INTRODUCTION

Rural marketing is promotion of a company’s products in the rural market buy using strategies which differs from that of

urban market, the rural market is more price sensitive but it has preference for quality.

The Concept of Rural Marketing in India Economy has always played an influential role in the lives of

people .In India leaving out a few metropolitan cities, all the district and industrial townships are connected with rural

markets.

The rural market in India is not a separate entity in itself and it is highly influenced by the sociological and

behavioral factors operating in the country. The rural population in India accents for around 627 million, which is exactly

74.3 percent of the total population.

The Rural market in India brings in bigger revenues in the country, as the rural region comprise of the

maximum consumers in this country. The rural market in the Indian economy generates almost more than half of the

country’s income. Rural marketing in Indian economy can be classified under two broad categories. These are:

The market for consumer goods that comprise of both durable and non durable goods.

The market for agricultural inputs that include fertilizers, pesticides, seeds and so on.

The concept of rural marketing in India is often been found to form ambiguity in the minds of people who think rural

marketing is all about agricultural marketing. However, rural marketing determines the carrying out of business activities

bringing in the flow of goods from urban sectors to the rural regions of the country as well as the marketing of various

products manufactured by the non-agricultural workers from rural to urban areas. To be precise, rural marketing in India

economy covers two broad sections, namely:

Selling of agricultural items in the urban areas

Selling of manufactured product in the rural regions.

For quite some time now, the lure of rural India has been the subject of animated discussion in corporate suits. And there is

a good reason too with urban markets getting saturated for several categories of consumer goods and with rising rural

incomes, marketing executives are fanning out and discovering the strengths of the large rural markets as they try to enlarge

their markets.

Today, the idea has grown out of its infancy and dominates discussions in any corporate boardroom strategy session. Adi

Godrej, chairman of the Godrej group that is in a range of business from real estate and personal care to agri-foods, has no

hesitation proclaiming, it is a myth that rural consumers are not brand and quality conscious. A survey by the National

Council for Applied Economic Research (NCAER); India’s premier economic research entity, recently confirmed that rise

in rural incomes is keeping pace with urban incomes.

From 55 to 58 percent of the average urban income in 1994-95, the average rural income has gone up to 63 to 64 percent by

2001-02 and touched almost 66 percent in 2004-05.The rural middle class is growing at 12 percent against the 13 percent

growth of its urban counterpart. Even better, the upper income class those with household incomes of over Rs. One million

[$22700] per annuam is projected to go up to 21 million by 2009-10 from four million in 2001-02.It will have a 22 to 23

percent rural component. Higher rural incomes have meant larger markets. Already, the rural till is beginning to show. A

study by the Chennai-based Francis kanoi marketing planning services says that the rural market for FMCG is worth $14.4

billion, for ahead of the market for tractors and agri-inputs which is estimated at $10 billion.

Rural India also accounts for sales of $ 1.7 billion for cars; scooter and bikes and over one billion dollars of durables. In

total, that represents a market worth a whopping $27 billion. It is no wonder that even MNCs have cottoned on to the idea

of a resurgent rural India waiting to happen. Four years ago, coke’s rural growth of 37 percent far outstrips its urban growth

of 24 percent. Coke is not the first MNC to have cottoned on to the rural lure. Its global rival pepsico took a wider approach

to the business when it was given permission to setup shop in India in the late 1980s and investment in food processing and

farming was a pre-condition for entry.

All this potential has got India’s big business houses rushing to enter and expand rural businesses. Telecom gait Sunil

mittal, chairman of the $2 billion mobile telephony major Bharti Tele-venture, is another unbased flag-bearer of the ‘go-

rural’ strategy. He is confident that the next ‘explosive’ phase of demand for cellular connections is going to come from the

villages. The activities of Mahindra Shubhlabh services have attracted the attention of the International finance corporation,

the financial arm of the World Bank, which recently picked up a 27 percent stake in the company. Rural India accounts for a

market worth $27 billion. No wonder even MNCs have cottoned on to the idea of a resurgent rural India.

LITERATURE VIEW AND PROBLEM FORMULATION

Concept

In the recent years, rural markets have acquired significance; as the overall growth of the economy has resulted into

substantial increase in the purchasing power of the rural communities on account of green revolution, the rural areas are

consuming a large quantity of industrial and urban manufactured products. In this context a special marketing strategy

namely, rural marketing has emerged. But often rural marketing is confused with agriculture marketing- the later denotes

marketing of product of the rural areas to the urban consumers or industrial consumers, whereas rural marketing involves

delivering manufactured or processed inputs or services to rural producers or consumers.

What Makes Rural Markets Attractive?

Rural market has following attributes and the following facts substantial this:-

742 million people

Estimated annual size of the rural market-

FMCG Rs65000 Crore

Durables Rs5000 Crore

Anti inputs

(including tractors)

Rs45000 Crore

2/4 Wheelers Rs8000 Crore

In 2001-02, LIC sold 55% of its policies in rural India

Of two million BSNL mobile connections, 50% are in small town/villages.

Of the 6.0 lakh villages, 5.22 lakh have a Village Public Telephone (VPT)

41 million Kisan Credit cards have been issued (against 22 million credit-plus-debit cards in urban) with cumulative credit

of Rs 977 billion resulting in tremendous liquidity.

Of the 20 million Rediffmail sign-ups, 60% are from small towns 50% of transactions from these towns are on rediff online

shopping site.

42 million rural households (HHs) are availing banking services in comparison to 27 million urban HHs.

Investment in format savings instruments is 6.6 million HHs in rural and 6.7 million HHs in urban.

Opportunities

Infrastructure is improving rapidly.

• In 50 years only 40% villages have been connected by road; in next 10 years another 30% would be connected.

• More than 90% villages are electrified; though only 44% rural homes have electric connection.

• Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected by STD.

Social indicators have improved a lot between 1981 and 2001

• Number of “pucca” houses doubled from 22% to 41% and “Kuccha” houses halved (41% to 23%).

• Percentage of BPL families declined from 46% to 27%.

• Rural literacy level improved from 36% to 59%.

Low penetration rates in rural areas; so there are many marketing opportunities-

Durables Urban Rural Total(% of Rural HH)

CTV 30.4 4.8 12.1

Refrigerator 33.5 3.5 12.0

FMCGs Urban Rural Total(% of Rural HH)

Shampoo 66.3 35.2 44.2

Toothpaste 82.2 44.9 55.6

Marketers can make effective use of the large available infrastructure-

Post offices 1,38,000

Haats (Periodic Markets) 42,000

Melas (Exhibition) 25,000

Mandis (Agri markets) 7,000

Public Distribution Shops 3,80,000

Bank Branches 32,000

Proliferation of large Format Rural Retail Stores; Which have been Successful also-

• DSCL haryali

• M & M Shubh Labh Stores

• TATA/Rallis Kisan Kendras

• Warn bazaar, Maharashtra (Annual Sales Rs 40 Crore)

Rural Consumer insights

Rural India buys-

• Product more often (mostly weekly)

• Buys small packs, low unit price more important than economy.

In rural India, brands rarely fight with each other; they just have to be present at the right place.

Many brands are building strong rural base without much advertising support.

• Chick shampoo, seconds largest shampoo brands.

• Ghadi detergent, third largest brands.

Fewer brand choice in rural areas; number of FMCG brand in rural is ` half that of urban

Buy value for money, not cheap products.

Some Myths

Myth 1: Rural market is a Homogeneous mass

Reality: It’s a heterogeneous population various tiers are present depending on the incomes like Big Landlord; Traders;

Small farmer; Marginal farmers; Labours; Artisans. State wise variation in rural demographic are present viz. literacy

(Kerala 90%, Bihar 44%) and population below poverty line (Orissa 48%, Punjab 6%)

Myth 2: Disposable income is Low

Reality: Number of middle class HHs (annual income Rs 45000-2, 15,000) for rural sector is 27.4 million as compared to

the figure of 29.5 million for urban sector. Rural incomes CAGR was 10.95% compared to 10.74% in urban between 1970-

71 and 1993-94.

Myth3: Individuals decide about purchase

[

Reality: Decision making process is collective. Purchase process-influencer, decider, buyer, one who pays-can all be

different; so marketers must address brand message at several levels. Rural youth brings brand knowledge to households

(HH)

Why Different Strategies

Rural markets, as part of any economy, have untapped potential. There are several difficulties confronting the effort to fully

explore rural markets. The concept of rural markets in India is still in evolving shape, and the sector poses a variety of

challenges. Distribution costs and non-availability of retail outlets are major problems faced by the marketers. The success

of a brand in the Indian rural market is as unpredictable as rain. Many brands, which should have been successful; have

failed miserably. This is because most firms try to extend marketing plans that they use in urban areas to the rural markets.

The unique consumption patterns, tastes; and needs of the rural consumers, should be analyzed at the product planning stage

so that they match the needs of the rural people.

Therefore, marketers need to understand the social dynamics and attitude variation with in each village though nationally it

follows a consistent pattern.

The main problems in rural marketing are:-

Understanding the rural consumers

Poor infrastructure

Physical distribution

Channel management

Promotion and marketing communication

Dynamics of rural markets differ from other market types and similarly, rural marketing strategies are also significance

different form the marketing strategies aimed at an urban or industrial consumer.

To expand the market by tapping the countryside, more and more MNCs are foraying into India’s rural markets. Among

those that have made some headway are Hindustan lever, coca-cola, LG electronics, Britannia, Standard life, Philips,

Colgate Palmolive and the Foreign-investment telecom companies.

Opportunity

The Indian rural market with its vast size and demand base, offers a huge opportunity that MNCs cannot afford to ignore

with 28 million households, the rural population is nearly three times the urban.

As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million

tones from 176 million tones in 1991, rural India has a large consuming class with 41 percent of India’s middle-class and 58

percent of the total disposable income.

The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market

accounts for close to 70 percent of toilet-soap users and 38 percent of all two-wheeler purchased. The rural market accounts

for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, what

is more, the rural market for FMCG product is growing much faster than the urban counterpart.

The rural market may be alluring but it is not without its problems

Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute

dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasion;

poor road; power problems; and in accessibility to conventional advertising media.

However, the rural consumer is not unlike his urban counterpart in many ways.

The more daring MNCs are meeting the consequent challenges of availability; affordability, acceptability and awareness

(the so called 4As)

Availability

The first challenge is to ensure availability of the product or service. India’s 6,27,000 villages are spread over 3.2 million

sq.k.m; 700 million Indians may live in rural areas, finding them is not easy, However, given the poor state of roads, it is an

even greater challenge to regularly reach products to the far-flung villages. Any serious marketers must strive to reach at

least 13,113 villages with a population of more than 5,000 marketers must trade off the distribution cost with incremental

market penetration over the years. India’s largest MNCs, Hindustan Lever, a subsidiary of unilever; has built a strong

distribution system which helps its brands reach the interiors of the rural market. To service remote village, stockiest use

auto rickshaws, bullock-carts and even boats in the backwaters of kerala. Coca-Cola, which considers rural India as a future

growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company

depot supplies, twice a week, large distribution which who acts as hubs.

These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG electronics defines all

cities and town other than the seven metros cities and town rural and semi-urban market. To tap these unexplored country

markets, LG has set up 45 area offices and 59 rural/remote area offices.

