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A Report Submitted in partial fulfillment of the Requirements for the award of the Degree of
MASTER OF BUSINEES ADMINISTRATION OF THE P.B. SIDDHARTHA PG DEPARTMENT Submitted by G. RAVI ROLL NO: Y85338
DEPARTEMENT OF BUSINESS ADMINISTRATON P.B. SIDDHARTHA COLLEGE OF ARTS&SCIENCE
(Affiliated to Acharya Nagarjuna University)
VIJAYAWADA (2008 – 2010)
Rural India constitutes ‘the heart of India’, generating more than half the national income. According to the National Council of Applied Economic Research (NCAER), with about 74% of its population living in its villages. India has perhaps the largest potential rural market in the world. A potential of 742 million rural consumers live in 6,38365 villages across India. Rising incomes, improving infrastructure, and favorable government policies offer huge potential for rural marketing.
“If you see a woman in a village milking a cow, do you see an opportunity?
but that is exactly where Dr. Varghese kurien saw an opportunity and it gave birth to one of the most successful organizations in India-Amul .”
The need to look at rural markets:
The “Green Revolution” has in turn, brought a socioeconomic revolution in Indian villages. On account of the green revolution the rural areas are consuming a large quantity of not just the essential commodities but premium products as well. The younger generation in rural areas is now spending more on personal care and grooming products.
The above data [table 1] indicates, the Indian rural market with its vast demand base, offers great opportunities to companies. FMCGs demand in India nearly 53% comes from the rural market. For consumer durables the figure is 59%, these results has
evidently helped, going by the significant share contributed by rural areas to the total revenue of several leading consumer product companies. [Table-2]
Rural markets are already proving vital for company’s growth, clearly indicating that these markets can not be ignored by big players. Industry analysts have projected that urban households will grow by 4% while their rural counterparts are expected to grow 11% by 2009-10, implying that if the rural income rise by 1%, then the spending power of consumers will increase by about Rs.10,000cr. According to FICCI, by the end of 2025, rural consumption is expected to nearly three times of what it is today.
There is no denying the fact that Indian market is the fastest growing market in the world and the fact is that about 60% of the market considered market is yet to turn into a real market. rural
What is Rural Market?
According to the Census of India 2001, there are more than 4,000 towns in the country. It has classified them into six categories, class-I towns with one lake and above population , Class-II towns with 50,000-99,999 population, Class-III towns with 20,000-50,000 population and Class-IV towns with 10,000-19,999 population. It is mainly Hindustan Unilever and ITC, most FMCG and consumer durable companies, define Class-II and III towns that are rural.[table-3]
From this above data one can analyze the economics of cost involved in rural distribution coverage.
Rural Marketing Challenges:
• • • • Poor Infrastructure Non-availability of shops High levels of poverty Unemployment 6
• • • •
Poor literacy rate Poor media penetration Skeptical customers (less use new brand ) Rigid social customs
According to Dr. MS. Swaminathan of the swaminathan Research Foundation, rural areas can only be developed if the financial, structural, economic and social aspects are addressed in a holistic manner. This is possible if these areas are supported by adequate funds, equipments, infrastructure and education.
Indian consumers are poor but not backward. The future lies with those companies who see the poor as their customers. Companies should focus on creative solution and product engineering to reduce their costs and offer tremendous ‘life time value’ to the ‘Bottom of the Pyramid’ customers. Effective rural marketing is one and only solution to reach the BOP segment.
Rural Marketing Strategies:
Rural marketing concept is a customer-centered ‘sence and respond’ philosophy. The following section deals with how MNC’s and local companies have successfully established themselves in the rural market.
 Product Strategy:
The rural consumer is very conscious about getting ‘value for money’. Low price, high quality and multiple uses is basic principles rural product design.
