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ACKNOWLEDGEMENTS Many hands have toiled to ensure that this project finally sees the light of the day. It required continuous guidance, inspiration and support from many people and without their cooperation; this project would not have been complete. I take this opportunity to express my sincerest gratitude to my Project Guide, MR.KSHITEZ BANNERJEE who lived up to his Designation and was a constant source of guiding light for me at each and every stage of the execution of this project. I would also like to thank the following people who through their experience have enlightened me on the practical aspects of this subject without whom the study would not have been carried out successfully. Lastly I would like to thank my well-wishers and my colleagues who were a constant source of inspiration and in some cases also motivation as it ultimately has led to the completion of this project. Finally I would also like to give due credit to people, who knowingly or unknowingly have guided, supported and helped me in the completion of this project as without their support this project would have never seen daylight.

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RURAL & URBAN CONSUMER BEHAVIOUR Indias way is not Europes. India is not Calcutta and Bombay. India lives in her seven hundred thousand villages.....................Mahatma Gandhi, 1926

CONSUMER BEHAVIOUR Meaning and definition The study of consumer behaviour implies how and why a particular consumer or group reacts to decisions of producers. Consumer behaviour could be defined as those actions directly involved in obtaining, consuming, and disposing of products and services, including the decisions process that proceeds and follow the action. According to another author consumer behaviour is the behaviour that consumer display in scanning for purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs. The study of consumer behaviour is the study of how individuals make decisions to spend their available resources (time, money, effort) on consumption related items. It includes the study of what to buy, when to buy, why to buy, from where to buy, how often to buy, and how often they will use it. Normally in consumer behaviour one studies the behaviour of consumers for consumption goods but in the study the behaviour of the buyer is also included. He may be user i.e. ultimate consumer or he may be buying for someone else. In a competitive environment, one cannot trust a product or a consumer. The producer has to produce what is demanded or what can be demanded. Study of consumer behaviour will help us to know what can be sold and what goods and services are likely to get rejected.

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In certain products like medicines one buys on the prescription of a physician which is also a part of consumer behaviour. In case of capital goods that is plant, equipment, machinery, buildings etc the decisions are often based on technical advice of others. In case of industrial raw materials the decision is influenced by supplier of equipment. Then there are purely consumer goods with short life and once they are used they extinguish. They are called Fast Moving Consumer Goods (FMCG). There are other consumer goods which are durable like cars, refrigerators, electrical iron, juicer-mixer, etc but they basically consumer items with long life. There are also goods like clothes, which are not consumed in one go but are used for long. The behaviour of consumers for all these products is taken on different considerations than short-term consumer goods like fruits, juices, ice cream or milk. In short consumer behaviour implies study of behaviour of purchaser of all goods and services whether purely consumer goods, intermediate goods or capital goods. In other words it implies study of attitude of all consumers in disposing of their resources. Further it is not confined to final users but also include study of attitudes, of all those who take investment decisions whether they consume themselves or buy for others. It also includes study of behaviour of those who are consultant, advisers and give their opinion to but or not to buy a particular thing and the study of factors which influence their advise/opinion. Consumer behaviour is an art and a science, economics, psychology, sociology. The study of consumer behaviour envelops all these and more. Be it a housewife buying a tube of tooth paste, an executive buying a tie, a school kid buying a pen or a multimillion dollar corporation buying heavy capital equipment, the process of buying is complex and, at times, intriguing. The consumer buying process is influenced by the consumers financial position, personality, tastes, preferences, reference groups, social standing, and even the economic sentiment that is dictated by the status of the economy.

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Rural Consumer Behaviour Consumer Buyer 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, 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. Characteristics of rural markets Out of the total 6,30,000 villages in India less than 500 people live in 50% of these villages 40% (300 mn) live in 7% (50,000) villages Only 1% (6300 villages) have more than 5000 people Owner/ farmers constitute 34% of the house hold sectors in rural India and they account for 65% of TV purchases Even though literacy levels are on the rise in rural India it is of limited meaning in terms of marketing as by definition literate people can only sign their names I. Economic Status The average household income of the urban population (Rs.36,000p.a) is thrice that of the rural (Rs.12,000p.a). According to NCAER (National Council of Applied Economic Research) the lower income group (<70,000) will shrink by 55% in 2006-2007 and upper income groups (>1,40,000) will double in 2006-2007

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The aspirants, lower middle and middle class are the largest segment and are the largest base for durables and FMCG goods The well off segment like the wheat farmers in Punjab are as of today a negligible base The destitute i.e. the lowest income group have a very low purchasing power.

Factors influencing behavior The various factors that effect buying behaviour 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 behaviour, 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 color 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 Rural consumer behaviour Cultural factors exert the broadest and deepest influence on consumer behaviour. The marketer needs to understand the role played by the buyer's culture. Culture is the most basic element that shapes a persons wants and behaviour.

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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 behaviour are: 1. Product (colour, size, design, shape): There are many examples that support this point. 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 relaunched as Spacio (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 looks at technology with the viewpoint of the smaller the better. However, in rural 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. 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 Mukhiyas 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 VCRs, LCVs Urban consumer behaviour Family influences Family is an important influence on purchase decisions. Bonnet and Kassarjian say Attitudes towards personal hygiene, preferences for food items etc. are acquired from parents. tractors,

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Peer group influences Researchers say that peer groups are much more likely than advertising to influence attitudes and purchasing behaviour. Personality Personality also affects consumers attitudes. Traits such as aggression, extroversion, submissiveness or authoritarianism may influence attitudes toward brands and products. Information and experience According to learning theory, consumers past experiences influence their brand attitude and condition their future behaviour. It is seen that brand loyalty will quickly end if brand does not perform well. Therefore, information and experience also determines attitude. Situational influences Purchase task - who are you buying for? Social surroundings - who are you shopping with? Physical surroundings - where are you shopping? Temporal factors - how much time do you have to shop? Antecedent states What kind of mood are you in? Have you just been paid? Do you shop for status or self-gratification?

