SARASWATI COLLEGE OF ENGINEERING

DEPARTMENT OF
MASTER OF MANAGEMENT STUDIES.

Research paper: Research Methodology Project

Title: Rural Marketing

Guide: Prof Priyadarshani Poddar Name of Author: Umesh

A. Parulekar

Date: 22nd February 2010

ABSTRACT

RURAL INDIA…a new dawn

India needs creative solutions to start a revolution which can take its villages
fast forward in time – converting them into economically viable units and
growth engines, harnessing the power of the villagers, and opening up new
horizons with the promise of a better tomorrow.

Page 1
 RESEARCH METHODOLOGY

 Primary Data

Primary data is collected from targeted audience with the help of questionnaire.
About 60 respondents were asked several questions regarding their awareness
about Rural Marketing.

 Secondary Data

Secondary data is collected from various journals and articles published on

internet. Books Marketing issues were useful in compiling this project.

Page 2
 Introduction

Before gamboling into issues like where the Indian rural market stands and the
opportunities for corporate’s 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!"

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 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 Corporation, Cavin Kare, Britannia and Hero Honda to name a few.

Wheel's wall
Khaitan fans' ad on a horse cart
painting

We can safely say that until some years ago, the rural market was being given a
step-motherly treatment by many companies and advertising to rural consumers
was usually a hit and miss affair. More often than not, the agenda being to take
a short-cut route by pushing urban communication to the rural market by merely
transliterating the ad copy. Hence advertising that is rooted in urban sensitivities
didn't touch the hearts and minds of the rural consumer. While, this is definitely
changing, the process is slow. The greatest challenge for advertisers and
marketers continues to be in finding the right mix that will have a pan-Indian

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rural appeal. Coca Cola, with their Aamir Khan ad campaign succeeded in
providing just that.

Corporates are still apprehensive to "Go Rural." A few

agencies that are trying to create awareness about the rural
market and its importance are Anugrah Madison, Sampark
Marketing and Advertising Solutions Pvt Ltd, MART, Rural
Relations, O&M Outreach, Linterland and RC&M, to name
a few. Also, the first four agencies mentioned above have
come together to form The Rural Network. The paramount
objective of the Network is to get clients who are looking
for a national strategy in rural marketing and help them in
Lifebuoy's wall executing it across different regions.
painting in rural
India Interestingly, the rural market is growing at a far greater
speed than its urban counterpart. "All the data provided by
various agencies like NCAER, Francis Kanoi etc shows that rural markets are
growing faster than urban markets in certain product categories at least. The
share of FMCG products in rural markets is 53 per cent, durables boasts of 59
per cent market share. Therefore one
can claim that rural markets are
growing faster than urban markets,"
says Sampark Marketing and
Advertising Solutions Pvt Ltd
managing director R A Patankar.

Coca-Cola India tapped the rural

market in a big way when it
introduced bottles priced at Rs 5 and "Yaara da Tashan..." McCann
backed it with the Aamir Khan ads. Erickson's ads with Aamir Khan
The company, on its behalf, has also created universal appeal for Coca
been investing steadily to build their Cola
infrastructure to meet the growing needs of the rural
market, which reiterates the fact that this
multinational has realised the potential of the rural
market is going strength to strength to tap the same.

Clearly the main challenge that one faces while

dealing with rural marketing is the basic
understanding of the rural consumer who is very
In 2000, ITC took an different from his urban counterpart. Also
initiative to develop distribution remains to be the single largest problem
direct contact with marketers face today when it comes to going rural.
farmers who lived in far-
flung villages in Madhya Page 5
Pradesh. ITC's E-
choupal was the result of
this initiative.
"Reaching your product to remote locations spread over 600,000 villages and
poor infrastructure - roads, telecommunication etc and lower levels of literacy
are a few hinges that come in the way of marketers to reach the rural market,"
says MART managing director Pradeep Kashyap.

