Rural Marketing of FMCG Products

Rural Marketing of FMCG Products

ACKNOWLEDGMENT

There are several claimants for gratitude in the task of preparation of this

project on “Rural Marketing for FMCG.”

I would like to express my sincere gratitude to my project guide Prof. Richa

Jain for giving guidance and taking active interest throughout my project

work.

My heartfelt thanks to the entire faculty for providing me with infrastructure

for the project work & also whose knowledge has immensely contributed in

the preparation of the project.

I would like to thank to those whose contribution certainly adds value to my

project directly or indirectly.

I would also like to thank the staff of Thakur College Of Science &

Commerce whose help was integral part of this venture.

Ms Flavia D’souza

Thakur College of Science & Commerce


EXECUTIVE SUMMARY

It is often said that markets are made not found. This is especially true for the rural

market in India. It is a market for truly creative marketer. Rural marketing is distinct

specialization of marketing discipline, which encompasses a customized application of

marketing tools & strategies to understand the psyche of rural consumers in terms of

needs, tailoring the products to meet such need & effectively delivering them to enable a

profitable exchange of goods & services to & from the rural market.

Already rural market is proving to be vital for the growth of most companies. Take the

largest FMCG Company in the country, Hindustan Lever more than half its annual sales

of Rs.11, 700 crores comes from the rural market.

The term rural marketing is synthesis of two words- Rural & Marketing. Rural India is

evolving, is dynamic & has stood on its own for centuries Rural India’s population is

more than one tenth of the world population, hence, important to India & the World. The

rural market consists of more than 100 million households with a total population of

about 740 million. In spite of being larger in size, rural areas are characterized by low per

capita income, low literacy, and average agricultural productivity & low level of

industrialization.

Only FMCG companies, with deep pockets, unflinching rural commitment & staying

power can play this rural game at the market. But as stated by C.K. Prahlad, “The future

lies with companies, who see the poor as their customer.” It is a high- risk area, but with

the promise of a large customer following as a prize for those who succeed. The Key to

reducing the risk is to understand the market, consumer needs & behavior. The rural

market is still an area of darkness for India entrepreneurs, an idea that is vast in size, but a

amorphous in detail. & yet, it represents the largest potential market in the country, with

over 75% of the population. It is a market with potential, but the marketers need to have a

long term vision & commitment. The marketer can expect results in the time frame of 10


to 20 years. As these results are not going to come very fast, an approach of gradually

building the rural market, in phases, is needed to be successful.

Fast moving consumer goods (FMCG) have attracted Indian villagers when the urban

demand for goods is getting saturated. The manufacturing companies look at this

development as an opportunity. Large FMCG companies including Multinational

companies (MNC,s) are planning their own strategies to enter this large & developing

rural market. The marketing Strategies have to be tailor made to suit the rural condition.

Leading companies in the FMCG sector in India have taken up a development approach

to nourish this new market. The companies are Hindustan Lever Limited (HLL), Nirma,

Godrej, Proctor & Gamble, Reckett & Colemn, Karnataka soaps & detergent limited.

HLL has done considerable pioneering work in developing FMCG products for the rural

market & initiating collaborative & innovative strategies.


INDEXSr.No Chapter Name Pg.No.

1 Literature Review

2 Rural Marketing of FMCG (Theory)

3 Conclusions & Recommendations

4 Results and Findings

4 Annexure

5 Referenced & Sources


INTRODUCTION

The word Market is derived from the Latin word “Marcatus” meaning goods or trade or a

place where business is conducted

Philip Kotler defines Marketing as “a social & managerial process by which

individual & groups obtain what they need & wants through creating, offering &

exchanging products of value with others.”

American Marketing Association (AMA) defines “Marketing is the process of

planning & executing the conception, pricing, promotion & distribution of ideas,

goods & services to create exchanges that satisfy Individual & organizational goals.”

The word rural means places for away from towns & cities. The census of India (2001)

defines rural as that what is not urban & urban is – All locations within a

municipality/corporation, cantonment board or a notified town area committee

All other locations satisfying all the following criteria:-

1) Min. population of 5000

2) At least 75% of male workforce engaged in non-agricultural activities &

3) A population density of over 400 persons per sq. km.

RBI- Definition-

Location with population up to 10,000 will be considered as rural & 10,000 to 1, 00,000

as semi-urban

NABARD- Definition- All locations irrespective of villages or town, up to a population

of 10,000 will be considered as ‘Rural’

There are currently more than 20,000 villages in the 5,000-10,000 population strata as per

the census of 2001, so any population cut off criteria should definitely include these

villages as rural areas. Of the nearly 6.4lakh villages in India, only 20,000 villages have


population more than 5,000.For consumer expendables/FMCG the rural market can be

defined as all locations having population up to 20,000 irrespective of their status as

villages or towns.

As per national commission on agriculture, “Rural marketing is a process which

starts with a decision to produce a saleable farm commodity & involves all aspects

of market structures or system, functional & institutional, based on technical &

economic considerations & includes pre- & post-harvest operations, assembling,

grading ,storage, transportation & distribution”

Definition of Corporate Rural Marketing:-

Rural marketing can be defined as a function that manages all activities involved in

assessing, stimulating & converting the purchasing power of rural consumers into an

effective demand for specific products & services & moving these products & services to

the people in rural areas to create satisfaction & a better standard of living & thereby

achieving organizational goals.

Rural marketing has also been defined as the process of developing, pricing, promoting,

distributing rural-specific goods & services leading to exchange between urban & rural

markets, which satisfied consumer demand & also achieves organizational objectives.

Marketing is all about ‘getting to know your customer’

Although the per capita income in rural is less than half of urban, the rural sector already

accounts for 53% of FMCG & 59% of durables brought in India. However, rural

penetration & consumption levels for most product categories are much lower than urban

because of limited purchasing power with villagers. Improved irrigation facilities,

infrastructure, and better roads, free trading in agri produce, removal of excise duty on

tractors, agri implements; & the insurance scheme for farmers announced in the budget

should all give a boost to the rural economy & generate a greater demand for corporate

products. However, to benefit from this new opportunity, urban markets will have to gain

a better understanding of rural lifestyles, needs & aspirations & design appropriate


products. Corporate will need to extend their distribution reach to service this new

segment living in six lakh old villages, offer smaller packs at lower process points &

communicate in the local Idiom to connect with rural audiences. A pan rural India

marketing strategy will not work. Corporate will have to not only think local, but also act

local.

Adi Godrej, chairman, Godrej group. “The rural consumer is discerning & the rural

market is vibrant. At current rate of growth, it will soon outstrip the urban market. The

rural market is no longer sleeping but we are”

OBJECTIVES

1. To study and analyze the factors that influence consumer buying behavior of the rural

consumer with respect to FMCG products.

2. To identify and define the marketing strategies to be adopted by FMCG companies

that will help them to gain competitive advantage in the industry, earn profits without

jeopardizing the needs and desires of rural consumers.

RATIONALE OF THE STUDY

In the fast changing business environment, where all business firm are expanding their

activities in different business segments and at the same time diversifying in different

geographical areas, all the business organizations are going global to earn huge profits.

So the ultimate aim of the marketing manager is to tap the untapped market area. The

reference to the word untapped market area brings to our mind is the rural area, since

India is the land of villages, or we can say the real India lies in Rural India, but most of

the business firms do not concentrate on rural areas because of low profit potential in

these areas. But the smart Marketer will first focus on rural areas to gain competitive

advantage over other firms.

So the main purpose of undertaking the project is to put a light on what steps the

marketer should follow or what marketing strategies should be adopted in order to sell the


product in the market and at the same time what communication strategy to follow to

convince the rural people to buy the product.

METHODOLOGY

1. The major source of gaining information is Internet.

2. Secondly, there are many personal views supporting this topic.

3. The collected data was analyzed to find out the relevant facts.

4. The analyzed information is projected in the report.

LIMITATIONS

In developing countries like India, illiteracy and poverty being the major concern serves

as a drawback for Internet marketing. Moreover, educated people also do not make a

move towards the trend of Internet marketing and prefer traditional marketing due to

privacy issues, leakage of confidential data which creates huge financial loss and

psychological disturbance.


RURAL MARKETING

Villages are the heart of India. Approximately 75% of India’s population (equaling

12.2% of the World’s population) lives in 6, 38,365 villages spread over 32 lakh square

kilometers. Of this rural population, about 90% is concentrated in the villages having

population less than 2000. As per the Census (2001), rural segment comprises 13.5 cr.

households which constitute 72% of total households in India with 48 cr. Adults

households.

Phases of rural marketing:-

Phase Time period Nature Major

production

Source

marketing

Target

Market

1. From

Independence

to Green

Revolution

Agriculture

marketing

Agriculture

produce

Rural Urban

2. Green

Revolution to

pre-

liberalisation

period

Marketing of

agri-inputs

Agricultural

inputs

Urban Rural

3. Post-

liberalisation

period in 20th

century

Rural

marketing

Consumables

& durables

for

consumption

& production

Urban &

rural

Rural

4. 21st century Developmental

marketing

All products

& services

Urban &

rural

Urban &

rural


Nature & characteristics of the rural market:-

Large & scattered market:-India’s rural market is large & scattered in the sense

that it consists of approximately 75 cr. rural consumers who live in approximately

6,38,365 villages spread over 32lakh square kilometer area

Heterogeneous market:-The rural market is not a homogeneous one. As many as

20,000 ethnic groups are present in rural India & this poses a formidable

challenge to the marketer. There are 24 villages & 1642 dialects & the dialects

(boli) varies every 100 km. or so, making it extremely difficult to develop a

uniform promotional message. Rural India is thus a mosaic of markets & this

heterogeneity is the hallmark of the rural market

Standard of living: - Unreliability factor in case of rural income makes the rural

customers extremely conscious in their purchase behaviour as they are not

confident about their future earning as over 70% of the rural population is

employed in small scale. Agriculture & the related occupations & the propensity

to save for the future exigencies makes them spend less to improve their standard

of living even when they have good income. Besides this low literacy, social

backwardness, low saving, traditional attitude etc. also have contributed to lower

standard of living.

Infrastructural facilities: - The infrastructural facilities like roads, warehouses,

communication systems & financial facilities are inadequate in rural areas. Roads

do not connect nearly 50% villages in the country. Promotion & physical

distribution thus becomes very difficult in the rural terrain because of inadequate

infrastructural facilities over 50% rural households have access to electricity as

main source of lighting but 46% still use kerosene for lighting


According to the NCAER Indian Market Demographics Report 1998, the consuming

class households (annual income between Rs.45,001 & Rs.2,15,000) in rural India equals

the number in urban India .

Rural India is generating more than half of the national income. India’s 58%disposable

income comes from its rural parts where 41% of the country’s middle class homes are

located. The 55.6% contribution to the national income by 74.6 cr. rural population is

higher than urban India’s contribution of 44.6% by 25.4 cr. people. But the per capita

income turns out to be significantly lower that in rural areas because of large population

base.

The importance of rural market can be understood from the fact that if India’s rural

income grows by 1% there will be a corresponding increase of about 10,000 cr. in the

villager’s buying power.

Rural India: - A fertile ground for marketing.

1) 70% of the villages to be connected by the road in the tenth plan

2) Procurement of productive asset is also on the increase in rural area, leading to

increased disposable income & higher purchasing power.

3) A sum of Rs.7, 36,500 crore has been earmarked under the tenth plan for Agri institute

credit.

4) A sum of Rs.86, 000 crore has been disbursed under the Kisan credit card scheme

5) India has the largest number of the tractors in the world

6) The 6.6 million rual people who have invested in formal

Ages & stages of the life cycle

Size of rural market

Estimated annual size Rural market

FMCG Rs.65,000 crore

Durables Rs.5,000 crore

Agri-inputs (incl. tractors) Rs.45,000 crore


2/4 wheelers Rs.8000 crore

Total Rs.1,23,000 crore

Source: - Francis Kanoi 2002

RURAL INDIA

Rural population in India:-

Year

Rural

population

in million

Ratio

percentage

Urban

population

in million

Ratio

percentage

Total in

million

1951 295 82.2 62 17.4 357.0

1961 360 82.0 79 18.0 439.0

1971 439 80.1 109 19.9 548.0

1981 508 76.0 160 24.0 668.0

1991 621 74.3 215 25.7 836.0

2001 736 70.2 285 27.2 1021.0

Source: - Census of India, 2001

Location & concentration of rural population- Geographic factor:-

Sr.

no.

Population range

(No. of persons)

Number

of villages

Population to

total percentage

Population

in millions

Proportion to

total percentage

1. Less than 200 1,20,073 21.55 12.19 2.4

2. 200 to 499 1,50,722 27.05 51.31 10.1

3. 500 to 999 1,35,928 24.40 97.03 19.1

4. 1,000 to 1,999 94,486 16.96 131.57 25.9

5. 2,000 to 4,999 46,892 8.42 137.67 27.1

6. 5,000 to 9,999 7,202 1.29 47.24 9.3

7. 10,000 & above 1,838 0.33 30.99 6.1

8. Total 5,57,137 100.00 508.00 100


Literacy level:-


Literacy level in percentage:-

Sr.

no. Sex 1971 1981 1991 2001

Rural Urban Rural Urban Rural Urban Rural Urban

1. Males 34 61 41 66 58 81 61 82

2. Females 13 42 18 48 31 64 32 67

3. All 24 52 30 57 45 73 50 75

Rural market structure- Demographic Environment

Household in million:-

Year 1991 2001

Rural Urban Total Rural Urban Total

Household (million) 112 40 152 138 54 192

Family size number 5.55 5.32 5.36 5.31

House Type 1981 1991 2001

Pucca 22 31 41

Semi-Pucca 37 36 36

Kuccha 41 33 23

100 100 100

Literacy rate:-

Census 1991 Census 2001 % increase

Male Female Persons Male Female Persons Persons

Rural 57.87 30.62 44.69 71.18 46.58 59.21 14.52

Urban 81.09 64.05 73.08 86.42 72.99 80.06 6.98

Total 64.13 39.29 52.21 75.85 54.16 65.38 13.17

Source: - Census of India


Socio-Economic

Classification (SEC)

Rural Characteristics, Behaviour, Aspirations & Lifestyle

R1 Land lord farmers, educated, exposed to urban environment,

children in school/colleges in nearby towns, aspiring to match

urban lifestyle, technology adopters, experiment with modern

farming methods, eager for additional source of income, socially

& politically well connected, high spender on social occasions,

own durables like tractor, 2 wheeler, TV, music system, steel

almirah, LPG, refrigerator, mixer grinders

R2 Rich farmers with about 5 acres of land, may not be educated, but

wants children get educated with friends & relatives in urban,

consult them for technology adoption, conscious of status, aspires

to be well known in social & political circles, own durables like

tractor, 2wheeler, TV, LPG

R3 Average land holding 2-5 acres, manages small savings, children

sent to village school, opts for time tested technology, low risk

taker, owns durables like TV, tractors (self & rental)

R4 Has little or no land, agricultural labour, living below poverty

line, a major purchase from public distribution system

Distribution of Indian population by age (All India Rural Urban) in millions:-

Year Kids Children Adolescents Young

adults

Mid

aged

Aged Total

0-4 5-14 15-19 20-34 35-54 55+

1996 119.5 233.2 90.7 224 178.1 88.7 934.2

2001 108.5 239.1 109.0 246.8 207.3 101.7 1012.4

2006 113.5 221.2 122.4 279.1 239.2 118.7 1094.1

Hardly any shops in 2.30lakh villages


17% of villages, 50% of rural population, 60% of rural wealth

Distribution of Towns:-

Class of town Population Number of towns Percentage of towns

Class 1 More than 1lakh 423* 8.6%

Class 2 50,000-99,999 498 9.6%

Class 3 20,000-49,999 1386 26.9%

Class 4 10,000-19,999 1560 30.2%

Class 5 5,000-9,999 1057 20.5%

Class 6 Less than 5,000 237 4.6%

Total 5,161 100%

* 10lakh=27, 5-10lakh:42, 1-4lakh:354

Source: - Census of India 2001

Indian villages according to population size

Population size

Villages in size

groups,2001

Villages in size

groups,1991

% of Total

Population

for 2001

Number Percent Number Percent

Less than 200 96,855 15.6 1,03,952 17.9 1.2

200-500 1,36,454 21.4 1,41,143 24.3 5.9

501-1,000 1,56,737 24.4 1,44,998 25.0 14.5

1,001-2,000 1,40,751 21.9 1,14,395 19.7 25.9

2,001-5,000 87,206 13.5 62,915 10.8 37.5

More than 5,000 20,363 3.2 13,376 2.3 15.0

Total no. of

inhabited

villages

6,38,366 100 5,80,779 100

Source: - Compiled from Census 2001 & 1999

Indian states (Number of villages)


State/UT No. of villages Stae/UT No. of villages

All India 6,38,365 Assam 26,247

Jammu & Kashmir 6,652 West Bengal 40,783

Himachal Pradesh 19,831 Jharkhand 32,615

Punjab 12,729 Orissa 51,352

Chandigarh 24 Chhatisgarh 20,308

Uttaranchal 16,805 Madhya Pradesh 55,392

Haryana 6,955 Gujarat 18,544

Delhi 165 Daman & Diu 23

Rajasthan 41,353 Dadra & Nagar Haveli 70

Uttar Pradesh 1,07,440 Maharashtra 43,722

Bihar 45,113 Andhra Pradesh 28,123

Sikkim 452 Karnataka 29,483

Arunachal Pradesh 4,065 Goa 359

Nagaland 1,315 Lakshadweep 24

Manipur 2,391 Kerala 1,364

Mizoram 817 Tamil Nadu 16,317

Tripura 870 Pondicherry 92

Meghalaya 6,023 Andaman & Nicobar islands 547


Rural Population

Indian population overview

As per Census Data

Sr. No. Year 200

1

1991 1981

1. Population in million 102

7

846 683

2. Density per square km 324 273 230

3. Person per household 5.5 5.52 5.55

4. Villages inhabited’000 627 627 579


5. Rural population (million) 742 629 524

6. Urban population (million) 285 218 159

7. Rural population as % of total population 72.2 74.3 76.7

Social Economic Classification (SEC) Rural:-

Type of house

Education Pucca Semi pucca Kuccha

Illiterate R4A R4A R4B

Below SSC R3A R3B R4A

SSC/HSC R2 R3A R3B

Some college not graduate R1 R2 R3B

Grade/PG (General) R1 R2 R3A

Grade/PG (Professional) R1 R2 R3A

The allocation for rural development has increased from Rs.8, 900 crore in the seventh

plan to Rs.34, 400 crore, Rs.89, 000 crore & Rs.1, 20,000 crore in the Eighth, Ninth &

Tenth plans respectively. Human Poverty Index (HPI)

Period Rural Urban

1981 53 27

1991 44 22

Source: - Human Development Report 2001

Population below the poverty line (Rural)

period No. of persons (million) Percentage of persons Poverty line (Rs.)

