Chapter.

1 Profile of Rural Marketing

1.1 Introduction to Rural Marketing

1.2 Definition of Rural Marketing
1.3 Statistical Approach to Rural Marketing
1.4 Evolution of Rural Marketing
1.5 The Reasons to Prefer the Rural Areas
1.6 Characteristics of Rural Marketing
1.7 Classification of Rural Marketing
 Profile Rural Marketing

1.1 Introduction to Rural Marketing:

The rise in rural marketing provided volume growth to all leading companies in
the beginning of 90’s. Rural markets are facing many challenges to target rural markets.
Higher rural incomes driven by agricultural growth have increased the purchasing power
to consume branded and value-added products in rural areas. Marketers and
manufacturers are increasingly aware of the purchasing power, size and demand base of
the Indian hinterland. Efforts are been made by them to understand the attitude of rural
consumers.
Marketers want to follow the principle of WALK THEIR WALK and TALK
THEIR TALK. Marketing mix is framed according to rural tastes and lifestyles.
For example: MIRC ELECTRONICS, which owns the Onida television brand, launched
IGO, which was positioned as a value-for-money brand targeted at rural markets,
especially customers who were upgrading their black-and-white TVs, which constitutes
65% of the total colour television buyers. The ad campaign screamed loudly in rural
lexicon: “kasam se, kya TV hai!”

1.2 Definition of Rural Marketing:

According to Prof. Ramkishen Y, “Rural marketing is the process of

developing, pricing, promoting, distributing rural-specific goods and services, leading to
exchanges between urban and rural markets, which satisfies consumer demand and also
achieves organizational objectives.”

Let us understand this definition and its implications: -

• Rural marketing involves a two way marketing process.
• Every want is backed by an ability and willingness to buy. These are known
as ‘demands’. Marketers are now trying to satisfy the rural demands by
customizing the products and manufacturing the products as per the demand.

1.3 Statistical Approach to Rural Marketing:

 Government agencies like IRDA (Insurance Regulatory and Development Authority)

and NCAER (National Council for Applied Economic Research) define ‘rural’ as
“villages with a population of less than 5,000, with 75% of the male population
engaged in agriculture, etc.”
 Two-thirds of the country’s consumers live in rural areas, which are around 700
million people, and almost 26% of the National income is generated there.
 10 consecutive monsoons have led to 26% of GDP as returns from agriculture. This
has increased their purchasing power.
 India is divided into 597 districts, and has 6,38,667 villages, of which 32% can be
reached as they are connected by pucca roads.
 However, 68% of the rural market lies untapped due to various reasons ranging from
inaccessibility to lack of awareness.
 In all there are more than 3.8 million retail outlets in rural India, averaging 5.8 shops
per village.
 The rural market has been growing at 3-4% per annum, adding more than 1 million
new consumers every year.
 It now accounts for close to 50% of the volume of consumption of fast-moving
consumer goods (FMCG) in India.

As a result Rural India is becoming an important part of the market

development strategies of all FMCG and consumer durables companies as well as service
companies.

1.4 Evolution of Rural Marketing:

The Glorious Past (1940-1990):

In 1949, Asian Paints was the first company to enter rural markets. In 1960
HLL saw rural markets as an opportunity and entered with lifebuoy soap. Today HLL
dominates rural markets and have its presence in more than 1 lakh villages. Major players
like Colgate and Dabur followed in. in 80’s companies like Nirma, Cavinkare, and
Marico entered rural markets. MNC’s like P&G (Proctor & Gamble) also found potential
in rural markets.

The Pulse of the Present (1990-2000):

Around 70% of the population lives in rural India, which is almost
700 million in number. A 1% increase in their purchasing power can lead to an increase
of Rs.10,000 crores in the government revenues. Cos. Are launching a range of products
to cater to the changing lifestyles in rural India. MNC’s like LG, Samsung, Revlon and
insurance biggies like Birla Sun life, Max New York Life and Prulife are entering rural
markets in a big way. But till today these have altogether tapped only 1-lakh villages out
of the 6-lakh odd villages.

