A

PROJECT REPORT
ON
STRATEGIES & TACTICS IN RURAL MARKETING
(Submitted as a requirement of partial fulfillment for the degree of master of
business administration)
RAJASTHAN TECHNICAL UNIVERSITY

Session: 2010-2011

UNDER THE GUIDENCE OF: SUBMITTED BY:

Ms. SAKSHI SHARMA HITESH KUMAR
PANDEY
FACULTY OF SESGI, PGC MBA PART-I

FACULTY OF MANAGEMENT STUDIES

SHANTI EDUCATION SOCIETY’S GROUP OF INSTITUTION BT-1,

BIO-TECHNOLOGY PARK, SITAPURA, JAIPUR (Raj.)-302022

Preface
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Rural India has changed tremendously. The data published by the National Council of
Applied Economic Research shows that in the last ten years, the income of rural India has
grown several-fold. There is a definite shift from middle to upper middle class and from
lower to middle class segments.
For the last 10 consecutive years, we have had good monsoons. So, agriculture is
prospering. Of course, there have been setbacks in the last couple of years.
Another interesting aspect is, today rural India is not 100 per cent dependent on an
agrarian economy. Unlike in the past where the ratio between those who involved in
agriculture and in other business was 75-25, today the estimated ratio is 50:50, if not
60:40.
So today, 50-60 per cent of the rural population is involved in other businesses. A lot of
people belonging to the second generation are getting white-collar jobs in nearby towns.
So, there is a growing middle class with a monthly income in rural India and it is a drastic
change from the past where their income was totally dependent on the monsoon, cropping
season, etc.. Because of these reasons in near future India rural market has so much
potential and so much growth.

Villages are the integral parts of a nation, not just as places of abode, but more than the
custodians, traditions and the spirit of the nation itself. They become even more important
in the Asian context, where a majority of the population resides in any hamlets.

The topic strategies and tactics in rural market in India have more significance today
because in urban area now there is no wide scope for corporate world.

Corporate world need that to be successful in the rural market, first understand the
profile of rural area, consumer behavior of rural customer, marketing mix in rural area,
and the achievement their target in rural area company should go with a clear strategy

.I sincerely hopes that this piece of information provides delight to the learners in the
Field of rural marketing.

ACKNOWLEDGEMENT

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The beatitude, bliss and euphoria that accompany successful completion of any task
would not be complete without the expression of appreciation of simple virtues to the
people who made it possible. So, with reverence, veneration honor I acknowledge all
those whose guidance and encouragement has made successful in winding up this.

I take this opportunity to thank Mr. R. K. agrawal, advisor, Dr. Rakesh Duggal , campus
director of SESGI, Ms. Shakshi Sharma, project guide & faculty members for their
support and encouragement which helped me in the completion of this report.

I extend my gratitude and thankfulness to shanti education society group of institutions .

Last but not the least I’m also grateful to my parents for providing me the continuous
support to motivate me to successfully complete my report.

(Signature of student)

TABLE OF CONTENTS
3
S.NO. CONTENTS PAGE NO.
1. INTRODUCTION 1

2. INDIAN RURAL MARKET :A BRIEF 3

PROFILE
3. FEATURES OF RURAL MARKETING 4

4. CHALLENGES & OPPORTUNITIES OF 5

RURAL MARKET
5. BEHAVIOR OF RURAL CONSUMER 6

6. DEMAND IN RURAL MARKET 19

7. PRODUCT BRANDING AND PROTECTION IN 21

RURAL MARKET
8. MARKETING MIX 29

-PRODUCT HANDLING IN RURAL AREA

-4 P’S OF MARKET
9. RESEARCH METHODOLOGY 35

10. CASE STUDY OF ITC e-CHOPAL 37

11. RECOMMENDATION 47

12. CONCLUSION 48

13. BIBLIOGRAPHY 49

Introduction

Conceptual Framework

Given the Literacy scenario in to consideration the promotion of Brands in rural markets
requires the special measures. Due to the social and backward condition the personal
selling efforts have a challenging role to play in this regard. The word of mouth is an
important message carrier in rural areas. Infect the opinion leaders are the most
influencing part of promotion strategy of rural promotion efforts. The experience of
4
agricultural input industry can act as a guideline for the marketing efforts of consumer
durable and non-durable companies. Relevance of Mass Media is also a very important
factor. Door Darshan had already acquired high penetration in rural households.

Now the cable and other Channels have also penetrated in rural households. The
newspapers and other printed Media are also gaining strategy but their role is still
secondary in this regard.

According to the national commission on agriculture: Rural marketing is a process

which start with a decision to produce a saleable farm commodity and it involves all the
aspects of market structure or system, both functional and institutional, based on technical
and economic considerations and includes pre and post harvest operations, assembling,
grading, storage, transportations and distributions.

In recent years, rural markets of India have acquired significance, as the overall growth of
the Indian 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.

Rural India with its traditional perception has grown over the years, not only in terms of
income, but also in terms of thinking. The rural markets are growing at above two time’s
faster pace than urban markets; not surprisingly, rural India accounts for 60% of the total
national demand.

Today, rural market occupies a larger part of our economy and it is expected to grow at
least four times the existing size. Another contributing factor for rural push was growing
saturation in urban markets. To be precise, rural marketing in Indian economy covers two
broad sections: -

1. Selling of agricultural products in the urban areas.

2. Selling of manufactured products in the rural regions.

In present situation, our huge population is helping marketers to think new marketing
strategies. 630 Billion Rural populations are greater than total consuming markets of
many countries like Canada, South Korea, etc.

Review of Literature

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The Marketing Mastermind (2003), Hindustan Lever rural marketing Initiatives by "A
Mukund" Marketing Mastermind has given the perspectives in which HLL has
approached towards rural markets.

The Economic Times (2003), "The rural market likes it strong" the strength of rural
markets for Indian companies. Financial express, June 19, 2000 has published the strategy
about FMCG majors, HLL, Marico Industries, Colgate Palmolive have formula had for
rural markets.

Research Modules Operating and Design.

The research methodology for this research work is based on the survey technique. Few
brands like Coca-Cola, BPL, And Asian Paints have been chosen to conduct the research
work.

The Gram Panchayat areas have been selected on random basis from the list of available
Gram Panchayat. The four-Gram Panchayat have been short-listed and 60 respondents
have been selected in each Gram Panchayat so the total sample size N = 240.

The respondents were organized in a group and asked about their views on following
advertisement actions and theme.

1) In case of Coca-Cola how does the role of Aamir Khan affect the rural consumers?

2) In case of BPL Television how does Amitabh Bachchan give the impression about BPL
Brand

3) How does the advertisement of Asian Paints with the Slogan "Sunil Babu" influence
the rural consumers

Profile of rural marketing

1- There are 42,000 rural supermarkets in India that exceed the total number of
retail chain series in US (35,000).
2- In 2001-02 the life insurance corporation sold 55% of its policies in rural India.

3- Of the 20, 00,000 BSNL mobile phone connections 50% are in small towns
and villages.

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4- Of the 6, 00,000 odd villages in entire country, 5.22 lacs had a village public
telephone as of march, 04.
5- The billing per cell phone in small town in Andhra pradesh is higher than the
billing in the capital hyderabad city.
6- Of the 2 crore who have signed up for rediff mail, 60% are from small towns.

7- Internet access in semi urban and rural areas has increased through the
‘Sanchar Dhabas’ of BSNl, operating in 3617 out of 6332 blocks in the
country.
8- The 41 million Kisan Credit Cards issued in rural India exceed the 40
million Credit plus Debit cards issued in urban India..
9- Electricity consumption by the agriculture sector has shown a sharp increase
from 17.6% of total consumption in 1980-81 to 29.2% in 1999-2000.
10- 742 million rural consumers.

11- A 230% increase in the flow of institutional credit for agriculture between
1997-98 and 2004-05.
12- According to NCAER Indian market demographics report 1998 the
consuming class households in rural India equals the number in urban India.
13- The largest FMCG company Hindustan Lever get more than half of its annual
sales of Rs. 11700 crore from the rural market.

Features of rural marketing

• Large and scattered market.

• Major income from agriculture

• Improvements in agricultural productivity.

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 • Improvements in standard of living.

• Traditional outlook, but no stereotype consumer.

• Diverse socio-economic backgrounds.

• Infrastructure facilities

Challenges and opportunities in rural market

Challenges in rural market

• Distribution problem
• Understanding the psyche of the rural consumer
• Limited knowledge
• Communication problem

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 • Cost per contact
• Sales of fake and spurious products

These are the list of some products:-

Sr. original product Limitation product

1 ponds Polons

2 Rin Run

3 501 bare 509 bar

4 Cadbury’ éclairs Choudharys éclairs

5 lifebuoy Lifejoy,life boy

6 Colgate College

7 fair & lovely Friend and lovely

Opportunities in rural markets

• Rising rural prosperity

• Lesser dependence on agriculture and monsoon
• Increasing rural consumption
• Rural marketing efforts
• Increasing sale of branded products
• Large population

Consumer behavior in rural area

Consumer Buying Behaviour refers to the buying behaviour of final consumers -

individuals and households who buy goods and services for personal consumption. All of
these final consumers combined make up the consumer market.

