Rural Marketing

PROJECT REPORT ON "RURAL MARKETING" BY AARON FERNANDES T.Y. B.M.S. SEMESTER V SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICS MUMBAI

PROJECT GUIDE PROF. VAISHALI CHAUDHARY

UNIVERSITY OF MUMBAI 2003-2004

Rural Marketing I. ACKNOWLEDGEMENTS

Many hands have toiled to ensure that this project finally sees the light of the day. It required continuous guidance, inspiration and support from many people and without their cooperation; this project would not have been complete. I take this opportunity to express my sincerest gratitude to my Project Guide, Ms. Vaishali Chaudhary, who lived up to her Designation and was a constant source of guiding light for me at each and every stage of the execution of this project. I would also like to thank the following people who through their experience have enlightened me on the practical aspects of this subject without whom the study would not have been carried out successfully. i. Prof. (Ms) Dr. Malini Johari ii. Prof. (Ms) S.G. Kelkar Andheri iii. Professors at Shri Chinai College: Prof. Sunil Fussey Prof. Vaishali Chaudhary Prof. Padma Iyer Prof. Gitanjali Thorvat Principal, Shri Chinai College, Andheri BMS Co-ordinator, Shri Chinai College,

Lastly I would like to thank my well-wishers and my colleagues who were a constant source of inspiration and in some cases also motivation as it ultimately has led to the completion of this project. Finally I would also like to give due credit to people, who knowingly or unknowingly have guided, supported and helped me in the completion of this project as without their support this project would have never seen daylight.

Rural Marketing
Chapt er No.

CONTENTS
RURAL MARKET ENVIRONMENT

Page No.

I II III IV V VI

Introduction The Features of Indian Rural Markets Profile of the Rural Consumer Understanding Rural Markets Changing Profile of Rural Marketing Factors Contributing to the Growth of Rural Marketing

15 56 68 8 11 12 12 12 14

1 14

2
I II III

RURAL MARKETING
What is Marketing? Rural Marketing Rural Market Strategies

15 20
15 15 15 15 16 20

3
I II III IV

PRODUCT STRATEGY
Introduction Rural Product Categories Product Item Decisions Branding Strategies

21 21 21 22 22 25 25 27

21 27

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Chapt er No.

CONTENTS PRICING STRATEGY

Introduction Consumer Categories Price in Marketing Mix for Rural Marketing Pricing Methods General Pricing in Rural Markets

Page No.

28 34
28 29 29 29 30 30 33 33 34 28

4
I II III IV V

5
I II III IV V

PROMOTION STRATEGY
Introduction Unique Traits on the Part of Salesmen for Rural Marketing Personal Selling & Opinion Leaders Managing Sales Force of Rural Market Selecting Proper Media Mix

35 41
35 35 35 37 37 37 37 39 39 41

6
I II

PHYSICAL DISTRIBUTION STRATEGY

Introduction Channels
4

42 50
42 42 42

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45 45 45 45 47

III IV

Inter-Net Marketing Channel Management in Rural Markets

Chapt er No.

CONTENTS
Possible Approaches for Effective Channel Management in the Rural Context

Page No.

47 50

7
I II III IV V

CASE STUDY ANALYSIS

The Making of CHIK E-choupal, the V21 SCM Model A Matter of PRESTIGE How Mahindra Maxx-ed It!!! The Mahindra Case Study The COLGATE Case Study

51 80
57 58 62 63 67 68 75 76 80 51

BIBLIOGRAPHY & WEBLIOGRAPHY

Rural Marketing

Chapter 1 RURAL MARKET ENVIRONMENT

I. Introduction:
The emergence of an active cash economy is bound to create is bound to create a strong rural demand and promote rural consumption. The traditional growth and dominance of urban industrial centres is undergoing rapid changes. A more equitable distribution in rural areas would also help in slowing down the rapidly increasing influx of people from rural to urban areas. There are two sections of rural population: A large portion has a low income and low consumption levels; The rest are rural rich.

The rural population forms a major portion of the Indian population as seen below:

Division of Population in India

Urban 26%

Rural Urban

Rural 74%

Rural Marketing
About 75% of the Indian people reside in rural areas. In other words, for every consumer in the urban area, there are three of them in the rural areas. Though the proportion of rural population is showing a slight decrease over the years, but in absolute numbers, the rural population is growing at a higher rate than the urban population. This large population will require a wide range of consumable and durable goods and services. At the same time the need of the rural areas does not automatically guarantee a market, unless it is backed by income and the resultant purchasing power. For a vast majority of the rural population, the main occupation is agriculture and allied activities. The graph below gives the distribution of rural population as per their occupation pattern.

Occupation Pattern of Rural India

2% 9% 10% 50%
Agricultural Labour Business Non-agricultural Labour Salary Earners Notgainfully employed

2%

Agriculture

27%

About half of the rural population own or lease land to cultivate it for their livelihood. Another 27% are dependent on these cultivators for their jobs as agricultural labourers. Thus, a total of 77% of rural population depend on land only for their living and land is their source of living.

Rural Marketing
There are others, constituting small proportions, who are engaged in business like petty shopkeepers or merchants and salary earners like teachers, health workers and village level officials. The implication of this is that the income generation in rural areas entirely depends on how the land is used, what crops are cultivated, how much is marketed, how much is consumed and the marketing arrangements for the production. If rainfall is adequate, weather conditions are favourable and appropriate technology is available, the rural areas prosper as it has happened in the states of Punjab, Haryana and Western Uttar Pradesh. So the disposable income in the hands of the rural people is very much conditioned by the status of agriculture and other allied activities. This also indicates that major part of income generated is a source of agriculture. 75% of income generation in rural areas is from agriculture and agriculture-related activities. One of the deterrents for marketers to exploit the rural market potential has been the vastness of the rural market in terms of areas covered and the location of the rural population. It is much easier to cater to the needs of the urban population because of their concentration, but it is very difficult in the case of rural population because of their widespread nature. The villages are also not uniform in size. Nearly 48% of the villages have a population of less than 500 persons or about 100 households, which is probably of no consequence to marketers. This may be acceptable since the proportion of population covered by these 48% of villages account for only 12% of the total population. Yet it should be borne in mind that the people of these villages also have land and cultivate and generate some income. Thus the location and size of population of villages throw a challenge to marketers. This phenomenon is not true for the whole country and there are wide variations among the different states. In states with high irrigation and

Rural Marketing
fertile lands, the concentration of population is more when compared to states with low irrigation facilities and lack of arable land.

Literacy Levels in India

ILLITERATE LITERATE

100 80 60 40 20 0 Rural Urban

Given the distribution of rural and urban population, it can be seen that the number of literates in rural areas are more than in urban areas. It is an interesting got note that has been a considerable increase in the number of literate persons in rural areas since the last two decades. This has its implications in communicating with the rural population. It appears to prove that communication should not prove to be such a big hurdle. Today, television has proved to be an effective medium for communication with the rural masses. The telecasting network in the country today covers about 93% of the population. Assuming that the entire urban population is covered by the television but the television, which is only 23%, then nearly 67% of the rural population will be covered by television. Thus, television reaches a larger segment of the rural population than any other form of mass media. Though radio is also very popular, people like to see to believe.

Rural Marketing
The above factors point that the potential for marketing of goods and services depends heavily on agriculture, since it is the main occupation in rural areas. The market for agricultural inputs fertilizers, pesticides, insecticides, tractors, irrigation equipment and seeds has been expanding over the years in rural areas as the Indian farming is fast becoming market-oriented. But the rural market has remained a dark area for those manufacturing and marketing consumables and consumer durables. To successfully exploit the potential offered by the rural market, there is a need to first understand the rural market in terms of the characteristics mentioned above. Only a few established companies HLL, Lipton, Brooke Bond, TOMCO, and P & G have been trapping the potential of the rural market for a long time.

I. The Features of Indian Rural Markets

1) Large and Scattered Market: - The rural market of India is large and scattered in the sense that it consists of over 63 crore consumers from 5, 70,000 villages spread throughout the country. 2) Major Income from Agriculture: - Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with agricultural prosperity. Roughly speaking, a location is defined as rural, if 75 per cent of the population is engaged in agriculture related activity. In India, close to 70 per cent of the population is agrarian and contributes to about one-third of Indias GNP. 3) Low Standard of Living: - The consumers in the village area do have a low standard of living because of low literacy, low per capita income, social backwardness, low savings, etc.

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4) Traditional Outlook: - The rural consumer values old customs and tradition. They do not prefer changes. 5) Diverse Socio-Economic Backwardness: - Rural consumers have diverse socio-economic backwardness. This is different in different parts of the country. Infrastructure Facilities: The Infrastructure Facilities like roads,

warehouses, communication system, and financial facilities are inadequate in rural areas. Hence physical distribution becomes costly due to inadequate Infrastructure Facilities.

II. Profile of the rural consumer:

1. Size of the Rural Consumer: The size of the rural consumer group can be understood from the following details provided in the table: Population of India Rural v/s Urban: 1971, 1981, 1991 and 2001 Population Total % 1971 Rural Population 43.90 cr 82 Urban Population 10.91 cr 20 Total Population 54.81 cr 100 Total 1981 50.20 cr 15.62 cr 65.82 cr % Total 1991 76.3 64.1 cr 23.7 20.3 cr 100 84.4 cr % Total 2001 76 74.2 cr 24 28.5 cr 100 102.7 cr % 72.3 27.8 100

Rural population forms a major portion of the Indian population as seen in the table. If we consider the state level picture, in several states like Uttar Pradesh, Rajasthan, Madhya Pradesh and Kerala, the rural population constitutes more than 80% of the total population. In states like Bihar and Orissa 90% of the population is in rural areas. 11

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2. Location Pattern of Rural Consumer: The urban population of India is concentrated in 3200 cities and towns and the rural population is scattered over 6, 38,365 villages. Statistics shows that out of the 6,38,3645 villages have populations of more than 5000 persons each. About 55% of the villages have population in the range of 500 people or less. The influence is clear, rural demand is scattered over a large area, unlike the urban demand, which is highly concentrated. 3. Literacy Level: It is estimated that there are 23% literate in rural India as compared with 365 of whole country. The rural literacy in the rural area is on an increase. Among the rural population Kerala tops with 77%. The literacy rate has its implication in communication with the rural population. It appears that communication should not prove a hurdle, provided appropriate means are chosen. 4. Rural Income: An analysis of the rural income pattern reveals that nearly 60% of the rural income is from agriculture. Rural prosperity and the discretionary income with rural consumers are directly tied up with agricultural prosperity. The pre-dominance of agriculture in the income pattern has one more significance-rural demand is more seasonal. 5. Rural Savings: The rural consumers have been drawn into the saving habit in a big way. The commercial banks and the co-operative have been marketing the 12

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saving habit in the rural areas for quite some years. Today nearly 70% of the rural households are saving a part of their income. The habit is particularly widespread among salary earners and selfemployed non-farmers. 6. Significant Aspects: It can be seen in general sense low purchasing power, low standard of living, low per capita income, low literacy level and overall low social and economic positions are the traits of the rural consumers. By and large, the rural consumers of India are a tradition bound community; religion, culture and even superstition strongly influence their consumption habits.