1983 252 46 89.5

1993-94 244 37 20.6

1999-2000 193 27 328

Source: - Human Development Report 2001

Sectoral Allocations during the five year plans (Rs. Billion)


Heads of Development Seventh plan Eighth plan Ninth plan Tenth plan

1985-90 1992-97 1997-2000 2002-07

Agriculture 105 225 372 589

Rural Development 89 344 890 1,219

Source: - Planning Commission

Components of Non-food items – Source NSSO 2001

By 2002, 5, 07,000 villages (i.e. 86% of total number of villages) had been electrified

(Source:-Planning Commission, Tenth five year plan)

Respondents Sampling- SEC categories

R1- most prosperous R4- least prosperous

SEC categories:-

R1- 3% R2- 9% R3- 36% R4- 52%

SEC Rural % of rural

population

SEC Urban % of urban

population

R1 4 A 10

R2 11 B 17

R3 37 C 21

R4 48 D 23

E 28

Source: - IRS 2003-04

The purchase behaviour SEC is often different from other SEC’s. They generally make

bulk purchases from nearby town markets as they look for more variety & better quality

products.

SEC R2 & R3 prefer to purchase from weekly haats which offer opportunities to bargain.


Rural vs. Urban shops

Urban Rural

1.68 million outlets spread over 5,000 town

& cities

3.5 million outlets spread over 6lakh

villages

Source: - ORG 2002

Literacy level

Census 1951- Literacy in rural area-25%

Census 1991- Males-52% Female-39%

Census does not include children below 5 years old

2001- Literacy rate-65.4% all India

Rural area less than 60% male 45% for females

Consumer expenditure in rural areas:-

Consumer expenditure in rural areas (Value in per person for a period of 10 days)

Amount Percentage of total

Food 110.25 64.10

Non-food 61.82 35.90

Total 172.00 100.00

Source: - Rural Development Statistics

Rural Income Pattern- Economic factor:-

Source of Income Proportion to total percentage

Pattern of rural income Census of India,2001

Agriculture 58.80 55

Agriculture wages 16.10 20

Business & Crafts 8.80 8

Non-Agricultural wages 7.20 8

Salaries 2.50 3

Current Transfer 1.90 2

Others 4.70 4


Total 100.00 100

Source: - Pattern of Rural Income & Census of India, 2001

Demographic Factors- Occupation Pattern:-

Sr. no. Occupation Proportion of Rural

Population percentage

1. Agriculture 52

2. Agricultural Labour 25

3. Business 10

4. Non-Agricultural Labour 9

5. Salary Earners 2

6. Not Gainfully Employed 2

Total 100


FAST MOVING CONSUMER GOODS

A study by the Chennai based Francis Karoi marketing planning services estimated the

total value of the rural market at a whooping Rs.1, 23,000 cr., divided into the categories-

FMCG Rs.65000 cr., durables Rs.5000 cr., tractors & agri inputs Rs.45000 cr. & two &

four-wheelers Rs.8000 cr. Approximately 32.5 cr. Indians lived below poverty line

(BPL), which is around one-third of the country’s population. The incidence of poverty in

rural areas at 39.4% is much higher than 28.4% in urban areas, although, about 80% of

the poor people in India lived in rural areas in 1995 but this does not mean rural

population is above the poverty line & in actual terms it turns out to be a large number.

The percentage of BPL families declined from 46% to 27%. But actual number remains

more or less the same. The percentage of BPL population varies significantly from one

state to other for ex., Orissa with 48% BPL population is poles apart from Punjab where

which this figure is just 6%(planning Commission, Government of India) The rural

FMCG market, comprising a basket of 20 products was worth Rs.44,000 cr. In 1998,

accounting for over half of the all-India market then. The rural FMCG market grew at an

annual average rate of over 12% between 1993 & 1998

The rural household spends Rs.3, 203 per years for 22 FMCGs, that is Rs.229 per month

& this figure excludes cereals, pulses, vegetables & milk. The 1988-93 periods saw a

good average annual growth rate of 5.8% in the FMCG sector. NCAER data shows that

in this period the rural FMCG growth was greater than the urban increase. During the

next five year (1993-98), the agriculture sectors average annual growth fell to 1.94% but

the FMCG growth was around 12%.

The formidable challenge in the FMCG sector is to maintain quality, build aspiration

value & at the same time keep the prices lower to make the products affordable to

Bottom of the Pyramid (BOP) customers”

FMCG are also termed as non-durable goods- a tangible item that is quickly consumed,

worn out or outdated & consumed in single use or a few uses consumer products used for


personal, family or household use are further classified as three types: Convenience,

Shopping & Special categories.

Characteristics/ Features of FMCG:-

The sector touches every aspect of human life, from looks to hygiene to palate.

This industry is characterised by a strong focus on the floor Ps Product, Pricing,

Place & Promotion.

It is a high volume, low value driven industry in most categories.

It is brand driven, rather than product driven.

The capital investment is in the area of marketing: Brand building & Promotion.

Distribution network is extremely vital for the success of an organization in this

Industry.

FMCG sector is the cornerstone of Indian Economy. It has been in existence for a quite a

long time, but it began to take shape only during the last fifty- odd years. FMCG, the

fourth largest sector of Indian Economy which had an estimated market size of Rs.85,

000 cr. in 2003, is a significant direct & indirect employer out of the total spend of Rs.89,

000 cr. more than Rs.53, 000 cr. was attributable to rural areas.

Launch cost is as high as 50-100 per cent of the revenue as the brand matures, gain

consumer acceptance & as turnover rises.

Around 60% of Indian FMCG market is unorganized. Local players had nearly 70% of

the FMCG market. In the FMCG sector increasing competition is the main reason for loss

of pricing poser in most brands. In the FMCG industry in India, companies distribute

their products to over 10lakh retail outlets or point of sales.

Cash poor & low level of income the poor consumer has to be accessed differently.

Major Indian consumer product companies (Britannia, P& G, HLL, Colgate etc.) have a

very sound presence throughout the Indian market with their strong brands. The leading

companies make considerable investment in R & D to sharpen & maintain their edge in

the business. Brand equity, therefore is an extremely important factor in FMCG Industry.


Cavinkare gave HLL a run for money in the shampoo market; Anchor challenged the

dominance of Colgate & HLL in the toothpaste market. Jyoti labs dislodged the Reckitt

& Colemon’s long time leader Robin Blue with its Ujala Fabric Whitening. Flanking

attacks make excellent marketing sense for smaller & regional players with limited

resources. This is how the brainchild of Karsan Bhai Patel, Nirma detergent powder

became a national brand & a household name as well.

The phenomena the pricing war is very common in FMCG sector.

Penetration of different FMCG product categories in rural market:-

Category Penetration (%) Highest Penetration Brand

Toilet soap 91% Lifebuoy

Washing cake/Bars 88% Wheel

Edible oil 84% Double Hiran Mustard

Tea 77% Lipton Taaza

Washing powder/liquid 70% Nirma

Salt 64% Tata Salt

Biscuits 61% Parle-G

Source-ORG-MARG R Panel, Strategic Marketing, July-Aug 2002. pp 32

Fast Moving Consumer Goods (FMCG)

Product Basket:- Toilet soap, Washing cake, Tooth powder, Body talcum powder, Hair

oil, Shampoo, Face cream, Lipstick, Nail polish, Packaged biscuits, Tea, Health

beverages, Cooking oil, Vanaspati, Electric bulb, Electric tube, Footwear, Cigarettes.

The major players in the FMCG category in rural market

HLL, Dabur, Marico, Colgate-Palmolive, Nirma, Cavinkare, & Godrej


Rural FMCG Market will boom

Category Total Size+

2001-02 *

% Growth **

2006-07 *

Rural size Urban + Rural

Toilet soap 7,500 13.40 6,021 11,291

Body talcum powder 940 23.65 793 2,292

Toothpaste 2,080 23.50 1,441 4,140

Cooking medium

(oil)

17,000 10.91 15,377 25,806

Cooking medium

(Vanaspati)

3,900 7.63 2,844 4,108

Tea 6,500 10.97 4,955 8,337

Health beverages 908 28.54 601 2,110

Electric bulbs 750 9.40 354 555

Electric Tubes 158 10.15 74 121

Cigarettes 7,662 13.09 6,422 11,879

Packaged biscuits 2,500 6.79 1,323 1,837

Hair oil/cream 175 30.85 179 689

* Projections + figures in Rs. Crore for 1998-99

** Annual growth rates compounded for last five years

Source: - Business Intelligence Unit & National Council for Applied Economic Research

(NCAER)

Most popular consumables- Rural ranking, urban ranking

Rural Ranking Ranks Urban Ranking

Toilet soap 1 Toilet soap

Washing powder 2 Biscuits

Packaged tea 3 washing powder

Biscuits 4 Packaged tea

Detergent cakes 5 Detergent cakes


FMCG companies targeting rural markets in India/ Rural Shop Window:-

Company Products Strategy

Colgate Palmolive Dental cream Tapping 1.4 lack new

villages in a year

Dabur India Chawanprash digestive

lozenges

Creating awareness by

taking bowling alleys to

villages

Godrej soaps Toilet soaps Setting task force to hike

per capita usage

HLL Personal products &

detergents & FMCG

Door to door selling in

villages of population under

2000

Mahaan foods Pickles, ghee, vadies &

papads

Launched first TV ad

campaign to enhance image

in rural areas

Marico Hair oil Selling low price sachets

Contribution of ‘rural market’ to all-India market (in terms of volume):-

Sr.

no.

Product category Name of product Contribution in

percentage

1. Washing & cleaning material Detergent, 45.5

Soap cake/Bars, 68.0

Washing powder 55.0

2. Toiletries Premium soaps, 26.0

Popular soaps, 50.5

Toothpaste, 39.0

Toothpowder, 24.5

Shampoos, 6.5

Safety Razor blades, 50.5


Shaving rounds, 31.0

Shaving creams. 5.0

3. Cosmetics Talcum powders, 43.0

Hair oils, 22.0

Acne preparations 23.0

4. Food/Beverages Packaged tea, 40.5

Coffee, 15.0

Milk foods, 20.0

Weaning foods, 18.0

Beverages 8.0

5. OTC products (over the

counter)

Glucose powders, 42.0

Rubefacients, 38.0

Cold/Analgesics 45.0

6. Miscellaneous Batteries, 56.0

Torches 33.0

Source: - Several sources like Business India, The Economic Times etc.

Rural sales as proportion to total sales of some FMCG companies

FMCG company Percentage rural share

Hindustan Lever Limited 50%

Colgate-Palmolive 50%

Godrej (GCPL) 30%

Cavinkare 33%

Marico Industries 25%

Cadbury India Ltd 25%

Heinz 20%

Nicholas Piramal 19%

Source: - The Economic Times dated January 28, 2002 pg.1


CONSUMER BEHAVIOUR

Differences in consumer behavior in rural & urban markets

1) Need-based buyer behaviour: - When compared to the Indian urban society, which

is turning towards consumerism; the rural consumer is likely to remain driven by

his needs. First the will therefore be cost-conscious & thrifty in his spending habits.

2) Conscious Decision-making:- The urban consumer may be an impulse buyer; but

the rural consumer is more discerning because of income limitation. The rural

consumer is very suspect of being fooled & does not make the decision very fast.

3) Value for money: - Although all the four Ps apply in the rural market, price is an

important determining factor. Therefore, the challenge for the marketer in the

hinterland is to develop the right product proposition & to ensure that it is available

at those places where the rural consumers actually buy it. Today sachets of

shampoo, toothpaste, hair oils, & several other products are making it possible to

tap the vast rural market. Companies come up with special rural packaging like

Chic shampoo sachets @ Rs.1; Parle-G tikki packs @ Rs.2, Shanti Amla oil by

marico.

4) Consensus decision making: - The urban buyer’s behavior is individual or at the

most family-driven, whereas in rural areas the decision making is a collective

process. The rural buyer has to ensure social acceptance of his decision making &

the products he is purchasing. Therefore, he prefers census decisions. Parties

involved in the influencing or making a decision can be an opinion leaders, retailer

& family members.

5) Innovative resistance to change: - Sociological distinctiveness & innate resistance

to change make the rural consumers suspicious of all change as they have a strong

fear of ridicule from others.


6) Different lifestyle & product usage environment: - The product-usage environment

shapes the wants & consumers thus, solution to the different needs of consumers are

different in many cases for urban & rural markets & understanding of this product

use situation, which could be different in urban & rural setting, will unravel cost of

opportunities for the marketer, but the lack of it will pose a serious challenge.

7) Different perceptions with regard to marketing stimuli: - culture influences the

perceptions & behaviour; therefore preferences for colour, size, shapes & taste lead

to a situation where the same products/promotion is perceived differently in

different socio-cultural settings.

8) Brand Consciousness: - Ogilvy & mather rural communication networks head,

O.K. Bose, says, “branded goods comprise 65% sale in villages today, & the share

of non-branded goods is shrinking dramatically. The rural consumer recognizes the

package of Parle biscuits pack by its yellow stripes & Parle baby. Consumers refer

to Nirma as the peela powder. The rural world values logos, colours & symbols for

brand identification.

9) Brand loyalty:- Pond’s is a leader in talcum powder category with a penetration of

65% & volume contribution of 56% moreover, 60% of Pond’s users in rural India

have purchased no other users in rural India have purchased no other brands i.e.

They are 100% brand loyal, which reflects the strength of a brand in rural Bazaar.

In the skin care category, fair & lovely fairness cream with the penetration of 75%

accounted for 60% of the skin care market in rural India in 2002. It also enjoys the

undistinguished patronage of 58% of its user households. Thus, both Pond’s & fair

& lovely were enjoying almost monopoly in the rural market in their respective

categories.


10) Quality Consciousness: - The rural consumer wants a good product with consistent

quality. The product must perform. The rural consumer may be illiterate but they

have plenty of common sense & survival skills.

11) Rising aspirations: - The rural consumers are becoming conscious about their

lifestyle & their right to live a better life. They are becoming more demanding &

choosy in their purchase behaviour than ever before because of increase in

awareness, aspirations & disposables income village girls are saving some money to

buy fair & lovely at weekly haat.

12) Innovative uses of products: - Horlics was used in Bihar as a health beverage for

fattening up cattle. Iodex is also rubbed into the skin of animals after hard days

work to relieve them from muscular pain. In a market where hair dyes is used to

paint the buffaloes.

Consumer Behaviour:-

Consumer- buying behaviour models

Marketing

Stimuli

Other stimuli Buyers

Characteristics

Buyer’s decision

process

Buyer’s decision

Product Economic Cultural Problem

recognition

Product choice

Price Technological Social Information search Brand choice

Place Politics Personal Evaluation Dealer choice

Promotio

n

Cultural Psychological Post purchase

behaviour

Purchase timing

Purchase amount


Consumption by age & life-cycle stage: Rural vs. Urban

Products & Services

Age Life cycle stage Urban Rural

Below 12 Child Video games, Chocolates,

Beverages/health drinks

Toys, ice candy, daliya

13-19 Teenage Cell phone, motorcycles,

Internet

Bicycle, television, cinema

20-40 Young Car, personal computer,

branded clothing, alcohol,

stores/malls

Motorcycle, telephone,

LPG, tailored/unbranded

clothes, country/local (haat

bhatti)liquor, haat

40-60 Middle aged Luxury car, credit cards,

house, health insurance,

holiday trips

Tractor, kisan credit card,

postal savings, mela

Above 60 Old Clubs, theatre, parks Chaupal, playing cards,

pilgrimage

Comparison of Rural & Urban Lifestyles:-

Dimensions Urban Rural

Demographics Convent educated, salary earner,

small nuclear family, large dense

population, apartments

Govt school, self employed, large

family, small/scattered

population,

Activities Office jobs, internet surfing, health

club, shopping, club & party

Agriculture, physics, sports,

gossip, playing cards, cinema,

religious congregation

Interests Chinese, continental food,

designer clothes, beauty saloons,

holiday trips

‘Desi’ food, milk, bright coloured

clothes, jewellery, visiting towns,

markets/mela


Consumerism: - the shift

Loose unbranded tea Packaged, branded tea

Home made sweets (jaggery) Branded biscuits

Open vessel wood fire looking cycle Pressure cooker cooking on LPG

Earthen vessel for cool water Refrigerator for cold water

Sharbat, nimbu paani Aerated drinks

Rural consumer classification percentage

Rural consumer classification 1995-96 2006-07

The affluent/

very rich

Households owning personal car/jeep with

other products

1.6 5.6

The well-off Household owning any/all of these-air-

conditioners, motorcycle, scooter, washing

machine, refrigerator, colour TV with other

durables but not car/jeep

2.7 5.8

The climbers Household owning any/all of these mopeds,

VCR/VCP, mixer, grinder, sewing machine,

audio-equipments, B/W TV, geyser with other

durables but not these mentioned under first

three categories

8.3 22.4

The aspirants Household owning any/all of these- bicycle,

electric fans, electric iron with other durables

but not those mentioned under first three

categories

26.0 44.6

The destitute Households other than those classified under

categories 1 to 4 above (owning any/all/none of

these- wrist watches, pressure cooker, cassette,

recorder, transistor/radio

61.4 20.2

Source:- NCAER


Buying Roles:-

Initiator: - One who suggests the idea of buying.

Influencer: - One whose views influence the decision.

Decider: - One who decides to buy or not.

Buyer: - One who makes the actual purchase.

User: - One who consumes or uses the product.