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Urban consumer Rural consumer

The Differences in Buyer behaviour Rural Conservative Values, aspirations, needs - traditional and based on culture, social customs, beliefs Eldest Male Member KDM Collective Sanction Urban Innovative Follow trends (including International) Varies Unheard of

Distinctive features of rural markets vis--vis urban markets SIDDHARTHA PAHARI PG/10/1203

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Features Demand pattern Spread Literacy level Per Capita Income Awareness of needs Infrastructure Sources of information, communication Supply Product info guidance Consumer Protection

Rural Seasonal Scattered Low Low Not entirely known Poor Word of mouth personal/ direct selling, TV, radio, unconventional media Erratic, untimely Needed No awareness Rural product portfolio

Urban Uniform Concentrated Moderate Moderate Known Moderate All Timely Adequate Increasing awareness

Category I Pressure cookers Pressure pans Mono cassette recorders Bicycles Wrist watches (mech) Wrist watches (Quartz) Radio/ transistors Electric Irons Ceiling fans Table fans

II 2 in 1 (mono_ 2 in 1 (stereo) B & W TV (S) B&W TV (R) Instant geysers Storage geysers Sewing machines Vacuum cleaners Mixer/ grinders

III (Items costing more thanRs.6,000) CTV (S) CTV (R) VCRs VCPs Scooters Mopeds Motorcycles Refrigerators Washing machines

CTV sales 65% in rural India Rural share of durables about 60% (esp. bicycles, wrist watches, radios/ transistors) Share of category I is declining and II and III is increasing. Purchase of goods under category III has increased by 25 % over the previous year, category II has increased by 15% and category I by 3%.

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Preference for brands Segment % of consumers who preferred branded items Necessity/ popular < 40% 40 80% >80%

Coconut oil

Iodized salt Tea Washing cakes Biscuits Blues (neel) Hair oils Bulbs

Toilet soaps Washing powder Analgesics Toothpaste Razor blades Shampoo Batteries Rubs, balms Skin cream Toothbrushes Antiseptics Chyavanprash Digestives Mosquito repellents Shaving creams Tube lights

Premium

Refined oil

Demand Pattern Durables CTV Refrigerator FMCGs Shampoo Toothpaste Urban 30.4 33.5 Urban 66.3 82.2 Rural 4.8 3.5 Rural 35.2 44.9 Total (% of rural HH) 12.1 12.0 Total (% of rural HH) 44.2 55.6

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1. Myth-1: Rural Market Is a Homogeneous Mass Reality: Its a heterogeneous population. Various Tiers are present depending on the incomes like Big Landlords; Traders, small farmers; Marginal farmers: Labors, artisans. State wise variations in rural demographics are present viz. Literacy (Kerala 90%, Bihar 44%) and Population below poverty line. (Orissa 48%, Punjab 6%) 2. Myth-2: Disposable Income Is Low Reality: Number of middle class HHs (annual income Rs 45,000- 2, 15,000) for rural sector is 27.4 million as compared to the figure of 29.5 million for urban sector. Rural incomes CAGR was 10.95% compared to 10.74% in urban between 1970-71 and 1993-94. 3. Myth-3: Individuals Decide About Purchases Reality: Decision making process is collective. Purchase process- influencer, decider, buyer, one who pays can all be different. So marketers must address brand message at several levels .Rural youth brings brand knowledge to Households (HH). RURAL MARKET ENVIRONMENT I. Introduction: The emergence of an active cash economy is bound to create is bound to create a strong rural demand and promote rural consumption. The traditional growth and dominance of urban industrial centres is undergoing rapid changes. A more equitable distribution in rural areas would also help in slowing down the rapidly increasing influx of people from rural to urban areas. There are two sections of rural population: A large portion has a low income and low consumption levels; The rest are rural rich.

The rural population forms a major portion of the Indian population as seen below: SIDDHARTHA PAHARI PG/10/1203

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Division of Population in India

Urban 26%

Rural Urban

Rural 74%

About 75% of the Indian people reside in rural areas. In other words, for every consumer in the urban area, there are three of them in the rural areas. Though the proportion of rural population is showing a slight decrease over the years, but in absolute numbers, the rural population is growing at a higher rate than the urban population. This large population will require a wide range of consumable and durable goods and services. At the same time the need of the rural areas does not automatically guarantee a market, unless it is backed by income and the resultant purchasing power. For a vast majority of the rural population, the main occupation is agriculture and allied activities. The graph below gives the distribution of rural population as per their occupation pattern.

