RURAL MARKETING Answer two questions. All the questions carry equal marks 1. Define RURAL.

How big is the Rural Markets in India? What is the total share of FMCG Markets in Rural? How FMCG Companies are covering this huge market potential? 2. According to LG, except the seven metros, entire India is Rural. Do you agree with this statement? If Yes, Why and if No, Why not? Give proper examples. 3. What is Amma Shakti and E-Chopal? Which companies initiated these? Discuss in detail about CSR in Rural India. 4. Define Shandies, Mandies, Mela and Haat. How do they differ from each other? Discuss with examples. ____________________________________________________________________

Solution to Question 1

Defining Rural India:

Organisation
NSSO ( Census)

Definition

Limitations
rural not defined

Planning Commission LG Electronics NABARD

Population density < 400 / Sq Km 75 percent of the male working population is engaged in agriculture No Municipal corporation / board Towns upto 15,000 population are considered rural All places other than the 7 metros All locations with a population upto 10, 000 considered rural

Town characteristics not defined Only clarifies what are the cities Village & town characteristics not defined

Sahara

Commercial establishments located in areas servicing less than 1000 population

Population characteristics unknown

Size and Structure of Rural Markets

Rural markets, as part of any economy, have untapped potential. There are several difficulties confronting the effort to fully explore rural markets. The concept of rural markets in India is still in evolving shape, and the sector poses a variety of challenges, including understanding the dynamics of the rural markets and strategies to supply and satisfy the rural consumers.

Rural Tourism in India is a country of rich culture and heritage. With above 70% population residing in villages, real India has its roots right inside this simplistic structure. Rural Tourism in India takes you to a journey of not so known -- the land and people which is the back bone of this country. It is a journey to explore diversity and hospitality from nook and corners of India. Rural tourism attempts to take you away to a dreamland full of peace, simplicity and innocence. Connect with nature, unlearn luxury, and spend time with people who support your life by providing the raw inputs for complex city life needs. From agriculture to sericulture, they do it all. What you explore during these tours is a unique experience and an eye opener to the basics of a developing economy in the country? You not only get to see rural life closely, but also get a chance to connect and open avenues for rural India by interacting with people closely.

The senior generation still believes that the villages are yet enjoying the pastoral bliss, the villagers enjoy daily dose of Hindi films, either on the TV or on make-shift halls. Village still gets reflected in the help elders provide to the children in writing school essays on village life. However, the topic of village is always a short life as it can never sustain long discussion or enquiry

Indians consider the villages to be still living in prehistoric times with people having primitive passions that evoke fear amongst the urban population, the fear of the unknown. They consider the village to be the other India quite different from the urban India. Village the urbanite believes can be presented as amusement in a reality TV show. The implications of these urban understandings of the villages are given below-

Urban mind has distanced itself from the rural market through the belief that rural marketing needs specialization for success. The entire village scene has been stereotyped with the belief that they are all the same in the entire country. There is yet no attempt at understanding the village buyers and their buying motivations and this fact is most evident when the rural advertisements are viewed-the way Dhanno sings about her happy living, people in panchayats talking about the new road likely to come to the village soon and the advent of village fairs with nautankis. As any marketer of repute will tell, this situation needs to be changed and changed drastically, fast. India is a country where majority population, almost 70% lives in villages. There are nearly 627000 villages in the country spread across its length and the breadth. However, the village people are poorer than the city folks as the village contributes less than 50% of the total country s income. However, now the situation is gradually changing for the better.

There are 25 official languages and some four hundred dialects spoken in the country. Most world religions have their adherents here.

In the first half of the twentieth century, village people were using neem or babul tree s twig for cleaning their teeth. Today, they are using tooth powder or toothpaste. Instead of groundnuts the children are asking for chocolate candies. Face cream or lotions have replaced Besan, chickpea flour as a face cleanser.

Appreciating the size and business potential of the rural market, major companies, including, Hindustan Lever, P&G have made special strategies for targeting rural markets.

Total Share of FMCG Markets in Rural India: At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas.

FMCG Companies covering the huge market potential: With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i.e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future

According to a study by research firm The Nielson Company, the fast moving consumer goods market (FMCG) in rural India is tipped to touch US$ 100 billion by 2025 on the back of "unrelenting" demand driven by rising income levels. According to the study, rural India now accounts for more than half of sales in some of the largest FMCG categories. The study found that: Rural purchasing power has grown faster than urban in the last six quarters Faster growth in rural is not limited to penetration; today the rural consumer s frequency of consumption is growing faster as well, demonstrating their entrenchment in these categories Instant noodle sales are growing nearly twice as fast in rural India compared to urban in both penetration and frequency Seemingly urbane brands in categories like deodorant and fabric softener are growing much faster in rural India than urban Several FMCG firms, including ITC and DCM, have been registering faster and higher growth 1`in the sales of their goods in the rural markets as compared to the urban markets. Some of the FMCG companies such as Godrej Consumer Products, Dabur, Marico and Hindustan Unilever (HUL) have increased their hiring in rural India and small towns in order to establish a local connect and increase visibility. Swiss FMCG giant, Nestle plans to make further inroads into the rural markets. The company has asked its sales team to deliver "6,000 new sales points every month in rural areas" to expand its presence in Indian villages, according to Antonio Helio Waszyk, Chairman and Managing Director, Nestle India. At present, rural consumers spend about US$ 9 billion per annum on FMCG items and product categories such as instant noodles, deodorant and fabric, with the pace of consumption growing much faster than urban areas, as per the findings.