Affordability

The second challenge is to ensure affordability of the product or service with low disposable incomes products need to be

affordable to the rural consumer

Most of who are on daily wages. Some companies have addressed the affordability problem by introducing small unit

packs. Godrej recently introduced three brands of cinthol, fairglow and Godrej in 50gm packs, priced at Rs 4-5 meant

specifically for Madhya Pradesh, Bihar and Uttar- Pradesh.

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 more is mainly targeted at the rural market. Coca-Cola has paid off;

eighty percent of new drinkers now come from the rural markets. Coca-Cola has also introduced sun fills, powdered soft-

drinks concentrate. The instant and ready to mix sun fill is available in an single-serve sachet of 25gm priced at Rs 2 and

mutiserve sachet of 200gm priced at Rs 15.

Acceptability

The third challenge is to gain acceptability for the product or service. Therefore; there is a need to offer products that suit

the rural market. One company which has reaped rich dividends by doing so is LG electronics in 1998; it developed a

customized TV for the rural market and christened it Sampoorna. It was a runway hit selling 1, 00,000 sets in the very first

year. Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice boxes-a tin box

for new outlets and thermocol box for seasonal outlets.

The key dilemma for MNCs eager to tap the large and fast-growing rural markets is whether they can do so without

hurting the company’s profits margins. Mr. Carlo Donati, Chairman and Managing-Director, Nestlé, while admitting that his

company’s product portfolio is essentially designed for urban consumers, caution companies from plunging headlong into the rural market as

capturing rural consumers can be expensive,” Any generalization” says Mr.Donati, “about rural India could be wrong and one should focus on

high GDP growth areas, be it urban, semi-urban or rural.”

The union budget for 2009-10 hiked the allocation for the National Rural Employment Guarantee Act (NREGA) to US$

8.03 billion, giving a further boost to the rural economy.

This is in addition to the farmer loan waiver of US$ 13.86 billion and the ambitious Bharat Nirman Programme with an

outlay of US$ 34.84 billion for improving rural infrastructure.

FMCG

Rural consumers spend around 13 per cent of their income, the second highest after food (35 per cent), on fast moving

consumer goods (FMCG), as per a RMAI study.

The FMCG industry in India was worth around US$ 16.03 billion in August 2008 and the rural market accounted for a

robust 57 per cent share of the total FMCG market in India.

The FMCG sector saw rural markets post 20 per cent growth, ahead of the 17-18 per cent growth from urban India, aided by

three years of good monsoon, higher prices of farm produce and farm-loan waiver.

Most FMCG companies are now working on increasing their distribution in smaller towns and focusing on marketing and

operations programme for semi-urban and rural markets.

For instance, Godrej Consumer Products intends to increase revenue from rural areas from 38 per cent to 55 per cent in the

next three years by increasing its distribution network substantially. The products will reach out to 50,000 villages in the

next couple of years from the present 18,000 villages while the number of towns covered will double from 3,300 to almost

6,500 in a year.

Retail

The rural retail market is currently estimated at US$ 112 billion, or around 40 per cent of the US$ 280 billion retail market.

Major domestic retailers like AV Birla, ITC, Godrej, Reliance and many others have already set up farm linkages. Hariyali

Kisan Bazaars (DCM) and Aadhars (Pantaloon-Godrej JV), Choupal Sagars (ITC), Kisan Sansars (Tata), Reliance Fresh,

Project Shakti (Hindustan Unilever) and Naya Yug Bazaar are established rural retail hubs.

Pharmaceuticals

According to a report by McKinsey, the rural and tier-II pharma market will account for almost half of the growth till 2015.

The tier-II market will grow to 44 per cent by 2015, amounting to US$ 8.8 billion.

This growth will be further augmented with the government increasing the allocation under National Rural Health Mission

(NRHM) by US$ 424.3 million over interim budget estimate 2009-10 of US$ 2.49 billion.

Elder Pharmaceuticals is increasing its focus on the rural market. The company that largely makes active pharmaceutical

ingredients plans to increase its sales by 8-9 per cent mainly from rural areas and has allocated US$ 8.26 million to

strengthen the sales force for this segment.

Telecommunication

A Gartner forecast revealed that Indian cellular services revenue will grow at a compound annual growth rate (CAGR) of

18.4 per cent to touch US$ 25.6 billion by 2011, with most of the growth coming from rural markets. Also, a joint

Confederation of Indian Industries (CII) and Ernst & Young report reveals that of the next 250 million Indian wireless

users, approximately 100 million (40 per cent) are likely to be from rural areas, and by 2012, rural users will account for

over 60 per cent of the total telecom subscriber base in India.

In a bid to acquire rural subscribers, most Indian telecom operators have started investing in infrastructure to roll out their

services in these areas. Realising this as a huge potential, small Indian handset manufacturing companies, including

Micromax, Intex Technologies and Karbonn, have lined up a marketing spent of around US$ 21.02 million for the financial

year 2009-10.

Automobiles

For the auto industry, semi-urban and rural markets contribute close to 40 per cent of sales, led by demand for two-

wheelers, entry-level cars and tractors.

Significantly, car sales grew 8.3 per cent in June 2009, aided by rising demand in semi-urban and rural markets.

Mahindra & Mahindra is bullish on the rural and semi-urban markets, with its utility vehicle, Scorpio clocking 60-65 per

cent sales from the rural markets as against 20 per cent earlier. TVS Motor also registered around 50 per cent of its sales

from the rural and semi-urban markets.

Consumer durables

A survey carried out by RMAI has revealed that 59 per cent of durables sales come from rural markets.

Presently, around 50 per cent of sales in the US$ 5.14 billion consumer electronics industry come from the urban markets,

30 per cent from tier-II and -III towns and balance 20 per cent from rural India.

Many leading consumer durable companies are now increasing their presence in rural India. Recently, Samsung has also

rolled out its 'Dream Home' road show which was to visit 48 small towns in 100 days in an effort to increase brand

awareness of its products. Samsung expects that its rural revenues would increase to US$ 287.7 million in 2009 from US$

164.4 million last year. The company also plans to expand its sales channel by 25-30 per cent in rural India.

Whirlpool, is eyeing rural markets in India for its next phase of growth. The company is set to tap markets with a population

between 100,000 and 500,000 in the first phase, and in the next phase, will look at expanding the base in villages with a

population of 50,000.

Road ahead

The development of rural infrastructure is an important priority for the government and out of the total projected investment

of US$ 283.83 billion to be incurred by the centre and the states in the Eleventh Plan; US$ 80.82 billion would be spent

entirely towards improvement of rural infrastructure.

According to international consultancy firm Celent, rural markets in India will grow to a potential of US$ 1.9 billion by

2015 from the current US$ 487 million. Rural markets are growing at double the pace of urban markets and for many

product categories, rural markets account for well over 60 per cent of the national demand.

 

Objectives and Research Methodology

Objectives

The main objective is to analyze the present promotion strategy of few brands in rural markets. To measure the success of

rural marketing campaign of few brands in terms of consumer appreciation. Another objective to study the determinants of

specification factors which can decide the success of the rural promotion strategy. To evaluate the effects of adopting the

specific brand ambassadors in the rural marketing context. To present suffocate on above-mentioned objectives.

Research Methodology

Before gamboling into issues like where the Indian rural market stands and the opportunities for corporates to explore there... let's look at the definition of urban and rural India. The Census defined urban India as - "All the places that fall within the administrative limits of a municipal corporation, municipality, cantonment board etc or have a population of at least 5,000 and have at least 75 per cent male working population in outside the primary sector and have a

population density of at least 400 per square kilometer. Rural India, on the other hand, comprises all places that are not urban!"

Now for some facts and figures. The Indian rural market today accounts for only about Rs 8 billion (53 per cent - FMCG sector, 59 per cent durables sale, 100 per cent agricultural products) of the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of the total share. So clearly there seems to be a long way ahead.

Time and again marketing practitioners have waxed eloquent about the potential of the rural market. But when one zeroes in on the companies that focus on the rural market, a mere handful names come to mind. Hindustan Lever Limited (HLL) is top of the mind with their successful rural marketing projects like 'Project Shakti' and 'Operation Bharat'. The lynchpin of HLL's strategy has been to focus on penetrating the market down the line and focusing on price point. Furthermore, activating the brand in the rural market through activities, which are in line with the brand itself, is what sums up HLL's agenda as far as the rural market is concerned informs MindShare Fulcrum general manager R Gowthaman. Amul is another case in point of aggressive rural marketing. Some of the other corporates that are slowly making headway in this area are Coca Cola India, Colgate, Eveready Batteries, LG Electronics, Philips, BSNL, Life Insurance

Lifebuoy's wall painting in rural India

CaseStudy -1

Coca-Cola India’s Thirst for the Rural Market

In early 2002, Coca-Cola India (CCI) Refer Exhibit I for information about CCI) launched a new advertisement

campaign featuring leading Bollywood actor - Aamir Khan.

The advertisement with the tag line - 'Thanda Matlab Coca-Cola4' was targeted at rural and semi-urban consumers.

According to company sources, the idea was to position Coca-Cola as a generic brand for cold drinks.

The campaign was launched to support CCI's rural marketing initiatives. CCI began focusing on the rural market in

the early 2000s in order to increase volumes.

This decision was not surprising, given the huge size of the untapped rural market in India (Refer Exhibit II to learn about the rural market in India). With flat sales in the urban areas, it was clear that CCI would have to shift its focus to the rural market. Nantoo Banerjee, spokeswoman - CCI, said, "The real market in India is in the rural areas.

If you can crack it, there is tremendous potential."5

However, the poor rural infrastructure and consumption habits that are very different from those of urban people were

two major obstacles to cracking the rural market for CCI.

Because of the erratic power supply most grocers in rural areas did not stock cold drinks. Also, people in rural areas

had a preference for traditional cold beverages such as 'lassi'6 and lemon juice.

Further, the price of the beverage was also a major factor for the rural consumer.

CCI's Rural Marketing Strategy

CCI's rural marketing strategy was based on three A's - Availability, Affordability and Acceptability. The first 'A' - Availability emphasized on

the availability of the product to the customer; the second 'A' - Affordability focused on product pricing, and the third 'A'- Acceptability focused

on convincing the customer to buy the product.

Availability

Once CCI entered the rural market; it focused on strengthening its distribution network there. It realized that the

centralized distribution system used by the company in the urban areas would not be suitable for rural areas.

In the centralized distribution system, the product was transported directly from the bottling plants to retailers (Refer

Figure I). However, CCI realized that this distribution system would not work in rural markets, as taking stock directly

from bottling plants to retail stores would be very costly due to the long distances to be covered.

The company instead opted for a hub and spoke distribution system (Refer Figure II). Under the hub and spoke distribution

system, stock was transported from the bottling plants to hubs and then from hubs, the stock was transported to spokes

which were situated in small towns. These spokes fed the retailers catering to the demand in rural areas.

Affordability

A survey conducted by CCI in 2001 revealed that 300 ml bottles were not popular with rural and semi-urban

residents where two persons often shared a 300 ml bottle. It was also found that the price of Rs10/- per bottle was

considered too high by rural consumers...

Acceptability

The initiatives of CCI in distribution and pricing were supported by extensive marketing in the mass media as well as

through outdoor advertising.

The company put up hoardings in villages and painted the name Coca Cola on the compounds of the residences in the

villages.

Further, CCI also participated in the weekly mandies by setting up temporary retail outlets, and also took part in the annual

haats and fairs - major sources of business activity and entertainment in rural India...

