Scope of Rural Marketing for FMCG Companies

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A RESEARCH REPORT

ON

Scope of Rural Marketing For FMCG Companies

A report submitted to U.P. Technical University for the fulfillment of MBA Degree.

SUBMITTED TO SUBMITTED BY

Dr. S. K. Mishra HEMANT SHARMA

Head Of Dept of Management Roll no. 0625070009

BBSIMS MBA IV semester

Gr. Noida

B.B.S. Institute of Management Studies

Plot no 33, Knowledge Park III

Greater Noida (U.P)

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COLLEGE CERTIFICATE

This is to certify that a Marketing Research report, titledScope of Rural

Marketing For FMCG Companiesbeing submitted by Mr. HEMANT

SHARMA for the fulfillment of requirement of MBA degree, affiliated to

UP Technical University Lucknow. This is a record of an independent

work done by him under my guidance & supervision.

Authorized by:

Signature

Dr. Bimal Agarwal

Director

BBS Institute Of Management Studies

Gr. Noida.

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Declaration

I hereby declare that the research report titled Scope of Rural Marketing For FMCG

Companies is the result of individual efforts and has been completed under the guidance of

Mr. Bipin Singh, BBS Institute Of Management Studies, Gr. Noida.

The finding and interpretation in the report are based on the data collected by me and the

report is not a reproduction of any other project submitted for similar purposes.

HEMANT SHARMA

MBA IVth Sem.

Roll No. 0625070009

BBS Institute Of Management Studies

Gr. Noida2006-08

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ACKNOWLEDGEMENT

It is with the feeling of satiated and sense of Zenith that I draft this

acknowledgement note. I wish to express my gratitude to those who have

generously helped me to compile the Dissertation and stand up high, to the

expectation of the institute.

I would like to express sincere gratitude to Mr. Bipin Singh andMr. Sarvesh

Singh, my faculty members guide for his considerable advice, time and

substantial encouragement throughout the course of this dissertation.

Last but not the least; I would like to thank my friends for their diligent

endeavor and earnest desire to lead me towards my path of perfection.

Regards

HEMANT SHARMA

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CONTENTS

1. Executive Summary .6

2. OBJECTIVE.8

3. RESEARCH METHODOLOGY9

4.INTRODUCTON.12

5. RURAL MARKET ENVIRONMENT..14

6. THE CHANGING FACE OF FMCG MARKETING IN RURAL

SECTOR......38

7. ADVERTISING IN RURAL SECTOR.40

8. STRATEGIES ADOPTED BY DIFFERENT FMCG

COMPANIES42

9. STRATEGIC ISSUES..51

10. PROBLEMS IN RURAL MARKETING...64

11. RURALMARKETING-CHALLENGES AND

OPPORTUNITIES...68

12. OPPORTUNITIES FOR DIFFERENT FMCG COMPANIES.71

13. CONCLUSION76

14. RECOMMENDATION..80

15.LIMITATIONS OF THE STUDY.81

16. BIBLIOGRAPHY...82

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Executive Summary

A variety of factors have rendered the rural market quite attractive to corporate in recent

years. The growing opportunity in the rural market is no doubt the prime factor. The rural

demand has been growing rapidly and its composition has been changing for the better in the

recent years. The increased income/ purchasing power of the rural consumer and the

improved income distribution has enhanced rural demand for several products. Better access

to many modern products/brands has added to this growth.

The heat of competition in the urban market actually serves as the stronger driver behind the

growing interest of cooperates in the rural market. The fact that the rural market is still

largely an untapped as well as the early entrants can tap it without having to face intense

competition as in the case of the urban market, makes the rural market all the more attractive

to them.

Corporate have been finding the going increasingly tough in the urban market , especially for

the products in respect of which penetration levels are already high . For example penetration

level for the toothpaste in the urban market has now reached close to 80 per cent. In contrast,

it is below 30 per cent in the rural market. Moreover in the urban market many consumers

have been using a toothpaste for quite some time and have settle

down to the brand, itsflavour , and other characteristics .They can not be expected to switch

their brand very easily . In contrast, in rural markets, there a lot of first time users of

toothpaste whom the company can tap from the scratch.

Corporate find that the highly penetrated urban markets allow little room for volume growths

for most of what are called, necessity products (toothpaste, bath soap, washing products, tea

etc). Growth opportunity for many of the emerging products (coffee, shampoo, talcum

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powder etc) too is rather low in the urban market . The rural market thus becomes essential

for companies with strong aspirations. Not comprising in the rural market keep them out of

about half of the countrys market for the necessity products and the one-third for the

emerging products by value .It is but natural that in these circumstances, corporate set their

sights on the rural market

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OBJECTIVE

The over all objective of the thesis is to throw light on Scope of Rural Marketing for FMCG

Company in India.

SUB OBJECTIVE:

Rural marketing of FMCG Companies Present and future.

Future growth potential of rural marketing of FMCG Companies in India.

Different Strategies adopted by different FMCG companies to increase our rural market

share.

Challenges faced by different FMCG Companies.

Various opportunities for FMCG Companies in the future.

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Research Methodology

Type of Research : Descriptive and conclusive

Data type : Secondary

Data collection source : Magazines,journals,internet

Introduction

This chapter aims to understand the research methodology establishing a framework of

evaluation and revaluation of primary and secondary research. The techniques and concepts

used during primary research in order to arrive at findings; which are also dealt with and

lead to a logical deduction towards the analysis and results.

RESEARCH DESIGN

I propose to first conduct a intensive secondary research to understand the full impact and

implication of the industry, to review and critique the industry norms and reports, on which

certain issues shall be selected, which I feel remain unanswered or liable to change, this

shall be further taken up in the next stage of exploratory research. This stage shall help me

to restrict and select only the important question and issue, which inhabit growth and

segmentation in the industry.

The various tasks that I have undertaken in the research design process are :

Defining the information need

Descriptive and casual research.

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SECONDARY DATA

Information that already exists somewhere, having been collected for another purpose.Sources include census reports, trade publications, and subscription services. Data that have

already been collected and published for another research project (other than the one at

hand). There are two types of secondary data: internal and external secondary data.

Information compiled inside or outside the organization for some purpose other than the

current investigation. Data that have already been collected for some purpose other than the

current study. Researching information, which has already been published. Market

information compiled for purposes other than the current research effort; it can be internal

data, such as existing sales-tracking information, or it can be research conducted by

someone else, such as a market research company or the U.S. government. Published,

already available data that comes from pre-existing sets of information, like medical

records, vital statistics, prior research studies and archival data.

Secondary source of data used consists of books and websites

My proposal is to first conduct a intensive secondary research to understand the full impact

and implication of the industry, to review and critique the industry norms and reports, on

which certain issues shall be selected, which I feel remain unanswered or liable to change,

this shall be further taken up in the next stage of descriptive research.

DESCRIPTIVE RESEARCH

STEPS in the descriptive research:

Statement of the problem

Identification of information needed to solve the problem

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Selection or development of instruments for gathering the information

Identification of target population and determination of sampling Plan.

Design of procedure for information collection

Collection of information

Analysis of information

Generalizations and/or predictions

.

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INTRODUCTION

The rural market of India is fascinating and challenging at the same time. It offers large

scope on account of its sheer size. And, it is growing steadily. Even a modest growth pushes

up the sales of a product substantially, in view of the huge base.

It is attractive from yet another angle. Whereas the urban market is highly competitive, the

rural market is relatively quiet. In fact, for certain products, it is totally virgin market.

Simultaneously, the market also poses several problems and hurdles. The firms have to

encounter them squarely and put in a great deal of effort, if they have to get a sizeable share

of the market.

Efforts to capture the market with due thought and focus on the constraints with streamlined

strategies to overcome the same will tend to define the path ahead for rural marketing in

India.

