Rural Marketing

PROJECT WORK
PAPER NO. XXXVII
(OPTION B) TERM PAPER

UNDER THE GUIDANCE OF

MENTOR: MS. REETIKA JAIN

SUBMITTED BY
NAME: RITIKA SETH
COLLEGE ROLL NO: 1336
UNIVERSITY ROLL NO: HR-460/05
ACADEMIC SESSION: 2007-08
HANSRAJ COLLEGE
UNIVERSITY OF DELHI
 DECLARATION

I, Ritika seth, student of B.Com (Hons) 3rd year, hereby declare that the project work on
Rural Marketing – Switching on in Rural India is my original piece of work. It is done
according to my true understanding and knowledge of the subject and is not copied
from any published source or website.

(Ritika Seth)
(Name and signature of student)

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 ACKNOWLEDGEMENT

As a student of commerce, I have gone through a vast amount of literature and material
available on the topic “Rural Marketing – Switching on in rural India”. I feel indebted to
several authors and researchers who helped me a lot in understanding various issues
relating to my topic.

I am also grateful to my mentor Ms Reetika Jain for her guidance, support, patience and
excellent corrections. Her experience and expert knowledge inspired me reach beyond
my limits and capabilities. In addition, I sincerely thank my family and friends who
provided me their support.

(Ms. Reetika Jain) (Ritika Seth)

(Name and signature of Mentor) (Name and signature of student)

3
 Index
Declaration

Acknowledgement

Chapter Contents Page No.

1 Introduction

1.1 Need for study

1.2 Objective of study

1.3 Limitation of study

1.4 Plan of study

2 Rural marketing in India

2.1 Types of rural markets

2.2 What makes rural markets attractive

2.3 Factors for rural market boom

3 Rural Market - A World of Opportunity

3.1 Characteristics of Rural marketing environment

3.2 Opportunities

4 Does the Rural Market like it hot or cold?

5 Selling in rural India

5.1 The 4A approach
5.2 Developing marketing mix for rural markets
5.3 People power
6 Case Study(ITC’s E-choupal)
7 Problems relating to marketing in rural area
8 Suggestions
9 Conclusion
References

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 Chapter-1

INTRODUCTION
Rural Markets constitute an important segment of overall economy. Typically, a rural
market will represent a community in a rural area with a population of 2500 to 3000
people.
Rural marketing is as old as the civilization. Surplus of agro - products are
exchanged in earlier days in the barter system. The introduction of currency, transport,
and communication has increased the scope of rural market. Here we’ll discuss the
present scenario of rural marketing especially rural produce, and its importance, current
trends, and highlights certain problems related to rural marketing. Further the
improvements which make the rural marketing system most effective.
Marketing of agricultural production has received adequate attention of researchers,
policy makers, and central and state governments. This has resulted in establishment of
regulated markets with an aim to see that the agricultural produce get better price. The
advent of commercial and market oriented farming, with the help of modern agricultural
technology, necessitated the use of manufactured inputs like fertilizers, pesticides, high
yielding varieties of seeds to improve rural produce.
.
Need for study

The rural market has changed drastically in the past one decade. A decade ago, the
rural market was more unstructured and was not a prioritized target location for
corporate. Very few companies, mainly the agro-based ones, were concentrating in
these markets. There were no innovative strategies and promotional campaigns. A
distribution system did exist, but was feeble. Illiteracy and lack of technology were the
other factors leading to the poor reach of products and lower level of awareness
amongst villagers.
Gradually, corporate realized that there was saturation, stiff competition and clutter in
the urban market, and a demand was building up in rural areas. Seeing the vast

5
potential of 75 per cent Indians living in rural areas, they started focusing on these
unexplored, high-potential areas.
Companies came up with special rural products, like Chic Shampoo sachets @ Re 1,
Parle G Tikki Packs @ Rs 2, customized TVs by LG, Shanti Amla oil by Marico. All
these brought positive results for them.
Also, campaigns like Project Bharat by Hindustan UniLever, where trials were
generated across India in 1999. In the first phase, they covered 11.5 million rural
households and increased awareness by 41 per cent.
Project Jagruti in the second phase by Colgate Palmolive India was a village consumer
contact programme in 2001. It increased penetration of Colgate Dental Cream by
doubling the villages from 33,000 to 55,000, reaching to a million houses. Such projects
lead to increased penetration of products in rural areas.
As a result, retail outlets have sprung up in practically all the villages that store products
of various brands and categories. Also, high congregation areas, like fairs, haats,
markets etc. are proving to be an important marketing tool since clusters of target
audience can be tapped at the same time and place.

Rural Marketing - The Future of Indian Industry.

