sachet packs for rural markets. Incidentally.

Now the cable and other Channels have also penetrated in rural households. Conceptual Framework Given the Literacy scenario in to consideration the promotion of Brands in rural markets requires the special measures. The data has tabulated in following manner. Advertisement of Coca-Cola (Acceptability pattern) Contents Favor Language and content of Ad. 72% Back ground effect of Ad.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 feeling plays very important role. Relevance of Mass Media is also a very important factor. Door Darshan had already acquired high penetration in rural households. The newspapers and other printed Media are also gaining strategy but their role is still secondary in this regard. BPL advertisement Contents Amitabh Bachchan Ambassador Favor brand 75% Non-Favor 20% No Comment 5% as a International School Of Business & Media 60 . Results and Discussions: The field exercise has given the various inputs about the rural consumers. Infect the opinion leaders are the most influencing part of promotion strategy of rural promotion efforts. The Language and content (72%) and expression style of Aamir Khan (85%) play significant role. Due to the social and backward condition the personal selling efforts have a challenging role to play in this regard. 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 experience of agricultural input industry can act as a guideline for the marketing efforts of consumer durable and non-durable companies. The experimental design was suitable as the rural consumers fell interest about it and descriptive design depends on the explanation past about the campaign of these Brands. 50% expressions and communication styles of Aamir 85% Khan Non-Favor 20% 20% 15% No Comment 8% 30% - The Ad plays an important role for giving boost to rural consumers feeling. The word of mouth is an important message carrier in rural areas.

The total concept and delight fulness is a strong factor for this ad. This point must be reflected in ad for rural markets. lyrics must not be ignored in this regard. Interesting and delightful Ad. Different Modes of promotions in rural market. International School Of Business & Media 61 . 62% 30% 20% 5% 18% Amitabh Bachchan is a leading player in the ad feature. Modes Hats Wall Paintings Melas Favor 65% 40% 65% Non-Favor 30% 53% 20% No Comment 5% 7% 15% Hats and Melas play a very important role in this regard. which are close to their culture. Suggestions 1) Rural consumer environment must be understood before the creation of ad. Contents Style of Presentation The concept of ad. The 65% response in favor of this is an indicator of this. 4) Selection of brand ambassadors. The Action style of Amitabh Bachchan is a very delighted factor for rural Consumers. 2) Rural mindset accepts the brands easily. Favor 77% 65% 63% Non-Favor 20% 20% 17% No Comment 3% 15% 20% Style of presentation plays an important role. 77% is a high figure as this affects the whole creativity aspect of any ad.The Action style of Amitabh Bachchan 65% The language of Ad. 3) Sponsorships to the Melas and Hats must be considered in a significant manner. They have a special liking for folk culture so this can be taken in an effective utilization of brand promotions.

4) Special promotion measures are the strong applicable factors in this regard International School Of Business & Media 62 . 2) Background figures are also a deterministic factor.Conclusions The following conclusions could be drawn: 1) The Language and content must be according to the suitability of rural environment. 3) Admissibility of brand ambassadors plays an important role in this regard.

from traditional mosquito repellant to coils and mats. comes here only in fits and starts. From low-priced brands to premium brands. However. And close to half of India's buying potential lies in its villages. Nearly two-thirds of all middle-income households in the country are in rural India. Electricity. households are upgrading from indigenous teeth-cleaning ingredients to tooth powder and tooth-pastes. Telephone is a luxury here. The rural India offers a tremendous market potential. And a delivery by road may take any stretch of time.FMCG CONSUMTION IN RURAL INDIA Here the rain gods still play havoc with one's dreams. International School Of Business & Media 63 . bustle and transaction. Thus for the country's marketers. A mere one percent increase in India's rural income translates to a mind-boggling Rs 10. brimming over with din. has made the rural consumer more demanding and choosier in his purchase behaviour than ever before. Realizing this Corporate India is now investing a sizeable chunk of its marketing budget to target the rural consumers. small and big. There is a remarkable improvement in the form of products used. This is where the real India resides. if at all. Thanks to the increasing literacy level and media explosion. The dusty village path winds past a cluster of slumbering cottages and leads one to a weekly rural bazaar or haat. Brand consciousness is on the rise. This. For instance. rural reach is on the rise and is fast becoming their most important route to growth. There is also a visible shift from local and unbranded products to national brands. people are becoming conscious about their lifestyles and about their rights to live a better life. studies indicate a slow but determined shift in the use of categories.000 crore of buying power. clubbed with increasing disposable income of rural households. things are changing fast now. And the dusky village damsel has now learned to pine for a satin rose. INCREASING BRAND AWARENESS In the rural families.

in the process. It is evident that in the villages low-priced brands are well accepted and one might feel that a larger proportion of the purchases made in rural market can be attributed to local/ unbranded players.. however. coffee and salt. Category Toilet Soap Washing cakes/Bars Edible oil Tea Washin powder / liquid Salt Biscuits Category Penetration 91% 88% 84% 77% 70% 64% 61% Brand with penetration Lifebuoy Wheel Double iran mustard Lipton Taaza Nirma Tata Salt Parle G highest FOCUS ON URBAN CATEGORIES International School Of Business & Media 64 . 20% on toiletries. approximately. A number of category products have established themselves firmly in the rural households.FMCG CONSUMPTION Organizations like Hindustan Lever Ltd. Colgate Palmolive. Surprisingly. Parle foods and Malhotra Marketing have carved inroads into the heart of rural markets. 13% on washing material. 10% on cosmetics. Nirma Chemical Works. the regional brands. tea. local brands and the other unbranded offerings got displaced by the leading brands. Company HLL Nirma Chemical Works Colgate Palmolive Parle Foods Malhotra marketing Category Washing cakes/bars Tea Salt Household penetration 88% 56% 33% 31% 27% % volume of local brands / unbranded 88% 56% 33% Of the expenditure on consumer goods in rural household. the unbranded/local component contributes to a substantial portion of the volume of only a few of the highly penetrated categories. 44% is on food articles such as biscuits. Various categories of products have been able to spread their tentacles deep into the rural market and achieved significant recognition in the country households. 4% on OTC products and 9% on other consumables. And.

8% The rural youths are more open to fresh concepts as against their elderly family members. Surveys also reveal that trials are not restricted to the more affluent echelon of the villages. Similarly. Brand Surf Ariel Pantene Denim Penetration of category users 6. Category Skin creams Talcum Powders Household Penetration 18% 15% the skin care category. accounts for 60% of the skin care market in rural India. 60% of the Pond's users have purchased no other brand i. This clearly indicated that after being considered urban for a long time.7% of the shampoo using households started using Pantene. Similarly. Both Pond's and Fair & Lovely are enjoying a monopoly in the rural markets in their respective categories. It also enjoys the undistinguished patronage of 58% of its user households. PREMIUM BRANDS Pond's is the leader in the talcum powder category with a penetration of 65% and volume contribution of 56%. Moreover. with a penetration of 75%.9% of the talcum powder-using families have started using Denim talc and 0. Rural India is not averse to trying out the premium brands at high prices. Nycil and Liril are trailing far behind. And. traditionally urban categories such as skin creams and talcum powder have also made a mark.2% 4. Fair & Lovely fairness cream.8% 1. Their difference in choice of products/brands with the seniors of the households often leads to a “dual-usage” of product categories.5% 1.e.Though the commodity products have greater penetration. the rural talcum powder market darted ahead. As an instance. This should further encourage the marketers to focus their attention on rural buyers. growth of rural skin cream market was at par with that of urban skin cream market. they are 100% brand loyal. some categories are now wearing a rural face. A study indicated that a majority of the premium brand users are using the brand for the first time. many of the households using International School Of Business & Media 65 . Similarly 0. in many a case. it is the rural market that is actually driving the growth of category. The experimenting households are more-or-less evenly spread across the various socio-economic clusters of the rural market. 20% of the households using tooth powder also use tooth paste. This reflects the strength of the brand in rural bazaar. Its rivals viz. While the urban talcum powder market suffered a de-growth.