A Hindi poet has rightly said, Bharat mata gram vasini which means Mother India lives in

her villages.

According to the 2001 census, Indias population was 100 million, of which 73 percent lived

in villages. This are average statistics. There are states like UP, MP, Rajasthan, Kerala,

Bihar and Orissa where the rural population varies from 80 to 90 percent. The spread of

population in 4,200 cities and towns is to the extent of 25 percent, and of the

Remaining 75 percent is in 5,76,000 villages. This sheer base defines the volume and scope

of rural marketing.

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Marketing in India has for a long time meant urban marketing. But now rural marketing is

being widely researched and discussed. If market potential is considered, the rural market is

big with approximately 70 percent of the population still residing in rural areas and with 40

percent the Gross National Product emanating from agriculture.

The following transactions, (which broadly outline the landscape of rural marketing) , can be

categorized as follows:

Marketing of agricultural inputs like fertilizers, pesticides, farm machinery etc;

Marketing of products made in urban centers and sold to rural areas like soap,

toothpaste, television sets, etc;

Marketing of products made in rural areas sold to urban centers like khadi cloth, hand crafted

products etc; and

Marketing of products made and sold in rural areas like milk and milk products, locally

manufactured toothpowder, cloth etc.

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THE RURAL MARKET ENVIRONMENT

The rural market environment need a separate examination as it varies significantly from that

of the urban market. We shall deal with the subject under the three headings :-

1. The rural consumer.

2. The rural demand.

3. Other aspects of the rural market environment.

(A)-THE RURAL CONSUMER : A Detailed Profile :-

Size of Rural Consumer Group

In numerical terms , Indias rural market is indeed a large one ; it consists of more than 740

million consumers. 73% of Indias total population is rural . The rural market consists of

more than 12 crorer households, forming over 70%of the total households in the country.

Characteristics of Rural Consumer Group:-

LOCATION PATTERN :-

Rural Market of India is a geographically scattered market. The rural population is scattered

across 5,70,000 villages . And, of them , only 6300 villages , have a population of more

than 5,000 each . More than 3 lakh villages, are in the category of 500 people or less.

SOCIO-ECONOMIC POSITION :-

Rural Consumers continue to be marked by low per capita income/ low purchasing power.

Similarly, they continue to be a traditional -bound community, with religion, culture and

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tradition strongly influencing their consumption habits. Nearly 65% of rural income comes

from agriculture.

Rural Prosperity and discretionary income with rural consumers are thus linkedto asizeable

extent with agricultural prosperity.

LITERACY LEVEL :-

Rural India has a literacy rate of 28% compared with 55% for the whole country. The adult

literacy programmes launched in the rural areas are bound to enhance the rural literacy rates

in the years to come . The rate is certainly on the low side.

LIFE STYLE :-

The rural consumers are marked by a conservative and tradition-bound lifestyles. But the

lifestyle of a sizeable segment of rural consumers has already changed significantly in recent

years .The changes can be attributed to several factors such as:

Growth in income and change in income distribution .

Growth in education.

Enlarged media reach ( particularly television).

Growing interaction with urban communities.

Marketers effort to reach out the rural market.

BUYING BEHAVIOUR :-

Buying behaviour of rural consumers have been effected by the following factors:-

INFLUENCE OF CULTURE:-

Rural consumers perception of products are strongly influence by cultural Factors . For

example-the preference in respect ofcolour, size and shape is the result of cultural factors.

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GEOGRAPHIC LOCATION:-

Rural consumer behaviour is also influenced by the geographical location of the consumers.

For example , nearness to feeder towns and industrial projects influenced the buying

behaviour of the consumers in respective cluster of villages.

EXPOSURE TO URBAN LIFESTYLES:-

Extent of exposures of rural consumers to urban lifestyles also influences their buying

behaviour.

THE WAY THE CONSUMER USES THE PRODUCT:-

The situation in which the consumers utilize their the product also their buying

behaviour.For example Lack of electricity automatically increase the purchase of batteries

by rural consumers.: since the rural consumers cannot use washing powders /detergents

powders that much, as they wash their clothes in streams or ponds , they go is more for

washing bars and detergents cakes.

PLACE OF PURCHASE:-

Different segments of rural buyers buy their requirements from different places \ outlets.

Some buy from the village , shopkeepers; some from village markets/ meals; other buy from

the town that serves as the feeder to the rural area.

MARKETERS EFFORT TO REACH OUT THE RURAL

MARKET:-

Many corporate have been trying hard to develop a market their products in rural areas ,

investing substainlly in these areas. Developmental marketing has created discriminating

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buyers demand in the rural market. This has brought about some change in the way buyers

purchase different product.

(B)- THE RURAL DEMAND :A Detailed Profile :-

Steady growth

Rural demand has grown steadily over the years. Not only has the market grown in

quantitative terms , but qualitative terms too it has undergone a significant change.

Change in the composition of Rural Demand

The composition of rural demand has also been changing significantly in recent years Many

new products have entered the consumption basket of the rural consumers. and the relative

shares of the different categories of products in the consumption basket .The upper

segments, in particular , have started buying and using a variety of modern consumer

products, which were till recently unknown in the rural market.

Several products already well established in the rural market

Marketers cannot now assumes that rural India consumes only certain traditional/ essential

products and that its share in other product category is meager. It is perhaps well known that

products like packaged tea , bath soaps and washing products, including

detergents/detergents cakes , are popular items of consumption in rural market .Products like

shampoo ,toothpaste and talcum powder , and durables like electric irons , bicycles , mopeds,

scooters and motorcycles have joined this category in recent years. The rural demand for

electric irons , mopeds and motorcycles have note between 30 and 50 percent of the all-India

demand.

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In many products , rural consumption accounts for a larger share than

urban:-

In many products , rural consumption now accounts for a larger share than urban . In washing

soaps (cakes/bars ), the rural share is over 60 per cent .

In popular bath soaps , it is more than 50 per cent and in batterie4s ,it is more than 56 per

cent .similar is the case with packed tea and hair oils.

Among durable, the rural market now accounts for a larger share of the total sales in

Sewing machines.

Radio/ transistors.

Tape Recorders.

Wrist watches.

Black and White Television sets.

Cassette recorders.

Bicycles.

Table Fans.

Pressure Cookers.

In Many Products, the rural markets has overtaken the urban in growth

rate:-

A survey by NCAER shows that the rural market is growing faster than the urban market

several products . These includes packaged tea, detergent powder, washing shop, and

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detergent cake. Growth of motorcycle too has been more in the rural market than the urban

market.

Position of durables

According to NCAER survey , Rural Indias market for consumer durables is estimated at Rs

.4500 crore , with an annual growth rate 8 per cent .

OWNERSHIP OF DURABLES BY RURAL CONSUMERS

Product No. of owner per 100 households

Bicycles 53

Fan (ceiling) 19Fan (table) 13

TV(B&W) 16

Pressure cooker 13

Wristwatch(mechnical) 76

Radio/Transistors 42

It can be seen from above table that now every other other rural household has a bicycle,

every third households has a fan , every sixth has a black and white televisions set, and every

seventh a pressure cooker. Also , nearly 80 per cent of rural holds own a mechanical wrist

watch and 42 per cent a radio/transistor .Rural India now purchase a third of the colour

television sets, a fourth of the mixers/ grinders and fifth of the refrigerators sold in the

country.

Factors Behind the growth and Diversification in Rural Demand:-

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Variety of factors , acting in concert , have brought about the big growth and welcome

changes in the rural demand, a few of them such as growth in income , changes in income

distribution , changes in lifestyles, and the expectation.

New income due to agricultural /rural development:-

The technological break through ,popularly known as the GREEN REVOLUTION, which

took place in Indian agriculture from the mid 1970 onwards, has added to the prosperity of

rural India considerably. Moreover, in recent years , as part of the new farm policy , high

support prices are offered for farm products. As a result , there is now more money in the

hands of the owner-farmers in the rural areas.