Rural Consumer Class 2001- 02 Very Rich 0.8

2006-07 1.6 NUMBER MILLIONS

OF

HOUSEHOLDS IN Consuming Class Climbers Aspirants Destitutes 26.8 54.7 25 20.9 41.3 63.3 14.7 12.2

III. Understanding Rural Markets:

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There has been always a vast difference between the two markets for a long time now. The difference is not only between urban and rural but also within the rural areas -- between regions, states and districts. There is a difference in the media reach, the education levels, in the culture and the type of products that the two markets are exposed to and this leads to a difference in the two markets.

The difference is in things like -- how do you celebrate New Year, how do you celebrate birthdays? Small things like these are celebrated in a completely different manner when the rural and the urban customers are concerned. There is a vast difference in the lifestyles of the people in the two regions. The kind of choices of brands that an urban customer enjoys is different from the choices available to the rural counterparts. The rural customer usually has 2 or 3 brands to choose from whereas the urban one has multiple choices. The difference is also in the way of thinking. The rural customer has a fairly simple thinking as compared to the urban counterpart. But with technology coming in, mass media reach and the literacy levels going up this divide is expected top reduce. The biggest thing is that there is lack of any research into the consumer behavior of the rural areas. There is considerable amount of data on the urban consumer regarding things like -- who is the influencer, who is the buyer, how do they go and buy, how much money do they spend on their purchases, etc. but on the rural front - the effort has started to happen now. So there is a need to understand the buyer.

There is no collective effort. Some people have spent time in the rural markets, carried out studies and have understood the rural behavior, but their works have not been passed or known to the rest of the industry. So, an in depth understanding of the consumer is one key area that the industry needs to work on. 14

Rural Marketing

There are vast differences in the rural areas as well. There are some 5, 60,000 villages and some 525 districts and each one is different from the other. The geographical spread is not as homogeneous as it is with the urban areas owing to vast cultural differences. So an in depth understanding of the areas is what is required.

The field of rural marketing has been witnessing a lot of action from both the fast moving consumer goods (FMCG) sector and consumer products manufacturers but, there has been little success in the manner in which rural research is carried out.

The limitation lies in the inadequate or unavailability of appropriate tools to evaluate the rural market behavior. The problem arises because of general lack of education resulting in low awareness about the products and hence the inability to respond to the queries of the researcher in these areas. Conventional research tools do not work in these markets, as these are difficult to comprehend for the illiterate and semi-literate rural people.

The typical research scales used are for ranking, rating and attitude measurement, limiting the research questions to simple yes/no kinds that do not bring the true essence of the research process. In an effort to look in to this issue two students from Management Development Institute, Gurgaon along with Pradeep Kashyap, director of Marketing And Research Team (MART) tried working out on some possible solutions to this problem. The limitation of conventional research tools during the research project prompted them to look at alternative sources to solve this problem and the results were favorable.

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Colors are very strong indicators, and forms, of expressing the feelings in the rural areas and there are tools devised with colors that represent and reflect the right answer to the researchers' queries. The selection of colors is done on the basis of the association of rural people with these colors. For instance, it has been observed that dark green represents a good crop or Haryali (as they call it) and hence represents prosperity and is considered to be the best. Light green represents not very good crop and stands next to dark green color.

Yellow represents dry sand or a dry field and hence comes next. Orange is the color of the setting sun and represents the end of the day and hence is placed after yellow and just before red, a color that represents danger to them. Such hypothesis has been working well, according to MART, and it has incorporated these tools in its research projects.

This is probably the beginning to a new form of research and analysis that might change the paradigm of rural marketing research and, who knows, one might just see this field blossom into a specialized research activity. If a simple ranking and rating is achieved, a lot can be explained about the rural preferences and behavior providing the marketers and manufacturers of goods specific to the rural markets get that meaningful insight to be able to help grow the markets in these areas.

IV. Changing Profile of Rural Marketing

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The position in the rural market was totally different some twenty years ago. At present there is a demand for certain articles like T. V., fans, radio, engine oil, readymade garments, detergents, medicines, etc. New product like toiletries, baby care products and consumer durables are now getting good support in the rural market. Parle Agro is marketing 80% of its sale in the rural areas. Batliboi and Co. Ltd. is a leading marketer in agricultural implements. Hindustan Lever sells its products like soaps, shampoos, face cream, etc. in all rural markets on a large scale. Kirloskar and Crompton are leading rural marketers in diesel engines and agricultural machinery. In the service sector the Central Bank and Canara Bank are the largest banks in rural India. More and more manufacturers are turning towards rural markets because the urban are getting saturated. The Indian rural markets have turned out to be gold mine for the marketers in the nineties.

V. Factors contributing to the growth of rural marketing:

1. New Employment Opportunities: The income from new employment and rural development efforts launched in the rural areas has increased the purchasing power among the rural people. Self employment policy with the assistance from the bank has become a great success in the rural areas. 2. Green Revolution: A technological break through has taken place in Indian agriculture. Rural India derived considerable benefit from green 17

Rural Marketing
revolution. Today, rural India generates 185 million tones of food grains per year and substantial output of various other agricultural products. 3. Expectation Revolution among Rural Masses: More than the green revolution, the revolution of rising expectation of the rural people influenced the marketing environment of rural India. It brought about a powerful change in the environmental dynamics. It enlarged the desires as well as the awareness of the rural people. 4. Favorable Government Policies: As a part of the process of planned economic development, the government has been making concerted efforts towards rural development. The massive investment in the rural India has generated new employment, new income and new purchasing power. In the recent years as a part of new farm policy, high support prices are offered for farm products. Various measures like tax exemption in backward areas, subsidy, concessions, incentives, assistances, literacy drive in rural areas has brought rapid growth of rural markets. 5. Literacy Growth: The literacy rate is on the increase in the rural areas. This brings about a social and cultural change in the buying behaviour of the rural consumer. They are exposed to mass media which create new demand for goods and services. 6. Growth in Income: The rise in the income resulting from the new farming strategy is adding meaning and substance to the growing aspirations of the rural people. Remittances from Indians working abroad have also made a sizeable contribution to the growing rural income and purchasing power. 7. Attraction for Higher Standard of Living : The rural consumers have been motivated to change their consumptions habits enjoy a higher

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standard of living by the growing awareness about better living and easy availability of information about the goods. 8. Marketing Efforts: Firms like Bajaj, HLL, etc., have started penetrating the rural market realizing the rising expectations and the demand revolution in the rural India.

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Chapter 2 Rural Marketing

I. What is Marketing?
The American Marketing Association defines marketing as those activities which direct the flow of goods and services from production to consumption. Marketing is also defined as the set of human activities directed at facilitating and consummating exchanges. In essence, marketing covers all those activities involved in providing customer satisfaction, and making a profit for the manufacturer who makes use of available resources to the maximum. Marketing starts with the customer -- what he wants to have; and ends with the customer giving him what he wants.

II. Rural Marketing

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

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Rural Marketing III. Rural Market Strategies

(DEVELOPMENT STRATEGIES FOR RURAL MARKETING IN INDIA) An appropriate segmentation of highly heterogeneous rural market and identification of the needs and wants of different segments will form the very basis for rural marketing strategies. The strategies of the 4 Ps of the marketing mix would be an ideal one for the rural market.

a. PRODUCT STRATEGIES: The following are the product strategies for the rural market and rural consumers: 1. Small Unit Packing: This method stands a good chance of acceptance in rural markets. The advantage is that the price is low and is easily affordable by the rural consumer. Products like shampoos, pickles, biscuits, etc have tested this method. 2. New Product Designs: The manufacturer and the marketing men can think in terms of new product designs, keeping in view the rural life style. E.g. P.V.C. shoes and chappals can be considered suited ideally for rural consumers due to adverse working conditions. The price of P.V.C. items is also low and affordable. 3. Sturdy Products: Sturdiness of the product either in terms of weight or appearance is an important criterion for rural consumers. For the rural consumers, heavier weight means that the product is more durable, e.g. the experience of torch light dry battery cell manufacturers supports this because rural consumers preferred dry battery cells which are heavier than the lighter ones. 21

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4. Utility Oriented Products: Rural consumers are more concerned with the utility of the product and its appearance. Phillips India Ltd. developed and introduced BAHADUR (a low cost medium wave receiver) during the early seventies. Initially the sales were good but declined subsequently, on investigation it was found that the rural consumers chose to purchase radios for entertainment purposes, not only for news & information. 5. Brand Name: The rural consumers do give their own brand name on the name of an item. A brand name or logo is very important for a rural consumer for identification purposes.

b. PRICING STRATEGIES: Pricing strategies are linked to product strategies. The product packaging and presentation also keeps the price low to suit the rural consumer. 1. Low Cost/Cheap Products: This is a common strategy widely adopted by manufacturing and marketing concerns wherein the price can be kept low by low unit packing like paisa pack of tea, shampoo sachets, etc. 2. Refill Packs/Reusable Packaging: Health drinks available in the urban areas. The containers can be put to multipurpose uses, which can have a significant impact in the rural market. E.g. tea, coffee & many other consumer goods re available in refill or reusable packages. 3. Application of Value Engineering: In the food industry, Soya protein is being used instead of milk protein. The nutrition content of both being 22

Rural Marketing
the same, Milk protein is expensive whereas Soya protein is cheaper. The basic aim being to reduce the value of the product so it becomes affordable to a larger segment, thus expanding its market. c. PHYSICAL DISTRIBUTION STRATEGIES: While it is necessary to formulate specific strategies for distribution in rural areas, the characteristics of the product - whether it is consumable or durable, the life of the product and other factors have to be kept in mind. 1. Coverage of Villages with 2000 & Above Population : Coverage of villages with up to 2000 and above population could be the break even point for a distribution setup. By doing so the percentage of villages covered comes to only 10% of all the villages but the rural population covered will be substantial. 2. Use of Co-operative Societies: Co-operatives have an arrangement for centralized procurement and distribution through their respective state level federation. Such state level federations can be motivated to procure & distribute consumable items and low value items to the members of the society for selling to the rural consumers. 3. Utilization of Public Distributor System: The PDS in the country is fairly well organized, whose effective utilization should be explored by the manufacturing and marketing men. Its purpose is to make available essential commodities like food grains, sugar, kerosene etc. to the consumers at a reasonable price. Fair price shops are run by the state civil supplies corporation, co-operatives etc. Who have an arrangement for centralized for procurement and distribution?