1.5 The Reasons to Prefer Rural Areas:

Presently, companies operating in India are left with only two options,
i.e. either to go Global or to go Rural. The cost of going global is very high and also it’s
tough to penetrate markets in other countries. Rural India is emerging as a large market
for a number of goods and services. So, it’s better to target the rural market. Marketers
find a similarity between the criticality of rural as well as urban markets. Some reasons
for the same are listed below: -

a) Saturation of urban markets: There is cutthroat competition in urban markets. Due

to the wide variety of choices of products, it becomes difficult for existing
companies to maintain their market share. Compared to urban markets, the rural
markets provide better opportunities.
 b) A huge untapped market: With a rural population of more than 700 million, it has
a huge potential and market areas as only around 1-lakh villages are tapped out of
the 6-lakh odd villages.
c) Rising disposable incomes: Good monsoons during the past 10 years have raised
farmers’ incomes. Non-farm sectors now account for almost 50% of the total rural
incomes. It is a market that corporatists cannot afford to ignore. Another reason
for the rising disposable incomes of the villages is that Agricultural income is
non-taxable.
d) Remittances from abroad: Many households in rural India have one of their
family members abroad, mostly in Gulf countries. People working there send their
savings to their families in India, which is an additional source of income.
e) Impact of the media: The growing reach of the electronic media has created a
huge change in the lifestyles of rural consumers because of TV programmes like
soaps and other serials. Rural people are spending more on lifestyle products
these days. Modi, Revlon, for instance sells more lipsticks in the rural market than
in urban areas. Last year rural sales were Rs.25 crores; only Rs.12 crores came
from the urban market.

1.6 Characteristics of Rural Marketing:

India is a big country and its rural markets have varied

characteristics that change from people to people, region to region. Some of the main
features of India’s rural markets are: -

1) Diverse Nature: There are 6,38,667 Indian villages in all.

 Out of these 50% share a very small population of less than 500 and a
limited purchasing power. Many of these villages don’t even have a
single shop.
 In the second category there are 2,50,000 villages with a population
between 500-2000. There are at least 5 shops per village.
 Lastly there are 60,000 villages with a population of more than 2000.
 Companies should try and focus on the last two categories more as
they have high potential. Regional disparities heavily influence
economic development, social interaction patterns, mobility patterns
and awareness levels.
 This in turn influences purchasing power.

2) Urban Market Saturation:

 There is a cutthroat competition in urban markets, which have reached
a stage of saturation.
 As a result, marketers are shifting focus to greener pastures in rural
markets, as there is equal number of households in rural areas as in
urban areas.
 3) Rising Disposable Income of Rural Customers:
 New tax structures, good monsoons, the green revolution and the
Administered Pricing Mechanism (APM) have raised disposable
incomes in rural areas.
 It is ironic that rural people spend so lavishly on weddings, ceremonies
and festivals amidst deficiency.
 Today the rural consumer shop for ‘value’.
 It is this ‘income’ that the companies are going to tap in the near
future.

4) Rising Literacy Levels:

 Nearly 45% of rural Indians are literate out of which 59% are men and
31% are women.
 Around 12 crore people in villages are literate as compared to 12.5
crore in urban India.
 Every year produces 60 lakh literate people.
 Farmers are remarkably well informed about the changing world
around them.
 The increased enrolment in schools has also generated a wave of rural
demand for lifestyles and aspiration products. Hence, one cannot make
generalizations about Indian Rural Markets.

5) Spread of Cable Television:

 The growth of satellite TV channels has had a major impact on
villagers.
 It has led to a change in lifestyle and consumption patterns.
 Television has high capacity to raise interest levels as it has greater
accessibility compared to other media.
 Rural consumers now aspire to buy brands rather than to just purchase
commodities.

1.7 Classification of Rural Marketing:

URBAN RURAL

RURAL URBAN

RURAL RURAL

Urban to Rural (U2R): A major part of rural marketing falls in this category. It
is the transaction where urban products are sold in the rural areas. The urban products,
which are generally sold in rural areas, are pesticides, fertilizers, seeds, FMCG, tractors,
bicycles, consumer durables, etc.
 Rural to Urban (R2U): It is basically where agricultural products are marketed
in urban areas. Usually a farmer seeks to sell his produce in an urban market. An agent or
middlemen plays a crucial role in this marketing process. These are basically
cooperatives like AMUL, MAPRO, etc. Products sold under R2U category include seeds,
fruits, vegetables, milk and milk products, forest produce like beeswax, honey, spices,
cotton for textile mills etc.

