A RESEARCH REPORT ON

Scope of Rural Marketing For FMCG Companies

A report submitted to U.P. Technical University for the fulfillment of MBA Degree.

SUBMITTED TO
Dr. S. K. Mishra Head Of Dept of Management BBSIMS Gr. Noida

SUBMITTED BY
HEMANT SHARMA Roll no. 0625070009 MBA IV semester

B.B.S. Institute of Management Studies Plot no 33, Knowledge Park III Greater Noida (U.P)

COLLEGE CERTIFICATE
This is to certify that a Marketing Research report, titled Scope of Rural
Marketing For FMCG Companies being submitted by Mr. HEMANT

SHARMA for the fulfillment of requirement of MBA degree, affiliated to UP Technical University Lucknow. This is a record of an independent work done by him under my guidance & supervision.

Authorized by:

Signature Dr. Bimal Agarwal Director BBS Institute Of Management Studies Gr. Noida. 2

Declaration

I hereby declare that the research report titled Scope of Rural Marketing For FMCG Companies is the result of individual efforts and has been completed under the guidance of Mr. Bipin Singh, BBS Institute Of Management Studies, Gr. Noida. The finding and interpretation in the report are based on the data collected by me and the report is not a reproduction of any other project submitted for similar purposes.

HEMANT SHARMA MBA IVth Sem. Roll No. 0625070009 BBS Institute Of Management Studies Gr. Noida 2006-08

ACKNOWLEDGEMENT

It is with the feeling of satiated and sense of Zenith that I draft this acknowledgement note. I wish to express my gratitude to those who have generously helped me to compile the Dissertation and stand up high, to the expectation of the institute. I would like to express sincere gratitude to Mr. Bipin Singh and Mr. Sarvesh Singh, my faculty members guide for his considerable advice, time and substantial encouragement throughout the course of this dissertation. Last but not the least; I would like to thank my friends for their diligent endeavor and earnest desire to lead me towards my path of perfection.

Regards
HEMANT SHARMA

CONTENTS
1. Executive Summary .6 2. OBJECTIVE.8 3. RESEARCH METHODOLOGY9 4.INTRODUCTON.12 5. RURAL MARKET ENVIRONMENT..14 6. THE CHANGING FACE OF FMCG MARKETING IN RURAL SECTOR......38 7. ADVERTISING IN RURAL SECTOR.40 8. STRATEGIES ADOPTED BY DIFFERENT FMCG COMPANIES42 9. STRATEGIC ISSUES..51 10. PROBLEMS IN RURAL MARKETING...64 11. RURALMARKETING-CHALLENGES AND OPPORTUNITIES...68 12. OPPORTUNITIES FOR DIFFERENT FMCG COMPANIES.71 13. CONCLUSION76 14. RECOMMENDATION..80 15.LIMITATIONS OF THE STUDY.81 16. BIBLIOGRAPHY...82

Executive Summary
A variety of factors have rendered the rural market quite attractive to corporate in recent years. The growing opportunity in the rural market is no doubt the prime factor. The rural demand has been growing rapidly and its composition has been changing for the better in the recent years. The increased income/ purchasing power of the rural consumer and the improved income distribution has enhanced rural demand for several products. Better access to many modern products/brands has added to this growth. The heat of competition in the urban market actually serves as the stronger driver behind the growing interest of cooperates in the rural market. The fact that the rural market is still largely an untapped as well as the early entrants can tap it without having to face intense competition as in the case of the urban market, makes the rural market all the more attractive to them. Corporate have been finding the going increasingly tough in the urban market , especially for the products in respect of which penetration levels are already high . For example penetration level for the toothpaste in the urban market has now reached close to 80 per cent. In contrast, it is below 30 per cent in the rural market. Moreover in the urban market many consumers have been using a toothpaste for quite some time and have settle down to the brand, its flavour , and other characteristics .They can not be expected to switch their brand very easily . In contrast, in rural markets, there a lot of first time users of toothpaste whom the company can tap from the scratch. Corporate find that the highly penetrated urban markets allow little room for volume growths for most of what are called, necessity products (toothpaste, bath soap, washing products, tea etc). Growth opportunity for many of the emerging products (coffee, shampoo, talcum

powder etc) too is rather low in the urban market . The rural market thus becomes essential for companies with strong aspirations. Not comprising in the rural market keep them out of about half of the countrys market for the necessity products and the one-third for the emerging products by value .It is but natural that in these circumstances, corporate set their sights on the rural market

OBJECTIVE
The over all objective of the thesis is to throw light on Scope of Rural Marketing for FMCG Company in India.

SUB OBJECTIVE:
Rural marketing of FMCG Companies Present and future. Future growth potential of rural marketing of FMCG Companies in India. Different Strategies adopted by different FMCG companies to increase our rural market share. Challenges faced by different FMCG Companies. Various opportunities for FMCG Companies in the future.

Research Methodology

Type of Research Data type Data collection source

: : :

Descriptive and conclusive Secondary Magazines,journals,internet

Introduction

This chapter aims to understand the research methodology establishing a framework of evaluation and revaluation of primary and secondary research. The techniques and concepts used during primary research in order to arrive at findings; which are also dealt with and lead to a logical deduction towards the analysis and results.

RESEARCH DESIGN

I propose to first conduct a intensive secondary research to understand the full impact and implication of the industry, to review and critique the industry norms and reports, on which certain issues shall be selected, which I feel remain unanswered or liable to change, this shall be further taken up in the next stage of exploratory research. This stage shall help me to restrict and select only the important question and issue, which inhabit growth and segmentation in the industry. The various tasks that I have undertaken in the research design process are :

Defining the information need Descriptive and casual research.

SECONDARY DATA
Information that already exists somewhere, having been collected for another purpose. Sources include census reports, trade publications, and subscription services. Data that have already been collected and published for another research project (other than the one at hand). There are two types of secondary data: internal and external secondary data. Information compiled inside or outside the organization for some purpose other than the current investigation. Data that have already been collected for some purpose other than the current study. Researching information, which has already been published. Market information compiled for purposes other than the current research effort; it can be internal data, such as existing sales-tracking information, or it can be research conducted by someone else, such as a market research company or the U.S. government. Published, already available data that comes from pre-existing sets of information, like medical records, vital statistics, prior research studies and archival data. Secondary source of data used consists of books and websites My proposal is to first conduct a intensive secondary research to understand the full impact and implication of the industry, to review and critique the industry norms and reports, on which certain issues shall be selected, which I feel remain unanswered or liable to change, this shall be further taken up in the next stage of descriptive research.

DESCRIPTIVE RESEARCH STEPS in the descriptive research: Statement of the problem Identification of information needed to solve the problem

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 Selection or development of instruments for gathering the information Identification of target population and determination of sampling Plan. Design of procedure for information collection Collection of information Analysis of information Generalizations and/or predictions .

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INTRODUCTION
The rural market of India is fascinating and challenging at the same time. It offers large scope on account of its sheer size. And, it is growing steadily. Even a modest growth pushes up the sales of a product substantially, in view of the huge base. It is attractive from yet another angle. Whereas the urban market is highly competitive, the rural market is relatively quiet. In fact, for certain products, it is totally virgin market. Simultaneously, the market also poses several problems and hurdles. The firms have to encounter them squarely and put in a great deal of effort, if they have to get a sizeable share of the market. Efforts to capture the market with due thought and focus on the constraints with streamlined strategies to overcome the same will tend to define the path ahead for rural marketing in India. A Hindi poet has rightly said, Bharat mata gram vasini which means Mother India lives in her villages. According to the 2001 census, Indias population was 100 million, of which 73 percent lived in villages. This are average statistics. There are states like UP, MP, Rajasthan, Kerala, Bihar and Orissa where the rural population varies from 80 to 90 percent. The spread of population in 4,200 cities and towns is to the extent of 25 percent, and of the Remaining 75 percent is in 5,76,000 villages. This sheer base defines the volume and scope of rural marketing.

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Marketing in India has for a long time meant urban marketing. But now rural marketing is being widely researched and discussed. If market potential is considered, the rural market is big with approximately 70 percent of the population still residing in rural areas and with 40 percent the Gross National Product emanating from agriculture. The following transactions, (which broadly outline the landscape of rural marketing) , can be categorized as follows:

Marketing of agricultural inputs like fertilizers, pesticides, farm machinery etc; Marketing of products made in urban centers and sold to rural areas like soap, toothpaste, television sets, etc;

Marketing of products made in rural areas sold to urban centers like khadi cloth, hand crafted products etc; and

Marketing of products made and sold in rural areas like milk and milk products, locally

manufactured toothpowder, cloth etc.

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THE RURAL MARKET ENVIRONMENT

The rural market environment need a separate examination as it varies significantly from that of the urban market. We shall deal with the subject under the three headings :1. The rural consumer. 2. The rural demand. 3. Other aspects of the rural market environment.