The expectation revolution:-

The rising expectations of the rural people have greatly influenced the rural market

environment. It has enlarged the desire as well as awareness of the rural people ; it has

strengthen their motivation to work, earn and consume. The rise income provides substance

to the aspiration.

Rural Demand is More Seasonal:-

Rural demand is more seasonal compared to urban demand .The pre-dominance of

agriculture in the income pattern is one main reason for this. The relatively greater influence

of marriages and festival on the purchase pattern is the another. After all, agriculture in many

parts of India is still depends on the vagaries of the monsoon.

TAPPING THE RURAL MARKETS :-

While rural India does constitute an attractive and sizeable market, firm have to strive hard

for securing a share of it. Practically in every task of marketing , rural marketing poses some

unique problems.

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The major tasks that need unique handling in rural marketing are:

Segmentation and targeting.

Product management.

Physical distribution.

Channel management.

Marketing communications.

A.SEGMENTATION AND TARGETING :-

The rural consumers are not a homogeneous lot in economic conditions, or literacy, or

lifestyles, or buying behaviour. It would, therefore, firm to assume that the rural market as a

whole can be served by a single offer or a single product -price-promotion combination.

Firms have to analyses the consumers in depth, carry out thorough market segmentation and

select relevant segments as target markets. And they have to develop a distinctive positioning

and a distinctive marketing mix for each target segment.

Geographical Segmentation:-

The rural market can be segmented geographically, using different geographical bases.

Climate and level of irrigation:-

Climate can be one of them; regions endowed with favorable climate are usually more

prosperous compared with climatically handicapped region. Level of irrigation can be

another base; irrigated areas and dry land areas pose different economic and marketing

environments.

Nearness to a feeder town:-

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Firms can also segment the rural market using nearness to a feeder town as the base.

Consumers located close to a feeder town visit it at least once a month to sell their product

and/or to buy their requirements, and in buying habits , they differ from those living in the

interior areas. It will thus be meaningful to segment the rural market in to consumers located

closer to a feeder town and consumers located away from them .

Demographic segmentation:-

The rural market can be segmented demographically too. In fact, there are many possibilities

of segmenting the rural market demographically.

Population concentration:-

It can be one base. About 40 percent of the rural population live in 7 percent of the villages

in the country and remaining 60 percent in the other 93 per cent of the villages. Thus, the

market can be segmented on the basis of different size classes with regard to population.

Age:-

In particular, the youth in the rural areas can be picked up as a separate market. There is a

population of more than 20 crore in the age group of 16-30 years in the rural market. Surveys

have revealed that the younger generation dominates the purchase in the rural market. The

rural youth differ from their elders in their buying behaviours .It will thus be meaningful to

segment the rural youth as a separate market.

Literacy level:-

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It can be another demographic base for segmenting the rural market. Though rural India, is

characterized by low literacy ,there are wide variations in the matter of literacy within rural

India . for example- The rural literacy rate in Kerela is 80 Per cent , that in Bihar is only 15

per cent.

Income:-

The rural consumers can be segmented in to different income classes. The rural consumers

can also be segmented into regular income and demand .All rural consumers are not

characterized by sesonalty of income .There is a sizeable salaried class in the rural areas .

There is also a sizeable self-employed group, consisting of shopkeepers and service

providers. There is nothing seasonal about the income of such people .Obliviously , those

with regular income will differ in buying habits compared with those whose income is

seasonal.

Buying behavior segmentation:-

Rural consumer differ in their buying behavior from their urban counterparts as well as

among themselves. This fact too could be factored in to segmentation exercise . firms

should ,however , generate relevant data on the rural consumers and their buying behavior ,

perception and attitudes ,and then segment them using their buying behavior as the base.

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Thompson rural index:-

Hindustan Thompson Associates have developed the Thompson rural market index based

on 26 variables , including area of the concerned district , demographic pattern occupational

pattern , agriculture related data , rural electrification data and commercial bank data . The

index can be used in segmentation.

B. PRODUCT STRATEGY :-

The first decision to be made in product strategy in the rural context is whether the product

that is sold in the rural context is whether the Product is sold in the urban market can be

supplied to the rural market as it is , or whether it must be adapted . it depends on the

situation and the nature of the product .Basically , the firm must find out what kind of

product is actually required by the rural consumer and then decide if it should make an

altogether distinct product or adapt the existing product.

Economic and income realities of the market should certainly be considered while

developing the product strategy for the rural market . when products are designed reflecting

both these influences ,the chance of success is greater.

Lower priced product versions do help in many cases in the rural market ,but no

generalization can be made in this regard . Many companies try to reduce the prices of their

products for the rural market by creating smaller size by decreasing the quality . The

approach works sometimes and with some products, but not all times, with all products.

Specifically Designed Products:-

Specifically designed product to help in many cases

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TRACTOR /TRAILEIER : -

The tractor /trailer is an apt example. It is a product specifically designed for the rural

market. It is designed as a replacement for the plough as well as a vehicle for transporting

both men and material in rural areas.

EVEREADYS JEEVAN SATHI TORCH:-

Eveready s Jeevan Sathi brass torch is another example of suucesssful rural specific product

strategy. Initially Evereadys brass torch was not picking up well in the rural areas . Union

carbide launched a market research study for locating the reasons. The study by the ad

agency OBM found that the rural folks rejected the torch since all of its parts are not made of

brass .the design , developed abroad, had given the product certain plastic parts, like the

reflector. The Indian rural consumer felt that the plastic parts would not durable . OBM also

found that the rural people were prepared to pay high prices for the same torch if it were

made all brass. Eveready then introduced for the rural market the all brass torch designed to

last life long and positioned it Jeevan Sathi as a life long companion.

MODEL VARIANT:-

Models developed specifically for the rural market have found more takers in the market .

For instance, Motorcycles that are designed to take on the rig ours of rural roads have

succeeded more in the rural market.

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COLOUR VARIANT :-

The rural consumer differ from their urban cousins in colour preference . in case of some

products , colour may matter vary much . firms can exploit this fact to their advantage . For

example , ASIAN PAINTS understood the substantial difference between the rural buyer in

the colour preference . Asian Paints introduced paints with bright colours for the rural

markets . Asian Paints also communicated the feature well through its communication

campaigns.

Different products/ models , Different brands, packing, pricing and

different positioning:-

By and large, the rural market can be tapped better through different products / models ,

different brands, different packaging and different positioning.

PACKAGE DESIGN AND PACK SIZE:-

In some case , the product can be the same , but the package and pack size may have to be

different for the rural target group. Package design and colour help identification of brands

by rural buyers . Many rural consumers are not quite conversant with various brands .All the

same, they manage to pick the brand that they want . They recognize the brands by its

packaging . This the reason why a number of local brands in rural areas imitate the packaging

of big national brands.

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As regard pack size , as a general , it can be stated that smaller packs are more suited to

the rural areas . Low purchasing power and limited availability of cash for shopping force the

rural consumer to go in for smaller packs with low unit price. In some cases ,they also

prefer small packs so that they can make a beginning on small scale and after trial and

satisfaction go in for regular purchases.

In recent years , sale of shampoo brands were priced at Re 1 or below per sachet helped

the trail and adoption. The 5-gram Vicks Vapourb tin and the small size Lifebuoy soap are

other such examples.

HUL, has deepened coverage of many of its products in the rural market through such

combination. It has come up with a series of small pack sizes/saches that specially cater to

low end consumers.

Logo, Symbols and Mnemonics :-

Image is far more potent the rural market , which in many cases is an uninitiated market.

Symbols, therefore , add value to brand recall and brand personality in the rural market.

Asian Paints Gattu:-

Asian Paints Gattu though equally well known in urban and rural market , has greater

effectiveness as an identity tool in the rural market .Actually in many rural parts of India ,

Asian Paints is referred to as the bahahawala orchokrawala company.