Future Prospects

CCI claimed all its marketing initiatives were very successful, and as a result, its rural penetration increased from 9% in

2001 to 25% in 2003. CCI also said that volumes from rural markets had increased to 35% in 2003.

The company said that it would focus on adding more villages to its distribution network. For the year 2003, CCI had a

target of reaching 0.1 million more villages.

Analysts pointed out that stiff competition from archrival PepsiCo would make it increasingly difficult for CCI to garner

more market share.

PepsiCo too had started focusing on the rural market, due to the flat volumes in urban areas.

Like CCI, PepsiCo too launched 200 ml bottles priced at Rs. 5. Going one step ahead, PepsiCo slashed the price of its 300

ml bottles to Rs 6/- to boost volumes in urban areas...

AbstractThe case focuses on the rural marketing initiatives undertaken by the cola major - Coca Cola in India.

The case discusses in detail the changes brought about by Coca Cola in distribution, pricing and advertising to make inroads

into rural India.

The case also discusses the concept of rural marketing and its characteristics in a developing country like India.

Further, it also provides details about PepsiCo's rural marketing initiatives.

Case Study -2

Where HLL’s Shakti comes from

FMCG giant Hindustan Lever has embarked on yet another ambitious venture, Project Shakti, to spur growth and

penetration of its products in rural India while changing lives and boosting incomes. Catalyst presents a first hand account.

A HARSH summer sun beats down mercilessly on the drive to Nalgonda district in Andhra Pradesh. The rocky landscape is

parched, scorched by successive years of drought. The destination is Peddakaparthy village, 65 kms from Hyderabad, and

the seat of a brave new experiment by fast moving consumer goods major, Hindustan Lever Ltd (HLL), where, undaunted

by the vagaries of nature, a group of village women are attempting to bring about a transformation in their lives. Through a

combination of micro-credit and training in enterprise management, these women from self-help groups have turned direct-

to-home distributors of a range of HLL products and helping the company plumb hitherto unexplored rural hinterlands.

From the time HLL's new distribution model, named Project Shakti, was piloted in Nalgonda district in 2001, it has been

scaled up and extended to over 5,000 villages in 52 districts in AP, Karnataka, Gujarat and Madhya Pradesh with around

1,000 women entrepreneurs in its fold. The vision is ambitious: to create by 2010 about 11,000 Shakti entrepreneurs

covering one lakh villages and touching the lives of 100 million rural consumers.

What's Project Shakti all about? How does it work and benefit the company? Catalyst was part of a media team that HLL

invited to visit Peddakaparthy village to see Project Shakti at work. The team visits the house of Jella Sujathamma, whose

spouse is a weaver who weaves the famous Pochampally sarees of AP. However, her income was not enough for her family,

which includes three children.

Five years ago, Sujathamma had joined a self-help group (SHG), formed by the district rural development authority. HLL

has operated Project Shakti through these self-help groups; AP was chosen for the pilot project as its has the most number

and better established SHGs - there are about 4.36 lakh SHGs in AP covering nearly 58.29 lakh rural women. C.S.

Ramalakshmi, Commissioner, Women Empowerment & Self employment, Govt of AP, points out that AP alone has about

half of the SHGs organised in the country. Says Pradeep Kashyap, Managing Director, Marketing & Research Team

(MART): "This network has ensured that AP is the incubator for all our experiments in working out new models of

distribution of FMCGs and other products." MART, an organisation which works in the social sector, implements the on-

ground activities for many companies wanting to work the rural sector, including HLL. The likes of Sujathamma, among

the first Shakti entrepreneurs, have been chosen from these SHGs. She, HLL officials explain, is a shining example of the

success of the model - Sujathamma, on an initial loan of Rs 10,000 from her SHG to start the enterprise, has a turnover of

Rs 10,000-Rs 25,000 a month earns a profit of Rs 750-Rs 2,000 a month, an average return of 8 per cent. Besides, she now

also sells staples, sugar, edible oil and a variety of other household items.

The objectives of Project Shakti, explains Dalip Sehgal, Executive Director, New Ventures & Marketing Services, HLL, are

to create "income-generating capabilities for underprivileged rural women by providing a sustainable micro-enterprise

opportunity" and to improve rural living standards through "health and hygiene awareness". For HLL, it is "enlightened

self-interest". Creating opportunities to increase rural family incomes puts more money in their hands to purchase the range

of daily consumption products - from soaps to toothpastes - that HLL makes. It also enables HLL access hitherto

unexplored rural hinterlands. Says Sehgal, "We looked at several models of rural distribution, even at the Grameen Bank

model in Bangladesh, before we decided on the pilot in Nalgonda to figure out this model. Now the model has been refined

based on our learning here and we expect to roll out quickly in other states."

For HLL greater penetration in rural areas is also an imperative - presently over 50 per cent of its incomes for several of its

product categories like soaps and detergents come from rural India. The challenge for HLL now is to take its products to

towns with a smaller population - under 2,000 people. As Sehgal points out, HLL's conventional hub-and-spoke distribution

model which it uses to great effect in both urban and semi-urban markets, wouldn't be cost-effective in penetrating the

smaller villages. Now, with this new distribution model, the smaller markets are now being referred to as `Shakti markets'.

How it works

Typically, a woman from a SHG selected as a Shakti entrepreneur receives stocks at her doorstep from the HLL rural

distributor and sells direct to consumers as well as to retailers in the village.

Each Shakti entrepreneur services 6-10 villages in the population strata of 1,000-2,000 people

Typically, as Sehgal points out, a Shakti entrepreneur sets off with 4-5 chief brands from the HLL portfolio - Lifebuoy,

Wheel, Pepsodent, Annapurna salt and Clinic Plus. "These are the core brands, they we layer it with whatever else is in

demand like talcum powder or Vaseline during winters," elaborates Sehgal. These brands apart, other brands which find

favour with a rural audience are: Lux, Ponds, Nihar and 3 Roses tea.

Typically, unit packs are small. All the brands are national and HLL is cool to the idea of creating a rural-specific brand as it

will only dissipate the advertising media effort for the brands. To get started the Shakti woman borrows from her SHG and

the company itself chooses only one person. With training and hand-holding by the company for the first three months, she

begins her door-to-door journey selling her wares.

The impact is slow and HLL too is not expecting any quick returns on this project. In Andhra, so far, since the experiment

began, HLL has seen 15 per cent incremental sales from rural Andhra, which contributes 50 per cent to overall sales from

Andhra of HLL products. But analysts see this rural foray as something the company has got to do. As Nikhil Vora, Sr. Vice

President of research group ASK Raymond James explains, if there is one company that can take on the onus of developing

the rural markets, it's HLL. Says he: "HLL contributes 20 per cent of the total FMCG business in the country. So, clearly,

the onus is on HLL to grow the market. Returns may not happen in the next five years, but a lot of consumer understanding

and insights comes from an exercise like Project Shakti, which in turn can lead to product innovation."

An analyst with a leading brokerage points out that a lot of HLL's rural initiatives in the recent past have not paid off

because of poor rural incomes. But, a monsoon revival and greater rural incomes can mean payback time for projects like

Shakti. "Large companies like HLL have to push greater into rural areas. Brand loyalty is declining among urban

consumers; they're looking mostly for consumer promos; regional brands too are snapping at their heels. So, to attain

growth, going rural has become an imperative," she says. Concurs K.N. Siva Subramanian, Sr. Vice President, Franklin

Templeton India Ltd: "The (HLL) management had recognised the impending saturation of the urban markets some time

back and launched aggressive plans to capture the rural markets. However, a slowdown in the agricultural sector resulted in

rural incomes remaining flat and affecting sales. We believe that by targeting lower price points and further expanding the

distribution network, companies can tap the potential of rural markets. Initiatives like Project Shakti will help them in

establishing and consolidating their base in rural markets." Regional brands, or even larger FMCG companies, do not have

the kind of distribution reach that HLL has established and in the long run, that could prove a winner for HLL, according to

analysts.

The future of Shakti

Having perfected the model in Nalgonda, in 2003 HLL plans to extend Shakti to a 100 districts in Madhya Pradesh, Gujarat

and UP. There are other plans brewing. One is to allow other companies which do not compete with HLL to get onto the

Shakti network to sell their products. Talks are on with battery companies like Nippo, TVS Motor for mopeds, insurance

companies for LIC policies. "We wanted to first stabilise the project before we can look at other companies. It requires

somebody with scale and size to build a platform and then invite other companies onto this platform," elaborates Sehgal.

The most powerful aspect about this model, emphasises Sehgal, is that it creates a win-win partnership between HLL and its

consumers, some of whom will also draw on the organisation for their livelihood, and it builds a self-sutaining virtuous

cycle of growth for all.

The next stage of Project Shakti is even more ambitious. HLL is now in the process of piloting `I-Shakti', an IT-based rural

information service that will provide solutions to key rural needs in the areas of agriculture, education, vocational training,

health and hygiene. The project will be piloted in Nalgonda district again. Based on a palm pilot, HLL is looking at sourcing

appropriate low-cost hardware from Hewlett-Packard while Unilever Research out of London is developing the consumer

interactivity software. As Sehgal puts it, women in the rural areas are the catalyst of change and that is why its whole

programme keeps women in focus. "It's like popcorn in a machine; one bursts at first and then everything begins popping;

here too, one woman as an agent of change bursts into a movement," he says. Clearly, it's the rural women who give Shakti

its strength.

AP's self-help groups

THERE are about 4.36 lakh women self-help groups in Andhra Pradesh covering nearly 58.29 lakh poor women. AP alone

has about half of the SHGs organised in the country. The SHGs are also popularly called DWCRA groups and this name

became popular after the DWCRA programme (Development of Women and Children in rural areas) through which

women's groups were assisted initially. The SHGs not only save but also take small loans out of the corpus available with

the group. The group corpus consists of savings , government assistance as well as bank loans. Members use the loan out of

the group corpus for their personal needs initially. However, in the long run such loans are utilised for income generation

activities. Since the inception of the SHGs, an amount of Rs 1,362.98 crore has been mobilised as corpus by these groups

and it is estimated to reach Rs 1,500 crore by the middle of this year.

The women's savings movement, explains C.S. Ramalakshmi, Commissioner, Women Empowerment, Govt of AP, started in 1993 as an offshoot

of the total literacy campaigns conducted by the government. Rural women organised themselves into `thrift and credit' groups with one rupee

saving a day and this mass movement, in which 58 lakh members saved more than Rs 800 crore is rotated internally and lent amongst members

twice in a year as per the interest rates fixed by the groups. Such amounts are used for their daily consumption needs as well as for making goods

to sell. It is into this strong network that HLL tapped to launch Project Shakti. While the savings was there among the SHGs, there was no

channel of investment. Now, HLL has provided a window of opportunity to invest and earn.

Technology to the grassroots

A few companies have spearheaded the e-mandi for procurements from their rural suppliers and use them to sell

products and services. There is a lesson in this for other manufacturers who sell in the country's vast rural market.

A milk collection centre at Anand: e-mandis make a difference to the farmer.

RURAL markets are not going to be the same for very long. Gone are the days when individual companies

attempted to create a brand pull by advertising their products and arranging for live demonstrations. The fertiliser

manufacturers sold fertilisers, the pesticide makers sold pesticides, and the farm equipment makers sold their wares

and so on. Of course, the makers of consumer products such as TV, bicycle, fan and other FMCG items tried their

best to create a market preference for their brands.