(A)-THE RURAL CONSUMER : A Detailed Profile :Size of Rural Consumer Group

In numerical terms , Indias rural market is indeed a large one ; it consists of more than 740 million consumers. 73% of Indias total population is rural . The rural market consists of more than 12 crorer households, forming over 70%of the total households in the country.

Characteristics of Rural Consumer Group:LOCATION PATTERN :Rural Market of India is a geographically scattered market. The rural population is scattered across 5,70,000 villages . And, of them , only 6300 villages , have a population of more than 5,000 each . More than 3 lakh villages, are in the category of 500 people or less.

SOCIO-ECONOMIC POSITION :Rural Consumers continue to be marked by low per capita income/ low purchasing power. Similarly, they continue to be a traditional -bound community, with religion, culture and

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tradition strongly influencing their consumption habits. Nearly 65% of rural income comes from agriculture. Rural Prosperity and discretionary income with rural consumers are thus linked to a sizeable extent with agricultural prosperity.

LITERACY LEVEL :Rural India has a literacy rate of 28% compared with 55% for the whole country. The adult literacy programmes launched in the rural areas are bound to enhance the rural literacy rates in the years to come . The rate is certainly on the low side.

LIFE STYLE :The rural consumers are marked by a conservative and tradition-bound lifestyles. But the lifestyle of a sizeable segment of rural consumers has already changed significantly in recent years .The changes can be attributed to several factors such as: Growth in income and change in income distribution . Growth in education. Enlarged media reach ( particularly television). Growing interaction with urban communities. Marketers effort to reach out the rural market.

BUYING BEHAVIOUR :Buying behaviour of rural consumers have been effected by the following factors:-

INFLUENCE OF CULTURE:Rural consumers perception of products are strongly influence by cultural Factors . For example-the preference in respect of colour, size and shape is the result of cultural factors.

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GEOGRAPHIC LOCATION:Rural consumer behaviour is also influenced by the geographical location of the consumers. For example , nearness to feeder towns and industrial projects influenced the buying behaviour of the consumers in respective cluster of villages.

EXPOSURE TO URBAN LIFESTYLES:Extent of exposures of rural consumers to urban lifestyles also influences their buying behaviour.

THE WAY THE CONSUMER USES THE PRODUCT:The situation in which the consumers utilize their the product also their buying

behaviour.For example Lack of electricity automatically increase the purchase of batteries by rural consumers.: since the rural consumers cannot use washing powders /detergents powders that much, as they wash their clothes in streams or ponds , they go is more for washing bars and detergents cakes.

PLACE OF PURCHASE:Different segments of rural buyers buy their requirements from different places \ outlets. Some buy from the village , shopkeepers; some from village markets/ meals; other buy from the town that serves as the feeder to the rural area.

MARKETERS EFFORT TO REACH OUT THE RURAL MARKET:Many corporate have been trying hard to develop a market their products in rural areas ,

investing substainlly in these areas. Developmental marketing has created discriminating

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buyers demand in the rural market. This has brought about some change in the way buyers purchase different product.

(B)- THE RURAL DEMAND :A Detailed Profile :Steady growth

Rural demand has grown steadily over the years. Not only has the market grown in quantitative terms , but qualitative terms too it has undergone a significant change.

Change in the composition of Rural Demand

The composition of rural demand has also been changing significantly in recent years Many new products have entered the consumption basket of the rural consumers. and the relative shares of the different categories of products in the consumption basket .The upper

segments, in particular , have started buying and using a variety of modern consumer products, which were till recently unknown in the rural market.

Several products already well established in the rural market

Marketers cannot now assumes that rural India consumes only certain traditional/ essential products and that its share in other product category is meager. It is perhaps well known that products like packaged tea , bath soaps and washing products, including

detergents/detergents cakes , are popular items of consumption in rural market .Products like shampoo ,toothpaste and talcum powder , and durables like electric irons , bicycles , mopeds, scooters and motorcycles have joined this category in recent years. The rural demand for electric irons , mopeds and motorcycles have note between 30 and 50 percent of the all-India demand.

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In many products , rural consumption accounts for a larger share urban:-

than

In many products , rural consumption now accounts for a larger share than urban . In washing soaps (cakes/bars ), the rural share is over 60 per cent . In popular bath soaps , it is more than 50 per cent and in batterie4s ,it is more than 56 per cent .similar is the case with packed tea and hair oils. Among durable, the rural market now accounts for a larger share of the total sales in Sewing machines. Radio/ transistors. Tape Recorders. Wrist watches. Black and White Television sets. Cassette recorders. Bicycles. Table Fans. Pressure Cookers.

In Many Products, the rural markets has overtaken the urban in growth rate:A survey by NCAER shows that the rural market is growing faster than the urban market several products . These includes packaged tea, detergent powder, washing shop, and

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detergent cake. Growth of motorcycle too has been more in the rural market than the urban market.

Position of durables
According to NCAER survey , Rural Indias market for consumer durables is estimated at Rs .4500 crore , with an annual growth rate 8 per cent .

OWNERSHIP OF DURABLES BY RURAL CONSUMERS

Product Bicycles Fan (ceiling) Fan (table) TV(B&W) Pressure cooker Wristwatch(mechnical) Radio/Transistors No. of owner per 100 households

53 19 13 16 13 76 42

It can be seen from above table that now every other other rural household has a bicycle, every third households has a fan , every sixth has a black and white televisions set, and every seventh a pressure cooker. Also , nearly 80 per cent of rural holds own a mechanical wrist watch and 42 per cent a radio/transistor .Rural India now purchase a third of the colour television sets, a fourth of the mixers/ grinders and fifth of the refrigerators sold in the country.

Factors Behind the growth and Diversification in Rural Demand:-

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Variety of factors , acting in concert , have brought about the big growth and welcome changes in the rural demand, a few of them such as growth in income , changes in income distribution , changes in lifestyles, and the expectation.

New income due to agricultural /rural development:The technological break through ,popularly known as the GREEN REVOLUTION, which took place in Indian agriculture from the mid 1970 onwards, has added to the prosperity of rural India considerably. Moreover, in recent years , as part of the new farm policy , high support prices are offered for farm products. As a result , there is now more money in the hands of the owner-farmers in the rural areas.

The expectation revolution:The rising expectations of the rural people have greatly influenced the rural market environment. It has enlarged the desire as well as awareness of the rural people ; it has strengthen their motivation to work, earn and consume. The rise income provides substance to the aspiration.

Rural Demand is More Seasonal:Rural demand is more seasonal compared to urban demand .The pre-dominance of agriculture in the income pattern is one main reason for this. The relatively greater influence of marriages and festival on the purchase pattern is the another. After all, agriculture in many parts of India is still depends on the vagaries of the monsoon.

TAPPING THE RURAL MARKETS :While rural India does constitute an attractive and sizeable market, firm have to strive hard for securing a share of it. Practically in every task of marketing , rural marketing poses some unique problems.

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The major tasks that need unique handling in rural marketing are: Segmentation and targeting. Product management. Physical distribution. Channel management. Marketing communications.

A.SEGMENTATION AND TARGETING :The rural consumers are not a homogeneous lot in economic conditions, or literacy, or lifestyles, or buying behaviour. It would, therefore, firm to assume that the rural market as a whole can be served by a single offer or a single product -price-promotion combination. Firms have to analyses the consumers in depth, carry out thorough market segmentation and select relevant segments as target markets. And they have to develop a distinctive positioning and a distinctive marketing mix for each target segment.

Geographical Segmentation:The rural market can be segmented geographically, using different geographical bases.

Climate and level of irrigation:Climate can be one of them; regions endowed with favorable climate are usually more prosperous compared with climatically handicapped region. Level of irrigation can be another base; irrigated areas and dry land areas pose different economic and marketing environments.

Nearness to a feeder town:-

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Firms can also segment the rural market using nearness to a feeder town as the base. Consumers located close to a feeder town visit it at least once a month to sell their product and/or to buy their requirements, and in buying habits , they differ from those living in the interior areas. It will thus be meaningful to segment the rural market in to consumers located closer to a feeder town and consumers located away from them .

Demographic segmentation:The rural market can be segmented demographically too. In fact, there are many possibilities of segmenting the rural market demographically.

Population concentration:It can be one base. About 40 percent of the rural population live in 7 percent of the villages in the country and remaining 60 percent in the other 93 per cent of the villages. Thus, the market can be segmented on the basis of different size classes with regard to population.

Age:-

In particular, the youth in the rural areas can be picked up as a separate market. There is a population of more than 20 crore in the age group of 16-30 years in the rural market. Surveys have revealed that the younger generation dominates the purchase in the rural market. The rural youth differ from their elders in their buying behaviours .It will thus be meaningful to segment the rural youth as a separate market.