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4. Utilisation of Multipurpose Distribution Centres by Petroleum/Oil Companies: Petroleum/oil companies have evolved a concept of multipurpose distribution centres in rural areas. These outlets can be profitably used for selling consumable & durable items. In addition to petrol, diesel etc. fertilizers, seeds, etc. can be stocked at these outlets. 5. Distribution upto Feeder Markets/Mandi Towns: Keeping in view the hierarchy of markets for the rural consumers, the feeder markets and the mandi towns offer excellent scope for distribution. From the feeder towns and the mandi towns the stockist or the wholesaler can arrange for distribution to the village shops in the interior places. 6. Shandies/Haats/Jathras/Melas: These are the places where the consumers congregate as a rule. Shandies/Haats are held on a particular day every week, Jathras and Melas are held once or twice a year for longer durations, normally timed with religious festivals. 7. Agricultural Input Dealers: Fertilizers should be made available to the farmers within the range of about four to five km. from their residence, as per the essential commodities Act. There are about 2 lakh fertilizer dealers in the country both in co-operative & private sector. E.g. Varana-Nagar in Maharashtra, where sugar & milk co-operatives have totally changed the life styles of people. The supermarket in VaranaNagar caters to exclusively to rural consumers.

d. PROMOTION STRATEGIES: The promotion measure should be cost effective. Word of mouth is an important message carrier in the rural areas and opinion leader play a

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significant role in influencing the prospective rural consumers about accepting or rejecting a product or a brand. Other attributes are explained as under: 1. Mass Media: Mass media is a powerful medium of communication. The mass media generally used are: a. Television b. Cinema c. Radio d. Print Media: handbills, booklets, posters, banners, etc. 2. Personal Selling and Opinion Leaders: In personal selling it is required that the potential users are identified and awareness is created among them. A highly motivated sales person can achieve this. Word of Mouth holds a lot of validity in the rural areas. This is the reason why opinion leaders are thriving among rural consumers. 3. Special Campaigns: These should be undertaken during harvest & marketing seasons in rural areas. E.g. Tractors owners meet (tonee) conducted by MRF.

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Chapter 3 Product Strategy

I. Introduction
It has been observed that the rural consumer outlook is very different from the urban consumer and what works out for the urban consumer may not work for the rural consumer. Most of the companies treat rural markets as a dumping ground for lower end products designed for an urban audience. It could tremendously benefit the companies if they use a little bit of their technical expertise to create specific products for the rural economy. The product must be affordable and satisfy rural needs. It also depends on the consumers attitude towards the product and the cost-benefit analysis done by him before buying the product. A rural consumer is largely governed by the social values of rural society. E.g. If a rural consumer has the potential to buy an expensive premium consumer durables like VCRs, washing machines, refrigerators etc. he thinks first of the social values of rural society.

II. Rural Product Categories

The NCAER has categorized the consumer goods into three categories. Category I- Products are of immediate use to the family. E.g.- bicycles, fans etc. Category II- Products are a combination of entertainment products and products that ease household work strain. E.g. - mixer grinder, cassette player etc.

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Category III- Here products are a combination of means to supplement income, easy household working, and source of entertainment. E.g. - washing machine, motorcycle, etc. I. Product Item Decisions: The product or service offered by the marketer has the ability to satisfy the needs & wants of the customer. Products are physical and tangible. E.g. footwear, motorcycle, etc. Services are intangible and people based. E.g. health care, etc. The main consideration in individual product/service offer is developing of product at three levels, Namely1. Core Product Development: Core product refers to the advantages that are specified by consumer needs. Core product developer has to focus on the needs of the consumer. Business is to be viewed as a customer satisfying process & not as a goods producing processing process. A product that provides the important form utility and ensures performance of the basic function is the core product. Products are transient, but the basic needs of the consumer group remain the same. For an e.g. the need for brushing teeth- old products were neem sticks, charcoal, etc. whereas now toothpaste, tooth powder is used, still the need for brushing the teeth remains the same.

2. Tangible Product Development: The product concept becomes visible and operational when the psychological needs are specified in physical terms. Every product has five characteristics: a. Quality b. Features c. Style/design 27

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d. Packaging e. Branding Quality: Success in the market depends on offering products to the market segments that will be profitable. Quality signifies the ability of the product to meet the following expectationsReliability, Economy, Durability, Capability, Efficiency

The product designers should interact with the marketers to know how the consumers evaluate the quality of products, since consumers develop their own norms, beliefs & notions about the quality of products.

Features: Features are extras to a product, which are of value to the buyers. They are improvements provided for more comfort and convenience. They are of two types i. Rational, problem solving ii. Emotional, fancy The consumer is willing to pay for the solutions to the problems he has in using the product. The features, which capture the attention of the buyer, are less functional and fancier in nature. Design and style: Design means the arrangements of parts, form, colour, etc. so as to bring out an artistic unit with functionality, aesthetics, convenience of 28

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operation, ease of service of service, repair & costs, etc. Good design adds to the product attractiveness and usefulness. The three components of personalities are structure, shape & style, which are acquired through design. Packaging: It is providing a container/wrapper for a product for the purpose of handling & protection. The three levels arei. Primary package- To hold the product, e.g. bottles. ii. Secondary package- To hold the primary package, e.g. cardboard boxes. iii. Shipping package- To carry the secondary package from one place to another e.g. corrugated boxes. All products need shipping package. HLL has made bubble pack shampoos. They are neither sachets nor bottles & works on the principle of capillary action. The rural markets were kept in mind & this type of package was developed keeping in mind the convenience of storage after use. Branding: Brand is the term, name, sign, symbol, design or a combination of them, which helps to identify the seller products & identify them from competitor products. Its primary purpose is creating an identity of the product. The brand names should be easily understood & recognized by the rural consumer. Unfamiliar & absurd brand names cause hesitation in the minds of the consumer. The rural brands are recognized through symbols, logos and colours. E.g. -Billi waali cell - Battery with the cat as a symbol- Eveready. 3. Augmented Product Development: The marketer should have a vision to look at the specific needs of the consumers and their related requirements. He needs a broader view to have the whole picture of consumption of the consumer. Augmentation requires fortifying the

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product strategy with extra force drawn from other Ps due to which the product offers make buying a pleasant and exciting experience.

II. Branding Strategies

Brand Name makes products familiar and evokes possessiveness. Branded goods comprise 65% of sales in the villages. The share of non-branded goods is shrinking dramatically. E.g. LG Electronics India gave the name Sampoorna to the customized T.V. developed for the rural market. The word (Sampoorna) is a part of Bengali, Hindi & Tamil language. The strategy worked very well and the company sold about as 114 crores worth T.V. Sets in the villages in a year. Strategy becomes effective when other elements (emotional) are in consonance with it. OTHER IMPORTANT STRATEGIES: i. CUSTOMER IMPORTANT STRATEGIES: a. Mass Product Strategies: The urban consumers are brand conscious whereas the rural consumers are price sensitive. They are more concerned about the functional benefits of the products and the value-for-money they pay. Hence, several companies have launched no frills economy products to attract rural consumers and low-end urban markets. E.g. Agni Tea launched by Tata. b. Premium Product Strategy: In case of some products rural consumers exhibit preferences similar to those of urban consumers. Premium brands are gaining wide acceptance in rural areas. E.g. some high profile brands that have gained popularity in the rural households are Fair & Lovely, Surf & Ariel detergents, Pantene Shampoo and LGs Golden Eye models.

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ii. INNOVATION STRATEGIES: a. Rural Urban Common: There are many products that are common to rural & urban markets. They include cosmetics, toiletries, washing powder, communication services etc. e.g. Videocon is pushing walkman into markets with a population under 50,000. Electrolux is test marketing urban models of refrigerators and washing machines in rural Punjab. b. Special for Rural: There are some companies who choose to develop products especially to meet rural market needs while others experiment with packaging. E.g. Green Cards- Andhra Bank & Allahabad Bank has issued credit cards known as Green Cards to farmers. COMPANY PRODUCTS Bajaj Electricals Home Appliances Colgate Palmolive Dental Cream Dabur India Chawanprash, Digestive Lozenges Electrolux Refrigerators, Washing Machines Eveready India Batteries Godrej Soaps Toilet Soaps Hero Cycles Bicycles Hero Honda Motors Motorbikes, Mopeds HLL Personal Products and Detergents J K Dairy Dairy Whitener Koshika Telecom Cellular Services LG Colour Televisions Mahaan Foods Pickles, Ghee, Vadis and Papads Maharaja Home Appliances Marico Hair Oil Nippo Batteries Batteries Philips India Consumer Durables Titan Industries Watches United Phosphorus Pesticides Videocon Consumer Durables iii. QUALITY STRATEGIES:

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Many companies utilize the quality aspect to win the customer. In the organized sector competition requires quality improvements. a. Quality Improvement Strategy: Sundaram Clayton introduced TVS-50 XL in 1980. It was powered by 48 CC engine and a load capacity of 120 kg. in 1983 the company researched the uses of vehicle. It was being put to various uses by the farmers. The company decided to give TVS-50 XL a 53.3 CC engine, which was at that tie the highest powered in its class. b. Spurious Goods Strategy: Spurious products, generally marketed by the unorganized, low-end entrepreneurs somehow, make their way into the market and eat away the large chunk of corporate marketers profit. The imitation will have resemblances that dope the consumer. E.g. - Lifebuoy - Loveboy Tata - Teta

Chapter 4 Pricing Strategy

32

Rural Marketing I. Introduction:

One of the important constituent of rural marketing mix is pricing. In the rural market value-for-money brands give the fastest sales for the FMCG sector. FMCG majors are trying to increase sales through low unit perks and VFM products. In segments like bathing soaps, washing soaps, and detergents, toothpastes, etc. the consumers are increasingly opting for more VFM launcher. VFM brands like Nirmas Soap, Britannias Tiger are doing better than the other premier brands from their own companies. According to ORG many estimates, in the year 2001, Breeze recorded a growth of 12 % while Lux a premium brand recorded a negative growth of 12.3%. Britannias Tiger grew by 12.6% in 2001. In a slowdown mass brands register better growth than premium brands. In the home appliances category, Videocon was one of the first companies to enter the rural markets in home appliances. Phillips who was the market leader for radio sets (cost Rs. 250) were attacked by Videocon by launching a radio set for Rs. 180. They grab a major chunk of the market, at present they are marketing walky range of personal cassette players at low prices to rural customers. Only charging a lower price is not enough, they have to offer value-for-money. Pricing strategy requires a holistic approach. Pricing is a part of the marketing strategy. It should be designed in such a way that it contributes to the objectives of the marketers and needs and wants of the customer groups.

II. Consumer Categories

Rural customers like urban ones can be divided into three categories:

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1. Quality Conscious Customers: who are very rich and whose annual income is over 1.5 lakhs. 2. Value Conscious Customers: who is the consuming class and whose annual income is between Rs. 45,000 Rs. 1, 50,000. 3. Price Conscious Customers: who are climbers, aspirants and destitute. The annual income of climbers is Rs. 22,000 Rs. 45,000. The annual income of aspirants is Rs. 16,000 Rs. 22,000 and the destitute whose annual income is below Rs. 16,000.