The consumer market in this case is Rural India. About 70% of India’s population lives in
rural areas. There are more than 600,000 villages in the country as against about 300 cities
and 4600 towns. Consumers in this huge segment have displayed vast differences in their
purchase decisions and the product use. Villagers react differently to different products,
9
colours, sizes, etc. in different parts of India. Thus utmost care in terms of understanding
consumer psyche needs to be taken while marketing products to rural India.

Thus, it is important to study the thought process that goes into making a purchase
decision, so that marketers can reach this huge untapped segment.

Factors influencing buying behavior

The various factors that effect buying behavior of in rural India are:

1. Environmental of the consumer - The environment or the surroundings, within

which the consumer lives, has a very strong influence on the buyer behavior, eggs.
Electrification, water supply affects demand for durables.
2. Geographic influences - The geographic location in which the rural consumer is
located also speaks about the thought process of the consumer. For instance,
villages in South India accept technology quicker than in other parts of India.
Thus, HMT sells more winding watches in the north while they sell more quartz
watches down south.
3. Influence of occupation – The land owners and service clan buy more of Category
II and Category III durables than agricultural laborers/farmers.
4. Place of purchase (60% prefer HAATS due to better quality, variety & price)
Companies need to assess the influence of retailers on both consumers at village
shops and at haats.
5. Creative use of product ex Godrej hair dye being used as a paint to colour horns of
oxen, Washing machine being used for churning lassi. The study of product end
provides indicators to the company on the need for education and also for new
product ideas.
6. Brand preference and loyalty (80% of sale is branded items in 16 product
categories)

Cultural factors influencing consumer behavior:

Cultural factors exert the broadest and deepest influence on consumer behavior. The
marketer needs to understand the role played by the buyer’s culture. Culture is the most
basic element that shapes a person’s wants and behavior.

In India, there are so many different cultures, which only goes on to make the marketer’s
job tougher. Some of the few cultural factors that influence buyer behavior are:

1. Product (colour, size, design, and shape): There are many examples that support
this point.
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 For example, the Tata Sumo, which was launched in rural India in a white colour,
was not well accepted. But however, when the same Sumo was re-launched as
Spacious (a different name) and in a bright yellow colour, with a larger seating
capacity and ability to transport good, the acceptance was higher.

Another good example would be Philips audio systems. Urban India, the
viewpoint is totally opposite. That is the main reason for the large acceptance of
big audio systems. Thus Philips makes audio systems, which are big in size and
get accepted in rural India by their sheer size. looks at technology with the
viewpoint of ‘the smaller the better’. However, in rural

2. Social practices: There are so many different cultures, and each culture exhibits
different social practices.

For example, in a few villages they have common bath areas. Villagers used to
buy one Lifebuoy cake and cut it into smaller bars. This helped lifebuoy to
introduce smaller 75-gram soap bars, which could be used individually.

3. Decision-making by male head: The male in Indian culture has always been given
the designation of key decision maker.

For example, the Mukhiya’s opinion (Head of the village), in most cases, is shared
with the rest of the village. Even in a house the male head is the final decision
maker. In rural areas, this trend is very prominent.

4. Changes in saving and investment patterns From gold, land, to tractors, VCR’s,
LCV’s

The Differences in Buyer behavior

Rural Urban

· Conservative ·Innovative

· Values, aspirations, needs - traditional and based on · Follow trends

culture, social customs, beliefs
(including
International)
· Eldest Male Member KDM · Varies
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· Collective Sanction · Unheard

Brand Protection in India

This is the latest initiative by the consumer goods industry in India in association with
Federation of Indian Chambers of Commerce and Industry to fight a long standing
menace - that of counterfeits and pass-off products.

Be it Soap, shampoo, toothpaste or hair oil, biscuit, soft-drink or confectionery,

batteries or balm - go to any market in India and you will find a plethora of products that
are available in look alike packages under slightly twisted names – Fair & Lovely could
be Pure & Lovely or a Parachute could be Parashudh. The packaging, color and design of
the pass-off product is so similar to the original, that it is impossible to distinguish
between the two if you are not the sort who reads product names before picking them up.
Leave alone the vast uneducated masses that live in this country, hardly any of the
educated informed consumer would also be in a habit of verifying the accuracy of the
product name or manufacturer before buying goods at the local kirana shop. A recent
study conducted by AC Neilson reveals that 80% of consumers realize they have brought
a counterfeit or fake product only after they have consumed it. And there may be a large
number of those who never realize the same even after consumption!

While the problem of fakes is witnessed all across the country, it is more severe in the
North. Counterfeiting is rampant in the states of Delhi, Punjab, Haryana and UP. Procter
& Gamble, which has embarked on a major drive against counterfeits of its popular Vicks
Action 500 brand, found through a study that 54 strips in every 100 strips of Action 500
being sold in the market were counterfeits. The company’s sales growth in this sector has
been stated to have been affected by 10% due to this menace of counterfeits. Counterfeits
and pass-off products are reportedly affecting sales of several brands to the extent of 20-
30%. It is estimated that the counterfeit products contribute to about Rs17bn worth of
sales of the Rs60bn FMCG market. Government would be losing almost Rs6bn in
revenues that would have been generated on excise, octroi, sales and income taxes that
would have been paid on these sales. For companies, besides loss of revenues, an even
greater loss would be through damage to brand reputation or loss of customer loyalty
caused by the poor quality of these look alike brands. And the customer unwittingly is
using products that may sometimes cause bodily harm or even danger to life.

The problem of counterfeits is not confined to India alone. It is estimated that counterfeits
account for Rs200bn i.e. about 5-7% of total world trade.
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The consumer goods industry in India has therefore come together to launch on offensive
against these unscrupulous players. A Brand Protection Committee has been formed
under the aegis of the Federation of Indian Chambers of Commerce and Industry (FICCI).
The Mission of the Committee is to stem the sale of counterfeits and fakes in India.
Directors of leading consumer non-durable companies such as P&G, HLL, Marico,
Smithkline Consumer, Britannia, Indian Shaving and research agencies such as A C
Neilson and CERC are members of the Brand Protection Committee. The committee aims
to work in close conjunction with industry, consumer associations, trade associations and
regulatory authorities to eliminate counterfeit and pass-off sales in the country. The
Committee proposes to focus on enforcement of applicable laws, measure and publicize
negative economic impact of counterfeits and create consumer awareness, and take action
against errant manufacturers, wholesalers, distributors and retailers with the help of
regulatory authorities. This is a concerted effort on part of the FMCG industry to stem the
loss that accrues to the companies, the Government and the consumers.

The problem of fakes is more rampant in rural areas due to low literacy levels and
consumers reliance on product identification through pneumonic. Companies are trying to
educate customers to look for certain packaging identification marks before purchase.

Product Strategy: This is a strategy which companies apply to their product according
to the market needs and the target group. It is a strategy which best suits the company and
also targets the consumer of that particular region. Some product strategies are such that
they encapsulate the whole of rural India.

e.g.: Coca-Cola targeted the whole Indian rural market with the positioning of “Thanda
Matlab Coca-Cola” advertisements because most of the villagers say when wanting a
drink refer to it as Thanda…… so Coca-cola used that word.

Product Market Selection:

While launching product variants for different markets, a company has to consider two
things:-

- Reach: the company must ensure that the rural area they are targeting should be
easily reachable by road and should also be well connected with a major town
nearby. This is important because regular supplies have to be transported to the
village from the major town.

- Cost-effectiveness: in order to supply to the village area, a company must assess

their costs and other charges so as to maximize returns. Only if cost-effective,
must the market be selected and product variants (if any) be launched.
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Product Features: this is the most important factor in reinforcing positioning because
rural folk will purchase products only if they have functional benefits and features that
appeal.

- The consumer should experience the product benefits. They should be able to
use, touch and feel the product, and benefit from the it, only then will they buy it
again.

- Demonstration: an example of this would be Colgate showing video films

wrestler with a weak tooth; highlighting the importance of oral hygiene; and other
examples would include free shampoo washes, etc. and companies can get very
innovative with their demonstrations.

- Product Education: companies need to educate the rural consumers about their
products and their advantages. E.g. Colgate Palmolive shows video films on oral
hygiene to the rural masses.

Most of the companies build their strategy linking consumer perceptions and their
product features.