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Occupation Pattern of Rural India

2% 9% 10% 50%
Agricultural Labour Business Non-agricultural Labour Salary Earners Notgainfully employed

2%

Agriculture

27%

About half of the rural population own or lease land to cultivate it for their livelihood. Another 27% are dependent on these cultivators for their jobs as agricultural labourers. Thus, a total of 77% of rural population depend on land only for their living and land is their source of living. There are others, constituting small proportions, who are engaged in business like petty shopkeepers or merchants and salary earners like teachers, health workers and village level officials. The implication of this is that the income generation in rural areas entirely depends on how the land is used, what crops are cultivated, how much is marketed, how much is consumed and the marketing arrangements for the production. If rainfall is adequate, weather conditions are favourable and appropriate technology is available, the rural areas prosper as it has happened in the states of Punjab, Haryana and Western Uttar Pradesh. So the disposable income in the hands of the rural people is very much conditioned by the status of agriculture and other allied activities. This also indicates that major part of income generated is a source of agriculture. 75% of income generation in rural areas is from agriculture and agriculture-related activities. One of the deterrents for marketers to exploit the rural market potential has been the vastness of the rural market in terms of areas covered and the location of the rural SIDDHARTHA PAHARI PG/10/1203 Page 13

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population. It is much easier to cater to the needs of the urban population because of their concentration, but it is very difficult in the case of rural population because of their widespread nature. The villages are also not uniform in size. Nearly 48% of the villages have a population of less than 500 persons or about 100 households, which is probably of no consequence to marketers. This may be acceptable since the proportion of population covered by these 48% of villages account for only 12% of the total population. Yet it should be borne in mind that the people of these villages also have land and cultivate and generate some income. Thus the location and size of population of villages throw a challenge to marketers. This phenomenon is not true for the whole country and there are wide variations among the different states. In states with high irrigation and fertile lands, the concentration of population is more when compared to states with low irrigation facilities and lack of arable land.

Literacy Levels in India

ILLITERATE LITERATE

100 80 60 40 20 0 Rural Urban

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Given the distribution of rural and urban population, it can be seen that the number of literates in rural areas are more than in urban areas. It is an interesting got note that has been a considerable increase in the number of literate persons in rural areas since the last two decades. This has its implications in communicating with the rural population. It appears to prove that communication should not prove to be such a big hurdle. Today, television has proved to be an effective medium for communication with the rural masses. The telecasting network in the country today covers about 93% of the population. Assuming that the entire urban population is covered by the television but the television, which is only 23%, then nearly 67% of the rural population will be covered by television. Thus, television reaches a larger segment of the rural population than any other form of mass media. Though radio is also very popular, people like to see to believe. The above factors point that the potential for marketing of goods and services depends heavily on agriculture, since it is the main occupation in rural areas. The market for agricultural inputs fertilizers, pesticides, insecticides, tractors, irrigation equipment and seeds has been expanding over the years in rural areas as the Indian farming is fast becoming market-oriented. But the rural market has remained a dark area for those manufacturing and marketing consumables and consumer durables. To successfully exploit the potential offered by the rural market, there is a need to first understand the rural market in terms of the characteristics mentioned above. Only a few established companies HLL, Lipton, Brooke Bond, TOMCO, and P & G have been trapping the potential of the rural market for a long time.

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II. The Features of Indian Rural Markets 1) Large and Scattered Market: - The rural market of India is large and scattered in the sense that it consists of over 63 crore consumers from 5, 70,000 villages spread throughout the country. 2) Major Income from Agriculture: - Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with agricultural prosperity. Roughly speaking, a location is defined as rural, if 75 per cent of the population is engaged in agriculture related activity. In India, close to 70 per cent of the population is agrarian and contributes to about one-third of Indias GNP. 3) Low Standard of Living: - The consumers in the village area do have a low standard of living because of low literacy, low per capita income, social backwardness, low savings, etc. 4) Traditional Outlook: - The rural consumer values old customs and tradition. They do not prefer changes. 5) Diverse Socio-Economic Backwardness: - Rural consumers have diverse socio-economic backwardness. This is different in different parts of the country. Infrastructure Facilities: - The Infrastructure Facilities like roads, warehouses, communication system, and financial facilities are inadequate in rural areas. Hence physical distribution becomes costly due to inadequate Infrastructure Facilities. Profile of the rural consumer: 1. Size of the Rural Consumer:

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The size of the rural consumer group can be understood from the following details provided in the table: Population of India Rural v/s Urban: 1971, 1981, 1991 and 2001 Population Total 1971 Rural Population 43.90 cr Urban Population 10.91 cr Total Population 54.81 cr % Total 1981 82 50.20 cr 20 15.62 cr 100 65.82 cr % Total 1991 76.3 64.1 cr 23.7 20.3 cr 100 84.4 cr % Total 2001 76 74.2 cr 24 28.5 cr 100 102.7 cr % 72.3 27.8 100

Rural population forms a major portion of the Indian population as seen in the table. If we consider the state level picture, in several states like Uttar Pradesh, Rajasthan, Madhya Pradesh and Kerala, the rural population constitutes more than 80% of the total population. In states like Bihar and Orissa 90% of the population is in rural areas. 2. Location Pattern of Rural Consumer: The urban population of India is concentrated in 3200 cities and towns and the rural population is scattered over 6, 38,365 villages. Statistics shows that out of the 6,38,3645 villages have populations of more than 5000 persons each. About 55% of the villages have population in the range of 500 people or less. The influence is clear, rural demand is scattered over a large area, unlike the urban demand, which is highly concentrated. 3. Literacy Level: It is estimated that there are 23% literate in rural India as compared with 365 of whole country. The rural literacy in the rural area is on an increase. Among the rural population Kerala tops with 77%.

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The literacy rate has its implication in communication with the rural population. It appears that communication should not prove a hurdle, provided appropriate means are chosen. 4. Rural Income: An analysis of the rural income pattern reveals that nearly 60% of the rural income is from agriculture. Rural prosperity and the discretionary income with rural consumers are directly tied up with agricultural prosperity. The predominance of agriculture in the income pattern has one more significance-rural demand is more seasonal. 5. Rural Savings: The rural consumers have been drawn into the saving habit in a big way. The commercial banks and the co-operative have been marketing the saving habit in the rural areas for quite some years. Today nearly 70% of the rural households are saving a part of their income. The habit is particularly widespread among salary earners and self-employed non-farmers. 6. Significant Aspects: It can be seen in general sense low purchasing power, low standard of living, low per capita income, low literacy level and overall low social and economic positions are the traits of the rural consumers. By and large, the rural consumers of India are a tradition bound community; religion, culture and even superstition strongly influence their consumption habits.