Type of

consumer

Urban Profile Rural Profile

Innovator Young, public school educated

affluent, in business, fun loving

party goers, credit card holder

Young progressive farmers (plans

crop rotation, new crops), urban

exposure (friends, relatives, children

in school/college), Kisan credit card,

additional income(part time service,

agents)

Early adopter Young, educated, affluent,

employed in MNC, with

exposure to media, credit card

holder

Rich farmer, high disposable income,

urban exposure (children in

school/college), high social status,

conscious evaluator, kisan credit card

Early

majority

Young, educated, married,

disposable income, self

employed/in service

Mediocre farmer, member of

cooperative ready fro kisan credit

card, willing to adopt technology

product

Late majority Middle aged, in service/self

employed, opts for consumer

schemes

Member of cooperative society,

hesitates to take agri-loans, adopts

only time tested technology/product

after approval from opinion leader

Laggard Middle aged in service, shops in

neighborhood

Marginal farmers using traditional

forms of cultivation


Demand: Rural vs. Urban

Sr.

no.

Features Rural Urban

1. Demand pattern Seasonal Uniform

2. Spread Widely spread Concentrated

3. Literacy level Low High

4. Sources of supply Inadequate Adequate

5. Physical communication Facilities Poor Very good

6. Product knowledge Not known Known

7. Awareness of needs Not known Known

8. Sources of information Word of mouth

mostly rural

Any media

9. Product concept Not known Known

10. Timeliness of supply Untimely Timely

11. After-sales-service availability Inadequate Adequate

12. Expenditure pattern Somewhat

unproductive

Productive

13. Guidance on usage Needed Not needed

14. Per capita income Low High

15. Product as status symbol Mostly no Mostly yes

16. Consumer protection Rarely available Easily available

Status Symbol

Rural Urban

Social/political status Educational degree

Tractor (50 HP +)/Jeep/Car Car

Large pucca house with courtyard House wealth

Children’s city education/Jobs Children school/college

Land Air conditioning


Telephone Club membership

Pilgrimage Holiday abroad

Levels of social interaction:-

Urban Particulars Rural

Parties, Social Gathering,

House visits

Place of meeting Choupal, community

meeting

Once in while Frequency of meeting Almost daily

Almost every time Meeting people new to the

circle

Very rare

Usually by phone Keeping in touch Personal interaction

A.C. Nielsen Study:-

Differences & variation in climate affect the demand for some products for example;

talcum powder & deodorants sell more in the hot & humid parts of south India. The sever

winter in the north India leads to higher demand for Chyavanprash during this season.

Development levels:- In east India, the poor electricity infrastructure aids sales of

flashlights, batteries & mosquito coils.

For product like Chocolates, butter & ice cream, refrigeration facilities are essential.

Differences in food habits help identify gaps in portfolio or point to the need to develop

alternative products & promotion strategies. People in south India extend their

preferences for the coffee taste even to the toffees. Identifying regions with supply gaps

help marketers to priorities their efforts. In eastern India, low milk availability aids sales

of categories like milk powders.

Water scarcity in the areas like Tamil Nadu leads to increased sales of packaged drinking

water.

Cultural differences & profile of people: - people in north India tend to have large

households, hence their preferences is for large economy packs. In the south India small

packs sell more as the household size is smaller.


Traditional ways of thinking & cultural habits aid sales of herbal/natural products &

affect sales of color cosmetics.

Outgoing image: - conscious people in north India buy more high-end color cosmetics.

MARKET SEGMENTATION

Definition of Market segmentation:-

According to Philip Kotler, “Market Segmentation is the subdividing of market into

homogenous sub-sections of customers, where any sub section may conceivably be

selected as market segment to be reached with a distinct marketing mix”

According to W. J. Stalion, “Market Segmentation consists of taking the total

heterogeneous market for a product & dividing it into several sub-markets or segments,

each of which tends to be homogeneous in all significant aspects”

Geographic factor, Demographic factor, Economic factor

Benefits of market segmentation:-

Customer-oriented Philosophy: - As the marketing mix will be determined on the

basis of the homogeneous market segments. It helps in serving the needs of

customer in an optimum manner.

Enables tailoring of marketing programmer: - As the marketer is aware of the

consumer needs, he can develop customized & tailored marketing programs that

can delight the customers with benefits & the experience.

It Enables development of strong positioning of brand as the organization is

serving the customer needs in a highly customer-oriented manner. It establishes a

strong image of the organization in the target market.


Conditions for Effective market segmentation:-

Measurable:-The market segment must be measured in order to calculate the

market potential. This will be there basis to develop marketing strategies to tap

the potential

Accessible:-The market segments need to be accessible by marketing efforts in a

financially viable manner

Profitable:-the market segments need to be large enough to be profitable

Data availability: - Certain type of data must be available about the market of

significantly important segmentation variable. Then only effective segmentation

can be executed.

Segmentation of rural market: -

India has about 6, 38,000 villages, 50% of the villages are very small having a population

less than 500 with a limited purchasing power & many of them do not have even a single

shop. The next following categories with population of 501 to 2,000 numbering 2.5lakh

villages have around five shops. These villages may not be good enough for a favorable

distribution cost benefit equation to begin with, but can be tapped later after successful

tapping the villages with a populating more than 2,000.

Therefore the role of segmentation becomes extremely important in the rural market.

Marketer has to implement market penetration effort in phase going step by step. The

lower handing fruits need to be priced up first for revenue gains & for the learning that

will come with it. These initial gains can form the basis for further expansion deeper into

rural market.

Companies therefore need to focus initially on villages with the population of 2,000 or

more & there are 60,000 of them & also on high potential 501 to 2,000 population

category villages. The larger villages are more urbanized & so are the people’s attitudes.

Whereas those located in the remote areas are rooted in traditional values. FMCG


companies can cover 1, 00,000 villages by appointing 2,000 stockiest in towns of

population OF 20,000 each. Stockiest can conveniently distribute products to 50 locations

around their town.

Approaches for segmenting the rural markets of India

Based on size of village population: - ORG-MARG has suggested the

classification of the rural belt in there board & simple categories

class-1 villagers with population over 5,000

Class-2 villagers with population between 1,000-5,000

Class-3 villagers with population less than 1,000

For marketers who are entering the rural market for the first time, Class-1 villagers

are an ideal target market. However the FMCG organizations, which were operating

in the rural market for a long time, are now developing marketing & distribution

strategies to move to class-2 targeting class-3 market with traditional distribution

channels is not available as cost of distribution comes out to be higher than returns in

this market. Therefore, organization like HLL are developing alternative channels like

project Shakti to target market

Based on location with respect to nearby town:-

Villagers near urban centers: - These villages because of their proximity to the urban

areas are somewhat urbanized. Their resident’s education profile, shopping habits, &

brand choices resembles to a great extent to make most of purchases from the nearby

towns.

Villages in developing districts: - These are somewhat developed villages with

consumers being aware of various marketing promotion to some extent. The income

profile of these villages is good enough to make them potential market for branded

goods Immobile & self-sufficient Asiatic villages. These are the remote villages

located in the less developed districts. The income & education profile of consumers

in there villages is not very attractive from the marketing point of view. The


connectivity & infrastructure availability is also very minimal. Most of these villages

can be classified as media dark.

Based on size of farmland:-The generally followed classification on basis of

size of farmland like this

Marginal farmer:- holding up to 1.0 hectare

Small farmers:-holding 1.0-2.0 hectares

Semi-medium farmers:-holding 2.0-4.0 hectares

Medium farmers:- holding 4.0-10.0 hectare

Large farmers:- holding 10.0 hectares & above

Based on income:-Rural rich consumer, concentrated rich customer,

Scattered rich customer, Rural consumer around urban area, Rural consumer

above poverty line, Rural consumer below poverty line,

NCAER has also classified the Indian consumer into the following five classes on the

basis of their propensity to consume.

Destitute: Have income less than Rs.16, 000 p.a. (market for basic, economical &

essential commodities)

Aspirants:-Have annual income in the Rs.16, 000p.a.-Rs. 22,000 p.a. ranges (market

for basic durables)

Climbers:-Their income is between Rs.22, 000-Rs.45, 000p.a. (market for

consumables & consumer durables)

Consumer:-Their income is between Rs.45, 000-Rs.2, 15,000p.a. (Market for

consumables & consumer durables)

Very rich: - Those have income higher than Rs.2, 15,000p.a. (Market for international

brands)


Segmenting the markets: -

Nirma Vs HLL

Until about twenty years ago, the rural market in India was considered as homogeneous

mass. The decade of the 1980s was a significant one for Hindustan Lever Limited (HLL),

when the giant & undisputed market leader in the detergents (Surf) in India suffered

significant losses at the hands of new & small firm, Nirma Chemicals, Nirma

immediately caught the fancy of middle & lower-income customers, who were finding it

difficult to make both ends meet with their limited monthly income.

Nirma was the lowest –priced branded washing powder available in grocery &

cooperative stores. The middle class housewife was happy as she could now choose a

lower priced washing powder against Surf, which was beyond her budget. Nirma also had

an impact on upper-middle class & higher-income families, who choose Nirma for

washing their expensive clothes.

Around 1984, HLL decide to take a fresh look at the market. Research conducted across

the country revealed that different income group of customers had varying expectations

from detergents & washing powders. Thus to counter attack from Nirma, HLL launched

Sunlight (Yellow), Wheel (green), & Rin (blue) detergent powders for different market

segments. This strategy for segmenting the market helped HLL win back parts of its lost

market. Nirma had won the first round by introducing a low-priced product, for the

highly price-sensitive Indian market.

Mass marketing: -

Initiated by leading FMCG companies HLL offered only one detergent powder, Surf, to

all customers but when Nirma entered the market & grabbed a sizeable market share of

low-income households, HLL woke up & introduced Wheel.

Colgate-Palmolive successfully marketed the same Colgate toothpaste to all consumers in

urban & rural markets till recent years. However as the rural market started to evolve &

consumers became more demanding, Colgate introduced Cibaca.

Colgate 10-gm sachet of toothpaste was designed in 2000 keeping the rural consumer in

mind. Britannia introduced smaller packs sizes of Tiger biscuits in 1998 at Rs.4, Rs.2,

and Rs.1


Micro marketing:-

Anmol-Mustard oil: - Dabur launched Anmol, mustard & amla-based hair oil, to target

rural consumers in the northern markets who used loose mustard oil. A small 50ml. pack

priced at Rs.10 was introduced.

Basis of Segmentation:-

Geographic: - 1) Region: - East, West, North, South

2) Village size: - <500, 501-1000, 1001-2000, 2001-5000, 5000>

3) Density: - low, moderate, high

4) Climate: - summer, rainy, winter

5) Culture: - 56 socio-cultural regions (e.g. Avadh, Bundelkhand, Rohilkhand,

Purvanchal & Braj in Uttar Pradesh

Demographic: - 1) Age & life cycle: - children, teenager, young adults, elders, seniors

2) Family structure: - nuclear, joint

3) Gender: - male, female

4) Income: - destitute, climbers, middle, high

5) Landownership: - landlord, rich farmer, small or marginal farmers, agricultural

labourer

6) Education: - illiterate, semi-literate, literate

7) House type: - pucca, semi-pucca, kuccha

8) Occupation: - farmers, wage earner, salaried

9) Religion: - Hindu, Muslim, Christian, Sikh, parsi

10) Caste: - upper caste, lower caste

Psychographic: - 1) Social class:- upper, lower, middle

2) Lifestyles: - trendsetter, follower/adopter, tradionalist

3) Personality: - authoritarian, ambitious

Behavioural: - 1) Occasion: - festival, mela, jatra, weekly haat


2) Benefit sought: - quality, convenience, value for money, service

3) User status: - non-user, ex-user, first time user, regular user, potential user

4) Usage rate: - light user, medium user, heavy user

5) Loyalty status: - strong, weak, non-loyal

6) Place purchase: - village shop, haat, nearby town, mela

Dabur has segmented its toothpaste market on the basis of economy & flavor positioning

Lal Dant Manjan for low-income groups, red toothpaste for middle-income groups & Red

Gel for relatively sophisticated & rich rural consumers.

Rural market segmentation

Segment coverage examples

Segmentation Marketing type Coverage strategy Products examples

Zero Mass undifferentiated Soaps, face

powder, ,condoms,

consumer goods

Substantial Segment Differentiated Seeds, fertilizers,

agri-implements,

smaller packets of

FMCG

Selective Niche Concentrated Internet, computer,

mobile phones

For rural marketing of FMCGs the segments of rural market is Cash Starved. Hence tooth

paste, shampoo, soaps, toothpowder are all required in smaller packets that can be sold in

cities.


Segmentation of Biscuit market:-

Biscuit market segments

Sweet Salty Semi-sweet Sweet & salty

Glucose Milk Biscuits Arrow root Marie

Special segment would consist of

1) Creams/wafer cream

2) Calories

3) Health

Estimated relative share of various types of biscuits:-

Glucose: - 35% Milk biscuits: - 17% Arrow root: - 18% Cream biscuits: - 12%

Maries:-11% other:-07%

About 60% of biscuit market is in the hands of the organized sector

Source: - Probity Research report


TARGET MARKETING

Developing a targeted marketing strategy:-

1) Define relevant market

2) Analysis of characteristics & wants of potential customer

3) Identify the basis for segmenting the market

4) Define & describe market segments

5) Analyses competitor’s position

6) Evaluate market segments

7) Select market segments

8) Finalize marketing mix(es)

Identifying & selecting target market:-

This is one of the toughest tasks of rural marketer. After he has segmented the rural

market, he has to consider a combination of factors (for which the availability of

authentic data is not easy even in the present day information age) to decide which rural

market segments an organization would like to target % the ones which are not fit to be

targeted some of the feature important for this analysis as follows:-

1) Social-cultural, Economic development & infrastructural environment of different

districts.

2) Density of population in different villages.

3) Heterogeneity & homogeneity of population across regions.

4) Mobility, media availability & cost of access to the area.

5) System of attraction.

Selecting the target marketing strategy:-

1) Undifferentiated marketing: - It is a marketing strategy created by the same marketing

mix product, price, place & promotion for all markets. The firm considers the target

market as one & the same. It requires extensive distribution in the maximum number of

retail outlets for ex. Revlon, Pepsi & Sony.


2) Concentrated marketing: - It involves devising a marketing mix on one product, one

segment principle. This strategy can be used by small companies also because small

companies can create niches in one product, one segment for ex. Cosmetics Lakme.

3) Differentiated marketing: - It involves devising multiple marketing mix offerings For

Ex. Unilever & Proctor & Gamble.

Market targeting for different products:-

Company Brand Name Target Markets

P & G Ariel Micro System All housewives, household income of Rs.8,000+

Godrej Soaps Evita Soap Women who care for their complexion

HLL Fair & lovely lotion Skin care conscious urban women

Coca-Cola Thums-up Youth market

Coca-Cola Limca Thirst-quencher

Coverage of segments:-

Segmentation Type of marketing Coverage strategy Example

Zero Mass Undifferentiated Ghari, Medimix

Substantial Segment Differentiated Vicco Vajradanti, Colgate

Selective Niche/Single segment Concentrated Multiple brands of soaps of

HLL

.

Winning markets through effective segmentation & targeting:-

When Brooke Bond Lipton India Ltd. (now HLL) decided to expand its branded tea into

the largely unbranded loose-tea segment in the rural market, the company explored the

buying, consumption & other habits of all tea consumers in order to identify a cross

section of people united by common behaviour traits only after conducting this extensive

research did HLL conceive A1, the new brand for this market, as a bundle of benefits

designed to meet the needs of this segment.

Naturally, pain-vanilla demographic & usage data would not have helped in carving out a

well defined niche so HLL created its own profile of would-be consumers, both urban &


rural. HLL began by collecting photographs & video clips of people across the country

who buys loose tea in order to study their lifestyle, in general & their tea-preparation &

tea drinking habits in particular, including the times in the day when they drink tea, how

they serve it, & the family members who are regular tea drinkers, alongside, HLL tracked

other items of food & drink that those people consumed, the soaps & detergents that they

used & how they spent their leisure so as to understand just where tea & its consumption

stood in their matrix of the needs.

The objectives were first to understand exactly what bases of segmentation could be used

to differentiate consumers & second to identify the key issues for the consumer groups. It

was crucial to come up with useful definition of the segment under review. It would have

been too simplistic to use price as a factor to define the segment. As a result of this

elaborate exercise, HLL found a simple but highly effective idea that it could use to

define its segment: the desire for strong cup of tea. Cutting across geographical, cultural,

income & age groups, this need emerged as a unifier for many tea drinkers. So HLL used

this as the one overriding characteristic that would distinguish its chosen niche from

characteristics that would distinguish its chosen niche from the rest of the market.


MARKET POSITIONING

Positioning is the act of designing the company’s offerings & image so that it occupies a

distinctive place in the mind of the target segment. Positioning involves:-

1) Identifying the unique feature of the product (USP) as well as the differences of the

offer vis-à-vis the competitors offer.

2) Selecting the differences that have greater competitive advantages

3) Communicating such advantage to the target audience.

Himani positions its Sona Chandi Chyavanprash on the two plat forms of the healthy

body & a sharp mind. Thus it captures the pleasure of the contrast.

Ghari detergent identified a gap in the low price- high quality quadrant & positioned its

brand accordingly; as a result it quickly became a rural super brand, leaving behind rival

brands like Wheel.

Product differentiation: - Coke introduced the Chota Coke at Rs.5 for rural. Colgate

introduced a herbal version of its toothpaste using the positioning of ‘natural fee’

preferred in rural areas. Meswak, Neem, & Babool toothpastes also followed a similar

positioning strategy.

People: - the endorsement of Coca-cola by Amir Khan (addressed as villager) or of Sona

Chandi Chyavanprash by Sunny Deol, brings huge differentiation to the product image &

helps in pushing the sales of the product decides which positioning to promote:- for rural,

the positioning statement should focus on the generic benefit(s) for the product ‘Sprite

bujhaye pyaas baki sab bakwas’ & ‘handa matlab Coca-cola’are two advertising line or

jingles suitable for rural consumer.

HLL plans rural campaign to reposition Lifebuoy:-

FMCG major Hindustan Lever Ltd Embarked on a massive rural campaign using the

concept of hygiene as a platform to reposition its leading brand Lifebuoy.

