Rural Marketing

PROJECT REPORT ON

"RURAL MARKETING"

BY

AARON FERNANDES

T.Y. B.M.S.

SEMESTER V

SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICS

MUMBAI

PROJECT GUIDE

PROF. VAISHALI CHAUDHARY

UNIVERSITY OF MUMBAI

2003-2004

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Rural Marketing

I. ACKNOWLEDGEMENTS

Many hands have toiled to ensure that this project finally sees the light

of the day. It required continuous guidance, inspiration and support from

many people and without their cooperation; this project would not have been

complete.

I take this opportunity to express my sincerest gratitude to my Project

Guide, Ms. Vaishali Chaudhary, who lived up to her Designation and was a

constant source of guiding light for me at each and every stage of the

execution of this project.

I would also like to thank the following people who through their experience

have enlightened me on the practical aspects of this subject without whom

the study would not have been carried out successfully.

i. Prof. (Ms) Dr. Malini Johari – Principal, Shri Chinai College, Andheri

ii. Prof. (Ms) S.G. Kelkar – BMS Co-ordinator, Shri Chinai College,

Andheri

iii. Professors at Shri Chinai College:

Prof. Sunil Fussey

Prof. Vaishali Chaudhary

Prof. Padma Iyer

Prof. Gitanjali Thorvat

Lastly I would like to thank my well-wishers and my colleagues who

were a constant source of inspiration and in some cases also motivation as it

ultimately has led to the completion of this project. Finally I would also like to

give due credit to people, who knowingly or unknowingly have guided,

supported and helped me in the completion of this project as without their

support this project would have never seen daylight.

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Rural Marketing

Chapt

er No. C O N T E N T S Page No.

11 RURAL MARKET ENVIRONMENTRURAL MARKET ENVIRONMENT 1 – 141 – 14I Introduction 1 – 5

II The Features of Indian Rural Markets 5 – 6

III Profile of the Rural Consumer 6 – 8

IV Understanding Rural Markets 8 – 11

VChanging Profile of Rural Marketing

12 –

12

VIFactors Contributing to the Growth of Rural

12 –

14

Marketing

22 RURAL MARKETINGRURAL MARKETING 15 –15 – 2020

I What is Marketing? 15 – 15

II Rural Marketing 15 – 15

III Rural Market Strategies 16 – 20

33 PRODUCT STRATEGYPRODUCT STRATEGY 21 –21 – 27 27

IIntroduction

21 –

21

II Rural Product Categories 21 –

3

Rural Marketing

22

IIIProduct Item Decisions

22 –

25

IVBranding Strategies

25 –

27

Chapt

er No. C O N T E N T S Page No.

44PRICING STRATEGY

28 – 28 –

34 34

IIntroduction

28 –

28

II Consumer Categories29 –

29

III Price in Marketing Mix for Rural Marketing 29 – 30

IV Pricing Methods 30 – 33

V General Pricing in Rural Markets 33 – 34

55 PROMOTION STRATEGY 35 –35 – 4141

I Introduction 35 – 35

II Unique Traits on the Part of Salesmen for Rural

35 – 37

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Marketing

III Personal Selling & Opinion Leaders 37 – 37

IV Managing Sales Force of Rural Market 37 – 39

V Selecting Proper Media Mix 39 – 41

66 PHYSICAL DISTRIBUTION STRATEGY 42 –42 – 50 50

I Introduction 42 – 42

II Channels 42 – 45

III Inter-Net Marketing 45 – 45

IV Channel Management in Rural Markets45 –

47

Chapt

er No. C O N T E N T S Page No.

VPossible Approaches for Effective Channel

47 –

50

Management in the Rural Context

77CASE STUDY ANALYSISCASE STUDY ANALYSIS

51 – 51 –

8080

I The Making of ‘CHIK’ 51 –

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57

II E-choupal, the V21 SCM Model

58 –

62

III A Matter of ‘PRESTIGE’ 63 – 67

IV How Mahindra Maxx-ed It!!! – The Mahindra 68 – 75

Case Study

V The COLGATE Case Study 76 – 80

BIBLIOGRAPHY & WEBLIOGRAPHYBIBLIOGRAPHY & WEBLIOGRAPHY

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Rural Marketing

Chapter – 1

RURAL MARKET ENVIRONMENT

I. Introduction:

The emergence of an active cash economy is bound to create is bound to

create a strong rural demand and promote rural consumption. The traditional

growth and dominance of urban industrial centres is undergoing rapid

changes. A more equitable distribution in rural areas would also help in

slowing down the rapidly increasing influx of people from rural to urban areas.

There are two sections of rural population:

A large portion has a low income and low consumption levels;

The rest are rural rich.

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

below:

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Rural Marketing

About 75% of the Indian people reside in rural areas. In other words, for every

consumer in the urban area, there are three of them in the rural areas. Though

the proportion of rural population is showing a slight decrease over the years,

but in absolute numbers, the rural population is growing at a higher rate than

the urban population. This large population will require a wide range of

consumable and durable goods and services. At the same time the need of

the rural areas does not automatically guarantee a market, unless it is backed

by income and the resultant purchasing power.

For a vast majority of the rural population, the main occupation is agriculture

and allied activities. The graph below gives the distribution of rural population

as per their occupation pattern.

About half of the rural population own or lease land to cultivate it for their

livelihood. Another 27% are dependent on these cultivators for their jobs as

agricultural labourers. Thus, a total of 77% of rural population depend on land

only for their living and land is their source of living.

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Rural Marketing

There are others, constituting small proportions, who are engaged in business

like petty shopkeepers or merchants and salary earners like teachers, health

workers and village level officials. The implication of this is that the income

generation in rural areas entirely depends on how the land is used, what crops

are cultivated, how much is marketed, how much is consumed and the

marketing arrangements for the production. If rainfall is adequate, weather

conditions are favourable and appropriate technology is available, the rural

areas prosper as it has happened in the states of Punjab, Haryana and

Western Uttar Pradesh. So the disposable income in the hands of the rural

people is very much conditioned by the status of agriculture and other allied

activities. This also indicates that major part of income generated is a source

of agriculture. 75% of income generation in rural areas is from agriculture and

agriculture-related activities.

One of the deterrents for marketers to exploit the rural market potential has

been the vastness of the rural market in terms of areas covered and the

location of the rural population. It is much easier to cater to the needs of the

urban population because of their concentration, but it is very difficult in the

case of rural population because of their widespread nature.

The villages are also not uniform in size. Nearly 48% of the villages have a

population of less than 500 persons or about 100 households, which is

probably of no consequence to marketers. This may be acceptable since the

proportion of population covered by these 48% of villages account for only

12% of the total population. Yet it should be borne in mind that the people of

these villages also have land and cultivate and generate some income.

Thus the location and size of population of villages throw a challenge to

marketers. This phenomenon is not true for the whole country and there are

wide variations among the different states. In states with high irrigation and

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Rural Marketing

fertile lands, the concentration of population is more when compared to states

with low irrigation facilities and lack of arable land.

Given the distribution of rural and urban population, it can be seen that the

number of literates in rural areas are more than in urban areas. It is an

interesting got note that has been a considerable increase in the number of

literate persons in rural areas since the last two decades. This has its

implications in communicating with the rural population. It appears to prove

that communication should not prove to be such a big hurdle. Today,

television has proved to be an effective medium for communication with the

rural masses. The telecasting network in the country today covers about 93%

of the population.

Assuming that the entire urban population is covered by the television but the

television, which is only 23%, then nearly 67% of the rural population will be

covered by television. Thus, television reaches a larger segment of the rural

population than any other form of mass media. Though radio is also very

popular, people like to see to believe.

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Rural Marketing

The above factors point that the potential for marketing of goods and services

depends heavily on agriculture, since it is the main occupation in rural areas.

The market for agricultural inputs – fertilizers, pesticides, insecticides, tractors,

irrigation equipment and seeds – has been expanding over the years in rural

areas as the Indian farming is fast becoming market-oriented. But the rural

market has remained a dark area for those manufacturing and marketing

consumables and consumer durables. To successfully exploit the potential

offered by the rural market, there is a need to first understand the rural market

in terms of the characteristics mentioned above. Only a few established

companies – HLL, Lipton, Brooke Bond, TOMCO, and P & G – have been

trapping the potential of the rural market for a long time.

I. The Features of Indian Rural Markets

1) Large and Scattered Market : - The rural market of India is large and

scattered in the sense that it consists of over 63 crore consumers from

5, 70,000 villages spread throughout the country.

2) Major Income from Agriculture : - Nearly 60 % of the rural income is

from agriculture. Hence rural prosperity is tied with agricultural

prosperity. Roughly speaking, a location is defined as “rural”, if 75 per

cent of the population is engaged in agriculture related activity. In India,

close to 70 per cent of the population is agrarian and contributes to

about one-third of India’s GNP.

3) Low Standard of Living : - The consumers in the village area do have

a low standard of living because of low literacy, low per capita income,

social backwardness, low savings, etc.

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4) Traditional Outlook : - The rural consumer values old customs and

tradition. They do not prefer changes.

5) Diverse Socio-Economic Backwardness : - Rural consumers have

diverse socio-economic backwardness. This is different in different

parts of the country.

Infrastructure Facilities: - The Infrastructure Facilities like roads,

warehouses, communication system, and financial facilities are inadequate in

rural areas. Hence physical distribution becomes costly due to inadequate

Infrastructure Facilities.

II. Profile of the rural consumer:

1. Size of the Rural Consumer :

The size of the rural consumer group can be understood from the

following details provided in the table:

Population of India

Rural v/s Urban: 1971, 1981, 1991 and 2001

Population Total % Total % Total % Total %

1971 1981 1991 2001

Rural Population 43.90 cr 82 50.20 cr 76.3 64.1 cr 76 74.2 cr 72.3

Urban Population 10.91 cr 20 15.62 cr 23.7 20.3 cr 24 28.5 cr 27.8

Total Population 54.81 cr 100 65.82 cr 100 84.4 cr 100 102.7 cr 100

Rural population forms a major portion of the Indian population as seen in

the table. If we consider the state level picture, in several states like Uttar

Pradesh, Rajasthan, Madhya Pradesh and Kerala, the rural population

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Rural Marketing

constitutes more than 80% of the total population. In states like Bihar and

Orissa 90% of the population is in rural areas.

2. Location Pattern of Rural Consumer :

The urban population of India is concentrated in 3200 cities and towns

and the rural population is scattered over 6, 38,365 villages. Statistics

shows that out of the 6,38,3645 villages have populations of more than

5000 persons each. About 55% of the villages have population in the range

of 500 people or less.

The influence is clear, rural demand is scattered over a large area,

unlike the urban demand, which is highly concentrated.

3. Literacy Level :

It is estimated that there are 23% literate in rural India as compared

with 365 of whole country. The rural literacy in the rural area is on an

increase. Among the rural population Kerala tops with 77%.

The literacy rate has its implication in communication with the rural

population. It appears that communication should not prove a hurdle,

provided appropriate means are chosen.

4. Rural Income :

An analysis of the rural income pattern reveals that nearly 60% of the

rural income is from agriculture. Rural prosperity and the discretionary

income with rural consumers are directly tied up with agricultural

prosperity. The pre-dominance of agriculture in the income pattern has one

more significance-rural demand is more seasonal.

5. Rural Savings :

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The rural consumers have been drawn into the saving habit in a big

way. The commercial banks and the co-operative have been marketing the

saving habit in the rural areas for quite some years. Today nearly 70% of

the rural households are saving a part of their income.