- Size: sizes are altered or increased in accordance with the consumer perceptions
which can be found out by surveys and by in depth interviews with the rural
consumer. E.g. torches and audio systems, Tata Spacio was a bigger rural version
of the Tata Sumo.

- Shape: companies have changed product features like wide bodied cookers with
handles on both the sides for ‘chulha’ cooking.

- Colour: an example would be that mostly all hair oils are green in colour. Tata
launched the Spacio in a bright yellow colour.

- Consistency: Cadbury came out with harder chocolates so as to delay the melting
process.

- Taste: the villagers’ tastes and preferences should be incorporated in food items.

- Technology: companies came out with better technology to enable their products
to perform better under the tough rural circumstances. E.g. Philips eye-fi (to
improve satellite reception), LML scooters with stronger suspension, electronic
instruments to withstand voltage fluctuations and Philips also came out with
power free radios.

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 Packaging: (Sachets, bubble packs) Packaging of the product largely depends on
these factors:

- Affordability: companies should consider the fact that rural consumers largely
depend on daily wage. A product should be packaged by keeping this in mind.
E.g. Videocon came out with a washer priced at Rs. 3000.

- Perceptions: social and cultural perceptions should be taken care of while

packaging the product. E.g. Tata Spacio came out in a bright yellow colour and
not in the traditional white colour because the rural people in some parts of India
perceive white as a symbol of death.

- Ability to read: the product should be packaged so that the rural consumer should
identify it. Since literacy levels are low symbols, logos and visuals are important
associating it with a symbol. E.g. lightning picture of Rin.

Pricing: pricing should be kept in accordance with the financial strength of the
villagers or the people one aims to target. One should remember that a major part
of the rural consumer base earns a daily wage, so their savings are minimal. A
company should not emphasize on price but on value. It should provide value to
the rural consumer for the least possible price.

The Consumption Basket of the villagers is allocated among different needs

among the villagers and they prioritize and spend their meager earnings.

Examples of good pricing strategies are Philips 14” TV for Rs. 8000 which
provides good value for the price and Videocon washer for Rs. 3000.

THE SEGMENTATION PROCESS

- This process includes:

- Identification of the segmentation variable,

- Segmentation of the market,

- Development of the profile.

The different variables are:-

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1. GEOGRAPHIC: Segmentation on the basis of geography is done depending on
various factors such as

-Region: North, South, East and West.

-Village Size: < 500 people

501 – 2000 people

2001 – 5000 people

> 5000 people

Proximity to the feeder town

Density: The no. Of people per sq. km

Climate: Moderate, rain fed or dry with scanty rainfall.

Level of Irrigation: Whether good, moderate, scanty or none at all.

2. DEMOGRAPHIC: Segmentation based of demographics takes into consideration

factors such as Age, Income, Occupation, Literacy (Level of Education) and Caste.

3. PSYCHOGRAPHICS/BEHAVIOURAL: Such segmentation is done using

variables such as Lifestyle of the people, (whether rigid, traditional, changing or imitating
urban), Occasion, (whether on a regular day or a special occasion), Benefits sought from
the product (such as Quality, Price and Service), and Loyalty to brands, (whether Low,
Medium or High.)

Rural Consumers majorly look into the value that the product offers. They associate value
with the Benefits that the product offers, its Availability, and its Cost. When talking of
Benefits, they look at the features of the product as well as the Packaging and
attractiveness, Availability, whether or not the products are available at Retail Shops and
Haats, Cost, whether or not the product is reasonably priced.

• Rural Branding

It is the process of creating and publicizes the brand name so that it is instantly
understood by the customer. It is different from branding in rural areas as there people

16
don’t understand English names of brands. They rather associate the product with the
picture on the package. E.g. “Laal sabun or red soap for lifebuoy.”

Creating an Identity – under this process an identity is created in the minds of the
customer. E.g. ‘TATA Namak – Desh Ka Namak’ here what TATA has done is they have
given the salt a national image. They have associated it with the country and as a result
rural consumers tend to connect with it and trust it more & they also remember it well.

Enhance Recognition – The brand should be recognizable to the consumer and create top
of the mind (TOM) consumer recall. E.g. Fevicol ‘majboot jod’.

Building a brand Image – The brand should have a personality of its own. E.g. Mahindra
& Mahindra has built its brand image in the tractor sector. Bhumiputra series of tractors,
Sarpanch series have done very well in the rural areas. Brand name has connected well
with villagers.

Researching the Rural Markets

- Marketer has limited understanding of the rural consumer.

E.g. The consumer research people in the rural areas of the south find researching very
difficult as the people do not answer in Hindi. As a result the marketer should make note
of such points in order to market his product well.

- Consumer responses to variables in urban markets may need to be unlearned. The rural
consumer must be handled differently due to the vast psychographic difference.

Essentials (points to remember)

Sceptism of villagers – the villagers do not trust a person from a big company. Some
people do not even answer an official well. Thus when marketing, promoting or
advertising a product, one should take care that it is done in the regional language. This
makes the customer willing to listen or see.

Informal (Dress, Greeting) – Dressing at the first meet should be very informal in order
for them to receive u well. Informal greeting helps generally researchers to get
information out of rural consumers.

Be a good listener and always explain the objective of the research at the outset.

Don’t write down too much as it again creates doubts in the minds of the consumer.

17
Never refuse their hospitality. It feels like an insult to them when someone does so.

Rural Market of Telecom Sector

With a total telephone subscriber base of over 200 million (fixed plus mobile), India is
one of the fastest growing telecom markets in the world. While Indian telecom players
have consolidated their position in the last ten years or so of operations by carving out a
nationwide footprint, foreign telecom majors have also set their sights on this growing
market. The world's largest telecom company by revenues, Vodafone, is the latest to enter
the country by acquiring a controlling stake in the fourth largest mobile operator Hutch
Essar from Hutchison Telecommunications International Ltd (HTIL).

Though the average revenue per user (Arpu) is falling with declining tariffs, telecom
companies are still profitable and are expanding their networks largely because tele-
density levels are still low (just 18.26 mobiles per 100), with penetration levels of just
13% (rural penetration is an abysmal 4%). Naturally, while the country boasts over 160
mobile subscribers, there's plenty of scope to grow and this explains why India is seen as
the most promising place in the global telecom space.

While urban markets are lucrative and would continue to be the focus of all operators,
interestingly there is a sudden interest to tap the rural market, largely untouched by the
telecom revolution. Last year, the government amended the Indian Telegraph Act, 1885,
to give private players access to the Universal Service Obligation (USO) fund as well.
The USO fund aims to expand rural telephone services, and each operator contributes 5%
of its adjusted gross revenue to it. The fund has a total corpus of around Rs 3,488 crore.
The recent tender floated by the department of telecommunications (DoT) for assistance
under the USO fund in two parts-creation of infrastructure and providing services-even
saw some negative bids by operators; instead of taking funds out of the USO fund, they
were willing to pay the government to let them provide rural services.

Clearly, with 70% of population in rural areas, private operators have finally realised
the potential of the rural market. The government now plans to come out with a similar
tender under the USO fund for broadband expansion in the rural areas. According to the
vision plan drawn up by DoT, 200 million rural telephone connections are envisaged by
the end of 2012, translating into a rural tele-density of 25%. An exercise carried out by
18
DoT and the Planning Commission aptly reflects why private operators are bullish about
rural India and why today's digital divide would be greatly bridged in coming years. The
total number of rural households would be around 160 million, assuming five members
per household, of which 130 million households would be above the poverty line.
Considering one telephone for every three households and one telephone for every two
households by the year 2012, the number of rural telephones would be around 80 million
by conservative estimates.

Taking into account lower tariffs and thereby affordability, there will be on average 1.5
telephones for every rural household above the poverty line by the end of the 11th Plan.
Therefore, around 195 million rural telephone connections would be required by the year
2012. It is further expected that one out of every three households below the poverty line
would also have a telephone, adding a further requirement of 10 million rural telephone
connections. Thus, there will be a total requirement of 205 million rural telephone
connections.

Rural tele-density will increase as telecommunications is seen as a fundamental

requirement for economic and social activities in rural areas. It is an accepted fact that 1%
increase in tele-density results in a 3% increase in the growth of GDP. Private operators
have already entered into infrastructure sharing agreements amongst themselves to
achieve faster rollout. For its part, the government is clear that this time, rural telecom
growth targets will not be missed.

Insurance and rural market

The insurance industry market in India was liberalized in 2000 and the first private
insurance companies opened shop that November. The industry has now witnessed more
than two years of private sector participation. However, the overall market has not really
expanded, in real terms, beyond the urban domains.

The penetration of insurance in India is pitiably low at just about 1.6 per cent of GDP. If
the overall market has to grow and expand, insurance companies will need to look at
newer segments rather than fight for a share in the same pie.
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 Saving habit

The strong saving habit is underscored by the finding that even the relatively low-
income families tend to save about a third of their annual earnings.