The repositioning of the 107-year-old Lifebuoy has been done in a bid to drive growth in

a sluggish soap market.The new Lifebuoy is a completely new product with a new

formulation, fragrance & lather profile. It also represents a shift in positioning from a


male soap to a family soap. The repositioning of Lifebuoy was necessitated by a shift in

market trends. Earlier consumers had little or no choice & needed a basic cleaning soap,

but today consumers in rural India can choose from much wider section. The query of

rural consumers is, ‘Why do I need Lifebuoy when all soaps clean?’ It was indicative of

decline of the brand, prompting HLL to launch Lifebuoy Active & Lifebuoy Extra Strong

in mid 2001. Lifebuoy is no longer a carbolic soap with perfume. It is now toilet soap

with a different ‘health’ fragrance. With this launch, the carbolic segment has been wiped

out, Lifebuoy previously accounted for 95% of this segment. In the process of making the

switch, HLL changed everything that Lifebuoy had once stood for perfume, formation,

size & shape. Every element of the communication strategy was also changed.

The first phase of communication strategy was to tell customers that Lifebuoy has

changed from an earlier focus on man. The concentrated has now shifted to the family,

with the message that Lifebuoy is the right soap for effective protection against disease-

causing germs.


MARKETING MIX 4 Ps P for PRODUCT

The concept of marketing mix, ‘A series of interconnected & interdependence marketing

issues that need to be considered together was first developed by marketing academic,

Neil Borden, in the 1950s. In 1960s, Jeriome McCarthy, Professor, Harvard Business

School, elaborated the concept of four Ps (McCarthy 1960)

Marketing Mix refers to the set of actions, tactics, tools or variable that a company uses

to promote & sell its brand or a product in a market.

‘Product’ refers to anything that is capable of or can be offered to satisfy a need or want.

Product for the rural market must be built or modified to suit the lifestyle & needs of

rural consumers. Rural consumers like to buy products for need-based consumption. The

product must also prove to be useful & easy to use.

In the past, FMCG products percolated into rural areas from urban areas automatically,

but they were not specifically designed for rural areas. But if the organizations want to

develop demand in rural areas significantly, then they need to modify the existing

products to cater to the specific needs & tastes of the rural markets through innovative

designs. New product development is a sequential process of finding ideas for new goods

or services & then transforming them into commercially viable products or services that

can be launched in the market for serving the needs of customers, at profit.Is there a need

to redesign or modify products sold in urban areas to suit the rural consumers, or can the

same products be sold as they are?. The answer to this question is both yes & no, since it

depends upon the product & its characteristics while there may not be much

maneuverability for redesign or modification in the case of some products, it is possible

in the case of several others like Paisa packs of tea costing only 25ps. (which is

reasonably sufficient for two cups of tea), 5gram Vicks vaporub tin, small size 75 gram

Lifebuoy soap, 25grams pouch of Colgate toothpowder costing only 3 rupees, small

denomination packets of some washing powders like Nirma, Sachet packs of shampoo

costing a rupee, low priced cigarettes like Hero ( an ITC brand introduced in 1993 which

was clearly positioned to upgrade beedi smokers), cough syrups in sachets, Vicks singles

cough drops & others.The factor to be considered while redesigning or modification are: -

1) the specific requirement of consumers 2) their habits of usage 3) their purchase habits


4) their income levels 5) customs, beliefs, taboos etc. a few years back, Colgate

Palmolive introduced small tubes of toothpaste popularly known as “Colgate ka chhota

packet.” Yet another example is that of a cigarette from ITC known as “Hero”. This was

priced at at 15 paisa per sticks only. The purpose of this cigarette was to upgrade the

beedi smoker to cigarettes while making the product available at a price comparable to

that of beedi. Similarly Pepsi & Thums-up have introduced 200ml. bottles for Rs.5 only

called Chhota Pepsi or a Thums-up. In fact the rational for introduction of 200ml. bottle

is interesting. It was observed that two rural consumers shared a 300ml. bottle costing

Rs.8 or 9. They could not afford a bottle each. By introduction of a 200ml. bottle costing

only Rs.5, it bought the product within the reach of rural consumer as well as increased

volume of sales. Two persons can now consume 400ml. between them instead of the

earlier 300ml. at a nominally higher cost. New product Cadbury launched Chocobix, c

chocolate-flavoured biscuit based on the consumer’s insight that rural mother opt for the

more affordable biscuits rather that the more expensive chocolate bars for their children

MARKETING MIX 4 Ps P for PRICE

Price: - Rural consumers are price sensitive. They are price conscious & frugal. Village

retailers charge more than Maximum Retail Price (MRP) by justifying that they spend

time & money to fetch the products from distributors & wholesalers. Thus it helps to seek

higher margin. Coca-Cola found that it was not just Pepsi that they are competing with in

the rural market but also nimbu pani, jaljeera & other drinking option to refresh the

customer. Therefore price of substitutes must be studied along with the price of

competitor before & after the launch price of a product.

Low Volume-Low Price: - This strategy of reducing prices by reducing the package size

in order to make it appear more affordable, is delivering very good result for a large

number of FMCG product categories, in the rural markets of India.

Ensuring price compliance: - Rural retailer, most of times, charge more than MRP. The

manufacturer has to ensure price compliance through promotional campaigns, as was

done by Coca-Cola (The Ad campaign in which Amir Khan insists local retailers to


charge Rs.5 not Rs.6 by saying “Panch”) or by ensuring the availability of products at the

retail outlets directly.

Pricing policies in rural areas:-

1) Odd pricing: - The term odd pricing is used in two ways. It may be a price ending in

an odd number of prices just under round number. Odd pricing is adopted by sellers of

specialty goods. For example A shoe manufacturer price his product at 99-95 etc.

2) Psychological pricing: - In this method of pricing the price is fixed at a full number.

The people who set such pricing feel apparent psychological significance from the point

of view of buyers. For example it is believed that are certain critical points at prices such

1.5 & 10 studies conducted proved that change of price over certain range has little effect

until some critical point is reached.

3) Customary price: - Customary prices are fixed by custom. For ex, sweet manufacturer

price their products in such a way that a particular variety of sweets or soft drinks are

sold at approximately the same price. Usually such a pricing is adopted by chain stores.

4) Pricing at prevailing prices: - This type of pricing is resorted to meet competition.

Such a pricing is also termed as “Pricing at the market”. This is because a price above

those of competitors would sharply bring down sales while lower price would not

significantly increase them.

5) Prestige price: - Some consumers are of the attitude that the quality of the product

depends upon its price. Generally prestige pricing is applied to luxury goods, where the

seller is successful in creating a prestige for his product. In such case sales would be less

at lower prices. Customers may fear that at the low prices it can not be of good quality &

will actually buy more at some what higher prices than they would at lower prices.

6) Price lining: - The policy of price lining is found among retailers. This type of pricing

is related to both psychological & customary prices. There the pricing decisions are made


only initially such fixed prices remain constant over long periods of time. Any changes in

the market conditions are met by adjustments in the quality of merchandise.

7) Geographic pricing: - When the manufacturer serves a number of district regional

markets. This policy is followed. He can adopt different prices in each area without

creating any ill-will among customers.

8) Dual pricing: - If manufacturer sells the same product at two or more different prices,

it is an example of dual pricing. This is possible only if in the same market different

brands are marketed. Railways have adopted dual pricing. Here for the same distance of

travel in the same vehicle. The services are sold to passengers at different prices under

different classes. This is also referred to as discriminatory pricing.

9) Administered pricing: - here the products are priced for the market on the basis of the

policy decision of the seller cost, competitive pressure, the law of supply & demand is

not at all considered here. The administered prices usually remain unchanged for

substantial periods of time.

10) Monopoly pricing: - New product pricing is in reality monopoly pricing; since

competition is absent the seller has a true hand in fixing the price. The principle on which

this pricing is based is “What the traffic will bear”

11) Skimming pricing: - This is also known as “Skim-the-cream-pricing”. The process

involves in setting a very high price for a new product initially & to reduce the price

gradually as competitor enter the market. In the initial period until the product is accepted

by the customer this type of pricing is adopted; a) When sales volume of the product is

very sensitive to the price b) When large volume of sales is to be affected. c) When the

product faces a threat from competition. d) When stability of price is required.

12) Expected pricing: - Under this method, the price that will be accepted by the

customers is found out. Usually a fixed price can not be decided in advance & hence


price range is offered. The response of customers to price is analysed & later a price is

fixed.

13) Sealed bid pricing: - This method is followed in the case of specific job works.

Government contracts are usually awarded through system known as tenders. This would

be contractors anticipate the expected expenditure & offer a price. The minimum price

quoted is accepted & the work is awarded to the party.

14) Negotiated pricing:-Industry suppliers adopt this method. Manufacturer who require

goods of highly specialized & individually designed nature often negotiate the only when

fix the price for example in case of automobiles, various components required by

manufacturer are entrusted to suppliers. Under such circumstance the prices are

negotiated & fixed.

15) Mark-up pricing: - In order to establish a sale price, this method is adopted by

wholesalers & retailers. When the goods are received, the retailer adds a certain

percentage to the manufacturer’s price to arrive at the retail price e.g., an item that cost

Rs.50 is sold for Rs.600. the mark-up price is Rs.10.

Price: - There is a need for low priced products or redesigned/modified products whose

unit cost will be low. Mostly, this has been achieved by reducing the package size (paisa

packs in tea, smaller packaging of toothpowder or Vicks cough drops etc.). Similarly

cheaper blends of tobacco have been used to make cheaper blends of cigarettes like Hero,

Blue Bird, and Honey Dew & Cavenders. These cigarettes are priced low to make them

an effective substitute for beedies. One of the brands of Hindustan Lever tea which

contains tea, chicory & Tapioca flour illustrates this concept. Tea costs about Rs.100 per

kg while chicory & tapioca flour costs only Rs.40 & Rs.10 per kg respectively. By

substituting 30% of tea with lower cost material, the overall price can either be brought

down or maintained at tomes of rising prices.


Affordability: - Godrej recently introduced three brands of Cinthol, Fair Glow, & Godrej

in 50-gm. Packs priced at Rs.4-5 meant specifically for Madhya Pradesh, Bihar, & Uttar

Pradesh the so called BIMARU states.

Hindustan Lever among the first MNCs to realize the potential of India’s rural market,

has launched a variant of its largest selling soap brand, Lifebuoy at Rs.2 for 50gm, the

move is mainly targeted at the rural market. Coca-cola has addressed the affordability

issue by introducing the returnable 200ml. glass bottle priced at Rs.5. the initiative has

paid off. Eighty percent of new drinkers now come from rural market. Coca-cola has also

introduced Sunfill, a powdered soft drink concentrate. The instant & ready to mix Sunfill

is available in a single-serve sachets of 25gm. Priced at Rs.2 & a multi-serve sachets of

200gm priced at Rs.15.

Godrej Consumer Product, which is trying to push its soap brands into the inferior areas,

uses radio to reach the local people in their own language.

Price initiatives in rural market: - Nestle

Nestle’s rural initiative have largely been based on price-led initiatives brands such as

Maggie noodles & Kit Kat chocolates have been priced at Rs.5 & a few other candy &

chocolate brand are priced at Rs.2 per unit. There prices point not only help Nestle reach

more retail formats in urban market but also help in making inroads into rural markets,

currently rural markets account for below 10% of the food major’s revenues.

MARKETING MIX 4 Ps P for PLACE

Place: - Place, the third ‘P’, is the major reason behind the evolution of rural marketing as

a distinct discipline. Distribution can make or break company. In the FMCG industry in

India, specially, companies have to distribute their low value, high volume products to

cover 10lakh retail Outlets or point of scale. The most successful FMCG companies have

the biggest networks made up of stock points, distributors or C& Fs (Carrying &

Forwarding Agents), redistribution stockiest, wholesalers & retailers. Along with the

efforts of wholesalers & dealers, companies need to have ‘direct point of contact’ with


retailers & sub-retailers in rural areas if they want top have strong network. “If you are

bound to lose your market to competitor, says Sameer Singh, Wilkinson’s Marketing

Managers.

A vast network of 1.38lakh rural post offices can be trapped imaginatively in order to

target consumers in remote villages. Emami Ltd. has tied up with the Post & Telegraph

department to place its product across 5000 Post Offices. The Pilot project has been

initiated in Maharashtra & eventually, it wants to reach all the 1.05lakh Post Offices

across India. Personal selling network is another very successful distribution channel

being developed by companies like HLL. It adds a personal touch to the marketing, as the

salesman is residents of the village & community itself, making it easier to sell the

products & maximize sales for the company.

In 1989 under ‘Operation Harvest’ A van covered six villages a day, 36 villages a week

or 144 villages in a month. This is because HLL assisted the Rs. In extending their

distribution network beyond the villages already covered. The villages covered under the

scheme of at least 2,000 person & those villages which generated consistently sales of at

least Rs.2, 000 during the visits were included in the regular distribution programme

under IDC. This was followed by ‘Operation Bharat’ which concentrated on villages with

at least 1,000 people & offered potential. Self Help Group (SHGs) is estimated about

6lakh SHGs are now functioning in the country with a heavy concentration in the south.

HLL gives a margin of 10% to SHGs as opposed to only 8% to retailers. A village having

a population of 1,000 persons is assumed to spend Rs.4 per head per month on products

similar to HLL products. If 50% of Rs.4 spent goes to HLL products, the sales per month

by a SHG will be Rs.2, 000. A 10% margin on sales will be Rs200 which will accrue to

SHG’s funds. This distribution programme is called ‘Project Shakti’

In villages beyond the reach of distribution system, some shopkeepers make their own

arrangement for the procurement. Most of them commute to the nearby town to get their

supplies to make up for the expenses thus incurred; they charge the consumers more than

maximum retail price.


MARKETING MIX 4 Ps P for PROMOTION

Elephant march:-The erstwhile Brooke Bond, March major tea making company,

periodically arranges for an elephant march through the villages. The ITC also adopted an

innovative promotion campaign for their low priced ‘Hero’ blend of cigarettes- their

promotion strategy was a three day affair. On the first day a person on a cycle, cycle

rickshaw or auto rickshaw goes through the villages announcing on a public address

system that “Hero aa raha hai”- Hero is coming. This is primarily to create interest &

arouse the curiosity of the rural consumers. On the second day, an elephant dropped out a

large sheet with the logo of Hero & a huge cutout of Hero. Cigarette packet went through

the village distributing free samples of the product to induce trail. The third day saw a

video van coming into the village playing popular movie songs to attract crowd. The

message about the product was disseminated among the rural consumers.

Rural van: - Colgate-Palmolive has been using van promotion in rural areas. Their main

objectives were direct consumer contact, demonstration of the product, and sample to

customers & spot sales. The campaign was more for selling the concept of “Oral

Hygiene” to the rural consumer. In a way this could be called as ‘generic promotion’ of

toothpowder, toothpaste, & toothbrush apart from going to villages, they also selected

places of mass gathering like shandies, where young children were asked to brush/clean

their teeth with the paste/powder & tell others about the feeling of freshness they

experienced. Simultaneously, salesman approached the village shops & motivated the

shopkeeper to stock their products.

The rural van promotion has been made simpler by agencies like Sampark Marketing &

Advertising solutions, Video Express & Video-on-Wheels.

POP Promotion: - Van promotion in rural areas by both owned & hired vans, is widely

adopted by companies to create awareness for their products-consumables & consumer

durables. Either POP materials are supplied to the shops when the distribution van visits

the villages or they collect the same when they go for purchases. One can find wall

posters, paintings & danglers in rural shops also.


Interactive Games: - Thums up campaign by Video on wheels.

The aim of campaign was to take Thums up deep into the rural markets. Participation in

the snakes & ladders game was open only to those who bought a bottle of Thums up. This

induced spot sales as well as trials among those people who had not tasted the soft drink

before. Attractive gifts were offered to encourage audience participation.

Dabur’s Pinball Game: - Dabur designed a pinball game in which the ball was in the

shape of the Dabur Chyavanprash container & the pins represented germs which would

be destroyed on taking the health tonic. People were invited to slip the ball in & see how

many pins were punctured.

Major rural sales promotion tools for FMCG products are

Free samples, Cash rebates or discounts, Price packs or gift attached to packs,

Gift, Contests, prizes, games, Product warranties, free trials, Point of purchase or sales

counter displays, demonstrations, Promotion of brands & Trade promotion to stimulate

wholesalers, retailers & field workers with gifts & awards.

RURAL MARKETING MIX

Branding: - rural buyers seek value. They are equally conscious of loosing face in public.

The Izzat notion is very important for them. Therefore rural audience is more cautious

while purchasing a product that will be seen by others. Thus they like to stick with

products & brands that have higher social acceptance.

According to Harish Manawani the then Vice President of Hindustan Lever,

“International brands need to be relevant in terms of perceived image, performance &

value if they are to succeed in India market.” Higher brand loyalty among the villager;

once a brand finds acceptance in a community, village, region or a state it becomes very

difficult to replace that brand.

Packaging: - The decision on packaging is influenced by characteristics of consumers,

i.e. affordability, cultural preferences, usage conditions & ability to read. smaller packs


provide the weaker sections with an opportunity to purchase same minimum quantity of

product by paying a lesser amount of money. It helps in reaching those customers. Who

don’t have any savings but earns daily basis to meet their daily requirement.

Colgate first made sachets of toothpowder, as required by the income stream. Since many

households in rural areas don’t have proper bathrooms & only have a window or a small

space to keep such things- Colgate put a cap on the sachet for convenience of storage.

Being illiterate rural population recognize its product by its packaging by watching on

television.

SKU: - Organization should maintain a smaller number of stock keeping units (SKU) for

the rural market. As the rural retailer has a limited working capital, he might not be in

position to stock all the SKUs in a particular product category. Deciding upon the

optimum number of SKU is critical for achieving success in the rural markets. Reusable

packages & small unit packages stand a good chance of acceptance in the rural market.

In case of mass media when it comes to rural market, two out of five Indians are not

reached by any media. TV, Press, Radio & Cinema put together. Doordarshan (DD)

telecast network covers at least two third of entire country with coming of the DTH

network facility, the rural rich can be targeted in a better way by television.

Radio continues to be the primary source for entertainment in rural market. News

programmed is widely listened to in rural areas. A radio can be played on without

electricity, on batteries; it is a very effective medium in the rural areas. FM radio

continues reach villages, towns, semi-urban areas surrounding cities, metro cities. The

relevance of the print media for rural communication needs careful examination. The

literacy level is low in rural areas as compared to urban areas. The Press advertisements

can target opinion leaders who can carry forward the message to the masses. Almost

three fourths of the rural adult population view cinema in the southern region, which also

accounts for nearly half of the cinema viewers in the country. So it can be very effective

media to promote products & services in the rural areas of the southern states.