Literacy level:-

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It can be another demographic base for segmenting the rural market. Though rural India, is characterized by low literacy ,there are wide variations in the matter of literacy within rural India . for example- The rural literacy rate in Kerela is 80 Per cent , that in Bihar is only 15 per cent.

Income:The rural consumers can be segmented in to different income classes. The rural consumers can also be segmented into regular income and demand .All rural consumers are not characterized by sesonalty of income .There is a sizeable salaried class in the rural areas . There is also a sizeable self-employed group, consisting of shopkeepers and service providers. There is nothing seasonal about the income of such people .Obliviously , those with regular income will differ in buying habits compared with those whose income is seasonal.

Buying behavior segmentation:Rural consumer differ in their buying behavior from their urban counterparts as well as among themselves. This fact too could be factored in to segmentation exercise . firms should ,however , generate relevant data on the rural consumers and their buying behavior , perception and attitudes ,and then segment them using their buying behavior as the base.

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Thompson rural index:Hindustan Thompson Associates have developed the Thompson rural market index based on 26 variables , including area of the concerned district , demographic pattern occupational pattern , agriculture related data , rural electrification data and commercial bank data . The index can be used in segmentation.

B. PRODUCT STRATEGY :The first decision to be made in product strategy in the rural context is whether the product that is sold in the rural context is whether the Product is sold in the urban market can be supplied to the rural market as it is , or whether it must be adapted . it depends on the situation and the nature of the product .Basically , the firm must find out what kind of product is actually required by the rural consumer and then decide if it should make an altogether distinct product or adapt the existing product. Economic and income realities of the market should certainly be considered while developing the product strategy for the rural market . when products are designed reflecting both these influences ,the chance of success is greater. Lower priced product versions do help in many cases in the rural market ,but no generalization can be made in this regard . Many companies try to reduce the prices of their products for the rural market by creating smaller size by decreasing the quality . The approach works sometimes and with some products, but not all times, with all products.

Specifically Designed Products:Specifically designed product to help in many cases

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TRACTOR /TRAILEIER : The tractor /trailer is an apt example. It is a product specifically designed for the rural market. It is designed as a replacement for the plough as well as a vehicle for transporting both men and material in rural areas.

EVEREADYS JEEVAN SATHI TORCH:Eveready s Jeevan Sathi brass torch is another example of suucesssful rural specific product strategy. Initially Evereadys brass torch was not picking up well in the rural areas . Union carbide launched a market research study for locating the reasons. The study by the ad agency OBM found that the rural folks rejected the torch since all of its parts are not made of brass .the design , developed abroad, had given the product certain plastic parts, like the reflector. The Indian rural consumer felt that the plastic parts would not durable . OBM also found that the rural people were prepared to pay high prices for the same torch if it were made all brass. Eveready then introduced for the rural market the all brass torch designed to last life long and positioned it Jeevan Sathi as a life long companion.

MODEL VARIANT:Models developed specifically for the rural market have found more takers in the market . For instance, Motorcycles that are designed to take on the rig ours of rural roads have succeeded more in the rural market.

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COLOUR VARIANT :The rural consumer differ from their urban cousins in colour preference . in case of some products , colour may matter vary much . firms can exploit this fact to their advantage . For example , ASIAN PAINTS understood the substantial difference between the rural buyer in the colour preference . Asian Paints introduced paints with bright colours for the rural markets . Asian Paints also communicated the feature well through its communication campaigns.

Different products/ models , Different brands, packing, pricing and different positioning:By and large, the rural market can be tapped better through different products / models , different brands, different packaging and different positioning. PACKAGE DESIGN AND PACK SIZE:In some case , the product can be the same , but the package and pack size may have to be different for the rural target group. Package design and colour help identification of brands by rural buyers . Many rural consumers are not quite conversant with various brands .All the same, they manage to pick the brand that they want . They recognize the brands by its packaging . This the reason why a number of local brands in rural areas imitate the packaging of big national brands.

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As regard pack size , as a general , it can be stated that smaller packs are more suited to the rural areas . Low purchasing power and limited availability of cash for shopping force the rural consumer to go in for smaller packs with low unit price. In some cases ,they also prefer small packs so that they can make a beginning on small scale and after trial and satisfaction go in for regular purchases. In recent years , sale of shampoo brands were priced at Re 1 or below per sachet helped the trail and adoption. The 5-gram Vicks Vapourb tin and the small size Lifebuoy soap are other such examples. HUL, has deepened coverage of many of its products in the rural market through such combination. It has come up with a series of small pack sizes/saches that specially cater to low end consumers.

Logo, Symbols and Mnemonics :Image is far more potent the rural market , which in many cases is an uninitiated market. Symbols, therefore , add value to brand recall and brand personality in the rural market.

Asian Paints Gattu:Asian Paints Gattu though equally well known in urban and rural market , has greater effectiveness as an identity tool in the rural market .Actually in many rural parts of India , Asian Paints is referred to as the bahahawala or chokrawala company.

The Nirma Girl:The Nirma Girl in Frock on the packs of Nirma washing powder has become the mnemonic for effective and good value in washing powders.

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The Dettol Sword and the Mortein Genie:

For the same reason , Reckitt& Colman has been focusing on the Dettol Sword and the Mortein genie in its rural communication. Brand Decisions

:-

Branding too needs skillful handling in the rural market. The rural consumers have already graduated from generic products to branded products. Today, the brand name is the surest means of conveying quality to rural consumers. In other words, brand is the key to confidence building among the rural consumers. Besides quality, it conveys that the manufacturer is going to show sustained interest in those products ands markets. Whether the same brand is used in both urban and rural market, or appropriate variants of the brand must be adopted for the rural market , is a matter for conscious decisions by the individual firms depending on the context. In quite afew cases , the same brand is providing right and cost effective . In some cases, however, the brand name that is suited to the urban market may not be quite suitable to the rural market. Low priced variants seem to work better in majority of cases in the rural market. It will, however , be incorrect to assume that rural consumers prefer local brands to national brands.

Sell Value Brands, Not Cheap Brands;While brands specifically developed for the rural market and low priced variants may work better in many cases , the strategy should be one of selling value brands . HLLs Lifebuoy,

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for example, is a low priced carbolic soap that is often the first choice of bath soap by a rural consumer .HLL, however , does not sell it as a cheap soap. Instead, sell it as a hygiene brand. It communicates the value of the brand to the target market. It also tries to enhances the value of the offer by giving suitable add-ons .for example, while targeting rural students for the soap , it distributed height charts along with the soap and conveyed its concern for their health and well being . Rural marketers would do well to add some value to their products in this fashion if they are keen to secure the loyalty of the consumers.

C. PHYSICAL DISTRIBUTION :The problems faced by the marketer in the Physical distribution in rural context are as follows:-

The Problems in Transportation and Warehousing :It is well known that transportation infrastructure s quite poor in rural India . Though the country has the fourth largest railway system in the world , many parts of rural India remain outside the rail network . As regards Road transport , nearly 50 per cent of the 570,000 odd villages in the country are still not connected by proper roads . While some improvement is taking place on account of the various rural development programmes, many areas still have only KACHA roads and most of the interiors have hardly any roads worth mentioning .As regards transport carriers , the most common ones are delivery vans and the animal drawn carts. Because of the difficulty in accessibility, delivery of products and services continues to be difficult in rural areas. In warehousing too, there are special problems n rural context. Business firms find it quite difficult to get suitable godowns in many part of rural India.

Cost service Dilemma Becomes more Acute :29

The firms can not simply rely on trickle down of stocks to the rural buyers. They need a network of clearing and forwarding (c&f) agents and distributors at strategic locations for facilitating proper distribution of the products in the rural market. They have to commit themselves to servicing the villages will help not only the availability of the product, but product promotion as well. In the matter of transportation, combining different modes can be cost effective. Trucks for medium distance movement and delivery vans and bullock carts for local haulage may serve the purpose better. Water transport too has a role in specific areas Bullock carts have a special role on rural distribution, especially in tertiary transport. They are cheaper; they are available in plenty and are ideal for the rural roads.

The Delivery Van ;The delivery van has a key role in rural distribution The companies concerned and their C & F agents /stockist / distributors operates these vans. Companies like Hindustan lever and ITC , who are pioneers in rural marketing in India, have a fleet of company delivery vans for rural distribution . The van take the products to the retail shops in every nook and corner of the rural market . It enables the firms to establish direct contact with rural dealers and consumers. It also help the firm in promotion . But the cost of operating such vans is quite high . Firms like HLL and ITC had the resources as wells the wisdom to consider van as initial investment in the market. Through the van , they were not only solving their transportation problem of the rural market, but were also developing the market for their products.