Annual household money flows

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 The average annual incomes are Rs 54,000 in segment A, Rs 40,000 in segment B and
Rs 32,000 in segment C. In segment A, the annual income range is Rs 20,000-2, 00,000;
in Segment B it is Rs 15,000-1, 50,000 and in Segment C Rs 5,000-80,000.

While the prospects in the rural sector are promising, the real challenge lies in
distributing and delivering systems cost-effectively and efficiently. It is common
knowledge that the cost of building exclusive delivery systems for selling insurance
would be prohibitive. However, valuable data are available on the existence of extensive
network built by the rural development agencies, banks, cooperative institutions, NGOs,
micro-financing institutions, women's SHGs, youth clubs, panchayats and some industrial
houses in the rural sector. Insurance companies would, therefore, be well-advised to
harness this infrastructure and work out collaborative arrangements with these institutions
to their mutual advantage.

Since delivery channels would really hold the key to a successful strategy, a look at
some:

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Demand in rural market

Demand from rural India is becoming increasingly attractive for manufacturers of fast
moving consumer goods (FMCG), automobile and organized retail businesses despite the
severe downturn in the global economy and its spillover effects on India's growth story,
according to a study paper of the Associated Chambers of Commerce and Industry of
India (Assocham).

In a report titled 'The Rise of Rural India' the industry chamber said companies in the
FMCG sector are upbeat about their prospects in rural India as it contributes substantially
to their bottomlines. " Majority of FMCG firms such as DCM, ITC have been recording
higher growth rates and sales of their products in rural areas compared to urban markets, "
the report said.

Assocham estimates the size of FMCG industry in India at Rs.200, 000 crore. Out of this,
domestic consumption accounts for Rs.17, 189 crore. "FMCG sector in rural areas is
expected to grow by 40 per cent compared to 25 per cent in urban areas. Rising rural
incomes, healthy agricultural growth, boost in demand, rising consumerism across India,
better penetration of FMCG products in the rural market are contributing to high growth
and rapid expansion of the FMCG industry in rural India."

As far as the auto sector is concerned, the rural market has been largely restricted to
tractors and two-wheelers. The two-wheeler penetration in villages is only 10% compared
to 25% in urban areas. High investment involved, poor conditions o f rural roads, lack of
finance facility, lack of service network have limited the scope of passenger cars in rural
areas, it was said.

Of late, auto firms have also begun tapping the countryside, the report said and cited the
example of Maruti Suzuki, which generates about 10 percent of its sales from rural sales,
amounting to 32000 cars.

Maruti has already launched its marketing campaign for rural India "Ghar Ghar Mein
Maruti" (Maruti in every Household"). On the other hand, Hero Honda, the two-wheeler
market leader, is planning to cover 1 lakh out of the six-lakh villages by end of this
financial year under a campaign called Har Gaon, Har Aangan (Every Village, every
Household). Mahindra and Mahindra has plans to foray into the two-wheeler market in
the hinterland with an initial investment of Rs.110 crore.

According to Hyundai, almost 50 per cent of the 220 million households in rural India are
potential car-buyers due to the agricultural subsidies extended by the government and also
on account of an increase in productivity of agri-based products.
22
Another potential area, the Assocham said, is the highly unexplored rural retail market
ACAEA currently estimated at $112 billion, or around 40 per cent of the $280-billion
retail market and growing at around 10 percent of the size of the Indian GDP.

Rural India provides a highly unexplored market for the expansion of retail activity. The
penetration of the organized retail specifically is very low, as approximately only ten
thousand out of six lakh villages in India have access to organized retail services.

"In view of the large investments made by the government in rural infrastructure, pushing
income and demand level, the prospects for organized retail are seen bright for rural India.
With the empowerment of rural people with education, employment, higher purchasing
power, better media exposure and better connectivity with outside world, they provide a
massive unexplored pool of consumers," the report said.

Product branding and strategies in rural market

23
Promotion of brands in rural markets requires the special measures. Due to the social and
backward condition the personal selling efforts have a challenging role to play in this
regard. The word of mouth is an important message carrier in rural areas. Infect the
opinion leaders are the most influencing part of promotion strategy of rural promotion
efforts. The experience of agricultural input industry can act as a guideline for the
marketing efforts of consumer durable and non-durable companies. Relevance of Mass
Media is also a very important factor.

The Indian established Industries have the advantages, which MNC don't enjoy in this
regard. The strong Indian brands have strong brand equity, consumer demand-pull and
efficient and dedicated dealer network which have been created over a period of time. The
rural market has a grip of strong country shops, which affect the sale of various products
in rural market. The companies are trying to trigger growth in rural areas. They are
identifying the fact that rural people are now in the better position with disposable
income. The low rate finance availability has also increased the affordability of
purchasing the costly products by the rural people. Marketer should understand the price
sensitivity of a consumer in a rural area. This paper is therefore an attempt to promote the
brand image in the rural market.

PERCEPTION OF RURAL MARKET IN MORDERN MARKETERS:

Indian Marketers on rural marketing have two understanding (I) the urban metro products
and marketing products can be implemented in rural markets with some or no change. (ii)
The rural marketing required the separate skills and techniques from its urban counter
part. The Marketers have following facilities to make them believe in accepting the truth
that rural markets are different in so many terms.

(i) The rural market has the opportunity for.

(ii) Low priced products can be more successful in rural markets because the low
purchasing, purchasing powers in rural markets.

(iii) Rural consumers have mostly homogeneous group with similar needs, economic
conditions and problems.

(iv) The rural markets can be worked with the different media environment as opposed to
press, film, radio and other urban centric media exposure.

24
How reality does affect the planning of marketers? Do villagers have same attitude like
urban consumers? The question arises for the management of rural marketing effects in a
significant manner so than companies can enter in the rural market with the definite goals
and targets but not for a short term period but for longer duration. The Research paper
will discuss the role of regard. The strategy, which will be presented in the paper, can be
either specific or universally applicable.

Realities before the Marketers

70% of India's population lives in 627000 villages in rural areas. 90% of the rural
population we concentrated in villages with a population of less than 2000, with
agriculture being the main business. This simply shows the great potentiality rural India
has to bring the much - needed volume- driven growth. This brings a boon in disguise for
the FMCG Company who has already reached the plateau of their business urban India.

As per the 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 the NCAER projections, the
number of middle and high-income households in rural India is expected to grow from 80
million to 111 million by 2007. In urban India, the same is expected to grow from 46
million to 59 million. Thus, the absolute size India is expected to be doubles that of urban
India.

HLL chairman MS Banga Says, "This exercise may not pay in the immediate future, but
will definitely give long-term dividends. Incidentally, over 50 percent of the sales of
HLL's fabric wash, personal wash and beverages are in rural areas. And we see a future in
going rural in a major way".

The improved agricultural growth is expected to boost rural demand, through not at too
sizzling a rate. Moreover, the price drop in personal products, after the recent excise duty
reductions, in also expected to drive consumption. "Better agricultural yields will give
farmers more spending power, making the rural markets bullish," says an analyst.

As a result, HLL has planned a rural marketing program that is expected to result in a
marked growth in the consumption of the company's products in the rural market. HLL
will adopt three-pronged marketing strategy- new price points, sizes and awareness
campaigns for its detergents and soaps segment to augment rural growth.

25
The Indian established Industries have the advantages, which MNC don't enjoy in this
regard. The strong Indian brands have strong brand equity, consumer demand-pull and
efficient and dedicated dealer network which have been created over a period of time. The
rural market has a grip of strong country shops, which affect the sale of various products
in rural market.

The companies are trying to trigger growth in rural areas. They are identifying the fact
that rural people are now in the better position with disposable income. The low rate
finance availability has also increased the affordability of purchasing the costly products
by the rural people. Marketer should understand the price sensitivity of a consumer in a
rural area. The small sachet packs are the examples of price sensitivity. Colgate has done
this experiment with launching of sachet packs for rural markets.

The Strategies & Tactics

 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 rural consumer. This, along with several other related issues,

26
 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

 Management of demand

 Developmental marketing

 Unique selling proposition (USP)

 Extension services

 Business ethics

 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.

27
 Management of demand involve continuous market research of buyer’s needs and
problems at various levels so that continuous improvements and innovations can
be undertaken for a sustainable market performance.

 Developmental marketing refer to taking up marketing programmers keeping the

development objective in mind and using various managerial and other inputs of
marketing to achieve these objectives.

 Media, both traditional as well as the modern media, is used as a marketing

strategy.

 Unique Selling Propositions (USP) involves presenting a theme with the product
to attract the client to buy that particular product. For examples, some of famous
Indian Farm equipment manufacturers have coined catchy themes, which they
display along with the products, to attract the target client that is the farmers.
English version of some of such themes would read like:

 The heartbeats of rural India

 With new technique for a life time of company

 For the sake of progress and prosperity

 Extension Services denote, in short, a system of attending to the missing links

and providing the required know-how.