III. Price in Marketing Mix for Rural Marketing

1. PRICING FOR QUALITY CONSCIOUS CUSTOMERS: These customers are basically concerned with functional benefits and value-for-money. If a marketer wants to develop an effective pricing strategy for these customers he must know whether the price quality relationship holds good for the market. Six propositions emerge which are applicable to rural market as well as urban market. a. Quality Differences: Larger the perceived difference quality of brands in a category, the price quality relationship is stronger. E.g. home appliances. b. Quality Uncertainty: Greater the uncertainty involved in judging the quality of product, stronger the price quality relationship. c. Price Consciousness: Higher the price consciousness of the consumer and more price variations within a particular category 34

Rural Marketing
of product, the price quality relationship is stronger. Therefore companies create a hierarchy of products establishing price quality relationship. d. Need Compulsion: Certain products that fulfill certain needs will have a strong price quality relationship. For e.g. a reputed doctor or lawyer would charge premium rates for their services because their services are viewed essential. e. Place Availability: Price quality relationship is stronger for the brands sold to the premium market within the same product category. f. Social Consciousness: Shoes and shirts that are publicly consumed products have a strong price quality relationship than privately consumed products like tooth powder and underwear.

IV. Pricing Methods

Marketer can employ the following methods when price-quality relationships are associated. Discriminatory Pricing: This is employed to charge different customer groups differently projecting differences of quality of offer. The differences discriminatory pricing are i. Product Form Pricing: Different versions of the product are priced differently. E.g. Chota Pepsi Rs. 5 ii. Location Pricing: Same product is priced differently at different locations. E.g. Residential places in city are costly.

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iii. Time Pricing: Prices varies by days or seasons. E.g. During summer, hill resorts charge higher rates. Perceived Value Pricing: In order to enhance the customers perceived value companies add features to their products. For each feature which enhances attractiveness, reliability, durability convenience, etc., the marketer charges an extra price. Psychological Pricing: Psychological pricing may be in the form of reference pricing or image pricing. In reference pricing the marketers position and sell products at higher prices by endorsement of products by celebrities or placing products with classy products. Another form of psychological pricing is image pricing. This pricing is effective in case of ego sensitive products like cameras, sunglasses, cars, etc. Since price acts as a signal of quality people prefer to buy expensive ones. 2. PRICING FOR VALUE CONSCIOUS CUSTOMERS: Some customers are willing to pay for the product of their choice a long as they get Value for Money. When consumers are value-conscious, price hiking need not lower sales. E.g. - Eveready Industries increased the price of the white 1.5 volt cells it sold in rural India by 6% from Rs. 7.50 to Rs. 8. But still the sales did not decline. Rural consumers cannot afford to buy large volumes, but they prefer t buy quality products. With the introduction of small unit packaging, there is increased penetration of shampoos, soaps etc.

a) Skimming Pricing: In this type of pricing companies as the time of introduction favor setting high prices to skim the cream off or low prices to sweep the entire ground. Skimming price is preferred when high price is aimed to communicate the 36

Rural Marketing
image of a superior. E.g. - P&G introduced Ariel and Tide detergents at high prices. Recently it cut the prices of most of its laundry and hair wash brands. b) Penetration Pricing: Penetration is chosen when market is highly price sensitive, and a low price stimulates market growth. Products like Maggi Noodles, Rin detergent penetrated the market with lower prices in the initial stages and later went up the price ladder. c) Value Pricing: It involves setting prices reasonably at a lower level compared to competitors through careful streamlining of operations to become a lowcost firm without sacrificing quality. It involves human development, quality management, supply chain management, etc. In India many companies are adopting this approach as the markets are saturated and competition has intensified. d) Psychological Pricing: Some smart sellers quote their prices that end in an odd number e.g. Rs. 99.95 paise. It conveys two notions. i. There is a discount or bargain ii. It belongs to a lower price range. Bata Shoe Company has been using this price tactics since long. 3. PRICING FOR PRICE CONSCIOUS CUSTOMERS: These consumers belong to the destitute, aspirants & climber groups. They can afford less. The climbers watch for promotional offers to whet appetite for quality products.

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Since branded products are costlier than unbranded and ungraded local ones, also not available in small quantities, the rural consumers purchase local brands or fake brands which are relatively cheap. Many companies have revolutionized the buying in rural areas by introducing sachets. Promotional pricing measures include price-offs, discounts or rebates, credit facilities and no interest or low interest long term finance schemes. Another way of inducing them to buy can be the low-priced minipack strategy. E.g. - HLL sells a mini pack of shampoo, toothpaste, face cream and talcum powder for Rs.15, if sold separately it would cost Rs. 27.

V. General Pricing in Rural Markets

a) Low Cost/Cheap Products: The price can be kept low by low unit packing like paisa packs of shampoo sachets etc. This is a very common strategy which is being widely adopted by many marketers. b) Refills/Reusable Packaging: The refill packs benefits the consumers in terms of price. Such measures can have significant impact too, since the price can be reduced to the advantage of rural consumers. In addition the packaging material used should be reusable in rural areas. Most fertilizers companies pack fertilizers in LDPE or HDPE sacks which can be washed & reused, which are in demand by the farmers. c) Application of Value Engineering: The application of value engineering evolves cheaper products by substituting costly raw material with a cheaper one. We now find costly materials being replaced by cheaper reinforced plastic. This technique does not sacrifice the technical efficiency of a product but lowers the product price.

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Chapter 5 Promotion Strategy

I. Introduction

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The rural market has a huge buying potential due to the increase in the income and higher prices of the agricultural products. It was neglected or ignored by the marketers due to varied reasons but with the growing awareness in the Information technology has reduced the urban rural divide and now the consumers in the rural areas are aware of the world class products. The increase in the network of roads, the literacy drive and many other things has brought about a change in the economy of the country. Rural India is now bound with opportunities waiting to be exploited by the potential marketers. Rural marketers should place greater emphasis on developing sales forces to exploit the rural market. Various novel ideas of sales promotions have been tried out during the harvest time since that is the time when the rural household becomes cash rich.

II. Unique Traits on the Part of the Salesman for Rural

Marketing:
Personal Selling is an essential element in rural marketing. Rural Marketing involves more intensive personal selling efforts than Urban Marketing. The basic traits of Personal Selling are enthusiasm, communication skill and knowledge of selling techniques which are required in equal measures by both urban & rural salesmen. In order to match the peculiar rural market conditions, the rural salesman require certain additional traits & capabilities listed below1. Knowledge of Local Language: This is the basic requirement for a rural salesman that he should be well versed with the local language. The rural salesman needs a strong background of the local language. 2. Willingness to Get Located in Rural Areas: It is common knowledge that the rural areas lack modern amenities compared to urban areas. Because of this factor salesmen are generally elected to work in rural 40

Rural Marketing
centres. It is only those who are genuinely happy in living and working in the villages can become good rural salesman. 3. Cultural Congruence: The salesman must have proper acquaintance with the cultural pattern of rural in the given rural territory. Since the cultural patterns of the rural community differ from one another, a cultural background i.e. in consolance with the culture of given rural community is a specific requisite of success for the rural salesman. 4. Attitude Factor: The rural salesman must have a great deal of patience and perseverance as their customer is a traditional person. It will not be possible for the rural salesman to clinch the sales quickly. He may have to spend a lot of time with the customer and also make several visits to gain a several response from him. 5. Capacity to Handle a Large Number of Product Lines: The rural salesmen are often required to handle a much large number of product lines as compared to their urban counterparts. The rural salesman usually does not generate economic value of business if they handle few products. They are compelled to handle a large variety of items and basically become a jack of all trades. 6. Greater Creativity: Often the product concerned may be very new in the rural context. The rural salesman must endeavor to introduce them in the rural market through creative selling, using consumption pioneers and opinion leaders.

III. Personal Selling & Opinion Leaders

Rural con sumers do not decide on the basis of information provided by companies or advertisement. They prefer consulting others who have 41

Rural Marketing
purchased the products previously. These actual experiences of the other actual users significantly influence the buying decision in rural areas. In Personal Selling, it is required that the potential users are identified and awareness is created among them about the product, its features & benefits. This can be achieved through the efforts of a highly motivated salesperson, supplemented by the influence of opinion leaders in villages. Opinion leaders & Word of Mouth are thriving among rural consumers. Opinion leaders in rural can be defined as a person who is considered knowledgeable and is consulted by others, and his advice is normally followed. He could be a politician, big landlord, teacher; progressive farmer etc. There could be different opinion leaders for different purposes. Word of Mouth information holds a lot of validity in the rural areas, since rural consumers place more emphasis on the experience of the other who uses different brands of the product.

IV. Managing Sales Force of Rural Market:

The task of sales force management carries certain added dimensions in the rural context. In selecting the salesman, in giving the orientation, in motivating them and in developing them the sales manager has to adapt to the unique requirement of rural selling. The major concern in sales function is to constantly improve profitability of the territory. The salesperson has to undertake the following activities in the field. 1. Increase Sales: The sales person has to identify his own and customers potential, call on more customers consisting of farmers, dealers etc. Training and motivating the distributors, dealers etc. help improve trade sales. Organising campaigns with special emphasis on farmers contacts and demonstration will be important in order to increase demand for the product. The services of NGOs can be used 42

Rural Marketing
e. g. Colgate Palmolive used NGOs to promote its toothpaste Colgate Supershakti. 2. Improve Companys Image: A sales person is the link between the customers and the company. He is the companys ambassador in the market. Transactions are based on trust in the salesperson. It is therefore important that he creates a good impression of the company in the eyes of the customers. 3. Develop Future Market: The salesperson will have to keep in touch with the latest advancements in the market. He has to identify & develop distribution system and undertaking demand generation activities are necessary for the developing the market for the future. 4. Effective use of Resources: Salesperson should not resort to dumping of stocks in order to achieve sales targets. He should ensure that stocking of goods is proportional to expected sales; it will help him in collecting dues as per the credit policy of the company.

5. Self

Improvement

and

Development:

The

salesman

need

comprehensive on the job training in selected village markets. They need to be educated about the rural marketing environment in addition to be trained in salesmanship, and in selling techniques.

MAIN TASKS INVOLVED IN SALES FORCE MANAGEMENT:

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1. Determination of personal selling objectives 2. Formulation of sales policies 3. Structuring the sales force. 4. Decide sales force size. 5. Fixing targets and quotas. 6. Selection, recruitment and training. 7. Managing sales force compensation, motivation and supervision. 8. Sales communication and reporting. 9. Sales co-ordination and control.

V. Selecting Proper Media Mix:

The firm has to choose a combination of formal & non-formal media in the rural context. The possibilities are enlisted below: A) The Formal Organised Media: 1. T.V.: It has the potential to become the primary medium for rural communication, 77% of the villages in India receive T. V. transmission & 27% of all rural people actually watch T. V. 2. Cinema: 29% of rural people watch cinema as a part of their regular lifestyle. Most villages have cinema house. Advertisements, documentaries combining knowledge and entertainment can be employed for rural communication. 3. Radio: It is a well-established medium in rural areas. Expansions in broadcasting facilities have taken place over the years.