D. Channel Management :Organizing marketing channels is the second part of the distribution task .
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Multiple tier add to the cost :The distribution chain in rural context usually requires more tiers, compared with he urban distribution chain . The distance between the production points and the rural market , and the scattered location of the consumer make it necessary . At the minimum, the distribution chain in the rural context need three tiers i.e. The village shopkeeper, the distributor , and the Whole seller/ stockist/ C&F agent in the town .in addition it involves the manufactures branch office operations in the territory. Producers who can reach the customers through the shortest distribution chain can do better in this market.

Non-Availability of Dealers :Firms find that availability of dealers is limited and the scope for appointment fresh / exclusive dealers of the company is equally limited in view of the low demand and nonavailability of suitable candidates.

Poor viability of the outlets :A good number of retail outlets in the rural market suffer from poor viability . A familiar paradox in rural distribution is that on the one hand the manufacturer incurs additional expanses on distribution and on the other hand , the retail outlets find that the business is un remunerative to them. The additional funds the manufacturers pumps into the system are used by the scattered nature of the market and the multiplicity tiers in the distribution chain.

Inadequate banking and credit facilities :-

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Distribution in rural markets is also capped due to the lack of adequate banking and credit facilities. It is estimated that there is only one bank branch for every 50 villages. Rural outlets need banking support for two important purposes: (1)- For remittances to principals and to get fast replenishment of stocks . (2)- For securing credit. Firms have been in search of a low- cost system of distribution with the wholesaler serving all the retailers , including the ones at the tail end , and the latter servicing the consumer . This is the strategy followed by Nirma to compete with HLL.

Nirma relies on the wholesaler network . HLL is trying to get around the problem by giving credit to the distributors.

E. Marketing Communication:In marketing communication and promotion too, rural markets pose many problems. The literacy rate among the rural consumers being low, the scope for using the printed word is rather limited. The traditional bound nature of the people and heir cultural barriers add to difficulty of the communication task. Marketing communication in the rural areas has to be necessarily in the local language and idiom. Rural communication is quite expansive. Rural communication has to go through the time consuming stages of creating awareness, altering attitudes and changing behavior. In addition, it has to break the deep- rooted behaviour pattern.

Managing the communication task:The rural communicator will do well to choose a combination of formal and non formal media. The possibilities are indicated in below table:-

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POSSIBLE MEDIA MIX IN THE RURAL CONTEXT Formal / organised media Non-formal /Rural -Specific Media
TV Cinema Radio Print Media-Press Other Print Media Audio-Visual/Publicity Vans Rural specific art forms like puppet show and HARIKHATHA. Demonstrations Meeting ,Announcements, Processions Caparisoned elephants and decorated bullock carts carrying advertisement panels Music records.

Outdoor POPs

Selecting The Media Mix :TV :With he increase in coverage and increase in TV ownership in rural areas , TV is gradually becoming the prime media for rural communication .

Cinema :The cinema is a useful medium in rural context . most large and medium villages have one or more cinema house. Also, more than one-third of all rural people do see cinema as a matter of regular lifestyle. Advertisement films , short feature films, with disguised advertisement message, and documentaries that combine knowledge and advertisements, can be employed for rural communication. It has been estimated that 33 per cent of the total cinema earnings in the country come from rural India.

Radio:-

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The radio is well -established medium in rural areas. A big expansion in broadcasting facilities has taken place in the country over the years. The availability of radio sets has also expanded. While radio as a medium cannot match TV in potency and effectiveness, in the existing context ,it can certainly play a significant role in rural communication.

Print media too has some scope :The role of print media is certainly limited in the rural context. Even the remotest rural parts have a small group, which is literate. Moreover, while the group may be numerically small , its member usually happen to be the opinion leaders , influencing the purchasing behaviour of the large segment of the rural consumers. so, it would be unwise to assume that the print media has no scope at all in the rural areas . Moreover, the younger generation in the rural areas is comparatively more literate. With the new trend of increasing rural literacy , the scope for using print media in rural communication will increase further.

Outdoor:The outdoors , which include hoardings, wall paintings, illumination and other displays, also lend well for rural communication . In fact , many companies are using the outdoors in the rural communication mix.

POPs( print of purchase) :-

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The POPs Point of purchase promotional tools- are also quite useful in the rural markets. The POPs meant for the rural market should be specially designed to suit the rural requirements. Symbols, Pictures, and colours must be liberally in POPs meant for the rural market. Colour is of particular significance . As a general rule ,the rural people love bright colours. The effective Communicator utilize such cues.

Audio-visual / publicity vans :The AV unit or the publicity van is very useful for the rural communication .The van is a comprehensive mobile promotion station at the exclusive command of the concerned firm. The firm can exhibit its films and other audio-visual presentations, such as slide shows, sound and sight presentations, puppet shows etc. from the instant promotion station. A potable shamiana or Platform often forms a part of the van. Even public meeting can be organised using the potable shamiana . The van can also be used for the sale campaign. It can also be used for Product demonstration. Naturally, the AV vans are quite popular with rural marketing firms .Practically all firms in the agri inputs business have their own AV vans followed by those marketing consumer durables. Colgate-Palmolive has supply vans that offer the free samples and screen video films on oral hygiene. It has an on going rural van programme, which cover on an average 80 million rural consumers per year. Vans are supplemented with bicycle vendors, who go to villages not accessible by the vans. Godrej has vans that play music and announce free gifts in the village square. The van than goes to few shops in the villages to sell the product.

Syndicated AV vans :-

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In recent years, rural AV vans have become a sharable service. Firms which can not afford to operate vans of their own, utilize syndicated AV van service offered by independent agencies.

Multi-purpose vans: Jain TVs Video -on-wheels :Recent years have witnessed the emergence of tools that are more innovative than the AV van. Jan TVs Video on- wheels is one of them.

Puppet shows, Harikhatha :Popular entertainment programmes like puppet show , dance, dramas, and Harikathas , specially developed for the product- promotion purpose , are now being used in rural markets. The traditional art forms readily render for communication with rural society . Village fairs , festivals and melas are ideal venues for projecting these programmes. In certain cases , public meeting too many be used for rural promotion.

Music Cassettes :Music cassettes are another effective medium for rural communication. It can be reached is an appealing and a comparatively inexpensive medium. Different language groups can be reached with low budget. They can be played in cinema houses or in other places where rural people assemble.

HUL rural specific communication for Surf :For propagating Surf, Hindustan Lever brought out separate advertisement films for the urban and rural audience. In the film meant for the rural audience, the company took particular care to demonstrate step-by-step the method to be adopted in washing with surf for

36

getting the best whitening effect. The company knew that an elaborate demonstration was essential for the rural audience.

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The Changing Face Of FMCG Marketing in rural sector

customers coupled with changing competition and saturated market is giving a tough time to the FMCG (Fast Moving Consumer Goods) marketing is no more going to be the same again! The changing consumer mindset thanks to more knowledgeable and discerning FMCG marketers. The changed scenario not only demands a new game plan with a sharp and decisive strategy but also a lot of creativity and insight. Some of the players in Indian FMCG industry have already taken a lead and are smartly moving to chart a success story for their brands. Some brands that reaped magnificent dividend from adopting a new strategy are Fairever, Ujala, Ghadi detergent, Chik, and Dandi namak. The greatest challenge for managers is to visualize an active market when what exists is abject poverty. These successful brands are just doing that- focusing on untapped markets. Take the example of Dandi namak. Who would have advised them to enter the branded salt market when Tata and HLL virtually share the whole market among them? But they entered this category when conventional wisdom said no. And they became a success story overnight. .They entered the market not to compete with Tata and HLL, but with the focus to take branded salt to rural and semi-urban areas. With this narrow focus, they not only captured a large rural and semi-urban market but also got some share of the urban market due to rub off effect. Moreover, these small players fully realize that in todays world, marketing needs money. So they dont shy away from investing in marketing. Again take the example of Dandi namak. They splashed out money on their lengthy TV commercials to ensure that the message gets ingrained in the mind of the prospect. Fairever and Ujala adopted the same 38

strategy. Of course they dont spend as much as the MNCs do but they do spend enough to get attraction. One of the important aspects of the strategy being adopted is effective communication about product. . Take the case of Dandi namak. The TV advertisement was bland and uninteresting. However, without any glitz, it was able to connect to its target customers because it talked in the language of its target customers. These brands send a powerful message to their target customers that they are made for each other.