The Nirma Girl:-

The Nirma Girl in Frock on the packs of Nirma washing powder has become the mnemonic

for effective and good value in washing powders.

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The Dettol Sword and the Mortein Genie:

For the same reason , Reckitt& Colman has been focusing on the Dettol Sword and the

Mortein genie in its rural communication.

Brand Decisions :-

Branding too needs skillful handling in the rural market. The rural consumers have already

graduated from generic products to branded products. Today, the brand name is the surest

means of conveying quality to rural consumers. In other words, brand is the key to

confidence building among the rural consumers. Besides quality, it conveys that the

manufacturer is going to show sustained interest in those products ands markets. Whether the

same brand is used in both urban and rural market, or appropriate variants of the brand must

be adopted for the rural market , is a matter for conscious decisions by the individual firms

depending on the context. In quite afew cases , the same brand is providing right and cost

effective . In some cases, however, the brand name that is suited to the urban market may not

be quite suitable to the rural market. Low priced variants seem to work better in majority of

cases in the rural market. It will, however , be incorrect to assume that rural consumers prefer

local brands to national brands.

Sell Value Brands, Not Cheap Brands;-

While brands specifically developed for the rural market and low priced variants may work

better in many cases , the strategy should be one of selling value brands . HLLs Lifebuoy,

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for example, is a low priced carbolic soap that is often the first choice of bath soap by a

rural consumer .HLL, however , does not sell it as a cheap soap. Instead, sell it as a hygiene

brand. Itcommunicates the value of the brand to the target market. It also tries to enhances

the value of the offer by giving suitable add-ons .for example, while targeting rural students

for the soap , it distributed height charts along with the soap and conveyed its concern for

their health and well being . Rural marketers would do well to add some value to their

products in this fashion if they are keen to secure the loyalty of the consumers.

C. PHYSICAL DISTRIBUTION :-

The problems faced by the marketer in the Physical distribution in rural context are as

follows:-

The Problems in Transportation and Warehousing :-

It is well known that transportation infrastructure s quite poor in rural India . Though the

country has the fourth largest railway system in the world , many parts of rural India remain

outside the rail network . As regards Road transport , nearly 50 per cent of the 570,000 odd

villages in the country are still not connected by proper roads . While some improvement is

taking place on account of the various rural development programmes, many areas still have

only KACHA roads and most of the interiors have hardly any roads worth mentioning .As

regards transport carriers , the most common ones are delivery vans and the animal drawn

carts. Because of the difficulty in accessibility, delivery of products and services continues to

be difficult in rural areas. In warehousing too, there are special problems n rural context.

Business firms find it quite difficult to get suitable godowns in many part of rural India.

Cost service Dilemma Becomes more Acute :-

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The firms can not simply rely on trickle down of stocks to the rural buyers. They need a

network of clearing and forwarding (c&f) agents and distributors at strategic locations for

facilitating proper distribution of the products in the rural market. They have to commit

themselves to servicing the villages will help not only the availability of the product, but

product promotion as well.

In the matter of transportation, combining different modes can be cost effective.

Trucks for medium distance movement and delivery vans and bullock carts for local haulage

may serve the purpose better. Water transport too has a role in specific areas Bullock carts

have a special role on rural distribution, especially in tertiary transport. They are cheaper;

they are available in plenty and are ideal for the rural roads.

The Delivery Van ;-

The delivery van has a key role in rural distribution The companies concerned and their C &

F agents /stockist / distributors operates these vans. Companies like Hindustan lever and ITC

, who are pioneers in rural marketing in India, have a fleet of company delivery vans for rural

distribution . The van take the products to the retail shops in every nook and corner of the

rural market . It enables the firms to establish direct contact with rural dealers and

consumers. It also help the firm in promotion . But the cost of operating such vans is quite

high . Firms like HLL and ITC had the resources as wells the wisdom to consider van as

initial investment in the market. Through the van , they were not only solving their

transportation problem of the rural market, but were also developing the market for their

products.

D. Channel Management :-

Organizing marketing channels is the second part of the distribution task .

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Multiple tier add to the cost :-

The distribution chain in rural context usually requires more tiers, compared with he urban

distribution chain . The distance between the production points and the rural market , and the

scattered location of the consumer make it necessary . At the minimum, the distribution chain

in the rural context need three tiers i.e. The village shopkeeper, the distributor , and the

Whole seller/ stockist/ C&F agent in the town .in addition it involves the manufactures

branch office operations in the territory.

Producers who can reach the customers through the shortest distribution chain can do

better in this market.

Non-Availability of Dealers :-

Firms find that availability of dealers is limited and the scope for appointment fresh /

exclusive dealers of the company is equally limited in view of the low demand and non-

availability of suitable candidates.

Poor viability of the outlets :-

A good number of retail outlets in the rural market suffer from poor viability . A familiar

paradox in rural distribution is that on the one hand the manufacturer incurs additional

expanses on distribution and on the other hand , the retail outlets find that the business is un

remunerative to them. The additional funds the manufacturers pumps into the system are

used by the scattered nature of the market and the multiplicity tiers in the distribution chain.

Inadequate banking and credit facilities :-

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Distribution in rural markets is also capped due to the lack of adequate banking and credit

facilities. It is estimated that there is only one bank branch for every 50 villages. Rural outlets

need banking support for two important purposes:

(1)- For remittances to principals and to get fast replenishment of stocks .

(2)- For securing credit.

Firms have been in search of a low- cost system of distribution with the

wholesaler serving all the retailers , including the ones at the tail end , and the latter

servicing the consumer . This is the strategy followed by Nirma to compete with HLL.

Nirma relies on the wholesaler network . HLL is trying to get around the problem by giving

credit to the distributors.

E. Marketing Communication:-

In marketing communication and promotion too, rural markets pose many problems.

The literacy rate among the rural consumers being low, the scope for using the printed

word is rather limited. The traditional bound nature of the people and heir cultural barriers

add to difficulty of the communication task. Marketing communication in the rural areas has

to be necessarily in the local language and idiom.

Rural communication is quite expansive. Rural communication has to go through the

time consuming stages of creating awareness, altering attitudes and changing behavior. In

addition, it has to break the deep- rooted behaviour pattern.

Managing the communication task:-

The rural communicator will do well to choose a combination of formal and non formal

media. The possibilities are indicated in below table:-

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POSSIBLE MEDIA MIX IN THE RURAL CONTEXT

Formal / organised media Non-formal /Rural -Specific MediaTV Audio-Visual/Publicity Vans

Cinema Rural specific art forms like puppet

show and HARIKHATHA.

Radio Demonstrations

Print Media-Press Meeting ,Announcements, Processions

Other Print Media Caparisoned elephants and decorated

bullock carts carrying advertisement

panels

Outdoor Music records.

POPs

Selecting The Media Mix :-

TV :-

With he increase in coverage and increase in TV ownership in rural areas , TV is gradually

becoming the prime media for rural communication .

Cinema :-

The cinema is a useful medium in rural context . most large and medium villages have one or

more cinema house. Also, more than one-third of all rural people do see cinema as a matter

of regular lifestyle. Advertisement films , short feature films, with disguised advertisement

message, and documentaries that combine knowledge and advertisements, can be employed

for rural communication.

It has been estimated that 33 per cent of the total cinema earnings in the country come

from rural India.

Radio:-

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The radio is well -established medium in rural areas. A big expansion in broadcasting

facilities has taken place in the country over the years. The availability of radio sets has also

expanded. While radio as a medium cannot match TV in potency and effectiveness, in the

existing context ,it can certainly play a significant role in rural communication.