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

AMAZING INNOVATOR With a queer psychology of purchase and usage, Indian rural market is still a puzzle to marketers. In many a case, it stretches its imagination to find surprisingly different uses of some of the products. And the red-faced marketers admit that they actually sell their products in areas they would otherwise find difficult, simply because there are other uses for them. For instance, in parts of Northern India, condoms are used by weavers as gloves on their fingers to weave fine threads. Lubrication on condoms allows them fine control on threads and protects their sensitive fingers. Buffaloes displayed at the haats for sale are dyed an immaculate black with Godrej hair dye. Horlicks is used as a health beverage to fatten up cattle in Bihar. In villages of Punjab, washing machines are being used to make frothy lassi in bulk. Paints meant for colouring up the rich-smooth walls are used to paint the horns of cattle to make identification easier and to achieve a long-term protection from theft. Iodex is rubbed into the skins of animals after a hard day's work to relieve muscular pain. The organizations in question might not be pleased with such usage. However, their moneybags keep on jingling.

THE OTHER TWISTS AND TURNS OVERCOMING THE INCOME VARIABILITY Savvy firms create innovative opportunities for the rural segments that are lagging behind in purchasing power. The local distribution for Akai in India, Baron International, realized that the market for new television sets are primarily urban. However, there was a considerable inertia when it came to replacing a working TV set of a previous generation.But Baron also knew that there existed a market, primarily rural, for used televisions. Rural retailers purchased traded-in sets from urban dealers. Urban consumers got something for their old TV sets, urban retailers made their margins from selling the traded-in sets, rural retailers made a profit on used TVs and rural consumers were offered TV sets they could afford. Resultantly, Baron's sales increased by 1500% over three years making it the most profitable firm in the television business.


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Many of the rural buyers tend to have little stock of money, only a flow. Consequently, they tend to make purchases only to meet their daily needs and have little capacity to build inventory. The marketing implications of this are far-reaching. Not only are pack sizes and price points affected, but in turns out that consumers have to make a selection from a much wider array of product categories. Thus the nature of competition for any given product is much broader. For instance, in a village haat, Coca Cola competes not just with Pepsi, but with a broad set of purchases that the rural consumers consider as “treats”.

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

CHANNEL POWER The rural consumers interact directly with their retail salespersons who has a strong conviction power and whose recommendations carry weight. The owners' relationship with customers is based on an understanding of their needs and buying habits and is cemented by the retailer extending credit. Some of the successful manufacturers creatively develop new revenue activities for the rural retailer. United Phosphorous Limited (UPL), an Indian crop protection company, realized that in its rural markets small farmers were not applying pesticide at all, or applying it inappropriately due to the lack of application equipment. The capital cost of the equipment (mounted pumps and dispensers that cost up to $3000) was placed out of reach of small farmers and most rural retailers. UPL designed a program in which it arranged for bank loans for its rural retailers to purchase application equipment and demonstrated to their retailers the additional revenue possibilities from renting this equipment to small farmers. The result was an added revenue stream for rural retailers.


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

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

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

TRAVAILS IN DISTRIBUTION In spite of recognizing the potential of this vast market of 700 million, marketers are often unable to cater to it because of lack of adequate infrastructure. The distances between villages, the terrain and the lack of pucca roads connecting the places act as impediments for them to reach their customers. But once if they overcome these hassles and reach those remote bazaars to be first on the shelf in the product category, they develop a privileged relationship with the retailer that offers them a tremendous competitive advantage. Rural retailers are far less specialized than their urban counterparts and carry a wider range of products. Since frequent delivery is not possible in their part of the world, they tend to carry only a single brand in each product category. And, usually, the brands that are first on the rural shelves become synonymous with

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is. This requires a significant reorientation in the allocation of funds across media. rich in colour. make point of purchase advertising and trade push indispensable. It opted for slick commercials. torturous. while it only accounts for 0. And this increasing awareness has led to a significant change in his buying behaviour and consumption patterns. back fire. surely. now it is the turn of the rural consumers to dictate the terms. Hence. with the shifting dynamics of the present-day market situation. the improved technology has allowed the cable and satellite networks to increase their reach across the countryside thus exposing a rural consumer to a lifestyle that was beyond his dreams. Rural buyers living in small isolated groups distributed across vast distances have limited access to the broadcast media. at times. However. but the effect was somewhere lost on a market where 60% of all TVs are still black and white. The company also provides product usage demonstrations to the captive audience because written instructions on the pack may be illegible to the consumers who are either illiterate or do not understand the dialect. Maggi noodles. interspersed with advertisements for Unilever's products. While the urban market is getting increasingly competitive and saturated. Unilever pioneered the concept of video vans that travel from village to village screening films in the local language. The existence of a multiplicity of languages and varying level of illiteracy complicates the task of communication further.product category and are difficult to dislodge. the brand that created the category of instant noodles. For instance. sans electricity and other modern facilities. For example. thus promising a far better scope for growth for marketers. even once during the purchase cycle to ensure repeat purchase. RURAL MEDIA Urban consumers shop daily and have 365 opportunities a year to switch brands while the rural purchasers who buy their goods in weekly haats have only 54. Where mass media is used. a drive down the rugged countryside. reached the rural shelves before anyone else and remained the market leader ever since. On re-entering India in the 1990s. outdoor advertising accounts for over 7% of all media expenditures in India. But the pain is worth bearing. with high production values. And this reinforces the need for marketers to formulate a well-designed strategy to feel the pulse and to tackle the mystic rural market.8% in USA. Attempts to reach rural consumers. International School Of Business & Media 69 . the rural market is blooming with increase in the disposable incomes of the households. in the recent past. Thus. variability can. To overcome some of these challenges. Coca Cola decided to reinvest massively on a TV advertising campaign.

The Streamline system has extended direct HLL reach in these markets to about 37% of International School Of Business & Media 70 . Several of company's major business categories. Therefore. The principle of Project Streamline is to leverage HLL’s scale and organisational synergy to increase reach in rural markets. higher quality servicing. the key issues that need to be addressed are availability. EXTENDING AVAILABILITY Data on rural consumer buying behavior indicates that the rural retailer influences 35% of purchase occasions. The statistics is daunting. Indeed. From 1998. which market Packaged Mass Consumer Goods (PMCG) of everyday use. the project has been rolled out in select states of the country where the terrain or poor stage of market development typically makes any distribution system unviable. The sub-stockist then performs the role of driving distribution in neighbouring villages using unconventional means of transport such as tractor. already get over 50% of their sales from rural areas. The pivot of Streamline is the Rural Distributor (RD). such as Fabric Wash. 90% of the rural population is concentrated in villages with a population of less than 2000. would be provided to rural trade. or 70% of India's population. Thereby. who are based in these very villages. credit and full-line availability. giving the company a substantial competitive edge over the next decade.000 villages in rural areas. Each of these substockists is located in a rural market. Project Streamline was conceptualised to significantly enhance HLL’s control on the rural supply chain through a network of rural sub-stockists.RURAL MARKETING – THE “HINDUSTAN LEVER LIMITED PRESPECTIVE THE CHALLENGE Around 700 million people. sheer product availability can determine brand choice. But the company also recognizes that there is much more that needs to be done. live in 6.27. As part of the project. Particularly for companies. the size of the rural market makes it essential to tap. such as HLL. Our distribution system is the best amongst PMCG companies. who has15-20 rural sub-stockists attached to him. To service rural markets. bullock cart. volumes and market share. awareness and overcoming prevalent attitudes and habits. we have traditionally focused on the rural market. Personal Wash and Beverages. et al. in terms of frequency.