Now the attempt is on to create virtual bazaars or agri-portals akin to weekly mandis where the sellers of various

commodities and buyers gathered together. Mandi in Hindi means commodity market, a market where buyers and

sellers meet and transact business. The most notable virtual mandis are the e-Choupal by ITC, Inagriline by EID

Parry, and the Dairy Portal by Amul. This article briefly explains the functioning of these three portals and draws

lessons for rural marketing in India.

ITC's E-Choupal

What was started by ITC as a cost-effective alternative supply chain system to deal directly with the farmer to buy

products for exports is getting transformed into a meta market for rural India. The tobacco giant has already set up

over 700 choupals covering 3,800 villages in four States — which include Madhya Pradesh, Uttar Pradesh,

Karnataka and Andhra Pradesh — dealing with products ranging from soya bean, coffee, aquaculture and wheat.

Consider why a farmer would opt for the e-choupal over the regular mandi. Farmers who strike orders on the

Internet kiosk with ITC have a choice. They can either bring their produce to the ITC warehouse or factory and get

reimbursed for the transportation cost or they could give their supplies to one of the collection centres that have

been set up by the company for a cluster of villages or even deliver it to the sanchalak who runs the Choupal.

Both ITC and the farmers make a neat saving by bypassing the middleman in the mandi. For instance, the farmer

saves as much as Rs 250 per tonne on soya bean because he does not incur costs such as bagging, transportation,

loading and unloading, to haul his goods to the mandi. The company, on the other hand, saves over Rs 200 a tonne

by avoiding transporting the produce from the mandi to the company outlet even after reimbursing the farmer for

transport. And the sanchalak, the local-level entrepreneur, also makes money by getting a 0.5 per cent commission

on the total transaction made through his kiosk.

But the kiosk can be used for reverse trading also — for companies to sell products and services needed by farmers

directly. And ITC is already putting together a strategy to leverage the infrastructure to market and distribute goods

and services that farmers require. The facility will be available for selling both ITC's products as well as those of

other companies — of course, at a price. The company has taken some initial steps to get agricultural input

companies to sell their products directly to farmers.

It has already roped in US seeds giant Monsanto, fertiliser companies such as BASF and Nagarjuna Fertilisers and

the State-owned MP State Seeds Corporation to take orders and market their products through the site. These

companies can display their products on the Net, train farmers on how to use them, offer special prices, book orders

from farmers and — through the sanchalak — deliver it at the village. Of course, ITC does not provide the service

free. Companies have to pay a 10 per cent fee on the face value of the transaction and the tobacco company pays the

sanchalak five per cent of the sales as commission for any product sold on his kiosk.

ITC is also experimenting with using the kiosk to sell fast moving consumer goods (FMCGs). As the first step, it is

selling gas lanterns and packaged vegetable oil. At the moment, these are being manufactured by third parties on

behalf of ITC. Orders by farmers are being booked by the sanchalak who also arranges to have them delivered to

the farmer's doorstep. If the idea clicks, the platform would be available for other companies too, which could help

ITC generate healthy revenues?

The third initiative is to leverage the e-choupal to sell services. Talks are already on with various insurance

companies for using the e-choupal as a medium for both educating and selling insurance products to the farmer —

in which the sanchalak becomes the insurance agent.

The ITC virtual mandi is emerging as a one-stop shop for selling and buying of all kinds of products and services in

the rural market. As ITC owns the infrastructure and interacts with the rural consumers, it will be able to cross-

subside its products and services through the revenue obtained by selling the products and services of other

companies.

Inagriline by EID Parry

The agri-portal of EID Parry, http://www.indiagriline.com,/ has been designed to address the specific needs of the

rural farming community and is an attempt to catalyse e-

commerce in agricultural and non-farm products by offering a

network of partnerships.

This content has been developed by using in-house expertise (EID

Parry's Sugar and Farm Inputs Division and Corporate R&D

Lab) and working with the TN Agriculture University and its

Research Stations, TN University for Veterinary and Animal

Sciences, National Horticulture Board, AMM Foundation,

Murugappa Chettiar Research Centre, other players in

agriculture-related media and publishing houses. The content is in the local language (Tamil) for ease of use.

There is also a Web-based application for the registered sugarcane growers of EID Parry to access and maintain

their transaction records with the company. An application for the dealer channel and the sales force of the company

is also under development.

The first 16 Internet Kiosks (`Parry's Corners') have been set up using the franchisee scheme. These

owners/operators have been trained to use PCs and surf the Portal and the Net and assist users coming to the kiosks.

About 150 farmers have been trained on the use of the Net and the portal and especially the special application built

for them to view their transaction record with the company.

Amul's Dairy Portal

Dairy Information System Kiosk (DISK) project by AMUL was conceived with two components: 1) an application

running at the society level that could be provided Internet connectivity and 2) a dairy portal at the district level

serving transactional and information needs of all members and staff in the district co-operative structure. The

software used at the society level was developed to provide:

- Data analysis and decision support to help a rural milk collection society in improving its performance, i.e.

increasing milk collection.

- Data analysis to improve productivity and yield of milk cattle.

- Farmers with facilities to place orders for goods and services offered by different agencies in the co-operative

sector and seek information on subjects of interest.

The services to be offered at these centers would include:

1) Delivery of information related to dairying, including best practices in breeding and rearing milch cattle,

scheduling of Government and other private sector agency services, and collecting feedback on the quality of

service provided to the catchment area

2) Access to a multimedia database on innovations captured by Srishti (an NGO working with IIM-A) from

hundreds of villages, covering agricultural practices, medicinal plants, home remedies, tools and implements and so

on, and a multimedia format that has captured the description of the innovations provided by innovators and a visual

presentation of the innovations

3) Use as a communication centre offering services such as e-mail, fax and Internet telephony (if Internet telephony

is permitted)

4) Internet Banking Services and Automated Teller Machines (ATMs), which will enable the milk societies to credit

payments directly to sellers' bank accounts. (The sellers already have plastic card identifiers. The card identifier

may have to be upgraded to smart cards carrying biometric identification. The cards can be used to withdraw cash

from ATMs)

5) A way for farmers to download government forms, receive documents (from a government Web site) and order

supplies and agricultural inputs from manufacturers; and

6) A means of communicating with farmers via the automatic printing process of daily payment slips.

Implementation of the project requires computerisation of its more than 70,000 village societies and automation of

milk collection process. In nearly 600 centres, the automation has been completed and 2,500 societies are

computerised. Each farmer is given a plastic card as ID. At the counter he drops the card into a box that reads it

electronically and transmits the identification number to the PC. The milk is emptied into a steel trough kept over a

weighbridge. Instantly the weight of the milk is displayed to the farmers and communicated to a PC. The trough is

connected by a pipe to a can, which transports milk to the dairy. One operator is required to fill the cans. Another

operator sitting next to the trough takes a 5-ml sample of milk and holds it up to a tube of an Electronic milko-tester

(a fat-testing machine, which is a local adaptation of an expensive and sophisticated tester made by A/SN Foss

Electric, Denmark). The fat content is displayed to the farmer and communicated to the PC, which calculates the

amount due the farmer based on the fat content of the milk. The total value of the milk is printed on a payment slip

and given to the farmer who collects the price from the adjoining

Lessons for rural marketers

We see the re-emergence of mandis in the form of portals or virtual bazaars. After all, the concept of mandis cannot

be written off that easily. They have evolved over a period of time and have lasted for several centuries. They lost

their prominence temporarily due to the brand marketing strategies adopted by companies.

The basic problem with brand marketing is its high cost. Mandis offer a cost-effective method of marketing. With

the virtual mandis the cost saving is still better. Consider for example the case of marketing farm inputs like

fertilisers, seeds and pesticides. In the brand marketing approach, the same information is provided by several

marketers through different media and methods. In the virtual mandis, several people can join hands and provide

best possible information in a most cost effective manner to the farmers.

The virtual mandis operate on the principles of collaboration, co-operation and co-evolution as opposed to the

conflict, confrontation and competition approach followed by brand marketers. At the very basic level several

agencies, such as agricultural universities and governmental agencies join hands with each other to provide the

necessary information to the villagers. As more and more people join the network, the member benefits grow

exponentially. Hence it makes sense to enrol as many member as possible, be it the consumers or suppliers.

Technology is the key to achieving success in the new marketing approach. With the cost of technology coming

down day by day, it should not be a big problem to invest in technology. Also, several firms and agencies can share

the cost of building the necessary infrastructure to build the virtual mandis.

Interestingly, it is the buyers of rural produce who have taken the initiative to exploit the virtual mandi concept.

What started as automation of procurement system by Amul or streamlining of supply chain by ITC and EID Parry

has led to the formation of virtual mandis.

The rural market grab has already begun. Once the rural consumers get attached to these new forms of virtual

mandis they are going to procure most of their requirements from the same source and sell their produce in the same

mandis.

This offers an interesting challenge for those companies that are selling in the rural market including the agri-input

companies, farm equipment companies, FMCG and consumer durable manufacturers. Are these companies going to

continue the traditional brand marketing approach or turn to the emerging virtual mandis? Once customers get

locked in with the new breed of virtual mandis, existing rural marketers are going to find it hard to win them back.

Case Study -3

 Case Study in Rural Marketing

Dalmia Consumer Care

"Fish where the fish are"

Looks like remixes are the order of the day. Be it the plethora of music video remixes that are dominating the small screen

today or be it Haldiram's latest Recipe Remix Campaign. In either case, an endeavor has been made to reposition an old

product through attractive packaging, innovations and incentives that appeal to the consumer. With mouth watering and

tongue tingling names like 'Bhujiawich', 'Nut Cracker Raita', 'Jor Garam Chaat', 'Corn Mix Cutlet', 'Bhujia Roll';

Haldiram's seems to have struck the right cord in appealing to the consumers.

The age old Haldiram's bhujia, which was originally perceived as a brand for the 30+ age group, is looking to cater to the

younger lot. The conservative brand is now out with a 'Recipe Remix' campaign which was conceived by its ad agency

Profile Advertising (which took eight months to convince the client to go ahead with the new campaign) with a view to

create a workable product extension for the packaged goodies. With this campaign Haldiram's also hopes to form a long

term relationship with its existing and potential clientele.

The new campaign with the tag line of 'Taste Mein Naya Twist' aims to drive home the point that a whole lot of new,

never-eaten-before recipes can be created out of a single pack of namkeens, instead of the only earlier option of just eating

it simply out of the pack.

Talking about the new campaign and more importantly the need for it, Profile Advertising CEO Jiten Dhawan said,

"Having worked in nurturing the brand for almost 14 years, we felt it was time for Haldiram's to realise the essential fact

that, as a company it has been perceived largely as a brand addressing the 35 years plus category.

However, with the introduction of packaged 'Chips' and other ready to eat snacks in the pipeline, it was important for

Haldiram's to be accepted across the board in all age groups from four to 70 years." Since kids are now becoming

increasingly important in the household decision making process and with pester power at its peak; targetting the lower

age segments, i.e. four - 30 years; who have had no regular association with Haldiram's in the past seems to be the ideal

thing to do. The campaign for Haldiram’s Chips has a tag line of ‘Just Munch Karo’ and connects to all age groups.

The soft launch of this new campaign was initiated in the first week of January 2004 in both print and radio. What with the

television being expensive for advertising, Haldiram's has decided to stick to print and radio for the time being at least.