Print media too has some scope :-

The role of print media is certainly limited in the rural context. Even the remotest rural parts

have a small group, which is literate. Moreover, while the group may be numerically small ,

its member usually happen to be the opinion leaders , influencing the purchasing behaviour

of the large segment of the rural consumers. so, it would be unwise to assume that the print

media has no scope at all in the rural areas . Moreover, the younger generation in the rural

areas is comparatively more literate. With the new trend of increasing rural literacy , the

scope for using print media in rural communication will increase further.

Outdoor:-

The outdoors , which include hoardings, wall paintings, illumination and other displays, also

lend well for ruralcommunication . In fact , many companies are using the outdoors in the

rural communication mix.

POPs( print of purchase) :-

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The POPs Point of purchase promotional tools- are also quite useful in the rural markets.

The POPs meant for the rural market should be specially designed to suit the rural

requirements. Symbols, Pictures, and colours must be liberally in POPs meant for the rural

market. Colour is of particular significance . As a general rule ,the rural people love bright

colours. The effective Communicator utilize such cues.

Audio-visual / publicity vans :-

The AV unit or the publicity van is very useful for the rural communication .The van is a

comprehensive mobile promotion station at the exclusive command of the concerned firm.

The firm can exhibit its films and other audio-visual presentations, such as slide shows,

sound and sight presentations, puppet shows etc. from the instant promotion station. A

potable shamiana or Platform often forms a part of the van. Even public meeting can be

organised using the potable shamiana . The van can also be used for the sale campaign. It

can also be used for Product demonstration.

Naturally, the AV vans are quite popular with rural marketing firms .Practically all

firms in the agri inputs business have their own AV vans followed by those marketing

consumer durables.

Colgate-Palmolive has supply vans that offer the free samples and screen video

films on oral hygiene. It has an on going rural van programme, which cover on an average

80 million rural consumers per year. Vans are supplemented with bicycle vendors, who go to

villages not accessible by the vans.

Godrej has vans that play music and announce free gifts in the village square. The

van than goes to few shops in the villages to sell the product.

Syndicated AV vans :-

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In recent years, rural AV vans have become a sharable service. Firms which can not afford to

operate vans of their own, utilize syndicated AV van service offered by independent

agencies.

Multi-purpose vans: Jain TVs Video -on-wheels :-

Recent years have witnessed the emergence of tools that are more innovative than the AV

van. Jan TVs Video on- wheels is one of them.

Puppet shows, Harikhatha :-

Popular entertainment programmes like puppet show , dance, dramas, and Harikathas ,

specially developed for the product- promotion purpose , are now being used in rural

markets. The traditional art forms readily render for communication with rural society .

Village fairs , festivals and melas are ideal venues for projecting these programmes. In

certain cases , public meeting too many be used for rural promotion.

Music Cassettes :-

Music cassettes are another effective medium for rural communication. It can be reached is

an appealing and a comparatively inexpensive medium. Different language groups can be

reached with low budget. They can be played in cinema houses or in other places where rural

people assemble.

HUL rural specific communication for Surf :-

For propagating Surf, Hindustan Lever brought out separate advertisement films for the

urban and rural audience. In the film meant for the rural audience, the company took

particular care to demonstrate step-by-step the method to be adopted in washing with surf for

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getting the best whitening effect. The company knew that an elaborate demonstration was

essential for the rural audience.

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The Changing Face Of FMCG Marketing in rural sector

customers coupled with changing competition and saturated market is giving a tough time to

the FMCG (Fast Moving Consumer Goods) marketing is no more going to be the same

again! The changing consumer mindset thanks to more knowledgeable and discerning FMCG

marketers. The changed scenario not only demands a new game plan with a sharp and

decisive strategy but also a lot of creativity and insight. Some of the players in Indian FMCG

industry have already taken a lead and are smartly moving to chart a success story for their

brands. Some brands that reaped magnificent dividend from adopting a new strategy are

Fairever, Ujala, Ghadi detergent, Chik, andDandi namak.

The greatest challenge for managers is to visualize an active market when what exists is

abject poverty. These successful brands are just doing that- focusing on untapped markets.

Take the example ofDandi namak. Who would have advised them to enter the branded salt

market when Tata and HLL virtually share the whole market among them? But they entered

this category when conventional wisdom said no. And they became a success story

overnight. .They entered the market not to compete with Tata and HLL, but with the focus to

take branded salt to rural and semi-urban areas. With this narrow focus, they not only

captured a large rural and semi-urban market but also got some share of the urban market due

to rub off effect.

Moreover, these small players fully realize that in todays world, marketing needs money.

So they dont shy away from investing in marketing. Again take the example ofDandi

namak. They splashed out money on their lengthy TV commercials to ensure that the

message gets ingrained in the mind of the prospect. Faireverand Ujala adopted the same

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strategy. Of course they dont spend as much as the MNCs do but they do spend enough to

get attraction.

One of the important aspects of the strategy being adopted is effective communication about

product. . Take the case ofDandi namak. The TV advertisement was bland and uninteresting.

However, without any glitz, it was able to connect to its target customers because it talked in

the language of its target customers. These brands send a powerful message to their target

customers that they are made for each other.

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Advertising in Rural India: -

A dramatic change is in progress. Villagers who used to crack open peanut M & M candies,

eat the nut and throw away the shell are now demanding chocolate candies that will melt in

their mouths, not in their hands. Charcoal-cleaned teeth are a rare sight; so is the case with

twigs ofniim (neem) and babul (babool) tree. Today, the ultra bright shine of Colgate or

some other international brand of toothpaste holds more appeal than the traditional methods

of cleaning teeth. Even the native expressions of cleaning teeth, such as daatun karnaa and

musaag lagaanaa, are endangered to being replaced by new expressions such as paste

karnaa, 'to brush teeth with paste'.

Villages and small towns, which were once inconsequential dots

on maps, are now getting the attention of global marketing giants and

media planners. Thanks to globalization, economic liberalization, IT

revolution, Indian female power, and improving infrastructure, middle

class rural India today has more disposable income than urban India.

Rural marketing is gaining new heights in addition to rural advertising

because of the following reason:-

Various rural media (conventional and non-conventional) and

integrated marketing communication. In addition to rural market

discourse, media forms such as wall paintings, calendar advertising,

outdoor advertising, print, radio and television advertising

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In particular, uniquely Indian media forms such as video van technology, which has

changed the face of not only marketing but also political campaigning. Rural markets

(haat) which are the mobile McDonald's or Walmarts of India.

Targeting women and religious groups in addition to rural population.

Marketing taboo products such as 'bidi', cigarettes, sanitary supplies, and other such

products

Globalization and its effects on product naming, product monitoring, rural discourse

and media forms.

Creativity and deception, together with guidelines for advertisers and marketers.

Information structures and logic of rural ads.

Ads as a social barometer of changing relationships and value

systems.

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Strategies adopted for rural marketing by different FMCG Companies :-

ITC's e-choupal :-

ITC's e-choupal initiative is changing the lives of farmers on a scale no other venture has

ever done. The company is entering more than 30 new villages a day, every single day of the

week, 365 days a year.

. Take a remote village. Go to the smallest farmer there. Educate him in the best farming

techniques. Inform him of daily weather conditions and price movements in the market.

Make available to him at his doorsteps the best possible seeds, pesticides and fertilizers at the

most competitive prices. And when his crop is ready, help him find the best buyer.

Imagine doing all of this in 30,000 villages across six states season after

season, year after year. Doing it at no cost to the farmer and yet making money for yourself.

Impossible, would be the most obvious verdict to such a proposal.