In the process. and increasing the reach of our products. The project. insurance and education. and live in extremely small villages (less than 2000 population). doubles communication reach. For HLL. and voluntary organisations to propagate health and International School Of Business & Media 71 . and Project Bharat's influence was restricted to raising penetration and awareness levels. and provide products/services in agriculture. already covers over 5000 villages in 52 districts of Andhra Pradesh. health. and is almost double of their past household income. which they will then directly sell to consumers. is a new rural programme. This path-breaking venture aims to facilitate the doubling of HLL’s share of the rural consumer's wallet in three years. As most of these women are from below the poverty line.1000 per month on a sustainable basis. Karnataka Madhya Pradesh and Gujarat. The model is unique in that it influences all the variables that influence growth. some of whom will also draw on the company for their livelihood. A typical Shakti entrepreneur conducts business of around Rs. INFLUENCING AFFORDABILITY Project Streamline focused on extending distribution. The vision is to reach over 100. The model consists of groups of (15-20) villagers below the poverty line (Rs.000 villages.750 per month) taking micro-credit from banks. the project now aims to expand the company’s coverage to 50% of rural population by 2003. armed with training from HLL and support from government agencies concerned and NGOs. Most important. United Nations' Development Programme (UNDP). started in 2001. Plans are being drawn up to cover more states. which will reach villages with a population below 2000 and influence income as well.15000 per month. and using that to buy HLL products. the number of HLL brands and SKUs stocked by village retailers has gone up significantly. which gives her an income in excess of Rs. The SHGs have chosen to adopt distribution of HLL's products as a business venture. thereby touching about 100 million consumers. this earning is very significant. This model triples physical reach. This will both catalyse holistic rural development and also help the SHGs generate even more income. HLL is tying up with various Non-Governmental Organisations.India's rural population from 25% in 1995. which operate like direct-to-home distributors. and helps build a self-sustaining virtuous cycle of growth. creates a platform for influencing attitude changes and raising incomes. On the anvil. The company’s rural growth engine raises incomes of rural families by channel intervention through rural Self-Help Groups (SHG). Distribution will acquire a further edge with Project Shakti. the project is bringing new villages under direct distribution coverage. This model creates a symbiotic partnership between HLL and its consumers. Having done that. and is being progressively extended. HLL's partnership with Self Help Groups of rural women. generating employment and incomes for themselves.

Market development can be a difficult task because in rural India. create a channel to raise awareness of its brands and catalyse affluence in rural India.000. The operation was conducted in high-potential districts of the country. which was interspersed with product communication. unconventional media including ambient media. Cinema vans. and a message reach of 65% up from the current TV reach of 33%. company vans visited villages across the country and distributed sample packs comprising a low-unit-price pack each of shampoo. HLL has been utilising events such as fairs and festivals. Hopefully. they will continue to buy into the categories. value-for-money alternatives. In the course of the operation. For instance. The exercise was started by HLL’s Personal Products Division in 1998. both consumption and penetration is low. means utilising targeted.hygiene messages. 15.000 villages up from the current 85. Project Bharat. only three out of 10 people in rural areas use toothpaste or talcum powder. such as soaps. et al. Thus HLL generated awareness of its product categories and the availability of affordable packs. sought to address many of these issues. OVERCOMING ATTITUDES AND HABITS Creating distributive reach is not sufficient to tap the rural markets. Consumers were also made aware of the superior benefits of using our products vis-à-vis their current habits. 75% of the population up from 43% today. International School Of Business & Media 72 . The project. ENHANCING AWARENESS Mass media reaches only 57% of the rural population. The distribution was supported by explanation of product usage and a video show. as consumers in rural areas get exposed to such valueadded. user ship and top-of-mind awareness in the districts targeted. Even in categories with high penetration. influence attitudes. attitudes and habits. talcum powder. thus. as occasions for brand communication. toothpaste and skin cream priced at Rs. shop-fronts. and only six use washing powders. or shampoo and skin care products.35. the first and largest rural home-to-home operation to have ever been mounted by any company. Generating awareness. then. The project saw a 100% increase in penetration. The goal is to reach 2. and covered 13 million households by the end of 1999. walls and wells are other media vehicles that the company has utilised to heighten brand and pack visibility. successfully addressed issues of awareness. haats. consumption is once per five bathing occasions. In the process the company aim to increase access. and the affordability of the pack sizes on offer.

However. So Personal Products rolled out a follow-up programme. International School Of Business & Media 73 .000. to once more target villages with a population of over 2. sampling once is not adequate to convert non-users. the Integrated Rural Promotion Van (IRPV).

43.5 25.3 1.CONSUMER DEMOGRPHICS POPULATION DISTRIBUTION OVERALL INDIA West (%) 23.5 South (%) Total UT Other states URBAN AND RURAL DISTRIBUTION POPULATION 100 80 60 40 20 0 EA ST NO SO W IN DI A UT H RT H ES T U Ts Rural % Urban % International School Of Business & Media 74 .7 East (%) North (%) 31.4 19.

AGE DISTRIBUTION OF POPULATION % 80 65 50 35 20 5 -10 PERCENTAGE 1992 1997 2007 0 to 4 5 to 14 15 to 59 60 & Above AGE GROUP International School Of Business & Media 75 .

We expect the sector to show better performance during the third quarter (October-December). during the period Apr-Jun’00 the refrigerator sales grew by 3. it is likely to see some movements as we enter 3QFY01. Navaratri. the air conditioners sales grew by 36%. Moreover. However. In addition to this.CONSUMER DURABLES SECTOR: TIME TO BUY The performance of the consumer durable sector has been sluggish in the past. • Most of the players. International School Of Business & Media 76 . Besides this. However. Most of them have lined up interesting sales promos. while the washing machine sales grew by 5%. This kind of growth is unlikely during FY01. the number of promotion schemes and freebies rise during the festive seasons. falling percentage of households in the lower income group. rising number of replacement buyers.5% during the corresponding period last year. which would hit the market around the time of Onam in Kerala. the market experts expect the refrigerator industry to go the CTV way now. The direct cool segment constituting the rest (85%) is expected to grow at 5%. speedy introduction of new products. Manufacturers are trying to encash this opportunity and are focusing on the forthcoming festival season. the CTV industry showed a 30% growth. Durga Pooja in West Bengal. there has been a sharp jump in the number of replacement buyers. Higher growth (approximately 20%) is expected to come from the frost-free segment constituting 15% of the total refrigerator industry. • Though the CTV sales are down. recent forecast by CII. Refrigerator exports grew by 13%. the reason is pretty straight – the festive season is on its way and that’s a reason enough for the consumers to spend some hard cash and get some goodies home.5%. refrigerator and air conditioner sales are picking up. Consumers have a tendency to wait for an auspicious occasion to purchase durable products. As per ASCON (Association Council of Confederation of Indian Industry). • As per the Department of Statistics. If you ask me why. increasing promos and ad spend. including BPL and Korean brands are introducing relatively low-priced products to push volumes. there are other reasons. the water coolers grew by 15%.3% during Apr-Jun’00 as against a growth of 14. and so on… The rationale in detail: • The festive seasons like Diwali (October) and Christmas (December) will spurt sales in the third quarter. as a general trend. Ministry of Statistics and Programme Implementation. Diwali. Due to the world cup factor last year (FY00). Christmas etc. easy availability of finance. The outlook for the next six months shows a 10-15% growth in sales and exports of consumer durable goods. like the growing sales of refrigerators and air conditioners. the consumer durable industry grew by 23.

Godrej. Among the ones who have increased ad spends this year are BPL (highest ad spend of Rs600mn).6 E 3 2 - Overall 11 10 5 Source: Ms. Thus. For the period 1H2000. There has been a considerable change in the pattern of ownership between 1990 & 1999. • The latest NCAER data reveals a definite fall in the percentage of households in lower income group and an increase in all the other income groups.92bn. This is true for both. LG. Whirlpool. • Table1: Data on Absolute % Increase in Ownership between 1990 & 1998 Social Class Product A B Colour TV 20 17 Refrigerator 19 17 Washing Machine 20 8 C 13 11 3 D 7 4 0. Videocon and Akai. the ad spends of consumer durable companies rose by 13% to Rs3. the urban as well as the rural area. The various financing schemes have provided easy access to the low and the middle income group consumers. International School Of Business & Media 77 . despite prevailing negative sentiments. Rama Bijapurkar. the companies have no comparable opportunity for heavy promotions this year. the future market growth is likely to come from small towns and SEC (Social Economic Class) B & C in large towns. More and more low middle class income groups are maturing to the higher level with the number of double income families going up significantly. This is despite the fact that after having spent large sums on advertising last year for the World cup cricket promotions. Apart from the big cities. • Easy availability of finance has also been one of the important factors that drove volumes in recent years.• Industry majors have also started aggressive advertising with innovative marketing schemes to attract customers. a strategic marketing consultant in an article on The marketing in India – The Economic Times. higher ad spends will result in higher sales. The table below shows the complete picture.