The habit is particularly widespread among salary earners and self-

employed non-farmers.

6. Significant Aspects :

It can be seen in general sense low purchasing power, low standard

of living, low per capita income, low literacy level and overall low social and

economic positions are the traits of the rural consumers.

By and large, the rural consumers of India are a tradition bound

community; religion, culture and even superstition strongly influence their

consumption habits.

Rural Consumer Class

2001- 02 2006-07

Very Rich 0.8 1.6 NUMBER OF

HOUSEHOLDS IN

MILLIONS

Consuming

Class

26.8 41.3

Climbers 54.7 63.3

Aspirants 25 14.7

Destitutes 20.9 12.2

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III. Understanding Rural Markets:

There has been always a vast difference between the two markets for a long

time now. The difference is not only between urban and rural but also within

the rural areas -- between regions, states and districts. There is a difference in

the media reach, the education levels, in the culture and the type of products

that the two markets are exposed to and this leads to a difference in the two

markets.

The difference is in things like -- how do you celebrate New Year, how do you

celebrate birthdays? Small things like these are celebrated in a completely

different manner when the rural and the urban customers are concerned.

There is a vast difference in the lifestyles of the people in the two

regions. The kind of choices of brands that an urban customer enjoys is

different from the choices available to the rural counterparts. The rural

customer usually has 2 or 3 brands to choose from whereas the urban one

has multiple choices. The difference is also in the way of thinking. The rural

customer has a fairly simple thinking as compared to the urban counterpart.

But with technology coming in, mass media reach and the literacy levels going

up - this divide is expected top reduce.

The biggest thing is that there is lack of any research into the consumer

behavior of the rural areas. There is considerable amount of data on the

urban consumer regarding things like -- who is the influencer, who is the

buyer, how do they go and buy, how much money do they spend on their

purchases, etc. but on the rural front - the effort has started to happen now. So

there is a need to understand the buyer.

There is no collective effort. Some people have spent time in the rural

markets, carried out studies and have understood the rural behavior, but their

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Rural Marketing

works have not been passed or known to the rest of the industry. So, an in

depth understanding of the consumer is one key area that the industry needs

to work on.

There are vast differences in the rural areas as well. There are some 5,

60,000 villages and some 525 districts and each one is different from the

other. The geographical spread is not as homogeneous as it is with the urban

areas owing to vast cultural differences. So an in depth understanding of the

areas is what is required.

The field of rural marketing has been witnessing a lot of action from both the

fast moving consumer goods (FMCG) sector and consumer products

manufacturers but, there has been little success in the manner in which rural

research is carried out.

The limitation lies in the inadequate or unavailability of appropriate tools to

evaluate the rural market behavior. The problem arises because of general

lack of education resulting in low awareness about the products and hence the

inability to respond to the queries of the researcher in these areas.

Conventional research tools do not work in these markets, as these are

difficult to comprehend for the illiterate and semi-literate rural people.

The typical research scales used are for ranking, rating and attitude

measurement, limiting the research questions to simple yes/no kinds that do

not bring the true essence of the research process. In an effort to look in to

this issue two students from Management Development Institute, Gurgaon

along with Pradeep Kashyap, director of Marketing And Research Team

(MART) tried working out on some possible solutions to this problem. The

limitation of conventional research tools during the research project prompted

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them to look at alternative sources to solve this problem and the results were

favorable.

Colors are very strong indicators, and forms, of expressing the feelings in the

rural areas and there are tools devised with colors that represent and reflect

the right answer to the researchers' queries. The selection of colors is done on

the basis of the association of rural people with these colors. For instance, it

has been observed that dark green represents a good crop or ‘Haryali’ (as

they call it) and hence represents prosperity and is considered to be the best.

Light green represents not very good crop and stands next to dark green

color.

Yellow represents dry sand or a dry field and hence comes next. Orange is the

color of the setting sun and represents the end of the day and hence is placed

after yellow and just before red, a color that represents danger to them. Such

hypothesis has been working well, according to MART, and it has incorporated

these tools in its research projects.

This is probably the beginning to a new form of research and analysis that

might change the paradigm of rural marketing research and, who knows, one

might just see this field blossom into a specialized research activity. If a simple

ranking and rating is achieved, a lot can be explained about the rural

preferences and behavior providing the marketers and manufacturers of

goods specific to the rural markets get that meaningful insight to be able to

help grow the markets in these areas.

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IV. Changing Profile of Rural Marketing

The position in the rural market was totally different some twenty years ago. At

present there is a demand for certain articles like T. V., fans, radio, engine oil,

readymade garments, detergents, medicines, etc. New product like toiletries,

baby care products and consumer durables are now getting good support in

the rural market.

Parle Agro is marketing 80% of its sale in the rural areas. Batliboi and Co. Ltd.

is a leading marketer in agricultural implements. Hindustan Lever sells its

products like soaps, shampoos, face cream, etc. in all rural markets on a large

scale.

Kirloskar and Crompton are leading rural marketers in diesel engines and

agricultural machinery.

In the service sector the Central Bank and Canara Bank are the largest banks

in rural India. More and more manufacturers are turning towards rural markets

because the urban are getting saturated.

The Indian rural markets have turned out to be gold mine for the marketers in

the nineties.

V. Factors contributing to the growth of rural

marketing:

1. New Employment Opportunities : The income from new employment and

rural development efforts launched in the rural areas has increased the

purchasing power among the rural people. Self employment policy with the

assistance from the bank has become a great success in the rural areas.

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2. Green Revolution : A technological break through has taken place in

Indian agriculture. Rural India derived considerable benefit from green

revolution. Today, rural India generates 185 million tones of food grains per

year and substantial output of various other agricultural products.

3. Expectation Revolution among Rural Masses : More than the green

revolution, the revolution of ‘rising expectation’ of the rural people

influenced the marketing environment of rural India. It brought about a

powerful change in the environmental dynamics. It enlarged the desires as

well as the awareness of the rural people.

4. Favorable Government Policies : As a part of the process of planned

economic development, the government has been making concerted

efforts towards rural development. The massive investment in the rural

India has generated new employment, new income and new purchasing

power. In the recent years as a part of new farm policy, high support prices

are offered for farm products. Various measures like tax exemption in

backward areas, subsidy, concessions, incentives, assistances, literacy

drive in rural areas has brought rapid growth of rural markets.

5. Literacy Growth : The literacy rate is on the increase in the rural areas.

This brings about a social and cultural change in the buying behaviour of

the rural consumer. They are exposed to mass media which create new

demand for goods and services.

6. Growth in Income : The rise in the income resulting from the new farming

strategy is adding meaning and substance to the growing aspirations of the

rural people. Remittances from Indians working abroad have also made a

sizeable contribution to the growing rural income and purchasing power.

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7. Attraction for Higher Standard of Living : The rural consumers have

been motivated to change their consumptions habits enjoy a higher

standard of living by the growing awareness about better living and easy

availability of information about the goods.

8. Marketing Efforts : Firms like Bajaj, HLL, etc., have started penetrating the

rural market realizing the rising expectations and the demand revolution in

the rural India.

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Chapter – 2

Rural Marketing

I. What is Marketing?

The American Marketing Association defines marketing as “those activities

which direct the flow of goods and services from production to consumption.”

Marketing is also defined as “the set of human activities directed at facilitating

and consummating exchanges.”

In essence, marketing covers all those activities involved in providing

customer satisfaction, and making a profit for the manufacturer who makes

use of available resources to the maximum. Marketing starts with the

customer -- what he wants to have; and ends with the customer – giving him

what he wants.

II. Rural Marketing

The Indian rural market with its vast size and demand base offers great

opportunities to marketers. Two-thirds of countries consumers live in rural

areas and almost half of the national income is generated here. It is only

natural that rural markets form an important part of the total market of India.

Our nation is classified in around 450 districts, and approximately 630000

villages, which can be sorted in different parameters such as literacy levels,

accessibility, income levels, penetration, distances from nearest towns and the

like.

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III. Rural Market Strategies

(DEVELOPMENT STRATEGIES FOR RURAL MARKETING IN INDIA)

An appropriate segmentation of highly heterogeneous rural market and

identification of the needs and wants of different segments will form the very

basis for rural marketing strategies. The strategies of the 4 P’s of the

marketing mix would be an ideal one for the rural market.

a. PRODUCT STRATEGIES :

The following are the product strategies for the rural market and rural

consumers:

1. Small Unit Packing : This method stands a good chance of acceptance

in rural markets. The advantage is that the price is low and is easily

affordable by the rural consumer. Products like shampoos, pickles,

biscuits, etc have tested this method.

2. New Product Designs : The manufacturer and the marketing men can

think in terms of new product designs, keeping in view the rural life

style. E.g. P.V.C. shoes and chappals can be considered suited ideally

for rural consumers due to adverse working conditions. The price of

P.V.C. items is also low and affordable.

3. Sturdy Products : Sturdiness of the product either in terms of weight or

appearance is an important criterion for rural consumers. For the rural

consumers, heavier weight means that the product is more durable, e.g.

the experience of torch light dry battery cell manufacturers supports this

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because rural consumers preferred dry battery cells which are heavier

than the lighter ones.

4. Utility Oriented Products : Rural consumers are more concerned with

the utility of the product and its appearance. Phillips India Ltd.

developed and introduced BAHADUR (a low cost medium wave

receiver) during the early seventies. Initially the sales were good but

declined subsequently, on investigation it was found that the rural

consumers chose to purchase radios for entertainment purposes, not

only for news & information.

5. Brand Name : The rural consumers do give their own brand name on

the name of an item. A brand name or logo is very important for a rural

consumer for identification purposes.

b. PRICING STRATEGIES:

Pricing strategies are linked to product strategies. The product packaging and

presentation also keeps the price low to suit the rural consumer.

1. Low Cost/Cheap Products : This is a common strategy widely adopted

by manufacturing and marketing concerns wherein the price can be

kept low by low unit packing like paisa pack of tea, shampoo sachets,

etc.

2. Refill Packs/Reusable Packaging : Health drinks available in the

urban areas. The containers can be put to multipurpose uses, which

can have a significant impact in the rural market. E.g. tea, coffee &

many other consumer goods re available in refill or reusable packages.

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3. Application of Value Engineering : In the food industry, Soya protein

is being used instead of milk protein. The nutrition content of both being

the same, Milk protein is expensive whereas Soya protein is cheaper.

The basic aim being to reduce the value of the product so it becomes

affordable to a larger segment, thus expanding its market.

c. PHYSICAL DISTRIBUTION STRATEGIES:

While it is necessary to formulate specific strategies for distribution in rural

areas, the characteristics of the product - whether it is consumable or durable,

the life of the product and other factors have to be kept in mind.

1. Coverage of Villages with 2000 & Above Population : Coverage of

villages with up to 2000 and above population could be the break even

point for a distribution setup. By doing so the percentage of villages

covered comes to only 10% of all the villages but the rural population

covered will be substantial.

2. Use of Co-operative Societies : Co-operatives have an arrangement

for centralized procurement and distribution through their respective

state level federation. Such state level federations can be motivated to

procure & distribute consumable items and low value items to the

members of the society for selling to the rural consumers.

3. Utilization of Public Distributor System : The PDS in the country is

fairly well organized, whose effective utilization should be explored by

the manufacturing and marketing men. Its purpose is to make available

essential commodities like food grains, sugar, kerosene etc. to the

consumers at a reasonable price. Fair price shops are run by the state

civil supplies corporation, co-operatives etc. Who have an arrangement

for centralized for procurement and distribution?