 Ethics in Business. Form, as usual, an important plank for rural markets and rural
marketing.

 Partnership for sustainability involves laying and building a foundation for

continuous and long lasting relationship.

 Building sustainable market linkages for rural products: Industry’s role, scope,
opportunities and challenges

28
 Market linkages for rural products: There are, broadly speaking, three ways in
which they can be connected to the markets. They can do it on their own —
through cooperatives. Or, the state can do it for them — through its procurement
engines. Stages one and two, in a manner of speaking.

 Across India, previous attempts to create such linkages have floundered. Take
Assam and other eastern states itself. Around the Eighties, the state government
here decided that cooperatives were a great way to consolidate its political base.
Loans went to the undeserving. Debts were written off. The institutions slowly got
corrupted. As for the linkages provided by the state, these offer uncertain
sustainability. Given this context, one can conclude that profit-oriented industry
linkages are a more sustainable, more scalable alternative. In this scenario,
companies can use the social infrastructure (the self help group et al) as an
alternative procurement and distribution chain and vice versa.

 Industry’s role in building market linkages: To make an effective market linkage,

industries have to play as an engine of market, which can generate a brand image
of the rural products. This initiative of industries will also strengthen the backward
and forward linkages of the rural market, besides, accelerating the innovations of
the rural products. Definitely, this strategy will also give a remarkable dividend to
the industries & profit making companies. In micro level, it is observed that to
create a sustainable market linkage for rural products, industries can develop an
ecosystem of Self Help Groups (SHGs) by involving the local communities
through village level empowerment. It is nothing less than the next phase in the
democratization of commerce. Under this paradigm, industries can create a
network with viable marketing channels covering all the linkages from villages to
the global level. This architecture provides the right value of procurement through
the village procurement centres and rural entrepreneurs can sell their products
faster with better price realization. This model is also capable of generating a
consumer business and an output business in a win-win scenario, where rural
producers can get a wide marketing horizon and the industries shall get a new,
lower cost ‘sales force’. Another role of industries in building market linkages for
agro-based rural products can be the ‘dynamic contract farming’. If a conventional
29
 industry can kick off a contract farming business, and export niche horticulture
crops like cucumbers, the small and marginal farmers who could grow these small
cucumbers would make Rs 30,000 in profits in a year. KRBL, one of India’s
largest basmati exporters, has contract farming agreements with 24,000 farmers;
Global Green buys from about 12,000 farmers. Moreover, in the current era of
information technology, industry and private companies can also creatively use
ICT for building sustainable marketing linkages. This approach creatively
leverages information technology (IT) to set up a meta-market in favour of small
and poor producers/rural entrepreneurs, who would otherwise continue to operate
and transact in 'uninvolved' markets where the rent-seeking vested interests exploit
their disadvantaged position. ITC e Choupal is the best example in this context.
Through creative use of Information Technology, ITC eChoupal has been creating
sustainable stakeholder value by reorganizing the agri-commodity supply chains
simultaneously improving the competitiveness of small farmer agriculture and
enhancing rural prosperity. eChoupal also sidesteps the value-sapping problems
caused by fragmentation, dispersion, heterogeneity and weak infrastructure. ITC
takes on the role of a Network Orchestrator in this meta-market by stitching
together an end-to-end solution. It eliminated the traditional 'mandi' system which
involved lot of middlemen as a result of which farmers failed to get the right value
for their produce. The solution simultaneously addresses the viability concerns of
the participating companies by virtually aggregating the demand from thousands
of small farmers, and the value-for-money concerns of the farmers by creating
competition among the companies in each leg of the value chain.

 The basic scope of this novel initiative will be the mutual benefits of the rural
entrepreneurs and industries. The entrepreneurs – primary beneficiaries, SHGs –
bridge with the community, participating companies/industries and rural
consumers have befitted through a robust commercial relationship. These models
of marketing linkages demonstrate a large corporation which can play a major role
in reorganizing markets and increasing the efficiency of a rural product generation
system. While doing so it will benefit farmers and rural communities as well as
shareholders. Moreover, the key role of information technology—provided and
maintained by the industry/company for building linkages, and used by local
30
 farmers—brings about transparency, increased access to information, and rural
transformation. Besides, this strategy of market linkage, addresses the challenges
faced by rural entrepreneurs due to institution voids, numerous intermediaries and
infrastructure bottlenecks. Moreover, the prime scope of this model is the creation
of opportunities for the rural entrepreneurs for product differentiation and
innovation by offering them choices. Because of this sustainable market linkages,
rural producers can participate in the benefits of globalization and will also
develop their capacity to maintain global quality standard. Nonetheless, it creates
new stakeholders for the industry sector. And subsequently, they become part of
the firms’ core businesses. The involvement of the private /industry sector at the
rural product and market development can also provide opportunities for the
development of new services and values to the customers, which will find
application in the developed markets. It will be worth mentioning that building a
sustainable market linkage through industry’s intervention will also empower the
rural mass (producers, farmers & entrepreneurs) to cope with socio-economic
problems in the rural society and will ensure economic self –reliance.

 There are significant challenges to the entire process the most important being the
capacity building of the rural entrepreneurs. For decades, the entrepreneurs
associated with very conventional/traditional knowledge of business, humiliation
with government, so they are likely to look at these initiatives with skepticism.
Only consistent performance can convince the skeptics. Therefore, the industries
must play a catalytic role to cope with this challenge and should also train the
entrepreneurs to develop their managerial and IT skills. On the other hand, the
products of the existing and popular brand also stand as threat to the rural
products. These global giants (brand) may try to suppress the rural products in the
markets with its communication hype. Therefore, developing alternative and
additional market linkages for these products is an absolute necessity. Moreover,
the low volumes of rural products, high operating costs, high attrition, and absence
of local know how and relationships may also create problem in the process.
Henceforth, it is essential to make a way out to cope with these odds.

31
  These issues gain added complexity under globalization, where markets are
characterized by extreme competition and volatility. While rural products has been
perceived traditionally as catering to the local market, or at best, to a wider
national

market through limited formal channels, the reality of globalization since the 1990s
introduced a new dimension to the market for such products. The issue of rural product
generation through industrialization, therefore, needs to be viewed from a new angle and
on far more scientific lines. The core of a scientific approach is to understand the market
opportunities for rural products along with the country's development priorities and to
chalk out a strategy where rural industries have an important role to play. While rural
products are forced to increasingly become part of global supply chains, these products
need to adapt themselves, not only according to the changing tastes of the national
market, but also according to changes in tastes in the international market. Therefore, a
process is essential to explore the market linkages and capacity building for SHGs
through a bottom up approach and continuous dialogue with stakeholders of rural
enterprise. This process should ensure the participation of rural people as consumers and
producers in the globalization mechanism, with better livelihoods and global access to
markets. The real challenge of building a sustainable market linkage starts here.

Marketing mix in rural market

What motivates me to buy? Is it feared of the dire consequences that i might face if i don’t
have the product? Is it the emotional connect with the brand that makes me buy the
brand? Is it the guilt that if i don’t buy the product, i might not do justice to the people i
love? or is it the greed for the feeling of pride that will overwhelm me after i possess the
product? But, do all these emotional triggers take a back seat and only play a passive role
when i talk of rural consumers? But again, all rural consumers are not misers. They all

32
are not looking for the cheapest product, they are probably looking for the most value for
money. It is not about a cheap buy, but a smart buy.

There is more to rural marketing than just offering LUPs ( Low Unit Packagings ),
reducing a product’s price or making an inferior product and dubbing the national ads in
vernacular. It might rather do more harm than good. It is very important to understand the
psyche of the rural consumer and modify the marketing mix so as to be fit to cater to the
rural demographics. Let us have a look at some of the companies, which, made the efforts
to understand a rural consumer, customized the offerings and revolutionized the rural
marketing mix.

PACKAGING

There are two reasons why a rural consumer prefers LUPs.

a. Since they dont have a big dwelling place, they might not have place for storage.

b. Many of them earn their wages daily so they can’t spend in bulk.

Let us look at some instances where some of the companies have taken up a strategic
move to introduce LUPs in the market.

HUL - Under “operation Bharat”, they introduced sachets of clinic plus, ponds, close up
and fairness cream to make sachet buying a habit for these consumers. Seeing that the
rural retailers sell the cut lifebuoy cakes to the consumers, it came up with 75 gm soap
cake and later launched 18 gm lifebuoy soap, priced at Rs. 2.

Asian paints - It introduced oil paints in 250 ml packaging, to cater to the rural
consumers’ need to paint the horns of their livestock and to paint their buffaloes for
selling.

