this is a project done on HUL and P&G distribution strategy. hope it will help u.

if anyone want the PDF file then i can send it to you. give me a mail on prateek.pranav@<hidden>

Study of Marketing Strategies of Hindustan Unilever Limited and Proctor & Gamble Submitted in partial fulfillment of the requirements of the course Post Graduate Diploma in Business Management (Session: 2007-2009) Faculty Guide Mr. Arun Kumar Submitted By Prateek Pranav EXECUTIVE SUMMARY

The Fast Moving Consumer Goods (FMCG) sector is a corner stone of the Indian economy. This sector touches every aspect of human life. The FMCG producers now realize that there is a lot of opportunity for them to enter into the rural market. The sector is excited about the rural population whose incomes are rising and the lifestyles are changing. There are as many middle income households in the rural areas as there are in the urban. Thus the rural marketing has been growing steadily over the years and is now bigger than the urban market for FMCG. Globally, the FMCG sector has been successful in selling products to the lower and middle income groups and the same is true in India. Over 70% of sales is made to middle class households today and over 50% of the middle class is in rural India. The sector is excited about a burgeoning rural population whose incomes are rising and which is willing to spend on goods designed to improve lifestyle. Also with a near saturation and cut throat competition in urban India, many producers of FMCG are driven to chalk out bold new strategies for targeting the rural consumers in a big way. But the rural penetration rates are low. This presents a tremendous opportunity for makers of branded products who can convert consumers to buy branded products. Many companies including MNCs and regional players started developing marketing strategies to lure the untapped market. While developing the strategies, the marketers need to treat the rural consumer differently from their counterparts in urban because they are economically, socially and psycho-graphically different to each other. This paper covers the attractions for the FMCG marketers to go to rural, the challenges, the difference between the rural and the urban market and the suitable marketing strategy with the suitable example of companies and their experience in going rural.

CONTENTS Description Page No. Chapter 1 Rural Market 1 Rural Marketing - Challenges And Opportunity 2 Impulse to go Rural 6 Rural Initiators 11 Rural Vs Urban Consumer 15 Strategies 17 Rural marketing Strategies 19 Chapter 2 About HUL 24 HUL Distribution Model 28 HUL Distribution Effort 30 Partnership Opportunities 38 HUL in foreign Market 38 Chapter 3 Proctor & Gamble 40

P & G Strategies 42 Summary 46 Bibliography 48


RURAL MARKETS Rural Markets are defined as those segments of overall market of any economy, which are distinct from the other types of markets like stock market, commodity markets or Labor economics. Rural Markets constitute an important segment of overall economy, for example, in the USA, out of about 3000 counties, around 2000 counties are rural, that is, non-urbanized, with population of 55 million. Typically, a rural market will represent a community in a rural area with a population of 2500 to 30000. Rural products of India are unique, innovative and have good utility and values. Large number of these rural products (like handicraft items, food products, embroidery, clothes & other products) sustains a significant segment of the population in the rural areas. Several attributes of rural products can be identified, for which, it has a demand in the market. Out of the lots, µethnic origin¶ and µindigenous design & appearance¶ are two traits of rural products, attracting a premium in the market. But, contrary to this, the nonuniformity of rural products (from one another) and lack of its quality control measures has been creating a negative demand. Besides, the small sized and dispersed production units of these rural products hinder realization of the economies of scale in marketing and result in high transaction costs per unit of output. Niche-based products have no local market. Products in local use are also not marketed horizontally; they often first travel down to market through a long chain of intermediaries and then up to more difficult locations in the rural areas. In the process, the people in rural areas suffer from both low prices as producers and high prices as consumers. In this conflict, rural products loss its equilibrium and the supply side becomes exponentially high. Because of this hazard, rural entrepreneurs face acute economic loss and rural markets become stagnant. Therefore, there is an emergent need for Building sustainable market linkages for rural products, so that, it can be connected to larger markets and farmers can get a sustainable livelihood. Interestingly, for FMCG and consumer durable companies, any territory that has more than 20,000 and 50,000 population, respectively, is rural market. So, for them, it is not rural India which is rural. According to them, it is the class-II and III towns that are rural. According to the census of India 2001, there are more than 4,000 towns in the country. It has classified them into six categories-around 400 class-I towns with one lakh and above population (these are further classified into 35 metros and rest non-metros), 498 classII towns with 50,000-99,999 population, 1,368 class-III towns with 20,000-50,000 population, 1,560 classIV towns with 10,000-19,999 population. It is mainly the class-II and III towns that marketer's term as rural and that partly explains their enthusiasm about the so-called "immense potential" of rural India. Demographic details of Indian rural markets: ‡ About 285 million live in urban India whereas 742 million reside in rural areas, constituting 72% of India's population resides in its 6, 27,000 villages. ‡ The number of middle income and high income households in rural Indian is expected to grow from 46 million to 59 million. ‡ Size of rural market is estimated to be 42 million households and rural market has been growing at five times the pace of the urban market.

hence the distribution effort put by the manufacture prove expensive and sometimes of no consequence. LOW PER CAPITA INCOMES Even tough about 35 ± 37 % of the gross domestic product is generated in the rural areas. Most villages in the eastern part of the country are inaccessible during monsoon season. since the land holding pattern. The massage has to be delivered in local language and dialects. A wide product range will give rise to distribution problems. Even tough the number of recognized language are only 16. it would be naive to think that any company can easily enter the market and walk away with sizable share. UNDERDEVELOPED PEOPLE AND UNDER DEVELOPED MARKET Even today about 75 districts in the country are drought prone and no new technology worth the name has percolated to increase the living standard of the living of these people. the distribution of the incomes is highly skewed. How many manufacturers and marketing men can afford such huge investment in term of personnel and also keep an effective control on it. based on the purchasing power 9. The structure involves stock points in feeder towns to service these retail outlets at the village levels. of dialects is estimated to be around 850. This apart. Hence the per capita income is low. Low literacy rate Increasing agricultural productivity leading to growth of rural disposable income. A leading company. The main problems in rural marketing are: 1. distances from nearest towns. the rural market by and large are the characterized by underdeveloped people and hence underdeveloped market 3. which distribute its consumable product in rural areas use bullock carts and camel back for the physical distribution and transportation of goods in to inaccessible areas. of th people below poverty line has not decrease in appreciable manner. RURAL MARKETING-CHALLENGES AND OPPORTUNITIES The Indian rural market with its vast size and demand base offers great opportunities to marketers. the no. LOGISTICS. In addition. which is the basic asset is highly skewed. the farmer with small agriculture land holding has also been unable to take advantage of the new technology. LACK OF PROPER PHYSICAL COMMUNICATION FACILITY Nearly 50 % of the villages don¶t have road even today. In some villages there may not be a shop from where product can be made available to a rural consumer. 7. accessibility. Thus. and approximately 630000 villages which can be sorted in different parameters such as literacy levels. Even company like broke bond have packets priced from 50 paise onwards. PHYSICAL DISTRIBUTION AND CHANNEL DISTRIBUTION The problems of physical distribution and channel management adversely affect the service as well as the cost aspect.‡ ‡ ‡ ‡ More government rural development initiates. Lowering of difference between taste of urban and rural customers. need examination. LOW LEVEL OF LITERACY . otherwise the product range will be to wide. The no. habits and need. 8. Thus the rural population presents a highly heterogeneous scene. It is only natural that rural markets form an important part of the total market of India. To be effective the products have to be physically moved to places of the point of consumption or place of purchase 4. but identification of shopkeeper. MARKET ORGANIZATION AND STAFF The size of market organization and the staff is very important. offering them credit assuring periodic supply and motivating them also become very crucial. STORAGE. 6. to have an effective control. income levels. Our nation is classified in around 450 districts. While positioning is possible in of durables. The rural market certainly offers a big attraction to marketers. it is shared by 66% of the population. The existent market structure consists of primary rural market and retail sales outlet. Thus willingness to enter the rural market alone is not sufficient. But it becomes difficult maintaining the required service level in the delivery of the product at retail level. product positioning become very difficult . compared to urban areas. 2. Twothirds of countries consumers live in rural areas and almost half of the national income is generated here. the no. These aspects require very careful consideration while evolving distribution strategy for the rural market. Comparative to the rural market will involve large marketing organization and staff. MANY DIALECTS AND LANGUAGES Even assuming that media are available for communication. The very product positioning limits the market only to such segments of farmers. positioning is difficult in consumables. of language and dialects vary widely from state to state. penetration. 5. HANDLING AND TRANSPORT It has been seen that the transportation facility is poor in rural areas. etc. PRODUCT POSITIONING In a highly heterogeneous market. Actually the market bristles with variety of problems. so this warrant designing new products or redesigning the existing one to suit the rural wants. region to region and probably district to district.