• Chart1: %Distn of Urban Households in Each Income group Chart2: %Distn of Rural Households in Each Income group • The consolidated quarterly results for 1QFY01 of the consumer durable companies (mentioned below) indicate a growth of 24% in net profits and a 6% growth in Operating profits. International School Of Business & Media 78 . the operating and the net margins improved to 9% and 4% from 8% and 3% respectively. Though there hasn’t been much improvement on the sales front in the first quarter.

78 24.06 506. Whirlpool of India. We expect a 10-15% topline growth in the sector for the 3rd quarter.that is. even if there won’t be a very strong bottomline growth.21 Apr-Jun'99 (3) 12042.41 3. in small towns or in big ones? Is it more fruitful to concentrate marketing efforts in rural Haryana than it is in urban Bangalore or Kolkata? Do consumption patterns differ in urban and rural areas for households in the same income or occupation group . do middle class households in urban areas have different spending habits as compared to their rural counterparts. and do urban salary earners spend differently from rural ones? How does this behaviour change across regions. International School Of Business & Media 79 .05 1104. even states and cities? The study seeks to answer these questions.61 8. FY01. Where does the consumer live.06 8. the effect of the rising sales will be positively reflected on the stock markets. and arrive at a conclusion as to which segment to tap for increasing medical insurance policies. Since consumer preferences change all the time. the report gives details of household ownership of various goods in relation to others.002) 5.15 Companies included: BPL. So.Table2: Consolidated Qtrly Results for the period 1QFY01 Period to (Rs mn) Sales Operating profit PAT OPM (%) Net Margin (%) Apr-Jun'00 (3) 12042. Thus. and the demand for one product is often related to that of other products. estimating the market still remains a complicated task. for instance.73 408. The Great Indian Market While the size of the Indian consumer market is growing by 15-20 per cent per annum in the case of motorcycles and roughly 50 per cent in the case of cellular phones. Carrier Aircon.33 1043. a marketer can easily see how many car-owning households have medical insurance today in comparison with the number of motorcycle-owning households that have such policies.39 Growth %yoy (0. The sales are likely to be backed by high volumes. Blue Star and Voltas. in urban India or in rural areas.69 4.

The Great Indian Market 2005 .000 households across 858 villages. carried out in 2001-02. 660 towns and cities in 221 districts all over India. through annual surveys since 1986 except for three missed years. States and cities. in association with Business Standard.a study by National Council of Applied Economics and Research (NCAER). covering over 300. The study also combines some of the results of another study by NCAER titled “The Great Indian Middle Class (2004)”. NCAER has been evaluating the changes in household income patterns and related changes in consumer & demand behaviour across regions. is based on the annual survey of households in various income brackets. NCAER was founded in 1956 as an independent body to give support to both the government and the private sector in empirical economic research. Middle Income Class Consumers in Rural India vis-à-vis their Urban Counterparts International School Of Business & Media 80 .

By 2009-10. such differences are likely to reduce.Difference of Consumption Patterns across Occupation Groups in Urban and Rural areas Around 41 per cent of urban households owned two wheelers in 2001-02 versus around 11 per cent for rural areas and by the end of the decade this difference will change to 71 per cent versus 31 per cent. The figure goes down to 38 per cent in the case of towns with over 50 lakh persons. International School Of Business & Media 81 . Difference in Consumption Patterns across towns of different sizes Just 35 per cent of households in towns with under five lakh people owned two-wheelers in 2001-02 as compared to 50 per cent for towns with 5-10 lakh persons and 63 per cent in the case of towns with 10-50 lakh persons.

192 2009-10 114.901 3. 80 per cent of Indian families earned less than Rs.2000 189 2000 .373 1. in Rs.304 22.176 28.712 546 201 40 20 188. this fell to 72 per cent by 2001-02 and is projected to fall to 51 per cent by 2009-10.876 International School Of Business & Media 82 . In contrast. those earning over Rs. households in '000s) Classification Deprived Aspirers Seekers Strivers Near Rich Clear Rich Sheer Rich Super Rich Income class <90 90 .268 6. '000 per annum at 2001-02 prices. 90.394 75.881 651 2001-02 135.200 200 .262 9.500 500 .000 a year.5000 63 5000 10000 >10000 Total 11 5 164.037 255 141 221.Country's Income Distribution - The Past & the Future In 1995-96. Growing Prosperity (Income figs.1000 1995-96 131.945 1000 .2 per cent to 0.173 2.034 1. 10 lakh a year rose from 0.4 per cent and will rise to 1.378 41.7 per cent by the end of the decade.

90. 2-5 lakh earning households. 27 per cent of motorcycle demand and 47 per cent of demand for regular-sized colour televisions.000 per annum owned motorcycles in 2001-02. 2 lakh and to 29 per cent in the case of the Rs. While just 3 per cent of families owned a car/jeep all over the country. this rose dramatically to 15 per cent in the case of households earning between Rs. 90. the top cities are way ahead.Effect of Change in Income Distribution on Demand for various Consumer Durables in Future While just two per cent of households who earned under Rs. As more people come into the higher income groups. In terms of usage too. the figure was as high as 15 per cent in these cities. International School Of Business & Media 83 . Importance of Top Cities in the Demand for Major Durables The top 67 cities account for 44 per cent of scooter demand.000 and Rs. demand increases more than proportionately.

it is Mumbai that has the lead.Usage of Durables Differ across Cities Over 30 per cent of Delhi-ites own cars/jeeps in comparison with 21 per cent in the case of Mumbaikars though at higher income levels. International School Of Business & Media 84 .

Most Preferred Secondhand Goods Close to 15 per cent of all scooters bought are second-hand as compared to around 11 per cent in the case of motorcycles. For white goods like washing machines and refrigerators these figures are under three per cent. over a fourth of all two-wheelers bought were second hand. In the case of wage-earners. Correlation in Demand International School Of Business & Media 85 . in the case of households with an income of over Rs. 3 lakh. a mere four per cent bought secondhand scooters.

naturally.6 100 62.6 43.6 12.The analysis shows. quite obviously. LlC was the only company that sold such policies) as compared to just 30 per cent of two-wheeler owning families that had a life insurance cover. just six per cent of this very large population of two-wheeler-owning households had credit cards as opposed to around 14 per cent in the case of car/jeep owning households.1 100 Refrigerators 68.3 per cent of 2-wheeler owners already own a car/jeep as well Equally important.6 12.2 30. the number of television owning families (45 per cent of Indians owned televisions in 2001-02) is much larger than the ones owning two wheelers (about 20 per cent). two-wheeler owners would make a better target market given their low usage as well as much larger number in comparison to those owning cars/jeeps.3 86.8 LIC policies 41. While a fifth of the two-wheeler owners in urban areas owned cars/jeeps in 2001-02.6 40.8 83.8 100 26. While credit card sellers would do well in both segments of households considering just how low the usage of credit cards was.3* 100 8. that while 62 per cent of two-wheeler-owning households already owned televisions in 2001-02.8 18. Correlation in demand Product 2-Wheeler Cars/Jeeps TVs 2LIC Cars/Jeeps TVs Refrigerators Wheeler policies 100 70. In overall terms. according to the survey.9 41.8 62. 54 per cent of those owning cars already owned at least one life insurance policy (at the time of the survey.1 21. Similarly. While six per cent of two-wheeler owners also owned air conditioners in urban areas. Equally important.8 * 12. of course. is to keep in mind the total size of the market for each product. Around a third of two-wheeler owners also owned a refrigerator in urban areas compared to under a tenth in rural areas (the all-India figure is around 22 per cent). clearly identifying the two-wheeler segment as an ideal candidate for switching to low-end cars such as the Maruti 800. International School Of Business & Media 86 . There is.7 54 24. only 12 per cent of them owned cars/jeeps. the figure was well under half a percentage point in rural areas. for instance. a big difference in the correlation matrix across urban and rural areas. the figure was under two per cent in rural areas.8 81.