Citing other challenges in rural marketing, Patankar says, "Campaigns have to

be tailor made for each product category and each of the regions where the
campaign is to be executed. Therefore a thorough knowledge of the nuances of
language, dialects and familiarity with prevailing customs in the regions that
you want to work for is essential. The other challenge is the reach and the
available means of reaching out to these markets, hence the video van is one of
the very effective means of reaching out physically to the rural consumers."

The fact of the matter remains that when compared to the Indian urban society,
which is turning into a consumerism society; the rural consumer will always
remain driven by his needs first and will therefore be cost conscious and thrifty
in his spending habits. "Decision-making is still conscious and deliberated
among the rural community. But nevertheless, the future no doubt lies in the
rural markets, since the size of the rural market is growing at a good pace. There
was a time when market predictions were made on the basis of the state of the
monsoon but this trend has changed over the years; there is a large non farming
sector, which generates almost 40 per cent of the rural wealth. Hence the growth
in the rural markets will be sustained to a large extent by this class in addition to
the farmer who will always be the mainstay of the rural economy," affirms
Patankar.

"Although the melting of the urban - rural divide will take a while, this is not for
want of the availability of the means but for want of the rural consumer's
mindset to change; which has its own
logic, which is driven by tradition,
custom and values that are difficult to
shed," he points out.

Fulcrum's Gowthaman says, "The

biggest impending factor or deterrent
on rural monies going up is that there
is a general sense of trying to
benchmark cost per contact (CPC). Satellite dish antennas reach rural
The television CPC is going to India
anyways be cheaper to rural CPC and unless and until the volume - value
equation turns the other way round, you will not be able to spend
disproportionate monies in the rural market."

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 For HLL, a one rupee or a five rupee sachet or the Kutti
Hamam (the small Hamam) helps in giving the
consumers a trial opportunity. While it does help in
generate volume but not in terms of values. "Till the
time that volume - value equation is managed better, the
CPC is preventing anybody to look at rural at a large
scale activation programme," reiterates Gowthaman.
Typical shop in rural Ultimately, the ball lies in the court of rural marketers.
India stcked with It's all about how one approaches the market, takes up
sachets, etc the challenge of selling products and concepts through
innovative media design and more importantly interactivity.

Anugrah Madison's chairman and managing director RV Rajan sums up, "There
is better scope for language writers who understands the rural and regional pulse
better. I also see great scope for regional specialists in the areas of rural
marketing - specialists like Event Managers, Wall painters, folk artists, audio
visual production houses. In fact all those people who have specialised
knowledge of a region are bound to do well, thanks to the demands of the rural
marketers."

So the fact remains that the rural market in India has great potential, which is
just waiting to be tapped. Progress has been made in this area by some, but there
seems to be a long way for marketers to go in order to derive and reap
maximum benefits. Moreover, rural India is not so poor as it used to be a decade
or so back. Things are sure a changing!

Rural Marketing - Concept

In 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 agricultural marketing – the latter
denotes marketing of produce 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.
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 What makes Rural Market Attractive?

Rural market has following arrived and the following facts substantiate this:

 742 million people

 Estimated annual size of the rural market
o FMCG Rs 65,000 Crore
o Durables Rs 5,000 Crore
o Agri-inputs (incl. tractors) Rs 45,000 Crore
o 2 / 4 wheelers Rs 8,000 Crore
 In 2001-02, LIC sold 55 % of its policies in rural India.
 Of two million BSNL mobile connections, 50% in small towns/villages

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 Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT)
 41 million Kisan Credit Cards issued (against 22 million credit-plus-debit
cards in urban) with cumulative credit of Rs 977 billion resulting in
tremendous liquidity.
 Of 20 million Rediffmail signups, 60 % are from small towns. 50%
transactions from these towns on Rediff online shopping site
 42 million rural HHs availing banking services in comparison to 27
million urban HHs.
 Investment in formal savings instruments: 6.6 million HHs in rural and
6.7 million in urban