Yogesh Chander Deveshwar, chairman of Rs 12,000 crore ITC, said when

S. Sivakumar, chief executive of its agri-business, approached him with an

equally ambitious idea in 2000. Knowing that he was asking for the moon,

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Sivakumar initially requested Rs 50 lakh to test the idea among soya

farmers in Madhya Pradesh. Deveshwar granted him Rs 10 crore. The

rest, as they say, is history. ITC's e-choupal network has already reached

3.1 million farmers, and is expanding into 30 new villages a day-making it

corporate India'smost ambitious rural initiative ever. Partnering ITC in the

network are 37 companies, NGOs and state governments, together

creating a new ecosystem for villages and establishing a direct link bet

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THE POWER OF 'e

The e-choupal redefines choupal, the Hindi word for village square where elders meet to

discuss matters of importance. The all-important letter in the word is "e". It stands for a

computer with an Internet connection for farmers to gather around and interact not just

among themselves but with people anywhere in the country and even beyond. It begins with

ITC installing a computer with solar-charged batteries for power and a VSAT Internet

connection in selected villages. The computer's functioning is freed from the notorious power

and telecom facilities at the village level. A local farmer called sanchalak (conductor)

operates the computer on behalf of ITC, but exclusively for farmers. The e-choupal offers

farmers and the village community five distinct services.

Farming methods specific to each crop and region, soil testing, expert advice-mostly sourced

from agriculture universities-all for free.

Purchase: Farmers can buy seeds, fertilisers, pesticides and a host of other products and

services ranging from cycles and tractors to insurance policies. Over 35 companies have

become partners in the e-choupal to sell their products through the network.

Sales: Farmers can sell their crops to the ITC centres or the local market, after checking the

prices on the Net.

Development work: NGOs working for cattle breed improvement and water harvesting, and

women self-help groups are also reaching villages through e-choupal. In some states farmers

can even access their land records online, sitting in their village. Access to health and

education services through e-choupal begins next month.

In many villages e-choupals have become the axis around which the local community

revolves. Be it for accessing newspapers online in the mornings (many villagers have

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discontinued their newspaper subscriptions) or checking the supply of products they ordered

on the Net, or watching movies on farming techniques in the evenings, farmers frequent e-

choupal at all times of the day. Each e-choupal covers between five and six villages.

EMPOWERING THE SMALLEST

Indian farmers typically buy at retail prices and sell their produce at wholesale prices, losing

out on both ends of the deal. By virtually aggregating them, e-choupal brings the power of

scale to the smallest of farmers. ITC ensures that there are at least two suppliers of all

products sold through the e-choupal. Farmers can pool their demand, compare prices and

place orders on the Net. Bargain and choice-two key virtues of competition-are delivered to

the farmers right on their doorstep.

When it is time to sell the produce, e-choupal helps the farmers by breaking

the monopoly of local markets that are controlled by trade cartels. In most mandis, farmers

are cheated at several stages-arbitrary pricing, under weighing, delayed payments. In Uttar

Pradesh, farmers lose between 10 and 30 per cent of their income to such malpractices. ITC

is setting up its own purchase centres in the six states covered by e-choupals. The farmers'

response has been overwhelming. In 2001-2, the company purchased 60,000 metric tonnes of

crop through e-choupal. By 2003-4 the purchase increased to 2,10,000 tonnes and in four

months of 2004-5, the company picked up 1,80,000 tonnes of farm produce.

For farmers it is a win-win situation. Sitting in their village, they can check the prevailing

purchase price at the mandi and the ITC centre through e-choupal and sell wherever they

wish to. ITC's entry into crop purchase invariably means a rise in mandi rates too, benefiting

even those farmers who can't sell to ITC. In places where ITC rates aren't higher than the

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mandi rates, farmers are drawn to ITC centres because the company uses electronic

weighing, better quality testing and ensures spot payment

ITC'S E- choupal achievement

It's achievement :-

(1)- 5,050 choupals, 29,500 villages, 3.1 million farmers.

(2)- Using e-choupal to source a range of farm produce (foodgrains, oilseeds, coffee,

shrimps).

(3)- Marketing a variety of goods and services though e-choupal(agri-inputs, consumer

goods, insurance, market research).

(4)-Transactions:$100in(2003).

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STRATEGY ADOPTED BY HUL

Hindustan Unilever to expand Project Shakti reachthe rural market:-

FMCG major Hindustan Lever will take its Project Shakti, the rural direct-to-home

distributor model, national and reach out to 100 million people in four years' time. The

project is at present on in Andhra Pradesh but will be soon be rolled out to other remote

villages across the nation. The target is to establish access with 100 million people in 3-4

years' time.The importance of the project is rural economy had immense potential and they

were the consumers of tomorrow.

Supported by micro-credit, the women from self-help groups were HLL's rural direct-to-

home distributors.

The idea behind Project Shakti was to help the company reach, penetrate and communicate

with rural consumers. The initiative benefited women in more than 4,750 villages.

VISION OF THE PROJECT:-

The vision was to change the lives of women in 100,000 villages by making them Shakti

dealers. This would provide economic opportunities for the underprivileged while creating a

distribution and communication channel for brands to access untapped rural markets with a

consumer base of 100 million rural Indians.

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STRATEGY ADOPTED BY COCO-COLA

Coca-Cola India doubled the number of outlets in rural areas from 80,000 in 2001 to

160,00in 2003, which increased market penetration from 13 per cent to 25 per cent.

It brought down the average price of its products from Rs 10 to Rs 5, thereby bridging the

gap between soft drinks and other local options like tea, butter milk or lemon water.

It doubled the spend on Doordarshan, increased price compliance from 30 per cent to 50 per

cent in rural markets and reduced overall costs by 40 per cent.

It also tapped local forms of entertainment like annual haats and fairs and made huge

investments in infrastructure for distribution and marketing.

Result: the rural market accounts for 80 per cent of new Coke drinkers and 30 per cent of its

volumes.

The rural market for Coca-Cola grew at 37 per cent over the last year, against a 24 per cent

growth in urban areas. Per capita consumption in rural areas has doubled in the last two

years.

The launch of the Rs 5 pack has reaped rich dividends in terms of sales and the bottles are

expected to account for 50 per cent of the company's sales in 2003.

Coca-Cola is just one example. A lot of fast-moving consumer goods and consumer

electronic companies are aggressively targeting rural consumers. The necessity arose because

the growth rates of consumer products were slowing down not because the markets were

getting saturated in terms of penetration.

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While overall volumes continue to grow reasonably well, there are too many players eating

into each other's market share.

The companies, therefore, reduce prices in urban areas and invest heavily

in sales promotion, intensifying the battle for market share.

The companies, therefore, reduce prices in urban areas and invest heavily in sales promotion,

intensifying the battle for market share.

Operating margins come under pressure and new growth markets have to be explored. This is

where the rural markets play an important role.

The rural market was tempting since it comprised 74 per cent of the country's population, 41

per cent of its middle class, 58 per cent of its disposable income and a large consuming class,

Coca-Cola India CEO Sanjiv Gupta said.

Today, real growth is taking place in the rural-urban markets, or in the 13,113 villages with a

population of more than 5,000.

Of these, 9,988 villages are in seven states -- Uttar Pradesh, Bihar, West Bengal,

Maharashtra, Andhra Pradesh, Kerala and Tamil Nadu.

For manufacturers of consumer goods, these are the markets to look out for. While the 1980s

saw a boom in Class I towns with the spread of television, the Class II towns showed strong

growth in the 90s propelled by reforms.

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According to the National Council for Applied Economic Research, the millennium belongs

to the Class III and IV rural-urban towns.

It estimates that an average rural Indian household will have five major consumer appliances

by 2006, almost double of what it had five years ago.

In order to efficiently and cost-effectively target the rural markets, the companies will have

to cover many independent retailers since in these areas, the retailer influences purchase

decisions and stock a single brand in a product category.

In such an environment, being first on the shelf and developing a privileged relationship with

the retailer is a source of competitive advantage to consumer good companies.

Most of the companies have started tinkering with pack sizes and creating new price points in

order to reach out to rural consumers since a significant portion of the rural population are

daily wage workers.