this difference is projected to fall from 5.3 per cent in rural areas. Thanks to the rapid rise projected in rural incomes over the next few years. At the aggregate level. this is expected to rise to just under 11 per cent in 2009-10. this difference narrows down considerably (63 per cent will own televisions as compared to 44 per cent for twowheelers.2 per cent. In the case of scooters.000 per annum in 2001-02 prices).3 times in the top income group. especially in the upper income groups. this will fall to under 22.5 in the case of mopeds.9 to 4. 11 % of car demand will come from rural areas. That is.So even if the correlation in demand is lower for televisions. urban usage was nearly 34 times as large as rural usage but by the end of the decade. rural usage will increase to 1. 28 per cent will own motorcycles as compared to 31 per cent with regular-sized colour televisions). from 2. the gap between rural and urban usage patterns is also projected to decline significantly.8 in the case of motorcycles and from 3. As a result.3 but by 2009-10. By the end of the decade. While some part of this is clearly due to the fact that rural areas are home to the majority of the country's population. in 2001-02. though.4 to 2.by the end of the decade.5 to 1. Changing Income Demographics will Drive Changes in Demand International School Of Business & Media 87 . Rural Market Rise By the end of the decade. In 2001-02. nearly a tenth of all urban households owned a car/jeep in 2001-02 compared to a mere 0. the number of potential targets is higher. Interestingly. the share of demand from the rural areas is projected to rise steadily . this is projected to fall to 5. roughly 11 per cent of the country's demand for cars/jeeps will come from rural areas. the change is even more stark. while roughly 2 per cent of 1995-96 demand came from rural areas and this rose to 8 per cent in 2001-02. In the case of the upper income groups (those who earn more than Rs 180. by the end of the decade. the urban to rural usage of cars was 7. while urban usage will grow to 26 per cent.7.

motorcycles will nearly touch the 8. is likely to lead to a dramatic hike in the demand for big-ticket items like motorcycles.The rapid rise in the country's middle and upper income classes. this will mean demand for cars/jeeps will easily cross the 3 million mark.5 million mark and regular sized colour TVs the 10 million mark. In terms of demand. will double for motorcycles to over 28 per cent. the number of households owning cars will more than double from around 4 per cent right now to over 9 per cent by the end of the decade. more than overall GDP growth per se. Rapid rise in incomes Per cent of households in each income group that own product Income in Rs. refrigerators and cars/jeeps.75 cars on an average As a result. International School Of Business & Media 88 .Cars/ Scooters cycles Jeeps Colour TVs 3 20 30 32 24 23 22 8 2 15 29 34 35 44 56 7 0 4 29 48 73 84 5 40 74 69 92 113 Refrigerators 4 34 63 59 70 79 103 14 175* 116 3 17 * means each family has 1. '000 Less than 90 90-200 200-500 500-1000 1000-2000 2000-5000 5000 above All India and Regular Moter. that for scooters will remain stagnant at around 8 per cent.

90. In the income group above this.7 per cent by the end of the decade. around 29 per cent owned motorcycles. that is those earning between Rs. that just two per cent of those with a family income of less than Rs. this fell to 72 per cent in 2001-02 and will further fall to 51 per cent by the end of the decade.75 per cent per annum till the end of the decade.7 per cent annually in the same period.000 and Rs. the income demographics will become unrecognisable. their consumption habits change dramatically. Just three per cent of families earned between Rs. Much of the increased demand. NCAER earlier forecast that even if India's GDP grows by around 6. this doubled by 2001-02 and is forecast to rise to 13 per cent by the end of the decade. giving rise to a more than expected (based on the usual GDP growth figures.a.2 per cent of the population in 2001-02. will rise to 1. 80 per cent of Indian families earned less than Rs 90. The same is true of most other categories. And in the Rs. 2 lakh a year.5 times this between 2005-06 and 2009-10 while growth in demand for TV sets of all types will more double. 90. NCAER's sample shows.6 per cent to 9. a key member of the team that worked on the project. 2-10 lakh in 1995-96. that is) surge in demand. In 1995-96. according to Dr Sanjay Dwivedi.000 p. owned a motorcycle in 2001-02.000 per annum. which grew by under 10 per cent between 1995-96 and 2001-02 will grow by 1. around 0. 2-5 lakh income earning households.Demand for all automotive categories. the number owning motorcycles is as high as 15 per cent. Those earning over Rs. as families move up the income ladder. then. for instance. Naturally. is not so much demand from existing households in various income groups as it is the one emanating from the migration of households into upper income groups. 10 lakh. from 4. International School Of Business & Media 89 .

000 per annum. 35. 90. naturally. 300. The study also estimates secondhand purchases according to the occupation of the head of the family. 90.000 in 2001- per annum. As a result. When it comes to scooters also. the average price paid for a secondhand car in that year was Rs.000 per annum bought used cars compared to over 16 per cent in the case of their urban counterparts.26 per cent of their scooter purchases in 2001-02 were second hand. not surprisingly. a secondhand one cost Rs. 90. and. around half those bought were financed while the figure was a lower 25 per cent in the case of two-wheelers and under 9 per cent in the case of washing machines. For cars.Demand for Secondhand Goods With secondhand cars/jeeps accounting for around a seventh of the total demand for such vehicles in 2001-02. compared to an average price of Rs. True Value. according to the NCAER. and found that cultivator households bought the largest proportion of used cars and scooters at the all-India level .000 per annum in 2001-02 were secondhand while the figure was a mere 4 per cent in the case of households earning over Rs. In the case of two-wheelers. just five per cent of rural households earning under Rs.000 and Rs. 90. 14. In the case of motorcycles. it's hardly surprising that auto-giant Maruti Udyog has gone in for a used-car business. 2.000 per annum. While under 14 per cent of urban households in the category of those earning below Rs. a seventh of demand is for used vehicles. While the average price of a new car was Rs. Households' purchase patterns differ dramatically across rural and urban areas. There is.06. around two-thirds of secondhand two-wheelers bought in 2001-02 were bought by households which had an annual income of under Rs. The highest proportion of cars. In the case of new cars. just around a tenth of those purchased in 2001-02 were second-hand. close to a fifth of all purchases of two-wheelers by households earning less than Rs. 1. a much higher demand for used vehicles in lower income groups. however.000 for a new machine. the figure was nearly 20 per cent for their rural counterparts. was bought by households with an annual income between Rs.000. 135. 40 per cent of the total.000 per annum bought second-hand two-wheelers in 2001-02. 90. International School Of Business & Media 90 .

" These include special economy models in the 14-inch colour television (CTV) segment.PHILIPS' MAHA RURAL STRATEGY THIS is bound to be a Maha affair of a different kind. Meanwhile. information and availability are concerned. International School Of Business & Media 91 . According to industry data. across the CTV and audio product range. the key reason behind this initiative lies in the growing potential of the rural market. focusing on rural towns with a population of less than 5. The pricing for these products has been structured to make it affordable for there target audience. refrigerators and washing machines. Apart from initiating new marketing and distribution programmes. while in 1997-98. economy in electricity consumption and on-screen display in the regional language. rural sales formed about 25 per cent of the total sales for CTVs. Philips will also be launching a range of new products during the rural initiative.000 and semi-urban towns with a population between 5.5 per cent of its turnover from the rural/semi-urban areas on the Mahasangram alone. in a bid to aggressively push its sales in the rural/semi-urban segment has designed an innovative strategy for these regions. it increased to 36 per cent in 2001-2002 and is expected to go up to as high as 41 per cent in 2006-07.000. Called the `Philips Mahasangram Integrated Marketing Programme'.000 and 50. the rural initiative will be taken across the country from July 2. “They have specially designed value-for-money products specifically targeted at the semi-urban and rural consumer in India. Philips India. Other new models to be introduced will include features such as a new `Eye-fi' technology which allows picture improvement under any cable signal condition. among other things. starting at a price point of Rs 8. Consumer durables major." An indication of the size of this initiative can be obtained from the fact that Philips will be spending about 4.000. "The Philips Mahasangram is aimed at taking Philips' new products to the semi-urban and rural customers and increasing their awareness where product knowledge.