Rural Consumer Insight

 Rural India buys:

o Products more often (mostly weekly)
o 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
o Chik shampoo, second largest shampoo brand
o Ghadi detergent, third largest brand
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  Fewer brand choices in rural: number of FMCG brand in rural is half that
of urban
 Buy value for money, not cheap products

Some Myths about Rural Markets

I. Myth-1: Rural Market Is a Homogeneous Mass

Reality: It’s a heterogeneous population. Various Tiers are present depending

on the incomes like Big Landlords; Traders, small farmers; Marginal farmers:
Labors, artisans. State wise variations in rural demographics are present viz.
Literacy (Kerala 90%, Bihar 44%) and Population below poverty line (Orissa
48%, Punjab 6%)

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II. Myth-2: Disposable Income Is Low

Reality: Number of middle class HHs (annual income Rs 45,000- 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.

III. Myth-3: Individuals Decide About Purchases

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
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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 variations within each village though nationally it follows a consistent
pattern. The main problems in rural marketing are:

 Understanding the rural consumer

 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 significantly different from the marketing
strategies aimed at an urban or industrial consumer.

Opportunities

 Infrastructure is improving rapidly.

o In 50 years only 40% villages connected by road, in next 10 years
another 30%
o More than 90 % villages electrified, though only 44% rural homes
have electric connections
o 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 1991 and 2005

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 o Number of “pucca” houses doubled from 22% to 41% and
“kuccha” houses halved (41% to 23%)
o Percentage of BPL(Below Poverty Line) families declined from
46% to 27%
o Rural Literacy level improved from 36% to 59%
 Low penetration rates in rural so there are many marketing opportunities
Durables Urban Rura Total (% of rural HH)
l
CTV 30.4 4.8 12.1
Refrigerator 33.5 3.5 12.0
FMCGs
Shampoo 66.3 35.2 44.2
Toothpaste 82.2 44.9 55.6
 Marketers can make effective use of the large available infrastructure
o Post offices 1,38,000
o Haats (periodic markets) 42,000
o Melas (exhibitions) 25,000
o Mandis (agri markets) 7,000
o Public distribution shops 3,80,000
o Bank branches 32,000
 Proliferation of large format rural retail stores which have been successful
also.
o DSCL Haryali stores
o M & M Shubh Labh stores
o TATA/Rallis Kisan Kendras
o Escorts rural stores
o Warnabazaar, Maharashtra (annual sale Rs 40 crore)

Company Profile

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Set up in 1964 as a joint venture with UK-based James Finlay and Company to
develop value-added tea, the Tata Tea Group of Companies, which includes
Tata Tea and the UK-based Tetley Group, today represent the world's second
largest global branded tea operation with product and brand presence in 40
countries. Among India's first multinational companies, the operations of Tata
Tea and its subsidiaries focus on branded product offerings in tea but with a
significant presence in plantation activity in India and Sri Lanka.

The consolidated worldwide branded tea business of the Tata Tea Group
contributes to around 86 per cent of its consolidated turnover with the remaining
14 per cent coming from Bulk Tea, Coffee, and Investment Income. The
Company is headquartered in Kolkata and owns 27 tea estates in the states of
Assam and West Bengal in eastern India, and Kerala in the south.

Products & Brands

The company has five major brands in the Indian market - Tata Tea, Tetley,
Kanan Devan, Chakra Gold and Gemini -- catering to all major consumer
segments for tea. The Tata Tea brand leads market share in terms of value and
volume in India and the Tata Tea brand is accorded "Super Brand" recognition
in the country. Tata Tea's distribution network in the country with 38 C&F
agents and 2500 stockists caters to over 1.7 million retail outlets (ORG Marg
Retail Audit) in India.