Another reason for not coming up with a TVC (television commercial) as yet, was that the company felt it was safer to do

the first ever TVC for the brand on a corporate note rather than the Remix campaign. Dhawan said, "As of now we are

using the radio and the press for three months each. We have 160 seconds of commercial time on Radio Mirchi thrown in

with some Remix contests everyday. The ads are being published in women centric magazines like Femina, Filmfare,

Cosmopolitan, Savvy, Meri Saheli and Grihshobha. By the end of the month ads will also be placed in the publications like

Delhi Times and HT City. The Remix commercial we guess, would now be stage two."

Talking of budgets, the total ad spends initially allotted for the entire campaign was approximately Rs 3-3.5 million. But to

pitch against teen favourite munchies like Lays, Kurkure, Lehar etc which advertise heavily on television, Haldiram's sure

does need to keep in mind advertising on the idiot box. Dhawan elucidates, "Television no doubt is an excellent medium.

However you need to effectively sustain it in conjunction with the press. Advertising per se has to be consistent in order to

derive results." Not now, but later seems to be the agency's take on the TVC. "The Haldiram's Chips film has been shot

and will be released soon on television and cinema. It uses the concept - 'Just Munch Karo' in a storyline of a birthday

party which the kids can easily identify with," says Dhawan.

The Haldiram's Chips product was initially perceived to be a brand for the 30+, but a conscious effort is being made by the

client and the agency to change the target group to 18+, which was exactly what was done through the Chips ad campaigns

in the Delhi Times, HT City and radio spots. "We were very clear with the client that he should not suddenly expect kids in

the 4+ segment to switch loyalties from other brands. And so long as we continued to initiate trials amongst the kids, with

their mothers bringing in the packs home, we were sure the slow and steady approach of see, feel and try the product

would eventually work in sync with the next campaign exclusively targetted to the kids, starting off with a film," said

Dhawan.

Haldiram's goodies have been in the market since the last 20 years or so and have always had a low key affair as it

concentrated more on dealers and below the line activities, without giving much thought to advertising. It is only since the

last three or four years that they have really started spending and allocating some monies towards advertising.

For the new Recipe Remix campaign, the key was to implement it with a restricted budget by using Haldiram's existing

outlets with large footfalls as a trial base, by allocating separate Recipe Remix counters within each outlet to initiate trials

amongst the walk-ins. Secondly, the makers made sure that there was constant and extendable customer interaction with

the brand. Said Dhawan, "We ensured customer interaction by letting them recreate their own innovative Recipe Remixes

out of any of the Haldiram's Namkeens who in return could get a chance to win up to three gift vouchers of Rs 2,500 each

from Haldiram's every month. And only after that there would be a quantum change in the brand perception and product

acceptance."

All the innovative Recipe-Remixes have been worked out by Haldiram's chefs and sold at the Recipe Remix counter at

Haldiram's besides being showcased in the take-one leaflets placed at the Haldiram's outlets, in magazines and press ads.

The attractive press ads that have been developed around the Haldiram's goodies especially the Chips sends across the

message that the chips can be munched anytime and anywhere.Profile Advertising which has been handling the Haldiram's

for almost 14 years has a perfect understanding of the client and their product categories. Says Dhawan, "We understand

the client to such a great extent that we are almost given a free hand now to steer the communication stance. And the tone

has been primarily 'Hinglish' from the very beginning." With new upmarket packaging and a logo reduced in size of the

Haldiram's Chips package, the company is essentially targeting the 18+ years by giving them newer innovative ways of

accepting the product.

Expectation is particularly high on two counts with regard to the new Recipe Remix campaign. Firstly, increased

consumption within the existing segments of 35+ and secondly, an entirely newer experimental clientele base of 4+ which

has been averse to accepting and eating namkeens straight out of the pack.

Dhawan says, "Ideally, besides a change in brand perception, this concept would also create an acceptability of the brand

within the lower age segments, which it definitely requires, to further help with the launches of Funchees (Cheese Balls),

Ticklers (Potato Sticks) and Taka-Tak (Kurkure) which are in the pipeline."

Changes in the Namkeen packaging are also being looked at wherein behind each pack there would be a Recipe Remix.

Haldiram's have left no stones unturned in advertising their product. As of now, Haldiram's has created Recipe Remix

counters within four outlets in Delhi and Gurgaon to test market the concept and let the walk-in customers sample and buy

two Recipe Remixes each week. "There will be approximately 20,000 footfalls through which there will be a sizeable

visibility and awareness everyday. Also danglers and leaflet dispensers are being initiated at the 'A' category retail outlets

in Delhi and NCR regions to start with," says Dhawan.

Although it is too early and premature to gauge the campaign's effect on the actual increase in the overall sales of

Namkeens packs, it does seem that this one might just do well. Not just due to the new campaign or incentives provided by

the company but simply because Haldiram's has been a trusted name in the market for over two decades now.

The village is the key to Rural Distribution

For a large variety of consumer products, the private village shops are the main channels in the rural markets; they are also

the cheapest and the most convenience channel to align with. As such we shall examine in some detail how the private

village are utilized by firms in their rural marketing effort.

The network of village shops of India is considered by several experts as the largest and cheapest distribution channel in the

world. There are 3.6 million such shops in rural India. The village shopkeeper actually operated against several odds. He is

often forced to deal in a large number of products in order to make his operation viable. It means larger inventory and

higher inventory costs. The longer lead time for replenishments from the urban based producer enlarges his inventory

holding further. Also, as his sales are not uniform throughout the year, he has to carry the inventory over a longer period of

time. All this leads to the blocking up of his capital and increase his costs. The scope for making up the higher costs through

higher make up is rather limited. He cannot charge a higher mark up, as the consumer he is catering to cannot afford to pay

a higher price. Nor is he able to make the higher costs by increased turnover. The average daily turnover of a rural shop is

less than Rs 300. Even this level of turnover is generated only when he extends credit to his customers. And he incurs

additional expenses for the frequent trips he has to make to the supply points in the towns/ market centers. It is quite

interesting that in spite of all these handicaps, the

village shopkeeper conducts his rural retail operation at a profit, though quite nominal, it might be. He achieves this feat

largely tough his inborn ability for astute management of money and other inputs. He also puts in hard work. He keeps his

shop open for 14 hours a day compared to that 8 hour service provided by the urban shops and he keeps his keeps his shop

open on all 365 days in the year, with the support of his wife and children, and ensures that he does not miss a single

possible sale. It is mainly this human labor, the cost of which neither gets accounted, nor paid for fully that makes the

village shops of India one of the cheapest distribution channels in the world.

It is quite natural, therefore, that firms seeking an effective presence in the rural market, willingly embrace the private

village as the major component of their distribution outfit. The shops also function as their effective bridge with the

scattered rural consumers.

Organizing its mating channel out of these private shops, however, requires assiduous efforts on the part of the firm. It has

to select its outlets from out of existing shopkeepers. In some cases, it has to develop freshers and appoint them as outlets. It

has to select from among the available people ending on the product line and other relevant factors and train and develop

them into competent dealers for their products.

The name of the game is to motivate the retailer in rural market to stock a product or a brand.

Improving the viability of the outlets:

Improving the viability of the retail outlet is an important part of channel management in the rural context. In the first place,

the firm must be willing to view rural marketing as a long term venture. Secondly, the firm must encourage the outlets to

deal in a number of product lines. In affect, the firm can collaborate with other firms and make a joint retailing offer, there

by promoting the viability of the retail operation.

Analysis & Interpretation of Data

Brand Decisions (Rural markets)

Branding too needs skilful handling in the rural markets. The rural consumers have already graduated from generic products

to branded products. Today, the brand name is the surest means of conveying to rural consumers. To them, buying an

established and well spoken of brand is the sure way of reducing risk. 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 and markets. Whether same brand should be used in both urban and rural markets and appropriate variants of

the brand must be adopted for the rural market is a matter of conscious decision by individual firms depending on the

context. In quite a few cases the same brand is proving 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. It will, however be incorrect to assume that rural

consumers prefer local brands to national brands. Analysis actually shows that contrary to the commonly held view, many

rural consumers have a strong preference to nationally advertised and promoted 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, not cheap bands. HLL’s Lifebuoy, 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 cheap soap. Instead, sells it as

a hygiene brand. It communicates the value of the brand to the target market. It also tries to enhance the value of the offer

by giving suitable ‘add-one’. For example while targeting rural students for the soap, it distributed height charts along with

the soap and conveyed its concern of 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.

Examples of distinct brand offer for the rural market: There are several cases where the firms concerned have launched

distinct brand for the rural buyer and tapped the market better. Arvind Mills entered rural market with its specially made

Ruff and Tuff brand. Britannia has ventured into the rural market with Tiger brand biscuits and is steadily gaining market

share with this brand.

Pre-conceived notions have no place:

While specific research studies may provide useful insights on the rural markets, no one can make any sweeping

generalizations.

Using the example of CTV, illustrates that pre-conceived notions have no place in rural marketing.

Physical Distribution:

Let us first see the special problems, which marketers have to face in physical distribution in the rural context.

The problems in Transportation and Warehousing:

It is well known that transportation infrastructure is 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 improvements are

taking place on account of the various road development programs, many areas still have only mud and stone roads and

most of the interiors have hardly any roads worth mentioning. As regards transport carriers, the most common ones are the

delivery vans and the animals drawn carts. Because of the difficulty on accessibility, delivery of products and services

continue to be difficult in rural areas. In warehousing too, there are social problems in the rural context business. Business

firms find it quite difficult to get suitable warehouses in manypartsofruralIndia.

You are quite right when you say that the rural consumer has graduated from generic to branded products. A case to point is

the mobile phone which has revolutionalized this concept.j As regards to transportation and warehousing, the railways

cannot reach out to all the 6,12866 villages of India since it could result in infringement of lands, diminishing farm lands,

government lands meant for some other purposes. In any case one small railway station caters to on an average of 14

surrounding villages which is adequate. Moreover, the smaller and feeder stations are set up for relief work since railways

themselves cannot store all their materials at one place. Warehousing is also a problem in the villages. But the government

through its PDS has at least made an effort in this regard. Every Panchayat has a PDS in India. This also has a godown

under the government schemes. That it is misused or put into disuse by the respective Panchayats is not the fault of the

policy makers. It is like the misdemeanor of a small factory of a large group where the promoter cannot be faulted. In the

government, the policies and planning are picture perfect. It is only the implementation that is lopsided. Private sector can

provide their expertise and much needed funds to locally supplement such initiatives of the government. Only then we will

all be in the mainstream of nation building. At the moment, we are all sitting on the fence and blaming the government. The

private sector's CSR activities is extremely tight and inflexible and heavily prioritized. This does not mean that government

should not perk up its initiatives.

Buying behavior of Rural consumers

 To understand the buying behavior of rural consumers, we must go to the factors that influence their buying behavior. The

factors include:

1. Socio-economic environment of the consumer

2.Culturalenvironment

3.Geographiclocation

4.Education/literacylevel

5.Occupation

6.Exposuretourbanlifestyles

7.Exposuretomediaandenlargedmediareach.

8. The points of purchase of products.

9. The way the consumer uses the products

10.Involvementoftheresinthepurchase.

11. Marketers effort to reach out the rural markets

Some of these points are discussed in some detail below:

Influence of culture: Culture and tradition influence perception and buying behavior. For example, the preference in respect

of color, size and shape is often the result of cultural factors. Rural consumer’s€™ perception of products is strongly

influenced by cultural factors.