Case 1: Nokia 1100
Nokia 1100 has so penetrated in to the rural market. Nokia had to stop its production of 1100 because as its own product has become its toughest competitor. Nokia’s low-end cell phones are used as radios, alarm - clocks and flash lights by the rural customers. Strategy: “digital convergence at the bottom of market”
Case 2 : LG sampoorna TV
LG Electronics launched a customized TV sampoorna’. A more important aspect of customization is to make TV set which can appeal to local needs, it facilitated on screen display in vernacular language like Hindi, Tamil and Bengali. selling 1,00,000 sets in the very first year. Strategy: “thinking locally, succeeding globally”
Case 3: HUL Breeze 2-in-1
HUL developed a combined soap and shampoo that was cost-effective and also less harsh on hair than ordinary soaps. HUL launched the new soap-cum shampoo ‘Breeze 2-in-1’ Strategy: “value-added product would create a loyal customer”
Case 4: HUL pure-it [a water purifier brand]
HUL launched a innovative product ‘pure-it’ a water Purifier brand. Pure-it is available at economical price for the rural consumer as there is no clean drinking water in villages. Strategy: “Corporate social responsibility means come up with business models to cater to the BOP”
Case 5: TATA Nano
Tata Motors launched ultra low cost Nano. Nano is a low-end ‘rural car’, hence its creates a new segment of people of buying car. It is a victory for all those who have been advocating making available cheaper products for customers at the BOP. Strategy: “we needed to create a safer journey of transporting a family”
• • Innovative product designs and packaging. Avoid the marketing myopia, which means the costumer will have the same need but will want the new product.
Application of value engineering, which means costly metal being replaced by cheaper reinforced plastic. This technique does not sacrifice the functional efficiency of a product but lower the product price.
Using chinese product design strategy and raw material. Be care full on product duplicates and using security features. Marketers must often understanding rural customer’s needs and aspirations
even better than customers themselves do and creating products and services that meet existing and latent needs, now and in the future. A fair amount of research is required to understand the latent needs and desires of rural customers and provide suitable products.
 Price Strategy:
Rural markets are low price high volume growth markets. The rural markets being intensely price-sensitive in comparison to urban markets, reaching at a lower cost is a major challenge.
Case 1: Nirma
Nirma’s yellow detergent powder- a mass- market Phenomenon. Nirma’s low price policy has penetrated into the deepest rural markets in India. Strategy: “value- for- money”
Case 2: Cavinkare’s Chik shampoo
Cavinkare launched Chik in 50 paise sachets. Cavinkare targeted rural and small town customers who used soaps to wash their hair. it became the market leader in the rural markets with over 50% market share. It create a ‘sachet revolution’. Strategy: “low unit price packs.” (LUP)
Case 3: Mc Donald’s
The Indian customers seek high value for every rupee spent . so Mc Donald’s has been highlighting the “Happy price menu- Rs. 20” to shackle entry barriers appeal to Indian customers. Strategy:
Case 4: P&G price cut strategy
P&G in 2004 started price cut strategy in their detergent brands. P&G’s increase in the market share was
more at the cost of the low-priced detergents. There was a 200% increase in Tide after the price cut . Strategy: bring in the required ‘Economies of Scale’ which would profitability. lead to
Case 5: Britannia Tiger biscuits
Britannia also tasted success because of small affordable packaging of ‘Tiger’ biscuits it is specially design to the rural market, it’s helping the poor become consumers. Strategy: “low price strategy is begun to appeal target segment”
Case 6: Nestlé’s Maggi
Nestle’s rural initiatives have largely been based on Price-led initiatives. Brand such as Maggi noodles are priced at Rs.5. It helped Nestle in making in roads in to rural market. Strategy: “small pack - lower price”
Case 7: Marico parachute
Marico launched ‘parachute mini’ a bottle shaped
small pack being sold at an MRP of RS.1, 20 ml parachute a RS 5 that enables loose oil users ad to parachute. Strategy: “consumers to trail out the products with very little risk”
• • • • Use backward and forward integration. Using value-based pricing strategy . That means fixing of price, starting with customer and end with product. Use psychological tricky pricing strategies. That means method of odd number pricing etc. Effective total quality management is helps to low price high quality product. Companies should focus on creative solutions and product engineering to reduce their cost. Second, the company can design basic models minus frills to save cost.
 Promotion Strategy:
The challenge is to create communication that would help the rural consumer in recognizing brands, logos, visuals and colors. To effectively tap the rural markets, a brand must associate with their culture and personality.
Case 1: Idea cellular
Idea’s aggressive promotion campaigns ‘what an idea sirjee’ ad creates a real rural feel came through Strong advertisement. Strategy: spreading a social message “each one has aimed at the changing someone’s life for better”
Case 2: Coca-cola
Coca-cola ad ‘thanda matlab coca-cola’ caught attention of the rural consumers so much. Aamir khan playing foot sic with village bells. Strategy: “Using a renowned celebrity from in rural background”
Case 3: Godrej
Godrej uses radio to reach to the local people in their language and push its soap in interior and remote areas. Strategy: “low-cost marketing technique to gain maximum result”
Case 4: HUL Lifebuoy
HUL launched a direct rural contact program called ‘Lifebuoy Swasthya Chetana’ campaign, made sales goes up by 20% in 17,000 villages. Strategy: “lifebuoy has always been positioned on the platform of health and hygiene”
Case 5: MRF Bullock cart Tyres
MRF introduced nylon tyres for bullock carts with real life pahalwans. MRF use the communication through wall paintings in villages association with the muscleman symbol,(i.e.,Pahalwan=Muscleman).The result was that the MRF bullock cart tyres became the brand leader in this segment . Strategy: “Rural consumers understands symbols better and looks for endorsement by icons” .