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Rural Consumer Class 2001- 02 Very Rich 0.8

2006-07 1.6

NUMBER MILLIONS

OF

HOUSEHOLDS IN Consuming Class Climbers Aspirants Destitutes 26.8 54.7 25 20.9 41.3 63.3 14.7 12.2

Understanding Rural Markets: There has been always a vast difference between the two markets for a long time now. The difference is not only between urban and rural but also within the rural areas -between regions, states and districts. There is a difference in the media reach, the education levels, in the culture and the type of products that the two markets are exposed to and this leads to a difference in the two markets.

The difference is in things like -- how do you celebrate New Year, how do you celebrate birthdays? Small things like these are celebrated in a completely different manner when the rural and the urban customers are concerned. There is a vast difference in the lifestyles of the people in the two regions. The kind of choices of brands that an urban customer enjoys is different from the choices available to the rural counterparts. The rural customer usually has 2 or 3 brands to choose from whereas the urban one has multiple choices. The difference is also in the way of thinking. The rural customer has a fairly simple thinking as compared to the urban counterpart. But with technology coming in, mass media reach and the literacy levels going up this divide is expected top reduce. The biggest thing is that there is lack of any research into the consumer behavior of the rural areas. There is considerable amount of data on the urban consumer regarding things like -- who is the influencer, who is the buyer, how do they go and

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buy, how much money do they spend on their purchases, etc. but on the rural front the effort has started to happen now. So there is a need to understand the buyer.

There is no collective effort. Some people have spent time in the rural markets, carried out studies and have understood the rural behavior, but their works have not been passed or known to the rest of the industry. So, an in depth understanding of the consumer is one key area that the industry needs to work on.

There are vast differences in the rural areas as well. There are some 5, 60,000 villages and some 525 districts and each one is different from the other. The geographical spread is not as homogeneous as it is with the urban areas owing to vast cultural differences. So an in depth understanding of the areas is what is required.

The field of rural marketing has been witnessing a lot of action from both the fast moving consumer goods (FMCG) sector and consumer products manufacturers but, there has been little success in the manner in which rural research is carried out.

The limitation lies in the inadequate or unavailability of appropriate tools to evaluate the rural market behavior. The problem arises because of general lack of education resulting in low awareness about the products and hence the inability to respond to the queries of the researcher in these areas. Conventional research tools do not work in these markets, as these are difficult to comprehend for the illiterate and semi-literate rural people. Colors are very strong indicators, and forms, of expressing the feelings in the rural areas and there are tools devised with colors that represent and reflect the right answer to the researchers' queries. The selection of colors is done on the basis of the association of rural people with these colors. For instance, it has been observed that dark green represents a good crop or Haryali (as they call it) and hence represents SIDDHARTHA PAHARI PG/10/1203

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prosperity and is considered to be the best. Light green represents not very good crop and stands next to dark green color.

Yellow represents dry sand or a dry field and hence comes next. Orange is the color of the setting sun and represents the end of the day and hence is placed after yellow and just before red, a color that represents danger to them. Such hypothesis has been working well, according to MART, and it has incorporated these tools in its research projects.

This is probably the beginning to a new form of research and analysis that might change the paradigm of rural marketing research and, who knows, one might just see this field blossom into a specialized research activity. If a simple ranking and rating is achieved, a lot can be explained about the rural preferences and behavior providing the marketers and manufacturers of goods specific to the rural markets get that meaningful insight to be able to help grow the markets in these areas.

Factors contributing to the growth of rural marketing: 1. New Employment Opportunities: The income from new employment and rural development efforts launched in the rural areas has increased the purchasing power among the rural people. Self employment policy with the assistance from the bank has become a great success in the rural areas. 2. Green Revolution: A technological break through has taken place in Indian agriculture. Rural India derived considerable benefit from green revolution. Today, rural India generates 185 million tones of food grains per year and substantial output of various other agricultural products.

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3. Expectation Revolution among Rural Masses: More than the green revolution, the revolution of rising expectation of the rural people influenced the marketing environment of rural India. It brought about a powerful change in the environmental dynamics. It enlarged the desires as well as the awareness of the rural people. 4. Favorable Government Policies: As a part of the process of planned economic development, the government has been making concerted efforts towards rural development. The massive investment in the rural India has generated new employment, new income and new purchasing power. In the recent years as a part of new farm policy, high support prices are offered for farm products. Various measures like tax exemption in backward areas, subsidy, concessions, incentives, assistances, literacy drive in rural areas has brought rapid growth of rural markets. 5. Literacy Growth: The literacy rate is on the increase in the rural areas. This brings about a social and cultural change in the buying behaviour of the rural consumer. They are exposed to mass media which create new demand for goods and services. 6. Growth in Income: The rise in the income resulting from the new farming strategy is adding meaning and substance to the growing aspirations of the rural people. Remittances from Indians working abroad have also made a sizeable contribution to the growing rural income and purchasing power. 7. Attraction for Higher Standard of Living: The rural consumers have been motivated to change their consumptions habits enjoy a higher standard of living by the growing awareness about better living and easy availability of information about the goods.