RURAL MARKETING STRATEGY

Product strategy: - Value consciousness is a big driver for the rural market, consumers

are extremely aware of the equation of price, quality & image. Understanding this fact,

Britannia came with the concept, ‘Eat Healthy, Think Better’ (‘Swasth khao tan man

jagao.’) This moved Britannia, from standing for biscuits & source of quality to a brand

that stood for healthy food for health conscious Indian consumer.

Small Size packing: - The low per capita income, non-availability of regular pay & cash

forces the rural consumer to buy in small packets various products. The examples can be

explained in plenty. FMCG: - Almost all FMCG goods manufactured have come out with

smaller packets & low price varieties. Toothpaste is available in 10gm, 25gm & 50gm

packets/tubes. Soap powder is available for Rs.2,Rs.5,1/4kg,1/2kg packets. Both soap

cakes are available in small sizes of 25gm & 50gm in addition to the standard 75gm

sizes. Even Vicks ointment & tablets are available in small boxes & small packets.

Toothpowder is also available in small paper products for easy salability

Low-priced package & product:-Big & small companies have adopted on unwritten

policy to dump second grade quality to sell at loose prices in the rural market product like

ghutka, cold drinks, biddies cigarettes, tea & coffee, powders came to the rural areas in

smaller packets & lower rates than those sold ion cities the quality will be medium or

lower level loose tea is packed and sold in different brand names suiting the rural public.

The established brands cannot do this and hence they try to sell the quality product in

very small packages. They can always make up marginal losses in rural areas by selling

high priced product in cities

Application of value engineering: - This is tried & tested technique adopted to evolve the

cheaper products by substituting costly raw materials with cheaper ones. This technique

has been successfully applied in the case of Hindustan Lever’s tea blend which contains

tea, chicory, tapioca flour. Tea cost about Rs.100 per kg. Chicory costs about Rs.40 per

kg & tapioca floor about Rs.10 per kg. By substituting chicory to the extent of 20% &


tapioca flour to the extent of 10%, the price of tea blend is kept low. Chicory is well

known adulterant in coffee powder & tapioca is starch & forms the staple food in certain

region of the countries.

In 70s Britannia Industries introduced biscuit called “Probisk” with Soya protein, which

was for cheaper to other biscuits, while the nutrition content was the same. Their biscuits

were slightly dark in colour than other because of their Soya content.

Pricing strategy: - FMCG companies can cut cost to maintain the price points through

reducing the net weight of the products or doing goody with freebies & promotions.

Rupee 5 price point: - The current craze for Rs.5 positioning could be because of Coke’s

success in promoting the ‘Paanch’ strategy. Brooke Bond pack was available earlier in 5

paisa, later 10 paisa, 25 paisa & 50 paisa & then with inflation it becomes Rs.1 pack.

Now it is the time of Rs.5 pack. HLL sells for Rs.5 are Pond’s talk, Pond’s Cold creame,

Rin, Taaza, Fair & lovely & Lux. The price point also helps branded FMCGs, which are

battling fakes from unorganized sector. Rs.5 price point leads to growth in user base of

brands & increased category penetration for those who have introduced such packs.

Regionalisation of Advertising strategy: - Unique promotions need to be designed as

what works in north may not in the south. At times even dubbing the commercials in

local linguistics may not work. Emami has Madhuri Dixit & Amitabh Bachchan as

brands ambassadors but for Andhra Pradesh, it signed Chiranjeevi for the same. The

success of ‘Thanda matlab Coca-Cola’ campaign, which was aimed at the rural market, is

a case in point.

Low priced shampoo: - Cavinkare realized that for a family a five members at Rs.2 per

sachet & a minimum of four hair washes per person per month would mean an rs.40 send

for shampoo alone. Many rural families can not afford this expense.

The feedback was that of the cost of hair wash could be reduced to Rs.2 per person per

month. Villages would not be averse to trying a shampoo, i.e. a 50 paisa pack. It was a

challenge for the company to develop a formula & packaging to bring down the cost so


radically. When the 50 paisa sachet was lunched in 1999 the Chic market share was

5.6%, this rose to 23% by 2003 out of the total sale of Chik today, 65% comes from rural.

The pricing strategy of regional brands: - Ajanta clock manufacturing company has

understood the nuances of pricing associated with a stagnant, category such as toothpaste

& decided to adopt a ‘discount’ pricing strategy akin to what most regional players seem

to be doing. It has pegged its toothpaste price at a discount of roughly 60% compared to

the bigger brands from Colgate & HLL.

Distribution strategy: - According to Pradeep Kashyap,M.D., Marketing & Research

Team(MART) success in rural marketing depends on getting the distribution & pricing

right. Even expensive brands such as close up & Marie biscuits were doing well because

of deeper distribution. Brand has to be present at the right place. ‘jo Dikhta hai, wo Bikta

hai.’(What is seen, sells) Many of the brands are building stronger rural bases without

much advertising support. Being first on a shelf in there product category & developing a

privileged relationship with the retailer is a source of competitive advantage to consumer

goods companies. And usually the brands that are first on shelves become synonymous

with product category & are difficult to dislodge, thereafter. For example Maggi noodles

reached the rural shelves before anyone & remains the market leader ever since. Delivery

vans are provided by the organization like Coca-Cola, Pepsi, Amul to reach the rural

masses for their products. Proctor & Gamble had tie ups with Godrej, Marico Industries

& now it is planning one with Nirma for distribution of Camay soaps, Godrej tea has tied

up with Jyoti lab to use its extensive distribution network to promote its soft drink

concentrate in rural areas of Uttar Pradesh, Rajasthan, Maharashtra, Gujarat & Tamil

Nadu. Fluency encouragement in local language & employment of rural youth play a role

of word of mouth communication for FMCG companies. Harish Bijoor, renowned

Marketing Consultant puts it “Advertising is easy but the rural marketing is a donkey’s

work.” Organisations like Vicco Vajradanti, Colgate toothpowder, Dabur Lal Dant

Manjan that respected habits of the rural people by providing toothpowder as substitute

to something they were putting on their palm & use their finger to clean teeth created a

relatively a easy acceptability of the product.


Coverage of villages based on the population strata a company decides to reach the

villages with a population of 2,000 & above, then the number of villages to be covered

work out to 76,291 (13%) & the proportion of the rural population covered will be 48%.

Further reaching out to the villages with a population of 1,000 & above will increase the

number of villages to 1, 90,686 (32.8%) but the population covered will sky rocket to

73.7%. In case it is decided to cover villages with a population of 500 & above, the

number of villages will be 3, 35,684 (57.8%) but population covered will be whooping

99.4%. It is possible to run distribution vans to the villages with the increase in physical

communication facilities due to programmes like Pradhan Mantri Gram Sadak Yojana.

Some of the studies reveal that the bigger villages of above 5000 population are fairly

covered by the marketing people of various companies, manufacturing consumable &

durable products

Small village: - In order to reach small villagers, two types of strategies have to be

adopted i.e. reach all villages above 2000 population & reach all those within 50km.

radius of big towns & cities. This will help cover about 50% of the rural population &

even this extent of coverage means approximately 350 million populations & this is a

massive coverage. Very small villages below 500 populations can be ignored at this stage

as the output will not compensate the input. There should be distribution vans to cover

villages on fixed period (at least once a week) so that the shopkeepers as well as the

public are sure of supplies from the feeder centre, which will be nearby a town or city.

The village shop keeper of 2000 population in towns should be used as distribution

channel for shop keepers of very small villages around it. This is essential as some of the

smaller villages are not having motoratage roads.

Towns as Feeder centers: - Towns are frequently visited by rural people for education,

cinemas, purchases, medical treatment, & various functions. It will be convenient if the

town market is used as a distribution channel for various villages surrounding towns. One

or two traders in town need to be used as feeders to villages’ stores & also to sell directly


to villagers coming to towns. This method is already working in many places & can be

further strengthened.

Promotion strategies:-

Think Global Act Local, Think in local Idiom..

There is need of advertising professional who can think like the rural people. Then only

can we have insights like ‘Thanda matlab Coca-Cola’, Anurag Madison’s Chairman &

Managing Director, R. V. Rajan says Brand ambassadors for rural markets need to be

picked carefully as urban successes might not get replicated in the rural market that is

why Govinda in the Mirinda ad boosted the sales of the drink in the rural markets.

4 As of rural marketing mix are Affordability, Availability, Awareness, and Acceptability

Additional 4Ps are Passion a) Passion to earn Goodwill for the company. b) Passion to

serve & educate the consumer. C) Passion to give 100% to the rural marketing effort.

Place: - Whosever reaches the rural retailer’s shelf first is going to be successful in the

rural market. A rural retailer can stock only one or two brands for each product category.

His working capital & storing space do not allow him to store numerous brands. He also

knows his bargaining power as consumers do not have any other option except to buy

from him

Chhota Coke: - In what Coca-cola India terms ‘ a major initiative’, launched through its

latest, ‘Chhota Coke’ commercials, the company is taking its range of carbonated soft

drinks to all corners of the country. The intention to make Coke available & affordable to

all consumers, the strategy: pricing the 200ml bottle (Chhota) at Rs.5. the single-minded

objective of some of the latest Coke commercials has been to communicate the price

point. The company believes that the choice of ‘Chhota’, popular & endearing name

meaning ‘the younger one’ in India, will work well for its smaller sized bottle since it is

also consumer speak for the 200ml bottle in the market. Since the predominant pack size

across the country continue to be the 300ml. bottle. It was felt necessary to specify that

the 200ml. pack is the new, smaller & ‘younger’ offering from Coca-cola.


The Chhota Coke (Rs.5 for 200ml.) strategy of Coca-cola saw a spurt in demand in

villages & cities as well as increased penetration. It forced rival Pepsi to bring down the

prices of its 300ml. packs & also introduce a 200ml. pack.

Competitive strategy: - Suitable product: - A Very different substitutes of products &

brands are available in the rural areas. Like ‘Nimbu Pani’ is also a competitor to Coke

along with Pepsi in rural market. Freely available ‘Ash’ is also a competitor for vessel

cleaning brands like Vim in the rural areas. Thus, competing with such like substitutes

that do not exist in urban setting requires special approach & very different promotional

message.

Sahndies/ haats /jathras /melas: - Professional rural promotion van operators include

Sampark marketing & advertising solutions, “Video on wheels” & “Video express”.

Normally these mobile vans spend the daytime in shandies & then move to nearby village

in the evening so that the nights can also be used effectively for promotion. This method

of promotion is very popular with several companies these days.

e) Special campaigns: Brooke- Bond carried out matches in rural areas with brand, music

& caparisonal elephants to promote their brand of tea. Colgate-Palmolive’s rural

promotion campaign on “rural hygiene” is another such example.

Packaging strategy: - Velvette shampoo introduced in sachets helped develop rural

market for shampoo & ushered in ‘Sachets Revolution’ throughout India in all packaged

goods category. In Muslim dominated areas of Uttar Pradesh it sold the hair oil in green

packs but in Orissa, the same pack was sold in purple colour, whish is considered

auspicious there. Hindustan Lever found that retailers in some villages were cutting its

large 100gm. Soap into smaller pieces to sell & it introduced small 75gm. Soap.

Branding strategy: - In the packaged goods industries (FMCG), reduction of number of

brands & creating master brand to serve many segments by product variety or brand

extension is a strategic option adopted by many players. The high cost of building many

brands is significantly lowered if only few master brands have to be developed &

promoted for different but related products.


Emotional attachment strategy:- The consumer research conducted by HLL for the

Lifebuoy brand found that there was need to change product or packaging since

consumer felt products as old fashioned, meant for the people doing ‘dirty’ job. Hence to

connect emotionally; HLL came out with football team advertisement & emotional

branding was given fillip, another example of this is advertisement of TATA Salt “Maine

desh ka namak khaya hai.”

Logos & Symbols- strategy: - Use of symbols like muscle man for MRF, Lightening for

Rin, helps the rural consumers to identify brands at the time of purchase. Certain

successful brands in rural market have numbers, symbols & animals as brands: 555 soap,

Monkey brand toothpowder, Gemini tea (with elephant, Ghadi detergent etc. Tortoise

Mosquito Coils is another brand. Which was able to succeed with its brand name & loge

& which was well registered & received in the rural markets.

Deeper penetration of the market:- Britannia launched Tiger biscuits at Rs.1, Rs.2 & Rs.4

price point, which are much lower than the price point of its products like Glucon-D &

Marie Gold brands to make it more affordable in the rural market.

Hoardings/wall paintings: - This is also highly suitable for rural areas since the hoarding

or wall painting can include visuals with minimum write up. It has also been observed

that rural persons have more time to see & watch the hoardings than urban person.

The rule of the game: - To get a foothold in the semi-urban & rural markets, several

regional & some national brands enter with the objectives of taking on the competition.

They fight their marketing battles of selecting a particular brand often the market leader!

Then they deploy their entire marketing arsenal against this selected competitor. Ujala

used this strategy to full advantage against Robin Blue & now it commands nearby three

fourth of the Rs.2 billion Ultramarine blue market. Fairever did the same to fair & lovely.

Ghari detergent is doing the same thing now to Nirma & Wheel. Chik’s share is close to

that of Clinic plus, the market leader in shampoos. Even the advertising & distribution


strategies are designed with an eye on the company’s opponent. This hurts the big

companies badly. HLL realized that its brand fair & lovely was in danger only after

Fairever had garnered a healthy market share within months of launch.

RURAL MARKET STRATEGY

Market-Leader strategies in rural areas:-

1) Expand the total market strategy: - The market leader firms can normally gain the

maximum when the total market expands. The focus of expanding the total depends on

where the product is in its lifecycle. This strategy can be used when a product is in the

maturity stage.

2) Defining the market share strategy: - When the leader firm tries to expand the total

market size, it must also continuously defend its current business against enemy attacks.

For ex. Coca-Cola must constantly maintain its guard against Pepsi- Cola.

Six ways for a market leader to protect its market position:-

a)Position defense:- This strategy involve pouring maximum firms resources into its

current successful brands for ex. HLL increased its ad-spend in Clinic & Sun silk

shampoos & gave heavy promotion through price reduction.

b) Flanking defense:- This strategy both guards the marketing position of leading brands

& develops some flank market niches to serve as a defensive corner either to protect a

weak front or to establish an invasion base for counterattack if necessary.

c) Preemptive defense: - This defense strategy manoeuver involves the launching of an

offence against an enemy before it stands on offence.

d) Counter-offensive defense: - This is a strategy of identifying a weakness in an attacker

& aggressively going after that market niche so as to cause the competitor to pull back its

efforts to defend its own territory.


e) Mobile defense: - This strategy involves the leader broadening & expanding its

territories into new market areas by diversifying. Diversification into related areas is used

in mobile defense.

f) Contraction defense: - This strategy involves retrenching into areas of strength & is

often used in later stage of a product life cycle or when the firm has been under

considerable attack. For ex. HLL decided to concentrate on its core business areas, that is,

soaps & detergents, & has emerged as the clear leader in the toilet industry.

3) Expanding the market share strategy: - Market leaders can improve their profitability

through increasing their market share. Market leaders are successful at expanding their

market shares, like HLL, Proctor & Gamble, and McDonald’s

Market-Challengers Strategies: - The firm that occupies second & third ranks in an

industry can be called runner up or challenging firms for ex. Pepsi, Pepsodent.

The following strategies can be adopted by market challengers.

1) Frontal Attack: - This strategy is used when the challenger masses its competitive

forces right up against those of opponent by attacking its competitor’s strength rather

than its weakness. For this to succeed, the challenger needs a strength advantage over its

opponent.

2) Flank attack: - This strategy is used when the challenger set its sights on its targets

weakest points

3) Encirclement attack: - It is used only by well financed firms. It involves an attempt to

capture a wide slice of the competitors’ market through a grand offensive on several

board fronts.

4) Bypass attack: - It avoids any belligerent move directed against the competitors’

territory. It involves bypassing competitors & attacking easier markets.

5) Guerilla attack: - It involves making small, intermittent attacks on different territories

of the opponent. A guerilla attack uses both conventional & unconventional means of

attacking the opponent.


Market – Follower strategy:-

The following broad strategies are useful:-

1) Following closely: -The follower appears a challenger. In many aspects, but does not

muster too great a effort so as to block direct conflict. Such patterns are common in

capital intensive, relatively differentiated industries, such as Steel, Fertilizers &

chemicals.

2) Following at a Distance:- This technique is usually a safer, less conflict provoking,

alternative to do this, the follower parallels the leader’s general price levels, product

innovations & distribution, but at a distance & without significant threat to challenger

3) Following selectively: - In this strategy, the firm follows the leader quite closely in

some ways, goes its own way in other instances, & sometimes chooses not to participate

at all. The firm might be quite innovative, & get it avoids direct competition in board

fronts.

Market- Nichers’ strategies:-

Successful market nichers own their success to using one of these strategies to gain a

solid market presence.

The nicher can play a role a specialist in the following ways;

1) Channel specialist: - for ex. A nicher can decide to make a very large size distribution

network.

2) Service specialist: - The Company offers one or more services not available from other

companies. An example would be a business management institute taking admissions on

internet or telephones.

3) Product feature specialist: - The Company specializes in producing a certain type of

product or product features.

4) Product line specialist: - The Company produces only one product line or product.

5) Geographic specialist: - The firm sells only in a certain locality, region or area of the

country.

6) Specific Consumer specialist: - The firm limits its selling to one or few major

customers.


7) Customer size specialist: - The firm concentrates on selling to small, medium or large-

size customers. Many nichers specialize in serving small customers who are neglected by

major firms.

According to ORG (Operation Research group) survey, the rural market for packaged

consumer products has shown a 184 per cent growth during 1984-89; as against the 96%

growth in its urban counterpart during the same period.

Firms like Hindustan Lever, Lipton Brooke bond, Tata etc. use their own sales vans for

interior transportation, but the cost of operating such van is high

Market entry strategy:-

1) Penetration pricing: - A penetration pricing policy involves setting prices of a product

relatively low compared to those of similar products in the hope that they will secure

wide market acceptance, which will allow the company to raise the price at later date for

example Anchor White & Ajanta toothpastes used penetration pricing to enter the

crowded dental cream market.