Indian agricultural industry has been growing at a tremendous pace in the last few
decades. The rural areas are consuming a large number of industrial and urban
manufactured products. The rural agricultural production and consumption process
plays a predominant role in developing the Indian economy. This has designed a new
way for understanding a new process called Rural Marketing. The concept of rural
marketing has to be distinguished from Agricultural marketing.
Marketing is the process of identifying and satisfying customers needs and providing
them with adequate after sales service. Rural marketing is different from agricultural
marketing, which signifies marketing of rural products to the urban consumer or
institutional markets. Rural marketing basically deals with delivering manufactured or
processed inputs or services to rural producers, the demand for which is basically a
derived outcome. Rural marketing scientists also term it as developmental marketing, as

6
the process of rural marketing involves an urban to rural activity, which in turn is
characterized by various peculiarities in terms of nature of market, products and
processes.
The importance of rural marketing can be understood from the fact that today modern
inputs i.e. diesel, electricity, fertilizers, pesticides, seeds account for as much as 70% of
the total cash costs and 23% of the total costs incurred by the farmers in the Green
Revolution areas. Further the percentages were higher at 81% and 38% for small;
farmers owning 1.85 hectares of land.

Objective of study

The main objective of study is to analyze and present marketing of consumer products
in rural areas. To set direction for the study, the following objectives have been set forth.
They are to:-
1. present a rural market perspective,
2. present a profile of rural market,
3. study and analyze consumer behaviour in rural areas
4. examine the product and brand penetration in rural markets,
5. analyze marketing of consumer products in rural markets, and
6. Present strategic framework for marketing consumer products in rural areas.

Limitation of study

• Due to time constraint, in depth study on the topic could not be done.

• The main source of this project is relevant books, newspapers and internet.

• More statistical data or graphs could have been provided.

• Main focus is on the recent trends in rural marketing but initial researches are not
been properly studied.

7
Plan of study

 In the very first chapter, an introduction about the scope of rural marketing
is given. Since urban market is saturated and there are plenty of
opportunities of marketing in rural areas, they should start focusing on rural
areas and try to make profits by fulfilling their needs.

 Second chapter talks about scope of rural marketing in India.

 Third chapter discusses the various characteristics and opportunities

provided by rural market.

 Fourth chapter talks about the views of Marshall McLuhan and Harold
McInnis. They characterised all advertising media into 2 categories – Hot
(print media) and Cool (television).

 Fifth chapter contains the marketing mix to be used in rural India, and the
4A Approach.

 Sixth chapter discusses the most famous case study of ITC’s E-Choupal.

 Problems relating to rural marketing have been discussed in Seventh

chapter.

 Some suggestions have been given in chapter Eight to improve the rural
marketing structure in India.

 Chapter nine contains the conclusion.

8
 Chapter-2

RURAL MARKETING IN INDIA

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, as also in several other countries, like China, is still in evolving shape,
and the sector poses a variety of challenges, including understanding the dynamics of
the rural markets and strategies to supply and satisfy the rural consumers.
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.
Urban markets have reached a saturation level and further tapping them with high profit
margin is difficult. Competition is tough & many firms have to incur heavy promotional
expenditure. Also the awareness level of consumers is high and therefore product
features have to be changed often.
On the contrary, the rural markets are Green pastures for any marketer provided his
marketing plans are attuned to specialties of rural markets. The rural market is growing
fastly as compared to the urban markets. Being a new market, it could be easily
mended. The potentiality of rural markets is said to be is like a “WOKEN UP SLEEPING
GIANT”.

Types of Rural Markets

 HAATS /SANDIES (mostly for weekly market for all commodities)

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  MANDIS (mostly for all types of grains)
 Commodity Specialized Markets
Nasik for onions and Grapes market, Nagpur for Orange market, Kashmir for Apples
market, Farkka market for potato market and Assam for tea market.

What Makes Rural Markets Attractive?

Rural market has following attributes and the following facts substantiate this: -
 742 million people
 Estimated annual size of the rural market –

FMCG Rs. 65,000 Crore

Durables Rs. 5,000 Crore
Agri-Inputs (including tractors) Rs. 45,000 Crore
2 / 4 Wheelers Rs. 8,000 Crore
Source: - Rural marketing in India
Ruchika Ramakrishnan
 In 2001-02, LIC sold 55% of its policies in rural India.
 Of two million BSNL mobile connections, 50% are in small towns / 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 formal savings instruments is 6.6 million HHs in rural and 6.7
million HHs in urban
Rural population has been increased about 74% of the total population; the
demand for products and services has increased a lot in rural areas. Green revolution
in the North and white revolution in the West has brought about a new prosperity in

10
the lives of rural people. Government emphasis on rural development has caused
significant changes in the rural scenario. Moreover, the special attention given for
infrastructure development through the successive Five-year plans has improved the
buying and consumption pattern of rural people.

Factors for Rural Market Boom

1. Increase in population and hence increase in demand. The rural population in

1971 was 43.8 crores which increased to 52.5 crores in 1981 to 61.1 crores in
1991 & to 73.6 crores in 2001.
2. A marked increase in rural income due to agrarian prosperity.
3. Large inflow of investment for rural development programmes from government
and other sources.
4. Increased contact of rural people with their urban counterparts due to
development of transport and communication network.
5. Increase in literacy and education level and resultant inclination to sophisticated
living.
6. Inflow of foreign remittances and foreign made goods to rural areas.
7. Change in the land tenure system causing a structural change in the ownership
patterns and consequent changes in the buying behavior.

The general rise in the level of prosperity has resulted in two dominant shifts in the rural
consuming system:-
1. The conscious consumption of consumer durables.
2. The preference for branded goods.