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8. Marketing Efforts: Firms like Bajaj, HLL, etc., have started penetrating the rural market realizing the rising expectations and the demand revolution in the rural India.

PRODUCT STRATEGIES: The following are the product strategies for the rural market and rural consumers: 1. Small Unit Packing: This method stands a good chance of acceptance in rural markets. The advantage is that the price is low and is easily affordable by the rural consumer. Products like shampoos, pickles, biscuits, etc have tested this method. 2. New Product Designs: The manufacturer and the marketing men can think in terms of new product designs, keeping in view the rural life style. E.g. P.V.C. shoes and chappals can be considered suited ideally for rural consumers due to adverse working conditions. The price of P.V.C. items is also low and affordable. 3. Sturdy Products: Sturdiness of the product either in terms of weight or appearance is an important criterion for rural consumers. For the rural consumers, heavier weight means that the product is more durable, e.g. the experience of torch light dry battery cell manufacturers supports this because

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rural consumers preferred dry battery cells which are heavier than the lighter ones. 4. Utility Oriented Products: Rural consumers are more concerned with the utility of the product and its appearance. Phillips India Ltd. developed and introduced BAHADUR (a low cost medium wave receiver) during the early seventies. Initially the sales were good but declined subsequently, on investigation it was found that the rural consumers chose to purchase radios for entertainment purposes, not only for news & information. 5. Brand Name: The rural consumers do give their own brand name on the name of an item. A brand name or logo is very important for a rural consumer for identification purposes.

PRICING STRATEGIES: Pricing strategies are linked to product strategies. The product packaging and presentation also keeps the price low to suit the rural consumer. 1. Low Cost/Cheap Products: This is a common strategy widely adopted by manufacturing and marketing concerns wherein the price can be kept low by low unit packing like paisa pack of tea, shampoo sachets, etc. 2. Refill Packs/Reusable Packaging: Health drinks available in the urban areas. The containers can be put to multipurpose uses, which can have a significant impact in the rural market. E.g. tea, coffee & many other consumer goods re available in refill or reusable packages.

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3. Application of Value Engineering: In the food industry, Soya protein is being used instead of milk protein. The nutrition content of both being the same, Milk protein is expensive whereas Soya protein is cheaper. The basic aim being to reduce the value of the product so it becomes affordable to a larger segment, thus expanding its market. c. PHYSICAL DISTRIBUTION STRATEGIES: While it is necessary to formulate specific strategies for distribution in rural areas, the characteristics of the product - whether it is consumable or durable, the life of the product and other factors have to be kept in mind. 1. Coverage of Villages with 2000 & Above Population: Coverage of villages with up to 2000 and above population could be the break even point for a distribution setup. By doing so the percentage of villages covered comes to only 10% of all the villages but the rural population covered will be substantial. 2. Use of Co-operative Societies: Co-operatives have an arrangement for centralized procurement and distribution through their respective state level federation. Such state level federations can be motivated to procure & distribute consumable items and low value items to the members of the society for selling to the rural consumers. 3. Utilization of Public Distributor System: The PDS in the country is fairly well organized, whose effective utilization should be explored by the manufacturing and marketing men. Its purpose is to make available essential commodities like food grains, sugar, kerosene etc. to the consumers at a reasonable price. Fair price shops are run by the state civil supplies

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corporation, co-operatives etc. Who have an arrangement for centralized for procurement and distribution? 4. Utilisation of Multipurpose Distribution Centres by Petroleum/Oil Companies: Petroleum/oil companies have evolved a concept of multipurpose distribution centres in rural areas. These outlets can be profitably used for selling consumable & durable items. In addition to petrol, diesel etc. fertilizers, seeds, etc. can be stocked at these outlets. 5. Distribution upto Feeder Markets/Mandi Towns: Keeping in view the hierarchy of markets for the rural consumers, the feeder markets and the mandi towns offer excellent scope for distribution. From the feeder towns and the mandi towns the stockist or the wholesaler can arrange for distribution to the village shops in the interior places. 6. Shandies/Haats/Jathras/Melas: These are the places where the consumers congregate as a rule. Shandies/Haats are held on a particular day every week, Jathras and Melas are held once or twice a year for longer durations, normally timed with religious festivals. 7. Agricultural Input Dealers: Fertilizers should be made available to the farmers within the range of about four to five km. from their residence, as per the essential commodities Act. There are about 2 lakh fertilizer dealers in the country both in co-operative & private sector. E.g. Varana-Nagar in Maharashtra, where sugar & milk co-operatives have totally changed the life styles of people. The supermarket in Varana-Nagar caters to exclusively to rural consumers.

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PROMOTION STRATEGIES: The promotion measure should be cost effective. Word of mouth is an important message carrier in the rural areas and opinion leader play a significant role in influencing the prospective rural consumers about accepting or rejecting a product or a brand. Other attributes are explained as under: 1. Mass Media: Mass media is a powerful medium of communication. The mass media generally used are: a. Television b. Cinema c. Radio d. Print Media: handbills, booklets, posters, banners, etc. 2. Personal Selling and Opinion Leaders: In personal selling it is required that the potential users are identified and awareness is created among them. A highly motivated sales person can achieve this. Word of Mouth holds a lot of validity in the rural areas. This is the reason why opinion leaders are thriving among rural consumers. 3. Special Campaigns: These should be undertaken during harvest & marketing seasons in rural areas. E.g. Tractors owners meet (tonee) conducted by MRF. Pricing Strategy Introduction: One of the important constituent of rural marketing mix is pricing. In the rural market value-for-money brands give the fastest sales for the FMCG sector. FMCG majors are trying to increase sales through low unit perks and VFM products. In segments like bathing soaps, washing soaps, and detergents, toothpastes, etc. the consumers are SIDDHARTHA PAHARI PG/10/1203 Page 27