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Advertising in Rural India: A dramatic change is in progress. Villagers who used to crack open peanut M & M candies, eat the nut and throw away the shell are now demanding chocolate candies that will melt in their mouths, not in their hands. Charcoal-cleaned teeth are a rare sight; so is the case with twigs of niim (neem) and babul (babool) tree. Today, the ultra bright shine of Colgate or some other international brand of toothpaste holds more appeal than the traditional methods of cleaning teeth. Even the native expressions of cleaning teeth, such as daatun karnaa and musaag lagaanaa, are endangered to being replaced by new expressions such as paste karnaa, 'to brush teeth with paste'. Villages and small towns, which were once inconsequential dots on maps, are now getting the attention of global marketing giants and media planners. revolution, Indian Thanks to globalization, economic liberalization, IT female power, and improving infrastructure, middle

class rural India today has more disposable income than urban India. Rural marketing is gaining new heights in addition to rural advertising because of the following reason: Various rural media (conventional and non-conventional) and

integrated marketing communication. In addition to rural market discourse, media forms such as wall paintings, calendar advertising, outdoor advertising, print, radio and television advertising

40

In particular, uniquely Indian media forms such as video van technology, which has changed the face of not only marketing but also political campaigning. Rural markets (haat) which are the mobile McDonald's or Walmarts of India.

Targeting women and religious groups in addition to rural population. Marketing taboo products such as 'bidi', cigarettes, sanitary supplies, and other such products

Globalization and its effects on product naming, product monitoring, rural discourse and media forms.

Creativity and deception, together with guidelines for advertisers and marketers. Information structures and logic of rural ads. Ads as a social barometer of changing relationships and value systems.

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Strategies adopted for rural marketing by different FMCG Companies :ITC's e-choupal :ITC's e-choupal initiative is changing the lives of farmers on a scale no other venture has ever done. The company is entering more than 30 new villages a day, every single day of the week, 365 days a year. . Take a remote village. Go to the smallest farmer there. Educate him in the best farming techniques. Inform him of daily weather conditions and price movements in the market. Make available to him at his doorsteps the best possible seeds, pesticides and fertilizers at the most competitive prices. And when his crop is ready, help him find the best buyer. Imagine doing all of this in 30,000 villages across six states season after season, year after year. Doing it at no cost to the farmer and yet making money for yourself. Impossible, would be the most obvious verdict to such a proposal. Yogesh Chander Deveshwar, chairman of Rs 12,000 crore ITC, said when S. Sivakumar, chief executive of its agri-business, approached him with an equally ambitious idea in 2000. Knowing that he was asking for the moon,

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Sivakumar initially requested Rs 50 lakh to test the idea among soya farmers in Madhya Pradesh. Deveshwar granted him Rs 10 crore. The rest, as they say, is history. ITC's e-choupal network has already reached 3.1 million farmers, and is expanding into 30 new villages a day-making it corporate India's most ambitious rural initiative ever. Partnering ITC in the network are 37 companies, NGOs and state governments, together creating a new ecosystem for villages and establishing a direct link bet

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THE POWER OF 'e

The e-choupal redefines choupal, the Hindi word for village square where elders meet to discuss matters of importance. The all-important letter in the word is "e". It stands for a computer with an Internet connection for farmers to gather around and interact not just among themselves but with people anywhere in the country and even beyond. It begins with ITC installing a computer with solar-charged batteries for power and a VSAT Internet connection in selected villages. The computer's functioning is freed from the notorious power and telecom facilities at the village level. A local farmer called sanchalak (conductor) operates the computer on behalf of ITC, but exclusively for farmers. The e-choupal offers farmers and the village community five distinct services. Farming methods specific to each crop and region, soil testing, expert advice-mostly sourced from agriculture universities-all for free. Purchase: Farmers can buy seeds, fertilisers, pesticides and a host of other products and services ranging from cycles and tractors to insurance policies. Over 35 companies have become partners in the e-choupal to sell their products through the network. Sales: Farmers can sell their crops to the ITC centres or the local market, after checking the prices on the Net. Development work: NGOs working for cattle breed improvement and water harvesting, and women self-help groups are also reaching villages through e-choupal. In some states farmers can even access their land records online, sitting in their village. Access to health and education services through e-choupal begins next month. In many villages e-choupals have become the axis around which the local community revolves. Be it for accessing newspapers online in the mornings (many villagers have

44

discontinued their newspaper subscriptions) or checking the supply of products they ordered on the Net, or watching movies on farming techniques in the evenings, farmers frequent echoupal at all times of the day. Each e-choupal covers between five and six villages.

EMPOWERING THE SMALLEST

Indian farmers typically buy at retail prices and sell their produce at wholesale prices, losing out on both ends of the deal. By virtually aggregating them, e-choupal brings the power of scale to the smallest of farmers. ITC ensures that there are at least two suppliers of all products sold through the e-choupal. Farmers can pool their demand, compare prices and place orders on the Net. Bargain and choice-two key virtues of competition-are delivered to the farmers right on their doorstep. When it is time to sell the produce, e-choupal helps the farmers by breaking the monopoly of local markets that are controlled by trade cartels. In most mandis, farmers are cheated at several stages-arbitrary pricing, under weighing, delayed payments. In Uttar Pradesh, farmers lose between 10 and 30 per cent of their income to such malpractices. ITC is setting up its own purchase centres in the six states covered by e-choupals. The farmers' response has been overwhelming. In 2001-2, the company purchased 60,000 metric tonnes of crop through e-choupal. By 2003-4 the purchase increased to 2,10,000 tonnes and in four months of 2004-5, the company picked up 1,80,000 tonnes of farm produce. For farmers it is a win-win situation. Sitting in their village, they can check the prevailing purchase price at the mandi and the ITC centre through e-choupal and sell wherever they wish to. ITC's entry into crop purchase invariably means a rise in mandi rates too, benefiting even those farmers who can't sell to ITC. In places where ITC rates aren't higher than the

45

mandi rates, farmers are drawn to ITC centres because the company uses electronic weighing, better quality testing and ensures spot payment

ITC'S E- choupal achievement

It's achievement :-

(1)- 5,050 choupals, 29,500 villages, 3.1 million farmers.

(2)- Using e-choupal to source a range of farm produce (foodgrains, oilseeds, coffee, shrimps). (3)- Marketing a variety of goods and services though e-choupal(agri-inputs, consumer goods, insurance, market research). (4)-Transactions:$100 in(2003).

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STRATEGY ADOPTED BY HUL Hindustan Unilever to expand Project Shakti reachthe rural market:FMCG major Hindustan Lever will take its Project Shakti, the rural direct-to-home distributor model, national and reach out to 100 million people in four years' time. The project is at present on in Andhra Pradesh but will be soon be rolled out to other remote villages across the nation. The target is to establish access with 100 million people in 3-4 years' time.The importance of the project is rural economy had immense potential and they were the consumers of tomorrow. Supported by micro-credit, the women from self-help groups were HLL's rural direct-tohome distributors. The idea behind Project Shakti was to help the company reach, penetrate and communicate with rural consumers. The initiative benefited women in more than 4,750 villages.

VISION OF THE PROJECT:The vision was to change the lives of women in 100,000 villages by making them Shakti dealers. This would provide economic opportunities for the underprivileged while creating a distribution and communication channel for brands to access untapped rural markets with a consumer base of 100 million rural Indians.

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STRATEGY ADOPTED BY COCO-COLA

Coca-Cola India doubled the number of outlets in rural areas from 80,000 in 2001 to 160,00in 2003, which increased market penetration from 13 per cent to 25 per cent. It brought down the average price of its products from Rs 10 to Rs 5, thereby bridging the gap between soft drinks and other local options like tea, butter milk or lemon water. It doubled the spend on Doordarshan, increased price compliance from 30 per cent to 50 per cent in rural markets and reduced overall costs by 40 per cent. It also tapped local forms of entertainment like annual haats and fairs and made huge investments in infrastructure for distribution and marketing. Result: the rural market accounts for 80 per cent of new Coke drinkers and 30 per cent of its volumes. The rural market for Coca-Cola grew at 37 per cent over the last year, against a 24 per cent growth in urban areas. Per capita consumption in rural areas has doubled in the last two years. The launch of the Rs 5 pack has reaped rich dividends in terms of sales and the bottles are expected to account for 50 per cent of the company's sales in 2003. Coca-Cola is just one example. A lot of fast-moving consumer goods and consumer electronic companies are aggressively targeting rural consumers. The necessity arose because the growth rates of consumer products were slowing down not because the markets were getting saturated in terms of penetration.

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While overall volumes continue to grow reasonably well, there are too many players eating into each other's market share. The companies, therefore, reduce prices in urban areas and invest heavily in sales promotion, intensifying the battle for market share. The companies, therefore, reduce prices in urban areas and invest heavily in sales promotion, intensifying the battle for market share. Operating margins come under pressure and new growth markets have to be explored. This is where the rural markets play an important role. The rural market was tempting since it comprised 74 per cent of the country's population, 41 per cent of its middle class, 58 per cent of its disposable income and a large consuming class, Coca-Cola India CEO Sanjiv Gupta said. Today, real growth is taking place in the rural-urban markets, or in the 13,113 villages with a population of more than 5,000. Of these, 9,988 villages are in seven states -- Uttar Pradesh, Bihar, West Bengal, Maharashtra, Andhra Pradesh, Kerala and Tamil Nadu. For manufacturers of consumer goods, these are the markets to look out for. While the 1980s saw a boom in Class I towns with the spread of television, the Class II towns showed strong growth in the 90s propelled by reforms.