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4. POPs: The POPs point of purchase promotion tools area is quite useful in rural markets. They should be designed to suit rural requirements, using symbols & bright colours. 5. Outdoor: Many companies are using Hoardings, Wall Paintings, etc., as part of their outdoor medium. B) Informal/Rural Specific Media: 1. Music Records, Harikatha, and Puppet Shows: Music

cassettes/records are a very effective, inexpensive and appealing medium, which can be used in cinema houses etc. where people gather regularly. The traditional art forms such as puppet shows, harikathas render themselves for communication in rural society and can be used at melas. 2. Group Meeting, Demonstration, and House-to-House Campaigns: The promotion staff of the firm can effectively carry the product messages and demonstrations to the target audience at the group meetings. Promotion squads make house-to-house visits. They carry along product samples and promotion literature along with them. 3. Audio Visual Publicity Vans (AV Vans): The AV unit is very useful for rural communication. The firm can exhibit films, presentations, slide shows etc. The van can be used for sales campaigns in addition to promotions campaigns. They are quite popular with rural marketing firms. 4. Syndicated AV Vans: In recent years, rural publicity vans have become a purchasable service. Firms which afford to operate publicity

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vans of their own can utilize the syndicated AV vans service offered by independent agencies. 5. Interpersonal Media: They have a special merit since they facilitate two-way interactions. They also bring market feedback to the firm. Advantages of interpersonal media are they are segment specific, market specific and score high when it comes to participation and involvement of the audience.

Chapter 6 Physical Distribution Strategy

I. Introduction

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Product Distribution and retailing has developed into highly specialized activities in the urban market. However the distribution channel has remained in the background in the rural areas. Now the distribution has to be reworked from scratch with full rural orientation and awareness of existing rural channels of distribution. Many companies foresee the rural markets as a great opportunity for expanding their sales but they find distribution as a major obstacle. Unfortunately it is almost not possible to transplant strategies which work successfully in urban markets into rural markets. There are problem to reach the rural customers.

II. Channels:
1. Company depot which may be located at a particular state. 2. Redistribution stockist, C&F agents, semi-wholesaler and retailers who may be located at the district headquarters. 3. Semi wholesalers and retailers who may be located at Tehsil headquarters, mofussil towns or industrial townships. 4. Itinerant traders, vans, petrol pumps, semi-wholesalers retailers and cooperative societies, which may be at large villages or Haats. 5. Retailers, vans, sales people, NGOs and government agencies at the village level.

PRODUCT MOVEMENT ROUTES THROUGH INTERIOR

1 -------2 -------3 -----------------5 4

COMPANY

SPURIOUS BRAND MFG. FACILITY

REDISTRIBUTION STOCKIST, SEMI WHOLESALERS AND RETAILERS AT DISTRICT HEADQUARTERS

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RETAILERS IN SMALLER VILLAGES

Rural Marketing

SEMI-WHOLESALERS AND RETAILERS AT TEHSIL HEADQUARTERS OTHER MOFUSSIL TOWNS AND INDUSTRIAL TOWNSHIPS

INTINERANT TRADERS AT HAAT MARKET

SEMI-WHOLESALERS AND RETAILERS IN LARGE VILLAGES (POPULATION OF AT LEAST 5000 PERSONS)

Source: Pawan Bhandari and Rajan Iyer, A & M, January, January 15, p. 25. Most of the companies have direct representation in the form of redistribution stockist at level II and III. Level III in a district would comprise 7-10 towns. High outlet density and large customer population centres enables economies in developing these markets through working of sales-cum distribution van. In order to achieve a winning edge in rural sales the object is to maximize directed flow and control the of stocks at level III or V. Approaching level IV requires prior selection of haat markets and villages located in contiguous clusters. Various schedules with level III stockist at nodal points could be operated towards self-sustaining distribution rates for level IV markets. The next level is

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V. The villages are too small to allow economies in van distribution. But these villages form the bulk of the consumption in the rural areas. Example: HLL is focusing a mobile sub-stockist in hinterland towns having a population less than 20,000 to supply its toothpaste brands Close-up and Pepsodent to consumer in the surrounding villages. The sub-stockist will be linked to a super stockist who will be present in every district. The Old Setup: The Old Setup for distribution in the rural markets includes 1. Wholesalers 2. Retailers 3. Mobile Vans 4. Weekly Haats, Bazaars and Shandies and 5. Melas and fairs

THE NEW PLAYERS: 1. Unofficial Channels: Hero Honda has reported the emergence of an unofficial channel of distribution. Local real estate agents, village mechanics; and shopkeepers who sell non durables. These people take motorcycles from official dealers in twos and threes and display them outside their premises for sale. This paper work is left to the dealer to complete. 2. Co-operative Society: Co-operatives occupy an important place in Indias rural economy. The rural scan reports say that there are 4398 primary marketing societies and 2933 Large Agricultural Multipurpose Primary Marketing Services. Generally a co-operative exists for 2-3 villages. Farmers service co-operatives is a mini super market.

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The others are: 1. Public Distribution System. 2. Petrol Bunks. 3. Agricultural Input Dealers. 4. NGOs 5. Barefoot Salesman. 6. Syndicated Distribution.

III. Inter-Net Marketing:

In the Rural Setting: Efforts are on the way, in rural India, to bring convergence between what the poor need and what digital technology makes possible. The Net is becoming the livelihood for hundreds of rural youth, who are offering a combination of specialized Net services; interface which administration, organizations and customers.

IV. Channel Management in Rural Markets:

The second major task in rural marketing is organizing an effective distribution channel. This task too has many problems: 1. Multiple tiers, Higher Cost and Administration Problems : The distribution chain in the rural context requires a large number of tiers as compared to the urban context. In the rural context, at the minimum level the chain needs the village shopkeeper, the wholesaler, etc., whereas at the top level involves the manufacturers own warehouses, office operations at selected centers. Such multiple tiers make channel management a major problem area. 2. Scope for Manufacturers own Outlets Limited; Greater

Dependence on Dealers: Scope for manufacturers direct outlets such as depots or showrooms is limited in rural markets unlike in the urban context since it is expensive and unmanageable. 50

Rural Marketing

3. Non-Availability of Dealers: There is also a problem of availability of dealers. Suitable dealers are limited even if the firm is willing to start from scratch and try out rank newcomers; the choice of candidates is limited. 4. Poor Visibility of Retail Outlets: Sales outlets suffer from poor viability in the rural market. Scattered nature of market and the multiplicity of tiers in the chain use up the additional funds the manufacturer is prepared to part with. Moreover the business volume is not adequate enough to sustain the profitability of all groups and the retail tier is the worst sufferer. 5. Inadequate Bank Facilities: Due to lack of bank and credit facilities distribution in rural markets is handicapped. Rural outlets need banking support for 3 important purposes; a. In facilitating remittances to principals and to get fats replenishment of stocks. b. In receiving supplies through bank (retiring documents with the bank). c. To facilitate securing credit from banks. It is estimated that there is only one bank branch for every 50 villages. 6. Inadequate Credit Facilities from Banks: Another constraint is the inadequacy of institutional credit. Rural outlets are unable to carry adequate stocks due to lack of credit facilities. The vicious circle of lack of credit facilities leading to inadequate stocking and loss of business, finally result in poor viability of outlets, getting perpetuated. 51

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V. Possible Approaches for Effective Channel Management in the Rural Context:

The Existing Market Structure: Indian rural market is composed of 22,000 primary rural markets and 20 lakh retail sales outlets of which nearly 1 lakh are fair price shops of Public Distribution Systems (PDS) as estimated. One retail shop services 60 to 70 families in rural areas. The structure also involves stock points belonging to the manufacturer or area distributor to service these retail outlets at village levels in feeder towns. Available Channel Choices: The channel types that is available in the rural market area. The Private Shops b. The Co-operative Societies c. Fair Price Shops of PDS d. The Village Shandy or Weekly Market From the above, the co-operative societies are mainly concerned with the distribution of agricultural inputs. Fair price shops are concerned with the distribution of essential commodities consumed by the common man. The Village Shandy is a widely used channel of rural market. But its role in marketing branded products is limited. The Private Village Shops: Private shops are the main channels in the rural market for a large variety of products. They are also the cheapest and the most convenient channel to align with. The village shopkeeper is forced to deal in a large number of products in order to make his operations viable, which means a large inventory. The 52

Rural Marketing
larger lead-time for replenishments from urban based production point enlarges the inventory holding further. And as his sales are not uniform throughout the year, he has to carry inventory over a longer period of time, leading to the blocking up of his capital. Organizing ones channel out of these private shops, however, requires assiduous efforts on the part of the firm. The choices are usually confined toa. Existing traditional private shops. b. Moneylenders willing to branch off to trade. c. Land owners willing to branch off to trade. d. Educated unemployed persons. The firm has to select personnel from the above group depending on the product line and other relevant factors and then train and develop them into competent dealers. Satellite Distribution: A concept known as Satellite Distribution can be tried in developing a distribution channel in the rural market. Under this system, the firm appoints stockist in feeder towns, who take care of financing, warehousing the goods and sub-distribution of goods. The firm also appoints a number of retailers in and around the feeder towns and attaches them to the stockist. The goods are supplied to the stockist either in cash or credit or on consignment basis. The sales volume of the retailers will vary depending on the potential of the area covered and the capacity on the dealer concerned. Over a period of time, some retailers grow in terms of business turnover. If such retail points also happen to be transportation centers within the feeder town area, the firm elevates them as a stockist. The area of operation of the original 53

Rural Marketing
stockist shrinks in this process, but care has to be taken to see that his volume of business does not shrink. This is achieved, in practice, on account of growth in demand and deeper market penetration. If twenty retailers operate in the network of an original stockist, five or six of them get elevated over a period of time as stockist. Out of the retailers some remain attached to the original stockist and other relevant factors. The process continues as long as the market keeps expanding. And at any point of time, enough retail points in variably hover around or particular stockist, hence the name Satellite Distribution. The main advantage of this system is that it facilitates market penetration in the interiors of market. However, the firm must ensure is that it facilitates market penetration in the interiors of the market. The firm must ensure that in the process, the motivation of the earlier generation stockist is not destroyed due to overzealous and premature elevation of the retailers into stockist. After understanding the entire marketing mix for the rural markets, let us now see some practical examples of how companies have entered the rural markets and have been highly successful by modifying one or more Ps of the marketing mix to target the rural market. A few of the successful companies are as follows:

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Case 1 The Making of C H I K

Late 70s: Following the success of Velvette shampoo in the southern markets, a pioneering attempt to offer shampoos in small pillow packs, the market was flooded with 70-odd small labels of shampoos, each one eager to nibble a share of an enlarging pie. Most look similar with little differentiation.