Chapter-3

11
 RURAL MARKET - A WORLD OF OPPORTUNITY

GONE ARE the days when a rural consumer went to a nearby city to buy
“branded products and services”. Time has gone when only a select household
consumed branded goods, be it tea or jeans. There were days when only big
companies flocked to rural markets to establish their brands. Today, rural markets are
critical for every marketer - be it for a branded shampoo or an automobile. Time was
when marketers thought van campaigns, cinema commercials and a few wall paintings
would suffice to entice rural folks under their folds. Thanks to television, today a
customer in a rural area is quite literate about myriad products that are on offer in the
market place.
Trends indicate that the rural markets are coming up in a big way and growing twice as
fast as the urban, witnessing a rise in sales of typical urban kitchen gadgets such as
refrigerators, mixer-grinders and pressure cookers. According to a National Council
for Applied Economic Research (NCAER) study, there are as many 'middle income and
above' households in the rural areas as there are in the urban areas. There are almost
twice as many 'lower middle income' households in rural areas as in the urban areas.
At the highest income level there are 2.3 million urban households as against 1.6
million households in rural areas. According to Mr. D. Shiva Kumar, Business Head
(Hair), Personal Products Division, Hindustan UniLever Limited, the money available to
spend on FMCG (Fast Moving Consumer Goods) products by urban India is Rs. 49,500
crores as against is Rs. 63,500 crores in rural India.
The study of ownership of goods indicates some trend. It segments durables under 3
groups:-
1. Necessary Products:- Transistors, Wrist watch, Bicycle
2. Emerging Products:- Black & White T.V. and Cassette recorder
3. Lifecycle Products:- Colour T.V. and Refrigerator
Marketers have to depend on rural India for the first two categories for growth and size.
Even in lifestyle products, rural India will be significant over next five years.

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At a recent seminar in Chennai on 'rural marketing for competitive advantage in
globalize India', organized by Anugrah Madison Advertising Pvt Limited, marketing
pundits have echoed that a sound network and a thorough understanding of the rural
market is a must for making inroads into rural markets. The price-sensitivity of a
consumer in a village is something the marketers should be alive to. Rural income
levels are largely determined by the vagaries of monsoon and, hence, the demand there
is not an easy horse to ride on. Apart from increasing the geographical width of their
product distribution, the focus of corporate should be on the introduction of brands and
develop strategies specific to rural consumers. Britannia Industries launched Tiger
Biscuits especially for the rural market. It clearly paid dividend. Its share of the
glucose biscuit market has increased from 7 per cent to 15 per cent. Similarly,
Hindustan Unilever limited (HUL) has successfully influenced the rural market for its
shampoos in sachets. The sachet strategy has proved so successful that, according to
an ORG-MARG data, 95% of total shampoo sales in rural India by sachets.

Characteristics of Rural marketing environment

Rural markets are virgin markets and their size is compelling and attractive. The rural
marketing environment reveals that there are opportunities as well as problems.
While size is an advantage, the problems are scattered markets, poor standard of living
and socio-economic and cultural backwardness because of which special marketing
strategies are needed.
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 connections.
 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 -

13
 Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses
halved (41% to 23%).
 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 (exhibitions) 25,000
Mandis (agri markets) 7,000
Public Distribution Shops 3,80,000
Bank Branches 32,000
Source: - Rural marketing in India
Ruchika Ramakrishnan
Proliferation of large format Rural Retail Stores, which have been successful also
 DSCL Haryali Stores
 M & M Shubh Labh Stores
 TATA / Rallis Kisan Kendras
 Escorts Rural Stores
 Warnabazaar, Maharashtra (Annual Sale Rs. 40 crore)
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.

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 Chapter-4
DOES THE RURAL MARKET LIKE IT HOT OR COLD?

It is a well-known fact that traditional marketing research tools and techniques used in
urban areas are not applicable in the rural context. The reasons for that can be
explained using theories on media and culture of Marshall McLuhan and Harold
McInnis.
In an urban individualistic society, literacy rates are higher due to the rapid
industrialization provided by mechanized means. The Urban Man is therefore passive,
individualistic in nature, being brought up on technology, primarily print, i.e., books. In
an illiterate collectivistic culture, affiliation needs are stronger; therefore, a villager's
highest priority is to identify himself with his tribe. There is a feeling of collective identity
felt by the villager. The rural culture is by nature, non-linear, collectivistic and irrational
unlike a linear, sequential and rational urban culture.

Traditional research tools are ineffective owing to reasons stated in the above. It is
therefore, imperative for the marketer to develop appropriate research tools so as