The company has a 100% export-oriented unit (KOSHER & HACCP certified)
manufacturing Instant Tea in Munnar, Kerala, which is the largest such facility
outside the United States. The unit's product is made from a unique process,
Page 14
developed in-house, of extraction from tea leaves, giving it a distinctive
liquoring and taste profile. Instant Tea is used for light density 100% Teas, Iced
Tea Mixes and in the preparation of Ready-to- drink (RTD) beverages.

With an area of approx 15,900 hectares under tea cultivation, Tata Tea produces
around 30 million kg of Black Tea annually.

4P’s of Marketing of

TATA TEA

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1#

Product:

Bulk Tea

All grades of CTC Teas

All grades of Orthodox Teas

Organic Tea - Orthodox grades Teas

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are supplied in packaging as per ISO norms as well as customer requirements
viz. 4-ply Kraft Paper Sacks, Multiwall Paper Sacks, Rigid T--Sacks,
Polywoven Sacks, Currugated Fibre Carlons, Polylined Jute Bags etc.

Instant Tea

Instant Tea Division caters to customer specific product and are used for light
density 100% Teas, Iced Tea Mixes and in the preparation of Ready to Drink
(RTD) beverages. Instant Tea powder is packed in bulk packages of 20/25/35
kg each.

Intant tea powder - heavy density

Instant tea powder - institutional density
Instant tea powder - grocery density
Micro milled instant tea powder

2#

Price:

Marketers need to understand the psyche of the rural consumers and then act
accordingly. Rural marketing involves more intensive personal selling efforts
compared to urban marketing. Firms should refrain from designing goods for
the urban markets and subsequently pushing them in the rural areas. To
effectively tap the rural market a brand must associate it with the same things
the rural folks do. This can be done by utilizing the various rural folk media to
reach them in their own language and in large numbers so that the brand can be
associated with the myriad rituals, celebrations, festivals, “melas” and other
activities where they assemble.
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All the prices of the products depend upon the package ie 50gms or 100gms.

Normally a Penetrating Strategy is used frequently

3#

Place: (Distribution)

One of the ways could be using company delivery vans which can serve two
purposes- it can take the products to the customers in every nook and corner of
the market and it also enables the firm to establish direct contact with them and
thereby facilitate sales promotion.

However, only the bigwigs can adopt this channel. The companies with
relatively fewer resources can go in for syndicated distribution where a tie-up
between non-competitive marketers can be established to facilitate distribution.
Annual “melas” organized are quite popular and provide a very good platform
for distribution because people visit them to make several purchases. According
to the India n Market Research Bureau, around 8000 such melas are held in
rural India every year.

Rural markets have the practice of fixing specific days in a week as Market
Days (often called “Haats’) when exchange of goods and services are carried
out. This is another potential low cost distribution channel available to the
marketers. Also, every region consisting of several villages is generally served
by one satellite town (termed as “Mandis” or Agri-markets) where people prefer
to go to buy their durable commodities. If marketing managers use these feeder
towns they will easily be able to cover a large section of the rural population.

4#

Promotion:

Firms must be very careful in choosing the vehicle to be used for

communication. Only 16% of the rural population has access to a vernacular
newspaper. So, the audio visuals must be planned to convey a right message to
the rural folk. The rich, traditional media forms like folk dances, puppet shows,
etc with which the rural consumers are familiar and comfortable, can be used
for high impact product campaigns.

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 Some Live Examples

1. One very fine example can be quoted of Escorts where they

focused on deeper penetration. They did not rely on T.V or press
advertisements rather concentrated on focused approach depending on
geographical and market parameters like fares, melas etc. Looking at the
‘kuchha’ roads of village they positioned their bike as tough vehicle. Their
advertisements showed Dharmendra riding Escort with the punch line
‘Jandar Sawari, Shandar Sawari’. Thus, they achieved whopping sales of
95000 vehicles annually.