This could be doubled if corporate understood the rural buying behavior and got their distribution and pricing right.6 Middle 69. According to Mr. has found that 53 per cent of FMCG sales and 59 per cent of consumer durable sales lie in the rural areas. MART. the money available to spend on FMCG (Fast Moving Consumer Goods) products by urban India is Rs. for tractors and agri-inputs Rs. thus offering tremendous potential for growth.3 Low 32. This presents a tremendous opportunity for makers of branded products who can convert consumers to buy branded products. This again leads to problems of the communication for the promotion purpose. Also counterfeiting product with look-alike name and symbol cut the revenue of the producer of genuine product. and rural credit facilities. D. The higher income classes are likely to double by 2006 ± 07. the lowest income class (i.95 74. the FMCG sector has been successful in selling products to the lower and middle income groups. Some of the attractions are discussed below.000 crore. Of two million BSNL mobile connections. 460 billion FMCG market remains highly fragmented with roughly half the market going to unbranded . Rs.and four-wheelers. Also with a near saturation and cut throat competition in urban India .83 64. Over 70% of sales is made to middle class households today and over 50% is in rural India.000 villages in rural areas. In total.e.000 crore. IMPULSE TO GO RURAL There are many reasons that have urged the FMCG companies to enter the uncharted territory of rural India.23. Unlike the US market for FMCG which is dominated by a handful of global players. This sector touches every aspect of human life. RISING RURAL PROSPERITY India is now seeing a dramatic shift towards prosperity in rural households.7 Total 102. Business Head (Hair). by 2006 ± 07. . and the same is true in India.52 80. etc.76 72.48 0. Over 70% India¶s one billion plus population lives in around 627.96 70. 63.41 27. for durables Rs 5000 crore. 1.41 95. 2.7 23.8 95. This apparently is the result of development work.65. LARGE POPULATION The rural Indian population is large and its growth rate is also high. the rural market for FMCG is worth Rs. India¶s Rs.96 0.8 90. Indian FMCG market has been divided for a long time between the organized sector and the unorganized sector. Personal Products Division.29 29. Income group 2001-2002 2006-2007 Total(urban and rural) Rural % Total (urban and rural) Rural % High 1. This simply shows the great potentiality rural India has to bring the much needed volumes and help the FMCG companies to bank upon the volume driven growth.Rs. The FMCG sector is a cornerstone of the Indian economy. Hindustan Lever Limited.7 According to NCAER projections. of 20 million Rediffmail subscriptions. which happened under the five years plans and other special programs such as land reforms. the specialist rural marketing and rural development consultancy. so did half the transactions on Rediff's shopping site. the rural penetration rates are low. The sector is excited about a burgeoning rural population whose incomes are rising and which is willing to spend on goods designed to improve lifestyle.42 20. To drive home the potential of rural India just consider some of these impressive facts about the rural sector.2500 and below) will shrink by more than 60%. rural electrification rural communication.25 59.500 crore in rural India.000 crore and two.45.8000 crore.6 114. 1.7 2. Globally. According to a study by Chennai-based Francis Kanoi Marketing Planning Services Pvt Ltd.85 66.18 4. many produces of FMCGs are driven to chalk out bold new strategies for targeting the rural consumer in a big way. 50 per cent went to small towns and villages. 49. While access to the television advertisement is very expensive so radio and cinema appears fairly easy. Radio and television. Shivakumar. There are almost twice as many µlower middle income¶ households in rural areas as in the urban areas.500 crore as against is Rs. The absolute size of the rural market is thus expected to double that of urban India. But despite the high rural share in these categories. The dependence should be more on electronic media ± cinema. OPPORTUNITIES The Indian Fast Moving Consumer Goods (FMCG) industry began to shape during the last fifty odd years. unpackaged home made products.52 91. 60 per cent came from small towns. a whopping Rs. Print medium becomes ineffective and to the extent irrelevant in the rural areas since its reach is poor and so is the level of literacy. As per the National Council for Applied Economic Research (NCAER) study.The literacy rate is low in the rural areas as compared to the urban areas. there are as many µmiddle income and above¶ households in the rural areas as there are in the urban areas.

says Mr. affordable Web connectivity through various types of communication hubs will surely impact the currency of information exchange. this experiment can be replicated easily to all 27 states leading to over half a million Internet users through this experiment alone! The existing 600. This also makes it easy to sell look .65 1445 793 4237 2292 54. cooking oil. `Brand Building Beyond the Urban' under the auspices of the Departments of Business Management and Commerce of the Auxilium College here on Friday. ³A rural consumer is brand loyal and understands symbols better. Today's rural children and youth will grow up in an environment where they have 'information access' to education opportunities. the possibilities of change are becoming visible. the share of rural market is more than 505. 24 per cent own refrigerators and 10 per cent own washing machines. vanaspati ghee.000 public call offices in India will soon be transformed into public 'tele-info-centres' offering a variety of multimedia information services. WorldTel is expected to provide 1000 centres in Tamil Nadu with 2 to 20 terminals in each centre. EFFECTIVENESS OF COMMUNICATION An important tool to reach out to the rural audience is through effective communication. As the electronic ethos and IT culture moves into rural India. bank loans. In product categories like toilet soaps. If successful. career counseling. government schemes and services. companies should identify themselves with their advertisements. Twenty nine per cent of the rural people own cars.5 3198 1441 9376 4140 45.1 Toothpaste 23. Table 4. R. IT PENETRATION IN RURAL INDIA Today there are over 15 million villagers in India who are aware of the Internet and over 300. The market has been growing at 3-4% per annum adding more than one million new consumers every year and now accounts for close to 50% of volume consumption of FMCG. Anugrah Madison Advertising.23.000 crore of FMCG.3. it is argued. could drive a quantum jump in sales. Advertisements touching the emotions of the rural folks. If television could change the language of brand communication in rural India. Spending patterns of those who spend are now adapting to face the technology bug. health and legal advice and services. Rs 5.000 crore. . cigarettes and hair oil. comprising Rs 65. The growth rates of lot of FMCG are higher in rural markets than urban markets. The table below indicates the market size of FMCG products in 2001 ± 02 and 2006 ± 07 based on the annual growth rates compounded for 1994 ± 99 period. history was created with Public Call Office phone booths (essentially manually operated payphone facilities). Over the next two years.V Rajan. exam results. Studies have indicated that if the content has direct relevance and will result in commercial gains. worldwide news and information. 5. Rs 45. Consumerism has altered rural buying behavior in recent years. opening in every corner of the country. weather forecasts. livelihood options. tea. The rural consumers spend time and money to access higher level information. especially with reference to FMCG products. job opportunities.4 Vanaspati 7.6 4. The estimated annual business from rural markets was Rs 1. Rural FMCG market Category Growth % 2001-2002 2006-2007 Rural Market Share % Total Rural Share Total Rural Share Toilet soaps 13. people in rural areas are willing to pay for information services. land records. This experiment was an instant success and contributed to hundreds of thousands of jobs.alike".63 4549 2846 6648 4108 62. GROWTH IN MARKET The purchasing power in rural India is on steady rise and it has resulted in the growth of the rural market. The rural audience has matured enough to understand the communication developed for the urban markets. as a result. which points to the untapped potential in the rural areas." said Mr Nandakumar while inaugurating the Business Line Club and delivering the keynote address on the topic.1 Cooking oil 10.000 crore of durables. 27 per cent own colour televisions. Television has been a major effective communication system for rural mass and.000 crore of two-wheelers and four wheelers.4 9645 6021 18086 11291 62. CMD.000 crore of agricultural inputs including tractors and Rs 8. talcum powder. mandi prices.4 Body talcum 23.000 villagers have used it! Ten years back.91 20946 15731 35295 25806 73. "We therefore have to look at the rural market very seriously for future expansion.