49

According to the National Council for Applied Economic Research, the millennium belongs to the Class III and IV rural-urban towns. It estimates that an average rural Indian household will have five major consumer appliances by 2006, almost double of what it had five years ago. In order to efficiently and cost-effectively target the rural markets, the companies will have to cover many independent retailers since in these areas, the retailer influences purchase decisions and stock a single brand in a product category. In such an environment, being first on the shelf and developing a privileged relationship with the retailer is a source of competitive advantage to consumer good companies. Most of the companies have started tinkering with pack sizes and creating new price points in order to reach out to rural consumers since a significant portion of the rural population are daily wage workers. Thus, sachets and miniature packs, as in the case of shampoo sachets priced at Re 1 and Rs 2 or toothpaste at Rs 10, have become the order of the day in hinterland India and help improve market penetration. Yet, driving consumption of goods in rural areas is not just about lowering prices and increasing volumes but also about product innovation and developing indigenous products to cater to their demands. For example, soap makers use advanced technology to coat one side of the soap bar with plastic to prevent it from wearing out quickly.

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Also, the companies need to turn to innovative methods of advertising like fairs or haats to reach their potential customer base. Two years ago, many companies congregated at the Ganges river for the Kumbh Mela festival, where about 30 million people, mostly from rural areas, were expected to come over the span of a month. The companies provided 'touch and feel' demonstrations and distributed free samples. This proved to be extremely effective in advertising to the rural market.

Strategic Issues
The rural India offers a tremendous market potential. A mere one percent increase in Indias rural income translates to a mind-boggling Rs 10,000 crore of buying power. Nearly twothirds of all middle-income households in the country are in rural India. And close to half of Indias buying potential lies in its villages. Thus for the countrys marketers, small and big, rural reach is on the rise and is fast becoming their most important route to growth. Realizing 51

this Corporate India is now investing a sizeable chunk of its marketing budget to target the rural consumers.

Increasing brand awareness

In the rural families, studies indicate a slow but determined shift in the use of categories. There is a remarkable improvement in the form of products used. For instance, households are upgrading from indigenous teeth-cleaning ingredients to tooth powder and tooth-pastes, from traditional mosquito repellant to coils and mats. There is also a visible shift from local and unbranded products to national brands. From low-priced brands to premium brands.

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Price promotion
In an occasional effort to capture volume sale, multinational brands use price promotions that often yield dramatic, if temporary, sales increases in the rural areas. Their large volume increases reveal a potentially large market in the villages that remains untapped, just below the actual price points. To penetrate this market and generate sustainable volume sales, a permanent product entry at the lower price point is required. Failure to recognize the potentially huge market of the villages that lies below the surface of international price points can even place the premium branded business at risk

FMCG consumption
Organizations like Hindustan Lever Ltd., Nirma Chemical Works, Colgate Palmolive, Parle foods and Malhotra Marketing have carved inroads into the heart of rural markets. Various categories of products have been able to spread their tentacles deep into the rural market and achieved significant recognition in the country households. And, in the process, the regional brands, local brands and the other unbranded offerings got displaced by the leading brands.

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Company
HUL Nirma chemical works Colgate Pamolive Parle Foods

House hold penetration

86% 56% 33% 31%

31% 86%

HLL Nirma chemical works Colgate Pamolive

33%

56%

Parle Foods

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% volume of local brands/unbranded

33%
Category
Washing cakes/bars

Washing cakes/bars
%
86% 55% 33%

volume 86%

of

local Tea

brands/unbranded

55%

Tea Salt

Salt

Of the expenditure on consumer goods in rurahousehold,approximately, 44% is on food articles such as biscuits, tea, coffee and salt, 20% on toiletries, 13% on washing material, 10% on cosmetics, 4% on OTC products and 9% on other consumables. A number of category products have established themselves firmly in the rural households.

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It is evident that in the villages low-priced brands are well accepted and one might feel that a larger proportion of the purchases made in rural market can be attributed to local/ unbranded players. Surprisingly, however, the unbranded/local component contributes to a substantial portion of the volume of only a few of the highly penetrated categories.

Category
Toilet Soap Washing cakes/Bars Edlble oil Tea Washin powder / liquid Salt Biscuits

Category Penetration
91% 88% 84% 77% 70% 64% 61%

Brand with highest penetration

Lifebuoy Wheel Double Iran Mustard Lipton Tazza Nirma Tata Salt Parle G

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Focus on urban categories

Though the commodity products have greater penetration, traditionally urban categories such as skin creams and talcum powder have also made a mark. While the urban talcum powder market suffered a de-growth, the rural talcum powder market darted ahead. Similarly, growth of rural skin cream market was at par with that of urban skin cream market. This clearly indicated that after being considered urban for a long time, some categories are now wearing a rural face. And, in many a case, it is the rural market that is actually driving the growth of category.

Premium brands
Ponds is the leader in the talcum powder category with a penetration of 65% and volume contribution of 56%. Its rivals viz. Nycil and Liril are trailing far behind. Moreover, 60% of the Ponds users have purchased no other brand i.e. they are 100% brand loyal. This reflects the strength of the brand in rural bazaar

Category
Skin Cream Talcom Powder

Household Penetration
18% 15%

In the skin care category, Fair & Lovely fairness cream, with a penetration of 75%, accounts for 60% of the skin care market in rural India. It also enjoys t he undistinguished patronage

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Brand
Surf Ariel Pantene Denim

Penetration of Category users

6.20% 4.50% 1.80% 1.80%

of 58% of its user households. Both Ponds and Fair & Lovely are enjoying a monopoly in the rural markets In their respective categories. Rural India is not averse to trying out the premium brands at high prices. A study indicated that a majority of the premium brand users are using the brand for the first time. Similarly 0.9% of the talcum powder-using families have started using Denim talc and 0.7% of the shampoo using households started using Pantene. Surveys also reveal that trials are not restricted to the more affluent echelon of the villages. The experimenting households are more-or-less evenly spread across the various socio-economic clusters of the rural market. This should further encourage the marketers to focus their attention on rural buyers.

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Penetration of Category users

1.80% 1.80% 6.20%

Surf Ariel Pantene Denim

4.50%

The rural youths are more open to fresh concepts as against their elderly family members. Their difference in choice of products/brands with the seniors of the households often leads to a dual-usage of product categories. As an instance, 20% of the households using tooth powder also use tooth paste. Similarly, many of the households using premium brands also use mass market brands. For example, while 15% of Surf and 12% of Ariel using families also use Nirma detergent, 3% of Denim users use Ponds Dreamflower talc and 18% of Pantene using households use Clinic shampoo as well.

Income growth goes into consumption

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In urban households there are a number of competing demands for ones money. In rural households, they hardly change their house or go out on a vacation. They save only a small fraction of his money and spend the rest. And when there is a growth in their income, the money goes straight into consumption.

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Rural media
Urban consumers shop daily and have 365 opportunities a year to switch brands while the rural purchasers who buy their goods in weekly haats have only 54. Attempts to reach rural consumers, even once during the purchase cycle to ensure repeat purchase, make point of purchase advertising and trade push indispensable. This requires a significant reorientation in the allocation of funds across media. For example, outdoor advertising accounts for over 7% of all media expenditures in India. Rural buyers living in small isolated groups distributed across vast distances have limited access to the broadcast media. The existence of a multiplicity of languages and varying level of illiteracy complicates the task of communication further. To overcome some of these challenges, Unilever pioneered the concept of video vans that travel from village to village screening films in the local language, interspersed with advertisements for Unilevers products. The company also provides product usage demonstrations to the captive audience because written instructions on the pack may

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Quality consciousness
It will be unjustified to think that rural consumers are less bothered about product quality. Even the village buyers desire to buy a quality product and upgrade their quality of life. Marico, an Indian edible oil company, has found the rural consumers in the interior of India willingly pay a reasonable price premium for branded cooking oil, over community oil, because they are certain of its consistent quality. Unbranded products are often considered by some of them to be adulterated.

Travails in distribution
In spite of recognizing the potential of this vast market of 700 million, marketers are often unable to cater to it because of lack of adequate infrastructure. The distances between villages, the terrain and the lack of pucca roads connecting the places act as impediments for them to reach their customers. But once if they overcome these hassles and reach those remote bazaars to be first on the shelf in the product category, they develop a privileged relationship with the retailer that offers them a tremendous competitive advantage. Rural retailers are far less specialized than their urban counterparts and carry a wider range of products. Since frequent delivery is not possible in their part of the world, they tend to carry only a single brand in each product category. And, usually, the brands that are first on the rural shelves become synonymous with product category and are difficult to dislodge. For instance, Maggi noodles, the brand that created the category of instant noodles, reached the rural shelves before anyone else and remained the market leader ever since. Thus, a drive down the rugged countryside, sans electricity and other modern facilities, is, surely, torturous. But the pain is worth bearing.