15
to capture rural consumer information and insights. Here, I would like to identify
what kind of tools may be used based on the interaction between a medium/technology
and a cultural set-up.
According to McLuhan, any form of media creates an extension of the senses, i.e., it
may extend one sense's definition or amplify it, while numbing other senses. McLuhan
distinguishes all media as Hot/Cool based on their effects on the senses. Hot
media such as print media emphasis the use of one dominant sense, namely visual
sight. Hot media is exclusive since the dominant visual sense numbs the rest. Further,
hot media contain high information content, which means that the recipient has no
participatory role in the interaction.
Cool media, such as television, are inclusive in nature; encouraging interplay of all the
five senses, i.e., television encourages participatory nature of all the five senses. The
above is due to the fact that cool media contain low information content, based on which
the recipient plays an active role in the interaction process.
There is an important observation at this moment. Literacy campaigns may not be
effective when television penetration in the rural areas increases. The reason is simple.
The rural child `looks' at the entire image on television and does not `r-e-a-d' the image.
Therefore, when the rural child, well exposed to television, is made to read a book,
which is linear and sequential in nature, the child is not well equipped to comprehend
the alphabet.
Following are some of the informal or Rural specific media:-
1. Audio visual vans
2. Stage shows, plays, puppet shows performed at village melas and temple
festivals
3. Demonstrations
4. Study classes
5. Mike announcements and processions
6. A photograph/painting is highly visual and supplies more information than that
can be processed by the rural consumer (hot media). In their place, cartoons or
caricatures, which lack information, are cool media sources which provide a
participatory role of all the five senses.

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 7. Decorated bullock carts and caparisoned elephants carrying advertisement
panels
8. Music records
9. House to house campaigns
10. Information centers on company’s products
11. Games can be used as effective marketing research tools, which involve
collective participation of the tribe.

Studying rural consumers in their natural environments is a better research technique

that may be employed instead of using CLTs (central location tests), which are non-
indicative of their natural surroundings.

Care needs to be taken so as to respect the hierarchical, rigid, social class structure of
the rural village owing to their time and tradition-rooted culture. A deep understanding
of how media affects a cultural set-up can help develop the relevant market
research tools to understand that particular set of people sharing the same
beliefs and norms.

Before gamboling into issues like where the Indian rural market stands and the
opportunities for corporate 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 some facts and figures. The Indian rural market today accounts for only about Rs 8

17
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.
Today Market practitioners have realized 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 UniLever Limited (HUL) is top of the mind with their successful rural
marketing projects like 'Project Shakti' and 'Operation Bharat'. Amul is another case in point
of aggressive rural marketing. Some of the other corporate 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.

Khaitan fans' ad on a horse cart Wheel's wall 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 is 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
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. 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

18
 looking for a national strategy in rural marketing and help them
in executing it across different regions.
Interestingly, the rural market is growing at a far greater speed
than its urban counterpart. "All the data provided by various
agencies like National council of Applied Economic research
(NCAER), Francis Kanoi etc reiterates this fact.

Lifebuoy's wall painting

in rural India

"Yaara da Tashan..." McCann Erickson's ads with Aamir Khan created universal
appeal for Coca Cola
Coca-Cola India tapped the rural market in a big way when it introduced bottles priced at Rs
5 and backed it with the Aamir Khan ads.
Clearly the main challenge that one faces while dealing with rural marketing is the
basic understanding of the rural consumer who is very different from his urban counterpart.
Also distribution remains to be the single largest problem marketers face today when it
comes to going rural. "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

19
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.
"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). The television
CPC is going to anyways be cheaper to Satellite dish antennas reach rural India
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."

20
 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.
Ultimately, the ball lies in the court of rural

Typical shop in rural India stocked marketers. It's all about how one approaches the
with sachets, etc market, takes up 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 specialized 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 as poor as it
used to be a decade or so back. Things are sure a changing!

It's a twin-pronged strategy that has worked brilliantly for LG Electronics, India. Two
years ago the company's top brass was debating how to reach out to rural India.
At one level, the company figured it needed new cheaper products to lure the rural
buyer. At another level, it figured that more offices in smaller towns and cities were the
need of the hour.

21
LG moved quickly on both fronts. At one level, it has introduced cheaper products like it
Sampoorna television range. At another it has gone on an office-opening spree in
India's smaller towns. Currently, it has 40 branch offices. That will climb to 150 by year
end.
Says Anil Arora, head, marketing, LG India: "A chunk of our revenue was coming from
that segment and there was potential to grow it even further. Greater penetration has
meant greater focus."
But LG isn't the only white goods manufacturer that is striking deep into rural India.
There's also Mirc Electronics which late last year launched its Operation Vistaar
(meaning expansion).
Mirc is already selling a second-string brand Igo which is slightly cheaper than its Onida
range. Mirc says that both Igo and Onida are selling in the rural areas. Recently the
company has hired another 100 people for its Igo team.
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.
By comparison, 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 Videocon Appliances.
Leading the way is LG. In 2002, 60 per cent of its turnover came from the urban market.
Today, that's down to 40 per cent. The majority of LG's revenues are now coming from
smaller towns like Hapur, Trichy, Jorhat and Asansol.
Videocon, which sells about 40 per cent of its products in the rural areas, has just begun
a fresh thrust to boost sales outside the metros. It's hoping that by year end about 55
per cent of total sales will come from the rural areas. But it isn't designing new products
for rural customers.
Some companies are playing the game slightly differently. Samsung, for instance,
insists that it's a high end technology driven player. That's why the urban areas are still
a focus area for it and only 30 per cent of revenue comes from rural and semi-urban
India. "We have always been a hi-end technology driven player and want to keep that
equity," says Zutshi.