Geographic locations: Rural consumer behavior is also influenced by the geographic location of the consumers. For

example, nearness to feeder towns and industrial projects influence the buying behavior of consumers in the respective

clusters of villages. We are discussing this aspect in detail in the section on market segmentation in rural markets. To cite

one more example of how geographic location affects buying behavior, we can point out the fact that the lack of electricity

in many rural households acts as a barrier to the purchase of certain consumer durables.

Exposure to urban lifestyles: Extent of exposure of rural consumers to urban lifestyles also influences their buying behavior.

An increased exposure and interaction with urban communities has been the trend in recent years.

The way the consumer uses the products: The situation in which the consumers utilize the product also influences their

buying. The example of lack of electricity affecting buying behavior illustrates this point as well. Lack of electricity

automatically increases the purchase of batteries by rural consumers. Similarly, since rural consumers cannot use washing

powders/detergent powders that much, as they wash their clothes in streams or ponds, they go in more for washing bars and

detergent cakes.

Places of purchase: Buying behavior of rural consumer also varies depending on the 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/fairs; others buy from the town that serves as the feeder to the rural area. It is also seen that the same buyer

buys different requirements from different laces. For understanding the buying behavior of the rural consumer correctly, the

marketer must ask the question: Where from do they buy the products and why?

Involvement of others in the purchase: Involvement of others in the purchase in the purchase decision is yet another relevant

factor in this regard. There has been a change here in recent years. In the past, the head of the family used to make the

purchase decision all by himself. In contrast, the involvement of the other members of the family in the purchase decision

has been growing in recent years. An increase in literacy coupled with greater access to information has resulted in this

development. The marketer has to reckon the role of the influencers while sizing up the buying behavior of rural consumers.

Marketers efforts to reach out the rural market: In recent years, many corporate companies have been trying hard to develop

a market for their products in the rural areas, investing substantially in these areas. This has brought about some change in

the way buyers purchase different products. Developmental marketing has created discriminating buyers and hitherto

unknown demand in the rural market.

All the above factors influence the buying behavior of rural consumer and hence their responses to the marketing mix

variables, and the reference points they use for purchase decisions.

Quantum jump in retail outlets

There has been a big quantitative expansion in retail outlets in India in recent years. According to the Census of retail

Environment-96 (CORE 96) conducted by ORG-MARG , the number of retail outlets stocking fast moving goods (FMCG)

has jumped to 5.13 million in 1996 from 3.36 million in 1990, an increase of 52.67%. By the year 2000, the number has

gone up still further to over 6 million. A total of 5.13 million shops translate into 5.55 shops per 1,000 consumers, the

highest for any country in the world. Another interesting point is that the rate of growth of retail outlets has generally

outstripped the rate of population growth.

The reasons for the massive growth and the continuing spurt are many. In the first place, the Indian retail landscape is

dominated by small independent outlets, which belong to the less than 500 sq ft category. In fact, small outlets contribute to

as much as 96% of the total retail sales. The sharp rise in per capita consumption of consumer products in recent years has

contributed to the spurt in the number of such outlets. They now cater to a smaller consumer base compared to what they

used to cater in the past. This has given birth to more stores. Secondly, the number of products and brands in the

marketplace has risen too steeply for existing stores to have shelf-space to stock them all. New stores have sprung up to fill

this gap.

High density in urban areas:

Outlets in urban areas have grown more than those in rural areas. While 25 shops out of every 100 were urban in 1978, their

number rose to 35 by 1996. As a result, the density of shops in urban areas has soared from 4 to 7.6 per 1,000 persons. In

contrast, the increase in rural areas has been only from 3.6 to 4.8 shops per 1,000 persons. According to the All India

Census of Retail Outlets carried out by the Asian Information marketing and social research Pvt Ltd (AIMS) in 1996, retail

outlets stocking branded and packaged fast moving consumer goods (FMCG) in urban India, numbered 2.1 million. It

implies one shop for every 125 urban residents. This means that one out of every 25 or 31 families in urban areas is engaged

in retailing, assuming a retail outlet is essentially a family enterprise. According to a survey by ORG-MARG, more than

400,000 shops in urban India sell goods worth over Rs. 40,000 per day and over 40,000 shops sell goods worth more than

Rs 1 lakh per day.

General stores on the rise:

In India, for a long time, a large chunk of the retail outlets were grocery shops. This pattern has been changing in recent

years, in both urban and rural markets. Now, in urban India, 14.40% of retail outlets are general stores, 17% are paan-plus

shops, 6.31 % chemists, 5.80% food outlets, and 4% Cosmetics stores. Rural outlets are also becoming more sophisticated

and include general stores and chemists. However, the rural outlets still have a larger proportion of grocers.

Rural Market Environment

It can be emphasized that understanding the marketing environment holds the key to effective marketing management. This

is as truer of rural marketing as that of urban marketing. In this article we shall, therefore, initiate discussion on rural

marketing and the rural market environment.

The rural market environment needs a separate examination as it varies significantly from that of the urban market. Until a

few years ago urban market formed the main reference point in all the marketing discussions in marketing management.

Here we shall deal with the subject. Consumer and demand forms parts of a given marketing environment. It is to facilitate

detailed discussions that we are dealing with the subject under the three headings shown above. We shall examine here the

issues relating to rural consumer and rural demand.

The Rural Consumer: A Detailed Profile

Size of Rural Consumer Group: In numerical terms, India’s rural market is indeed a large one; it consists of more than

740 million consumers.

It can be seen that now 73 percent of India’s total population is rural. Though over the last three decades there has been

a marginal reduction in the rural population expressed as a percentage of the total population, there has been a steady

growth in rural population in terms of absolute numbers. And, it had reached 74 crore by 2001. In terms of households, the

rural market consists of more than 12 crore households, forming over 70 percent of the total households in the country.

Characteristics of rural Consumer Group:

Location Pattern: Practically, the whole of India, barring the metros and towns, constitutes the Indian rural market. In other

words, the market is spread through the length and breadth of the vast country.

A scattered market: It is evident that the rural market of India is a geographically scattered market. Whereas the urban

population of India is concentrated in 3,200 cities and towns, the rural population is scattered across 570,000 villages. And,

of them, only 6,300 villages, or less than 1.1 percent, have a population of more than 5,000 each. More than 3 lakh villages

or more than 55 percent of the total number of villages, are in the category of 500 people or less and more than 1.5 lakh

villages, or 25 percent, are in the category of 200 people or less. The inference is clear; unlike urban demand, which is

highly concentrated rural demand is scattered over a large area.

Socio-economic position: By and large consumers continue to be marked by low per capita income. Similarly they continue

to be tradition-bound community, with religion, culture and tradition strongly influencing their consumption habits.

However, as we shall see in detail, a sizable segment of rural consumers defy this description. Nearly 60 percent of rural

income comes from agriculture. Rural prosperity and discretionary income with rural consumers are thus linked to a

sizeable extent with agricultural prosperity. More than half the households are in the income category of les than 25,000 per

annum, but about 14 percent of the households have an annual income that exceeds Rs 50,000 per annum. Remittances from

Indians working outside India have made a sizeable contribution to the growing rural income/purchasing power is some

states.

Analysis reveals that, in recent years, rural consumers have been increasingly drawn into the savings habit. As much as 70

percent of the rural households now save a part of their income. The habit is relatively more wide spread among salary

earners like government staff, teachers, and self-employed non-farmers, who include in the main, shopkeepers and service

providers.

Selecting the Media Mix

Constraints in marketing Communication in the Rural Context: In marketing communication and promotion too, rural

markets pose many problems. The constraints emanating from the profile of the audience, and the limitations in the matter

of media cause these 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 their cultural barriers and taboos add to the difficulty of the communication task. The

situation is further compounded by the linguistic diversity. In the urban areas, marketing communication can be managed by

and large with English and Hindi. Marketing communication in the rural area has to necessarily be in the local language and

idiom. The constraints in media compound the difficulty.

Rural communication is also quiet extensive. 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 behavior patterns.

The rural communicator will do well to choose a combination of formal and non-formal media. The possibilities are

indicated below:

TV: With the increase in coverage and increase in TV ownership in rural areas. TV is gradually becoming the prime

medium for rural communication.

Cinema: The cinema is a useful medium in the rural context. Most large and medium villages have one or more cinema

houses. Also, more than one-third of all rural people do see cinema as a matter of regular lifestyle. Advertisement films

show feature films with disguised advertisement messages, and documentaries that combine knowledge and advertisement.

It has been estimated that 33 per cent of the cinema earnings in the country come from rural India.

Radio: The radio is a 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 exiting context, it can certainly play a significant role in rural communication.

Print media too has some scope: While the role of print media is certainly limited in the rural context, it cannot be ruled

out totally. Even he remotest rural parts have a small group, which is literate. Moreover, while the group may be

numerically small, its members usually happen to be the opinion leaders, influencing the purchasing behavior of large

segment of their 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. They can certainly be approached

through the written word and they can be used as carriers of messages to the older generation. 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 rural

communication. In fact many companies are using the outdoors imaginatively in their rural communication mix.

POPs: The POPs point of purchase (or point of sale) promotion tools are also quite useful in the rural markets. The POPs

meant of the rural market should be specially designed to suit to rural requirements. Symbols, picture and colors must be

used liberally in POPs meant for the rural markets. Color is of particular significance. As general rule, the rural people love

bright colors. The effective communicator utilizes such cues.

Audio visual /publicity vans: The AV unit or the publicity van is very useful for rural communication. The van is a

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

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

puppet shows etc from its instant promotion station.A portable shamiana or platform often forms a part of the van. Even

public meetings can be organized using the portable shamiana. Portable exhibition kits can also be carried in the van and

exhibitions put up instantly. The van can also be used for sales campaigns in addition to promotion campaigns. It can also

be used for product demonstrations. In short, the van can be used for carrying and delivering a tailor-made communication

programs to the rural audience. Syndicated AV vans: In recent years, rural AV vans have become a sharable service. Firms

which cannot afford to operate vans their own, utilize syndicated AV van service offered by independent agencies.

Rural Markets become attractive to corporate companies

 A variety of factors have rendered the rural market quite attractive to corporates in recent years.

The Growing Opportunity One Main Driver:

The growing opportunity in the rural markets is no doubt the prime factor. The rural demand has been growing rapidly and

its composition has been changing for the better in recent years. The increased income/purchasing power of the rural

consumer and the improved income distribution have enhanced rural demand for several products. Better access to many

modern products/brands has added to this growth.

Heat of competition in the Urban Market, A Stronger Driver:

The opportunity in the rural market becomes all the more rosier when the corporates see it in juxtaposition with the growing

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

the growing interest of corporates in the rural Market. The fact that the rural market is still largely an untapped and virgin

market and the fact that 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.

Corporates have been finding the going increasingly tough in the urban market, especially for products in respect of which

penetration levels are already high. For example, penetration level for toothpaste in the urban market has now reached close

to 80 percent. In contrast, it is below 30 percent in the rural market. Obviously, any substantial further growth in the product

can come only from the rural market. Moreover, in the urban market, many consumers have been using a particular

toothpaste for quite some time and have settled down to the brand, its flavor and other characteristics. They cannot be

expected to switch their brands very easily. In contrast, in rural areas, there are a lot of first-time users of toothpaste whom

the companies can tap from the scratch.

Toothpaste is but one example. Corporates find that the highly penetrated urban markets allow little room for volume

growths for most of what if what are called ‘necessity products’ toothpaste, bath soap, washing products, tea etc.