But it will be slow. while there may not be much maneuverability for redesign or modification for some of the product. growth in rural incomes. which depend on urban India mainly. In fact. This require extensive of market research. melas etc. One very fine example can be quoted of Escorts where they focused on deeper penetration. rural markets are critical for every marketer-be it for a branded shampoo (or) an automobile. The real India lives in villages-6. The need for a rethinking on the product specific to the rural demand lies in the fact that there are numerous imitation products in the rural market which look like original product. This can be done by utilizing the various rural folk media to reach them in their own language and in large numbers so that the brand can be associated with the myriad rituals. Philips. There are examples of redesign to suit rural market like tea packet costing only 50 paise. Examples:Original product Imitation product Ponds Polons . Rural marketing involves more intensive personal selling efforts compared to urban marketing. it is possible in several other. Coca-cola. youth and women. Their advertisements showed Dharmendra riding Escort with the punchline 'Jandar Sawari. which have been traditionally operating in the rural markets. the leadership in any product or service is linked to leadership in the rural India except for few lifestyle-based products. ITC and the foreign-invested telecom companies. The factors contributing to the growth of the rural. more and more MNC`s are foregoing into rural markets. In addition there is considerable expansion of the rural retail network and also Dordarshan expanding all over India has also contributed to the growth of the rural sector. They did not rely on T. and the government¶s investment in the rural development programs. Shandar Sawari'. melas and other activities where they assemble. today 'keep in touch' with the latest information and maximize both ends. Thanks to television. Gone are the days when a rural consumer went to a nearby city to but branded Products and services`. cinema commercials and a few wall paintings would suffice to entice rural folks under their folds. In September98 they established rural marketing sales. It will have its impact on target groups like farmers. To expand the market by tapping the countryside. LG Electronics. Product There is need to redesign or modify the product to suit the rural market. small size lifebuoy soap. it can be reasonably be assumed that the product manufactured and spold in urban areas can also be sold in rural areas but with some expaections. RURAL INITIATORS "Going rural" the new marketing mantra-all corporate companies agreed that the rural market the key to survival in India.6. Today. Such continued investment in the rural development programs will further strengthen and sustain the growth in coming years. Looking at the 'kuchha' roads of village they positioned their mobike as tough vehicle. Farmers. MARKETING OF CONSUMABLES AND DURABLES IN RURAL MARKET There has been tremendous growth in the consumption of packaged good in rural areas. On youth its impact is on knowledge and information and while on women it still depends on the socio-economic aspect. Surely. though. but are priced cheaper. The marketers who understand the rural consumer and fine tune their strategy are sure to reap benefits in the coming years. it had created quite a sensation among the rural folks as well within few months of their launch. today a customer in a rural area is quite literate about myriad products that are on offer in the market place. There were days when big companies flocked to rural markets to establish their brands. be it tea (or) jeans. Colgate Palmolive. An Indian farmer going through his daily chores wearing jeans may sound idiotic. They keep their cell phones constantly connected to global markets. This is where the fortunes of many of Indian biggest corporations are likely to be shaped. To effectively tap the rural market a brand must associate it with the same things the rural folks do. Time was when only a select household consumed branded goods. Thus. Among those that have made some headway are HLL. celebrations. IMPACT OF GLOBALIZATION The impact of globalization will be felt in rural India as much as in urban. they achieved whopping sales of 95000 vehicles annually. 38. price movements and products' availability in the international market place seem to drive their local business strategies. This growth can also be related to the marketing mix adopted by the major companies.25gm of Colgate tooth powder. Time was when marketers thought van campaigns.V or press advertisements rather concentrated on focused approach depending on geographical and market parameters like fares. Britannia. Standard life. Not for Arvind Mills. When it launched the Ruf & Tuf kits.365 villages to be precise. festivals. market is the growth of population. Animal feed producers no longer look at Andhra Pradesh or Karnataka. Marketers need to understand the psyche of the rural consumers and then act accordingly.

statistics the telecasting stations cover more of the rural population than urban areas. The campaign was more for selling a concept of ³oral hygiene´ to the rural consumers than the product itself. Accordingly to govt. Hence the distribution centre has to take the purchasing habit of the rural people into account. The pricing aspect is contingent upon the product. whose unit cost will be low. This was done sometime during 1987. Distribution The strategy of distribution should take into account the purchasing habit of the rural people. They could even engage professional agencies like video express or video on wheels for rural promotion activities. packaging material used and other factor. Honey dew etc. which if available is made available for very short duration only. Colagate -Palmolive has used Van promotion in rural areas. Since the quantum of purchase by the village shopkeeper is very small. its size of packaging. so that product may be available at the appropriate location. if this medium is to be used. Promotion Among all the element of the marketing mix. Generally speaking there have been only a few attempts in this direction to redesign and modify product for the rural market. if only product is made available to it in suitable form and price. There has been a concerted effort on the part of manufacturers and marketing men to sell products . this issue merits consideration. the margins are also very meager. promotion should receive adequate attention of manufacturing and marketing men. The ultimate consumer product reflects the lack of distribution network. With the expansion of broadcasting facility. Apart from going to the village they also selected places of mass gathering like shandies. Many companies have taken advantage of the facility. Incidentally this may go on to meet the demand from the poorer section of the urban population Price Pricing is another crucial issue of rural marketing. given the radius of area on which the program can be seen. demonstration of the product. While reach of the program cannot be questioned. While consumables are purchased in the village shop or Shandies or in bigger villages. the opportunity for promotion of products in the rural areas have opened up. Nilima These products also have sufficient demand to sustain local manufacturer. Generally. the issue is of the number of customer having the access of the television set for viewing. large towns or nearby cities. The rural market offer a huge potential. Apart from television. In the meantime. other larger towns and nearby cities. In villages beyond the reach of the distribution system. ingredients used in product. But the expenses incurred resulted in the village shopkeepers charging consumers more than the maximum retail price. Reason behind such wide range of products sold in the rural areas seems to be the heterogeneous nature of the product market. sample to consumers and spot sales. Most of them commute to the nearby town to get the supply. which now cover more than 90% of the population in the country.Rin Run Cadburys Eclairs Chaoudhary Eclairs Nirma Narima. there is no need low priced product or redesigns product. By and large. Apparently promotional measures adopted by various companies are one of the factors which have probably resulted in tremendous growth of the rural market. Hence there is a need of the marketing men to think in term of the products specifically designed or modified for the rural market. Hence in case of rural customers. A very elaborate distribution system is necessary in the case of consumer items through it is not the case with consumer durable items since the rural consumer purchase those items only from the Mandi towns. it is well known fact that the rural per capita income is much lower than the urban per capita income. The younger children were asked to brush/clean their teeth with the paste/powder and tell other about the feeling of freshness they experienced. Either the companies can operate their own vans or operate vans through their dealers and stockiest. the salesmen approached the village shops and motivated the shopkeepers to stock their products. Mostly this done by reducing the packaging size. Similarly cheaper blend of tobacco is used to make cheaper cigarettes like Hero. the shopkeepers make their own arrangement for the procurement. where the rural consumer make their purchase depending upon whether it is consumable or durable items. the consumer durables are purchased only in Mandi centers. The access can be limited to higher strata of rural of rural consumers who own television sets and to those where community television sets are available. the other rural promotion measure adopted by different organizations is worth consideration. a distribution system like appointment of dealers or stockiest or distributor should penetrate up to that level. Essentially. Their main objective was direct customer contact. the village shopkeeper invest their funds in purchases and rarely ever get credit facilities.

Several innovative promotional measures are adopted by various companies in rural area. On the rural front the efforts have started only recently and will take time to come out with substantial results. etc. The rural customer generally goes to the same retailer to buy goods. Naturally there¶s a very strong bonding in terms of trust between the two. socially. and psycho graphically different from his urban counterpart. including arrangements of credit. whereas there is considerable amount of data on the urban consumers regarding things like . along with several other related issues. and so on. The population is dispersed to such an extent that 90% of the rural population is concentrated in villages with population of less than 2000. This.specifically designed for the rural market. The difference in consumer behavior in essence stems from the way of thinking with the fairly simple thought process of the rural consumer in contrast to a much more complex urban counterpart. who is the buyer. after-sale service. Even greater challenge lies in terms of the vast differences in the rural areas which severely limits the marketer¶s ability to segment. how much money do they spend on their purchases. One more gray area that needs to be probed into is the importance of retailer in rural trade. regional branded and local unbranded product also thrives in rural market. So the geographical spread is not as homogeneous as it is with the urban areas owing to vast differences culture and education levels. Now in such a scenario the brand becomes subservient to the retailer and he pushes whatever brand fetches him the greatest returns.who is the influencer. and similarly rural marketing strategies are also significantly different from the marketing strategies aimed at urban or industrial consumers. target and position his offerings. The rural Indian consumer is economically. as there is a need to understand the rural consumer. STRATEGIES Dynamics of rural markets differ from other market types. On top of this there has hardly been any research into the consumer behavior of the rural areas. The brand awareness created by these products has given rise to a number of imitation products sold at cheaper price. Thus. Also with agriculture being the main business of rural sector the purchasing power of rural consumer is highly unpredictable which can lead to high variations in demand patterns. Rural consumer¶s brand choices are greatly restricted and this is where the retailer comes into the picture. Also with the low education levels of rural sector the rural buying behavior is such that the consumer doesn't ask for the things explicitly by brand but like "laal wala sabun dena" or "paanch rupey waali chai dena". So the primary challenge is to understand the buyer and his behavior. In addition.CHALLENGES The biggest mistake a FMCG company can make while entering the rural India is to treat it as an extension to the existing urban market. Management of demand involve continuous market research of buyer¶s needs and problems at various levels . Rural markets and rural marketing involve a number of strategies. in which several related items are sold to the target client. The policy with regard to distribution varies widely from company to company. similarly need is there to study the retailer as he is a chief influencer in the buying decision.. The kind of choices that an urban customer takes for granted is different from the choices available to the rural counterparts. Van promotion in rural areas by both owned and hired vans. is widely adopted by companies to create awareness for the products ± consumables and consumer durables RURAL VS URBAN CONSUMERS . how do they go and buy. Joint or co-operative promotion strategy involves participation between the marketing agencies and the client. Bundling of inputsi Management ofi demand Developmental marketingi Unique selling proposition (USP)i i Extension services Business ethicsi Partnership fori sustainability Client and Location specific promotion involves a strategy designed to be suitable to the location and the client. 'Bundling of inputs' denote a marketing strategy. The distribution mechanism takes care of village with at least a population of 5000 persons and the rest are left to make their own arrangement for procurement and sale. But there is a vast difference in the lifestyles of the rural and urban consumers. have been subject matter of intense discussions and debate in countries like India and China and focus of even international symposia organized in these countries. which include: Client and location specific promotioni i Joint or cooperative promotion.