2) Economy pricing:-

3) Value pricing:- This approach is used in case when external factors such as economic

recession or increased competition forces a company to provide ‘Value’ products &

services to retain sales for example Godrej No.1soap placed their offering containing

rose, sandalwood & neem ingredients at a very economical price. Similarly Ajanta

offered ‘vegetarian’ toothpaste at a low price.

4) Coinage pricing: - Coinage pricing strategy is mostly used in rural markets for FMCG

brands prices are set at coin value. These packs are small in size & are normally meant

for one-time consumption. For example, Coca-cola has effectively used the

communicated price point (Rs.5) of their small bottle to attract new segments. Some of

the brands that HLL sells for rs.5 are Pepsodent, Pond’s Dream flower Talc, Pond’s Cold

Cream, Rin, Taaza, Fair & Lovely, Clinic plus & Lux

5) Psychological pricing:-

6) Discount & Allowances


Discounts - A word of caution

Rural consumers very much like buying products at a discounted price, but the risk is that

sometimes a perception is created among consumers that the reduced price is the actual

price of the product & that earlier the company was charging a higher price!

Quantity discount: - Providing more quantity for the same price, for example, offering a

125gm. Toothpaste at the price of the standard 100gm. Pack many companies also offer

the 1+1 scheme (Good Knight Mosquito Coils)

However, in the case of commodities such as flour & salt, the quantity-discount strategy

is often not very successful because most people do not like to buy larger quantities of

such goods even at lower prices. Many customers will tell the retailer to keep the extra

quantity & instead give them the regular quantity after adjusting the price.

Discriminatory pricing:-

1) Customer-segment pricing: - Retailers sell the products at the MRP to people who buy

on credit whereas they will offer the same products at lower prices to people who

purchase on cash.

2) Product from pricing: - Like pan shops selling loose cigarettes, this practice is

common among the rural retailers with many FMCG categories. Mosquito repellent coils

or mat packs are opened & sold piece by piece at a higher unit price compared to the pack

price.

3) Location pricing: - People can buy the product at a lower price in nearby towns as

compared to the price they would be charged by village retailer.


BRAND MANAGEMENT

Lifebuoy was one of the first soap with rural areas as the key target market. Its jingle

‘Tandurusti ki raksha karta hai lifebuoy’ is still fondly remembered by a large number of

rural people. Needless to say it commanded a great brand loyalty. Colgate, Dalda, Tata,

Bajaj etc. have shown that it is perfectly feasible to build a brand in rural areas, provided

the organization adopts right set of brand building tools & in committed to the rural

market in the long term.

The term ‘Brand’ owes to its origin to the Norwegian word ‘brandr’ which means to burn

A brand is defined as a name, term, sign, symbol or special design or same combination

of these elements that is intended to identify or differentiate the goods or services of one

seller or a group of sellers. (American Marketing Association, Chicago) (Kotler, 1998)

A branding process, if executed well, creates a brand that is equipped to handle changes

in demographics, thinking, from & functional changes as well as competitors actions,

96% of new brands that are developed in the FMCG sector fails. This only goes to show

that the market place is in unforgiving master. It suggests that branding is not a static

phenomenon; rater a continuous change in product appearance & performance as well as

the total value equation is must for survival of any brand.

Brand loyalty can be defined as “the degree of consistency in buying particular brand(S)

as a definition of cognition, emotion, satisfaction, commitment, habit of positive attitude

towards brand(s)”

Mass consumption products like tea, soap, detergent & dish washing powder have several

regional brands with loyal customers. They are perceived to give value for money at a

lower price ‘Bhakar wadi’ a regional tea brand is savory relished in Maharashtra & has

virtually no competition in markets of Gujarat & Maharashtra 555 & Chhokra soaps for

washing clothes are strong regional brands in Punjab & adjoining states. Arun Ice Cream

of Hatsun Foods is another example of successful regional brand in Tamil Nadu

commanding nearly a third of market share.


In FMCG sector, the next battle for a market share in rural areas would be between local

or regional brand on one side & national brands on the other. The latter would

vehemently fight using all means to retain their market share & service. In the FMCG

sector, if we perform state by state analysis in India, the number two brand, in most of the

cases, is a regional brand.

Regional brands: Success stories.

Anchor Toothpaste: - Anchor toothpaste has the backing of Rs.1000 cr. Business group

dealing with electrical appliance. The 40- year- old Anchor group, realizing it had a

stronger retail network, decided to enter the toothpaste. Business Company identified a

unique selling proposition, which might have never, occurred to an MNC, Vegetarian

toothpaste. Some of the standard ingredients in toothpaste are obtained cheaply from

animal source & Anchor found an alternative in vegetable oil. Its Vegetation theme paid

off with company making inroads in states such as Gujarat & Rajasthan with high

concentration of purely vegetarian population. Anchor was Rs.150 cr. Toothpaste brand

build by Company that was totally in unrelated business of electrical switches due to the

extensive distribution network & understanding of market.

Parakh Foods: - Parakh Foods, which shot up to the top of growth league tables with its

Gemini Oil, is also backed by business group with good turnover. It started with the Dal

& Besan mills in 1964. In the 90s, the business reached saturation point. Sensing little

scope for expansion in existing businesses, they looked at new commodity based

businesses. The company launched Samrat edible oil leveraging the existing brand &

keeping its price low while maintaining the quality. Soon another brand Gemini was

introduced for refined Sunflower Oil at Rs.36 a liter. It was 30% cheaper than the price of

Rs.52 charged by established players. It now commands a significant market share in its

category.

The Cavinkare Strategy of providing the consumer with a free sachet of Shampoo if they

bring in five used empty sachets of Chic Shampoo, made the customer conscious that he


is buying only the Chic Shampoo; otherwise he will not be able to get the free sachets if

the empty sachet he retunes is of other brand or fake brand. Rural consumer recognizes

the Parle’s pack of biscuits by its yellow stripes of the baby.

Brand loyalty:-The concept of stickiness

Rural consumer is now faced with a lot of choice & having to evolve evaluating

parameters for making choices, as more brands appear on rural retail shelves (80% of all

packaged FMCG sold in rural market are branded either national or regional source:

ORG), still the number of FMCG brands available in rural markets is less than half of

those available in urban shops. Some brands like Ghari, Parle-G, Lux, fair & lovely &

Colgate were early entrants in rural markets & have gained high acceptance over period

of time, with virtually no competitive brands present in the market, availability was the

prime driver & what urban marketer interpret as brand loyalty is in fact ‘brand stickiness’

in rural India, a phenomenon where the villager stays with the brand not out of the

informed choice but because he does not know better.

The phenomenal success of Ghari detergent in the rural Hindi belt is attributed to product

performance matching promise, leading to customer satisfaction. The detergent is able to

clean the while dhotis/pajamas at an affordable price which is what rural consumer

expects from the product. Issues such as life span of clothes & protection of hands from

harsh chemicals in detergents are not important criteria for the rural consumer.

Markets have focused on creating awareness & making their brands available in rural

market but have made little efforts to build relationship with their customers. This is very

important aspect in the rural sector because villagers trust people with whom they have

strong relationship (family, friends, neighbous). Marketer need to convey a feeling of an

extended family with the trade & a sense of caring with consumers to build enduring

relationship in the rural sector. For a brand to establish in rural India, marketers need to

educate customer, develop their interest through interactive communication, trigger their

desire to own new product & build confidence in the brand through live demonstration &

post-purchase engagement with a customer.


All of these measures help build long term relationship to succeed in the rural market.

Brands must understand preferences of different customer segments rather than a attempt

a mass pan-India marketing approach. Regional tea brands like ‘Lamsa’ in Maharashtra

& ‘Kala Ghoda’ in Rajasthan are examples of successful regional brands that have

flavored their tea with spices to cater to local tastes. This customized convinces local

people that these brands care for them & creates a positive thinking towards the brand,

the first step in building a strong relationship with customers. The emotional connect add

extra value added to the products, resulting in regular purchase preferences & creating

enduring brand loyalty.

Branding in Rural India:-

Per cent

branded

<20% 21-40% 41-60% 61-80% 81-100%

Necessity Non-

refined

oil

Iodised salt,

Tea, Washing

cakes

Biscuits Toilet soap, Washing

powder

Popular Coconut

oil

Blues Analgesics, Safety-razor

blades, Toothpaste,

Shampoo

Premium Vanaspati,

bulbs,

Hair oil

Batteries, Rubs & balms,

Skin cream, Toothpowder

Super-

premium

Refined

oil

Home

insecticides

Toothbrushes, Antiseptic

creams, Antiseptic liquids,

Chyavanprash, Digestives,

Mosquito repellents,

Shaving preparations,

Tube lights

Source: - Business World, April-1999


Branded consumption now accounts for 80% total sales in as many as 18 product

categories; brands may be national, regional or local

Association Brands

Colours Lal Dant Manjan, Lal Sabun (Lifebuoy), Red battery (Everady)

Numbers 302 Pataka bidi, 555 detergent bar, 502 Pataka chai

Visuals Ghari detergent, Rath vanaspati, Chotiwala tel, Bagh Bakri tea, 3 Roses

tea, Katchua Chhap Mosquito Coil

Retailers play a major role in brand promotion in rural. Due to the strong bonding & trust

between consumers & retailer, coupled with low brand awareness, consumers often do

not ask for the product by brand but instead will request the retailer, ‘paanch rupaye wali

chai dena’ , that is ‘Give me the five-rupee tea.’ Now it is up to the retailer to push the

brand that he chooses since he is a strong & influential force in rural markets because

consumers trust its recommendations.The first mover brand in rural hence became

generic brands. Detergent powder came to be identified with Surf, vegetables oil with

Dalda & Mosquito coil with Katchua Chaap.Also brands like Clinic plus, Lifebuoy,

which were first movers at the national level in rural India, have became at the national

level in rural India. Hence became the most successful brands despite being priced higher

than competitions. Britannia Tiger biscuits created an identity associated with a smart,

active & sharp child.

Brand Spectrum in Rural

Largest Rural Brands:-

Brand Category Growth (%)

Parle- G Biscuits 8.2%

Lifebuoy Active Toilet soap 6.4%

Lux Toilet Soap 5.6%

Ghari Washing powder 21.5%

Nirma Washing powder -13.1%

Figures are year on year growth for MAT July 2004 by value

Source: - A.C. Nielsen Retail Store Audit, MAT July 2004


Brand Market Share (%) Growth (%)

Alpen Liebe Candy 17 4.8

Tata Salt 11 9.0

Britannia Marie Gold 9 4.5

Britannia Tiger 5 16.9

Source: - A.C. Nielsen Retail Store Audit, MAT July 2004 (figures in volume terms)

Brand Loyalty vs. Stickiness: - Loyalty level

Category % Loyalty Category % Loyalty

Chyavan Prash 77.3 Biscuits 22.8

Shaving Preparation 67.3 Batteries 17.7

Toothpowder 47.3 Toothpaste 12.6

Tea 25.3 Toilet soaps 3.1

Iodised Salt 24.2

Multiple brand users are those who have bought more than one brand in a category in the

last month.

The Retailer decides The Brand:-

In a small study conducted in 2004 in rural U.P. by MART for HLL. It was found that in

the village’s retail outlets, only regional & local brands were displayed on the shelves.

Customer who purchased on credit were offered regional brands on which the retailer in

turn gets a credit facility from the wholesaler when a cash-paying consumer entered the

shop & asked for a HLL brand, the retailer pulled it out from his counter draw! So the

retailer decided which brand is sold to a cash-paying customer & which brand to a

Credit-paying customer. Regional/local brands dominate in rural & their MRP have no

sanctity.


ADVERTISING

Rural communication: - AICDA Model

National

Languages

Hindi/English

Scheduled languages

Assamese, Bengali,

Gujarati, Kannada,

Kashmiri, Konkani,

Malayalam, Manipuri,

Marathi, Nepali, Oriya,

Punjabi, Sanskrit, Sindhi,

Tamil, Telugu, Urdu

Languages with widespread use

47 languages used for primary education

98 used in print media

71 used on radio, 13 used in films

Local vernaculars

Over 114 recognized varieties

216 mother tongues with more than

10,000 speakers were recorded in 1991

Source: - Tej K. Bhatia, Advertising in Rural India.

Awareness Interest Conviction Desire Action


The Communication Process Model based on Schramm, 1969

FMCG category Advertisement:-

Babool advertisement: - Rural people had a problem comprehending the message as ‘it is

two quick’, in the north, some respondents thought the advertisement was for a

toothbrush/ shaving cream.

Navaratna advertisement: - Rural people asked, ‘Why should he be dancing when he has

a headache?’ Most rural respondents in the south could not recognise Govinda. Similarly

in the north the recognition of Rambha has very low.

Dabur Janam Ghunti: - To market baby stripe water, Dabur Janam Ghunti, Dabur India

profiled rural consumers at Haats & Malas. The exercise helped the company debunk the

myth that the rural consumer will opt for tried & tested home recipes when it comes to

baby care products. In addition, It was discovered that while it is the housewife who

decides on product category, the man does the brand selection & purchase. These insights

helped Dabur India to redesign its communication strategy.

Sender Encoding Message Media Decoding

Response

Receiver

Feedback

Noise


Lifestyles: - Shampoo advertisements that depict woman tossing around their own

lustrous hair is a turn off for most rural women, as they tie up & cover their hair, instead

of creating a marketing, the adventure is creating cultural barrier.

Purchase needs: - During the pilot test launch of Vardaan bidi, the marketing team

discovered that many rural people believe that tobacco smoking leads to impotency. The

company decided to redesign its communication strategy, to stress the fact that Vardaan

is a tobacco less bidi & does not cause loss of sexual vigour. While promoting Revital

health capsules, it was found that farmers in rural Punjab seek power & vigour, whereas a

rickshaw puller or a truck driver demands more energy & longer hours of concentration

so as to increase his earning. Revital customized its one-to-one communication to address

these differing expectations of consumers from the same product.

TOMA: - Top of Mind Awareness

Rational appeal: - economy theme of Babool toothpaste advertisement, ‘Babool Babool,

Paise Wasool’

Brand Functional element Aspirational element

Lux Pure & mild Glamour & escape

Lifebuoy Health Heroism

Pond’s Dream flower Body care Achievement, career women

Blue Wheel Washing bright Achievement

Minto Fresh: - A television commercial for Minto Fresh, narrates the story of a Baniya,

Khussat Lal whose beautiful young wife, Mainna is unhappy & miserable. Enter a young

man, Challiya, riding a bicycle & chewing Minto Fresh dazzled & impressed by our

glamorous & dashing young hero, Mainna runs away with him. The advertisement ends

with the Line ‘Karna ho Mainna ko impress to khao hamesh Minto Fresh’.

Pictorial presentation:- The use of ‘Symbols’ (the muscle man logo of MRF tyres, the

‘Plus’ symbol of Clinic plus shampoo in promoting the brand helps rura; consumers

easily identify the brands at the point of purchase.


Advertising: - Advertising is highly public mode of communication. Its public nature

confers a kind of legitimacy on the product & also suggests a standardized offering.

Advertising can be used to build & enhance a long term image for a company/product.

The recent ITC advertisement ‘Putting India First’ cleverly weaves the company’s rural

initiatives of e-Choupals & large format rural retail stores to position ITC as a fairly

indianised company, concerned about the uplift of rural people & also to trigger quick

sales.

Direct House to house campaign:-

In 1998-99, Hindustan Lever implemented a major direct contact programme called

‘Project Bharat’, which covered 2.2 crore homes. Each home was given a box at a special

price of Rs.15, comprising a low-unit pack of shampoo, talcum powder, toothpaste &

skin cream, along with educational leaflets & audio-visuals demonstration. The project

helped to eliminate barriers to trial & strengthened the salience of both particular

categories & brand.

Push vs. Pull strategy: - factors in setting the promotion mix

A push strategy calls for using the sales force & trade promotion to push the product

through the channel. A Pull strategy calls for spending lot of money on advertising &

consumer promotion to build a consumer demand. For example, established players like

HLL & Britannia with deep pockets & a national presence rely more heavily on Pull &

small players like Ghari & Anchor with limited promotion & advertising budget, prefer

the push strategy.

Hoardings:-Hoardings on villages’ entry junction, writing, painting on wall of public

building in villages, compound walls of private people will be more appealing &

readable. The rural inputs like fertilizers & pesticides are advertised like this. The picture

of product & catchy slogan are considered to be the best promoters.

Various congregations like mela-Kumbha mela, Pushkar mela, Mysore Dussera,

Shabarimalai (Kerala). Local deities & Jatra or Fairs along the festival type celebrations


Marketing activities

Marketing activities

General scheme for Rural Advertising Production:-

Source: - Tej K. Bhatia, Advertising in Rural India.