22
Nevertheless, in the last two years, Samsung has looked at increasing awareness and
penetration of its products in second rung cities like Bhuj, Porbandar and Jalandhar.
The Samsung Dream Home road shows across the length and breadth of the country
have been a step in this direction. "We don't have a rural model or different pricing
strategy. But the products are focused on semi-urban or urban markets," says Zutshi.
Similarly, Mirc says it had to be careful about diluting the Onida brand. Igo, at Rs 5,000
for a 14-inch TV is priced Rs 500 to Rs 700 lower than the national brands.
At another level, there's Godrej Appliances that has learnt its rural lessons through trial
and error. Today, it is present in 900 towns of which 450 have a population above
100,000. Another 250 are towns with less than 100,000 residents.
Says Soumitra Ghatak, executive vice president, Godrej Appliances, "There is money
today in the rural household. So clearly we're looking at dropping anchor. The fear is not
being on their radar."
To match its new aims, for the first time, Godrej will be advertising on Doordarshan. Till
now the company has always advertised on cable television. The company has also
redefined its target group from SEC A, B and C to SEC D as well. Godrej's direct cool
refrigerator range starts at Rs 6,500.
Godrej admits that it fumbled on the way when it tried to sell cheaper products. Two
years ago it tried to sell a stripped- down fridge called Champion with only half a
freezer.
However, sales did not pick up so it had to be resigned and relaunched with a full
freezer. "Product features are important, rural customers are just as aware as the
urban," says Ghatak.
But LG's example shows that revenues can rise quickly if you get the mix right. The
company says that earlier a single branch office catered to Chandigarh, Jammu &
Kashmir, Punjab and generated Rs 18 crore (Rs 180 million) per month.
Now with more branches, revenue in the same area has gone up to Rs 50 crore (Rs
500 million) per month. Similarly other states like Rajasthan now have two branches --
Jodhpur and Jaipur -- instead of one.
The company has also taken other initiatives like 65 Remote Area Offices under the
branch offices that are empowered to directly link to the central billing system for orders,

23
230 service centers and 2,600 mobile authorized service personnel for villages having
below 10,000 residents. All these moves are part of LG's efforts to push turnover to a
whopping Rs 7,000 crore (Rs 70 billion) by year-end.
A city dealer will today sell a CTV by cutting into his margin, closer to the dealer price
rather than the marked retail price. So while he makes 5 percent to 7 percent, rural
dealers make 7 percent to 10 percent on a sale. "Volume makes up in the city whereas
value makes up in the rural area," says an industry observer.
Also, the increased rural focus doesn't mean the urban market will suffer. Samsung,
Onida and even LG are aggressively looking at the urban replacement market for their
hi-end premium product range.
"Cracking the rural market is easier said than done," says Godrej's Ghatak. Adds an
industry observer, "The rural market will not be about pricing but about how the
customer is serviced and treated. If one consumer is not happy, the entire village will
know and the company can then kiss that market goodbye."

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 Chapter-5
SELLING IN RURAL INDIA

Opportunity
The Indian rural market with its vast size and demand base offers a huge opportunity
that MNC’s can’t afford to ignore. With 128 million households, the rural population is
nearly 3 times the urban.
As a result of the growing affluence, fueled by good monsoon and the increase in
agricultural output, rural India has a large consuming class with 41% of India’s middle
class and 58% of total disposable income.
The rural market accounts for close to 70% of toilet -soap users and 38% of two-
wheeler purchased. It also accounts for half the total market for TV. Sets, fans, pressure
cookers, bicycles, washing soap, blades, tea, salt and toothpowder. This emphasizes
the importance of rural market for some FMCG’s.

The 4A Approach

The rural market may be alluring but it is not without its problems such as low per capita
disposable income; large number of daily wage earners; acute dependence on vagaries
of monsoon; seasonal consumption linked to harvests and festivals and special
occasions; poor roads; power problems; and inaccessibility to conventional advertising
media.

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

The more daring MNC’s are meeting the consequent challenges of availability, affordability,
acceptability and awareness (the so-called 4 As)

1. Availability
The first challenge is to ensure the availability of the product or service.
HUL has built a strong distribution system which helps its brands to reach the interiors
of the rural market. To service remote village, stockiest use auto rickshaws, bullock-

25
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. LG Electronics define all cities and towns other than the metro cities as
rural and semi-urban markets. To tap these unexplored markets, LG has set u 45 area
offices and 59 rural area offices.

2. 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 3 brands of Cinthol, Fair glow, and Godrej in 50 grams
packs, priced at Rs.4-5. HUL has launched a variant of Lifebuoy at Rs.2 for 50 grams.
Coca cola has addressed the affordability issue by introducing the returnable 200 ml
glass bottle priced at Rs.5

3. 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. In 1998, LG electronics develop a
customized T.V. for the rural market and christened it Sampoorna. It was a runway hit
selling 1,00,000 sets in 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 insurance companies that have made tailor
made products for the rural market have performed well. HDFC standard LIFE topped
private insurers by selling policies worth Rs.3.5 crore in total premia.
4. Awareness
With large parts of rural India inaccessible to conventional advertising media – only 41%
rural households have access to T.V. – building awareness is another challenge.
Fortunately, the rural consumer has the same likes as the urban consumer – movies
and music. However, the rural consumer expressions differ from his urban counterpart.
Outing for the former is confined to local fairs and festivals and T.V. viewing is confined

26
to the state owned Doordarshan. Consumption of branded products is treated as a
special treat or indulgence.
HUL relies heavily on its own company organized media. These are promotional events
organized by stockiest. Godrej consumer products use radio to reach the local people
in their language. Coca cola uses a combination of T.V., Cinema and radio to reach
53.6% of rural households. It has also used banners, posters and tapped all the local
forms of entertainment. LG electronics uses vans and road shows to reach rural
customers. The company uses local level advertising. Philips India uses wall writing
and radio advertising to drive its growth in rural areas.