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Rural Marketing
Velvette as a brand had become synonymous with sachet shampoo. Consumers would ask the retailer for a Velvette and they would walk away happy with whatever labels the retailer gave them. Many of them never knew the difference and for the rest it just did not matter. The success of the sachet changed the structure of the shampoo industry. New layers of consumers, most of them from rural pockets could now afford shampoos. The upper class tag attached to shampoos was fast fading away. The market was extremely cut-throat and trade had a significant influence on what the consumer bought. It was against this background that Chik shampoo was launched by CavinKare in March 1983. The brand was launched initially in 10ml packs and later in sachet form. Though the market was cluttered with low-cost shampoos, there was a clear opportunity for a good quality shampoo with appealing perfume at a price which will delight the consumer. The brand endeavoured to provide to the masses a significantly superior product than those available at similar points. Chik shampoo used French perfume at the time to differentiate itself on the plank of superior fragrance. The target audience was lower middle-class/semi-rural; monthly household income of Rs. 1,500-3,000; females in the age group of 16-plus. Innovative radio advertising based on popular cinema dialogues supported the brand; this was quite different from the plain jingles being used by other brands that advertised on radio. The advertising strategy was based on the consumer insight of the powerful appeal of cinema among the common masses. The brand roped in popular southern cine stars in the south like Amala, Khushboo, Manorama and Charlie who were popular with rural 56

Rural Marketing
audiences to endorse the brand. Radio was used as the sole mass medium of advertising and the annual advertising spends were in the region of about 2 lakh. Though shampoos were getting encouraging trials from the rural consumers, the penetration levels were extremely low. Many people had no clue how to use a shampoo. To encourage trials, CavinKares team travelled extensively in rural pockets, caught hold of schoolboys to demonstrate how to lather and wash, comb hair and show the difference. This exercise had a significant impact in breaking the ice and made people comfortable with the concept. Another method used to encourage trial was through a consumer scheme, where anyone could take any four empty shampoo sachets to a retailer and take home a Chik sachet free. Though more risky, this scheme paid off and more and more people began asking for Chik at their local retail outlet. By the late 80s the brand had become quite popular in the southern markets. The shampoo market was growing at a healthy clip of 15 per cent at that time. 1990 was a major turning point in the life of the brand when it introduced floral fragrance shampoos in two floral fragrances rose and jasmine. They turned out be an instant hit with the masses and sales jumped from Rs. 10 lakhs a month to Rs. 30 lakhs a month. The brand continued to use popular cinema celebrities and extended the endorsements to television media in 1992. In 1993, CavinKare had decided to take Chik shampoo national. Chik is a recruitment brand and the objective was to expand the market and get new customers into the category. The focus was largely rural though value-conscious sections in urban areas also were attracted to the proposition. The distribution in rural areas was driven through innovative trade schemes and consumer offerings. The market began to surge by the mid 90s, the shampoo market was growing at about 25 percent. Then, packs contributed nearly 40 percent of the total shampoo volumes. Rural markets were growing much faster than the urban markets. The key challenge was in reaching the 57

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rural markets. Most villages in India are of very small size. Close to 70 percent of villages in India have population of less than 1,000, the accessibility is low and the local markets are not developed. The good news is that there are about 47,000 haats and 25,000 melas organised in such villages. The average daily business transacted in these haats is close to Rs 2 lakh. The company made use of such opportunities as well as created availability in smaller villages through the wholesale network. The right marketing strategy for the rural market is to balance the conflicting dimensions of availability on the one hand and affordability on the other. During the mid 90s, the Chik pneumonic and the pack were changed to bring in design and colour elements, which enabled on-shelf differentiation and aided recall. Packaging becomes even more critical when viewed in the context for rural marketing. Consider some facts and insights, which a study on the factors influencing shampoo buying in rural markets threw. A significant portion of buying happens by looking at the wrapper. The rural consumer used this insight to improve packaging while branding was made more prominent and the graphic improved to enable quick identification. By the year 1999, Chik was already the second largest brand of shampoo in India - (also in rural markets) only next to Hindustan Levers Clinic Plus. This year was to see a major development in the brand, which would take it to greater heights. Some years back while on a market visit Mr. C. K. Ranganathan, Chairman & Managing Director, CavinKare Pvt. Ltd. happened to interact with a rural consumer who was using soap to wash his hair and had been doing this for ages. During the course of the discussion the consumer told the Chairman that he had not seen any visible damage to his hair. 58

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Though the hair felt rough, the consumer was fine with that. So why would he start paying for and using shampoos? During this discussion CavinKare got the insight that the number of adults per household in India is about five. At Rs. 2 per sachet of shampoo and four washes a month it meant Rs. 40 for hair wash alone. There was no way the consumers were willing to spend this kind of money on washing hair every month. CavinKare got the feedback that of the cost of hair wash could be cut to Rs. 2 per person per month he would no be averse to try a shampoo. That meant that the consumers wanted something as marginal as a 50-paise shampoo pack. Initially, the thought of offering a 50-paise shampoo sounded ridiculous. How do you offer a good quality shampoo at that price? Could something like this be viable? CavinKare worked backwards from this brief and made the 50-paise shampoo happen. It took them a few years to develop the formula and packaging. The launch happened in September 1999. Chik was the first brand to launch a shampoo sachet at 50-paise. The results were amazing; shampoos growth rate in rural India became almost twice that of the urban sector. The price point was instrumental in driving distribution in deep rural pockets. The market share of Chik after the launch of Chik 50-paise went up from 5.61 percent in 1999 to over 23 percent now. Today, Chik, a Rs 100 crore brand based on MRP value, is the No. 1 brand of shampoos in rural India. It is strong rural brand and roughly 65 percent of the sales of Chik shampoo come from rural markets. It symbolizes the requirement of a shampoo for Indian consumers. An accompanying table illustrates the rural hold of Chik in some states in India having significant rural population. The value proposition offered has helped us to become number one in many states in rural India. 59

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To sum up, rural markets are an opportunity as a challenge. In most rural markets recruitment is the issue. The rural consumer is very rational as well as value conscious. Therefore, the marketing mix must deliver superior value to the rural consumer at a price point he is comfortable with in order to be successful. Strategy Adopted As seen in the above case study, the company marketing Chik shampoos came up with a wide variety of changes to target the rural markets. Some of the changes that the company adopted are: 1. Changing the Packaging of the product by introducing sachets instead of conventional bottles. 2. Slashing the price of the product to 50-paise per sachet so that rural consumers could afford it. 3. Adopting innovative ways of promotion by using radio advertising in the form of jingles and cinema dialogues that would appeal the rural consumers. 4. A wide variety of perfumed shampoos were available so as to give more option to the rural consumers. 5. The village Haats and Melas were used as an efficient way of the rural distribution channels. 6. The packaging looks of the products were modified and they were made to look more attractive to the rural consumers. Thus it can be seen that to market Chik Shampoo, the company made significant changes in the 4 Ps of the marketing mix so as to ensure that their product successfully penetrated the rural markets.

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The move to enter the rural markets was highly successful for the company as the company within a small span of 5 years has witnessed a dramatic rise in the market share. This can be better viewed with the help of the chart below:
Chik Shampoo Market Share (Urban+Rural-Volume)
22.4

25 20

23.09

15.18 15 10 5 0 1998 1999 2000 2001 2002 4.84 11.33

As seen from the above graph, the market share of the company has increased considerably from just 4% in 1998 to around 23% in the year 2002, which means that the market share of Chik shampoo grew six folds in the last five years. Apart from gaining the market share, the shampoo was also successful in increasing the number of shampoo users so that the overall market of shampoo users increased. This was because the company made its shampoo more affordable and available to the rural market through efficient packaging, pricing, promotion and distribution. Today the company is a 100 crore company and leads the rural market for shampoos in India. Also 65% of the total sales of the company come from the rural markets.

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Case 2 E-choupal, the V21 SCM Model

The e-choupal idea cuts through the basic and historic problems crippling Indian agriculture: fragmentation of agricultural land holdings, the difficulty of access to those holdings and high levels of illiteracy, all of which make agricultural extension work unviable, making it difficult and daunting to adapt and apply the findings of laboratory research to agricultural cultivation.

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E-choupal makes use of the physical transmission strengths of the current intermediaries the only efficient option in the context of Indias weak infrastructure, making them an integral part of the value chain. Yet, by using the real-time multicasting ability of the Internet, these intermediaries are bypassed to deliver information and market signals directly to the farmers to enhance the long-term competitiveness of Indian agriculture. Under e-choupal, ITC has set up Internet kiosks in villages. These kiosks are managed by the farmers, selected from within the community and trained, known as Sanchalaks. At the kiosks, the Sanchalaks help the farmers to readily access the different agricultural crop-specific Web sites that ITC has created in the relevant local language. The farmers can learn online the best farm practices for their crop, the prevailing prices and price trends for the crop in the Indian and world markets, the intricacies of risk management, and the local weather forecast. The smallest individual farmers thus get the benefit of expert knowledge on the cultivation of their crop. E-choupal leverages the seamless workflow capabilities of IT to virtually integrate several best-in-class players along chain and offer the services on a single platform to every farmer. The farmers can order quality agricultural inputs online. Virtual aggregation of such demand effectively reduces the cost of these inputs, again bringing the power of scale to even the smallest of farmers. E-choupal links the Indian farmer to the consumers in local and global markets, by leveraging ITCs time-tested and proven competencies in branding, marketing and distribution. Unlike in the alternative mandi channel (where the farmer discovers the price for his produce after he has incurred costs of transportation, therefore ending up selling even if he is not satisfied with the price), e-choupal helps the farmer take an informed and empowered decision (because the price is known in the village itself). In the process, many non-value-adding activities like multiple transportation, handling and bagging, 63

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otherwise inevitable in the traditional supply chain, are eliminated, ploughing back a larger share of the consumers pie to the farmer. Thus, through the virtual vertical integration (V21) model of supply chain management (SCM), e-choupal secures the scale benefits for Indias agricultural economy without displacing the small farmer. E-choupal, the Unique 3-D Marketing Channel: On the ground, e-choupal is proving to be a unique 3-D marketing channel for many products and services consumed by rural India. The changes sweeping the marketing discipline in the backdrop of the increasing consumer-centricity of todays world are well known. For example, while superior products and distinctive functional benefits form the necessary starting point for success in the marketplace, the experiential dimension is becoming a critical differentiator. Process benefits which make transactions between buyer and seller easier, quicker, less expensive and more pleasant support this dimension. A third dimension, personalization, now successfully employed by a few marketing companies, will be the only sustainable differentiator in tomorrows world. Relationship benefits which reward the willingness of consumers to identify themselves and to reveal their purchasing behaviour - lay the foundation for this dimension. The organic blending of relevant knowledge (for example, application) and customized information (local weather), with farmers purchase transactions, is creating a unique value for him, especially in farm inputs. The Sanchalaks connected to the market, leading farm input companies and experienced agricultural scientists through the e-choupal infrastructure, are able to deliver this benefit to the farmer by leveraging the power of collaborative networks, previously unthinkable in rural India.