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4. Utilisation of Multipurpose Distribution Centres by Petroleum/Oil

Companies: Petroleum/oil companies have evolved a concept of

multipurpose distribution centres in rural areas. These outlets can be

profitably used for selling consumable & durable items. In addition to

petrol, diesel etc. fertilizers, seeds, etc. can be stocked at these outlets.

5. Distribution upto Feeder Markets/Mandi Towns : Keeping in view the

hierarchy of markets for the rural consumers, the feeder markets and

the mandi towns offer excellent scope for distribution. From the feeder

towns and the mandi towns the stockist or the wholesaler can arrange

for distribution to the village shops in the interior places.

6. Shandies/Haats/Jathras/Melas : These are the places where the

consumers congregate as a rule. Shandies/Haats are held on a

particular day every week, Jathras and Melas are held once or twice a

year for longer durations, normally timed with religious festivals.

7. Agricultural Input Dealers : Fertilizers should be made available to the

farmers within the range of about four to five km. from their residence,

as per the essential commodities Act. There are about 2 lakh fertilizer

dealers in the country both in co-operative & private sector. E.g.

Varana-Nagar in Maharashtra, where sugar & milk co-operatives have

totally changed the life styles of people. The supermarket in Varana-

Nagar caters to exclusively to rural consumers.

d. PROMOTION STRATEGIES:

The promotion measure should be cost effective. Word of mouth is an

important message carrier in the rural areas and ‘opinion leader’ play a

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significant role in influencing the prospective rural consumers about accepting

or rejecting a product or a brand. Other attributes are explained as under:

1. Mass Media : Mass media is a powerful medium of communication. The

mass media generally used are:

a. Television

b. Cinema

c. Radio

d. Print Media: handbills, booklets, posters, banners, etc.

2. Personal Selling and Opinion Leaders : In personal selling it is

required that the potential users are identified and awareness is created

among them. A highly motivated sales person can achieve this. Word of

Mouth holds a lot of validity in the rural areas. This is the reason why

opinion leaders are thriving among rural consumers.

3. Special Campaigns : These should be undertaken during harvest &

marketing seasons in rural areas. E.g. Tractors owners meet (tonee)

conducted by MRF.

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Chapter – 3

Product Strategy

I. Introduction

It has been observed that the rural consumer outlook is very different from the

urban consumer and what works out for the urban consumer may not work for

the rural consumer. Most of the companies treat rural markets as a dumping

ground for lower end products designed for an urban audience. It could

tremendously benefit the companies if they use a little bit of their technical

expertise to create specific products for the rural economy. The product must

be affordable and satisfy rural needs. It also depends on the consumer’s

attitude towards the product and the cost-benefit analysis done by him before

buying the product. A rural consumer is largely governed by the social values

of rural society. E.g. If a rural consumer has the potential to buy an expensive

premium consumer durables like VCR’s, washing machines, refrigerators etc.

he thinks first of the social values of rural society.

II. Rural Product Categories

The NCAER has categorized the consumer goods into three categories.

Category I- Products are of immediate use to the family. E.g.- bicycles, fans

etc.

Category II- Products are a combination of entertainment products and

products that ease household work strain. E.g. - mixer grinder, cassette player

etc.

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Category III- Here products are a combination of means to supplement

income, easy household working, and source of entertainment. E.g. - washing

machine, motorcycle, etc.

III. Product Item Decisions:

The product or service offered by the marketer has the ability to satisfy the

needs & wants of the customer. Products are physical and tangible. E.g. –

footwear, motorcycle, etc. Services are intangible and people based. E.g. -

health care, etc. The main consideration in individual product/service offer is

developing of product at three levels,

Namely-

1. Core Product Development : Core product refers to the advantages

that are specified by consumer needs. Core product developer has to

focus on the needs of the consumer. Business is to be viewed as a

customer satisfying process & not as a goods producing processing

process. A product that provides the important form utility and ensures

performance of the basic function is the core product. Products are

transient, but the basic needs of the consumer group remain the same.

For an e.g. the need for brushing teeth- old products were neem sticks,

charcoal, etc. whereas now toothpaste, tooth powder is used, still the

need for brushing the teeth remains the same.

2. Tangible Product Development : The product concept becomes

visible and operational when the psychological needs are specified in

physical terms. Every product has five characteristics:

a. Quality

b. Features

c. Style/design

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Rural Marketing

d. Packaging

e. Branding

Quality: Success in the market depends on offering products to the market

segments that will be profitable. Quality signifies the ability of the product to

meet the following expectations-

Reliability,

Economy,

Durability,

Capability,

Efficiency

The product designers should interact with the marketers to know how the

consumers evaluate the quality of products, since consumers develop their

own norms, beliefs & notions about the quality of products.

Features: Features are extras to a product, which are of value to the buyers.

They are improvements provided for more comfort and convenience. They are

of two types

i. Rational, problem solving

ii. Emotional, fancy

The consumer is willing to pay for the solutions to the problems he has in

using the product. The features, which capture the attention of the buyer, are

less functional and fancier in nature.

Design and style: Design means the arrangements of parts, form, colour, etc.

so as to bring out an artistic unit with functionality, aesthetics, convenience of

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Rural Marketing

operation, ease of service of service, repair & costs, etc. Good design adds to

the product attractiveness and usefulness. The three components of

personalities are structure, shape & style, which are acquired through design.

Packaging: It is providing a container/wrapper for a product for the purpose of

handling & protection. The three levels are-

i. Primary package- To hold the product, e.g. bottles.

ii. Secondary package- To hold the primary package, e.g. cardboard boxes.

iii. Shipping package- To carry the secondary package from one place to

another e.g. corrugated boxes. All products need shipping package.

HLL has made ‘bubble pack’ shampoos. They are neither sachets nor

bottles & works on the principle of capillary action. The rural markets were

kept in mind & this type of package was developed keeping in mind the

convenience of storage after use.

Branding: Brand is the term, name, sign, symbol, design or a combination

of them, which helps to identify the seller products & identify them from

competitor products. Its primary purpose is creating an identity of the

product. The brand names should be easily understood & recognized by

the rural consumer. Unfamiliar & absurd brand names cause hesitation in

the minds of the consumer. The rural brands are recognized through

symbols, logos and colours. E.g. -‘Billi waali cell’ - Battery with the cat as a

symbol- Eveready.

3. Augmented Product Development : The marketer should have a

vision to look at the specific needs of the consumers and their related

requirements. He needs a broader view to have the whole picture of

consumption of the consumer. Augmentation requires fortifying the

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Rural Marketing

product strategy with extra force drawn from other P’s due to which the

product offers make buying a pleasant and exciting experience.

IV. Branding Strategies

Brand Name makes products familiar and evokes possessiveness. Branded

goods comprise 65% of sales in the villages. The share of non-branded goods

is shrinking dramatically. E.g. LG Electronics India gave the name

‘Sampoorna’ to the customized T.V. developed for the rural market. The word

(Sampoorna) is a part of Bengali, Hindi & Tamil language. The strategy

worked very well and the company sold about as 114 crores worth T.V. Sets in

the villages in a year. Strategy becomes effective when other elements

(emotional) are in consonance with it.

OTHER IMPORTANT STRATEGIES:

i. CUSTOMER IMPORTANT STRATEGIES :

a. Mass Product Strategies : The urban consumers are brand

conscious whereas the rural consumers are price sensitive. They

are more concerned about the functional benefits of the products

and the value-for-money they pay. Hence, several companies

have launched “no frills” economy products to attract rural

consumers and low-end urban markets. E.g. Agni Tea launched

by Tata.

b. Premium Product Strategy : In case of some products rural

consumers’ exhibit preferences similar to those of urban

consumers. Premium brands are gaining wide acceptance in

rural areas. E.g. some high profile brands that have gained

popularity in the rural households are Fair & Lovely, Surf & Ariel

detergents, Pantene Shampoo and LG’s Golden Eye models.

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Rural Marketing

ii. INNOVATION STRATEGIES :

a. Rural Urban Common : There are many products that are

common to rural & urban markets. They include cosmetics,

toiletries, washing powder, communication services etc. e.g.

Videocon is pushing walkman into markets with a population

under 50,000. Electrolux is test marketing urban models of

refrigerators and washing machines in rural Punjab.

b. Special for Rural : There are some companies who choose to

develop products especially to meet rural market needs while

others experiment with packaging. E.g. Green Cards- Andhra

Bank & Allahabad Bank has issued credit cards known as ‘Green

Cards’ to farmers.

COMPANY PRODUCTS

Bajaj Electricals Home Appliances

Colgate Palmolive Dental Cream

Dabur India Chawanprash, Digestive Lozenges

Electrolux Refrigerators, Washing Machines

Eveready India Batteries

Godrej Soaps Toilet Soaps

Hero Cycles Bicycles

Hero Honda Motors Motorbikes, Mopeds

HLL Personal Products and Detergents

J K Dairy Dairy Whitener

Koshika Telecom Cellular Services

LG Colour Televisions

Mahaan Foods Pickles, Ghee, Vadis and Papads

Maharaja Home Appliances

Marico Hair Oil

Nippo Batteries Batteries

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Rural Marketing

Philips India Consumer Durables

Titan Industries Watches

United Phosphorus Pesticides

Videocon Consumer Durables

iii. QUALITY STRATEGIES :

Many companies utilize the quality aspect to win the customer. In the

organized sector competition requires quality improvements.

a. Quality Improvement Strategy : Sundaram Clayton introduced

TVS-50 XL in 1980. It was powered by 48 CC engine and a load

capacity of 120 kg. in 1983 the company researched the uses of

vehicle. It was being put to various uses by the farmers. The

company decided to give TVS-50 XL a 53.3 CC engine, which

was at that tie the highest powered in its class.

b. Spurious Goods Strategy : Spurious products, generally

marketed by the unorganized, low-end entrepreneurs somehow,

make their way into the market and eat away the large chunk of

corporate marketers’ profit. The imitation will have resemblances

that dope the consumer.

E.g. - Lifebuoy - Loveboy

Tata - Teta

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Rural Marketing

Chapter – 4

Pricing Strategy

I. Introduction:

One of the important constituent of rural marketing mix is pricing. In the rural

market value-for-money brands give the fastest sales for the FMCG sector.

FMCG majors are trying to increase sales through low unit perks and VFM

products. In segments like bathing soaps, washing soaps, and detergents,

toothpastes, etc. the consumers are increasingly opting for more VFM

launcher. VFM brands like Nirma’s Soap, Britannia’s Tiger are doing better

than the other premier brands from their own companies.

According to ORG many estimates, in the year 2001, Breeze recorded a

growth of 12 % while Lux a premium brand recorded a negative growth of

12.3%. Britannia’s Tiger grew by 12.6% in 2001.

In a slowdown mass brands register better growth than premium brands. In

the home appliances category, Videocon was one of the first companies to

enter the rural markets in home appliances. Phillips who was the market

leader for radio sets (cost Rs. 250) were attacked by Videocon by launching a

radio set for Rs. 180. They grab a major chunk of the market, at present they

are marketing ‘walky’ range of personal cassette players at low prices to rural

customers. Only charging a lower price is not enough, they have to offer

value-for-money.

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Rural Marketing

Pricing strategy requires a holistic approach. Pricing is a part of the marketing

strategy. It should be designed in such a way that it contributes to the

objectives of the marketers and needs and wants of the customer groups.