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increasingly opting for more VFM launcher. VFM brands like Nirmas Soap, Britannias Tiger are doing better than the other premier brands from their own companies. According to ORG many estimates, in the year 2001, Breeze recorded a growth of 12 % while Lux a premium brand recorded a negative growth of 12.3%. Britannias Tiger grew by 12.6% in 2001. In a slowdown mass brands register better growth than premium brands. In the home appliances category, Videocon was one of the first companies to enter the rural markets in home appliances. Phillips who was the market leader for radio sets (cost Rs. 250) were attacked by Videocon by launching a radio set for Rs. 180. They grab a major chunk of the market, at present they are marketing walky range of personal cassette players at low prices to rural customers. Only charging a lower price is not enough, they have to offer value-for-money. Pricing strategy requires a holistic approach. Pricing is a part of the marketing strategy. It should be designed in such a way that it contributes to the objectives of the marketers and needs and wants of the customer groups. Consumer Categories Rural customers like urban ones can be divided into three categories: 1. Quality Conscious Customers: who are very rich and whose annual income is over 1.5 lakhs. 2. Value Conscious Customers: who is the consuming class and whose annual income is between Rs. 45,000 Rs. 1, 50,000. 3. Price Conscious Customers: who are climbers, aspirants and destitute. The annual income of climbers is Rs. 22,000 Rs. 45,000. The annual income of SIDDHARTHA PAHARI PG/10/1203 Page 28

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aspirants is Rs. 16,000 Rs. 22,000 and the destitute whose annual income is below Rs. 16,000. III. Price in Marketing Mix for Rural Marketing 1. PRICING FOR QUALITY CONSCIOUS CUSTOMERS: These customers are basically concerned with functional benefits and value-formoney. If a marketer wants to develop an effective pricing strategy for these customers he must know whether the price quality relationship holds good for the market. Six propositions emerge which are applicable to rural market as well as urban market. a. Quality Differences: Larger the perceived difference quality of brands in a category, the price quality relationship is stronger. E.g. home appliances. b. Quality Uncertainty: Greater the uncertainty involved in judging the quality of product, stronger the price quality relationship. c. Price Consciousness: Higher the price consciousness of the consumer and more price variations within a particular category of product, the price quality relationship is stronger. Therefore companies create a hierarchy of products establishing price quality relationship. d. Need Compulsion: Certain products that fulfill certain needs will have a strong price quality relationship. For e.g. a reputed doctor or lawyer would charge premium rates for their services because their services are viewed essential. SIDDHARTHA PAHARI PG/10/1203

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e. Place Availability: Price quality relationship is stronger for the brands sold to the premium market within the same product category. f. Social Consciousness: Shoes and shirts that are publicly consumed products have a strong price quality relationship than privately consumed products like tooth powder and underwear.

General Pricing in Rural Markets a) Low Cost/Cheap Products: The price can be kept low by low unit packing like paisa packs of shampoo sachets etc. This is a very common strategy which is being widely adopted by many marketers. b) Refills/Reusable Packaging: The refill packs benefits the consumers in terms of price. Such measures can have significant impact too, since the price can be reduced to the advantage of rural consumers. In addition the packaging material used should be reusable in rural areas. Most fertilizers companies pack fertilizers in LDPE or HDPE sacks which can be washed & reused, which are in demand by the farmers. c) Application of Value Engineering: The application of value engineering evolves cheaper products by substituting costly raw material with a cheaper one. We now find costly materials being replaced by cheaper reinforced plastic. This technique does not sacrifice the technical efficiency of a product but lowers the product price. Promotion Strategy SIDDHARTHA PAHARI PG/10/1203

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Introduction The rural market has a huge buying potential due to the increase in the income and higher prices of the agricultural products. It was neglected or ignored by the marketers due to varied reasons but with the growing awareness in the Information technology has reduced the urban rural divide and now the consumers in the rural areas are aware of the world class products. The increase in the network of roads, the literacy drive and many other things has brought about a change in the economy of the country. Rural India is now bound with opportunities waiting to be exploited by the potential marketers. Rural marketers should place greater emphasis on developing sales forces to exploit the rural market. Various novel ideas of sales promotions have been tried out during the harvest time since that is the time when the rural household becomes cash rich.

Personal Selling & Opinion Leaders Rural con sumers do not decide on the basis of information provided by companies or advertisement. They prefer consulting others who have purchased the products previously. These actual experiences of the other actual users significantly influence the buying decision in rural areas. In Personal Selling, it is required that the potential users are identified and awareness is created among them about the product, its features & benefits. This can be achieved through the efforts of a highly motivated salesperson, supplemented by the influence of opinion leaders in villages. Opinion leaders & Word of Mouth are thriving among rural consumers. Opinion leaders in rural can be defined as a person who is considered knowledgeable and is consulted by others, and his advice is normally followed. He could be a politician, big landlord, teacher; progressive farmer etc. There could be SIDDHARTHA PAHARI PG/10/1203