Growth opportunity for many of the ‘emerging products’ (coffee, shampoo, biscuits, talcum powder etc) too is rather

low in the urban market. Thee rural market thus becomes essential for companies with strong growth aspirations. Not

competing in the rural market will keep them out of about half of the country’s market for, ‘necessity’ products

and one third of the market for ‘emerging’ products by value. It is but natural that in these circumstances, corporates

set their sights on the rural market.

Many Companies have already taken to the rural Market in a big way

It can be seen from the exhibit that many companies/industries have already taken to the rural market in a big way.

It can be seen from the FMCG category, half of the revenue of Hindustan Lever and Colgate comes from the rural market.

In the case of many other companies too, the countryside accounts for a substantial part (25-30 percent) of the total sales. It

can also be seen that about one-fifth of pharma sales occur in the rural India. For Glaxo, the proportion is slightly higher at

about 25 percent. In respect of high - priced durables, about one-fourth of the television sales happen in rural India; Kinetic

sells about 30 percent of its scooters, Toyota nearly half of its vehicles and Hero Honda 40 percent of its bikes.

Tapping the Rural Markets:

While rural India does constitute an attractive and sizeable market, firms have to strive hard for securing it. For, the market

bristles with a variety of problems. The firm has to grapple with them and find innovative solutions. Practically in every

task of marketing, rural marketing poses some unique problems.

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

1. Segmentation and targeting

2. Product management

3. Physical distribution

4. Channel management

5. Sales force management

6. Marketing communications

Retail Realities: Beyond Urban Boundaries

The Census of India defines rural as any habitation where the population density is less than 400 per sq km, and where at

least 75 per cent of the male working population is engaged in agriculture and where there isn’t any municipality on board.

The number of villages thus adds up to 638,691. According to the NCAER study, there are almost twice as many ‘lower

middle income’ households in rural areas as in the urban areas. The Indian rural market with its vast size and demand base

offers a huge opportunity that very few retailers would be willing to ignore. With 128 million households, the rural

population is nearly population is nearly three times that of the urban. As a result of the growing affluence, fuelled by good

monsoons and the increase in agricultural output to 200 million tones from 176 million tones in 1991, rural India has a large

consuming class with 41 per cent of India’s middleclass and 58 per cent of the total disposable income.

There has been a spurt in the purchasing capacity of farmers now enjoying an increasing marketable surplus of farm

produce. In addition, an estimated induction of Rs 140 billion in the rural sector through the government’s rural

development schemes in the Seventh Plan and about Rs 300 billion in the Eighth Plan is also, believed to have significantly

contributed to the rapid growth in demand. The high incomes combined with low cost of living in the villages have meant

more money to spend.

Retailing is the final phase of the distribution channel and it is clear by now that it is availability and distribution that drive

growth in rural Indian markets. Hence, retailing will be significant and will undergo greater organization and maturity in the

rural markets as in the urban markets. Innovative retail models, which take into account the nuances of rural market will

have to be invented and implemented. Some Indian firms have made a beginning; the e-choupal initiative launched by ITC

is one such example.

Spreading the ICT Revolution in Rural India: Experiences and

Examples

  

[This article is a compilation of the discussion on ‘Spreading the ICT Revolution in Rural India:

Experiences and Examples’ that was carried out by the ‘ICT for Development Community in

India’ on Solution Exchange, a UN initiative for development practitioners in India. The ICT for

Development Community comprises practitioners and professionals from various types of

organizations and disciplines, concerned with promoting Information and Communication

Technologies (ICT) as an enabler for sustainable development and as an alternative means of

livelihood, particularly for the grassroots communities of India . Solution Exchange connects the

members of this community and increases the effectiveness of their individual efforts, helping

them to share and apply each other’s knowledge and experience.]

NASSCOM Foundation, along with Rural Marketing Agencies Association of India (RMAAI),

recently organized a seminar in New Delhi on 'Spreading the ICT Revolution in Rural India'. The

seminar focused on the need for a more involved debate with the government and the role that

public private partnerships can play in ICT for development. The major question that was raised

was - why after almost a decade of ICT being applied to development, are we still talking about

pilots and scaled pilots, and not of our successes beyond pilots? In order to resolve this issue,

Sagarika Bose, Programme Manager at NASSCOM, sought insights and experiences of Solution

Exchange's 'ICT for Development Community in India' on lessons that they have learned from

attempts to scale up successes in the following two areas: 

1. ICT applications that have centered on the goal of meeting basic needs of agrarian rural

communities rather than towards creating an alternative economy 

2. ICT interventions that have helped develop rural communities, right from producers to

consumers

Professionals and practitioners from large well-established as well as small organizations who are

either themselves trying to create a difference in rural areas through the still undiscovered

potential of ICT or helping by being a part of such discussions to bring forth the value and benefits

that can be captured through the use of ICT to craft a superior, healthier and improved civilization,

participated in this discussion and contributed their views and shared their knowledge and

experiences.

Summary of Responses

Scalability and replication of ICTD projects in rural India depend on the right combination of

factors like infrastructure, leadership, research, community involvement, strategic partnerships and

provision of need-based and locale specific services. With the vision of spreading the ‘ICT

revolution’ to rural areas, members shared examples of successful ICTD projects that moved

beyond pilots, and discussed how and why some projects have been scaled up and replicated,

while others have failed.

Participants mentioned several projects that have moved beyond pilots. They listed social

entrepreneurship projects like Drishtee and SKS Microfinance, and projects initiated by

corporations like ITC’s e-Choupal, Hindustan Lever’s i-Shakti and Hewlett Packard’s photo

training. Members also listed ICT projects in the agriculture sector that emerged from conferences

in the late 1980s - DICNIC, AGRISNET, AgRIS, AGMARKNET, SeedNet, and DACNET- and

others that provide relevant information to agrarian communities like eKrishi and RASI. Members

cited ICT projects that provide services ranging from access to land records, empowering dairy

farmers and marginalized women, and for providing information on livelihoods. They pointed out

that most Indian ICTD projects lack global experience, and highlighted successful international

projects from the Solomon Islands that give farmers access to new technologies, and from Africa,

that use the internet for effective communication.

Discussants outlined several factors critical for successfully scaling up ICT projects beyond

pilots. They stressed that the planning state must have well-defined strategies, focusing on self-

sustainability and incorporating a specific plans for scaling up, along with community

involvement from the development stage. One suggestion to ensure scaling up is to roll out ICT

projects in ‘phases’ rather than pilots. Further, they underlined the importance of creating a strong

infrastructure and using appropriate Technology, including factoring in connectivity issues and

regular maintenance. Another essential factor for success is to include research at every stage.

Members cited the example of Media Lab Asia and suggested that universities (especially

agricultural) and institutions of higher education each adopt one district and undertake all the

research and development (R&D) activities for those areas. They also recommended studying

businesses like retail, telecom and Fast Moving Consumer Goods (FMCG), which have effectively

penetrated rural markets despite constraints, to apply their learning’s to rural ICT projects.

Along with planning and research, capacity building - especially in technology - of communities

by the implementing agency is essential for the sustainability of the project. Based on their

experiences respondents felt it is necessary to provide ‘handholding’ to rural communities for

quite some time. They pointed out that even corporate ventures require a gestation period, during

which the project demands intensive support and attention by the promoters. In addition,

discussants mentioned the need for Localized content to succeed in any rural set up in India .

ICT projects in local languages and need-based content related to livelihood security tend to be

more successful. Members also discussed the importance of resource generation for replication of

projects. Since funding agencies support projects for a limited period and implementing agencies

rarely have their own resources, it essential for projects to plan a model that incorporates a mix of

paid services and social goods. Respondents recommended engaging the government in a more

purposeful way to channelise its resources for making projects sustainable.

Further, respondents highlighted the need for project leadership to be well informed, open,

transparent and accountable in order to take projects to the next level. Scaling up depends on the

willingness of the leadership to learn and adapt, noting that businesses succeed because of the

decision-making capabilities at the highest levels of management. At the same time, they pointed

out that leadership is essential at all levels of the project, including those operating at the

grassroots.

Members recommended an integrated approach to ICT projects, incorporating successful non-ICT

interventions (assuming non-ICT bases are the structure and the ICT interventions are the

superstructures) in the areas of health, education and livelihoods. Noting that NGOs tend to

understand ‘development’ better, while businesses know how to bring projects to scale,

respondents recommended using Public Private Partnerships, with rural citizens as partners.

Highlighting the importance of such partnerships, they gave the cautionary example of Kerala’s e-

governance scheme and suggested that projects could possibly collaborate with successful

business ventures in rural areas.

Respondents also shared various resources that list relevant ICTD projects, and documentation on

mainstreaming ICT to foster inclusive growth and rural prosperity in India . Finally, members

noted that not all pilots need be ‘successful’ because many of them navigate uncharted territories,

and require testing before being introduced on a large scale. Without learning from failures,

successful models do not emerge, and scale does not really happen unless a solution is replicable

in the first place. Indeed, it may not even be possible to scale up every project. Respondents

concluded that the key to scalability and replication is to share existing knowledge and

experiences, and the ability to learn from both successes and failures.

Conclusions/Findings and Recommendations/Suggestions

Rural Agricultural Marketing - Suggestions for an Effective Infrastructure

Marketing could play the role of a change agent in the rural sector only if the necessary infra-structure is created and the

farmers are assured free access to the fruits of science and technology. In order to realize these, development of four

categories of firms need major attention; they are:

(i) farm input supply firms,

(ii) farm products marketing firms,

(iii) food processing and distribution firms and

(iv) facilitative service firms.

1. Farm input supply firms

the overall trend indicates that there is an increased consumption of fertilizers, purchase of seeds and utilization of credit. So

this trend necessitates not only the capacity expansion of the existing firms and entry of a number of firms, but also trained

entrepreneurs and executives with managerial competence. This category of firms covers broad spectrum of inputs like

seeds, agricultural chemicals, machinery and spare parts, veterinary medicines, fodder production and distribution, credit

and a lot more which are essential for improving the production.

The firm supplies and equipments should be made available at many local points in sufficient quantities so that farmers can

use them in proper time. These inputs should be technically effective and of dependable quality, offered at reasonable

prices. Here comes the dominant role of the extension services.

The cooperatives and farmers service societies have to be involved in the input delivery system. Minikit distribution of the

seeds is necessary to be experimented. Shortage of essential inputs must therefore be supplied to the farmers at his doorstep

in time and in enough quantity. This is possible only by establishing input firms at the rural level.

2. Farm product marketing firms

An efficient marketing system aims at satisfying not only the producers by paying remunerative prices for their produce but

also supplying the products to the consumers at reasonable prices. In the context of increased agricultural production, the

establishment of a large number of firms, both private and public sector, would be on the increase viz. whole saling,

retailing firms, grading and standardization, export and import, district market committees regulated markets, cooperatives,

storage and warehousing organizations, etc.

The combination of increased agricultural output and increased: demand for quality food indicates the opportunities for

entrepreneurs and executives in the farm product marketing firms. These entrepreneurs and the executives are to emerge

mostly from among the farming community and the non-farming community. Thus, the increased employment generation

assures not only higher income but also better income distribution among the rural families.

3. Food processing and distribution firms

Processing is a part and parcel of the product marketing. The food

processing units specially at farm level are yet to be developed and they are at the infancy stage only. The processing is

inevitable in the highly perishable products like milk, fruits, vegetables and also for many cash crops like cashew,

sugarcane, etc. establishment of processing units are essential.