II. Consumer Categories

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

1. Quality Conscious Customers : who are very rich and whose annual

income is over 1.5 lakhs.

2. Value Conscious Customers : who is the consuming class and whose

annual income is between Rs. 45,000 – Rs. 1, 50,000.

3. Price Conscious Customers : who are climbers, aspirants and

destitute. The annual income of climbers is Rs. 22,000 – Rs. 45,000.

The annual income of aspirants is Rs. 16,000 – Rs. 22,000 and the

destitute whose annual income is below Rs. 16,000.

III. Price in Marketing Mix for Rural Marketing

1. PRICING FOR QUALITY CONSCIOUS CUSTOMERS :

These customers are basically concerned with functional benefits and

value-for-money. If a marketer wants to develop an effective pricing

strategy for these customers he must know whether the price quality

relationship holds good for the market.

Six propositions emerge which are applicable to rural market as well as

urban market.

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Rural Marketing

a. Quality Differences : Larger the perceived difference quality of

brands in a category, the price quality relationship is stronger.

E.g. home appliances.

b. Quality Uncertainty : Greater the uncertainty involved in judging

the quality of product, stronger the price quality relationship.

c. Price Consciousness : Higher the price consciousness of the

consumer and more price variations within a particular category

of product, the price quality relationship is stronger. Therefore

companies create a hierarchy of products establishing price

quality relationship.

d. Need Compulsion : Certain products that fulfill certain needs will

have a strong price quality relationship. For e.g. a reputed doctor

or lawyer would charge premium rates for their services because

their services are viewed essential.

e. Place Availability : Price quality relationship is stronger for the

brands sold to the premium market within the same product

category.

f. Social Consciousness : Shoes and shirts that are publicly

consumed products have a strong price quality relationship than

privately consumed products like tooth powder and underwear.

IV. Pricing Methods

Marketer can employ the following methods when price-quality relationships

are associated.

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Rural Marketing

Discriminatory Pricing : This is employed to charge different customer

groups differently projecting differences of quality of offer. The

differences discriminatory pricing are

i. Product Form Pricing : Different versions of the product are priced

differently. E.g. Chota Pepsi – Rs. 5

ii. Location Pricing : Same product is priced differently at different

locations. E.g. Residential places in city are costly.

iii. Time Pricing : Prices varies by days or seasons. E.g. During summer,

hill resorts charge higher rates.

Perceived Value Pricing : In order to enhance the customers perceived

value companies add features to their products. For each feature which

enhances attractiveness, reliability, durability convenience, etc., the

marketer charges an extra price.

Psychological Pricing : Psychological pricing may be in the form of

reference pricing or image pricing. In reference pricing the marketers

position and sell products at higher prices by endorsement of products

by celebrities or placing products with classy products. Another form of

psychological pricing is image pricing. This pricing is effective in case of

ego sensitive products like cameras, sunglasses, cars, etc. Since price

acts as a signal of quality people prefer to buy expensive ones.

2. PRICING FOR VALUE CONSCIOUS CUSTOMERS :

Some customers are willing to pay for the product of their choice a long as

they get ‘Value for Money’. When consumers are value-conscious, price hiking

need not lower sales. E.g. - Eveready Industries increased the price of the

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Rural Marketing

white 1.5 volt cells it sold in rural India by 6% from Rs. 7.50 to Rs. 8. But still

the sales did not decline.

Rural consumers cannot afford to buy large volumes, but they prefer t buy

quality products. With the introduction of small unit packaging, there is

increased penetration of shampoos, soaps etc.

a) Skimming Pricing :

In this type of pricing companies as the time of introduction favor setting

high prices to skim the cream off or low prices to sweep the entire ground.

Skimming price is preferred when high price is aimed to communicate the

image of a superior. E.g. - P&G introduced Ariel and Tide detergents at

high prices. Recently it cut the prices of most of its laundry and hair wash

brands.

b) Penetration Pricing :

Penetration is chosen when market is highly price sensitive, and a low

price stimulates market growth. Products like Maggi Noodles, Rin

detergent penetrated the market with lower prices in the initial stages and

later went up the price ladder.

c) Value Pricing :

It involves setting prices reasonably at a lower level compared to

competitors through careful streamlining of operations to become a low-

cost firm without sacrificing quality. It involves human development, quality

management, supply chain management, etc. In India many companies

are adopting this approach as the markets are saturated and competition

has intensified.

d) Psychological Pricing :

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Rural Marketing

Some smart sellers quote their prices that end in an odd number e.g. Rs.

99.95 paise. It conveys two notions.

i. There is a discount or bargain

ii. It belongs to a lower price range.

Bata Shoe Company has been using this price tactics since long.

3. PRICING FOR PRICE CONSCIOUS CUSTOMERS :

These consumers belong to the destitute, aspirants & climber groups. They

can afford less. The climbers watch for promotional offers to whet appetite for

quality products.

Since branded products are costlier than unbranded and ungraded local ones,

also not available in small quantities, the rural consumers purchase local

brands or fake brands which are relatively cheap.

Many companies have revolutionized the buying in rural areas by introducing

sachets. Promotional pricing measures include price-offs, discounts or

rebates, credit facilities and no interest or low interest long term finance

schemes. Another way of inducing them to buy can be the low-priced mini-

pack strategy. E.g. - HLL sells a mini pack of shampoo, toothpaste, face

cream and talcum powder for Rs.15, if sold separately it would cost Rs. 27.

V. General Pricing in Rural Markets

a) Low Cost/Cheap Products : The price can be kept low by low unit

packing like paisa packs of shampoo sachets etc. This is a very

common strategy which is being widely adopted by many marketers.

b) Refills/Reusable Packaging : The refill packs benefits the consumers

in terms of price. Such measures can have significant impact too, since

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Rural Marketing

the price can be reduced to the advantage of rural consumers. In

addition the packaging material used should be reusable in rural areas.

Most fertilizers companies pack fertilizers in LDPE or HDPE sacks

which can be washed & reused, which are in demand by the farmers.

c) Application of Value Engineering : The application of value

engineering evolves cheaper products by substituting costly raw

material with a cheaper one. We now find costly materials being

replaced by cheaper reinforced plastic. This technique does not

sacrifice the technical efficiency of a product but lowers the product

price.

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Rural Marketing

Chapter 5

Promotion Strategy

I. Introduction

The rural market has a huge buying potential due to the increase in the

income and higher prices of the agricultural products. It was neglected or

ignored by the marketers due to varied reasons but with the growing

awareness in the Information technology has reduced the urban rural

divide and now the consumers in the rural areas are aware of the world

class products. The increase in the network of roads, the literacy drive and

many other things has brought about a change in the economy of the

country. Rural India is now bound with opportunities waiting to be exploited

by the potential marketers. Rural marketers should place greater emphasis

on developing sales forces to exploit the rural market. Various novel ideas

of sales promotions have been tried out during the harvest time since that

is the time when the rural household becomes cash rich.

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

Marketing:

Personal Selling is an essential element in rural marketing. Rural Marketing

involves more intensive personal selling efforts than Urban Marketing. The

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Rural Marketing

basic traits of Personal Selling are enthusiasm, communication skill and

knowledge of selling techniques which are required in equal measures by

both urban & rural salesmen. In order to match the peculiar rural market

conditions, the rural salesman require certain additional traits & capabilities

listed below-

1. Knowledge of Local Language : This is the basic requirement for a

rural salesman that he should be well versed with the local language.

The rural salesman needs a strong background of the local language.

2. Willingness to Get Located in Rural Areas : It is common knowledge

that the rural areas lack modern amenities compared to urban areas.

Because of this factor salesmen are generally elected to work in rural

centres. It is only those who are genuinely happy in living and working

in the villages can become good rural salesman.

3. Cultural Congruence : The salesman must have proper acquaintance

with the cultural pattern of rural in the given rural territory. Since the

cultural patterns of the rural community differ from one another, a

cultural background i.e. in consolance with the culture of given rural

community is a specific requisite of success for the rural salesman.

4. Attitude Factor : The rural salesman must have a great deal of

patience and perseverance as their customer is a traditional person. It

will not be possible for the rural salesman to clinch the sales quickly. He

may have to spend a lot of time with the customer and also make

several visits to gain a several response from him.

5. Capacity to Handle a Large Number of Product Lines : The rural

salesmen are often required to handle a much large number of product

lines as compared to their urban counterparts. The rural salesman

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Rural Marketing

usually does not generate economic value of business if they handle

few products. They are compelled to handle a large variety of items and

basically become a jack of all trades.

6. Greater Creativity : Often the product concerned may be very new in

the rural context. The rural salesman must endeavor to introduce them

in the rural market through creative selling, using consumption pioneers

and opinion leaders.

III. Personal Selling & Opinion Leaders

Rural con sumers do not decide on the basis of information provided by

companies or advertisement. They prefer consulting others who have

purchased the products previously. These actual experiences of the other

actual users significantly influence the buying decision in rural areas. In

Personal Selling, it is required that the potential users are identified and

awareness is created among them about the product, its features &

benefits. This can be achieved through the efforts of a highly motivated

salesperson, supplemented by the influence of opinion leaders in villages.

‘Opinion leaders’ & ‘Word of Mouth’ are thriving among rural consumers.

Opinion leaders in rural can be defined as a person who is considered

knowledgeable and is consulted by others, and his advice is normally

followed. He could be a politician, big landlord, teacher; progressive farmer

etc. There could be different opinion leaders for different purposes. ‘Word

of Mouth’ information holds a lot of validity in the rural areas, since rural

consumers place more emphasis on the experience of the other who uses

different brands of the product.

IV. Managing Sales Force of Rural Market:

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Rural Marketing

The task of sales force management carries certain added dimensions in

the rural context. In selecting the salesman, in giving the orientation, in

motivating them and in developing them the sales manager has to adapt to

the unique requirement of rural selling. The major concern in sales function

is to constantly improve profitability of the territory. The salesperson has to

undertake the following activities in the field.

1. Increase Sales : The sales person has to identify his own and

customers potential, call on more customers consisting of farmers,

dealers etc. Training and motivating the distributors, dealers etc. help

improve trade sales. Organising campaigns with special emphasis on

farmers’ contacts and demonstration will be important in order to

increase demand for the product. The services of NGO’s can be used

e. g. Colgate Palmolive used NGO’s to promote its toothpaste Colgate

‘Supershakti’.

2. Improve Company’s Image : A sales person is the link between the

customers and the company. He is the company’s ambassador in the

market. Transactions are based on trust in the salesperson. It is

therefore important that he creates a good impression of the company

in the eyes of the customers.

3. Develop Future Market : The salesperson will have to keep in touch

with the latest advancements in the market. He has to identify &

develop distribution system and undertaking demand generation

activities are necessary for the developing the market for the future.

4. Effective use of Resources : Salesperson should not resort to

dumping of stocks in order to achieve sales targets. He should ensure

that stocking of goods is proportional to expected sales; it will help him

in collecting dues as per the credit policy of the company.

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Rural Marketing

5. Self Improvement and Development : The salesman need

comprehensive on the job training in selected village markets. They

need to be educated about the rural marketing environment in addition

to be trained in salesmanship, and in selling techniques.