Colgate - Understanding the paucity of space for rural consumers, it came up with caps
for their toothpaste sachets, to facilitate extended storage while usage of its product.

Rural consumers identify a brand by its logo and package color rather than the letters
(attributed to the low literacy levels). Hence the loud and bright colors on the packaging.
This has, though, not proved a deterrent for the imitation product industry, which hitch-
hikes on the years of brand building exercises of the veterans.

• PRODUCT

33
Catering to 70 crores residents in 6 lakhs villages, where the habits, customs and culture
change every 100 kms is commensurate to catering to 2 demographically rich countries
thousands of miles apart. Customization of products to suit the requirements of such
diverse demographics hence becomes logical. Many consumer durables companies have
just removed the value added features from their products and relaunched them in the
rural markets. (e.g. Refrigerators without frost free technology, LG’s Sampoorna TV).
Though, changing your product seems to be a time consuming and tedious exercise, it has
brought some mentionable and fabulous results for the companies who have used
consumer insights to bring in these changes.

HUL - Let us see 2 examples of he forerunner in interpreting and gaining from insights
bringing in changes in its product range to cater to the profit storehouse.

1. India’s 16% contribution to the world population and 28% to world’s hair shows the
latter’s role in accentuating the physical appearance of an individual. Indigence forced the
rural community to use the same soap for hair and skin, since a Rs. 2 shampoo sachet
categorized itself as a luxury item for them. HUL, having taken a cue from this insight,
introduced Breeze 2 in 1, a multipurpose soap for hair and skin !

2. The premium positioning of Taj Mahal tea did not prevent them from launching Taj
Mahal Janata for the rural markets by using chicory and tapioca flour to decrease costs.

Arvind Mills - Being used to get their clothes stitched, the Rs. 300 price tag on a
readymade entry level jeans was a major deterrent for the rural youth. None other than
Arvind mills executed theinnovative idea of distributing ready to use stitch kits to the
rural tailors, priced at Rs. 195. Arvind mills sold 5 million kits in 2 years !!

Britannia - They launched “Probisk” biscuits which used soya proteins instead of milk
proteins as its ingredient, hence making a biscuit cheaper without altering its nutrition
conten.

Hawkins - Unlike in urban areas, the use of coal and wood made the control on the
flame of the burner difficult. To help the rural women avoid hand-burns and facilitate the
handing of the pressure cooker, it came up with a new product with 2 long handles on
both sides of the cooker.

Philips - The rural mindset of “Sturdier the product, more powerful it is” led to their
“Mahasangram” campaign where they introduced larger and louder radios for rural
demographics.

34
PLACE

Complexities galore in these distinctive yet blended markets of rural consumerism. A

rural consumer who takes 2 years to make a watch-buying decision definitely does not
believe in impulse buying of consumer durables, but timely availability becomes an
important factor in their buying decisions for consumer goods. The following distribution
structure enumerates various touch-points with respect to the rural consumers.

Research shows that on an average the daily sales figure of a shandy with average 314
outlets are close to a whopping Rs. 2 lakhs per day and that of an individual outlet is Rs.
874. These rural supermarkets have the potential to challenge all the world’s K-marts and
Wal-marts put together in their size and sales!

HUL - Initiated “Project Harvest”, “Project Bharat” and “Project Shakti” (which utilized
the concept of self help groups) to extend their distribution to the villages with a
population of 2000, 1000 and less than 1000 respectively. Each state has one or two
Carrying and Forwarding Agents (C&FAs) who are assisted by Redistribution Stockiest
(RS), who are allotted a specific area and are responsible for the physical distribution of
the products. RS, in the vans provided to them cover the areas allocated to them called
Indirect Coverage (IDC). The frequency of the RSs’ visit to these IDC depends upon the
kind of business these IDCs generate.

LG - This is a perfect example of a brand which has maintained a premium positioning

in the urban market and still has managed to cater to the rural markets. When LG
launched its “Sampoorna” TV range, it understood that shops in all the villages won’t be
profit centers since a rural consumer usually buys such high-priced items from assembly
markets or from the markets of nearby towns and cities.

There are plethora of examples of co-operative societies ( Amul ), SHGs ( Shakti ), e-

Choupal, distribution in rural financial services, but i will restrict myself to just touching
the periphery of the topic and not dig deeper into these models.

35
 PROMOTION

When in Rome, be a Roman. Er, “When in Rome, speak Roman”. To make the
Promotions/Advertisements in rural markets successful, you have to connect instantly
with the consumers. You not just have to use the local dialect, but the psycho-graphic
inclinations that a rural consumer has so long been trained to develop should be built
upon. The strategy of shock-and-awe might not be as successful as a fighting teaser
campaign that sinks in easily. Also, a promotion that establishes an emotional connects
will lead to returns, sooner than later.

CavinKare - Appreciating the cost-concern of consumers, it did a pre-launch campaign

where it went to the village schools and gave a free head-wash to children and then
launched its “chic” brand at a meagre 50 paise per sachet. Consumers, having seen the
live results, liked the value proposition and hoarded the shops!

HUL - The company has continuously designed innovative promotions to reach the rural
markets.

1. Lifebuoy in its rural contact program called “Lifebuoy Swasthya Chetna”, where it
spread information on how washing hands can keep diseases away, targeted a population
of 5 crores in 15000 villages. It applied a 2 prong approach.

HUL employed Health Development Officers and Health Development Assistants who
went to all the villages and educated the community through lectures and community
meetings.

They returned to the villages after 2 months, offered toys, badges and medals to children
who had made it a habit to wash hands regularly ( read saved “Lifebuoy” soap wrappers )
and a certificate to the children who had won these badges most often.

2. HUL capitalized on the huge gathering of 70 million odd pilgrims ( read prospective
customers ) in kumbh mela - They showed people using an ultra violet wand where germs
and dirt resided on their hands and how regular usage of soap can keep their hands clean.

ITC - The promotion done by ITC during its Hero cigarettes brand launch in 1993 is
unforgettable. In a campaign extended to 3 days, on the first day a person just went on
cycle or a rickshaw saying on a P.A. system “Hero aa raha hai”. On the 2nd day, an
36
elephant draped in a large “Hero” logo embossed sheet and carrying a huge cut-out of the
hero cigarette packet went through the villages distributing free samples of the product.
And finally on the third day, a video van came to the villages playing popular movie
songs to attract crowd. The campaign was so successful that the villagers actually started
waiting for an event to happen in those 3 days. It was done in u.p. and bihar in october
1993, and the sales figure reached 175 million sticks in just a matter of months.

There can be many such promotional exercises cited that companies have undertaken to
capture the mind share of a rural consumer. For instance, M&M organized nukkad nataks
and used paintings on the well walls, since people gathered there. LIC has used vans and
puppet shows to sell its policies.. Asian paints painted the house of the Sarpanch and the
post office to show that the paint can stand against time and weather. Castrol tried to gain
its consumers’ heart-share with its “jaago jaago jug jug jiyo campaign” aimed at
motivating the villagers to get together the issues that bother them when their new brand
CRB-plus was not doing well in the rural markets

37
 Research methodology

Research Objectives

The research paper consists of following objectives:

(i) To analyze the present promotion strategy of few brands in rural markets.

(ii) To measure the success of rural marketing campaign of few brands in Terms of
consumer appreciation.

(iii) To study the determinants of specification factors this can decide the success the
rural promotion strategy.

(iv) To evaluate the effects of adopting the specific brand ambassadors in the rural
marketing context.

(v) To present suffocate on above-mentioned objectives.

Research design

The research design applied for this purpose is experimental with descriptive. The
descriptive part explores its significance, characteristics, nature, need
of study, usage of study, impact of study in our society and
environment. The experimental design was suitable as the rural consumers fell interest
about it and descriptive design depends on the explanation past about the campaign of
these Brands.

Operational definition of the concept

Rural Markets are defined as those segments of overall market of any economy, which
are distinct from the other types of markets like stock market, commodity markets or
Labor economics. Rural Markets constitute an important segment of overall economy.
38
 Source of data

Data collection is an integral part of the marketing research. There are several ways of
collecting the appropriate data, which differ considerably in context of money costs,
time and other resources at the disposal of the researcher. the researcher should keep
in mind two types of data viz. primary and secondary.

The secondary data are those, which have already been collected by someone else like
various journals and publications of the company and that are used for quick
compilation of the report. This study has been conducted by using secondary sources
viz. websites, journals, newspaper, magazines.