By these, more particularly women would be benefitted if they are properly trained in processing the product at home level.

Apart from this, processing units will have significant linkages effect' by promoting new business for service companies,

transporters, traders, etc.

4. Facilitative service firms

The services that are normally dealt with are market information, quality control, research and development, finance,

insurance, etc. Under the present national policy framework, these are the potential areas for effective participation of the

government.

For all these, new ventures, low capital investment and of small-scale nature, private enterprises are to be encouraged. In the

case of medium capital investments, cooperatives and to some extent private agencies can be involved. In the case of fairly

high capital investment, the joint ventures comprising cooperatives and the government may be encouraged.

The Institute -village linkage programme, is an innovative scheme started

in 1995 as a part of extension services in which technology is assessed and refined through people's participation. As per the

extension principle "seeing is believing", the technologies are tested at farmers level.

Rural Marketing - A Critical Review

 

Prime Minister Manmohan Singh recently talked about his vision for rural India: "My vision of rural India is of a modern

agrarian, industrial and services economy co-existing side by side, where people can live in well-equipped villages and

commute easily to work, be it on the farm or in the non-farm economy. There is much that modern science and technology

can do to realize this vision. Rural incomes have to be increased. Rural infrastructure has to be improved. Rural health and

education needs have to be met. Employment opportunities have to be created in rural areas."

'Go rural' is the slogan of marketing gurus after analyzing the socio-economic changes in villages. The Rural population is

nearly three times the urban, so that Rural consumers have become the prime target market for consumer durable and non-

durable products, food, construction, electrical, electronics, automobiles, banks, insurance companies and other sectors

besides hundred per cent of agri-input products such as seeds, fertilizers, pesticides and farm machinery. The Indian rural

market today accounts for only about Rs 8 billion of the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of the total

share. So clearly there seems to be a long way ahead. Although a lot is spoken about the immense potential of the

unexplored rural market, advertisers and companies find it easier to vie for a share of the already divided urban pie.

The success of a brand in the Indian rural market is as unpredictable as rain. It has always been difficult to gauge the rural

market. Many brands, which should have been successful, have failed miserably. More often than not, people attribute rural

market success to luck. Therefore, marketers need to understand the social dynamics and attitude variations within each

village though nationally it follows a consistent pattern looking at the challenges and the opportunities which rural markets

offer to the marketers it can be said that the future is very promising for those who can understand the dynamics of rural

markets and exploit them to their best advantage. A radical change in attitudes of marketers towards the vibrant and

burgeoning rural markets is called for, so they can successfully impress on the 230 million rural consumers spread over

approximately six hundred thousand villages in rural India.

What rural market buys?

Rural India buys small packs, as they are perceived as value for money. There is brand stickiness, where a consumer buys a

brand out of habit and not really by choice. Brands rarely fight for market share; they just have to be visible in the right

place. Even expensive brands, such as Close-Up, Marie biscuits and Clinic shampoo are doing well because of deep

distribution, many brands are doing well without much advertising support — Ghadi, a big detergent brand in North India, is

an example.

Why Rural Market?

The Indian rural market has a huge demand base and offers great opportunities to marketers. Two-thirds of Indian

consumers live in rural areas and almost half of the national income is generated here. The reasons for heading into the rural

areas are fairly clear. The urban consumer durable market for products like colour TVs, washing machines, refrigerators and

air conditioners is growing annually at between 7 per cent and 10 per cent.

The rural market is zooming ahead at around 25 per cent annually. "The rural market is growing faster than urban India

now," says Venugopal Dhoot, chairman of the Rs 989 -crore(Rs billion) Videocon Appliances. "The urban market is a

replacement and up gradation market today," adds Samsung's director, marketing, Ravinder Zutshi.

Reasons for improvement of business in rural area

Socio-economic changes (lifestyle, habits and tastes, economic status)

Literacy level (25% before independence – more than 65% in 2001)

Infrastructure facilities (roads, electricity, media)

Increase in income 

Increase in expectations

MART, the specialist rural marketing and rural development consultancy has found that 53 per cent of FMCG sales lie in the

rural areas, as do 59 per cent of consumer durable sales, said its head Pradeep Kashyap at the seminar. Of two million BSNL

mobile connections, 50 per cent went to small towns and villages, of 20 million Rediffmail subscriptions, 60 per cent came

from small towns, so did half the transactions on Rediff's shopping site.

Special features of rural market

Unlike urban markets, rural markets are difficult to predict and possess special characteristics. The featured population is

predominantly illiterate, have low income, characterized by irregular income, lack of monthly income and flow of income

fluctuating with the monsoon winds.

Rural markets face the critical issues of Distribution, Understanding the rural consumer, Communication and Poor

infrastructure. The marketer has to strengthen the distribution and pricing strategies. The rural consumer expects value for

money and owing to has unsteady and meager status of weekly income; increasing the household income and improving

distribution are the viable strategies that have to be adapted to tap the immense potential of the market.

Media reach is a strong reason for the penetration of goods like cosmetics, mobile phones, etc., which are only used by the

urban people. Increasing awareness and knowledge on different products and brands accelerate the demand. The rural

audience are however critical of glamorous ads on TV, and depend on the opinion leaders who introduce the product by

using it and recommending it.

Opinion leaders play a key role in popularizing products and influence in rural market. Nowadays educated youth of rural

also influences the rural consumers. Rural consumers are influenced by the life style they watch on television sets. Their less

exposure to outside world makes them innocent and fascinated to novelties.

Creating brands for rural India

Rural markets are delicately powerful. Certain adaptations are required to cater to the rural masses; they have unique

expectation and warrant changes in all four parameters of product, price, promotion and distribution.

A lot is already emphasized on adapting the product and price in terms of packaging, flavouring, etc and in sachets, priced to

suit the economic status of the rural India in sizes like Rs.5 packs and Re.1 packs that are perceived to be of value for

money. This is a typical penetration strategy, that promises to convert the first time customers to repeated customers.

The promotion strategies and distribution strategies are of paramount importance. Ad makers have learnt to leverage the

benefits of improved infrastructure and media reach. The television airs advertisements to lure rural masses, and they are

sure it reaches the target audience, because majority of rural India possesses and is glued to TV sets!

Distributing small and medium sized packets thro poor roads, over long distances, into deep pockets of rural India and

getting the stockiest to trust the mobility is a Herculean task. Giving the confidence those advertisements will support. Sales

force is being trained to win the confidence of opinion leaders. Opinion leaders play an important role in popularizing the

brand. They sometimes play the role of entry barriers for new products.

The method of promotion needs to be tailored to suit the expectations of the market. Techniques that have proved to be

successful are Van campaigns, edutainment films, generating word of mouth publicity through opinion leaders, colourful

wall paintings. The Wide reach of television has exposed the other wise conservative audience to westernization. Panchayat

televisions in Tamilnadu carries message that are well received and contribute to community development.

Dynamics of rural markets differ from other market types, and similarly rural marketing strategies are also significantly

different from the marketing strategies aimed at an urban or industrial consumer. This, along with several other related

issues, have been subject matter of intense discussions and debate in countries like India and China and focus of even

international symposia organized in these countries. 

Rural markets and rural marketing involve a number of strategies, which include:

* Client and location specific promotion

* Joint or cooperative promotion

* Bundling of inputs

* Partnership for sustainability

Client and Location specific promotion involves a strategy designed to be suitable to the location and the client. Joint or co-

operative promotion strategy involves participation between the marketing agencies and the client. 'Bundling of inputs'

denote a marketing strategy, in which several related items are sold to the target client, including arrangements of credit,

after-sale service, and so on. Media, both traditional as well as the modern media, is used as a marketing strategy to attract

ruralcustomers.

Partnership for sustainability involves laying and building a foundation for continuous and long lasting relationship.

Innovative media can be used to reach the rural customers. Radio and television are the conventional media that are reaching

the rural audience effectively. But horse cart, bullock cart and wall writing are the other media, which can carry the message

effectively to the rural customers. 

Rural marketing is an evolving concept, and as a part of any economy has untapped potential; marketers have realized the

opportunity recently. Improvement in infrastructure and reach, promise a bright future for those intending to go rural. Rural

consumers are keen on branded goods nowadays, so the market size for products and services seems to have burgeoned. The

rural population has shown a trend of wanting to move into a state of gradual urbanization in terms of exposure, habits,

lifestyles and lastly, consumption patterns of goods and services. There are dangers on concentrating more on the rural

customers. Reducing the product features in order to lower prices is a dangerous game to play.

BIBLOGRAPHY

Books

Advertising Management- B.S.Rathore.

Marketing In India- S.Neelamegham

Marketing Management- Ramaswamy & Nambhkumari

Rural Marketing- Gopalaswamy

Business World’s Marketing White book 2003-04

Magazines and Newspaper

Business World

Business India

Times of India

Economic times

Internet Sites

www.indiatimes.com.

www.coca-colaindia.com

www.onlinequotes.com

www.hll.com

www.indiainfoline.com.

www.ict.com

www.itc.com

www.google.com

Appendix

Some facts

Videocon’s washer, a washing machine without a drier has been launched specifically for the rural areas at Rs8000 a piece. It has registered 100% growth over the past three years.

L.G. sells ‘Sampoorna’ a television model for rural homes at about Rs.10,000, Samsung and BPL have similar models targeted towards rural markets as well.

Qualis, a Rs.5.67 lakh, multi-utility vehicle manufactured by Toyota is preferred over Mahindra and Mahindra’s ‘Armada’ priced at Rs.4.32 lakh.

Improved rural distribution system has helped Godrej consumer products achieve a distribution reach of more than a million retail outlets for its brands, Cintol Fresh toilet soaps and Godrej Powder Hair Dye sachet and also increase overall distribution for its key brands by 20-30 percent since September 2000.

Graphs

Occupation Pattern of Rural India2%2%

9%

10%

27%

50%

Agriculture

Agricultural

labour

Business

Non-agricultural

labour

Salary earners

Not gainfully

employed

Literacy Levels in India

4573

5527

0

20

40

60

80

100

120

Rural Urban

Illiterate

Literate

Division of Population in India

Urban26%

Rural74% Rural

Urban

List of Company Surveyed

Coca-Cola India Hindustan Lever Limited Amul Dairy ITC Haldiram Manufacturing Co. Pvt. Ltd.

PROPOSED QUESTIONNAIRE (IF ANY)

1. Do you consume the urban product?

[ ] YES [ ] NO

2. If Yes, what type of product do you buy?

_________________________________________________________

3. Which market is available at nearest from your home?

_________________________________________________________

4. Which product that is necessary but not easily available to you?

_________________________________________________________

5. Do you find any price difference in between rural and urban area’s product?

[ ] YES [ ] NO

6. What influenced you to buy a particular brand?

[ ] Advertisement

[ ] Word of Mouth

[ ] Attractive Packaging

[ ] Dealer

[ ] Shop Display

[ ] Family/Friends/Relatives

[ ] Any Other (Please Specify) __________________________________

7. If a particular brand is not available with the retailer you will?

[ ] Drop the idea of buying products

[ ] Go to another retail outlet

[ ] Try another (competitor’s) brand

8. Do you have adequate transport facilities to carry product from one to

another Place?

[ ] YES [ ] NO

9. Do you have appropriate facilities in your village to store the specific

product?

[ ] YES [ ] NO

10. Do you have credit facilities to buy any product and do you use?

[ ] Available but not use

[ ] Not Available

[ ] Available and Use