MAIN TASKS INVOLVED IN SALES FORCE MANAGEMENT:

1. Determination of personal selling objectives

2. Formulation of sales policies

3. Structuring the sales force.

4. Decide sales force size.

5. Fixing targets and quotas.

6. Selection, recruitment and training.

7. Managing sales force compensation, motivation and supervision.

8. Sales communication and reporting.

9. Sales co-ordination and control.

V. Selecting Proper Media Mix:

The firm has to choose a combination of formal & non-formal media in the

rural context. The possibilities are enlisted below:

A) The Formal Organised Media :

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Rural Marketing

1. T.V. : It has the potential to become the primary medium for rural

communication, 77% of the villages in India receive T. V. transmission

& 27% of all rural people actually watch T. V.

2. Cinema : 29% of rural people watch cinema as a part of their regular

lifestyle. Most villages have cinema house. Advertisements,

documentaries combining knowledge and entertainment can be

employed for rural communication.

3. Radio : It is a well-established medium in rural areas. Expansions in

broadcasting facilities have taken place over the years.

4. POP’s : The POP’s point of purchase promotion tools area is quite

useful in rural markets. They should be designed to suit rural

requirements, using symbols & bright colours.

5. Outdoor : Many companies are using Hoardings, Wall Paintings, etc.,

as part of their outdoor medium.

B) Informal/Rural Specific Media :

1. Music Records, Harikatha , and Puppet Shows : Music

cassettes/records are a very effective, inexpensive and appealing

medium, which can be used in cinema houses etc. where people gather

regularly. The traditional art forms such as puppet shows, harikathas

render themselves for communication in rural society and can be used

at melas.

2. Group Meeting, Demonstration, and House-to-House Campaigns :

The promotion staff of the firm can effectively carry the product

messages and demonstrations to the target audience at the group

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Rural Marketing

meetings. Promotion squads make house-to-house visits. They carry

along product samples and promotion literature along with them.

3. Audio Visual Publicity Vans (AV Vans) : The AV unit is very useful for

rural communication. The firm can exhibit films, presentations, slide

shows etc. The van can be used for sales campaigns in addition to

promotions campaigns. They are quite popular with rural marketing

firms.

4. Syndicated AV Vans : In recent years, rural publicity vans have

become a purchasable service. Firms which afford to operate publicity

vans of their own can utilize the syndicated AV vans service offered by

independent agencies.

5. Interpersonal Media : They have a special merit since they facilitate

two-way interactions. They also bring market feedback to the firm.

Advantages of interpersonal media are they are segment specific,

market specific and score high when it comes to participation and

involvement of the audience.

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Rural Marketing

Chapter 6

Physical Distribution Strategy

I. Introduction

Product Distribution and retailing has developed into highly specialized

activities in the urban market. However the distribution channel has

remained in the background in the rural areas. Now the distribution has to

be reworked from scratch with full rural orientation and awareness of

existing rural channels of distribution. Many companies foresee the rural

markets as a great opportunity for expanding their sales but they find

distribution as a major obstacle. Unfortunately it is almost not possible to

transplant strategies which work successfully in urban markets into rural

markets. There are problem to reach the rural customers.

II. Channels:

1. Company depot which may be located at a particular state.

2. Redistribution stockist, C&F agents, semi-wholesaler and retailers who

may be located at the district headquarters.

3. Semi wholesalers and retailers who may be located at Tehsil

headquarters, mofussil towns or industrial townships.

4. Itinerant traders, vans, petrol pumps, semi-wholesalers retailers and co-

operative societies, which may be at large villages or Haats.

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Rural Marketing

5. Retailers, vans, sales people, NGO’s and government agencies at the

village level.

Source: Pawan Bhandari and Rajan Iyer, A & M, January, January 15, p.

25.

49

COMPANY SPURIOUS BRAND MFG. FACILITY

REDISTRIBUTION STOCKIST, SEMI WHOLESALERS AND RETAILERS AT DISTRICT HEADQUARTERS

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

INDUSTRIAL TOWNSHIPS

INTINERANT TRADERS AT

HAAT MARKET

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

PERSONS)

RETAILERS IN SMALLER VILLAGES

PRODUCT MOVEMENT ROUTES THROUGH INTERIOR

--------

--------

--------------

---------

1

2

3

4

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Rural Marketing

Most of the companies have direct representation in the form of redistribution

stockist at level II and III. Level III in a district would comprise 7-10 towns. High

outlet density and large customer population centres enables economies in

developing these markets through working of sales-cum distribution van.

In order to achieve a winning edge in rural sales the object is to maximize

directed flow and control the of stocks at level III or V. Approaching level IV

requires prior selection of haat markets and villages located in contiguous

clusters.

Various schedules with level III stockist at nodal points could be operated

towards self-sustaining distribution rates for level IV markets. The next level is

V. The villages are too small to allow economies in van distribution. But these

villages form the bulk of the consumption in the rural areas.

Example: HLL is focusing a mobile sub-stockist in hinterland towns having

a population less than 20,000 to supply its toothpaste brands Close-up and

Pepsodent to consumer in the surrounding villages. The sub-stockist will

be linked to a super stockist who will be present in every district.

The Old Setup:

The Old Setup for distribution in the rural markets includes

1. Wholesalers

2. Retailers

3. Mobile Vans

4. Weekly Haats, Bazaars and Shandies and

5. Melas and fairs

THE NEW PLAYERS:

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Rural Marketing

1. Unofficial Channels : Hero Honda has reported the emergence of an

unofficial channel of distribution. Local real estate agents, village

mechanics; and shopkeepers who sell non durables. These people take

motorcycles from official dealers in twos and threes and display them

outside their premises for sale. This paper work is left to the dealer to

complete.

2. Co-operative Society : Co-operatives occupy an important place in

India’s rural economy. The rural scan reports say that there are 4398

primary marketing societies and 2933 Large Agricultural Multipurpose

Primary Marketing Services. Generally a co-operative exists for 2-3

villages. Farmers service co-operatives is a mini super market.

The others are:

1. Public Distribution System.

2. Petrol Bunks.

3. Agricultural Input Dealers.

4. NGO’s

5. Barefoot Salesman.

6. Syndicated Distribution.

III. Inter-Net Marketing:

In the Rural Setting: Efforts are on the way, in rural India, to bring

convergence between what the poor need and what digital technology

makes possible. The Net is becoming the livelihood for hundreds of rural

youth, who are offering a combination of specialized Net services; interface

which administration, organizations and customers.

IV. Channel Management in Rural Markets:

The second major task in rural marketing is organizing an effective

distribution channel. This task too has many problems:

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Rural Marketing

1. Multiple tiers, Higher Cost and Administration Problems : The

distribution chain in the rural context requires a large number of tiers as

compared to the urban context. In the rural context, at the minimum

level the chain needs the village shopkeeper, the wholesaler, etc.,

whereas at the top level involves the manufacturer’s own warehouses,

office operations at selected centers. Such multiple tiers make channel

management a major problem area.

2. Scope for Manufacturer’s own Outlets Limited; Greater

Dependence on Dealers: Scope for manufacturer’s direct outlets such

as depots or showrooms is limited in rural markets unlike in the urban

context since it is expensive and unmanageable.

3. Non-Availability of Dealers : There is also a problem of availability of

dealers. Suitable dealers are limited even if the firm is willing to start

from scratch and try out rank newcomers; the choice of candidates is

limited.

4. Poor Visibility of Retail Outlets : Sales outlets suffer from poor

viability in the rural market. Scattered nature of market and the

multiplicity of tiers in the chain use up the additional funds the

manufacturer is prepared to part with. Moreover the business volume is

not adequate enough to sustain the profitability of all groups and the

retail tier is the worst sufferer.

5. Inadequate Bank Facilities : Due to lack of bank and credit facilities

distribution in rural markets is handicapped. Rural outlets need banking

support for 3 important purposes;

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Rural Marketing

a. In facilitating remittances to principals and to get fats

replenishment of stocks.

b. In receiving supplies ‘through bank’ (retiring documents with the

bank).

c. To facilitate securing credit from banks. It is estimated that there

is only one bank branch for every 50 villages.

6. Inadequate Credit Facilities from Banks : Another constraint is the

inadequacy of institutional credit. Rural outlets are unable to carry

adequate stocks due to lack of credit facilities. The vicious circle of lack

of credit facilities leading to inadequate stocking and loss of business,

finally result in poor viability of outlets, getting perpetuated.

V. Possible Approaches for Effective Channel Management

in the Rural Context:

The Existing Market Structure: Indian rural market is composed of

22,000 primary rural markets and 20 lakh retail sales outlets of which

nearly 1 lakh are fair price shops of Public Distribution Systems (PDS) as

estimated. One retail shop services 60 to 70 families in rural areas. The

structure also involves stock points belonging to the manufacturer or area

distributor to service these retail outlets at village levels in feeder towns.

Available Channel Choices: The channel types that is available in the

rural market are-

a. The Private Shops

b. The Co-operative Societies

c. Fair Price Shops of PDS

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d. The Village Shandy or Weekly Market

From the above, the co-operative societies are mainly concerned with the

distribution of agricultural inputs. Fair price shops are concerned with the

distribution of essential commodities consumed by the common man. The

‘Village Shandy’ is a widely used channel of rural market. But its role in

marketing branded products is limited.

The Private Village Shops: Private shops are the main channels in the

rural market for a large variety of products. They are also the cheapest and

the most convenient channel to align with.

The village shopkeeper is forced to deal in a large number of products in

order to make his operations viable, which means a large inventory. The

larger lead-time for replenishments from urban based production point

enlarges the inventory holding further. And as his sales are not uniform

throughout the year, he has to carry inventory over a longer period of time,

leading to the blocking up of his capital.

Organizing one’s channel out of these private shops, however, requires

assiduous efforts on the part of the firm. The choices are usually confined

to-

a. Existing traditional private shops.

b. Moneylenders willing to branch off to trade.

c. Land owners willing to branch off to trade.

d. Educated unemployed persons.

The firm has to select personnel from the above group depending on the

product line and other relevant factors and then train and develop them

into competent dealers.

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Satellite Distribution: A concept known as ‘Satellite Distribution’ can be

tried in developing a distribution channel in the rural market. Under this

system, the firm appoints stockist in feeder towns, who take care of

financing, warehousing the goods and sub-distribution of goods. The firm

also appoints a number of retailers in and around the feeder towns and

attaches them to the stockist. The goods are supplied to the stockist either

in cash or credit or on consignment basis.

The sales volume of the retailers will vary depending on the potential of the

area covered and the capacity on the dealer concerned. Over a period of

time, some retailers grow in terms of business turnover. If such retail points

also happen to be transportation centers within the feeder town area, the

firm elevates them as a stockist. The area of operation of the original

stockist shrinks in this process, but care has to be taken to see that his

volume of business does not shrink. This is achieved, in practice, on

account of growth in demand and deeper market penetration.

If twenty retailers operate in the network of an original stockist, five or six

of them get elevated over a period of time as stockist. Out of the retailers

some remain attached to the original stockist and other relevant factors.

The process continues as long as the market keeps expanding. And at any

point of time, enough retail points in variably hover around or particular

stockist, hence the name ‘Satellite Distribution’.

The main advantage of this system is that it facilitates market penetration

in the interiors of market. However, the firm must ensure is that it facilitates

market penetration in the interiors of the market. The firm must ensure that

in the process, the motivation of the earlier generation stockist is not

destroyed due to overzealous and premature elevation of the retailers into

stockist.

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After understanding the entire marketing mix for the rural markets, let us now

see some practical examples of how companies have entered the rural

markets and have been highly successful by modifying one or more P’s of the

marketing mix to target the rural market. A few of the successful companies

are as follows:

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Case – 1

The Making of ‘C H I K’

Late 70’s: Following the success of Velvette shampoo in the southern markets,

a pioneering attempt to offer shampoos in small pillow packs, the market was

flooded with 70-odd small labels of shampoos, each one eager to nibble a

share of an enlarging pie. Most look similar with little differentiation.