Philips plans to implement an innovative FMCG style marketing strategy to push its durables in the rural segment.200 crore by fiscal 2005 and to Rs 3. "Research studies showed us that in semi-urban and rural India.000 to Rs 2. in just one year. the same amount which the household would have spent on batteries. as far as audio products are concerned. "The Mahasangram Integrated Marketing Programme is essentially about implementing a non-durables strategy marketing in a consumer durable segment. innovative tactics like advertising on an inland letter form or postcard (a popular form of communication in rural areas) and sponsorship of local events. and for consumers to see the innovation and authority in the brand. is ideal for this rural household as the household actually saves on costs incurred on batteries." Various promotional activities which Philips plans to initiate during the Mahasangram include a series of on-ground activities such as point of sale material at retailers' counters. and experiences a payback of the money invested in the radio. We see huge potential for the product in both the semi-urban and the rural markets. the radio segment is expected to grow from the current Rs 160 crore to around Rs 1. In addition. which does not require batteries or any external source of electricity for operation. at Rs 4. The company has recently revamped its portable audio range and introduced new models in monos and stereos with new features and styling. an average household spends Rs 1.000 every year for the next 12 years." A reason for the renewed focus on the segment could be the fact that a bulk of demand for radio sets is expected to come from the rural/semi-urban areas in the future.000 annually on batteries for a radio set. "Philips as a market leader in audio needs to drive the business and pioneer new concepts to grow the business. among other things. Out of this at least 60 per cent of the growth is expected to come from the semi-urban and rural areas. Meanwhile. According to industry estimates. priced at Rs 995.Similar innovative products are planned in the audio segment as well." Philips also recently introduced a new CD portable system. A one-minute winding of the lever runs the radio for as long as 30 minutes. The Free Power Radio.400 crore by fiscal 2010. the expected increase in FM services is also expected to boost demand for radio sets. road-shows. It also manages to save more than Rs 1. Philips claims to have the biggest distribution network (as compared to other consumer electronics companies) and a high degree of penetration International School Of Business & Media 92 . On the Distribution front.000 in a bid to make the CD-based music system affordable to the semi-urban and rural customers. mobile vans with Philips products on display and games. Products to be pushed during the Mahasangram include the recently launched Free Power Radio. The advertising and marketing strategy will be a combination of above-the-line and below-the-line/ on-ground activities. They are planning effective use of a number of media vehicles to ensure efficient communication of our message and maximum utilization of the monies spent.

Rural India holds the future for growth in FMCG and Consumer Durable sector and therefore companies have started looking towards it and which are left will have to do so very soon indeed. the requirement is to tap them in effective manner with efficient strategies. These steps have helped Phillips in developing there volume reach. so that there is a focus on improving relations. major retailers. in order to cater to volume drivers i. the company is aiming to increase that figure to 45 per cent in the same period.even in the rural and semi-urban areas. "Keeping in mind the objective of extensive physical reach of 80 per cent plus. trade with these retailers. International School Of Business & Media 93 . The company has carried out an extensive product-wise mapping exercise over 540 districts across India. where portable audio is concerned.. specially for FMCG companies where the urban markets are saturated so they have to sell in rural areas where exists huge opportunities. It is targeting to increase the percentage contribution in terms of portable audio from rural/semi-urban areas to the total turnover to 50 per cent by end-2003 from the current 28 per cent. and catering to their needs.e. For CTVs. they have developed a second line of activity in there distribution set-up. from the current 22 per cent CONCLUSION: So by the end of this project one can easily make out the potential that Rural Markets carries." Philips is hoping that its innovative rural marketing initiative coupled with the high growth in the rural market will boost its market share. we have identified the main retailers of each distributor and practice the Key Account Management Approach with them. geographical reach and counter share significantly. Also.

This will also help to sell inventories of products out dated in urban markets. The focus should be on infecting marketing culture into the villages. 1. The educated unemployed youth in the villages could be trained to carry out this mission.RECOMMENDED STRATEGIES FOR RURAL MARKETING The past practices of treating rural markets as appendages of the urban market is not correct. DECENTRALISING RURAL MARKETS Decentralizing the Rural Market by detaching them from the urban bases. Managing “Distribution channels” effectively like HLL is doing because this is the biggest hurdle in rural markets and then creating awareness and avialiability are key issues to be managed effectively. This will help the companies to phase their marketing efforts. SELECTION OF THE SALESMAN The salesman in rural markets should be selected from the educated unemployed villagers. since rural markets have their own independent existence. 5. trained well and appointed as salesmen. The town-to-villages shuttling salesmen are to be replaced by stationary salesman in villages " 3. But the rural markets can be exploited by ruralising them. NEW PRODUCTS MARKET Rural markets are laggards in picking up new products. 4. A give-andtake two-way approach should replace the present one-way exploitation 2. International School Of Business & Media 94 . and if cultivated well could turn into a generator of profit for the marketers. EDUCATE THE VILLAGERS Companies should also adequately concentrate on educating the villagers to save them from spurious goods and services . rather than treating them as convenient extensions of the urban market.

6 66.2 78.8 9.6 86.4 19.3 77.ANNEXURE: INDIAN STATES: Population (Rural and Urban) State West Rajasthan Goa Maharashtra Gujarat Total West West (%) East Manipur Nagaland Bihar West Bengal Arunachal Pradesh Sikkim Assam Meghalaya Orissa Total East East (%) North Delhi Chandigarh Madhya Pradesh Punjab Haryana Uttar Pradesh Himachal Pradesh Jammu & Kashmir Population (mn) Rural (mn) Urban (mn) Rural % Urban % 44.9 76.5 0.6 0.1 27.3 16.40 18.2 55.2 29.9 0.5 14.0 61.8 31.3 27.4 111.4 27.0 1.4 0.0 59.5 4.4 1.33 1 75 49.3 76.5 75.7 34.4 89.3 21.6 23.37 19.2 7.1 5.3 165.7 21.5 10.1 0.7 0.7 0.8 86.84 1.04 2.3 80.5 88.0 38.8 12.2 88.8 77.1 110.5 139.8 10.6 214.9 12.0 15.6 21.9 90.5 9.1 0.4 1.4 0.0 4.5 30.4 0.3 6.41 22.9 1.5 24.4 33.2 20.6 15.7 48.7 33.1 50.4 176.3 82.3 65.6 66.1 0.9 8.1 10.95 72.1 23.6 0.3 12.2 90.8 72.9 41.21 86.4 27.8 70.7 82.7 25.7 5.1 10.7 23.5 0.7 19.4 68.9 0.9 0.3 4.8 14.0 41.4 15.2 37.9 89.6 International School Of Business & Media 95 .2 37.8 0.4 1.21 11.5 1.

5 25.3 0.2 70.01 0.3 200.7 36.9 66.4 23.9 58.8 29.0 50.5 0.6 75.6 65.6 21.9 26.1 137.02 0.13 0.5 46.1 0.7 24.2 34.1 45.2 43.7 0.3 0.0 31.52 0.4 31.7 13.1 17.3 64.5 30.21 0.0 49.03 0.9 7.5 63.1 0.8 48.7 216.07 0.1 73.8 0.9 19.9 73.8 56.0 196.5 69.7 8.4 3.5 55.7 2.05 0.1 26.4 846.5 74.3 26. 580781 26586 3649 24685 67513 360 18028 6759 16997 27066 96 .1 0.Total North North (%) South Tamil Nadu Andhra Pradesh Kerala Karnataka Total South South (%) Union Territories Andaman Nicobar Dadara & Nagar Haveli Daman & Diu Lakshwadeep Pondicherry Total UT Other states All India Population is as per 1991 Census 265.3 21.5 53.3 0.5 29.9 73.3 36.05 0.8 1.7 78.7 628.7 Indian States : Number of Villages State/Union Territory All India Andhra Pradesh Arunachal Pradesh Assam Bihar Goa Gujarat Haryana Himachal Pradesh Karnataka International School Of Business & Media No.3 91.