Developing Marketing Mix for Rural markets

I. Identifying and selecting target markets

This is the toughest task for a marketer who has to deal with rural markets. What
exactly are rural markets? The criteria for Rural-Urban differentiation should be
analyzed to have a clear perception on the dominant factors that influence rural
consumer behavior. The factors to be considered are:-
1. Occupation
2. Environment
3. Size of community
4. Density of population
5. Heterogeneity and homogeneity of the population
6. Social differentiation and stratifications
7. Mobility
8. System of interaction
The marketer has to adopt a totally different approach in locating and identifying the
target market and relevant market segments for his products.

27
II. The Product Mix

The basic question is whether the products intended for urban elite class can be
marketed to rural consumers or product mix modifications are needed to suit the per
capita income, the product utility values, the habits and attitudes of rural people, etc.
Basically the product should be made available in small packaging, and should be
cheap also to suit the pocket of rural consumers. For example:-tea, cigarettes, PVC
chappals etc.
There can be following product strategies:-
i) Straight extension strategy
Same product with minimum modifications. E.g. only in packaging.
ii) Product adoption strategy
Products modified to suit the specific need. E.g. detergent powder in urban markets &
detergent cakes in rural markets.
iii) Backward invention strategy
Selling less complex products. E.g. electric sewing machine in urban markets &
manually operating machines in rural markets.
iv) Forward invention strategy
Developing entirely new products. E.g. tractor.

III. The Price Mix

Re-designing of product should be strictly in consonance with maintaining a low cost for
the products. E.g. Companies like Cavin Kare (Chik Shampoo, Meera Herbal Powder,
Fairever Cream and so on), Anchor (100 per cent vegetarian toothpaste), Ghadi
detergent powder and Power soap are proof that regional brands can become brands to
reckon with. And don't forget Nirma, the most enduring example of a brand that began
as a regional player and is now a giant. The price strategy should suit the quantum and
frequency of income receipt of rural people. However, low price should not be anyway
affecting the quality of products.

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IV. The Distribution Mix

Rural marketing problem is essentially a distribution problem. Though rural consumers

are aware of substitutes, they are compelled to accept the product available in the retail
outlets. Thus the producers may have a tie-up arrangement with the cooperative
institutions which are deep rooted in the villages to ensure regular supply of their
products. E.g. Ujala-blue is being regularly supplied & is available in all the retail outlets.
More and more companies turn to the local haats to sell their products. While haats
offer opportunities to target consumers from several villages at one place, and to that
extent make your effort cost-effective, ensure that the people who patronize these haats
are the kind who will buy your brand.
Studies also indicate that rural consumers prefer to shop for durables such as
televisions, automobiles and appliances in the nearest big town or city. So, if your
products are in towns with populations of 50,000, you're closer to the rural consumer
than you would have thought.

V. The Promotion Mix

The technological advancement in the field of T.V. has made it a powerful medium to
expose products to rural people. Radio continues to be the common medium to reach
them. Low literacy level does not warrant heavy advertisement in the print media.
Publicity through special shows, films, mobile vans painted walls and participation in
village haats and melas are good methods of promotion. Festival season is an apt
occasion for introducing new product.

29
People Power
Rural marketing efforts need special mindsets, which many of the urban-oriented
management graduates who are at the helm of affairs at most organizations do not
possess.
A separate marketing and sales vertical headed by people with passion and
commitment to rural marketing and supported by a field team that can face the rough
and tough of the vast country-side with courage and conviction is a must.
The best bet is to recruit students from specialized institutes such as the Indian Institute
of Rural Management, or at least, management graduates who have studied the subject
as an elective.
Many of these are students from small towns, people with fire in their bellies who want
to prove themselves in big companies and have no issues about working in smaller
markets. Pay them well - remember, you pay peanuts, you get only monkeys - and
discuss the path their careers are likely to take in the organization. And send them out
in the field only after thorough training.
Ensure the consistency of the team involved in any project, until the completion of a
specific task.

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 Chapter-6
CASE STUDY
ITC’S E-CHOUPAL

In 2000, ITC took an initiative to develop direct contact with farmers who lived in
far-flung villages in Madhya Pradesh. ITC's E-choupal was the result of this
initiative.