Velvette as a brand had become synonymous with ‘sachet shampoo’.

Consumers would ask the retailer for a Velvette and they would walk away

happy with whatever labels the retailer gave them. Many of them never knew

the difference and for the rest it just did not matter.

The success of the sachet changed the structure of the shampoo industry.

New layers of consumers, most of them from rural pockets could now afford

shampoos. The ‘upper class’ tag attached to shampoos was fast fading away.

The market was extremely cut-throat and trade had a significant influence on

what the consumer bought.

It was against this background that Chik shampoo was launched by CavinKare

in March 1983. The brand was launched initially in 10ml packs and later in

sachet form.

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Though the market was cluttered with low-cost shampoos, there was a clear

opportunity for a “good quality shampoo with appealing perfume at a price

which will delight the consumer”.

The brand endeavoured to provide to the masses a significantly superior

product than those available at similar points. Chik shampoo used French

perfume at the time to differentiate itself on the plank of superior fragrance.

The target audience was lower middle-class/semi-rural; monthly household

income of Rs. 1,500-3,000; females in the age group of 16-plus.

Innovative radio advertising based on popular cinema dialogues supported the

brand; this was quite different from the plain jingles being used by other

brands that advertised on radio. The advertising strategy was based on the

consumer insight of the powerful appeal of cinema among the common

masses. The brand roped in popular southern cine stars in the south like

Amala, Khushboo, Manorama and Charlie who were popular with rural

audiences to endorse the brand. Radio was used as the sole mass medium of

advertising and the annual advertising spends were in the region of about 2

lakh. Though shampoos were getting encouraging trials from the rural

consumers, the penetration levels were extremely low. Many people had no

clue how to use a shampoo. To encourage trials, CavinKare’s team travelled

extensively in rural pockets, caught hold of schoolboys to demonstrate how to

lather and wash, comb hair and show the difference. This exercise had a

significant impact in breaking the ice and made people comfortable with the

concept. Another method used to encourage trial was through a consumer

scheme, where anyone could take any four empty shampoo sachets to a

retailer and take home a Chik sachet free. Though more risky, this scheme

paid off and more and more people began asking for Chik at their local retail

outlet.

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By the late ‘80s the brand had become quite popular in the southern markets.

The shampoo market was growing at a healthy clip of 15 per cent at that time.

1990 was a major turning point in the life of the brand when it introduced floral

fragrance shampoos in two floral fragrances – rose and jasmine. They turned

out be an instant hit with the masses and sales jumped from Rs. 10 lakhs a

month to Rs. 30 lakhs a month. The brand continued to use popular cinema

celebrities and extended the endorsements to television media in 1992.

In 1993, CavinKare had decided to take Chik shampoo national.

Chik is a recruitment brand and the objective was to expand the market and

get new customers into the category. The focus was largely rural though

value-conscious sections in urban areas also were attracted to the proposition.

The distribution in rural areas was driven through innovative trade schemes

and consumer offerings. The market began to surge – by the mid ‘90s, the

shampoo market was growing at about 25 percent. Then, packs contributed

nearly 40 percent of the total shampoo volumes. Rural markets were growing

much faster than the urban markets. The key challenge was in reaching the

rural markets. Most villages in India are of very small size. Close to 70 percent

of villages in India have population of less than 1,000, the accessibility is low

and the local markets are not developed.

The good news is that there are about 47,000 haats and 25,000 melas

organised in such villages. The average daily business transacted in these

haats is close to Rs 2 lakh. The company made use of such opportunities as

well as created availability in smaller villages through the wholesale network.

The right marketing strategy for the rural market is to balance the conflicting

dimensions of ‘availability’ on the one hand and ‘affordability’ on the other.

During the mid ‘90s, the Chik pneumonic and the pack were changed to bring

in design and colour elements, which enabled on-shelf differentiation and

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aided recall. Packaging becomes even more critical when viewed in the

context for rural marketing.

Consider some facts and insights, which a study on the factors influencing

shampoo buying in rural markets threw.

A significant portion of buying happens by looking at the wrapper. The rural

consumer used this insight to improve packaging while branding was made

more prominent and the graphic improved to enable quick identification.

By the year 1999, Chik was already the second largest brand of shampoo in

India - (also in rural markets) – only next to Hindustan Lever’s Clinic Plus. This

year was to see a major development in the brand, which would take it to

greater heights. Some years back while on a market visit Mr. C. K.

Ranganathan, Chairman & Managing Director, CavinKare Pvt. Ltd. happened

to interact with a rural consumer who was using soap to wash his hair and had

been doing this for ages. During the course of the discussion the consumer

told the Chairman that he had not seen any visible damage to his hair.

Though the hair felt rough, the consumer was fine with that.

So why would he start paying for and using shampoos? During this discussion

CavinKare got the insight that the number of adults per household in India is

about five. At Rs. 2 per sachet of shampoo and four washes a month it meant

Rs. 40 for hair wash alone. There was no way the consumers were willing to

spend this kind of money on washing hair every month. CavinKare got the

feedback that of the cost of hair wash could be cut to Rs. 2 per person per

month he would no be averse to try a shampoo. That meant that the

consumers wanted something as marginal as a 50-paise shampoo pack.

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Initially, the thought of offering a 50-paise shampoo sounded ridiculous. How

do you offer a good quality shampoo at that price? Could something like this

be viable?

CavinKare worked backwards from this brief and made the 50-paise shampoo

happen. It took them a few years to develop the formula and packaging. The

launch happened in September 1999. Chik was the first brand to launch a

shampoo sachet at 50-paise. The results were amazing; shampoo’s growth

rate in rural India became almost twice that of the urban sector.

The price point was instrumental in driving distribution in deep rural pockets.

The market share of Chik after the launch of Chik 50-paise went up from 5.61

percent in 1999 to over 23 percent now.

Today, Chik, a Rs 100 crore brand based on MRP value, is the No. 1 brand of

shampoos in rural India. It is strong rural brand and roughly 65 percent of the

sales of Chik shampoo come from rural markets. It symbolizes the

requirement of a shampoo for Indian consumers. An accompanying table

illustrates the rural hold of Chik in some states in India having significant rural

population. The value proposition offered has helped us to become number

one in many states in rural India.

To sum up, rural markets are an opportunity as a challenge. In most rural

markets recruitment is the issue. The rural consumer is very rational as well as

value conscious. Therefore, the marketing mix must deliver superior value to

the rural consumer at a price point he is comfortable with in order to be

successful.

Strategy Adopted

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As seen in the above case study, the company marketing Chik shampoos

came up with a wide variety of changes to target the rural markets. Some of

the changes that the company adopted are:

1. Changing the Packaging of the product by introducing sachets instead

of conventional bottles.

2. Slashing the price of the product to 50-paise per sachet so that rural

consumers could afford it.

3. Adopting innovative ways of promotion by using radio advertising in the

form of jingles and cinema dialogues that would appeal the rural

consumers.

4. A wide variety of perfumed shampoos were available so as to give

more option to the rural consumers.

5. The village Haats and Melas were used as an efficient way of the rural

distribution channels.

6. The packaging looks of the products were modified and they were

made to look more attractive to the rural consumers.

Thus it can be seen that to market Chik Shampoo, the company made

significant changes in the 4 P’s of the marketing mix so as to ensure that their

product successfully penetrated the rural markets.

The move to enter the rural markets was highly successful for the company as

the company within a small span of 5 years has witnessed a dramatic rise in

the market share. This can be better viewed with the help of the chart below:

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As seen from the above graph, the market share of the company has

increased considerably from just 4% in 1998 to around 23% in the year 2002,

which means that the market share of Chik shampoo grew six folds in the last

five years.

Apart from gaining the market share, the shampoo was also successful in

increasing the number of shampoo users so that the overall market of

shampoo users increased. This was because the company made its shampoo

more affordable and available to the rural market through efficient packaging,

pricing, promotion and distribution. Today the company is a 100 crore

company and leads the rural market for shampoos in India. Also 65% of the

total sales of the company come from the rural markets.

63

Chik Shampoo Market Share(Urban+Rural-Volume)

4.84

11.33

15.18

22.4 23.09

0

5

10

15

20

25

1998 1999 2000 2001 2002

Rural Marketing

Case – 2

E -choupal, the V21 SCM Model

The e-choupal idea cuts through the basic and historic problems crippling

Indian agriculture: fragmentation of agricultural land holdings, the difficulty of

access to those holdings and high levels of illiteracy, all of which make

agricultural extension work unviable, making it difficult and daunting to adapt

and apply the findings of laboratory research to agricultural cultivation.

E-choupal makes use of the physical transmission strengths of the current

intermediaries – the only efficient option in the context of India’s weak

infrastructure, making them an integral part of the value chain. Yet, by using

the real-time multicasting ability of the Internet, these intermediaries are

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bypassed to deliver information and market signals directly to the farmers to

enhance the long-term competitiveness of Indian agriculture.

Under e-choupal, ITC has set up Internet kiosks in villages. These kiosks are

managed by the farmers, selected from within the community and trained,

known as ‘Sanchalaks’. At the kiosks, the ‘Sanchalaks’ help the farmers to

readily access the different agricultural crop-specific Web sites that ITC has

created in the relevant local language. The farmers can learn online the best

farm practices for their crop, the prevailing prices and price trends for the crop

in the Indian and world markets, the intricacies of risk management, and the

local weather forecast. The smallest individual farmers thus get the benefit of

expert knowledge on the cultivation of their crop. E-choupal leverages the

seamless workflow capabilities of IT to virtually integrate several best-in-class

players along chain and offer the services on a single platform to every farmer.

The farmers can order quality agricultural inputs online. Virtual aggregation of

such demand effectively reduces the cost of these inputs, again bringing the

power of scale to even the smallest of farmers.

E-choupal links the Indian farmer to the consumers in local and global

markets, by leveraging ITC’s time-tested and proven competencies in

branding, marketing and distribution. Unlike in the alternative mandi channel

(where the farmer discovers the price for his produce after he has incurred

costs of transportation, therefore ending up selling even if he is not satisfied

with the price), e-choupal helps the farmer take an informed and empowered

decision (because the price is known in the village itself). In the process, many

non-value-adding activities like multiple transportation, handling and bagging,

otherwise inevitable in the traditional supply chain, are eliminated, ploughing

back a larger share of the consumer’s pie to the farmer.

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Thus, through the virtual vertical integration (V21) model of supply chain

management (SCM), e-choupal secures the scale benefits for India’s

agricultural economy without displacing the small farmer.

E-choupal, the Unique 3-D Marketing Channel:

On the ground, e-choupal is proving to be a unique 3-D marketing channel for

many products and services consumed by rural India.

The changes sweeping the marketing discipline in the backdrop of the

increasing consumer-centricity of today’s world are well known. For example,

while superior products and distinctive functional benefits form the necessary

starting point for success in the marketplace, the experiential dimension is

becoming a critical differentiator. Process benefits – which make transactions

between buyer and seller easier, quicker, less expensive and more pleasant –

support this dimension. A third dimension, personalization, now successfully

employed by a few marketing companies, will be the only sustainable

differentiator in tomorrow’s world. Relationship benefits – which reward the

willingness of consumers to identify themselves and to reveal their purchasing

behaviour - lay the foundation for this dimension.