Case study of ITC E-choupal success in rural market

39
ICT has potential to make significant inroads in a traditional agrarian economy like India.
Indian agro-sector has been exploiting the benefits to ICT. Innovative ICT application
platforms are being created by private sector players in conjunction with local farmers.
One such private initiative has been by ITC Ltd in the state of Madhya Pradesh. It has
helped the farmers in many ways, such as developing of local leadership, shared
ownership of the assets created in this initiative, access to the latest knowledge for the
agro-sector, sustainable income levels and skill development for productivity
improvement. This initiative from ITC has become a benchmark today in the ICT
initiatives in agro-sector. Several best practices can be learned from this initiative,
namely:

§ ease of replicability and scalability

§ Customization to meet the specific local needs and

§ Organizational commitment.

The success of e-choupal has heralded a new era in the Indian agro-sector. The work
needs to be carried forward and replicated in the other untapped areas. Creating business
channels that can create a win-win situation both business and farming community has
enormous economies of scope. Once a channel is created it could be used for many
products and services as shown in this case study. The main reasons for the success of the
platform have been the involvement of local farmers and maintenance of the rural IT
network by the corporate entity.

“Internet will extend electronic marketplace and make it the ultimate go-between, the
universal middleman.”- Bill Gates

40
 Introduction

India is second most populous country in the world. Majority of its population lives in
villages & earns their livelihood through farming. Agriculture is the backbone of Indian
economy. It contributes around 26% of the total GDP. 65% of Indian population lives
mainly in its 600,000 villages. Agriculture is the mainstay of the majority of the villagers
as they are employed in agriculture or agriculture related services. Presence of diverse
agro climate zones and a variety of soil and agro-climatic conditions have made possible
the cultivation of almost every item from cash crops to food grains. Agriculture provides
livelihood to about 65% of the labor force and accounts for 8.56% of India's exports.
After USA, India has maximum area of arable land but productivity per hectare is
nowhere near the world best. India is not in the top ten countries in terms of productivity
of rice and wheat. Despite green revolution Indian agriculture sector has not been able to
achieve the world level productivity. Cardinal reasons behind this are highly

Fragmented nature of Indian farming with close to 33% of arable land held in units of less
than 2 hectares per owner. It doesn’t let farmers enjoy the economies of scale in
operations and modern farming equipment proves very expensive for them. Because of it
quality is also a problem. The fragmented farms are constraining the risk taking ability of
Indian farmer locking him up into a vicious cycle of low risk taking ability > low
investment > low productivity > weak market orientation > low value addition > low
margin > low risk taking ability. So there is a need to look for interventions that can help
the farmers realize higher level of income. This is a case study of the development of a
rural market hub using a set of information communication technologies. This is the
largest e-market initiative undertaken by any corporation in India and also it has been a
successful experience. Many others are tying to replicate this.

Rural Market e-Choupal 1

41
Background

Indian farmers rely on Department of Agriculture for various inputs such as weather,
modern and scientific farming practices and insurance cover. All these are accumulated
by the VLW of Department of Agriculture from various sources like Government
Universities, Meteorological department, insurance companies’ etc. For seeds, fertilizers
etc. farmers approach input retailer who source them from wholesalers who are in direct
contact with the manufacturers. After harvest, farmers bring their produce to Mandis
(regional market yards) in small multiple lots throughout the year, where the beans are
auctioned to the traders and agents of the processing companies in an open outcry method.
The Government, to facilitate fair price discovery and enable aggregation of goods,
regulates these market yards. Successful bidders then bag the beans, weigh them, pay cash
to the farmers, and transport the cargo to the processing units (to whom it would have
been sold through a broker). Many intermediaries carry out this whole activity, each one
acting as a principal with the next leg in the transaction chain. But with every
intermediary the cost of produce increases to the processor as intermediary adds his profit
margin to the cost although the farmers get the

lowest price and margin in the whole value chain. Apart from this, intermediaries also
block the flow of market information to the farmers and use that information for their own
good. Here poor farmers are squeezed to the maximum without the benefits of their labor
accruing to them but to the intermediaries. International Business Division of ITC started
the new initiative namely e-choupal (village meeting place on an electronic platform).

Rural Market e-Choupal 2

About ITC-Inter Business

ITC Limited with an annual sale of US$ 2 billion from its diversified businesses is one of
India’s largest corporations with its presence in tobacco, hotels, paper boards, foods
42
fashion retailing and commodity export. International Business Division (IBD) started in
1990, a division of ITC is engaged in exports of a range of agricultural commodities. It
contributes over 60% of ITC Group's total foreign exchange earnings. ITC-IBD has a
focused approach on strengthening its core competencies in select commodities. Today,
IBD continues to deliver agri-commodities like Feed Ingredients - Soyameal, Rapeseed
Meal; Foodgrains - Rice (Basmati & Non Basmati), Wheat & Wheat Products, Pulses;
Coffee, Black Pepper; Edible Nuts - Sesame Seeds, HPS Groundnuts, & Marine
products like Shrimps and Prawns. ITC IBD’s largest item for exports is soybean meal (a
rich source of protein) which are exported to the animal feed mills around the world,

Competing with several transnational trading companies, mainly from the USA, Brazil,
and Argentina.

E-choupal concept

E-choupal is a Hindi word which means “village meeting place”. Market is a meeting
place where vendors and customers come together to do transactions. e-choupal is a
virtual market place where farmers can transact directly with a processor and can realize
better price for their produce. e-choupal has the advantages of the market but spans very
large varieties of vendors and customers. Geographical distances do not restrict
participation in the e-choupal. The main disadvantage of conventional market is that
information asymmetry is inherent in the market where as e-choupal provides for
transparent transactions. This enables the participation of smaller as well as larger players.
Elimination of some layers of intermediaries allows for larger share of profits to reach the
lower end of value chain. The main attractiveness of e-choupal is that it can be used for
connecting large producers/small producers and small users/large users, thereby
eliminating the need for hierarchy of brokers. Internet is used as a low transaction cost
backbone for communication. Physical delivery of produce to the processor is still done
through the existing intermediaries. e-choupal does not attempt total elimination of
intermediaries, as intermediaries are indispensable in economy like

India where intermediaries are adding value to the every step of value chain at a low cost.
Intermediaries have the expertise in storage, transportation, quality assessment and
counter party risk reduction, which are difficult to replicate. e-Choupal provides farmers
with all the market information and this helps them to become market oriented. In e-
choupal intermediaries are leveraged but they are disinterring mediated from the market
information flowing to the farmers.

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Rural Market e-Choupal 3

Idea Generation

The idea of creating and leveraging an electronic market place came from the
Brainstorming session done by senior executives of ITC-IBD. ITC believes in using a
business model that does well to society and helps in improving the standard of living of
stakeholders as well as add value to the shareholder wealth. He also believed that to tap
the Indian rural market opportunity, and to reach across a wide range in rural India, the
leaders have to understand and unleash the power of the small-scale entrepreneur in
village communities.

Idea InitiationThe challenge of servicing the changing needs of global customers,

competing with the aggressive transnational trading behemoths in a low margin agri-
commodity business, operating from a high cost economy like India and looking for
alternative markets in the period of recession were the basic business driver behind the
new business model. Apart from this ITC was increasingly looking to introduce service
element in its activities and improve the customer centricity. Service element was never
tried in commodity business in India before. ITC was aiming to introduce new lots, new
varieties, new packaging and non-standardized orders though the new model. ITC is the
major exporter of soya bean. It used to buy soya bean mainly from the local markets. This
created the problem of poor quality produce; need to handle a large variety and high cost
of intermediation. Indian market has inadequate physical, social and institutional
infrastructure that is substituted by intermediaries and they also add value to the chain on
every step. ITC was looking for a solution that doesn’t eliminate the intermediaries
entirely but at the same time leverage their strengths. Apart from this

Conceptualization of the Project

ITC-IBD’s top executives had a major brainstorming session. ITC was looking for a
business model that is customer centric but uses existing infrastructure. Questions like the
following were pondered upon:

· What’s the best corporate business model for rural India?

44
· Does it require a new breed of leaders?

· What are the challenges that these leaders are facing?

· Will they have to work within new organizational structures?

Rural Market e-Choupal 4

The answers pointed towards an electronic market with low transaction cost. There are
numerous intermediaries’ in the value chain of the commodity business. But their total
elimination from the value chain would not be prudent for any business model as they
makeup for weak infrastructure, and deliver critical value in each leg at very low cost. But
their aggregate cost makes the chain uncompetitive. And many times, by blocking
information flow and market signals, they are able to extract abnormal profits for
themselves than the value they are adding. A more effective business model must be able
to leverage the physical transmission capabilities of these intermediaries, yet must disinter
mediate them from the flow of information and market signals. Answer to this question
was found in virtual vertical integration in the value chain. Creative use of information
technology through e-Choupal have strengthened the basic business by enabling reduction
of costs in the supply chain and deliver superior products /services to the customers like
real time information on monsoon, prices, better farming practices while it has facilitated
the interaction between company and village community. Apart from this, IT also gave
the opportunity to build a unique model of ‘rural distribution’ on the same platform.