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A couple of other important process benefits that e-choupal is delivering to the marketer are: Superior demand forecasting and real-time communication with the help of Sanchalaks and the IT infrastructure, especially valuable in FMCG as well as short-window-demand products, The ability to assemble groups of highly involved customers for

credible and focused research as well as to demonstrate product features. This is proving to be a boon in consumer durables. By virtue of its wealth-enhancing capability, e-choupal has been able to build valuable and sustainable relationships with farmers who constitute the majority of rural consumers. As the relationships transcend short-term expedient considerations, these people share a wealth of information about themselves, which is then converted into valuable knowledge to market tailor-made credit and insurance products. Emerging areas like telemedicine, eGovernance, education and entertainment will soon ride on the Internet, Web-casting and video conferencing infrastructure of e-choupal. The Road Map notwithstanding the Speed Breakers: The e-choupal project, launched in June 2000, has today become the largest Internet-based corporate intervention in rural India. E-choupals network today reaches out to more than a million farmers in over 11,000 villages through 2,100 e-choupal kiosks that ITC has set-up across four states Madhya Pradesh, Karnataka, Andhra Pradesh and Uttar Pradesh. The hurdles that ITC encountered while setting up and managing the echoupals relate primarily to the inadequacies in infrastructure in rural India: lack of power supply, telecom selectivity and bandwidth. Imparting

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computer usage skills to first time Internet-users in the remote areas of rural India is providing to be another daunting proposition. ITC has been evolving several alternative and innovative solutions to overcome these challenges: for instance, arranging back-up power through batteries charged by solar-panels, upgrading telephone exchanges with RNS (RAX Network Synchronization) kits, installing VSAT (very small aperture terminals) equipment introducing mobile choupals, local caching of static content, enhancing efficiency in streaming-in dynamic content, and setting up a distributed 24x7 helpdesk infrastructure. ITC has worked closely with farmers in designing and managing the entire echoupal initiative. The active participation of farmers in e-choupal has created a sense of ownership in the project among the entire farming community. Farmers view e-choupal as the new age cooperative. Encouraged by this enthusiastic response from farmers, ITC has planned to extend the e-choupal initiative to 11 other states across India over the next seven years. ITCs vision is to extend this interactive transaction and fulfillment channel to cover one-lakh villages, and reach out to 10 million farmers growing a range of agricultural products. Conclusion: Growing competitiveness of Indian agriculture induced through such a market-led business model, can trigger a virtuous cycle of higher productivity, higher productivity, higher incomes, enlarged capacity for farmer risk management, higher order of investments, feeding even higher quality and productivity. On the other hand, growth in rural incomes would unleash the latent demand potential for industrial goods so necessary for the continued growth of Indian economy. This creates another virtuous cycle snowballing the economy into higher growth trajectory.

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ITC is planning to extend its integrated watershed development programme and holistic community development programmes to all the villages covered by the e-choupal network. The consequently cascading economic multiplier effect will be extraordinary. Thus, ITCs pioneering e-choupal movement exemplifies the economic power of the synergy between the corporate sectors creations of shareholder value with the development of Indias agricultural economy

Case 3 A Matter of PRESTIGE

This cast stresses on why companies decide to go rural. What are the factors that attract them and are rural markets potentially bigger markets than the urban city centers? Again the basic concept that this case covers is that of the marketing strategies adopted by the company to market their pressure cooker brand Prestige in rural areas.

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The Background: Prestige - Indias leading pressure cooker brand, over the last few years was facing problems of stagnant/declining sales and reduced realizations. The pressure cooker category growth rates itself were on the decline and on the menace of the unorganized sector, volumes have been under pressure for most manufacturers. Urban markets were getting saturated in fact; markets like Mumbai were having negative growth rates. Also, Prestige Popular, in larger sizes (which sell in the South our strong hold) was launched in 1999, and since then the sales of this premium offering of the company has been on the decline. However, rural markets were growing at almost five times the growth of the category. This was when the company decided that rural markets were going to be a thrust area. Traditionally, Prestige was very strong in the higher population strata markets and market share declined as one came down the pop strata. How it all began? The exercise began, when the company decided to do a pilot project in the rural Mehboobnagar district of Andhra Pradesh with the help of MART, an agency with vast expertise in the field of rural marketing. At this point of time Hindustan Lever was in the process of rolling out its Project Shakti, its rural marketing initiative was also with assistance from MART in AP.

The Pilot Project: The womens self help group (SHG) movement had been very strong in AP. Basically groups of women around 15 a group who save a rupee a day and the corpus so generated loan out to members of the group to help them in their work and not for meeting personal needs. The groups get a matching loan from the government on soft terms. The interest earned is ploughed back into the corpus. There are over four lakh such groups in AP. Taking advantage of the available situation; the company decided to convince these women Self Help Groups to help sell the Prestige brand. 68

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MART and the company organized meetings of the women of the SHGs and explained the concept of pressure cooking, giving them details on the company, the brand and what they stand to gain by selling Prestige pressure cookers. For enlisting dealers the help of animators, who are paid a stipend by the Government for propagating / implementing development activities of the State Governmental among the rural population, was enlisted. All those who became dealers were given a demo pressure cooker. Meetings were organized by the dealers for potential customers, where the concept of pressure-cooking was explained. Company personnel attended these meeting so that dealers got trained on the concept of pressure cookers. Intense working of these markets for two months by a management trainee of the company along with the guidance provided by MART saw the company selling 50 pressure cookers. The company thus with its excellent strategy the back up that it got from the state government could enter the rural markets successfully. It could enter a market (Mehboobnagar), which was one of the most backward districts of AP. However after the whole exercise i.e. from the companys pilot project, the company had come down to the following major conclusions on how to go rural and the various problems that governed rural selling that are discussed below: 1) Logistics and high price point. 2) Limited rural purchasing power. 3) Difficulty in convincing the customer on the products utility. From the conclusions thus drawn the company could now frame a proper policy with the perfect product design, price point etc. it then came up with the product with the following changes (the new adopted strategy): 1) A rural brand at a much lower price point was launched immediately. 69

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2) To take care of another crucial aspect of logistics was another problem as there were few distributors. For this TTK directly started supplying to these dealers from warehouses at Hyderabad and also at Vijaywada. 3) To take the initiative forward the company got in touch with the Department of Women Empowerment. The TTK group was asked to make a proposal on how it could work with the Government on improving the lot of the rural women. After prolonged discussions with the department, TTK gave a proposal, which was three-pronged strategy: Appointing women as dealers of Prestige; Setting up an assembly plant in AP with land and building provided by the Government using women of the rural areas; Setting up a ready-to-fry snacks conversion units in each of the 21 Districts of AP with equipment provided by TTK and appointing dealers to sell these snacks in each of the mandals in these 21 districts (around 1,000). The TTK had its own brand of ready-to-eat snack, Fryums, which had been withdrawn but the group sells pellets to converters who convert it to ready-to-fry snacks and sell it. The whole proposal involved creating one-lakh women workdays and generating Rs 3.42 crore of income for the rural women in the fifth year of operations. The Dealer Network Scheme: For setting up the assembly unit the group asked for some fiscal benefits from the State Government. The proposal was accepted by the principle by the department and the company and the departments are working hand in hand for its implementation. From then, TTK Prestige has set up a four member sales team to take the rural initiative forward. Dealers would be women as individuals or SHGs themselves. A woman or a SHG can become a dealer by paying around Rs 5,000 for a lot of six pressure cookers. The company also provides one free 70

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demo cooker to the dealer. The company coordinates with the department and organizes a series of meetings involving SHG members in the districts to enlist dealers. Once a woman becomes a dealer the rural promoter of the company works with her in making calls to prospective customers. When the dealer is able to get a gathering of prospects, the rural promoter does a demo. The AP government has been releasing gas connections under the Deepam scheme to the people in rural areas whereby the government pays the deposit to the oil company and the beneficiary has to pay for the cylinder, gas stove and regulator. The beneficiaries are the members of the SHGs based on seniority. The TTK group is selling its gas stoves to the SHGs, who, in turn, sell to the beneficiaries making a profit. Around 16 lakh gas connections are to be released this year and the company intends to make a dent in this segment. The Result and The Future Plans: From then on theres been no looking back for the company. Today, TTK Prestige is working on a separate sub-brand to be sold exclusively through rural women. This will be at a much lower price point. As sales from the rural initiative are incremental, margins have been kept to a bare minimum. The product specs will not be comprised in any way. There will be some product differentiators to prevent the product from coming into the normal channel and affecting company realizations. The assembly unit proposed to be set up will be for pressure cookers and gas stoves which can be sold in AP both in the regular channel and the rural channel proposed to be established. The polishing and assembly part will be done in this plant. Both these operations are labour intensive. The department will provide the land and building and the company the machinery and expenditure. Employment will be provided to 75 women in the first phase.

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In the ready-to-fry foods project a group of around 30 women will be formed in each district. Each member of this group will have to invest around Rs. 4,000. Besides, the groups would be licensed to use the Yummies brand name owned by TTK. Pilot projects are underway in four districts Chittoor, Anathapur, Kurnool and Nellore where the groups are being formed to generate the corpus. The strategy had been so successful that the company intends to replicate this model in three other southern states i.e. TN, Karnataka and Kerala in the near future. This initiative shows how the corporate sector and the government can work hand in hand to bring about rural upliftment.

Case 4 How Mahindra Maxx-ed It !!! The Mahindra Case Study

The biggest myth that exists in the minds of most marketers is that rural is all about traditional dhoti clad villagers living in huts. The reality however is very different. The new rural generation is clad in jeans and T-shirts and though it may not know Schumacher, it stands divided on Sehwags ability to counter Glenn McGrath and Brett Lee. Magazines such as 72

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Debonair and Fantasy adorn the roadside of Bikaner just as in the Book Shoppe at the airport. This clearly depicts that it is now becoming difficult to differentiate between the rural and urban class. To understand the case it is important to first understand some rural facts: Facts on Ownership: 95.9 percent of rural households (HHs) are self-owned 31 percent of rural HHs owns a radio and an equivalent number own a TV. 27 percent own wristwatches. 8.5 percent of the HHs owns a two-wheeler. Facts on Consumption: 95 percent of rural India uses toilet soaps. 76 percent uses detergent (powder/liquid). 48 percent uses dental products (toothpowder/toothpaste). Facts on Living Standards: 45 percent of rural India has pucca houses. 3.6 crore HHs have a telephone connections. 6.5 crore individuals in rural India are covered by life insurance policies. Facts on Travel: Five lakh people from rural India have gone abroad. 27 percent of rural India has taken a holiday within the country. Again there are as many four-wheelers in rural India as in the top eight metros. So, indeed, what is rural? It is in fact the biggest market having the highest potential for various products. It consists of around 13.5 crore households as per the latest census figures and with 48 crore adult individuals. A segment of 92 lakh HHs- that is prosperous and has urban-like

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consumption. So there is tremendous opportunity to grow by tapping the rural consumer. The Background: Rural customers have always have had a fascination for automobiles, particularly utility vehicles (UVs). The UVs have been sought either for personal use or for commercial purpose (making the vehicle available on hire to others) and in some cases both.