Pull strategy

IntermediariesPush strategy

Manufacturer

End user

Intermediaries

Manufacturer

End user

Global Positioning: - English

Regional Adaptation: - Four regions of India: North, South, East, and West.(E.g. Hindi for North, Tamil for South, Bengali for East, Marathi for west)

Area-specific adaptation (e.g. Punjabi for Punjab

Last- Destination, Adaptation: Rural dialects, Colour & Motif


Message Effectiveness:-

Source: - Sanal Kumar Velayudhan, Rural Marketing

Language

Meaning: - Words have differed meaning in different region & hence may cause distortion

Pictorial presentation

Simple: - Improved receptivity

Form

Utilitarian: - Influences attitudes & preferences

Likeable: - Increases acceptance

Narrative: - Increases refection through involvement

Source

Improves recall

Message

Creates interest & improves comprehension

Trustworthy: - Used for feedback on product performance

Expert: - Effectiveness increases in evaluation for complex products

Associations


MEDIA MANAGEMENT

Media & Media Reach in Rural Markets:-

Percentage of Rural Adult Population Total Number (Million)

Press 9 32

Radio 28 113

TV 27 108

Cinema 36 125

Total 100 352

Rural Media:-

Conventional Media Non-conventional Media Personalised Media

Television Haat & Male Direct mailer

Radio Folk media (Puppet show,

Magic show

Point of sale

(Demonstration, Leaflet)

Press Video van Word of mouth

Cinema Mandi Interpersonal

communication

Outdoor:- Wall paintings,

Hoarding

Animator

Rural Adult viewers of TV & cinema & print media readership

Rural adult viewers %

Region TV Cinema Print media

readership

East 23 29 4

North 37 24 7

West 39 23 7

South 26 76 18

All India 31 36 10


Radio- print media

Region wise readership

Region % Rural readership % share of total readership

East 4.0 13.0

North 7.3 20.0

West 6.8 16.0

South 18.3 51.0

All India 9.8 100.0

State wise Kerala has the highest readership of rural people at 53% & Bihar has the

lowest rural reader at 3%

Media Topology- Intrinsic Characteristics

Media

form

Reach Audience

involvement

Type Accessibility

Time/Place

Viewin

g cost

Audience

Exposure

TV Mass Low Urban Limited in

rural areas

No Transient

Cable Mass Low Urban Limited in

rural areas

Yes Transient

Radio Mass Highest in

Mass media

Urban Highest in

mass media

No More

lasting than

TV

Print Mass No Largel

y

Urban

High in rural

areas

Yes Permanant

Cinema Mass Higher than

TV

Mixed Somewhat

limited in

rural areas

Yes Transient

Video

rath

Personal/

Customise

d

Very high

(When van

arrives)/

Mixed Highest/but

not mass

media/reache

No More

lasting than

TV/mass


Hands on

demonstration

s

s where mass

media can

not reach

media

Wall

paintings

Personal/

Customise

d

High Rural Highest in

rural areas

No Lasting

Calender

Art

Less than

print

No Mixed Limited in

rural areas

Yes Lasting

Haats/

Oral sales

calls

Personal/

Customise

d

Highest

(Hands on

demonstration

)

Rural Highest/ but

not mass

media/

reaches

where mass

media can

not

No More

lasting than

convention

al media

Source: - Tej K. Bhatia, Advertising in Rural India

Doordarshan: - The Doordarshan television channel has the maximum reach in rural

India. The overall reach (urban rural) is 97% of the entire population of India.

Classification of Indian housewives: - A separate classification has been suggested by

pathfinders for Indian housewives, in which 8 categories have come up. The gregarious

hedonist (east, Bengali speaking, liberal extrovert), contemporary, affluent, sophisticated

(west, spender & open minded), tight-fisted traditionalist, troubled home-body (largely

illiterate, low media exposure), anxious rebel (south, workaholic thrifty), contented

conservative (optimist, efficient)


RURAL MARKETING-DISTRIBUTION

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Channels of Distribution:-

Layer Channel partner Location

Layer 1 Company depot/ C & FA National/ State level

Layer 2 Distributor/ Van operator, Super

stockiest/ Rural distributor

District level

Layer 3 Sub-distributor/ Retail stockiest/ Sub-

stockiest/Stall Seller/ Shakti dealer

Tehsil HQ, Town & large villages

Layer 4 Wholesale Feeder towns, Large villages, Haats

Layer 5 Retailer Villages, Haats

Channel of distribution for FMCG:-

Company manufacturing plant Company depot

C & FA Distributor Sub-stockist

Retail outlets Consumer


Distribution model of FMCG companies:-

Company

C & FA

Distribution(Urban)

Wholesaler

Retailer(Urban)

Retailer (Urban)

Distributor(Rural)

Sub-distributor Wholesaler

Retailer (Satellite Market Marketkt)

RetailerLocal

Retailer Rural


Distribution model 2

Nirma Distribution System:-

Ahmedabad

Hyderabad, Kolkata, Kanpur

Covers

At the district level 300-400 Outlets

Directly

At the Tehsil level

Per capita Sales= Annual Sales/Market Population

Company C & FA Depot

Distributor

Wholesaler Retailer

RetailerLocal

Nirma

Depot

Direct Distributor

Sub-distributor/Big wholesalers

WholesalerRetailer

Wholesaler Retailer


M M M M

C R W W

C R J

C R

C

Fast moving consumer goods marketing channel

Manufacturer

Wholesaler Wholesaler

Consumer

1) Direct or 2) one level Channel 3) Two Level channel 4) Three level channel

Zero level channels

Jobber

Retailer

Retailer Retailer


Amul distribution pattern organisation

Federation

(State level)

Union

(District level)

Inputs Outputs

DCS

(Village level)

Farmers

Distribution: - Consumables are purchased in the village shops, shandies or in bigger

villages, consumer durables are purchased only in mandi centers, large town or nearby

cities. The distribution system of Proctor & Gamble covers every village or town, which

has a population of at least 5,000 persons.

Distribution strategy- Hindustan Lever:-

It is only some enlightened companies like Hindustan Lever Limited (HLL), which has

recognised the great potential offered by the rural market & has been constantly trying to

extend their distribution system beyond the villages they are already covering. In the

early eighties, HLL had initiates a scheme called “Operation Harvest” to extend their

distribution system to villages with a population of 2,000 & above Persons which offered

sales of at least 2,000 per visit. In the nineties, HLL had ‘Operation Bharat’ to cover the

villages with a population of about 1,000 persons. In the late nineties or early Twentieth


century, they again has programme called ‘Project Shakti’ to cover villages with less than

1,000 populations. Thus HLL’s presence is felt in very small villages also.

Excellent distribution system:-

Carrying & Forwarding Agents (C & FAs)

State wise one or two

Redistribution Stockists

Covers specific area by vans

Indirect Coverage (IDC)

Villages with Business Rs.15, 000/- Others villages

Visit every week once a month

Rural transport


Distribution systems of Britannia: -

Production Centre

(Company/owned & contract manufacturing)

Carrying & forwarding Agents

(C & FA)

Authorised wholesalers

(Distributors, redistribution stockiest)

Wholesalers Retailers

Smaller retailer

Customer


PACKAGING

Pack size & convenience: - Sachet Revolution-

Chik Shampoo:- The success of the Velvet shampoo ‘sachet’ was the harbinger of a

revolution in the shampoo industry as conventional beliefs about it being an ‘upper-class’

product were shattered. Cavinkare’s Chik shampoo was launched in southern India in

1983 to grab the opportunity to provide the consumer good-quality shampoo with

appealing perfume at a price that will delight the consumer.

Cavinkare’s team traveled extensively in rural pockets & caught hold of schoolboys for

shampoo demonstration in order to make people comfortable about the idea. At the same

time, consumer schemes such as providing free sachets in exchange for four empty ones

were also used. These experiments gave the brand its identity of consequent popularity.

In 1990, the brand introduced the concept of a variety of floral fragrances (thus offering a

choice to consumers) & tripled its sales within a month.

Encouraging by the response, Chik shampoo turned national with rural focus through

innovative trade scheme & consumer offerings. By responding to consumers needs like

offering attractive wrapping, by 1999 Chik had became the second largest brand in its

category. Latter the company realized that reducing its price from current Rs.2 to 50paisa,

it would be able to convert many non-shampoo users to its use & dramatic results were

obtained as the market share increased from 5.61% to 23%. The sale of 50paisa sachets in

the rural market is almost five times that of the urban market an Rs.100 crore brand with

65% of sales from rural markets, Chik shampoo today is number one in many states

Source: - Compiled from the article in the praxis issue on managing rural markets; July

2003 conducted by Mr. C. K. Ranganathan, CMD, Cavinkare.

This strategy of selling in smaller packs to enroll lower SECs was later followed by HLL,

Godrej, Dabur & a large number of players at the price point of 50paisa, Rs.1 & Rs.2 in

the FMCG market. Riding on the success of shampoo, sachets packaging was replicated


in many other product categories (Tiger biscuits, Close up toothpaste, Parachute hair oil

etc.)

In the early 19990s, Rasna Industries introduced a soft drink concentrate sachet priced ar

Rs.5, which makes six glasses (compared to the regular pack, costing Rs.27.50, which

makes 32 glasses). This addressed the problem of cooling soft drinks in addition to the

affordability factor. Several years late, Coca-cola introduced its Rs.1 single used Sunfill

pack for rural markets. Companies introduced soaps, cosmetics, cold drinks, & toothpaste

in small packs Beauty soaps (Lux, Breeze), Pond’s Cold cream, fair & lovely cream,

Chota Pepsi & Close up toothpaste were made available at Rs.5 in small packs. Tiger

biscuits were introduced in transparent oropacts especially designed for small outlets like

Paanwalla shops that do not normally stocks biscuits.

Convenience is another important factor in the decision to use a product. Colgate

introduced its toothpowder in a small sachets & provided a cap for the packet as rural

households often do not have a proper place to store things in the bathroom =. Other

products also designed for convenience of use include Close-up toothpaste & fair &

lovely cream with cap. Another recent innovation in the packaging has been undertaken

by Marico, which introduced parachute coconut oil in Rs.1 plastic bottle that are easy to

use at any time.

If rural India today accounts for about half of detergent sales, this is because the industry

has developed low-cost, value-for-money, branded products like Wheel & Nirma.

Sachets today constitute 70% of HLL’s sales. According to an ORG-MARG study low-

unit-packs (LUP) have grown nearly 10% between 1995 & a1999. LUPs are driving sales

in most categories like shampoo, beauty soaps, talcum powder, toothpaste & skin cream

except categories like biscuits, sanitary napkins & milk powder.

Packaging Aesthetics: - Lifebuoy is identified as the red soap. Tiger biscuit has an

attractive red pack with an image of Tiger. Distinct altering of local languages on the

pack & images or symbols that convey the products benefit influence consumer


perception about the brand. The picture of lightening used on Rin detergent pack is

distinct & communicates the brand benefit of whiteness easily & effectively to the

illiterate consumer. In the case of ITC, which sales its Gold flake brand with a yellow

cover in the south, where this colour is associated with prosperity & purity. In the north,

the package colour is golden as in this region yellow is often associated with jaundice &

ill-health.

Year-wise launch of small unit packs:-

Sr. no. Product category 1998 1999 2000 2001

1. Washing Powder/liquid 27 21 19 25

2. Coconut oil 14 21 19 25

3. Hair oil 11 6 6 15

4. Shampoo 17 38 47 51

5. Toothpaste 1 5 9 05

6. Toothpowder 9 6 11 03

7. Talcum powder 8 21 17 25

8. Skin cream 7 5 4 1

9. Packaged tea 51 63 63 15

10. Coffee 4 5 2 6

11. Ketchup/sauce 0 3 2 1

12. Mosquito repellent 2 2 2 3

13. Biscuits 11 55 35 23

Source: - Small Talk, The Economic Times, Brand equity, March 20, 2002 pg.3

Most popular pack sizes:- Rural

Product Pack sizes available Popular size (contribution)

Biscuit 5gm-7000gm 100gm (43%)

Razor blades 1-60 nos. Pack of 5 (63%)

Shampoo 3ml-1000ml 7ml (41%)

Washing powder 20gm-5000gm 500gm (39%)

Source: - A. C. Nielsen Retail Store Audit, MAT July 2004


Contribution of small packs (% of sale) to volume: rural & urban:-

Sr.

no.

Product

category

1998 1999 2000 2001

Rural Urban Rural Urban Rural Urban Rural Urban

1. Washing

powder

12.0 7.4 14.2 8.2 17.2 8.7 19.4 9.6

2. Coconut oil 6.4 4.0 9.8 6.0 10.8 6.9 13.1 7.9

3. Hair oil 16.4 9.8 17.8 10.7 18.3 11.0 18.3 11.5

4. Shampoo 85.0 46.6 86.5 52.6 89.3 56.1 90.0 59.4

5. Toothpaste .08 0.9 1.4 1.4 2.0 1.8 3.4 2.7

6. Toothpowder 49.8 35.7 54.8 38.7 56.7 41.0 56.8 42.9

7. Talcum

powder

22.3 13.0 28.5 16.2 34.3 18.2 31.8 18.1

8. Fairness

cream

1.8 3.2 1.2 3.5 1.0 3.5 0.5 2.5

9. Packaged tea 65.8 38.0 66.4 41.5 66.8 40.4 64.7 40.7

10. Coffee 19.6 8.3 28.9 9.4 33.0 12.1 37.8 13.3

11. Mosquito

repellent

2.8 1.3 4.6 3.7 4.9 3.0 4.7 4.1

12. Ketchup/

sauce

0.0 0.5 0.1 0.7 1.1 1.4 2.5 1.3

13. Biscuits 1.5 1.4 1.7 2.0 3.1 2.9 5.2 4.4

Source: - Small Talk, The Economic Times, Brand equity, March 20, 2002, pg.3

Low priced packaging: - A good example is that of Taj Mahal tea, a brand of the

erstwhile Brooke Bond. Taj Mahal is a premium branded product, which is also available

in sachets in rural areas is an inferior blend, qualified by the words “Janata Blend”. By

evolving a blend & terming it as “Janata Blend”. The price is kept within the reach of

rural consumers. Another recent example is the blend sold by Hindustan Lever, Which

we discussed earlier. To keep the price of tea within the reach of rural buyers, they

marketed a brand of tea which contained 70% tea, 20% Chicory & 10% Tapioca flour.


When tea prices increase, blending the tea with low cost fillers like Chicory & tapioca

makes sense. If one is interested in rural market similar is the case of Cigarettes where

blends like Blue Bird, Honey Dew, Taj Chap, Passing Show, etc. are thriving. The basic

objective of keeping the price low is to entice rural consumers to try. This may not be

possible in all types of products. But wherever this can be resorted to, the market is

bound to expand.

FAKES MARKET

Some names of original & Imitation of products:-

Sr no. Original Products Imitation Products

1. Ponds pollons

2. Rin Run

3. 501 Bar 509 Bar

4. Cadbury’ Eclairs Choudhary’ Eclaires

5. Brook Bond Paisa(Packs of

Tea)

Benson Brand Paisa

6. Nirma Nilima, Narima

7. Lifebuoy Lifejoy, Liteboy

8. Colgate(Toothpaste) college

9. Fair & lovely (fairness

cream)

Friends & Lovely

Fake brands:- An ORG-MARG retail audit found that for every 100 strips of genuine

Vicks Action 500, these were 54 counterfeit strips sold in the market for example, Bond’s

(for Pond’s talc), Fair & lonely (for Fair & lovely), Likeboy (for Lifebuoy), Clinic

shampoo with clamic & Tiger biscuits with Fighter. Rural markets suffer from the

problems of low penetration & poor availability of branded products. Hence, although

there exists a huge demand for branded products, there are no distribution channels to

make the product reach the customer. This has led to the growth of spurious brands to fill

this gap in the demand.


THE FAKES MARKET

Look-alikes:- Look-alikes products where appearances (packaging material closely

resembles) is similar to that of a popular brands in same product category for example,

Shagun for Lifebuoy (150gm) & Lalita Amla for Dabur Amla.

Spell-alike: - Spell-alike are fakes of original brands have names that are subtly &

cleverly misspell for example, Paracute for Parachute, Fare & Lonely for Fair & Lovely

& Pomes for Ponds.

Duplicate: - Duplicates are exact replicas of original brands- colour, design & name on

the package wrapper of the original brands i.e.- ingredients, brand name, manufacturer

name.

Features Duplicate Spell-alike Look-alikes

Brand name Original Misspelt Different

Pack appearances Replica Identical Similar

Manufacturers address Original Incomplete Own name

Price M.R.P. 40 % low 10-15% low

Margins 200-300% 100-150% 60-70%

Quality Very poor Poor Reasonable

Intention of retailer To cheat To mislead To freeload

Consumer Unaware Unaware Want cheaper product

Identify None Only literate Majority

Offer None Discounts Schemes


Strategy for counter fakes: - Action against fakes :-

Dabur: - Dabur replaced its plastic blow-moulded container with a premium four-colour

shrink-sleeve packaging, which has a graining texture & water bubbles. The packaging is

difficult to replicate. This resulted in a sales growth of 12% of original products. Others

have assigned the task of checking counterfeits to their sales force.

P & G initiates raid on brand pirates: - A research study by A. C. Nielsen introduced that

sales of Vicks look-alike products equaled the sales of the genuine brands. P & G

initiated action against the manufacturers of look-alike Vicks Vaporub & Lozenges. The

company obtained an injunction from the court & with the assistance of court

representatives & advocates. It conducted raids on the premise of the fake manufacturer

& sized products valued at Rs.3.5 million. These included a look-alikes veporising rub

being marketed under the brand name Vikas cough drops under the name Venus & a

Menthol drop under the name Super plus 5

Coca-cola:- Coca-cola has put into place 48 consumer response coordination, who works

with their team to redress the consumer’s complaints about overcharging & spurious

bottling. In addition, they have a large network of route salesman, who have a one-to-one

relationship with the retailers on their beat & hence are able to keep their ears to the

ground.


CHALLENGES & OPPORTUNITIES

Opportunities in rural markets:-

There is an opportunity to make a lot of money in rural India. But, there are obstacles too.

The biggest obstacles are that the rural consumer is still evolving. Thus we can conclude

there are both challenge & opportunities in the rural market. But a responsive marketer,

who makes a serious attempt to understand the rural market with regard to his product

category, is more likely to succeed than one who has a piecemeal approach towards it.

Rural markets remain untapped because of 3 Ds- “Distance, Diversity & Dispersion”,

according to D. K. Bose, vice president, O & M Rural. Reaching your production remote

location spread over 6, 00,000 villages & that too with poor infrastructure-roads,

telecommunication, etc. & lower levels of literacy are a few hinges that come in the way

of markets to reach the rural market,” says MART Managing Director, Pradeep Kashyap.

HLL gets 50% of its sales turnover of Rs.11, 700 cr. from rural India. FMCG have a

market worth Rs.64800 cr. in rural India. Carbonated soft drinks worth Rs.1, 800 cr. are

selling in rural India. As per FICCI estimates 1/3 of premium luxury goods were sold in

rural markets in 2002. Sales of labeled goods have already overtaken those of non-

branded products in villages.

The rural consumer is very religious: - A market can integrate the religious beliefs

prevalent in an area into the marketing mix. The promotional material built around

religious themes is not only going to last longer, but will be kept with care by the

villagers. Keeping this in mind, Dabur developed religious calendars & gave a Hanuman

Chalisa with their products. These gifts were kept by the rural consumers at important

places of home, with care & were used for a long time, such an association with a brand

is of a long term nature & adds to the image of a brand, both in quantitative as well as

qualitative terms


Products can be sold in the rural market provided the packaging & pricing are modified

as per the needs of rural market. The success of Britannia’s Tiger biscuits, Cavinkare’s

Chik shampoo & small cake for Rs.5 only are evidences of the phenomenon. The five

rupee Coke in 200 ml bottles are conceived on basis of the insight of the shopping

behaviour of the rural consumer. Mr Kartik Raina of Dalmia Consumer Care, Which has

successfully experienced with a tobacco free beedi called ‘Vardan’ articulates this as,

“The rural market is not for all but for those with the guts, the skin of an elephant & the

mind of an evangelist.”