Rural-to-Rural (R2R): This includes activities that take place between two
villages in close proximity to each other. The transactions involve areas of expertise a
particular village has. Items in this category include agricultural tools, handicrafts,
bullock carts, dress materials etc.
 Chapter.2 Consumer Behavior in Rural Areas

2.1 Characteristics of Rural Consumer

2.2 Rural Consumer Class
2.3 Factors Influencing Rural Consumer Behavior
2.4 Model of Rural Consumer Behavior
2.5 Rural Marketing Strategy
 Consumer Behavior in Rural Areas

2.1 Characteristics of Rural Consumer:

 Literacy level:

Consumers Literacy level in %

Urban India 52%
Rural India 45%

The literacy rates are much lower in the villages of underdeveloped

states like Bihar, Andhra Pradesh, etc.
 Income level:

Consumers Income level

Urban India High
Rural India Low

Low purchasing power, standard of living, per capita income, economic

and social positions are the traits of rural consumers.
 Location Pattern of Rural Consumer:
India

Urban Rural

3,200 cities & Towns 6,38,667 villages

6,300 villages 3,00,00 1.5 lakh

Villages villages

5,000 persons 500 people 200 people

Or less or less
 Reference Groups: Typically, in a rural area the reference groups are primary health
workers, doctors, teachers and panchayat members, the village trader or the grocer,
commonly called ‘Baniya’ or ‘Mahajan’ are an important influencer in the decision
making of rural customer. A marketer needs to be aware of these influences that can
effect changes in the rural customer’s consumption patterns.
 Occupation: Consumption patterns differ according to income levels. Typically, in a
rural area the principal occupation is farming, trading, crafts, plumbing, electric
works, primary health workers and teachers.
 Media Habits: Rural people are fond of music and folklore. In rural areas a popular
form of entertainment is the ‘Tamasha’ and ‘Nautanki’. And then there are television,
radio and video films.
 Other Variables: Culture, language, religion, caste and social customs are some other
important variables for profiling a rural customer. Rural consumers have a lot of
inhibitions and tend to be rigid in their behavior. A company has to take intense care
while targeting them.

2.2 Rural Consumer Class:

Groups Population Examples

1. Affluent Group 150 million people Cash rich wheat farmers
in Punjab, Chilli
merchants in Andhra
Pradesh (Guntur).
2. The Middle 300 million people Sugarcane farmers in
Class Uttar Pradesh, Jute
farmers in West Bengal.
3. The Poor Size is very large The poorest farmers
growing Jowar, Bajra,
etc. of Bihar, Orissa.

2.3 Factors Influencing Rural Consumer Behavior:

 Stimuli
 Perception
a. Exposure
b. Interpretation
 Attitudes
a. Changing Effect
b. Changing Beliefs
c. Changing Behavior
 Needs and Motives
 Demographics
 Culture
 Believes and Value
 Social Class
 Influence Groups
a. Reference Groups
b. Opinion Leaders
c. Innovations

2.4 Model of Rural Consumer Behavior:

Need Pre-Purchase Evaluation of Purchase

Recognition Research Alternatives Decision

Post-Purchase
Behavior

Need recognition: A rural customer first recognizes his needs and accordingly thinks of
purchasing the products. This is the first step in the Simple Decision Making Model.
EX: Ramlal, Sarpanch of Sonawani District, wants to purchase a color TV.

Pre-purchase Search: Once there is need recognition, the next step is to do a pre-purchase
search. EX: consider the earlier example, Ramlal may go to a nearby city and visit a
showroom that has multiple products.

Evolution of alternatives: the third step is to basically to pick up the best alternative from
the available options. EX: Ramlal may look for the products of Videocon, Onida, and LG
that are available with the dealer and may finally select one of them.

Purchase decision: This is the action that result in the purchase of the product from
among available alternatives. The customer may plan to purchase a specific product that
suits his needs and is within his budget. EX: Ramlal may plan to go for LG’s Sampoorna
colour TV, as it has a vernacular on-screen display, better sound and superior picture
quality. Besides, it is priced at only Rs. 8,500.