7 26.05 71.32 44.Kerala Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram Nagaland Orissa Punjab Rajasthan Sikkim Tamilnadu Tripura Uttar Pradesh West Bengal Andman & Nicobar Chandigarh Dadra & Nagar Haveli Daman & Div Delhi Lakshdweep Pondichery Source : IRS 99 1384 71526 40412 2182 5484 698 1216 46989 12428 37889 447 15822 855 112803 37910 504 25 71 24 199 7 263 PENETRATION OF CONSUMER EXPENDABLES Penetration rates .8 38.19 98.96 17.77 17.14 26.93 International School Of Business & Media 97 .Rural & Urban 1985-86 (%) Personal products Washing Cake Washing Powder Toilet Soap Tooth Paste Tooth Powder 89.52 Increase 3.7 34.47 43.28 61.59 1995-96 (%) 93.1 3.

5 10.67 4.9 99.4 5.42 7.9 52.39 91.7 17.34 5.6 77.6 9.0 (0.49 45.97 1.0 23.Talcum Powder Face Cream Lipstick * Nail Polish* Hair Oil/Cream Shampoo* Food & beverages Cooking medium oil Cooking medium vanaspati Packaged Biscuits Tea Health Beverages Cigarettes 39.6 13.37 21.09 6. Therefore 85-86 numbers refer to penetration in 1992-93 Source : NCAER Penetration rates .8 12.22 5.0 10.07 13.4 87.8 57.9 7.0 87.27 40.43 57.5) 8.0 45.3 15.3 10.4 41.98 * The penetration rates of lipstick.3 18.23 6.9 15.12 20.5 1995-96 (%) 96.9 94.25 3.65 4.1 54.95 31.3 15.Urban 1985-86 (%) Personal products Washing Cake Washing Powder Toilet Soap Tooth Paste Tooth Powder Talcum Powder Face Cream Lipstick* Nail Polish* Hair Oil/Cream Shampoo* Food & beverages Cooking medium oil Cooking medium vanaspati 90.37 75.59 16.05 5.9 75.8 35.1 Increase 6.52 10.3 84.67 85.78 4.17 20.25 10.6 18.0 69.6 International School Of Business & Media 98 .85 33.1 42. shampoo & nailpolish are available from 1992-93 onwards only.88 18.1 33.3 3.47 5.8 54.2 42.5 12.4 15.9 71.3 66.56 2.4 62.99 10.

Therefore 85-86 numbers refer to penetration in 1992-93 Source : NCAER International School Of Business & Media 99 .85 14.35 13.65 1995-96 (%) 91.59 35.81 5.56 2.93 31.1 89.5 24.8 24.82 36.34 52.82 1.56 2.03 36.14 73.18 3.7 4.11 83.92 37.9 18 79.44 1.3 92.8 20.4 8.55 23.59 11.62 0.97 5.58 5.89 5.Packaged Biscuits Tea Health Beverages Cigarettes 29.14 8. shampoo & nailpolish are available from 1992-93 onwards only.82 55.17 2. shampoo & nailpolish are available from 1992-93 onwards only.4 83.52 72.3 53.46 18.03 * The penetration rates of lipstick.1 23.46 14.16 6.7 5.37 18.68 Increase 7.2 10.37 97.0 84.9 12.46 31.92 32.51 5.6 28.2 7.84 0.97 37.Rural 1985-86 (%) Personal products Washing Cake Washing Powder Toilet Soap Tooth Paste Tooth Powder Talcum Powder Face Cream Lipstick* Nail Polish* Hair Oil/Cream Shampoo* Food & beverages Cooking medium oil Cooking medium vanaspati Packaged Biscuits Tea Health Beverages Cigarettes 83.16 18.69 7.2 * The penetration rates of lipstick.15 14. Therefore 85-86 numbers refer to penetration in 1992-93 Source : NCAER Penetration rates .98 0.02 2.

0 21.0 20-24 51.Urban & Rural Reach Demographic TV (%) Sex Male 47.0 21.0 Internet (%) 0.0 72.1 - 0.0 82.0 5.1 4.0 75.0 97.0 15-19 57.0 0.0 Age (Years) 12-14 57.0 14.0 55+ 29.1 0.0 15.0 25.0 14.0 19.0 20.0 17.0 11.2 0.0 54.0 27.0 13.0 21.0 20.0 94.0 7.0 1.1 1.0 54.0 34.0 45-54 38.0 53.0 44.0 16.0 Radio (%) Cinema (%) 16.0 63.1 0.0 21.0 8.0 2.0 21.0 23.0 18.0 23.1 0.0 Female 42.0 96.0 21.0 26.0 17.0 90.0 64.0 15.0 27.2 100 International School Of Business & Media .0 15.MEDIA REACH Media Reach .0 92.4 2.0 15.1 0.w Farmers Fish/ Poultry 19.0 14.0 35.0 15.0 25.0 7.0 22.0 0.0 42.0 42.0 15.0 Press (%) 45.0 13.0 13.0 17.0 35.0 12.0 87.0 79.0 11.0 93.0 70.0 25-34 44.0 5.0 26.0 98.0 7.0 90.0 32.0 11.0 13.0 21.0 22.0 21.0 95.0 5.0 Education Illiterate Below SSC SSC & above Graduate and above Occupation Industry / Businessmen Prof/Senior Execs Trader/ Shopowner Junior Execs Clerk / Salesman / Sup Skilled Worker Unskilled Worker Non-Working / Retd / House.1 0.0 10.0 22.0 35-44 41.

0 23.7 2.2 0.2000 2001 .0 21.0 30.0 87.0 26.2 0.0 94.0 77.0 24.0 61.0 37.0 16.0 14.0 18.0 49.0 90.0 35.0 9.0 48.0 76.0 59.0 57.0 67.0 22.0 13.0 58.3000 3001 .0 1.0 14.0 23.0 22.0 28.0 40.0 72.0 12.0 36.0 15.0 18.0 41.0 23.0 54.0 62.0 7.0 16.0 18.5000 5001 .0 84.0 18.0 23.0 17.0 24.0 16.0 16.0 16.0 24.0 65.0 37.0 23.0 45.0 24.0 12.0 19.0 15.0 14.4999 < 1000 Income (MHI Rs) Upto 1000 1001 .0 24.0 77.0 19.0 15.0 44.0 10.0 23.0 10.0 15.0 45.0 13.0 21.0 84.0 88.0 21.0 16.0 74.0 15.0 76.0 6.0 27.0 22.0 22.000 >= 5000 1000 .0 54.0 41.0 22.0 93.0 23.0 11.0 24.0 47.0 91.0 70.0 79.0 76.0 13.0 71.0 21.1 0.0 15.0 16.1 lakh < 50.0 23.0 10.0 12.0 23.1 0.3 101 International School Of Business & Media .0 19.0 14.0 11.0 23.0 18.0 18.0 22.0 8.0 16.0 86.0 23.0 0.0 16.0 14.0 15.0 87.0 21.Shop Owners / Traders Service Artisans Labourers Others Not Working Sec A1 A2 B1 B2 C D E Not Ascertained R1 R2 R3 R4 Population Strata 10 lakh+ 5-10 lakh 1-5 lakh 50.000 .0 14.0 40.0 61.8000 8000+ Not disclosed 43.0 9.0 69.0 31.0 12.0 7.1 0.0 18.0 12.0 80.0 64.0 59.0 58.0 47.