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Some of the key insights or other relevant facts that are to be noted here are: The rural consumer usually travels in a group. He is used to wide open spaces. Therefore, he seeks the same in his vehicle. Also seeks space for luggage. Rural consumer needs a vehicle that is rough and rugged, yet comfortable. Personal vehicles are also hired out when not being used or in demand. Incidence of hiring out of vehicles is greater than ownership. City and urban is aspirational. The villager shouldnt look like he has come from one. Optimisation is a way of life but image and show is very critical to the villager. The idea behind the concept: Analysing these insights, the rural needs were found and the Mahindra MAXX was launched as a product with more space; a vehicle that is more rugged and tough; least cost of ownership, more value and a more aspirational image. Quite clearly, the leveragable difference, which stands out, is more or as relevant to the rural customer is Zyaada. And Zyaada = MaXX. This was the core concept in the development of MaXX, and Mahindra & Mahindra launched the product in the commercial segment in February 2001. MaXX leveraged the benefit of Zyaada space, comfort and economy and the brand created a relatable aspirational value. What did it convey?

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The MaXX brand promise was defined on two planks rational and emotional terms. The rational plank was that the vehicle was big on size, which meant more space. The MaXX length and width was more than that of competing vehicles. The engine is high on fuel economy and low on maintenance, fulfilling the need for more value. The MaXX fuel consumption is 14-15 kmpl compared with the competitors 10-12 kmpl. On the emotional plank, MaXX positioned it as a travel companion. The different strategies adopted with respect to the 4 Ps The Product Strategy: The product strategy was to offer different MaXX value propositions to the different commercial target segments. To the value-conscious operator there was the MaXX Standard 10-seater; to the taxi opetator there was the MaXX TX; to the image seeker there was the MaXX Festiva. The MaXX Festiva was offered as a premium feature-loaded vehicle at an attractive price. Features included the metallic paint, fabric seats, fabric trims, styled interiors, aluminium footstep and an elegant spare wheel cover. The Target Group The Communication Strategy: The communication strategy was a great challenge as there were two distinct target groups. The commercial operator who was the vehicle buyer and the other was the vehicle hirer who was the operators customer. The hirer largely influences the operators purchase and in this case it was essential that the hirers were made aware of the MaXX space and comfort proposition.

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The operator, by and large, was aware of the Mahindra vehicles offered the least cost of ownership. At one end, hirers looked for space, comfort and image while the operator was looking for returns and least cost of ownership. The crucial insight was that the operator depended on hirer pull or customer demand for his vehicle. Thus the mass media strategy decision was to target the hirer while the route to target the operator was through below-the-line activities. The MaXX TVC, which was hence targeted at the hirers, projected MaXX to be the ideal travel companion. The Creative Strategy Promotion: The selected group, the hirers that needed to be targeted, had a majority that existed in the rural markets. This group had aspirations that mirrored and mood of the rural customer clearly followed urban attitudes. Thus the challenge was to produce the MaXX TVC in a manner that would easily appeal to the urban and yet create an empathy with the rural. The visual imagery had to be urban, the lyrics appealing to all and the music easily hummable by both. The elements of the TVC (Television commercial) were: proposition space and comfort (long travel) and the format were called slice of life. The press strategy was a combination of thematic advertisements targeted at hirers for brand saliency and tactical advertisements. Targeted at operators projecting the rational benefits and/or promotional schemes. Scores of below-the-line activities were carried out. There are over 100 tour operators meets all over India. The operators were given test

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drives. The local press was invited to these occasions. This ensured that MaXX received wide publicity, especially in the small regional press of vernacular languages creating some excitement in rural areas the operator meets and the press conference events were also covered by local cable TV in most places that aroused considerable interest amongst the hirers. Meanwhile, mileage melas highlighted the MaXX fuel economy advantage. Joy rides were given to customers to give them a taste of the MaXX space and comfort. MaXX road shows and nukkad nataks were held at contract/taxi stands along with product demonstrations and test-drives. MaXX hoardings were put up near bus stands; religious places and MaXX posters were put up in rural bank offices and local premises. There was a direct marketing mailer campaign targeted to over 30,000 existing Mahindra customers in rural areas to announce the launch of the new MaXX variants. Incentives were offered to them to come for a free test-drive at dealer showrooms. The communication and promotional strategy was able to establish a line of communication that encompassed both the hirer and the buyer. It also helped MaXX overcome the looks of the product and to create a brand that is aspirational to the hirer. The prime objective, to establish MaXX as a major player in the commercial segment, was achieved. The MaXX sales shot up after the television commercial was telecast and the overall communication and promotional strategy have caused the sales to climb nearly 2.5 times in Q4 as compared to Q1 in the year April 02 March 03. the tagline, MaXX Maane Zyaada, succeeded. Thus to sum up the above case is a classic example that portrays that though there exist wide differences in the rural and the urban market in terms of size and the consumer mindset, tapping the rural markets

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when you use the right strategies is very much possible. The only thing is that the strike needs to be perfect. The rural-urban divide is melting. Rural seeks urban imagery and yet peculiarities need to be understood.

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Rural Marketing The MaXX Brand Prism

Economy (DI engine) Spacious, Tough Mahindra

Family man, trusted, dependable, fun loving, Value conscious

Physique Companion Fellow traveler

Persona

Caring, promoting Relationship Culture f family values

User Image

Self Image

Large family, Semiurban business

Prudent Smart choice maker

The above prism thus explains in general the whole strategy that Mahindra had adopted to tap the rural markets.

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Rural Marketing Case 5 The COLGATE Case Study

Charcoal, neem sticks, husk, salt and powder mixtures have been some of the traditional form of oral hygiene products used in rural India. But these products are losing favour, especially due to the efforts of many organizations and companies, foremost among them, Colgate. The company claims to have persuaded about 300 million people into using oral hygiene products in the country for the last 25 years.

TOOTHBRUSH MARKET SHARE OF KEY PLAYERS

Smithkline Gilette Colgate

Colgate HLL Gilette Smithkline

HLL

Known as one of the leading brands for oral care in and around the world, Colgate soon got popular in rural India as well. Infact the brand has become so generic with the product itself that it is not surprising to find rural consumers asking for Colgate when they buy toothpaste or tooth powder or tooth brush. The company, on its part, says that the rural markets account for about one third of its total sales, the rest coming on urban sales.

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Maintaining a steady market share in the oral care product segment wasnt tough job for Colgate, but thats exactly what it didnt want. Colgate was heading for a total monopoly in the rural markets, and it was leaving no stone unturned for doing the same.

TOOTHPASTE MARKET SHARE Balsara

Colgate HLL Smithkline

Smithkline

Balsara

Colgate HLL

Aggressive is the only word that could perfectly describe the advertising and sales promotion strategy of Colgate. Colgate stepped up its rural promotion drives with IDA (Indian Dental Association) to add value. This has been the stepping stone to the high penetration in rural minds. Since 1976, Colgate has been doing this through its rural promotion vans and Young India, Bright Smiles, Bright Futures, schools dental education program. After conducting a small research in the rural areas Colgate concluded with five things that were common in all their rural consumers across India, they were:Rural consumers are brand loyal.

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They have disposal income (i.e. because their needs are limited, so lesser scope to spend.) Literacy level is on an increase. Elderly person in the family have the decision authority. If a brand is turned down in a household in a village, the whole village sooner or later boycotts the brand. High quality products was always a plus point of Colgate all they had to do was to now tap the still unattended rural markets and change their habits i.e. from the usage of manjans and datoon to toothpaste and tooth powder. In 1998, Colgate contacted 6 million people in 20,000 villages of which 15,000 villages had not experienced the availability of toothpaste and toothpowder let alone toothbrushes. Colgate decided to do this by controlling various advertising and promotional activities. Suggesting and implementing a rural promotional scheme was what Colgate called Sampark for, as they were specialist in rural advertising category. Sampark had limited budget to their disposal. Going in for mass media would not prove to be costly but the reach would be limited as, still only very few people own and possess a T.V. or a radio.

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TOOTHPOWDER MARKET SHARE

HLL Colgate Dabur HLL

Dabur Colgate

Sampark wanted something that had far and wide reach that is why Sampark decided to their advertising by door to door selling. Sampark hired people from a certain locality who knew the local language, jargons and idioms. This not only helped Colgate communicate easily with the consumer but was also effective in sending the right message across to the rural consumer, the other plus point of this message was that the communication gap was reduced to a large extend. These people would move about in the villages telling the people about the pros of using advanced oral care products and the cons involved in tradition oral care system, this was quite difficult as rural people always felt that natural was the best. Colgate trained these salesmen to convince the rural population and make them try the free sample that Colgate was distributing free. The next best option that Sampark choose after door to door selling was publicity vans also called as A/V vans. Seventy promotion vans do the rounds of the country and educate rural folks on oral hygiene products such as toothpaste, toothpowder and toothbrushes. These vans used to travel from village to village and depending upon the market day in that specific village. These vans also did a number of other activities at a time such as spot selling, sampling, retailing etc. The vans used to be parked in strategic locations, they

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were highly decorated so as to get more curious eyes and in the process educate the rural folk. The roving Colgate vans, after screening a 22 minute film on oral hygiene that explains how to use the product, offer sampling at stalls setup near the van. 60 percent of the towns were covered by Colgate with their own distribution strategy and the remaining 40 percent was covered by other distributors. There are puppet shows done in the villages educating the villagers about the plus points of using modern hygiene products. Educational films were also shown in between movies in theatres, these are usually 10-40 seconders which were educational and used to feature either actors, local lenders, for a farmer just like the ones viewing the documentary, later on after the movie would end free samples were distributed to the audience, these tactics are also used in Haats and Melas thought the length and breadth of India. The thrust towards promotion through schools has done wonders in changing the awareness levels as well as a shift towards the new decision-makers in the rural families. OTHER PROMOTIONAL MEASURES: The packaging strategy too over the years has made the penetration of its product that much easy for Colgate. The company has followed the very successful sachet route by introducing the toothpowder in 10 gram sachets of Rs. 1.50 each and toothpaste with Super-Shakti in 15 grams pack of Rs. 3 each. The affordable pricing is something that has increased the sales in rural India and there have been many who have updated from toothpowder to toothpaste in the process. Colgate has also gone ahead with the combination packs, offering a toothbrush with 30 gram toothpaste for Rs. 8.50. This has helped them increase their base in rural regions to great effect. Sachets and combi-packs are the ones that find encouraging responses in rural segments. They are fastest moving pack sizes in these markets. This shift towards smaller pack sizes is an adaptation towards the rural market, a decision that has, feel analysts, expanded the Colgate market in oral-dentifrice market in India. The thrust towards rural marketing is surely benefiting the company.

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