Case 6: HUL Vim
HUL launched a dish washing bar Vim. HUL Started to communicated the brand in rural area through public challenging campaigns. In this campaigns is succeed people washing utensils with sand are being educated to shift to dish washing bars. Strategy: “Brand awareness creates people using local unbranded products to national brands”
Case 7: Dabur Chyawanprash
Dabur Chyawanprash was able communicate its core benefits of energy and immunity by involving locals in a game of bowling wherein, the nine pins, symbolizing various diseases, were demolished by a chyawanprash ball. Strategy: “For a brand to succeed in India, its communication and image must respect Indian values and serve to uphold them”.
Case 8: HUL Surf
Surf used the ‘Lalita ji; campaign to communicate the message of ‘getting more for your money’ to housewives and this message is well received by them. Strategy: “value for money need not necessarily mean cheap”
• • • • • •
Provide social outlet campaigns, the outlet provide free to any one, what brand they choose. Its creates a ‘trust factors’ to the consumers. Be care full on retail margins other wise they promoted local brands. Face-to-face ‘below the line’ touch, that means feel and talk mode at heats, melas and mandis. To capture the local sprit in the communication. Using local language. Patience is the name of the game. That means a rural consumer is not in a hurry and you can take your time in communicating the message. Developed a website, which gathers valuable feedback from satisfied customers and also display the total amount saved by consumers with the product impact. World-of-mouth communication strategy works better in rural markets
as these markets enjoy limited reach media. Once people become familiar with these products, they would perceive them as necessities.
 Distribution strategy:
Planning physical distribution, managing logistics and controlling marketing communication are major impediments for entering rural markets. The distribution structure involves stock points in feeder towns to service these retail outlets at the village levels.
Case 1: Coca - Cola
Coca -Cola is a pioneer company in distribution network. Coca-Cola has evolved a ‘hub and spoke’ distribution model for effectively reaching and serving rural markets. Coca-Cola provides low-cost ice boxes to the small distributors in rural areas because of the lack of the electricity. In this marketing strategy a wake up call for coke’s rural focus. Strategy: “Coke is available where, even water is not available”
Case 2: HUL
Hindustan unilever, the pioneer and a large player in India’s FMCG market. HUL is the first company to step into the Indian rural marketing. HUL launched ‘operation stream line’, distributed HUL’s products in villages using unconventional transport like ‘bullock carts’, ‘tractors’ and cycles. Today HUL’s products touch the lives of two out of every three Indians. Strategy: “HUL product can reach a place, where you can not reach”
Best solution for enter into the rural markets, that is the company should start the production in rural areas. Then it is easy to distribute and also its increase the local sprit.
Tie’up with public distribution system (Fair Price Shops). In our country, the public distribution system is fairly well organized. The revamped PDS places more emphasis on reaching remote rural areas of hills and tribaks. So FMCG companies collaborated with the PDS to utilize its well-established sales and distribution network in the rural markets.
Develop rural shopping malls. Rural shopping malls act as a two-way supply chain. While selling goods to the farmers and also buy their farm produce. Use a combination of wholesalers and retailers to penetrate every nook and corner of rural market. Going paces ahead of small packs and sachets’ the corporate world is now
coming out with ‘Rural Malls’ and ‘Self help groups’ as channel partners to promote consumer products in rural India. Unilever and ITC are working towards increasing their visibility and reach through marketing - cum social responsibility projects such as ‘shakti and e-choupal’ respectively.
A silent revolution is sweeping the Indian countryside. It has compelled marketing whizkids to go rural. The marketing battle fields has shifted from the cities to the villages, but in this battle both consumers and companies are winners, it is a win-win situation. ‘Go Rural’ seems to the latest slogan. Stop depending on research number. Go and meet up with a million villagers and ask what they want. Create the products and services that is relevant to their needs. Thus, it is quite clear value-for-money offerings companies could convert luxuries in to necessities for the Indian rural consumers.
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