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 2. HLL started ‘Operation Bharat’ to tap the rural markets. Under this
operation it passed out low–priced sample packets of its toothpaste, fairness
cream, Clinic plus shampoo, and Ponds cream to twenty million households.

3. ITC is setting up e-Choupals which offers the farmers all the

information, products and services they need to enhance farm productivity,
improve farm-gate price realization and cut transaction costs. Farmers can
access latest local and global information on weather, scientific farming
practices as well as market prices at the village itself through this web portal
- all in Hindi. It also facilitates supply of high quality farm inputs as well as
purchase of commodities at their doorstep.

4. BPCL Introduced Rural Marketing Vehicle (RMV) as their

strategy for rural marketing. It moves from village to village and fills
cylinders on the spot for the rural customers. BPCL considered low-income
of rural population and therefore introduced a smaller size cylinder to reduce
both the initial deposit cost as well as the recurring refill cost.

ANALYSIS OF DATA

Questionnaire has been divided in parts as follows:

• General awareness about Rural Market

• Strategically changes required for Rural marketing

General awareness about Rural Market

Q1. According to you Indian Rural Market have huge potential?

A] YES B] NO
Page 20
Q2. Rural Culture/Many Languages is barrier for the companies regarding
selling and marketing their product?
A] YES B] NO
Q3. Rural Market Is a Homogeneous Mass?
A] YES B] NO
Q4. Disposable Income(Spending ability) Is Low?
A] YES B] NO
Q5. Standard for living and Low Per Capita income are reason for low sales?
A] YES B] NO

YES NO TOTAL
245 55 300

yes
no

Strategically changes required for Rural marketing

Q6. Poor Infrastructure facilities is creating problem for companies?

A] YES B] NO
Q7. Lack of Communication system in Rural Area is creating problem for
effective communication?
A] YES B] NO
Q8. Company should come up with innovative marketing strategies for Rural
Mraket?

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 A] YES B] NO
Q9. According to you Government should help the companies to develop
Rural Market?
A] YES B] NO
Q10. Rural Marketing cannot be neglected?
A] YES B] No

YES NO TOTAL
273 27 300

yes
no

FINDINGS & CONCLUSION

 About 80% of people are aware about the Rural Market condition and
they think that Rural Market have huge potential and need lot of
marketing efforts to exploit this market condition.

 About 90% of people think there is need to change business strategies

and marketing strategies for survival and growth in the rural market and
government should provide better facilities to companies and business
persons. Lot of innovative marketing strategy should be develop and
applied as per the need of rural market.

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Thus 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.

REFERENCES

Bibliography
 Rural Marketing Pradeep Kashyap
 Rural Marketing Siddhartha Raut

Webliography
 www.google.com

 www.flipkart.com

 www.wikipedia.com

Page 23
 ANNEXTURE
Hello Sir/Madam
This questionnaire is regarding research to study how and up to what extent you
as an individual think about Rural Market.

Researcher : Umesh A. Parulekar

------------------------------------------------------------------------------------------------
Name:
Age: Gender: Occupation:

Q1. According to you Indian Rural Market have huge potential?

Page 24
 A] YES B] NO
Q2. Rural Culture/Many Languages is barrier for the companies regarding
selling and marketing their product?
A] YES B] NO
Q3. Rural Market Is a Homogeneous Mass?
A] YES B] NO
Q4. Disposable Income(Spending ability) Is Low?
A] YES B] NO
Q5. Standard for living and Low Per Capita income are reason for low sales?
A] YES B] NO
Q6. Poor Infrastructure facilities is creating problem for companies?
A] YES B] NO
Q7. Lack of Communication system in Rural Area is creating problem for
effective communication?
A] YES B] NO
Q8. Company should come up with innovative marketing strategies for Rural
Mraket?
A] YES B] NO
Q9. According to you Government should help the companies to develop
Rural Market?
A] YES B] NO
Q10. Rural Marketing cannot be neglected?
A] YES B] No

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