Solution to Question 3

Project Amma Shakti of HUL:

Hindustan Unilever Limited (HUL) to tap rural market conceived of Project Shakti. This project was started in 2001 with the aim of increasing the company s rural distribution reach as well as providing rural women with income-generating opportunities. This is a case where the social goals are helping achieve business goals.

The recruitment of a Shakti Entrepreneur or Shakti Amma (SA) begins with the executives of HUL identifying the uncovered village. The representative of the company meets the panchayat and the village head and identify the woman who they believe will be suitable as a SA. After training she is asked to put up Rs 20,000 as investment which is used to buy products for selling. The products are then sold door-to-door or through petty shops at home. On an average a Shakti Amma makes a 10% margin on the products She sells.

Objective of the project Amma Shakti: The Shakti entrepreneur program creates livelihood opportunities for underprivileged rural women. The Shakti Vani program works to improve the quality of life in rural India, by spreading awareness of best practices in health and hygiene. They are also studying the consumption habits of the rural People

E-Choupal of ITC:

E-Choupal is an initiative of ITC Limited, a large multi business conglomerate in India, to link directly with rural farmers via the Internet for procurement of agricultural and aquaculture products like soybeans, wheat, coffee, and prawns. e-Choupal was conceived to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries. The programme involves the installation of computers with Internet access in rural areas of India to offer farmers up-to-date marketing and agricultural information.

Benefits of E-Choupal: Helps in enhancing the competitiveness of Indian agriculture Farmers have more knowledge of prices and could have a much better control over the timing of making its trade. Reduces monopoly power of CAs(commission agents), which cut the costs for both farmers and soybean processor. Empowering rural India with the relevant information. Farmers can even use it for buying relevant supplies which they need. Improvement in the productivity Social stability Payment on delivery Lower cost of input for farmers as well as ITC

CSR in Rural India:

Defining CSR: Corporate Social Responsibility (CSR) is a concept that encourages organizations to consider the interests of society by taking responsibility for the impact of the organization's activities on customers, employees, shareholders, communities and the environment in all aspects of its operations. This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.

Corporate social responsibility is the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development.

Corporate Social Responsibility and the Investment Climate: Many businesses in emerging markets are realizing benefits from corporate social responsibility initiatives, with quantified improvements in revenue and market access, productivity, and riskmanagement. While emerging-market companies tend to focus more on short-term cost savings and revenue gains, intangibles, such as brand value and reputation issues, are more significant for companies in developed countries. The contemporary corporate social responsibility agenda, however, is relatively immature in all countries. Despite widespread rhetoric, its impact is still patchy. In practice, implementation of this agenda by many companies is shallow and fragmented.

Governments are beginning to view corporate social responsibility as cost-effective means to enhance sustainable development strategies, and as a component of their national competitiveness strategies to attract foreign direct investment and position their exports in global markets. There is a significant opportunity for the public sector to harness business enthusiasm for corporate social responsibility to help achieve its goal of reducing poverty. The challenge today for the public sector in developing countries is to identify corporate social responsibility priorities and incentives that are meaningful in their national context, and to play a role in strengthening appropriate local initiatives.

The business benefits of Corporate Social Responsibility: Corporate social responsibility (CSR) isn't just about doing the right thing. It offers direct business benefits. Building a reputation as a responsible business sets you apart. Many consumers prefer to buy from ethical businesses. Companies often prefer suppliers who demonstrate responsible policies, to minimize the risk of any damage to their own reputations. Some customers don't just prefer to deal with responsible companies, but insist on it. For example, sales of "environmentally friendly" products continue to grow - and these products often sell at a premium price. Amul India became as famous for its approach to responsible business as for its products. The company has grown dramatically while continuing to focus on CSR, Started in 1946 in small village of Khera District, Gujrat against British Polson Dairy Company. There are several such names. There are other benefits too:

A good reputation makes it easier to recruit employees. Employees stay longer, reducing the costs and disruption of recruitment and retraining. Employees are better motivated and more productive. CSR helps ensure you comply with regulatory requirements. Activities such as involvement with the local community are ideal opportunities to generate positive press coverage. Good relationships with local authorities make doing business easier. See the page in this guide on how to work with the local community. Understanding the wider impact of your business can help you think up profitable new products and services. CSR can make you more competitive, and reduces the risk of sudden damage to your reputation (and sales). Investors recognize this, and are more willing to finance you.