Thus, sachets and miniature packs, as in the case of shampoo sachets priced at Re 1 and Rs 2

or toothpaste at Rs 10, have become the order of the day in hinterland India and help improve

market penetration.

Yet, driving consumption of goods in rural areas is not just about lowering prices and

increasing volumes but also about product innovation and developing indigenous products to

cater to their demands.

For example, soap makers use advanced technology to coat one side of the soap bar with

plastic to prevent it from wearing out quickly.

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Also, the companies need to turn to innovative methods of advertising like fairs or haats to

reach their potential customer base.

Two years ago, many companies congregated at the Ganges river for the Kumbh Mela

festival, where about 30 million people, mostly from rural areas, were expected to come over

the span of a month.

The companies provided 'touch and feel' demonstrations and distributed free samples. This

proved to be extremely effective in advertising to the rural market.

Strategic Issues

The rural India offers a tremendous market potential. A mere one percent increase in Indias

rural income translates to a mind-boggling Rs 10,000 crore of buying power. Nearly two-

thirds of all middle-income households in the country are in rural India. And close to half of

Indias buying potential lies in its villages. Thus for the countrys marketers, small and big,

rural reach is on the rise and is fast becoming their most important route to growth. Realizing

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this Corporate India is now investing a sizeable chunk of its marketing budget to target the

rural consumers.

Increasing brand awareness

In the rural families, studies indicate a slow but determined shift in the use of categories.

There is a remarkable improvement in the form of products used. For instance, households

are upgrading from indigenous teeth-cleaning ingredients to tooth powder and tooth-pastes,

from traditional mosquito repellant to coils and mats. There is also a visible shift from local

and unbranded products to national brands. From low-priced brands to premium brands.

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Price promotion

In an occasional effort to capture volume sale, multinational brands use price promotions that

often yield dramatic, if temporary, sales increases in the rural areas. Their large volume

increases reveal a potentially large market in the villages that remains untapped, just below

the actual price points. To penetrate this market and generate sustainable volume sales, a

permanent product entry at the lower price point is required. Failure to recognize the

potentially huge market of the villages that lies below the surface of international price points

can even place the premium branded business at risk

FMCG consumption

Organizations like Hindustan Lever Ltd., Nirma Chemical Works, Colgate Palmolive, Parle

foods and Malhotra Marketing have carved inroads into the heart of rural markets. Various

categories of products have been able to spread their tentacles deep into the rural market and

achieved significant recognition in the country households. And, in the process, the regional

brands, local brands and the other unbranded offerings got displaced by the leading brands.

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Company House hold penetration

HUL 86%

Nirma chemical works 56%

Colgate Pamolive 33%

Parle Foods 31%

54

86%

56%

33%

31%HLL

Nirma chemical

works

Colgate Pamolive

Parle Foods


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Of the expenditure on consumer goods in rurahousehold,approximately,

44% is on food articles such as biscuits, tea, coffee and salt, 20% on toiletries, 13% on

washing material, 10% on cosmetics, 4% on OTC products and 9% on other consumables. A

number of category products have established themselves firmly in the rural households.

Category % volume of local

brands/unbrandedWashing cakes/bars 86%

Tea 55%

Salt 33%

55

% volume of local brands/unbranded

86%

55%

33%Washing

cakes/barsTea

Salt


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It is evident that in the villages low-priced brands are well accepted and one might feel that a

larger proportion of the purchases made in rural market can be attributed to local/ unbranded

players. Surprisingly, however, the unbranded/local component contributes to a substantial

portion of the volume of only a few of the highly penetrated categories.

Category Category

Penetration

Brand with highest penetration

Toilet Soap 91% Lifebuoy

Washing cakes/Bars 88% Wheel

Edlble oil 84% Double Iran Mustard

Tea 77% Lipton Tazza

Washin powder / liquid 70% Nirma

Salt 64% Tata Salt

Biscuits 61% Parle G

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Focus on urban categories

Though the commodity products have greater penetration, traditionally urban categories

such as skin creams and talcum powder have also made a mark. While the urban talcum

powder market suffered a de-growth, the rural talcum powder market darted ahead.

Similarly, growth of rural skin cream market was at par with that of urban skin cream

market. This clearly indicated that after being considered urban for a long time, some

categories are now wearing a rural face. And, in many a case, it is the rural market that is

actually driving the growth of category.

Premium brands

Ponds is the leader in the talcum powder category with a penetration of 65% and volume

contribution of 56%. Its rivals viz. Nycil and Liril are trailing far behind. Moreover, 60% of

the Ponds users have purchased no other brand i.e. they are 100% brand loyal. This reflects

the strength of the brand in rural bazaar

Category Household Penetration

Skin Cream 18%

Talcom Powder 15%

In the skin care category, Fair & Lovely fairness cream, with a penetration of 75%, accounts

for 60% of the skin care market in rural India. It also enjoys t he undistinguished patronage

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of 58% of its user households. Both Ponds and Fair & Lovely are enjoying a monopoly

in the rural markets In their respective categories.

Rural India is not averse to trying out the premium brands at high prices. A study indicated

that a majority of the premium brand users are using the brand for the first time. Similarly

0.9% of the talcum powder-using families have started using Denim talc and 0.7% of the

shampoo using households started using Pantene. Surveys also reveal that trials are not

restricted to the more affluent echelon of the villages. The experimenting households are

more-or-less evenly spread across the various socio-economic clusters of the rural market.

This should further encourage the marketers to focus their attention on rural buyers.

Brand Penetration of Category users

Surf 6.20%

Ariel 4.50%

Pantene 1.80%

Denim 1.80%

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The rural youths are more open to fresh concepts as against their elderly family members.

Their difference in choice of products/brands with the seniors of the households often leads

to a dual-usage of product categories. As an instance, 20% of the households using tooth

powder also use tooth paste. Similarly, many of the households using premium brands also

use mass market brands. For example, while 15% of Surf and 12% of Ariel using families

also use Nirma detergent, 3% of Denim users use Ponds Dreamflower talc and 18% of

Pantene using households use Clinic shampoo as well.

Income growth goes into consumption

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Penetration of Category users

6.20%

4.50%

1.80%

1.80%Surf

Ariel

Pantene

Denim


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In urban households there are a number of competing demands for ones money. In rural

households, they hardly change their house or go out on a vacation. They save only a small

fraction of his money and spend the rest. And when there is a growth in their income, the

money goes straight into consumption.

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Rural media

Urban consumers shop daily and have 365 opportunities a year to switch brands while the

rural purchasers who buy their goods in weekly haats have only 54. Attempts to reach rural

consumers, even once during the purchase cycle to ensure repeat purchase, make point of

purchase advertising and trade push indispensable. This requires a significant reorientation in

the allocation of funds across media. For example, outdoor advertising accounts for over 7%

of all media expenditures in India.

Rural buyers living in small isolated groups distributed across vast distances have limited

access to the broadcast media. The existence of a multiplicity of languages and varying level

of illiteracy complicates the task of communication further. To overcome some of these

challenges, Unilever pioneered the concept of video vans that travel from village to village

screening films in the local language, interspersed with advertisements for Unilevers

products. The company also provides product usage demonstrations to the captive audience

because written instructions on the pack may

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Quality consciousness

It will be unjustified to think that rural consumers are less bothered about product quality.

Even the village buyers desire to buy a quality product and upgrade their quality of life.

Marico, an Indian edible oil company, has found the rural consumers in the interior of India

willingly pay a reasonable price premium for branded cooking oil, over community oil,

because they are certain of its consistent quality. Unbranded products are often considered by

some of them to be adulterated.