It can be seen why the imitation product manufacture adopt the same style of packaging and that continuous improvements and innovations can be undertaken for a sustainable market performance. form. to attract the target client. the manufacturers and marketing men should think in term of low unit price and low volume packaging with an impression of sturdiness and utilities which should be enhance. Developmental marketing refer to taking up marketing programmes keeping the development objective in mind and using various managerial and other inputs of marketing to achieve these objectives. the imitation products of lifebuoy toilet soap also carry a red and white coloured wrapper. both traditional as well as the modern media. Wherever necessary. the recent concept of social marketing has also been an important concept. In addition to the strategies of marketing mix element wise. that is the farmers. which they display along with the products. an important plank for rural markets and rural marketing. SMALL UNIT PACKAGING 2. Ethics in Business. For the rural market. socio ± economic characteristics. Given the rural occupation pattern there are certain specific characteristics which have to be taken into account. UTILITY ORIENTED PRODUCTS 6. NEW PRODUCT DESIGNS 4. Unique Selling Propositions (USP) involve presenting a theme with the product to attract the client to buy that particular product. redesigning of the product can be thought of depending on the customs and habit of rural customers. RURAL MARKET SEGMENTATION Unlike urban market it is possible to segment the rural market also. a brand name or logo or symbol is very essential for the rural consumer to identify the product with. For examples. exposure to modernization. price. it will be ideal to think of strategies from the marketing mix point of view: product. Some of the typical characteristics which help companies in rural marketing segmentation are:‡ Land holding pattern ‡ Irrigation facility ‡ Progressiveness of farmer ‡ Cropping pattern ‡ Mix of enterprises ‡ Education level ‡ Sociological factor ‡ Occupation categories An appropriate segmentation of the highly heterogeneous rural market and identification of the needs and wants of different segmentation will form the very basis for rural marketing strategies. RURAL MARKETING STRATEGY Considering the type of environment the rural market operates and its associated problems. since the standard of living is very low and any effort to educate the rural consumers would result in the expansion and growth of the rural market in a generic sense. a system of attending to the missing links and providing the required know-how. as usual. BRAND NAME For evolving the pricing strategies. . in short. ³Light joy´ and ³light boy´. This can also be seen in many more products like ³friends and lovely´ face cream. Social marketing is very appropriate for the Indian rural market. LOW PRICED PACKAGING 3. Media. place and promotion. it is possible to evolve effective strategies for the rural marketing. PACKAGING STRATEGY 1. is used as a marketing strategy. and so also the experience of the manufacturing and marketing men who operate in the rural market. some of famous Indian Farm equipment manufactures have coined catchy themes. A rural consumer identifies the product from the colour of packaging and also low purchase price. In addition. The basis of segmentation can be similar ± demographic profile. STURDY PRODUCTS 5. English version of some of such themes would read like: The heartbeats of rural Indiai i With new technique for a life time of company For the sake of progress andi prosperity Extension Services denote. and income levels. Partnership for sustainability involve laying and building a foundation for continuous and long lasting relationship.

In addition. PROMOTION STRATEGY Given the literacy rate of the rural population and distribution of the rural consumers. Mass media i Television Cinemai Radioi Print Mediai 2. the promotion measures or strategies to be chosen should be cost effective.Over three lakh corporative society operate in the rural areas for or different purposes like. Non price competition 5. marketing co operatives. REFILL PACKS/ REUSABLE PACKAGING 4. since they already have a distribution set up. APPLICATION OF VALUE ENGINEERING ± This is a technique which can be tried to evolve the cheaper products. nearly two-thirds of rural population belongs to lower income brackets and such an attempt will expand the market considerably. it is possible to reach distribution van to the villages. USE OF CORPORATIVE :. For villages with very less population.The Public Distribution System (PDS) in the country is fairly well organized. depending upon the off. there is at least one corporative society of one form or another for every two or three villages. the distribution can be left to the initiative of the shop keepers and dealers in larger villages and to the shopkeepers of the small villages.With a . 4. farmer service corporative societies. during early 70¶s Britannia industries bring a product called ³ PROBISK ´ with soya protein. These distribution cabs can be used for promotion works also. if they have to exploit the potential of the rural market 2. by substituting the costly raw material with the cheaper one. Effective utilization of the PDS system should be explored by the manufacturing and marketing men. The distribution arrangement requires serious consideration by manufacturing and marketing men.with improved communication facilities. COVERAGE OF VILLAGES: . Banners iv. consumer corporative and other multipurpose corporative. so that the distribution cost can be minimized. Such application can be seen in the case of costly metal been replaced by cheaper reinforced plastic. UTILIZATION OF PUBLIC DISTRIBUTION SYSTEM: . since the target market is very large. dairy corporative. and at the same time not compromising with the utility and sturdiness of the product. Milk protein is costly but soya protein is cheaper but the nutrition content is the same. The frequency of visits may be fixed. but not at the cost of cutting down or rural population. Such state level federation can be motivated to procure and distribute consumables items and low level durables items to the member societies for selling to the rural consumers 3. Other mass media i. UTILIZATION OF MULTIPURPOSE DISTRIBUTION CENTRE BY PETROLEUM / OIL COMPANIES: . Given the number of such societies. These societies are linked to higher level of society like taluk. As seen earlier. Personal selling and opinion leader DISTRIBUTION STRATEGIES 1. Agro-techniques for crop cultivation 7. LOW COST /CHEAP PRODUCTS 2. Special campaigns 6. The pricing strategy for the rural market will entirely depend upon the scope for reducing the price of the product to suit the rural incomes. Posters iii.PRICING STRATEGY 1. Hand bills and booklets ii. Hoardings/wall painting 3. Thus these corporative have an arrangement for centralized procurement and distribution through their respective state level federation. Shandies / Hats / Jathras / Melas 4.takes or sales realization. The revamped PDS places more emphasis on reaching remote rural areas like hills and tribal areas. district or state level. consumable products may warrant the use of mass media. but the durables products will require personal selling efforts because of the smaller size of the target consumers. 1. AVOID SOPHISTICATED PACKAGING 3. Gift schemes v.

hygiene. Hence a good distribution network should touch the identified feeder market and mandi towns. DISTRIBUTION TO FEEDER MARKETS/ MANDI TOWNS:. HUL is the market leader in Indian products such as tea. HUL is also one of the country's largest exporters. These outlets can be profitably utilized for selling consumable and durable items also. formerly Hindustan Lever Limited. The strength of the companies is in their forceful communication abilities and the far reaching network CHAPTER 2 HINDUSTAN UNILEVER LIMITED About the company Hindustan Unilever Limited (abbreviated to HUL). is to "add vitality to life. This decision will be put to the Shareholders for approval in next "Annual General Meeting". facilitation. and personal care with brands that help people feel good. This is also known as idea marketing or public issue marketing.000 employees are headed by Harish Manwani. SOCIAL MARKETING Social marketing now hold an important role in the marketing activity and is now viewed as a social obligation. It is currently headquartered in Mumbai.13718 crores. seeking to increase the acceptability of a social idea or cause in target groups. the petroleum/ oil companies have evolved a concept of multi-purpose distribution centre in rural areas.view to cater the rural market. look good and get more out of life. They endow the company with a scale of combined volumes of about 4 million tonnes and sales of nearly Rs. soaps. it has been recognised as a Golden Super Star Trading House by the Government of India. The mission that inspires HUL's over 15. 5. hardware. touching the lives of two out of three Indians with over 20 distinct categories in Home & Personal Care Products and Foods & Beverages. concept development. The Anglo-Dutch company Unilever owns a majority stake in Hindustan Unilever Limited. the purpose of social marketing is to bring about a change in behavior and attitude through social advertising and social communication. Unilever. jewellery ." HUL meets everyday needs for nutrition. The manufacturing men and marketing men can play a vital role in such activity. From the feeder market and mandi town. HUL is one among those companies in the country that derives huge revenues (over 50 per cent) from the rural areas.300 managers. torch cells and other durables and consumer product. including over 1. It utilizes the concept of market segmentation.The villagers visit these town at regular intervals not only for selling the agricultural produce but also for the purchase of cloth. since they have the necessary capability to communicate. oil engine pump sets and mopeds. Social marketing is the design implementation and control of programs. Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods company. the nonexecutive chairman of the board. frequently utilized these outlets for their requirements. consumer research. communication. radios.000 employees. The rural consumer who possesses tractors. The company was renamed in late June 2007 to "Hindustan Unilever Limited" to provide the optimum balance between maintaining the heritage of the Company and the future benefits and synergies of global alignment with the corporate name of "Unilever". and incentive and exchange theory to maximize target group response. as its products have become daily household name in India. India and its 41. detergents. It is a mission HUL shares with its parent company. is India's largest consumer products company and was formed in 1933 as Lever Brothers India Limited. which can benefit the society and in turn lend a good image to the company also. . the stockiest or wholesaler can arrange for distribution to the village shop in the interior places. They also provide fertilizers and seeds.