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different opinion leaders for different purposes. Word of Mouth information holds a lot of validity in the rural areas, since rural consumers place more emphasis on the experience of the other who uses different brands of the product. Selecting Proper Media Mix: The firm has to choose a combination of formal & non-formal media in the rural context. The possibilities are enlisted below: A) The Formal Organised Media: 1. T.V.: It has the potential to become the primary medium for rural communication, 77% of the villages in India receive T. V. transmission & 27% of all rural people actually watch T. V. 2. Cinema: 29% of rural people watch cinema as a part of their regular lifestyle. Most villages have cinema house. Advertisements, documentaries combining knowledge and entertainment can be employed for rural communication. 3. Radio: It is a well-established medium in rural areas. Expansions in broadcasting facilities have taken place over the years. 4. POPs: The POPs point of purchase promotion tools area is quite useful in rural markets. They should be designed to suit rural requirements, using symbols & bright colours. 5. Outdoor: Many companies are using Hoardings, Wall Paintings, etc., as part of their outdoor medium. B) Informal/Rural Specific Media:

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1. Music Records, Harikatha, and Puppet Shows: Music cassettes/records are a very effective, inexpensive and appealing medium, which can be used in cinema houses etc. where people gather regularly. The traditional art forms such as puppet shows, harikathas render themselves for communication in rural society and can be used at melas. 2. Group Meeting, Demonstration, and House-to-House Campaigns: The promotion staff of the firm can effectively carry the product messages and demonstrations to the target audience at the group meetings. Promotion squads make house-to-house visits. They carry along product samples and promotion literature along with them. 3. Audio Visual Publicity Vans (AV Vans): The AV unit is very useful for rural communication. The firm can exhibit films, presentations, slide shows etc. The van can be used for sales campaigns in addition to promotions campaigns. They are quite popular with rural marketing firms. 4. Syndicated AV Vans: In recent years, rural publicity vans have become a purchasable service. Firms which afford to operate publicity vans of their own can utilize the syndicated AV vans service offered by independent agencies. 5. Interpersonal Media: They have a special merit since they facilitate two-way interactions. They also bring market feedback to the firm. Advantages of interpersonal media are they are segment specific, market specific and score high when it comes to participation and involvement of the audience. Physical Distribution Strategy Introduction

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Product Distribution and retailing has developed into highly specialized activities in the urban market. However the distribution channel has remained in the background in the rural areas. Now the distribution has to be reworked from scratch with full rural orientation and awareness of existing rural channels of distribution. Many companies foresee the rural markets as a great opportunity for expanding their sales but they find distribution as a major obstacle. Unfortunately it is almost not possible to transplant strategies which work successfully in urban markets into rural markets. There are problem to reach the rural customers. Channels: 1. Company depot which may be located at a particular state. 2. Redistribution stockist, C&F agents, semi-wholesaler and retailers who may be located at the district headquarters. 3. Semi wholesalers and retailers who may be located at Tehsil headquarters, mofussil towns or industrial townships. 4. Itinerant traders, vans, petrol pumps, semi-wholesalers retailers and cooperative societies, which may be at large villages or Haats. 5. Retailers, vans, sales people, NGOs and government agencies at the village level. The Old Setup for distribution in the rural markets includes 1. Wholesalers 2. Retailers 3. Mobile Vans 4. Weekly Haats, Bazaars and Shandies and 5. Melas and fairs THE NEW PLAYERS: 1. Unofficial Channels: Hero Honda has reported the emergence of an unofficial channel of distribution. Local real estate agents, village mechanics; and SIDDHARTHA PAHARI PG/10/1203

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shopkeepers who sell non durables. These people take motorcycles from official dealers in twos and threes and display them outside their premises for sale. This paper work is left to the dealer to complete. 2. Co-operative Society: Co-operatives occupy an important place in Indias rural economy. The rural scan reports say that there are 4398 primary marketing societies and 2933 Large Agricultural Multipurpose Primary Marketing Services. Generally a co-operative exists for 2-3 villages. Farmers service co-operatives is a mini super market. The others are: 1. Public Distribution System. 2. Petrol Bunks. 3. Agricultural Input Dealers. 4. NGOs 5. Barefoot Salesman. 6. Syndicated Distribution. Inter-Net Marketing: In the Rural Setting: Efforts are on the way, in rural India, to bring convergence between what the poor need and what digital technology makes possible. The Net is becoming the livelihood for hundreds of rural youth, who are offering a combination of specialized Net services; interface which administration, organizations and customers. Channel Management in Rural Markets: The second major task in rural marketing is organizing an effective distribution channel. This task too has many problems:

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1. Multiple tiers, Higher Cost and Administration Problems: The distribution chain in the rural context requires a large number of tiers as compared to the urban context. In the rural context, at the minimum level the chain needs the village shopkeeper, the wholesaler, etc., whereas at the top level involves the manufacturers own warehouses, office operations at selected centers. Such multiple tiers make channel management a major problem area. 2. Scope for Manufacturers own Outlets Limited; Greater Dependence on Dealers: Scope for manufacturers direct outlets such as depots or showrooms is limited in rural markets unlike in the urban context since it is expensive and unmanageable. 3. Non-Availability of Dealers: There is also a problem of availability of dealers. Suitable dealers are limited even if the firm is willing to start from scratch and try out rank newcomers; the choice of candidates is limited. 4. Poor Visibility of Retail Outlets: Sales outlets suffer from poor viability in the rural market. Scattered nature of market and the multiplicity of tiers in the chain use up the additional funds the manufacturer is prepared to part with. Moreover the business volume is not adequate enough to sustain the profitability of all groups and the retail tier is the worst sufferer. 5. Inadequate Bank Facilities: Due to lack of bank and credit facilities distribution in rural markets is handicapped. Rural outlets need banking support for 3 important purposes; a. In facilitating remittances to principals and to get fats replenishment of stocks.