The organic blending of relevant knowledge (for example, application) and

customized information (local weather), with farmer’s purchase transactions, is

creating a unique value for him, especially in farm inputs. The ‘Sanchalaks’

connected to the market, leading farm input companies and experienced

agricultural scientists through the e-choupal infrastructure, are able to deliver

this benefit to the farmer by leveraging the power of collaborative networks,

previously unthinkable in rural India.

A couple of other important process benefits that e-choupal is delivering

to the marketer are:

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Superior demand forecasting and real-time communication with the help of

‘Sanchalaks’ and the IT infrastructure, especially valuable in FMCG as well

as short-window-demand products,

The ability to assemble groups of highly involved customers for credible

and focused research as well as to demonstrate product features. This is

proving to be a boon in consumer durables.

By virtue of its wealth-enhancing capability, e-choupal has been able to

build valuable and sustainable relationships with farmers who constitute

the majority of rural consumers. As the relationships transcend short-term

expedient considerations, these people share a wealth of information about

themselves, which is then converted into valuable knowledge to market

tailor-made credit and insurance products.

Emerging areas like telemedicine, eGovernance, education and

entertainment will soon ride on the Internet, Web-casting and video

conferencing infrastructure of e-choupal.

The Road Map notwithstanding the Speed Breakers:

The e-choupal project, launched in June 2000, has today become the

largest Internet-based corporate intervention in rural India. E-choupal’s

network today reaches out to more than a million farmers in over 11,000

villages through 2,100 e-choupal kiosks that ITC has set-up across four

states – Madhya Pradesh, Karnataka, Andhra Pradesh and Uttar Pradesh.

The hurdles that ITC encountered while setting up and managing the e-

choupals relate primarily to the inadequacies in infrastructure in rural India:

lack of power supply, telecom selectivity and bandwidth. Imparting

computer usage skills to first time Internet-users in the remote areas of

rural India is providing to be another daunting proposition.

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ITC has been evolving several alternative and innovative solutions to

overcome these challenges: for instance, arranging back-up power through

batteries charged by solar-panels, upgrading telephone exchanges with

RNS (RAX Network Synchronization) kits, installing VSAT (very small

aperture terminals) equipment introducing mobile choupals, local caching

of static content, enhancing efficiency in streaming-in dynamic content, and

setting up a distributed 24x7 helpdesk infrastructure.

ITC has worked closely with farmers in designing and managing the entire e-

choupal initiative. The active participation of farmers in e-choupal has created

a sense of ownership in the project among the entire farming community.

Farmers view e-choupal as the ‘new age cooperative’.

Encouraged by this enthusiastic response from farmers, ITC has planned to

extend the e-choupal initiative to 11 other states across India over the next

seven years. ITC’s vision is to extend this interactive transaction and fulfillment

channel to cover one-lakh villages, and reach out to 10 million farmers

growing a range of agricultural products.

Conclusion:

“Growing competitiveness of Indian agriculture induced through such a

market-led business model, can trigger a virtuous cycle of higher productivity,

higher productivity, higher incomes, enlarged capacity for farmer risk

management, higher order of investments, feeding even higher quality and

productivity. On the other hand, growth in rural incomes would unleash the

latent demand potential for industrial goods so necessary for the continued

growth of Indian economy. This creates another virtuous cycle snowballing the

economy into higher growth trajectory.”

ITC is planning to extend its integrated watershed development programme

and holistic community development programmes to all the villages covered

by the e-choupal network. The consequently cascading economic multiplier

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effect will be extraordinary. Thus, ITC’s pioneering e-choupal movement

exemplifies the economic power of the synergy between the corporate sector’s

creations of shareholder value with the development of India’s agricultural

economy

Case – 3

A Matter of ‘PRESTIGE’

This cast stresses on why companies decide to go rural. What are the

factors that attract them and are rural markets potentially bigger markets than

the urban city centers? Again the basic concept that this case covers is that of

the marketing strategies adopted by the company to market their pressure

cooker brand “Prestige” in rural areas.

The Background:

Prestige - India’s leading pressure cooker brand, over the last few years

was facing problems of stagnant/declining sales and reduced realizations. The

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pressure cooker category growth rates itself were on the decline and on the

menace of the unorganized sector, volumes have been under pressure for

most manufacturers. Urban markets were getting saturated – in fact; markets

like Mumbai were having negative growth rates. Also, Prestige Popular, in

larger sizes (which sell in the South – our strong hold) was launched in 1999,

and since then the sales of this premium offering of the company has been on

the decline. However, rural markets were growing at almost five times the

growth of the category. This was when the company decided that rural

markets were going to be a thrust area. Traditionally, Prestige was very strong

in the higher population strata markets and market share declined as one

came down the pop strata.

How it all began?

The exercise began, when the company decided to do a pilot project in the

rural Mehboobnagar district of Andhra Pradesh with the help of MART, an

agency with vast expertise in the field of rural marketing. At this point of

time Hindustan Lever was in the process of rolling out its Project Shakti, its

rural marketing initiative was also with assistance from MART in AP.

The Pilot Project:

The women’s self help group (SHG) movement had been very strong in

AP. Basically groups of women – around 15 a group – who save a rupee a

day and the corpus so generated loan out to members of the group to help

them in their work and not for meeting personal needs. The groups get a

matching loan from the government on soft terms. The interest earned is

ploughed back into the corpus. There are over four lakh such groups in AP.

Taking advantage of the available situation; the company decided to convince

these women Self – Help Groups to help sell the Prestige brand.

MART and the company organized meetings of the women of the SHGs and

explained the concept of pressure cooking, giving them details on the

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company, the brand and what they stand to gain by selling Prestige pressure

cookers. For enlisting dealers the help of ‘animators’, who are paid a stipend

by the Government for propagating / implementing development activities of

the State Governmental among the rural population, was enlisted. All those

who became dealers were given a demo pressure cooker. Meetings were

organized by the dealers for potential customers, where the concept of

pressure-cooking was explained. Company personnel attended these meeting

so that dealers got trained on the concept of pressure cookers.

Intense working of these markets for two months by a management trainee of

the company along with the guidance provided by MART saw the company

selling 50 pressure cookers. The company thus with its excellent strategy the

back – up that it got from the state government could enter the rural markets

successfully. It could enter a market (Mehboobnagar), which was one of the

most backward districts of AP.

However after the whole exercise i.e. from the company’s pilot project, the

company had come down to the following major conclusions on how to go

rural and the various problems that governed rural selling that are discussed

below:

1) Logistics and high price point.

2) Limited rural purchasing power.

3) Difficulty in convincing the customer on the product’s utility.

From the conclusions thus drawn the company could now frame a proper

policy with the perfect product design, price – point etc. it then came up with

the product with the following changes (the new adopted strategy):

1) A ‘rural’ brand at a much lower price point was launched immediately.

2) To take care of another crucial aspect of logistics was another problem

as there were few distributors. For this TTK directly started supplying to

these dealers from warehouses at Hyderabad and also at Vijaywada.

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3) To take the initiative forward the company got in touch with the

Department of Women Empowerment. The TTK group was asked to

make a proposal on how it could work with the Government on

improving the lot of the rural women. After prolonged discussions with

the department, TTK gave a proposal, which was three-pronged

strategy:

Appointing women as dealers of ‘Prestige;

Setting up an assembly plant in AP with land and building provided by the

Government using women of the rural areas;

Setting up a ready-to-fry snacks conversion units in each of the 21 Districts

of AP with equipment provided by TTK and appointing dealers to sell these

snacks in each of the mandals in these 21 districts (around 1,000). The

TTK had its own brand of ready-to-eat snack, Fryums, which had been

withdrawn but the group sells pellets to converters who convert it to ready-

to-fry snacks and sell it. The whole proposal involved creating one-lakh

women workdays and generating Rs 3.42 crore of income for the rural

women in the fifth year of operations.

The Dealer Network Scheme:

For setting up the assembly unit the group asked for some fiscal

benefits from the State Government. The proposal was accepted by the

principle by the department and the company and the departments are

working hand in hand for its implementation.

From then, TTK Prestige has set up a four member sales team to take

the rural initiative forward. Dealers would be women as individuals or SHGs

themselves. A woman or a SHG can become a dealer by paying around Rs

5,000 for a lot of six pressure cookers. The company also provides one free

demo cooker to the dealer. The company coordinates with the department and

organizes a series of meetings involving SHG members in the districts to enlist

dealers.

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Once a woman becomes a dealer the rural promoter of the company works

with her in making calls to prospective customers. When the dealer is able to

get a gathering of prospects, the rural promoter does a demo. The AP

government has been releasing gas connections under the ‘Deepam’ scheme

to the people in rural areas whereby the government pays the deposit to the

oil company and the beneficiary has to pay for the cylinder, gas stove and

regulator. The beneficiaries are the members of the SHGs based on seniority.

The TTK group is selling its gas stoves to the SHGs, who, in turn, sell to the

beneficiaries making a profit. Around 16 lakh gas connections are to be

released this year and the company intends to make a dent in this segment.

The Result and The Future Plans:

From then on there’s been no looking back for the company. Today,

TTK Prestige is working on a separate sub-brand to be sold exclusively

through rural women. This will be at a much lower price point. As sales from

the rural initiative are incremental, margins have been kept to a bare

minimum. The product specs will not be comprised in any way. There will be

some product differentiators to prevent the product from coming into the

normal channel and affecting company realizations.

The assembly unit proposed to be set up will be for pressure cookers

and gas stoves which can be sold in AP both in the regular channel and the

‘rural’ channel proposed to be established. The ‘polishing’ and ‘assembly’ part

will be done in this plant. Both these operations are labour intensive. The

department will provide the land and building and the company the machinery

and expenditure. Employment will be provided to 75 women in the first phase.

In the ready-to-fry foods project a group of around 30 women will be

formed in each district. Each member of this group will have to invest around

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Rs. 4,000. Besides, the groups would be licensed to use the Yummies brand

name owned by TTK.

Pilot projects are underway in four districts – Chittoor, Anathapur,

Kurnool and Nellore where the groups are being formed to generate the

corpus.

The strategy had been so successful that the company intends to

replicate this model in three other southern states i.e. TN, Karnataka and

Kerala in the near future. This initiative shows how the corporate sector and

the government can work hand in hand to bring about rural upliftment.

Case – 4

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

The biggest myth that exists in the minds of most marketers is that rural

is all about traditional dhoti clad villagers living in huts.

The reality however is very different. The new rural generation is clad in jeans

and T-shirts and though it may not know Schumacher, it stands divided on

Sehwag’s ability to counter Glenn McGrath and Brett Lee. Magazines such as

Debonair and Fantasy adorn the roadside of Bikaner just as in the Book

Shoppe at the airport. This clearly depicts that it is now becoming difficult to

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differentiate between the rural and urban class. To understand the case it is

important to first understand some rural facts:

Facts on Ownership:

95.9 percent of rural households (HHs) are self-owned

31 percent of rural HHs owns a radio and an equivalent number own a

TV.

27 percent own wristwatches.

8.5 percent of the HHs owns a two-wheeler.

Facts on Consumption:

95 percent of rural India uses toilet soaps.

76 percent uses detergent (powder/liquid).

48 percent uses dental products (toothpowder/toothpaste).

Facts on Living Standards:

45 percent of rural India has pucca houses.

3.6 crore HHs have a telephone connections.

6.5 crore individuals in rural India are covered by life insurance policies.

Facts on Travel:

Five lakh people from rural India have gone abroad.

