Rural Marketing

An Indian Perspective

Facts about Rural India

Rural India consists of 6,38,596 villages that house

742,490,639 people. This figure represents around 70% of the total population of India and 12% of the globes population. In fact, as per Mc Kinsey, despite rising urbanisation, 63% of Indias population will continue to live in the rural areas even in 2025. Further, the number of consumers earning over $5 a day is projected to catapult from 50 million today to 150 million by 2020.

Demographic Classification - Income

No of households (m) Demographic classification Rich ( income greater than Rs 1m per annum) Well off (income greater than Rs 0.5m per annum) Total % of Total Urban 4.8 29.5 34.3 54.4% Rural 1.3 27.4 28.7 45.6% Total 6.1 56 63.0

Income Statistics

Why are Marketers going Rural?

Improvement in the living standards of the rural

people. The boon of the Green Revolution combined with government initiatives such as subsidies, loan waivers, minimum support prices (MSP) and employment schemes (MGREGS) have caused an increase in purchasing power. Cut throat competition in urban areas. Rural India - lack of strong presence by brands as well as a high growth potential. Further, improvement in infrastructure prompted by government initiatives. Also, rural India is insulated against global economic

Few Interesting Figures

Challenges
The requirement of the rural people is significantly

different from that of the urban areas, owing to varied demographic, social, economic and psychological environments. About 68% of the market remains untapped due to inaccessibility. This makes the distribution of products and their ready availability challenging. There is wide prevalence of fake brands, which flourish mainly due to illiteracy and lack of awareness. The disposable income is relatively low as compared to urban areas, seasonal, unstable. The Joint family system is still common, and reference groups have a major impact on buying behaviour.

Challenges (contd.)
Difficulties in conducting market research. Advertisements and other forms of communication also

have to be modified suitably to suit the tastes of the rural people. Advertising is expensive as messages need to be translated in several local dialects to create optimum impact.
The biggest challenge for any MNCs are meeting the

four aspects in rural marketing: Availability, Affordability, Acceptability & Awareness.

The 4 As of Rural Marketing

Marketing Tools Product Price Place Promotion Marketing Challenge Acceptability Affordability Availability Awareness

Availability
The first challenge is to ensure availability of the product or

service. Indias 627,000 villages are spread over 3.2 million sq km. 700 million Indians 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 villages. Over the years, Indias largest MNC, Hindustan Lever, has built a strong distribution system which helps its brands reach the interiors of the rural market. To service remote village, stockists 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. LG Electronics defines all cities and towns other than the

Affordability
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 and Fair Glow in 50-gm packs, priced at Rs. 4-5 meant specifically for rural markets. The success of Cavin Kare has become a very notable case study. It is a company that began in a small way. It started the Chic shampoo sachet for 50 paise when shampoo was available at Re.1, and it revolutionized the market. Hindustan Lever, among the first MNCs to realize the potential of Indias rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs.2 for 50 gm. 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 for coke now come from the rural markets.

Acceptability
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. It developed a customized TV Sampoorna for the rural market and was a runway hit selling 100,000 sets in the very first year. For this model, LG also introduced a new technology that provided better reception in low signal locations which is a common problem in rural areas. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices. 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 it.

Awareness
Since large parts of rural India are inaccessible to conventional

advertising media, building awareness is another challenge. Mass media is able to reach only to 57% of the rural population. Fairs and festivals, Haats, Melas etc., are used as occasions for brand communication. Cinema, vans, shop-fronts, walls and wells are other media vehicles that have been utilized to increase brand and pack visibility. Ideas like putting stickers on the walls of wells, huts, are some of the innovative media used by personal wash like Lux and Lifebuoy and fabric wash items like Rin and Wheel. Hindustan Lever relies heavily on its own company-organized media. 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. Coca-Cola uses a combination of TV, Cinema and Radio to reach rural households. Coke doubled its spends on doordarshan advertising. LG Electronics uses vans and road shows to reach rural customers.