or 50 paise) today constitute about 55% of Hindustan Lever's shampoo sales. Close-up.5. like Lifebuoy. Pepsodent toothpaste at Rs. whose unit prices are within the reach of rural consumers. At the same time. has for decades now been synonymous with soap in rural India. The operations involve over 2. the multinational has now adopted a single organisational-push approach to achieve greater penetration and sales. As against its earlier strategy of each business division dealing with the rural market on an individual basis. Re.000 suppliers and associates.1.soaps. HUL has traditionally been a company. Pond's Talc at Rs. Several of HUL¶s major business categories ² such as fabric wash.3 million retail outlets reaching the entire urban population.000 villages giving promotional packs. covering 6.5. health is of paramount importance. because indisposition is very directly related to loss of income. The rest of the shareholding is distributed among 360. It is also involved in education and rehabilitation of special or underprivileged children. tea.10% of the equity.5. women empowerment. share the same aspirations with their urban counterparts. 5. Along with Operation Bharat. and now has facilities in Mumbai and Bangalore.2. which makes this part of the market a critical growth aspect for the company. Clinic Plus. and rural development. most recent being the village built by HUL in earthquake affected Gujarat. HUL has responded to the trend with low unit price packs of even other products .50. . Secondly in 1998 HUL¶s personal products unit initiated Project Bharat. Pond's. like Wheel. During these exercise. HUL derives over 40 per cent of its sales from rural India. For example. personal products. HUL Penetration in Rural Market:The First major step taken by HUL to penetrate the rural market is that it evolved its distribution model. HUL's distribution network.2. HUL has also responded in case of national calamities / adversities and contributes through various welfare measures. greater push and deeper penetration. The Hindustan Unilever Research Centre (HURC) was set up in 1958.000 redistribution stockists.which holds 52. sachets (Rs. whose core equity is health and hygiene.5. Wheel. Kissan. HUL believes that an organisation's worth is also in the service it renders to the community. and water management. Kwality Wall's± are household names across the country and span many categories . The project covered 13 million rural households by the end of 1999. Fair & Lovely. it is because HUL has developed low-cost value-for-money branded products. Lux. vans from HUL and its distributors did the rounds of 30. initiated in the 1980s. detergents. This gave the company the required competitive edge. Fair & Lovely Skin Cream at Rs. Brooke Bond Taaza tea at Rs. comprising about 4. This approach is expected to lead to better cohesion. care for the destitute and HIV-positive. Example of HULs rural marketing strategy:A unique example is Hindustan Lever's Lifebuoy soap. Sunsilk. Surf Excel sachet at Rs.5. coffee. personal wash and beverages ² already get over 50 per cent of their sales from rural areas. rural consumers today. Rin. which incorporates latest technology in all its operations. If rural India today accounts for about half of detergents sales. branded staples. Lifebuoy.The company is now looking at the rural market from an organizational point of view rather than from the individual businesses¶ point of view. which would eventually lead to better sales.1. Such initiatives are successful and sustainable when linked with the company¶s core business and is mutually beneficial to both the population for whom the programme is intended and for the company. and relief & rehabilitation after the Tsunami caused devastation in South India. by offering them in pack sizes. where the media has its footprints. if products have to come up the order in the rural purchase hierarchy. The company has also taken initiatives to create markets even for apparently premium products. Pepsodent. officials say that it is not enough that individual business divisions push their own strategies for the rural market. Surf Excel. many with post-doctoral experience acquired in the US and Europe. ice cream and culinary products. With media reach gradually increasing. Pond's Cold Cream at Rs. the first and largest rural home-tohome operation to have ever been prepared by any company.Lux at Rs.675 individual shareholders and financial institutions. HUL is focusing on health & hygiene education. adding the company would have to work in unison in order to achieve a balanced growth. Knorr-Annapurna. HURC and the Global Technology Centres in India have over 200 highly qualified scientists and technologists. HUL's brands . In rural India. they have to be affordable. HUL conceptualized Project Streamline to enhance its control on the rural supply chain through a network of rural sub-stockists based in these villages. Lakme. Then HUL started Operation Harvest which was used as a medium of communication with the villagers. However. The principal issue in rural development is to create income-generating opportunities for the rural population. HUL has changed its strategy towards rural markets in order to tackle its somewhat flat growth in these areas. showing products ads and identifying key retail and distribution points. and extended its direct reach to 37 per cent of the country¶s rural population. and about 250 million rural consumers. Lifebuoy at Rs. Brooke Bond. They are manufactured over 40 factories across India.

HLL implemented a major direct consumer programme called Project Bharat. which spanned the decades of the 40s. The second characteristic of this period was the changes brought in as the company realised that the REDISTRIBUTION STOCKIST would be able to provide customer service only if he was serviced well. Large retailers also place direct orders. The project helped eliminate barriers to trial. with the company salesman as the consignee. . Goods were sent to these markets. which comprised almost 30 percent of the total orders collected. innovative incentives to retailers and organizing demand generation activities among host of other things. vocational training. an IT-based rural information service that provides solutions to key rural needs in the areas of agriculture. and strengthened salience of both particular categories and brands.significant change has been the replacement of the Company Depot by a system of third party. dental (Pepsodent toothpaste). audio-visual demonstrations. HUL launched Project Shakti in the year 2001. The REDISTRIBUTION STOCKIST financed his stocks and provided warehousing facilities to store them. increased the distribution reach of the company to a larger number of customers. The REDISTRIBUTION STOCKIST also undertook demand stimulation activities on behalf of the company. HUL has set up a distribution network that ensures availability of all their products. This system helped in transshipment. maintaining favorable trade relations.13 crore. had six µpromoters¶. canvassing for orders from the rest of the trade.´ a stock point for the company¶s products in that market. against cash payment.800 `Shakti' entrepreneurs covering 1-lakh villages in 15 States at the end of 2006 through its project shakti. Operation Bharat ² HUL¶s Rural Distribution Effort. providing. The company salesman still covered the market. HUL has followed a strategy of building its distribution channels in a transitional manner. Each van. and is functional since August 2003. Operation Streamline is one of the major initiatives undertaken by HUL in recent times to penetrate the rural markets. The most important benefit has been improved customer service to the REDISTRIBUTION STOCKIST. In order to achieve this. The REDISTRIBUTION STOCKIST was required to provide the distribution units to the company salesman.2 crore homes. and the money was remitted to the company. one wholesaler in each market was appointed as a ³Registered Wholesaler. The C&FA system has also resulted in cost savings in terms of direct transportation and reduced time lag in delivery. at all items. Phase I The first phase of the HUL distribution network had wholesalers placing bulk orders directly with the company. EVOLUTION OF HULS DISTRIBUTION MODEL To meet the ever-changing needs of the consumer. HUL has piloted `I-Shakti'. This knowledge led to the establishment of the ³Company Depots´ system. film songs and mythological serials interspersed with ads of Lever product. The Registered Wholesaler system. Operation Streamline In 1998. The salesman then collected and distributed the products to the respective wholesalers. The company salesman grouped all these orders and placed an indent with the Head Office. therefore. education. was to provide desired products and quality service to the company¶s customers. Close to 160 vans and over thousand promoters (sales staff of the distributors or some other private operators) were pressed into Operation. The cost came upto roughly Rs. which covered 2. The C&FAs act as buffer stock-points to ensure that stock-outs did not take place. HUL launched Operation Streamline to extend their distribution. and in different successive phases of the evolution of its distribution system. health and hygiene. He would then distribute stocks from the Registered Wholesaler through distribution units maintained by the company. in all outlets. Today Hindustan Unilever Ltd has more than doubled its direct rural reach with 30. In the recent past. Phase II The focus of the second phase. The next stage of Project Shakti was even more ambitious. bulk breaking. Phase III The highlight of the third phase was the concept of ³Redistribution Stockiest´ (RS) who replaced the REGISTERED WHOLESALERSs. The Registered Wholesaler was given a margin of 1 per cent to cover the cost of warehousing and financing the stocks held by him. equipped with a TV arid VCR. In the case of Operation . at a special price of Rs. in keeping with the purpose of integrating business interests with national interests. and acted as a stock point to minimise stock-outs at the REDISTRIBUTION STOCKIST level. comprising a low unit-price pack of haircare (Clinic shampoo). the Carrying and Forwarding Agents (C&FAs). has penetrated well into the rural market. The project has been set up in 8 villages in Andhra Pradesh.15.Based on these insights. skin-care (Fair & Lovely) and body-care (Pond¶s Dream flower talc) products along with educational leaflets . Each home was given a box. This includes.