Travails in distribution

In spite of recognizing the potential of this vast market of 700 million, marketers are often

unable to cater to it because of lack of adequate infrastructure. The distances between

villages, the terrain and the lack of pucca roads connecting the places act as impediments for

them to reach their customers. But once if they overcome these hassles and reach those

remote bazaars to be first on the shelf in the product category, they develop a privileged

relationship with the retailer that offers them a tremendous competitive advantage. Rural

retailers are far less specialized than their urban counterparts and carry a wider range of

products. Since frequent delivery is not possible in their part of the world, they tend to carry

only a single brand in each product category. And, usually, the brands that are first on the

rural shelves become synonymous with product category and are difficult to dislodge. For

instance, Maggi noodles, the brand that created the category of instant noodles, reached the

rural shelves before anyone else and remained the market leader ever since. Thus, a drive

down the rugged countryside, sans electricity and other modern facilities, is, surely,

torturous. But the pain is worth bearing.

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Preference for Low Unit Packs (LUP)

Trial is often encouraged by Low Unit Packs (LUP) or sachets. The sachet packaging

strategy caught the popular FMCG imagination in the early 1990s and it was considered as a

breakthrough in the psyche of the rural consumers. Today, the sachets are increasingly

dominant on shelves. Shampoo, for instance, has invaded the rural households with sachets at

low affordable prices. Sachets of tea, blues and washing powder are being launched in a big

way in the village haats by leading manufacturers. Companies like HLL and Marico are

making concrete efforts to create and then meet the demand of rural consumers by launching

products in small affordable packs.

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Channel power

The rural consumers interact directly with their retail salespersons who has a strong

conviction power and whose recommendations carry weight. The owners relationship

with customers is based on an understanding of their needs and buying habits and is

cemented by the retailer extending credit. Some of the successful manufacturers

creatively develop new revenue activities for the rural retailer. United Phosphorous

Limited (UPL), an Indian crop protection company, realized that in its rural markets

small farmers were not applying pesticide at all, or applying it inappropriately due to the

lack of application equipment. The capital cost of the equipment (mounted pumps and

dispensers that cost up to $3000) was placed out of reach of small farmers and most rural

retailers. UPL designed a program in which it arranged for bank loans for its rural

retailers to purchase application equipment and demonstrated to their retailers the

additional revenue possibilities from renting this equipment to small farmers. The result

was an added revenue stream for rural retailers.

Wider competition for a product

Many of the rural buyers tend to have little stock of money, only a flow. Consequently, they

tend to make purchases only to meet their daily needs and have little capacity to build

inventory. The marketing implications of this are far-reaching. Not only are pack sizes and

price points affected, but in turns out that consumers have to make a selection from a much

wider array of product categories. Thus the nature of competition for any given

product is much broader. For instance, in a village haat, Coca Cola competes not just with

Pepsi, but with a broad set of purchases that the rural consumers consider as treats.

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Problems in rural marketing

Where the rural market does offer a vast untapped potential , it should also be recognized

that it is not that easy to operate in the rural market because of several attendant problems .

Rural marketing is thus time consuming affair and requires considerable investment in terms

of evolving appropriate strategies with a view to tackle the problems .

The major problems faced by manufacturing and marketing men in rural areas are described

below:-

1. Underdeveloped people and underdeveloped market:-

The agriculture technology has tried to develop the people and market in rural areas .

unfortunately ,the impact of the technology is not felt uniformly through out the country

.while there are pockets- some districts in punjab , Haryana or western Uttar pradesh where

a rural consumer is some what comparable to his urban counterpart , there are lager areas

and groups of people who have remained beyond the technological break thorough .

Even today about 75 districts in county are drought prone and none technology

worth the name has percolated to in crease in the standard of living of these people in

addition ,the small agricultural land holdings have unable to take advantage of new

technological breakthrough . the number of people below below poverty line has not

decreased in any appreciable manner. Thus the rural markets ,by large number , by and large

are characterized byunderdeveloped market.. a vast of the rural people image old customs

tradition habits , taboos and practices

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2. Lack of proper physical communication facilities:-

Nearly 50% of the villages is the country do not have villages in the country dont have all

weather roads . physical communication to these villages is highly expensive . even today

,most villages is in eastern part today inaccessible during monsoon season .hence,

distribution put in by manufacturer prove expensive and some times of no consequences .to

be effective the products have to be physically moved to places of consumption or places to

purchase.

3. Media for rural communication:-

Among the mass media, at some point of time ,say in late 50s or early 60s ,radio was

considered to be a potential ,medium for communication to the rural families . now the

advent and expansion of telecast network appears for easy communication with rural masses.

The question is how many people access viewing television? There is a need to examine the

ownership pattern of television sets in rural areas to judge the potential reach of this medium.

Another e mass media is cinema . it has been observed that cinema viewing is fairly

satisfactory ,where available . mobile theaters are also good medium but very expansive

companies like HLL using these vans found 10 to12 times higher in rural areas than urban

areas due to bad roads in areas .

4. Hierarchy of markets:-

Rural consumer have identified market places for different items of their requirements. So

there can not be uniform distribution pattern for all products. It has been seen that 90% of

farmers visited the nearest town , where an agricultural produces assembling market is

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situated at least once a quarter for either selling the produce or for purchase of there

requirements . so town/ mandi centers with large hinterland villages become the focal point

thus depending upon the purchase habit of rural people. The distribution network for

different commodities has to be different.

5. Low level of literacy:-

The literacy rate is low in rural areas as compare to urban areas. This again lead to the

problem of communication for promotion purposes. Print medium becomes in effective and

to an extent irrelevant in rural areas since its reach is poor and so is the level of literacy. The

dependent should be more on electronic media cinema, radio and television. While the excess

to cinema and radio appears to be fairly easy and common. in not so in case of television.

Television advertising is very expensive. Probable it will be prudent to take advantage of

such professional rural advertising agencies. The promotion of product along with

distribution is also being resorted to by many.

6. Seasonal demand:

The distribution of any product in rural areas either agricultural inputs , consumables or

durable should necessarily follow a seasonal pattern. Since 75% of the rural income is

generated through agricultural operation which is seasonal so the demand pattern is also

seasonal. A typical example is that of fertilizers. The demand of fertilizers is always high

during the start of kharif and rabi system the fertilizers manufacturers have evolved a

distribution pattern so that the seasonal demand can be met. Like wise the demand for

consumables and durable will be high during the peek crop harvesting and marketing

season. . this is the time at which the rural people have substantial cash inflows. Hence the

distribution should be fairly intensive. During harvesting season this arrangement would

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result in adequate sales realization vise versa in summer months the demand will be very low

festivals seasons like sankranti, poangal, vaisakhi or depawali are also demand seasons. So

the distribution of rural areas should be more and frequent during the harvest and festival

seasons as opposed to a fairly uniform demand pattern in urban areas.

7. Many languases and dialects: -

Even assuming that media are avaiable for comunication or the company commit its own

media vans the large number of languages and dialects very wildly from statue to state and

reason to reason. The messages have to be delivered in local; languages and dialects. Even

though the number of recognized languages are only 16, the number of dialects are estimated

to be around 850.

8. Low per capita income:

Even though about 33 to 35 percent of gross domestic product is generated by rural areas. It

is shared 75% of population hence the per capita income is low compared to urban areas.

This apart the distribution of income is highly is skewed. Since the land holding patterned

itself is skewed thus the rural population present a highly heterogeneous seen. .Given the low

per capita incomes and population spread in the villages, what will be the off take of any

product by rural consumer, say from a village shop? What should be the inventory levels to

be maintained by a rural shopkeeper and how long will it take for the rural areas shopkeeper

to liquidate his stock ? If a company opts to distribute the products up to village these

aspects require very careful consideration while evolving distribution strategies for rural

markets.

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RURAL MARKETING-CHALLENGES AND OPPORTUNITIES

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

marketers. Two-thirds of countries consumers live in rural areas and almost half of the

national income is generated here. It is only natural that rural markets form an important part

of the total market of India. Our nation is classified in around 450 districts, and

ap

Scope of Rural Marketing for FMCG Companies

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