PROBLEMS OF RURAL MARKETING

As stated by A. S. Ganguly (Chairman, Hindustan Lever), directs delivery of goods even

the top 1 percent of the villagers costs twice as much as servicing urban markets

1) Transportation Problems: - Transportation infrastructure is quite poor in rural India.

Marketing activities require transportation facilities. 80% of the villages in the country

are not connected by roads.

2) Warehousing problems: - In the rural areas, there are no facilities for public

warehousing as well as private warehousing

3) Packaging problems: - Packaging is the first important step of product processing. If

the packaging cost is high, it will increase the total cost of products. It is suggested that

the marketer should use cheaper materials in packaging for the rural market.

4) Media problems: - Media have lot of problems in rural areas. TV is good medium to

communicate at message to the rural people but due to non-availability of power, as well

as TV sets, Two third of rural population can not get the benefits of various media.

5) Seasonal marketing: - The main problem of rural marketing is seasonal demand in

rural areas, because 75% of rural income is also seasonal. The demand for the consumer


goods will be high during the peak-crop harvesting period, because this is the time at

which the rural people have substantial high cash inflows. Rural marketing depends upon

the demand of rural people & demand depends upon income & consumer behaviour.

6) Low per capita income: - Per capita incomes are lower in rural areas compared to those

in urban areas again the distribution of rural income is highly skewed, since the

landholding pattern, which is the basic asset, it is skewed. Thus the rural population

presents a highly heterogeneous spread in villages.

7) Low level of literacy: - The literacy rate is low in rural areas compared to urban areas.

This again led to the problem of communication for promotion purposes. Print medium

becomes ineffective & to the extent irrelevant in the rural areas since its reach is poor &

so is the level of literacy.

As a nationwide study by Reserve Bank of India (RBI) on retail traders revealed that the

retailers in rural areas & small town maintain a higher margin than the retailer in urban

places. As per study retailer’s margin in rural areas is 8.7% as against 5.2% in urban

areas. As per 1991 census, Rural market comprise over 575 thousand villages in the

country, whose population range from less than 100 to 5,000 or more. About 78% of

these villages have less than 1,000 populations about 15% have 1,000 to 2,000

populations. Only 1.1% has more than 5,000population.

Problems in Rural marketer:-

Another mass media is cinema. It has also been observed that whatever

available, cinema viewing habit in rural areas is fairly satisfactory. Again

statistics indicate that rural areas account for hardly about 3,000 to 3,500

mobile theatres which is far less than the number of villages. Under such

circumstance, a company is forced to use its own promotion vans. Companies

like Hindustan Lever Limited, who use such vans, have found it to be very

expensive in as much as the per viewer cost is about 10 to 12 times higher in


rural areas as compared to per viewer cost in urban areas, the wear & tear on

such promotion vans & their costly equipment is also high. Here again, a few

companies like Video-on-Wheels, Sampark Marketing, & Advertising

solution & & Video Express specialize in rural van promotion & this can be

taken advantage by marketer.

Many languages & dialects: - Message has got to be delivered in the local

language & dialects. Even though the member of recognized languages is only

16, the number of dialects is estimated 850. Multi-dialect dubbing in AV

presentation is a viable solution but again, cost is factor.

Low per capita income:- Even though about 30% of gross income product is

generated in rural areas, it is shared by 72% of population, hence per capita

income are low compared to urban areas.

Product positioning: - consumable product like tea. Very large tea companies

like the Brook Bond Lipton have tea packets price from 25/50 paisa onwards

so that all segments of population are taken care of. The very product

positioning limits the market only to such segment of farmers. While

positioning is possible in case of durables, positioning of consumables do pose

problems.

Vastness & uneven spread: - The number of villages in India is more than

5lakh again the villagers are not uniform in size. Nearly 67% of the villages

have only a population of less than 500 persons, which account for 26% of

rural population. About half of the rural population lives in villages with

population size ranging from 1,000 to 5,000 persons, such villages being

considered as medium sized only 18% of the population live in villages with

population of 5,000 persons & above. Hence one can only think of tackling

about 2lakh medium & large villages, which can be considered as having

adequate potential. This type of distribution of population warrants


appropriate distribution & promotion strategies to decide the extent of

coverage of rural market.

Marketing of consumables:- Probably, there is no village in the country where

one can not find a toilet soap like Hamam or Lifebuoy or a detergent cake like

Rin or cigarettes like Scissors, Bluebird, Charminar or small yea sachets from

Hindustan Lever.

SOCIAL MARKETING

Kotler defines Social Marketing as follows: “Social Marketing is the design,

implementation & control of programmes seeking to increase the acceptability of social

idea or cause in a target group(s). It utilizes concepts of market segmentation, consumer

research, concept development, communication, facilitation, incentives & exchange

theory to maximize target group response. Colgate-Palmolive’s “rural hygiene”

programme is rural areas full in the category of social marketing programmes.

Another example is the National Egg Co-ordination Committee (NECC) advertisement

about the nutritional value of eggs in which no specific company or brand is promoted.

This is aimed at a change in consumption habits of people, resulting in adequate nutrition.

Such programmes not only earn credibility for the organization & promote goodwill

besides generating demand for product.The sanitary ware manufacturer can educate the

rural consumers about the importance of environmental hygiene toilet soap manufacturer

can advice about bodily hygiene. Thus it is possible for every FMCG company to choose

a relevant theme for social advertising & marketing. It should be mentioned here that the

federation of Indian Chamber of Commerce & Indian Industries (FICCI), New Delhi has

instituted annual awards for companies engaged in excellent rural development work.

This is an added incentive4s for the companies to take up social marketing.

a) Frame a public affairs policy

b) Choose a theme or a cause on a long term basis

c) Choose an area to operate, which will enthuse people


d) Take up the social communication programme on the theme chosen.

e) The company decides the social product, price, distribution & promotion

Social Marketing: Corporate Social Responsibility in Rural Market:-

You must have mindshare before you can have market share – Christopher M. Knight

Social marketing has been defined as design, implementation & control of programme,

seeking to increase the acceptability of social ideas or cause in a target group(s).

It utilizes the concept of market segmentation, consumer research, concept development,

communication, facilitation, incentives & exchange theory to maximize target group

responses. (Kotler, 1985)

Social Responsibility initiatives place the brand names in the heart & minds of

relationship seeking rural consumers. This is a bond which other will find difficult to beat

in the marketing warfare “For the community to actually experience technology & its

benefit it was figured that a CSR programme would be most effective.” Said Divakar

Shukla,Consultant Ogilvy PR.

ITC’s CSR initiative in rural areas:-

ITC has taken a good number of social initiatives in rural areas around its plants, which

are helping both the population of adjoining areas & the organization itself as a by-

product. These developmental efforts are providing meaningful employment

opportunities in the village itself. They are also increasing overall income & productivity

of people influenced by them

1) ‘Sunehra kal’ (Better tomorrow)

ITC has started comprehensive natural resource management initiative called ‘Sunehra

kal’ in the vicinity of couples, Sunehra kal is social forestry programme , launched by

ITC in 224 villages in 14 man dais around its Bhadrachalam plant in Andhra Pradesh. It

had provided earning opportunity to 6,405 households by the march 2005 after 4 years of


its launch in 2001. This is a part of Triple Bottom Line concept of ITC covering

economic, social, & ecological goal of the organization. This programme is targeted at

economically backward communities; living below the poverty line involves a

forestation, soil & water conservation, community development, health & sanitation,

education & watershed management. It provides attractive land use alternative to both

traditional farmers & wasteland owners.

ITC had aimed to cover 5,000 hectares in 14 mandals with the plantation opportunity by

the year 2005-06. Farmers of the villages can even grow these trees in the background of

their homes. ITC is supplying planting stock & provides extension of services & market

for the produce. The Programme is implementing through three NGOs which identify the

beneficiaries organize them into forest user groups (Sanghas) & create a village

development fund

2) Livestock Development Programme: - ITC’s Livestock development programme, in

collaboration with an NGO has created 32 battle development centers covering 635

villages in Bihar, Uttar Pradesh, & Madhya Pradesh by 2005 & had a plan to add 600

new villages every year to its ambit. The aim of the programme is to create the high

yielding progenies through genetic improvements. It has set up artificial insemination

center for cattle in the villages. These will provide the farmers with the livestock that can

give ten to eleven liters of milk a day & that will certainly enhance the rural incomes

because most of farmers have at least one milch cattle.

3) Other initiatives :- As a part of rural community development programme 40,000

women at risk & children under five have been covered under the mother & child health

programme Rupee 1 from every ‘classmate’ Notebook sold by ITC goes towards

supporting rural development initiative including primary education in village.

ITC has been conferred with ‘Golden Peacock Award’ for corporate social responsibility

in emerging economies for 2005. The award has been presented to the company for two

of its initiatives that are impact fully transforming lives & landscapes in the rural India:

ITC e-Choupal & social farm forestry


HLL’s Vindhya Valley Project: - In the year 2000 HLL helped state owned khadi board

through an advisory relationship with the Government of Madhya Pradesh. It helped the

board to brand a local produce from villages & tribal areas such as natural honey

collected from forests in the state under brand name ‘Vindhya Valley’. The products were

made by groups under DWCRA (Development of Women & Children in Rural Areas) &

distributed through their own outlets

HLL’s Swasthya Chetna Campaign: - HLL is positioning its largest selling soap brand

Lifebuoy in the health & hygiene platform. In 2002, HLL launched Lifebuoy. Swasthya

Chetna Campaign to build awareness about good health & hygiene & how simple habits

like washing of hands regularly with soap could prevent transmission of diseases.

HLL is also sponsoring World Health Organisation (WHO) recommended ORS save the

children to fight diarrhea.

Colgate Project Jagruti: - Colgate executes this rural oral hygiene drive along with the

IDA (Indian Dental Association) in 1998, 60lakh people in 20000 villages were contacted

under this project of which 15000 villages had no experience to the availability of

toothpaste & toothpowder let alone toothbrushes. Though the aim of this drive is to

promote the brand in rural areas, the overall strategy is also spreading the vital

information on oral hygiene among the lesser aware rural folks.

CRM- Indian Rural Market- Context

Customer care is practiced by some of leading FMCG in India. Some examples are given

as: - Recently Rockitt Colman Company for the first time in India has introduced. Tall

free telephone number are made available to serve its customer better Lakme Lever

employs “Computer touch Screen” to advice customer regarding use of cosmetics on the

basis of the skin colour satisfaction of the customer. Beauty consultants are also there at

the point of purchase to help hesitant customers. Pond’s Institute has a customer response


center to answer to reach & every letter & phone call received answered with empathy &

responsibility.

Recently HLL-SURF received “open customer feedback” on product defects &

suggestions. New products Surf Excel was launched on the basis of suggestions given by

customers.

ANNEXURES

TIMES OF INDIA NEWS REPORT

Poorer states drive rural FMCG sales

Namrata Singh, TNN | Nov 9, 2011

MUMBAI: That rural markets are driving consumption of FMCG products is well

known, but the fact that comparatively lesser developed eastern states such as Bihar,

Orissa, Chhattisgarh and Assam are leading rural sales is a trend that is being closely

tracked.

While villages of Punjab, Maharashtra and Tamil Nadu may have upgraded faster to

consume more premium FMCG products, it is these eastern states-which have a

significantly higher percentage of rural population compared to the country's national

average-that are driving rural FMCG sales. In these eastern states, the contribution of

rural FMCG sales to the total is more than 50%, against 40% in a richer state like Punjab,

says an industry report.

Richer states like Punjab, Tamil Nadu and Kerala spend three times more on FMCG

goods compared to poorer states like Bihar and Orissa. But, according to a research report

by HDFC Securities, the disparity in FMCG spending is lower than income disparity

between the richer and poorer states. "Our estimates show an income disparity of 3.4x

between the richer and poorer states. So, the lower differential between spends on FMCG


products shows that catch-up between poorer states and richer states in consumption will

be much more faster," the report states. This essentially means that poorer states are now

expected to catch up faster with the richer ones in terms of FMCG consumption.

"The disparity between the rich and poor rural markets is likely to get bridged in less than

a decade. We will formulate marketing strategies accordingly," says M P Ramachandran,

CMD, Jyothy Laboratories, which owns brands like Ujala and Maxo.

A strong rural franchise has become a source of competitive advantage in the poorer

states. "We believe that companies with a significant rural presence are likely to do well

in these states. Compared to this, the percentage of rural population is much lower in

states such as Tamil Nadu and Maharashtra," the report states.

"There are two kinds of rural markets-prosperous and the not-so prosperous where there

is a critical mass. A prosperous rural market is one where there is a higher proportion of

cash crops, floriculture, etc. Consumption in such rural markets is no different from urban

markets. There are other rural markets which may not be very prosperous but have a large

population. These markets are difficult to reach. So having a distribution reach in these

markets becomes a source of competitive advantage," says Saugata Gupta, CEO

(consumer products business), Marico.

Stratification

Given the significance of poorer rural markets, FMCG companies are following a

stratification strategy in product portfolios to cater to the different needs of rich and poor

rural markets. "In recent times, we are witnessing a clear segmentation in the structure of

consumption growth in rural markets linked to demographic/geographic advantages and

differential investments that are going into rural economy across the country," says

Hemant Bakshi, executive director (sales & customer development), Hindustan Unilever

(HUL), which draws about 40% of its turnover of Rs 20,000 crore from rural markets.

Bakshi said the rural growth story continues to be strong in India, while adding: "Starting

from low consumption levels and with increasing incomes, growing access to urban


centres and education is together leading to significant growth."

HUL follows a strategy of straddling the pyramid, wherein every category has

stratification based on pricing. This stratification is now visible not only in products, but

geographies, demographics and consumer segments as well. Today, most FMCG

companies, which have larger portfolio of products, have put in place a segmentation

strategy based on pricing.

Earlier, fewer FMCG companies were expanding their rural market penetration given the

challenges involved in doing so. Today, government-sponsored schemes like NREGA,

higher support prices have boosted rural sales, prompting more companies to undertake

the rural journey for their products. While premium products are being targeted at rural

markets where consumers have a greater propensity to spend, popular/mass products are

being shipped to the hinterland where the population is large but the spending power is

less.

Quoting Nielsen data, the HDFC Securities report shows that in Bihar the rural sales

percentage is as high as over 60%. In Assam, Chhattisgarh and Orissa, it is about 50%

and above. However, in terms of FMCG spend variation between states, richer states like

Punjab (almost 100%), Kerala (over 90%) and Maharashtra (over 80%), Karnataka (70%)

are higher compared to Bihar (about 30%).

The FMCG sector has been growing at 15% CAGR (compounded annual growth rate)

since fiscal year 2005. Compared to this, growth in the earlier phase (fiscal year 2002-05)

was a tepid 6%.


Marketing outlook for Indian FMCGs in 2012

By Tarun AroraFriday,Dec 30, 2011

Tarun Arora, EVP, Marketing, Godrej Consumer Products Ltd (GCPL),

lists the key FMCG trends of 2012:

Rural growth - Most FMCG categories are growing faster in rural as

compared to urban India. This growing importance of rural India will

also mean that regional players and categories with a strong

regional franchise will influence marketing plans. As these

categories expand, they will influence the way adjacent categories

and emerging alternatives will seek to market themselves.

Innovation Imperative – Innovation is imperative in the FMCG

category today. Differentiation is the key. Product life cycles are

getting shortened given the highly competitive scenario. There is

therefore a very strong thrust on innovation in the FMCG space

across various aspects ranging from brand proposition, packaging,

communication, consumer insighting to pricing.

We are constantly re-engineering our offerings on the innovation

plank with the objective of serving the evolving needs of the

consumer. Some of the examples in the innovation space include

the launch of GoodKnight Advanced Activ+ and GoodKnight

Advanced Low Smoke Coil.

Shopper Marketing – With the growth in modern retail, the store is

http://www.exchange4media.com/news/[email protected]


emerging as the most potent medium in the marketing of brands.

The Indian consumer is clearly enjoying the modern trade shopping

experience and is increasingly shopping there, as is evident from the

increased spending at modern stores. Shopper marketing has,

therefore, become an important tool for marketers driving brand

choice inside the stores.

Connecting and engaging with the Indian Digital consumer -

With 50+ million active social media users, Indians spend more time

on social media than on any other activity on the Internet, according

to Nielsen. Increasingly marketers are focusing on this medium,

however what will be critical is how brands can effectively break

away from the pack in order to differentiate and improve social

media engagement levels.

Some of our brand campaigns on social media including the ‘HIT Kill

Malaria’ campaign have received an overwhelming response.

We continue to be upbeat about consumer demand in 2012. As India

is one of the fastest growing economies, we will witness significant

play on innovation, leading to intensity of competition. We expect

growth to be driven on the back of new product launches and

renovations of existing products. We will invest significantly behind

these launches and support our innovations.


BIBLIOGRAPHY

Author Books Edition &

Year of

publishing

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Dr. S. L. Gupta Rural Marketing-

Text & Cases

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2004

Wisdom Publications

R. V. Badi

N. V. Badi

Rural Marketing First Edition

2004

Himalaya Publishing

House

T. P. Gopalaswamy Rural Marketing-

Environment,

Problems &

Strategies

Second Edition

2005

Vikas Publishing

House Pvt. Ltd.

Pradeep Kashyap

Siddhartha Raut

The Rural Marketing

Text & Practice

First Edition

2006

Biztantra An Imprint

of Dreamtech Press

Sanal Kumar Rural Marketing Second Edition Response Books


Velayudhan Targeting the Non-

urban Consumer

2007

Sage Publications

India Pvt. Ltd.

Tej K. Bhatia Advertising &

Marketing in Rural

India

Second Edition

2007

Macmillan India Ltd

Balram Dogra

Karminder Ghuman

Rural Marketing-

Concepts & Practices

Edition 2008 TATA Mc Graw- Hill

Publishing Companies

Ltd.

Rural Marketing of FMCG Products

Documents

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