This on-going project is committed to spreading the message of health and hygiene and touching more lives in rural India over 2007. it created a super stockiest. There are 1. Example:. awareness of different products in rural markets in weak. in the process. This is to cover the sub-stockest¶s costs in servicing retailers in his area. The first interaction with students is then replicated with the women and finally the rest of the community. In the initial phase. to extend their reach. The "Glo-Germ demonstration" is a unique tool to make unseen germs visible and emphasize the need to use soap to wash hands and kill germs.Penetration levels for its Fair & Lovely cream shot up nearly three times in just three months of launch of project. Lifebuoy saw a role for itself in propagating the message .000. The campaign has been divided into various phases. Then. But over a period of time. In 2006 alone LBSC contacted 10. As HUL demonstrated with Operation Harvest.6 million shops in rural areas. therefore. and another 3. The super-stockiest in the bigger towns service these sub-stockiest. HLL has launched a similar large. It has been working well for HUL. Jharkhand and Bihar. In less than two years. this exercise is best done through van operations. Being a cross-functional initiative. these markets are important since growth opportunities are high.000 villages of 10 states. a "Glo-germ demonstration" and a quiz with attractive prizes to reinforce the message are used. Operation Streamline opened up a new distribution channel beyond the territories that were covered by HUL¶s 7. HUL recognized early in its rural distribution initiative that market share would be created only when demand is built up through awareness. and having motor able roads. Cinema Van Operations have films and audio cassettes with song and dance sequences from popular films. medical practitioners. marketers begin by µseeding¶ the new territory. so others are beginning to experiment with it. forge relationships and loyalty with rural consumers. The project aims to generate awareness about good health-and-hygiene practices. Cinema Van Operations The Redistribution Stockiest typically funds these. etc. The programme has touched 27000 villages and 80 mn people over the last four years. a Health Development Facilitator (HDF) and an assistant initiates contact and interacts with students and influencers of the community.000 villages giving promotional packs. school teachers etc. which serviced a select group of neighbouring markets. Yet. who in turn pass it on to the Star Sellers. vans from HUL and its distributors did the rounds of 30. showing products ads and identifying key retail and distribution points. also comprising advertisements of HUL products. sub-stockiest structure. MP. i. Indirect Coverage Under the Indirect Coverage (IDC) method. Depending on their business objectives. It is a multi-phased activity which works towards effecting behaviour change amongst the rural population it touches.Streamline.000 villages that HUL wanted to reach.2 million urban retail outlets. trial and consistent availability. company vans were replaced by vans belonging to distribution Stockiest.scale direct contact. once dealers do the necessary demand creation exercises and as such off takes increases. village community representatives. the goods are distributed from the C &F Agents to the Re-distributors.500 odd distributors.000 villages in UP. The company decided to initiate mobile van operations in a focused manner to create both awareness and point of purchase access.e. Interestingly. called Lifebuoy Swasthya Chetana. Since the distributor cannot cover these retailers regularly. It demonstrates that ³visible clean is not really clean´ thereby proving the importance of washing hands with soap. It was also not always feasible for the distribution Stockiest to cover all these markets due to high costs involved. The company literally had to build up¶ the market village by village in its rural initiative. which will cover about 5 crore people in 15. During this exercise. Cost-effective distribution solutions were as first attempted by HUL. These successive µOperations¶ have enabled the company far deeper penetration levels than other companies. For the additional 30. these sub-stockiest are essentially stock points. van operations (usually run by the distributor or a third party) have also been used to regularly service retailers in these smaller markets rather than only making contract with the end consumer. it has doubled¶ the company¶s reach in rural India. It targets children as they are the harbingers of change in society and mothers since they are the custodians of health. Operation Harvest also involved conducting product awareness programmes on vans. and many other companies are veering around to that option today. Lever¶s distribution network now covers 60 per cent of the villages with population greater than 2. the Star Seller sells everything from detergents to personal products. Operation harvest endeavored to supplement the role of conventional media in rural India and. which is crucial in order to effect awareness and behaviour change in favour of hand wash hygiene. marketer¶s use varying definitions for what is rural. Operation Harvest The reach of conventional media and. The various stages reinforce the message and learnings. mostly through a brand awareness exercise. Whatever be the case. A number of tools such as a pictorial story in a flip chart format. there appears to be a convergence around the prescription that HUL has created to crack opens the rural markets. Being India¶s leading personal wash health brand. who are paid 1-2 per cent more margins that the retailers. Life Swastiya Chetana In 2002.

000 per month. Shakti Vani covered 10. by Western standards. Shakti provides critically needed additional income to these women and their families. some of whom will depend on the organization for their livelihood. Karnataka.of hygiene and health in villages. The Shakti model trains women from SHGs to distribute HUL products of daily consumption such as detergents. Pepsodent. iShakti. Subsequently.000 a month. rural women in India are underprivileged and need a sustainable source of income. toilet soaps and shampoos . SHAKTI ENTREPRENEUR The Shakti Amma¶s are the wealth creators for their villages. health & hygiene and infrastructure development. by equipping and training them to become an extended arm of the company's operation. In 2004. Annapurna salt and Clinic Plus. Shakti is a pioneering effort in creating livelihoods for rural women. in tandem with the company¶s dairy operations. We launched our Lifebuoy Swasthya Chetna initiative keeping this rationale in mind. Rajasthan.000 Shakti Entrepreneurs. or education for their children. The company has acquired a wealth of experience and learning from these activities. organised in Self-Help Groups (SHGs). and being and advisor and helper to their customers in the village. NGOs. Wheel. each woman is looked up to by villagers. there is a marked change in the woman's status within the household.the latter's penetration being only 30 per cent in rural areas. the factories that HUL continued establishing in less-developed regions of the country have been engaged in similar programmes in adjacent villages These factory-centered activities mainly focus on training farmers.000Rs15.700 -Rs. returns. Haryana.000 villages in 2005. education of the children. agriculture. and an overall betterment in living standards. In addition to money. training women to be communicators in the villages ‡ IShakti. approached for advice.000 villages and the vision is to cover 50. and builds a self-sustaining cycle of growth for all. the Internet-based rural information service. a microenterprise initiative ‡ the Shakti Vani program which translates as µthe voice of Shakti¶. vocational training and employment and women's empowerment. animal husbandry. with a much greater say in decisionmaking. The established Shakti dealers are now selling Rs 10. Tamilnadu. The women avail of micro-credit through banks. This results in better health and hygiene. HLL starts with the route sales person who identifies the Shakti entrepreneur for village. especially the girl child. generating alternative income. As a Shakti Amma. A Shakti entrepreneur sets off with 4-5 chief brands from the HUL portfolio . Uttar Pradesh and West Bengal with the total strength of over 40. and fulfilled by the knowledge that she is helping other people as well as her own family. Often they have simple goals.1. The most powerful aspect about this model is that it creates a win-win partnership between HUL and the consumers. Gujarat. Orissa. prices. Through the Shakti Vani program women are trained in health and hygiene issues then teach what they have learned to the village communities.Lifebuoy. which targets small villages with population of less than 2000 people or less.000 worth of products a month and making a gross profit of Rs 700-Rs1. has been launched in Andhra Pradesh. Shakti is HUL's rural initiative. Chattisgarh. HLL then provides the products and helps her understand what to do and how to realize maximum income. for their earnings wishing to buy a telephone. Maharashtra. Punjab. HUL¶S PROJECT SHAKTI HUL has been proactively engaged in rural development since 1976 with the initiation of the Integrated Rural Development Programme in the Etah district of Uttar Pradesh. Shakti is thus creating opportunities for rural women to live in improved . animal husbandry. It provides information and services to meet rural needs in medical health and hygiene. The software is voice enabled for illiterate users. education. and improving living standards in rural India. ‡ The Shakti Entrepreneur. A typical Shakti entrepreneur earns a sustainable income of about Rs. Madhya Pradesh. Jharkhand. a group community portal that enables users to access information in a variety of areas. Bihar. which is double their average household income. It seeks to empower underprivileged rural women by providing income-generating opportunities In general. a scooter for transportation. These are the core brands that they layer it with whatever else is in demand like talcum powder or Vaseline during winters. governmental bodies and other institutions have been working to improve the status of rural women.500 kiosks across the state by 2005. This Programme now covers 500 villages in the district. It has since been extended to in Andhra Pradesh. They learn about products. The vision is to have 3. Shakti has three initiatives. Nearly as important as the money they are earning is the improved social standing for the women.