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b. In receiving supplies through bank (retiring documents with the bank). c. To facilitate securing credit from banks. It is estimated that there is only one bank branch for every 50 villages. 6. Inadequate Credit Facilities from Banks: Another constraint is the inadequacy of institutional credit. Rural outlets are unable to carry adequate stocks due to lack of credit facilities. The vicious circle of lack of credit facilities leading to inadequate stocking and loss of business, finally result in poor viability of outlets, getting perpetuated. The COLGATE Case Study Charcoal, neem sticks, husk, salt and powder mixtures have been some of the traditional form of oral hygiene products used in rural India. But these products are losing favour, especially due to the efforts of many organizations and companies, foremost among them, Colgate. The company claims to have persuaded about 300 million people into using oral hygiene products in the country for the last 25 years.

TOOTHBRUSH MARKET SHARE OF KEY PLAYERS

Smithkline Gilette Colgate

Colgate HLL Gilette Smithkline

HLL

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Known as one of the leading brands for oral care in and around the world, Colgate soon got popular in rural India as well. Infact the brand has become so generic with the product itself that it is not surprising to find rural consumers asking for Colgate when they buy toothpaste or tooth powder or tooth brush. The company, on its part, says that the rural markets account for about one third of its total sales, the rest coming on urban sales. Maintaining a steady market share in the oral care product segment wasnt tough job for Colgate, but thats exactly what it didnt want. Colgate was heading for a total monopoly in the rural markets, and it was leaving no stone unturned for doing the same. Aggressive is the only word that could perfectly describe the advertising and sales promotion strategy of Colgate. Colgate stepped up its rural promotion drives with IDA (Indian Dental Association) to add value. This has been the stepping stone to the high penetration in rural minds. Since 1976, Colgate has been doing this through its rural promotion vans and Young India, Bright Smiles, Bright Futures, schools dental education program. After conducting a small research in the rural areas Colgate concluded with five things that were common in all their rural consumers across India, they were:Rural consumers are brand loyal. They have disposal income (i.e. because their needs are limited, so lesser scope to spend.) Literacy level is on an increase.

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Elderly person in the family have the decision authority. If a brand is turned down in a household in a village, the whole village sooner or later boycotts the brand.

High quality products was always a plus point of Colgate all they had to do was to now tap the still unattended rural markets and change their habits i.e. from the usage of manjans and datoon to toothpaste and tooth powder. In 1998, Colgate contacted 6 million people in 20,000 villages of which 15,000 villages had not experienced the availability of toothpaste and toothpowder let alone toothbrushes. Colgate decided to do this by controlling various advertising and promotional activities. Suggesting and implementing a rural promotional scheme was what Colgate called Sampark for, as they were specialist in rural advertising category. Sampark had limited budget to their disposal. Going in for mass media would not prove to be costly but the reach would be limited as, still only very few people own and possess a T.V. or a radio.

TOOTHPOWDER MARKET SHARE

HLL Colgate Dabur HLL

Dabur Colgate

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Sampark wanted something that had far and wide reach that is why Sampark decided to their advertising by door to door selling. Sampark hired people from a certain locality who knew the local language, jargons and idioms. This not only helped Colgate communicate easily with the consumer but was also effective in sending the right message across to the rural consumer, the other plus point of this message was that the communication gap was reduced to a large extend. These people would move about in the villages telling the people about the pros of using advanced oral care products and the cons involved in tradition oral care system, this was quite difficult as rural people always felt that natural was the best. Colgate trained these salesmen to convince the rural population and make them try the free sample that Colgate was distributing free. The next best option that Sampark choose after door to door selling was publicity vans also called as A/V vans. Seventy promotion vans do the rounds of the country and educate rural folks on oral hygiene products such as toothpaste, toothpowder and toothbrushes. These vans used to travel from village to village and depending upon the market day in that specific village. These vans also did a number of other activities at a time such as spot selling, sampling, retailing etc. The vans used to be parked in strategic locations, they were highly decorated so as to get more curious eyes and in the process educate the rural folk. The roving Colgate vans, after screening a 22 minute film on oral hygiene that explains how to use the product, offer sampling at stalls setup near the van. 60 percent of the towns were covered by Colgate with their own distribution strategy and the remaining 40 percent was covered by other distributors. There are puppet shows done in the villages educating the villagers about the plus points of using modern hygiene products. Educational films were also shown in between movies in theatres, these are usually 10-40 seconders which were educational and used to feature either actors, local lenders, for a farmer just like the ones viewing the documentary, later on after the movie would end free samples were distributed to the audience, these tactics are also used in Haats and Melas thought the SIDDHARTHA PAHARI PG/10/1203

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length and breadth of India. The thrust towards promotion through schools has done wonders in changing the awareness levels as well as a shift towards the new decisionmakers in the rural families. OTHER PROMOTIONAL MEASURES: The packaging strategy too over the years has made the penetration of its product that much easy for Colgate. The company has followed the very successful sachet route by introducing the toothpowder in 10 gram sachets of Rs. 1.50 each and toothpaste with Super-Shakti in 15 grams pack of Rs. 3 each. The affordable pricing is something that has increased the sales in rural India and there have been many who have updated from toothpowder to toothpaste in the process. Colgate has also gone ahead with the combination packs, offering a toothbrush with 30 gram toothpaste for Rs. 8.50. This has helped them increase their base in rural regions to great effect. Sachets and combipacks are the ones that find encouraging responses in rural segments. They are fastest moving pack sizes in these markets. This shift towards smaller pack sizes is an adaptation towards the rural market, a decision that has, feel analysts, expanded the Colgate market in oral-dentifrice market in India. The thrust towards rural marketing is surely benefiting the company.

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