EChoupal is an initiative of ITC Limited (a large agricultural processing company in

India) to link directly with rural farmers for the procurement of agricultural/aquaculture
produce like soya, coffee, and prawns. E-Choupal was conceived to tackle the
challenges posed by the unique features of Indian agriculture, characterized by
fragmented farms, weak infrastructure and the involvement of numerous intermediaries.
Traditionally, these commodities were procured in 'mandis' (major agricultural marketing
centers in rural areas of India), where the middleman used to make the most of the
profit. These Middlemen used unscientific means to judge the quality of the product,
used to set the price, difference in the payout for good quality and inferior quality was
less and hence no incentive for the farmers to produce good quality yield. With e-
choupal role of the middleman is eliminated.
ITC Limited has now established computers and Internet access in key rural areas
where the farmers can directly negotiate the sale of their produce with ITC Limited. The
PCs and Internet access at these centers enable the farmers to obtain information on
mandi prices, good farming practices and place orders for agricultural inputs like seeds
and fertilizers. This helps farmers in improving the quality of produce, and also helps in
realizing a better price. Each ITC Limited kiosk having an access to Internet is run by a

31
sanchalak—a trained farmer. The computer housed in a farmer’s house is linked to the
Internet via phone lines or by a VSAT connection and serves an average of 600 farmers
in 10 surrounding villages within about a 5 km radius. The sanchalak bears some
operating cost but in return gets commissions for the e-transactions done through his E-
Choupal. The warehouse hub is managed by the middle-men called samyojaks. The
samyojak acts as a local commission agent for ITC Limited.
Due to the E-Choupal services, farmers have seen a rise in their income levels because
of rise in yields, improvement in quality of output and a fall in transaction costs. Even
small farmers have gained too. Customized knowledge is offered to the farmers despite
heterogeneity. Farmers can get real time information despite their physical distance
from the mandis. The system saves procurement costs for ITC Limited. The E-Choupal
model is quite different from the other models, as the farmers do not pay for the
information and knowledge they get from E-Choupals. The E-Choupal model runs
without any subsidy. There is no government money involved in this project.
TC Limited has extracted value in four steps: (a) elimination of non-value adding
activities; (b)differentiating product through identity preservation; (c) value added
products traceable to farm practices; (d) e-market place and support services to future
exchange. One of the success factors is ITC Limited’s managerial competence to
execute a complex project and manage cost. The ITC Limited bottom line is –roll out, fix
it, and scale it up. The principle of the E-Choupals is to inform, empower and compete.
ITC Limited is adding 7 new E-Choupals a day and plans to scale up to 20,000 E-
Choupals by 2010 covering 100,000 villages in 15 states, servicing 25 million farmers.
Transactions through these E-Choupals may rise to about US $ 2.5 billion by 2010.

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 Chapter-7
PROBLEMS RELATING TO MARKETING IN RURAL AREA

The rural market offers a vast untapped potential; it should also be recognized
that it is not that easy to operate in rural market because of several problems. Rural
marketing is thus a time consuming affair and requires considerable investments in
terms of evolving appropriate strategies with a view to tackle the problems. The
problems are of four types:-
1. Physical distribution
2. Channel management
3. Sales force management
4. Promotion and marketing communication

1. Managing physical distribution in rural markets

The problems relate to:-
a) Transportation
b) Warehousing
c) Communication

a) Transportation
Many parts of the rural India remain outside the rail network. Nearly 50% of the
5,76,000 villages are not connected by road at all. Many parts have only kucha roads
and are not connected with any mundi-level town. The most common mode is animal
drawn cart. Because of these problems in accessibility, delivery of products and
services is difficult in rural areas.

b) Warehousing problems
There is no public warehousing agency in the interiors of rural India. None of the central
warehousing corporations (CWC), state warehousing corporations (SWC), warehouses
at the mundi levels or rural godown functions as public warehousing agencies. They

33
provide the warehousing service only to their members. In such cases the commercial
advantages of operating through a public warehousing agency are lost to the firm.

c) Communication problems
Communication infrastructure consisting of posts and telegraphs and telephones is
quite inadequate in rural areas and therefore poses difficulty in physical distribution.

2. Channel management in rural areas

The problems with respect to this are:-
a) At the minimum, the distribution channels in the rural context need the village
level shopkeeper, the mundi-level distributor, and the wholesaler or stockiest in
the town and on top the manufacturers own warehouses or branch office
operations. Such multiple tiers and scattered outfits push up costs and make
channel management a major problem area.
b) Scope for manufacturer’s own outlet such as showroom is limited as its
expensive as well as unmanageable and therefore greater dependence on
dealers or intermediaries. Controlling such a vast network of intermediaries is a
difficult task.
c) Non availability of dealers: - many firms find that availability of suitable dealers is
limited.
d) Poor viability of retail outlets: - sales outlets in the rural market at the retail level
suffer from poor viability, i.e., the business is unremunerative to them.
e) Inadequate bank facilities: - distribution in rural markets is handicapped due to
lack of adequate banking and credit facilities. It is estimated that there is only one
bank branch for every 50 villages. The rural outlets are unable to carry adequate
stocks due to lack of credit facilities and they are unable to extend credit to their
customers.