The kiosks offer information chiefly in the form of audio-visuals in the following areas: ‡ Health & Hygiene ‡ E-Governance ‡ Education ‡ Agriculture ‡ Employment ‡ Legal services ‡ Veterinary services The information provided in the above areas is called from the best available resources. A similar partnership is in place with Tata Adult Literacy for adult education. Andhra Pradesh. The crowd also comprises young teenaged girls and children. while improving the overall standard of living in their families. to 7 p. During the launch of these kiosks. People can also send queries on health and hygiene to a local doctor for a speedy response. users have to register themselves first and obtain the unique registration number. The kiosks remain open from 9 a. SHAKTI VANI Fair And Lovely(FAL) Vani operates under the aegis of Hindustan Unilever¶s Project Shakti.conditions and with dignity. On the advice of her roommate she starts using FAL. important village members like the sarpanch. This is followed by an µapplication challenge¶. an important businessman or anyone who is highly regarded by the villagers. a village girl who goes to town to study and wants to participate in a dance competition. An id card with the registration number is provided for use every time they visit the kiosk. taking additional care to ensure that information. Uttar Pradesh. But Moon Moon lacks in confidence because of her complexion. State Governments and NGOs with the common goal of rural development.´ Punjabi informs. the school principal.m. lest there be trouble in the future. where about 30-35 women in the age group of 25 to 30 have assembled. and have been functional since August 2003. A farmer from the village can obtain a quick solution to a pest problem with his crops. The baithak is at Baniyapara. six days of the week. especially in areas like agriculture. ³It is always better to meet and inform them that we are planning a programme in the village. a network spread across 18. As per plans to extend Project Shakti into other states. The job of identifying villages for activation programmes rests with the HUL sales team. Local school teachers have also been involved in the process. The kiosks have received an overwhelming response from the local populace. 19-year-old Rakhiba Khatoon. Villagers can avail of discount coupons from the kiosk for medical treatment from doctors operating in local areas. and doesn¶t just win the competition. Khatoon then invites a girl from the crowd and demonstrates the right method of applying FAL. The KOLs also help the activation team in selecting a local µFAL didi¶ for that particular kasbah or mohalla. I¶m introduced to FAL Vani.. Bihar and West Bengal. HUL seeks . To enable access to the services.m. where a dozen women from the crowd are given a minute to apply FAL: the one who applies it the fastest and in the right way wins. HUL team meets key opinion leaders (KOLs) like the sarpanch. while improving the distribution and reach of FAL. 'I-shakti¶ has also tied up with Azim Premji Foundation to deliver innovative educational modules to students of classes VIII-XII through the kiosk. Khatoon uses a flip-chart to tell the story of Moon Moon. The FAL didi is someone of a friendly disposition. Here.624 villages in the states of Tamil Nadu. Her role is to help gather the crowd for the presentation. but also returns to her village and starts a dance-school for kids. I-SHAKTI I-Shakti kiosks have been set up in 8 villages in Andhra Pradesh. Partnership Opportunities of HUL HUL is keen to work with Corporates.HUL is looking to engage in mutually beneficial partnerships with other corporates on both the Shakti as well as the i-Shakti platforms. The FAL Vani is a trained HUL employee who conducts the programme. These experts are also available on request. FAL Vani is engineered to empower rural women in earning a livelihood. schoolteacher and doctor are invited to help reinforce relationships with the villagers. Once a village has been selected. Maharashtra. is locally relevant and includes inputs from home-grown experts. to help provide solutions to problems raised by users through a query mailing system. is well-known in the village and in the good books of most villagers.

urban business models are not really successful in tapping the full potential of several small clusters of consumers across remote markets. CHAPTER 3 PROCTOR & GAMBLE P&G Procter & Gamble Co. COMPANY SUCCESS IN RURAL MARKET The rural micro-enterprise has helped the Rs 13. of Hindustan Lever¶s revenues came from the rural markets in India. Overall. Industry officials say the awareness level of rural consumers about products and brands are lesser than the urban markets. shampoos. Shakti¶s ambit already covers about 15 million rural population. given the saturation of urban markets. Also. Also. it is being promoted as Joyeeta and Saubaghya. HUL sources said the project currently contributes µhandsomely¶ to the company¶s sales. Breeze. Armed with micro-credit. The effort is expected to help Unilever tap fresh growth avenues in emerging markets in the face of recessionary trends in the US and Europe. Several rural pockets are populated by less than 2000 individuals but are seen as unreachable and remain untapped by consumer goods makers. Fair & Lovely. is a Fortune 500.717-crore Hindustan Unilever in pushing growth rates in several categories such as personal wash. Ponds. HUL IN FOREIGN MARKET The project has emerged as a successful low-cost business model and enhanced HUL¶s direct rural reach in the so-called media-dark regions. around 50&percnt. health and hygiene education. fabric wash. oral care and skin care. American multinational corporation headquartered in Cincinnati. Brands like Annapurna. HUL is working with over hundred NGOs across the country and would like to collaborate with more NGOs who are interested in extending the Shakti initiative amongst their SHGs in different states. Clinic Plus and Pepsodent have sold good numbers in smaller markets. Vietnam and Bangladesh. r ural women become direct-to-home distributors of Unilever brands in rural markets. companies try to reengineer their business models to derive growth from rural consumers. to global revenues. through their rural development departments to establish contact with SHG NGOs in their respective states. respectively. Wheel. There is a similar initiative in Vietnam as well. In Bangladesh and Sri Lanka. company sources said. It is being considered for other Latin American and African markets. Lux. . The project was started in 2001 to empower underprivileged rural women by providing income-generating opportunities.the support of State Governments. The Fortune 500 transnational which sells foods and home and personal care brands in about 100 countries has stepped up focus on the project given that emerging markets now contribute around 44&percnt. Lifebuoy. Lakme. The project is being customised and adapted in other Unilever markets such as Sri Lanka.

a remarkable achievement against well-entrenched competitors like HLL's Wheel and Rin. it soaked up a marketshare of 11 per cent. in which it holds 65 per cent. and commands just 1 per cent of the segment five years later. It is 10th in Fortune's Most Admired Companies list (as of 2007). given the huge growth potential therein. Then. Duracell. The latter reported a net profit of Rs 77 crore on gross sales of Rs 449. P&G is credited with many business Innovations including brand management. William Arnett Procter. however. This added brands such as Gillette razors. the next move is to invest in distribution and penetration. By 1998. Pantene's share had come down to 6 per cent 36 months later. a leading consumer packaged goods producer. Procter & Gamble India (P&G) launched Ariel. The challenge is to win the hearts and minds of the consumer by being cost efficient. in 1911. P&G's Ariel bar quickly grabbed 7 per cent of the detergent bars segment. its marketshare had dropped to less than 1 per cent. Beautyi Care Beauty segmenti Grooming segmenti Household Carei Babyi Care and Family Care segment Fabric Care and Home Care segmenti Healthi & Well-Being Health Carei Snacks. Soft & Dri. the company sponsored a number of radio programs. The deodorant brands Right Guard. Head & Shoulders. We are putting this in place and hope to accomplish the task in the next 2-3 years. The Cincinnati-based parent operates through two subsidiaries ² Procter & Gamble Home Products. which already had the image of a premium product. with HLL fighting back with Clinic and Sunsilk. the soap opera. Coffee and Peti Care P&G has been operating in India for the last 10-12 years. In the 1880s. Camay built a marketshare of 6 per cent-only to lose a quarter of it by 1999 because of a renewed assault on the segment by HLL's Lux International and Dove. In just 2 years. The company's leaders began to diversify its products as well and. a mid-segment detergent powder still riding on the equity of the mother brand. But.1994: Slotting the global soap brand. which is wholly-owned.8 crore in the year ended June 2002. Braun. and Dry Idea were sold to Dial Corporation. Some examples are 1991: Breaking new ground to create a premium segment in the Hindustan Lever Ltd (HLL)-ruled detergents market. instituted a "value pricing strategy" during . It also divested Gillette's oral-care toothpaste line. in a virtually stagnant market. and has been able to build stable equity in brands like Vicks. Camay. VALUE PRICING STRATEGY Procter & Gamble made dramatic and long-term changes in its pricing and promotion strategy. HLL has better Local market understanding and a robust distribution channel. As radio became more popular in the 1920s and 1930s. As of 2008. began producing Crisco. After the successful implementation of the Golden Eye distribution model. a shortening made of vegetable oils rather than animal fats. began a profit-sharing program for the company's workforce in 1887. HLL's Surf Excel with Active Oxygen became the segment-leader. P&G took its competitors by surprise. 1992: Capitalising on the highquality. The company called the soap Ivory. William Procter's grandson. Rembrandt. Within 12 months. 1993: P&G unveiled Ariel Super Soaker. P&G has agreed to sell its SpinBrush batteryoperated electric toothbrush business to Church & Dwight. an inexpensive soap that floats in water. forming the largest consumer goods company and placing Unilever into second place. in 1998. the brand started losing share. In India P &G found itself headlock with HLL on most of the front and losses ground in almost all of them. But." according to the company's June 2007 earnings release. and the Connect + Develop initiative. which was put in place by the company¶s former managing director Gary Cofer. Procter & Gamble (P&G). 1995: P&G launched Pantene. its global shampoo brand. these shows often became commonly known as "soap operas". as HLL quickly hit back with Rin Power White. Ariel. P&G is the 6th largest corporation in the world by market capitalization and 14th largest US Company by profit. In January 2005 P&G announced an acquisition of Gillette. As a result. among others. Procter & Gamble began to market a product. The acquisition was approved by the European Union and the Federal Trade Commission.Ohio. Costing thrice as much as the most expensive product till then-Surf with Wash Boosters-the compact detergent powder dominated the slot for 7 years. According to Mr Khosla P & G managing director (India) ³Golden Eye is the most efficient distribution system in the country. The companies officially merged October 1. and Procter & Gamble Hygiene and Health Care. with conditions to a spinoff of certain overlapping brands. that manufactures a wide range of consumer goods. 2005. and OralB to their stable. In July 2007 the company's operations are categorized into 3 "Global Business Units" with each Global Business Unit divided into "Business Segments. high-performance image built by the brand. into the popular price-segment.´ P&G had earlier pronounced that its strategy would largely revolve around the urban consumer. gaining a 5 per cent share of the competitive market in the very first year.