Identifying the Project Goals

The project was initiated with the objective of achieving a win-win situation for both
farmers and the company. So on the one hand more profits and larger share of

Commodity exports were ensured for the company and on the other hand farmers

Realized better prices for their produce and improved the productivity of their farms.
Initial goals were following:

Helps enhance farm productivity by

· Disseminating latest information on district level weather forecasts for

Short & medium terms

45
· Best practices in farming (generic as well as specific)· Supply of quality inputs (seed,
herbicide, fertilizer, pesticides etc) in the village itself

Helps improve price realization for farm produce by

· Making available live data on markets viz. Location / Buyer wise prices

Offered

· International market prices of relevant agri-commodities

· Historical & Up-to-date information on supply & demand

· Expert opinion on expected future price movements

Rural Market e-Choupal 5

Helps minimize transaction costs in marketing farm produce by

· Buying output at the farmers’ doorstep

· Through transparent pricing & weight management practices

Unique Business Model: e-Choupal

The e-Choupal model has been specifically designed to tackle the challenges posed by
the unique features of Indian agriculture, characterized by fragmented farms, weak
infrastructure and the involvement of numerous intermediaries, who block critical
marketing formation from passing to the farmers and use that information for getting a big
margin for themselves. The intermediaries capitalized on the economies of information
and economies of physical things, which are tied together in a bundle. Due to this, the
farmers do not get the proper price of its product & they continue to live below the
poverty line. But e-Choupal sets things in order as it smoothens the flow of information to
the farmers by disinter mediating intermediaries from the chain of information flow and at
the same time leverages the physical transmission capabilities of the them as they deliver
critical value at every link for a very low cost in a weak infrastructure environment. The
structure of e-choupal .

Rural Market e-Choupal 6

46
The project e-Choupal is ITC’s unique click & mortar initiative e-Choupal is an ICT
platform for carrying out trade at a number of locations. In this, ITC sets up a back-up
physical service support at the village level, called Choupal, through Sanchalak: a lead
farmer, who acts as the interface between computer and the farmer. ITC accumulates
information regarding weather, modern farming practices, and market prices from sources
like Meteorological Department, Agri-universities, mandis (regional market) etc., and
upload all information on to e-Choupal web site. All information is customized according
to local farmer’s requirements and provided into the local language through computer set
up by ITC in Sanchalak’s house. Sanchalak access this information and facilitates its
dissemination to farmers. Information regarding weather and scientific farming helps
farmers to select the right crop and improve the productivity of their Farms. Availability
of market information helps farmers to become market oriented. They know what price
ITC is quoting and the price prevalent in the local market, thereby helping better price
realization for farmers. If farmer decides to sell to ITC, Sanchalak works as the
aggregator of small farmers produce to sell them to ITC. Sanchalak also aggregates
farmers input purchase orders for various items like seeds, pesticides and places them
directly with the suppliers through internet and facilitate supply of high quality farm
inputs as well as purchase of farm produce at farmers doorstep with the help of
intermediaries. It can be deciphered that Choupal has added critical value to the existing
supply chain through innovative application of information technology. ITC-IBD has
successfully reached the vastly scattered farming villages of India and facilitated the
smooth flow of rich information to them by disintermediation the intermediaries in flow
of information. Power of information is working as the catalyst of transformation of the
life of farmers by helping them to get improved yields from their farms and better price
realization. Usually it is tough to maintain the expanding scale of reach and richness into
the products or services but e-Choupal is achieving it easily and we find that overall value
chain has been shifted horizontally on the scale of reach and richness. e-Choupal is an
ICT platform that facilitates flow of information and knowledge, and supports market
transactions on line.

· It transmits Information (weather, prices, news),

· It transfers Knowledge (farm management, risk management)

· It facilitates sales of Farm Inputs (screened for quality) and

· It offers the choice of an alternative Output-marketing channel (convenience, Lower

transaction costs) to the farmer right at his doorstep

Rural Market e-Choupal 7

47
· It is an interlocking network of partnerships (ITC + Met Dept + Universities +

Input COs + Sanyojaks, the erstwhile Commission Agents) bringing the “best-inclass” in
information, knowledge and inputs. e-choupal is, thus, distributed transaction platform
that brings together sellers, buyers along with information and service providers. e-
choupal is a model with a number of non-conventional characteristics namely:

· customer centric

· capable of being used for many commodities and multiple transactions

· Easily scalable once it is verified

· uses local talent and local people and develops local leaders

· can be extended to local as well as global procurers

· stimulates local entrepreneurs to extend their innovativeness

· uses all the existing institutions and legal frameworks and

· Many others can join the market as transaction time is low.

Role of ITC-IBD In The Innovative Process

An ICT transaction platform has to be created, rules have to be set for transactions and
platform has to be maintained. ITC, thus, acted as a platform creator, platform coordinator
and platform rule setter. A unique synthesis of concurrent top-down & bottom up
approach is the hallmark of this platform. What started as a top-down approach, when
senior management conceptualized the new model at strategic level, soon became a
48
bottom-up approach with the operating team generating several new ideas. Having
resourced the project in its initial phase with a strong belief in the model’s potential rather
than the short-term pay-off, the Chairman of ITC continuously provided the inspirational
leadership by challenging assumptions and flushing out alternative solutions. The senior
executives of IBD brings thought leadership to the project, conceptualizes experiences,
refines / articulates & communicates the business model / purpose constantly, besides
extracting the value out of ideas generated by the operations team to continuously broaden
the scope of the project. While the operating team, sweating it out in the rural hinterland
executing the strategies and expanding the network brings backfield experiences as
innovative inputs to be incorporated into the strategies.

The project is surging ahead through a well-coordinated team effort driven passionately
by every member, each one playing the leadership role at different point of time
depending on the context. Literally each one energizes the others.

Recommendation & Suggestions

 The rural market looks attractive for FMCGs. Rural market have a wide scope for
business houses for its large and scattered nature. Many companies HUL,
NIRMA, PARLE, ITC, LG, AMUL, COCA COLA, and ARVIND MILLS etc. are
successful for their sustainable long term strategy in rural market.
 To understand the consumer behavior in rural market is different from the urban
consumer. To branding the product in rural market is very tough job because there
is poor infrastructure. Marketing mix in rural market is completely different in
urban market. In rural market price is considers more Then compare to urban
market.
49
 The Language and content must be according to the suitability of rural
environment.
Background figures are also a deterministic factor.
 Admissibility of brand ambassadors plays an important role in this regard.
Special promotion measures are the strong applicable factors in this regard.
 Target consumers on unmet needs vis-à-vis price, products, and features.
 Develop the market through a unique positioning.
 Product and packaging should be creatively used for delivering VALUE and
influencing perception.
 Product features can be communicated effectively to create a favorable attitude.
 Distinct colors, designs, symbols help illiterate consumers to identify the brand.
 Leverage strengths e.g. distribution (e.g. Wheel) or costs (Nirma) to deliver the
value offering.
 For high-priced durables, the market can be enlarged through hire-purchased
schemes.

Conclusion

 Rural mindset accepts the brands easily, which are close to their culture. This
point must be reflected in ad for rural markets.
 Set up of a Life style Research Team this would analyze the needs & preferences

of the consumer, in depth.

 Selection of brand ambassadors, lyrics must not be ignored in this regard. They
have a special liking for folk culture so this can be taken in an effective utilization
of brand promotions

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  Sponsorships to the Melas and Hats must be considered in a significant manner.

 Understand at length his comfort levels in terms of what he wants and what he
would spend for what he wants.

 Make products and service available for him to suit his Needs & Preferences.

 Have a deep pocket network to make products Available for him at a close
proximity from where he can buy easily.

 Rural consumer environment must be understood before the creation of ads.

Bibliography

1. Marketing Management by Philip Kotler – 11E.

2. 'Advertising Express' ICFAI Journal Jan 2006 – Branding India.
3. Indian Management – May 2007.
4. "Positioning" – A1 Ries and Jack trint by warner Books.
5. The Power of Branding praxis – Business line's Journal on Management.

6. The Marketing White Book-2006 by business world 2E.

7. "The future of competition" by Prof.Venkat Ramasamy Co-author with C.K. Prahalad.

8. Monish Bali, "The rural market likes it strong", The Economic Times.
9. Neeraj Jha, "Gung-ho on rural marketing", The Financial Express.

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10. T. P. Gopal Swamy," Rural Marketing, Environment-Problems and strategies,
Wheeler Publishing, 1997.
11.www.hill.com
12.www.indiainfoline.com
13.The Marketing Mastermind Case study HLL- Rural Marketing Initiatives ICFAI Press,
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15. Marketing management: Ramakumari Ramaswami

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17. www.kiva.org

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19. www.marketmanics.com

20. www.iim-c.com

21. www.iiftdelhi.org

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