34
3. Sales force management in rural markets
These can be divided into the following:-
a) Rural marketing calls for some unique traits on the part of salesman. While
the basic traits such as empathy, enthusiasm, communication skills and
knowledge of selling techniques are required, additional traits and capabilities
matching the peculiar conditions of rural market are also required. They are:-
i) Willingness to get located in rural areas: - only those who are genuinely
happy in living and working in the villages can become good rural salesman.
Salesmen are generally reluctant to work in rural areas because of lack of
modern amenities. Some firms locate their salesmen in towns while
successful rural marketing firms locate their rural salesmen in the midst of the
rural market to be covered. For instance, Lipton India.
ii) Cultural congruence: - The cultural pattern of rural life differs from one area to
another. The salesmen must have proper acquaintance with it. Urban markets
in contrast present a cultural convergence.
iii) Attitude factors: - more patience and perseverance is required.
iv) Knowledge of the local language.
v) Capacity to handle a large number of product lines: - The rural salesmen are
often required to handle a much larger number of product lines compared with
their urban counterparts. The rural salesmen are not able to generate
economic volume of business if they handle just a few products. They are
compelled to handle a large variety of items and quite often the items differ
widely from one another, i.e. they are required to become jack of all trades.
vi) Travel: -The rural salesmen are required to travel more as compared to their
urban counterparts. While the urban salesmen move in highly concentrated
and compact market segments, the rural salesmen has to be a carrier of a
developmental message to the less privileged rural community.
b) Managing the rural sales force
The HUL’s rural salesmen have to cover 70,000 rural locations. Administrating such
a large and scattered sales force, supervising them, motivating them, giving them
orientation about the rural marketing environment and training in non-conventional

35
means of market promotion, supporting them in sales, coaching them on the jobs
and attending to their official and personal problems is really a tiresome job for the
sales manager.

4. Promotion and marketing communication in rural markets

There are many constraints emanating from the profile of the audience and
availability of media.
a) Problems relating to audience: - low literacy rate (printed words has little use),
tradition bound nature, cultural barriers, overall economic backwardness and
linguistic diversity.
b) Problems related to media: - All organized media put together can reach only
30% of the rural population of India. The print media reaches only 18% of the
rural population. Even in areas reached, the circulation is limited. Cinema is
relatively more accessible and nearly 33% of the total cinema earnings in the
country come from rural India. Rural communication is also expensive because
to be effective repeat exposures are must. Rural communication has to go
through creating awareness, altering attitudes and changing behavior. In
addition, it also has to work against deep rooted behavior patterns.
The crux of marketing communication in the rural context is finding a media mix that
will deliver the required message in a cost effective manner to the illiterate target
audience.

36
 Chapter-8
SUGGESTIONS
1 Suitable structure of support prices for various farm commodities adjusted from
time to time.
2. The government has to take the lead in the establishment of modern
infrastructure facilities.
3. Regulated infrastructure of markets and warehouses which ensure fair prices
4. Rural roads must be compliment and coordinate with railways, nearest
waterways (ports), and airports if possible.
5. The power of General Insurance must be given to cooperatives.
6. The development of communication systems appropriates to rural market, info
cells needed for rural communication.
7. Public weighing machines one in each rural market to ensure correct weighting
both for farm and non-farm arrivals.
8. For storage facilities the government should not depend on private agencies to
store food grains (National commission on Agriculture recommended).
9. Rural market need more number of godowns and ancillary platforms for
packaging and market office cum information cell, bank and post office also
required.
10. Agricultural technology must reach all over the country, irrespective of size of
land holding.
11. Rural communication must be in regional language and dialects.
12. The existing marketing staff must be increased and adequate training must be
given.
13. Extending financial support for modernization of the agro-processing units is also
needed.
14. Processing units should utilize fully capacity.
15. There is need to find out markets for agro-processed products within and out side
of the country.
16. The proper packaging technology must be improved.

37
 Chapter-9
CONCLUSION
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 600 thousand villages in rural India.
Considering the emerging issues and challenges, government support is necessary for
the development of marketing of agricultural produce. The government may adjust
suitable budget allocations to rural infrastructure plans, and proper supervision for
effective plan implementation. The core areas like transport, communication, roads,
credit institutions, crop insurance for better utilization of land and water at appropriate
level. The rural people and markets will definitely develop rural income and reduce
poverty. On the whole country’s economy will boost at an expected level.

38
REFERENCES:

 en.wikipedia.org/wiki/Rural_markets
 www.manage.gov.in/managelib/faculty/vkrao.htm
 www.thehindubusinessline.com/bline/2004/02/16/stories/2004021600160900.htm
 Ruchika Ramakrishnan, Rural Marketing In India, New century Publication.
 C.B.Gupta and N.Rajan Nair , Marketing Management
 Saxena Rajan, Marketing Management, 3rd Edition, Tata McGrawHill publishing
co. ltd, chapter30.
 Gopalaswamy, T.P., Rural Marketing: Environment problems and strategies; First
edition;(New Delhi:Wheeler publishing 1997), chapters 4,6,8, case B,C.
 Rao, G.S., Rural Marketing In India, (New Delhi,Anmol,2002)
 Singh, Sukhpal, Rural Marketing Management;(New Delhi:vikas)
 Vilayudhan, S.k., Rural Marketing – Targeting the non-urban consumer, (New
Delhi:Response,2002)
 gopalkrishnan.blogspot.com/2005/07/future-of-rural-markets.html
 http://www.financialexpress.com/old/fe_full_story.php?content_id=61535

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