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Preference for Low Unit Packs (LUP)

Trial is often encouraged by Low Unit Packs (LUP) or sachets. The sachet packaging strategy caught the popular FMCG imagination in the early 1990s and it was considered as a breakthrough in the psyche of the rural consumers. Today, the sachets are increasingly dominant on shelves. Shampoo, for instance, has invaded the rural households with sachets at low affordable prices. Sachets of tea, blues and washing powder are being launched in a big way in the village haats by leading manufacturers. Companies like HLL and Marico are making concrete efforts to create and then meet the demand of rural consumers by launching products in small affordable packs.

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Channel power
The rural consumers interact directly with their retail salespersons who has a strong conviction power and whose recommendations carry weight. The owners relationship with customers is based on an understanding of their needs and buying habits and is cemented by the retailer extending credit. Some of the successful manufacturers creatively develop new revenue activities for the rural retailer. United Phosphorous Limited (UPL), an Indian crop protection company, realized that in its rural markets small farmers were not applying pesticide at all, or applying it inappropriately due to the lack of application equipment. The capital cost of the equipment (mounted pumps and dispensers that cost up to $3000) was placed out of reach of small farmers and most rural retailers. UPL designed a program in which it arranged for bank loans for its rural retailers to purchase application equipment and demonstrated to their retailers the additional revenue possibilities from renting this equipment to small farmers. The result was an added revenue stream for rural retailers.

Wider competition for a product

Many of the rural buyers tend to have little stock of money, only a flow. Consequently, they tend to make purchases only to meet their daily needs and have little capacity to build inventory. The marketing implications of this are far-reaching. Not only are pack sizes and price points affected, but in turns out that consumers have to make a selection from a much wider array of product categories. Thus the nature of competition for any given product is much broader. For instance, in a village haat, Coca Cola competes not just with Pepsi, but with a broad set of purchases that the rural consumers consider as treats.

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Problems in rural marketing

Where the rural market does offer a vast untapped potential , it should also be recognized that it is not that easy to operate in the rural market because of several attendant problems . Rural marketing is thus time consuming affair and requires considerable investment in terms of evolving appropriate strategies with a view to tackle the problems . The major problems faced by manufacturing and marketing men in rural areas are described below:-

1. Underdeveloped people and underdeveloped market:The agriculture technology has tried to develop the people and market in rural areas . unfortunately ,the impact of the technology is not felt uniformly through out the country .while there are pockets- some districts in punjab , Haryana or western Uttar pradesh where a rural consumer is some what comparable to his urban counterpart , there are lager areas and groups of people who have remained beyond the technological break thorough . Even today about 75 districts in county are drought prone and none technology worth the name has percolated to in crease in the standard of living of these people in addition ,the small agricultural land holdings have unable to take advantage of new

technological breakthrough . the number of people below below poverty line has not decreased in any appreciable manner. Thus the rural markets ,by large number , by and large are characterized by underdeveloped market.. a vast of the rural people image old customs tradition habits , taboos and practices

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2. Lack of proper physical communication facilities:Nearly 50% of the villages is the country do not have villages in the country dont have all weather roads . physical communication to these villages is highly expensive . even today ,most villages is in eastern part today inaccessible during monsoon season .hence,

distribution put in by manufacturer prove expensive and some times of no consequences .to be effective the products have to be physically moved to places of consumption or places to purchase.

3. Media for rural communication:Among the mass media, at some point of time ,say in late 50s or early 60s ,radio was considered to be a potential ,medium for communication to the rural families . now the advent and expansion of telecast network appears for easy communication with rural masses. The question is how many people access viewing television? There is a need to examine the ownership pattern of television sets in rural areas to judge the potential reach of this medium. Another e mass media is cinema . it has been observed that cinema viewing is fairly satisfactory ,where available . mobile theaters are also good medium but very expansive companies like HLL using these vans found 10 to12 times higher in rural areas than urban areas due to bad roads in areas .

4. Hierarchy of markets:Rural consumer have identified market places for different items of their requirements. So there can not be uniform distribution pattern for all products. It has been seen that 90% of farmers visited the nearest town , where an agricultural produces assembling market is

66

situated at least once a quarter for either selling the produce or for purchase of there requirements . so town/ mandi centers with large hinterland villages become the focal point thus depending upon the purchase habit of rural people. The distribution network for different commodities has to be different.

5. Low level of literacy:The literacy rate is low in rural areas as compare to urban areas. This again lead to the problem of communication for promotion purposes. Print medium becomes in effective and to an extent irrelevant in rural areas since its reach is poor and so is the level of literacy. The dependent should be more on electronic media cinema, radio and television. While the excess to cinema and radio appears to be fairly easy and common. in not so in case of television. Television advertising is very expensive. Probable it will be prudent to take advantage of such professional rural advertising agencies. The promotion of product along with distribution is also being resorted to by many.

6. Seasonal demand:
The distribution of any product in rural areas either agricultural inputs , consumables or durable should necessarily follow a seasonal pattern. Since 75% of the rural income is generated through agricultural operation which is seasonal so the demand pattern is also seasonal. A typical example is that of fertilizers. The demand of fertilizers is always high during the start of kharif and rabi system the fertilizers manufacturers have evolved a distribution pattern so that the seasonal demand can be met. Like wise the demand for consumables and durable will be high during the peek crop harvesting and marketing season. . this is the time at which the rural people have substantial cash inflows. Hence the distribution should be fairly intensive. During harvesting season this arrangement would

67

result in adequate sales realization vise versa in summer months the demand will be very low festivals seasons like sankranti, poangal, vaisakhi or depawali are also demand seasons. So the distribution of rural areas should be more and frequent during the harvest and festival seasons as opposed to a fairly uniform demand pattern in urban areas.

7. Many languases and dialects: Even assuming that media are avaiable for comunication or the company commit its own media vans the large number of languages and dialects very wildly from statue to state and reason to reason. The messages have to be delivered in local; languages and dialects. Even though the number of recognized languages are only 16, the number of dialects are estimated to be around 850.

8. Low per capita income:

Even though about 33 to 35 percent of gross domestic product is generated by rural areas. It is shared 75% of population hence the per capita income is low compared to urban areas. This apart the distribution of income is highly is skewed. Since the land holding patterned itself is skewed thus the rural population present a highly heterogeneous seen. .Given the low per capita incomes and population spread in the villages, what will be the off take of any product by rural consumer, say from a village shop? What should be the inventory levels to be maintained by a rural shopkeeper and how long will it take for the rural areas shopkeeper to liquidate his stock ? If a company opts to distribute the products up to village these aspects require very careful consideration while evolving distribution strategies for rural markets.

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RURAL MARKETING-CHALLENGES AND OPPORTUNITIES

The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000 villages which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc. The success of a brand in the Indian rural market is as unpredictable as rain. It has always been difficult to gauge the rural market. Many brands, which should have been successful, have failed miserably. More often than not, people attribute rural market success to luck. Therefore, marketers need to understand the social dynamics and attitude variations within each village though nationally it follows a consistent pattern. While the rural market certainly offers a big attraction to marketers, it would be naive to think that any company can easily enter the market and walk away with sizable share. Actually the market bristles with variety of problems. The main problems in rural marketing are:

Physical Distribution Channel Management Promotion and Marketing Communication

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The problems of physical distribution and channel management adversely affect the service as well as the cost aspect. The existent market structure consists of primary rural market and retail sales outlet. The structure involves stock points in feeder towns to service these retail outlets at the village levels. But it becomes difficult maintaining the required service level in the delivery of the product at retail level. One of the way could be using company delivery vans which can serve two purposes- it can take the products to the customers in every nook and corner of the market and it also enables the firm to establish direct contact with them and thereby facilitate sales promotion. However, only the bigwigs can adopt this channel. The companies with relatively fewer resources can go in for syndicated distribution where a tie-up between non-competitive marketers can be established to facilitate distribution. As a general rule, rural marketing involves more intensive personal selling efforts compared to urban marketing. Marketers need to understand the psyche of the rural consumers and then act accordingly. To effectively tap the rural market a brand must associate itself with the same things the rural folks do. This can be done by utilizing the various rural folk media to reach them in their own language and in large numbers so that the brand can be associated with the myriad rituals, celebrations, festivals, melas and other activities where they assemble. One very fine example can be quoted of Escorts where they focussed on deeper penetration .In September-98 they established rural marketing sales. They did not rely on T.V or press advertisements rather concentrated on focused approach depending on geographical and market parameters like fares, melas etc. Looking at the kuchha roads of village they

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positioned their mobike as tough vehicle. Their advertisements showed Dharmendra riding Escort with the punch line Jandar Sawari, Shandar Sawari. Thus, they achieved whopping sales of 95000 vehicles annually. One more example, which can be quoted in this regard, is of HLL. A year back HLL started Operation Bharat to tap the rural markets. Under this operation it passed out lowpriced sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to twenty million households. Thus looking at the challenges and the opportunities which rural markets offer to the marketers it can be said that the future is very promising for those who can understand the dynamics of rural markets and exploit them to their best advantage.