27 percent of rural India has taken a holiday within the country.

Again there are as many four-wheelers in rural India as in the top eight

metros. So, indeed, what is rural? It is in fact the biggest market having the

highest potential for various products. It consists of around 13.5 crore

households as per the latest census figures and with 48 crore adult

individuals. A segment of 92 lakh HHs- that is prosperous and has urban-like

consumption. So there is tremendous opportunity to grow by tapping the rural

consumer.

The Background:

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Rural customers have always have had a fascination for automobiles,

particularly utility vehicles (UVs). The UVs have been sought either for

personal use or for commercial purpose (making the vehicle available on hire

to others) and in some cases both.

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Some of the key insights or other relevant facts that are to be noted here

are:

The rural consumer usually travels in a group. He is used to wide

open spaces. Therefore, he seeks the same in his vehicle. Also

seeks space for luggage.

Rural consumer needs a vehicle that is rough and rugged, yet

comfortable.

Personal vehicles are also hired out when “not being used” or “in

demand”. Incidence of hiring out of vehicles is greater than

ownership.

City and urban is aspirational. The villager shouldn’t look like he

has come from one. Optimisation is a way of life but image and

show is very critical to the villager.

The idea behind the concept:

Analysing these insights, the rural needs were found and the

Mahindra MAXX was launched as a product with more space; a vehicle

that is more rugged and tough; least cost of ownership, more value and a

more aspirational image. Quite clearly, the leveragable difference, which

stands out, is “more” or as relevant to the rural customer is Zyaada. And

Zyaada = MaXX.

This was the core concept in the development of MaXX, and

Mahindra & Mahindra launched the product in the commercial segment in

February 2001. MaXX leveraged the benefit of Zyaada space, comfort and

economy and the brand created a relatable aspirational value.

What did it convey?

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The MaXX brand promise was defined on two planks – rational and

emotional terms.

The rational plank was that the vehicle was big on size, which

meant more space. The MaXX length and width was more than that

of competing vehicles. The engine is high on fuel economy and low

on maintenance, fulfilling the need for more value. The MaXX fuel

consumption is 14-15 kmpl compared with the competitors’ 10-12

kmpl.

On the emotional plank, MaXX positioned it as a travel companion.

The different strategies adopted with respect to the 4 P’s

The Product Strategy:

The product strategy was to offer different MaXX value propositions

to the different commercial target segments. To the value-conscious

operator there was the MaXX Standard 10-seater; to the taxi opetator

there was the MaXX TX; to the image seeker there was the MaXX Festiva.

The MaXX Festiva was offered as a premium feature-loaded vehicle at an

attractive price. Features included the metallic paint, fabric seats, fabric

trims, styled interiors, aluminium footstep and an elegant spare wheel

cover.

The Target Group – The Communication Strategy:

The communication strategy was a great challenge as there were

two distinct target groups. The commercial operator who was the vehicle

buyer and the other was the vehicle hirer who was the operator’s

customer. The hirer largely influences the operator’s purchase and in this

case it was essential that the hirers were made aware of the MaXX space

and comfort proposition.

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The operator, by and large, was aware of the Mahindra vehicles

offered the least cost of ownership.

At one end, hirers looked for space, comfort and image while the

operator was looking for returns and least cost of ownership. The crucial

insight was that the operator depended on hirer pull or customer demand

for his vehicle.

Thus the mass media strategy decision was to target the hirer while

the route to target the operator was through below-the-line activities. The

MaXX TVC, which was hence targeted at the hirers, projected MaXX to be

the ideal travel companion.

The Creative Strategy – Promotion:

The selected group, the hirers that needed to be targeted, had a

majority that existed in the rural markets. This group had aspirations that

mirrored and mood of the rural customer clearly followed urban attitudes.

Thus the challenge was to produce the MaXX TVC in a manner that would

easily appeal to the urban and yet create an empathy with the rural. The

visual imagery had to be urban, the lyrics appealing to all and the music

easily hummable by both.

The elements of the TVC (Television commercial) were: proposition

– space and comfort (long travel) and the format were called ‘slice of life’.

The press strategy was a combination of thematic advertisements

targeted at hirers for brand saliency and tactical advertisements. Targeted

at operators projecting the rational benefits and/or promotional schemes.

Scores of below-the-line activities were carried out. There are over

100 tour operators meets all over India. The operators were given test

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drives. The local press was invited to these occasions. This ensured that

MaXX received wide publicity, especially in the small regional press of

vernacular languages creating some excitement in rural areas the

operator meets and the press conference events were also covered by

local cable TV in most places that aroused considerable interest amongst

the hirers. Meanwhile, mileage melas highlighted the MaXX fuel economy

advantage. Joy rides were given to customers to give them a taste of the

MaXX space and comfort.

MaXX road shows and nukkad nataks were held at contract/taxi

stands along with product demonstrations and test-drives. MaXX

hoardings were put up near bus stands; religious places and MaXX

posters were put up in rural bank offices and local premises.

There was a direct marketing mailer campaign targeted to over

30,000 existing Mahindra customers in rural areas to announce the launch

of the new MaXX variants. Incentives were offered to them to come for a

free test-drive at dealer showrooms.

The communication and promotional strategy was able to establish

a line of communication that encompassed both the hirer and the buyer. It

also helped MaXX overcome the “looks” of the product and to create a

brand that is aspirational to the hirer. The prime objective, to establish

MaXX as a major player in the commercial segment, was achieved. The

MaXX sales shot up after the television commercial was telecast and the

overall communication and promotional strategy have caused the sales to

climb nearly 2.5 times in Q4 as compared to Q1 in the year April ’02 –

March ’03. the tagline, MaXX Maane Zyaada, succeeded.

Thus to sum up the above case is a classic example that portrays

that though there exist wide differences in the rural and the urban market

in terms of size and the consumer mindset, tapping the rural markets

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when you use the right strategies is very much possible. The only thing is

that the strike needs to be perfect.

The rural-urban divide is melting. Rural seeks urban imagery and

yet peculiarities need to be understood.

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The above prism thus explains in general the whole strategy that Mahindra

had adopted to tap the rural markets.

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Economy (DI engine) Spacious, Tough Mahindra

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

Companion Fellow traveler Caring, promoting

f family values

Large family, Semi-urban business

Prudent

Smart choice maker

Physique Persona

Relationship Culture

User Image Self Image

The MaXX Brand Prism

Rural Marketing

Case – 5

The COLGATE Case Study

Charcoal, neem sticks, husk, salt and powder mixtures have been some of the

traditional form of oral hygiene products used in rural India. But these products

are losing favour, especially due to the efforts of many organizations and

companies, foremost among them, Colgate. The company claims to have

persuaded about 300 million people into using oral hygiene products in the

country for the last 25 years.

Known as one of the leading brands for oral care in and around the world,

Colgate soon got popular in rural India as well.

Infact the brand has become so generic with the product itself that it is not

surprising to find rural consumers asking for Colgate when they buy

toothpaste or tooth powder or tooth brush. The company, on its part, says that

the rural markets account for about one third of its total sales, the rest coming

on urban sales.

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Maintaining a steady market share in the oral care product segment wasn’t

tough job for Colgate, but that’s exactly what it didn’t want. Colgate was

heading for a total monopoly in the rural markets, and it was leaving no stone

unturned for doing the same.

‘Aggressive’ is the only word that could perfectly describe the advertising and

sales promotion strategy of Colgate. Colgate stepped up its rural promotion

drives with IDA (Indian Dental Association) to add value. This has been the

stepping stone to the high penetration in rural minds. Since 1976, Colgate has

been doing this through its rural promotion vans and “Young India, Bright

Smiles, Bright Futures”, schools dental education program.

After conducting a small research in the rural areas Colgate concluded with

five things that were common in all their rural consumers across India, they

were:-

Rural consumers are brand loyal.

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They have disposal income (i.e. because their needs are limited, so

lesser scope to spend.)

Literacy level is on an increase.

Elderly person in the family have the decision authority.

If a brand is turned down in a household in a village, the whole village

sooner or later boycotts the brand.

High quality products was always a plus point of Colgate all they had to do

was to now tap the still unattended rural markets and change their habits i.e.

from the usage of manjans and datoon to toothpaste and tooth powder. In

1998, Colgate contacted 6 million people in 20,000 villages of which 15,000

villages had not experienced the availability of toothpaste and toothpowder let

alone toothbrushes.

Colgate decided to do this by controlling various advertising and promotional

activities. Suggesting and implementing a rural promotional scheme was what

Colgate called ‘Sampark’ for, as they were specialist in rural advertising

category.

Sampark had limited budget to their disposal. Going in for mass media would

not prove to be costly but the reach would be limited as, still only very few

people own and possess a T.V. or a radio.

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Sampark wanted something that had far and wide reach that is why Sampark

decided to their advertising by door to door selling. Sampark hired people from

a certain locality who knew the local language, jargons and idioms. This not

only helped Colgate communicate easily with the consumer but was also

effective in sending the right message across to the rural consumer, the other

plus point of this message was that the communication gap was reduced to a

large extend. These people would move about in the villages telling the people

about the pros of using advanced oral care products and the cons involved in

tradition oral care system, this was quite difficult as rural people always felt

that natural was the best. Colgate trained these salesmen to convince the

rural population and make them try the free sample that Colgate was

distributing free.

The next best option that ‘Sampark’ choose after door to door selling was

‘publicity vans’ also called as A/V vans. Seventy promotion vans do the rounds

of the country and educate rural folks on oral hygiene products such as

toothpaste, toothpowder and toothbrushes. These vans used to travel from

village to village and depending upon the market day in that specific village.

These vans also did a number of other activities at a time such as spot selling,

sampling, retailing etc. The vans used to be parked in strategic locations, they

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were highly decorated so as to get more curious eyes and in the process

educate the rural folk. The roving Colgate vans, after screening a 22 minute

film on oral hygiene that explains how to use the product, offer sampling at

stalls setup near the van. 60 percent of the towns were covered by Colgate

with their own distribution strategy and the remaining 40 percent was covered

by other distributors. There are puppet shows done in the villages educating

the villagers about the plus points of using modern hygiene products.

Educational films were also shown in between movies in theatres, these are

usually 10-40 seconders which were educational and used to feature either

actors, local lenders, for a farmer just like the ones viewing the documentary,

later on after the movie would end free samples were distributed to the

audience, these tactics are also used in Haats and Melas thought the length

and breadth of India. The thrust towards promotion through schools has done

wonders in changing the awareness levels as well as a shift towards the new

decision-makers in the rural families.

OTHER PROMOTIONAL MEASURES:

The packaging strategy too over the years has made the penetration of its

product that much easy for Colgate. The company has followed the very

successful sachet route by introducing the toothpowder in 10 gram sachets of

Rs. 1.50 each and toothpaste with ‘Super-Shakti’ in 15 grams pack of Rs. 3

each. The affordable pricing is something that has increased the sales in rural

India and there have been many who have updated from toothpowder to

toothpaste in the process. Colgate has also gone ahead with the combination

packs, offering a toothbrush with 30 gram toothpaste for Rs. 8.50. This has

helped them increase their base in rural regions to great effect. Sachets and

combi-packs are the ones that find encouraging responses in rural segments.

They are fastest moving pack sizes in these markets. This shift towards

smaller pack sizes is an adaptation towards the rural market, a decision that

has, feel analysts, expanded the Colgate market in oral-dentifrice market in

India. The thrust towards rural marketing is surely benefiting the company.

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