Corporate Innovations for Rural Market

Company Godrej & Boyce Industry Segment Consumer Durables Product/Program ChotuKool Refrigerator Description Impact Powered by battery, a perfect Providing the rural/ semi-urban refrigerator for rural population. areas with a high-end product, the Does not require regular company pays commission of US$ electricity supply unlike the 3/ refrigerator to the rural agent; conventional models. making rural population the last mile connectivity of its supply chain. Low-cost Automated Teller Machines (ATM) which provide banking solutions to people in rural/ semi-urban areas. The machine consumes very less power, and has an elegant, rugged and reliable Cash Dispense Module. A wide range of products meant for rural and semi-urban bankers makes the financial operations seamless and uncomplicated

Vortex

Banking

Low cost ATM

Tata Consumer Chemicals goods

Water Purifier

Swach range of water purifiers The winner of the gold at the Asian promise pure drinking water to the Innovation Awards 2010 would be rural people at a very low cost of rolled out nationally and then in INR 999. It does not require emerging markets across Africa, running water or electricity to South-East Asia and Latin America. provide harmless, bacteria-free drinking water.

Corporate Innovations for Rural Market

HUL The multi-brand rural The main objective of the engagement module- Khushiyon campaign is to reach out to media ki Doli- initiated by HUL, provides dark villages with HUL brand various personal care and home messages to inculcate good care brands such as Wheel, Surf personal hygiene habits among Excel, Fair & Lovely, Sunsilk, the people. Shakti distributors Vim, Lifebuoy and Close Up. now account for 15 per cent of the company's sales in rural India FMCG Smaller packs of The initiative aimed at With an aim to penetrate into rural maggi noodles 'indianising' Nestle's global markets, Nestle has strived to and tomato ketch- portfolio to propel its growth in create products specifically for the ups the rural markets. The company consumers at the bottom of the promises nutritionally superior pyramid. The taste maker products for people residing in introduced not only delights the the hinterlands. taste buds, but also adds nutritional quality to the food. Software Nokia Life tools The mobile application, launched Nokia has tied up with in June 2009, empowers people government organizations, NGOs to have access to agricultural, and Reuters for this campaign educational and entertainment and has partnered with Idea content Cellular as the service provider. It has launched an ancillary microfinance campaign to facilitate handset purchase in the rural areas. FMCG Khushiyon ki Doli

Nestle

Nokia

Corporate Innovations for Rural Market

An initiative by ITC, ee-Choupal delivers real-time Choupal aims to empower information and customised farmers with up-to-date knowledge to improve the agricultural and marketing farmer's decision-making information through access ability, thereby better aligning to internet and computers. farm output to market The campaign was launched demands; securing better in 2000 and targetted to quality, productivity and empower 10 million farmers improved price discovery. by 2012. GlaxoSmit FMCG Asha- milk food GlaxoSmithKline's Asha, Realising that right product hKline drink which is 40 per cent cheaper needs to reach the right than the regular variant of consumer in time, the Horlicks, is the first product company will continue to from the UK-based MNC identify and bridge need gaps designed for rural for consumers, particularly in consumers. terms of nutrition products and their availability. Hero Consum Hero Dawn The New Delhi-based To get bigger share in rural Motocorp er company, which gets over areas, they are organizing Ltd. Durable 45 percent of its revenue free vehicle servicing and ITC Agricultu re e-Choupal

from sales in rural areas in medical camps in over the worlds second- largest 100,000 villages around the market for the two country to bolster its

Future of Rural..
Late Dr C K Prahalad in his book The Fortune at the

Bottom of the Pyramid has rightly said : that if we stop thinking of the poor as victims or as a burden and start recognising them as value-conscious consumers, a whole new world of opportunity will open up. He suggests that four billion poor can be the engine of the next round of global trade and prosperity, and can be a source of innovations.