OPPORTUNITIES FOR DIFFERENT FMCG MNCs

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

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TO expand the market by tapping the countryside, more and more MNCs are foraying into India's rural markets. Among those that have made some headway are Hindustan Lever, Coca-Cola, LG Electronics, Britannia, Standard Life, Philips, Colgate Palmolive and the foreign-invested telecom companies.

Opportunity :The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban. As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in 1991, rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income. The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased. The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster than the urban counterpart.

The 4A approach

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The rural market may be alluring but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions; poor roads; power problems; and inaccessibility to conventional advertising media. However, the rural consumer is not unlike his urban counterpart in many ways. The more daring MNCs are meeting the consequent challenges of availability, affordability, acceptability and awareness (the so-called 4 As)

Availability
The first challenge is to ensure availability of the product or service. India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. However, given the poor state of roads, it is an even greater challenge to regularly reach products to the far-flung villages. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Marketers must trade off the distribution cost with incremental market penetration. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system which helps its brands reach the interiors of the rural market. To service remote village, stockiest use auto rickshaws, bullock-carts and even boats in the backwaters of Kerala. Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG Electronics defines all cities and towns other than

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the seven metros cities as rural and semi-urban market. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices.

Affordability
The second challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to the rural consumer, most of whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh the so-called `Bimaru' States. Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. Coca-Cola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm priced at Rs 15.

Acceptability
The third challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market. One company which has reaped rich dividends by doing so is LG Electronics. In 1998, it developed a customized TV for the rural 74

market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice boxes a tin box for new outlets and thermocol box for seasonal outlets. The insurance companies that have tailor-made products for the rural market have performed well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crore in total premia. The company tied up with non-governmental organisations and offered reasonably-priced policies in the nature of group insurance covers.

Awareness:With large parts of rural India inaccessible to conventional advertising media only 41 per cent rural households have access to TV building awareness is another challenge. Fortunately, however, the rural consumer has the same likes as the urban consumer movies and music and for both the urban and rural consumer, the family is the key unit of identity. However, the rural consumer expressions differ from his urban counterpart. Outing for the former is confined to local fairs and festivals and TV viewing is confined to the stateowned Doordarshan. Consumption of branded products is treated as a special treat or indulgence. Hindustan Unilever relies heavily on its own company-organised media. These are promotional events organised by stockists. Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language.

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Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural households. It doubled its spend on advertising on Doordarshan, which alone reached 41 per cent of rural households. It has also used banners, posters and tapped all the local forms of entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media.LG Electronics uses vans and road shows to reach rural customers. The company uses local language advertising. Philips India uses wall writing and radio advertising to drive its growth in rural areas. The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether they can do so without hurting the company's profit margins. Mr Carlo Donati, Chairman and Managing-Director, Nestle, while admitting that his company's product portfolio is essentially designed for urban consumers, cautions companies from plunging headlong into the rural market as capturing rural consumers can be expensive. "Any generalisation" says Mr Donati, "about rural India could be wrong and one should focus on high GDP growth areas, be it urban, semi-urban or rural.

Conclusion
Rural Marketing Becomes Attractive To Corporate :-

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A variety of factors have rendered the rural market quite attractive to corporate in recent years. The growing opportunity in the rural market is no doubt the prime factor. The rural demand has been growing rapidly and its composition has been changing for the better in the recent years. The increased income/ purchasing power of the rural consumer and the improved income distribution has enhanced rural demand for several products. Better access to many modern products/brands has added to this growth. The heat of competition in the urban market actually serves as the stronger driver behind the growing interest of cooperates in the rural market. The fact that the rural market is still largely an untapped as well as the early entrants can tap it without having to face intense competition as in the case of the urban market, makes the rural market all the more attractive to them. Corporate have been finding the going increasingly tough in the urban market , especially for the products in respect of which penetration levels are already high . For example penetration level for the toothpaste in the urban market has now reached close to 80 per cent. In contrast, it is below 30 per cent in the rural market. Moreover in the urban market many consumers have been using a toothpaste for quite some time and have settle down to the brand, its flavour , and other characteristics .They can not be expected to switch their brand very easily . In contrast, in rural markets, there a lot of first time users of toothpaste whom the company can tap from the scratch.

Corporate find that the highly penetrated urban markets allow little room for volume growths for most of what are called, necessity products (toothpaste, bath soap, washing

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products, tea etc). Growth opportunity for many of the emerging products (coffee, shampoo, talcum powder etc) too is rather low in the urban market . The rural market thus becomes essential for companies with strong aspirations. Not comprising in the rural market keep them out of about half of the countrys market for the necessity products and the onethird for the emerging products by value .It is but natural that in these circumstances, corporate set their sights on the rural market

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Many company have already taken to the market in a Big Way :EXTENT OF RURAL SALES BY SELECTED COMPANIES Company HLL COLGATE GODREJ CADBURY SMITHKLINE BEECHAN HEINZ GLAXO CIPLA RANBAXY HERO HONDA KINETIC SOURCE:Economic times Company AUDIO REFRIGATORS CTVs PHARMA CEMENT PAINTS WASHNG MACHINES SOURCE:Economic times 9% 40% 24% 22% 20% 10-20% 10-12% Rural Sales 50 50 33 25 25 20 25 18 17 40 30 Rural Sales(% share)

Above tables shows that the extent of rural sales by select companies/Industries. Many companies/ Industries have already taken to the rural market in a big way. It can be shown from above table that in the FMCG Category, half of the revenue of HINDUSTAN LEVER and Colgates Come from the rural market . In the case of another companies too, the countryside accounts for a substantial part (25-30) per cent of the total sales. It can also be seen that about One-Fifth of Pharma sales occur in rural India . Kinetic sells about 30 per cent of its scooters. Hero Honda 40 percent of its bikes.

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Recommendations
1. Advertisements on rural media like radio, press media has been increased .
2. Physical Distribution channel must be made strong. 3. Awareness about the product must be increased among the peoples. 4. Profit margin percentage of the product for the retailers should be 5. The rural customers are usually daily wage earners and they dont incomes like the ones in the urban areas have. So the increased. have monthly

packaging is in smaller units and

lesser-priced packs that they can afford given their kind of income streams.

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Then thing like the colour that attracts him is also important. 6. A difference in the kind of media mix that is used to convey the messages to the rural customers. We need to use different models and means to reach them as what appeals to the urban customer may not appeal to him due to varying lifestyles. The communication and the design of it are also different as what attracts one need not attract the other as well. So again, even if the media reaches him, there might not be an impact as it may fail to attract

him as fails to connect to it due to the lifestyles being different. 7. Infrastructure like- road, electricity facility must be improved because most of the MNCs tap the rural market due to such difficulties. 8. In advertising local languages can be used to attract more and more viewers.

LIMITATIONS OF THE STUDY

The study is based totally on secondary data and such data relates to something of the past and not the exact present scenario. Hence totally depending on such given data could at timesbe misleading, that is no matter how good the report is one has to do certain amount of homework before jumping to conclusions on the basis of such study.

Marketing activity is something that is never stable and is constantly changing with the changing circumstances, ever changing rules and regulations that control these activities. 81

Hence something which is very up-to-date as of now might become obsolete in a very short span of time. One has to be very cautious before taking any decision based on such data and has to think beyond what is given. No amount of data can be accurate enough to give the desired results.

Another major drawback with respect to the study of Scope Of Rural Marketing For FMCG Company In India is that it is something that has been here for the past few years only and hence trying to get much information regarding it is also difficult, and whatever little that is available has to be taken note of and believed into. Only a few studies on the topic are available and hence very few facets of it can be seen. A lot more can be known about it but at a later stage when it has grown in proportions and is more frequently used by the various MNCs for increasing their market share and lot of competition increases among the MNCs and the urban market is saturated.

BIBLIOGRAPHY

Study books:
David H Maister , "Marketing Professional Services, Forward-Thinking Strategies for Boosting Your Business, Your Image, and Your Profits," 2nd Edition. Sep 2002. Edition. 13, Iss. 3; p. 57.delhi. Ali Abdulla ,The Marketing of Nations, A Strategic Approach to Building National Wealth, Aug 1997, Edition 122, pg. 104, Delhi. 82

Internet:
www.Indiainfoline.com www.Google.com www. Censusindia.com www.HLL.com

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