0 85.2 4.0 91.0 21.Source : IRS 98 Media Reach .0 97.0 17.0 63.0 97.0 74.0 52.0 16.0 56.0 20.0 16.1 International School Of Business & Media .0 54.0 55.0 12.0 83.0 72.0 84.0 11.0 16.0 21.0 8.0 14.0 70.0 22.0 72.0 23.1 102 0.0 18.0 27.0 19.0 21.0 98.0 95.0 45.0 11.0 15.0 62.0 91.0 42.0 8.0 30.0 13.0 32.0 18.0 35.0 26.0 93.0 15.0 94.0 45.0 85.0 90.0 92.0 19.2 0.0 90.0 20.0 17.1 0.0 3.0 72.1 2.Urban1998 Demographic Sex Male Female Age (Years) 12-24 15-19 20-24 25-34 35-44 45-54 55+ Education Illiterate Below SSC SSC+but not graduate Graduate and above Occupation Industr/ Businessmen Prof/Senior Execs Trader/ Shopowner Junior Execs Clerk / Salesman / Sup Skilled Worker Unskilled Worker Non-Working / Retd / House.0 15.w SEC A B C D E TV (%) Press (%) Radio (%) Cinema (%) Internet (%) 76.0 55.8 0.0 21.0 13.0 21.5 0.0 87.9 0.1 3.0 79.0 17.0 64.0 68.0 53.0 18.2 0.0 0.2 2.0 73.0 25.5 0.0 57.3 0.0 59.0 89.0 18.3 0.0 22.0 20.0 15.0 64.0 78.5 0.0 94.3 2.0 94.0 22.0 15.0 58.0 17.0 70.0 14.5 0.5 0.0 11.0 18.0 73.0 23.0 77.0 14.2 0.0 14.0 15.1 0.0 75.0 17.0 16.

0 17.0 74.0 12.IRS 98 43.0 Media Reach .0 14.0 12.0 35.0 16.0 47.0 11.0 10.0 17.0 13.0 92.2000 2001 .1 0.0 0.0 33.0 16.0 14.0 15.0 25.0 17.0 14.0 23.0 25.0 19.0 103 International School Of Business & Media .0 47.0 10.0 11.0 85.0 Press (%) 35.0 1.0 Cinema (%) 13.0 16.0 69.3000 3001 .0 15.0 21.0 30.0 45.0 13.0 25.0 18.0 16.5000 5000 .0 91.0 5.0 16.0 19.0 24.0 26.0 73.0 26.0 89.0 28.0 93.0 40.0 35.0 14.0 8.0 63.0 45.0 11.0 69.0 7.0 18.0 17.0 4.0 58.0 7.0 15.0 11.0 27.0 15.0 35.9 27.0 31.0 95.0 43.0 76.0 39.0 5.0 18.0 23.0 15.0 84.Rural 1998 Demographic Sex Male Female Age (Years) 12-24 15-19 20-24 25-34 35-44 45-54 55+ Education Illiterate Below SSC SSC+but not graduate Graduate and above Occupation Farmers Fish/ Poultry Shop Owners / Traders Service Artisans Labourers TV (%) 35.2 0.0 19.0 Radio (%) 16.0 79.0 58.0 13.0 21.0 35.Income (MHI Rs) <1000 1001 .0 26.0 28.0 19.0 22.0 13.0 19.0 19.0 7.8000 8000 Not disclosed Source.0 1.0 12.0 16.0 23.0 62.0 23.0 27.

0 5.0 1.0 30.0 60.0 9.0 37.0 14.0 9.0 57.0 26.0 33.8 25.0 15.IRS 98 37.0 13.0 10.0 6.0 15.0 54.0 24.3000 3001 .0 52.0 33.0 11.0 18.1999 (Urban & Rural) Zone West Goa Region All Rural Urban Gujarat All Rural Urban Madhya All Pradesh Rural Urban Maharashtra All Rural Urban Assam All Rural Total Press TV Radio Cinema Satellite(%) (mn) (%) (%) (%) (%) 1.0 17.0 5.0 5.0 9.0 84.0 65.0 30.0 21.0 75.0 34.0 58.0 11.5000 5000 .0 6.0 22.0 0.0 19.0 48.0 10.0 27.0 24.0 68.0 22.0 60.0 42.0 36.0 18.0 12.0 16.0 24.0 14.0 42.0 11.0 25.0 22.0 79.0 41.0 13.0 9.0 26.0 72.0 45.0 22.Others Not Working SEC R1 R2 R3 R4 Income (MHI Rs) <1000 1001 .0 13.0 4.0 29.0 45.0 East International School Of Business & Media 104 .0 16.0 54.0 13.0 4.0 18.0 13.0 41.0 25.0 11.0 24.0 22.0 8.0 69.0 11.0 9.0 8.State wise .0 0.0 44.0 12.0 7.0 76.0 48.8000 8000 Not disclosed Source.0 70.0 50.0 22.0 11.0 83.0 10.0 41.0 7.0 48.0 25.0 13.0 64.0 7.0 82.0 14.0 11.2000 2001 .0 16.0 21.0 12.0 74.0 8.0 4.0 12.0 12.0 67.0 11.0 19.4 59.0 22.0 27.0 41.0 3.0 9.0 Media Reach .0 17.0 41.0 10.0 46.0 17.0 34.

0 8.0 16.0 47.0 11.0 11.0 32.0 8.0 74.0 16.0 43.0 17.0 17.0 9.0 58.0 14.0 28.0 3.0 9.0 South Andhra Pradesh Karnataka International School Of Business & Media 105 .0 17.0 10.0 39.0 51.0 18.0 4.0 7.0 27.0 1.0 37.0 42.0 12.0 20.0 13.0 57.0 36.0 59.0 10.Urban Bihar All Rural Urban Orissa All Rural Urban West Bengal All Rural Urban North Delhi All Urban Haryana & All Chandigarh Rural Urban Himachal All Pradesh Rural Urban Punjab All Rural Urban Rajasthan All Rural Urban Uttar All Pradesh Rural Urban All Rural Urban All Rural Urban 2.0 32.0 12.0 24.0 20.0 61.0 31.0 5.0 9.0 84.0 44.0 22.0 7.0 39.0 3.0 9.0 10.0 9.0 34.0 66.0 4.0 14.0 34.0 28.0 13.0 53.0 86.0 10.0 12.0 5.0 78.0 5.0 20.0 19.2 18.0 10.0 4.0 13.0 61.0 13.0 15.0 39.0 48.0 67.0 26.0 19.0 6.0 64.0 16.0 42.0 3.0 13.0 4.0 25.0 11.0 12.0 31.0 40.0 21.0 10.0 24.0 4.0 24.0 25.0 8.0 4.0 10.0 51.0 5.0 17.0 17.0 32.0 0.0 16.9 22.0 32.0 14.0 23.0 42.0 39.0 13.0 18.0 28.0 39.0 27.0 41.0 16.0 1.0 40.0 10.0 85.0 7.0 22.0 57.0 24.0 12.0 57.0 22.0 44.0 40.0 30.0 14.0 48.0 83.0 48.0 15.0 68.0 91.0 9.0 34.0 7.0 41.0 20.0 30.0 27.0 42.0 13.0 18.0 87.0 13.0 68.0 45.0 10.0 24.0 0.0 46.0 15.0 40.0 24.0 19.0 27.0 27.0 14.0 14.0 27.0 53.0 55.0 22.0 27.0 80.0 17.0 7.4 17.0 5.0 0.0 7.0 54.0 15.0 16.0 4.0 8.0 11.0 110.0 30.0 84.0 19.0 41.0 55.0 20.0 85.0 53.7 12.

0 17.0 16.0 13.0 80.0 47.0 25.0 54.0 13.0 7.0 68.IRS 99 24.0 17.0 63.0 38.0 24.0 54.0 43.0 35.0 18.0 494.0 14.0 20.0 23.0 63.0 33.0 33.0 681.0 31.0 18.0 47.Kerala All Rural Urban Tamil Nadu All Rural Urban All India All Rural Urban Source.0 35.0 187.0 46.0 62.0 9.0 18.0 81.0 60.0 17.0 49.0 76.0 32.0 65.0 International School Of Business & Media 106 .0 36.0 5.0 51.0 78.0 6.0 31.0 41.0 35.0 68.0 35.0 48.

International School Of Business & Media 107 .

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