P&G's ad spend ran up to Rs 80 crore-an estimated 11 per cent of its sales of the advertised products. proving that P&G's ad rupees were not providing great returns in terms of turnover. reduced its distribution channel deal expenditures by 20&percnt. Overall. During the same time period. (due to the decrease of coupons use by 54. did some value-mapping P&G's focus on Ariel Microshine.. which is targeted strictly at the premium compact powder segment of the detergents market. P&G will no longer need to advertise on expensive mass-market channels. leaving the rest to the wholesaler. Of the three competitors. This was because the cut in promotions resulted in fewer consumers buying P&G brands. P&G's market share decreased 16percent. Slowly and slowly rural masses accepted shampoo a big way and start asking for the small bottles of shampoo. but neither did it take full advantage in a mad grab for market share. In future.3. 2. Hence in rural market P & G management compromise on the quality of the product and bring it down a little. trade deals). of share. and efficiencies in production P&G's Operation Golden Eye P&G's rural turnover is small. -.P&G was concerned with the cost of administering promotions. What is significant is that. a lower cost of good sold. advertising increased 6.1 percent. fearing that on one hand they attracted "cherry-picking" bargain hunters who could care less about the brand. and reduction in price cuts). The price-insensitive nature of the premium end of the market suits P&G. and coupons decreased 17. By contrast. P & G has always focused it energy and strategy on better and quality products but Indian market is price sensitive market and by adopting low price strategy HLL was eating P&G market share in both urban and rural market. The criteria for selling a product through a wholesale channel are that it must have strong consumer-pull. so it began trying an approach it learned from its competitors in the Philippines and China ± it began selling shampoo sachets at the price of Rs. Narrowing its focus will lower P&G's marketing expenses. and Gillette) net price paid increased 10&percnt. even P&G's top brand. and decreased channel deals by 15. concentrate on the outlets that contribute the maximum to sales.. Unilever.which it boosted advertising while simultaneously curbing its distribution channel deals (in-store displays. even in urban markets. only Gillette lowered prices and it increased coupons use by 127. It is the classic 20-80 solution. P&G.7&percnt. the overall competition's (including companies such as Colgate. P&G's presence is limited.. and increased its advertising expenditures by 20&percnt The Impact From 1990 -1996.1 percent.4&percnt. and significantly reducing its coupon promotions Things which inspired P&G to initiate this value pricing strategy was 1. but made up for this through increased prices 20&percnt. and on the other hand they weakened the loyalty of their core customers.. logistical efficiency . Meanwhile P&G increased advertising by 20. It is also thought that one of the prime architects of the strategy As a result.6 percent. Price-insensitive consumers buy on the basis of the value perception-the difference between the benefits of the product and its price.far more than Colgate. in what it calls Operation Golden Eye. P&G is focusing only on key outlets. Which increased the revenue of P&G but soon was copied by HLL and other competitor .. deals increased 13.3percent. is driven by the same logic. P&G began to acknowledge that high prices would hinder the Indian from using its products on a large scale. where tariffs are between 10 and 25 per cent lower. HLL spent only 6 per cent of its sales on advertising. and neither the cut in promotions nor the increase in advertising had any appreciable effect on SOR. because the markets it will now cater to can be reached through Cable and Satellite (C&S) channels. P&G wants to shift the basis of competition to non-price issues. possibly. like Doordarshan. over the course of six years (1990 through 1996) P&G reduced its coupon expenditures by over 50&percnt. and the effect of upand-down swings in demand on the production system. P&G was concerned with the impact of promotions on brand loyalty. the competition did not completely cooperate with P&G. Overall. In fact.3&percnt.. P&G's decision to concentrate on high-margin segments is also driven by the need to sustain its marketing drive. It lost 16&percnt.. Vicks-which accounts for 23 per cent of its sales-is sold mainly in the metros. the compact segment is growing at 10 per cent per annum while the rest of the market is limping along at 2 per cent. which has not been entirely comfortable in price-sensitive segments.7&percnt.. P&G's Value Pricing Strategy showed no change in share of requirements or category usage. which a brand like Vicks has. the net price paid by consumers of P&G products increased 20.. but it did end up with a reduced penetration rate. Indeed. which declined 16 percent.

It is clear that rural markets have caught the eyes of FMCG marketers and it is being targeted through experiments in a big way. it should be possible to seamlessly integrate them in the months and years to come. But is it a right marketing strategy? Or will it prove to be an expensive mistake? Well that¶s the issue most FMCG companies face today and the one we discuss here. has emerged as one of the key strategies being used by FMCG majors. With a judicious blend of click & mortar capabilities. the end objective is to improve the robustness of the rural supply chain. Whether the objective is to increase market share or to lower transaction costs. agricultural communities in villages use internet kiosks .SUMMARY According to a study by the National Council for Applied Economic Research (NCAER). Marico. thus offering tremendous potential for growth.3 million urban households as against 1. and. Ultimately the winner would be the one with the required resources like time and money and also with the much needed innovative ideas to tap the rural markets. It becomes amply clear that rural India has to be the hot target in future for FMCG companies as it presents a plethora of opportunities. Offering more product variants. Moreover. all form part of a FMCG corporate¶s strategy. Many of the FMCG companies are already busy formulating their rural marketing strategy to tap the potential before competition catches up. . sizes and different marketing and distribution channels. the number of middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. Colgate-Palmolive or Britannia. price points. There is huge potential and definitely there is lot of money in rural India but the smart thing would be to weigh in the roadblocks as carefully as possible. However not everything is all rosy and there exist some gray areas in the rural strategies also. But rural India isn¶t just being developed as a consumer market. the rural penetration levels are low. They are also able to disseminate knowledge on scientific farm practices & risk management. there are almost twice as many 'lower middle income' households in rural areas as in the urban areas. the middle and high-income market is expected to grow from 46 million to 59 million. given the right policy environment.6 million households in rural areas.known as i-shakti . To increase sales. there are scalable and robust models. But despite the high rural share in these categories. all waiting to be harnessed. In urban India. As per the NCAER projections. there are as many 'middle income and above' households in the rural areas as there are in the urban areas. In the end it is certain that FMCG companies will have to really gain inroads in the rural markets in order to achieve double digit growth targets in future. With extensive competition not only from MNCs but also from the numerous regional players and the lure of an untapped market has driven the marketers to chalk out bold new strategies for targeting the rural consumer in a big way. All biggies in the industry be it HLL. Thus. P&G are showing deep interest in rural India. The companies entering rural market must do so for strategic reasons and not for tactical gains as rural consumer is still a closed book and it is only through unwavering commitment that the companies can make a dent in the market. At the highest income level there are 2. growing the consumer pie rather than sharing it. the absolute size of rural India is expected to be double that of urban India. Moreover. It is also being developed as a cost effective supply access ready information in their local language on the weather & market prices. categories.

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