Post-purchase behavior: This is the final step in the Simple Model of Consumer
Behavior. The buyer’s relationship with the seller does not come to an end with the
purchase, especially in the case of commodities like consumer durables. This is not an
important factor for FMCG. EX: Ramlal may see whether LG has a service centre
nearby, in the event of the product needing servicing.
 2.5 Rural Marketing Strategy:

Introduction:
The stagnation in the urban markets, cutthroat competition and shrinking product
life cycles are forcing marketers to go rural. Pioneer marketers used an insensitive
approach to their advantage. They took the urban brand, tweaked the product a wee-bit,
extended the brand to low-unit packs, modified the packaging marginally, took the urban
advertisement and dubbed it in the vernacular. That was the way rural marketing was
done.
A more sensitive approach has to be adopted to succeed in the rural markets. The
conservative approach resulted in huge losses and erasing of brands completely from the
rural landscape e.g. LUX shampoo and POLAR fans. New rules have to be framed to
succeed in the rural markets. It’s a bit like handling a honeycomb; you want to take out
the honey, but you don’t want to be stung by the bees!
Let us see how a company can adopt a rural marketing strategy that achieves the
desired results. A company entering the rural markets will do it as:
 A new entrant: A company starts its life in markets and then ventures
in the urban areas. For example, CavinCare and Asian Paints
 A mid-entrant: An organization will enter the rural markets after
tasting success in urban markets. These companies seek to earn
around fifty percent of their revenue from the rural markets. For
example, HLL and LG.
 The late entrant: Companies in this category will enter the rural
markets with a lot of skepticism. After being successful in the urban
markets for a long tine, they finally decide to enter rural markets. For
example Cadbury and Nestle.

A company has to decide when it wants to enter the rural market.

Basically a company will enter the rural market for the following reasons:
 To look for new markets.
 To expand existing markets.
 To increase potential customers.
 To sustain profitability and increase market share.

The rural marketing strategy involves three stages:

I. The Planning Stage
II. The Execution and Implementation Stage
III. The Feed Back Stage
 Rural Marketing Strategy:

Planning Stage

Profile of Rural
Market

Segmentation,
Profile of Rural
Targeting &
Consumer
Positioning

Study Consumer
Behavior

Execution and Implementation Stage

Rural Product
Rural
Communication Rural Pricing

Rural Sales
Force Rural
Management Distribution

Feedback Stage

Monitor the Rural

Strategy

Feedback
&Control
 Chapter.3 Rural Distribution Network

3.1 Introduction
3.2 Functions of Rural distribution
3.3 Strategies of Rural Distribution
3.4 Statement of the Problem of Rural Marketing

Rural Distribution Network

3.1 Introduction:

 Rural distribution is considered as a nightmare because of the 6-lakh odd villages

spread across the country.
 To make it easier, one needs to ask from where rural consumers buy. In the case of
durables, 90% is purchased from towns with a population of 20,000 plus.
 The situation with FMCG is more complex but not insurmountable.
 Direct supply to the 20,000 plus population feeder towns should be quite sufficient, as
each distributor would, in turn, have supply networks of 100-plus outlets in 50-odd
locations, which can cover all villages up to the 2000-plus population category.

3.2 Function of Rural Distribution:

Rural Distribution Network can be divided into two categories:

RURAL DISTRIBUTION

PHYSICAL CHANNELS OF
DISTRIBUTION DISTRIBUTION

Multiple tiers

Non-availability of dealers

Poor viability of retail

Outlets

Inadequate Bank Facilities

Inadequate Credit Facilities

1) Physical distribution: Physical distribution is the process of delivering products to

the marketing channels and consumers. It encompasses the various activities
involved in the physical flow of the product, from the manufacturer to the
consumer. The following diagram illustrates the various processes of physical
distribution:

Transportation

Communication
 Warehousing

Transportation: The transportation infrastructure remains underdeveloped in

rural India. Although India has the fourth largest railway network in the world,
many parts of rural India remain outside its reach. As regards road transport, nearly
50% of the 6 lakh-odd villages do not have all-weather roads. Waterways are an
easy transport option in state like Kerala, Jammu and Kashmir. Many cos. use
animal carts to carry their goods. There are around 2 lakh mobile cycles traders in
rural India that are penetrating rural markets and thee mobile traders are of immense
help.
Communication: Communication plays a pivotal role in distribution for rural
markets. Lack of proper facilities like telephones, postal devices, Internet etc. in
rural areas poses lots of problems to marketers in servicing their retailers.
Companies are using Internet as a communication tool and are harnessing the power
of Internet in rural areas. It provides e-mail services in vernacular languages.
Warehousing: Companies find it difficult to suitable godowns in many parts of
rural India. There are no public warehousing facilities in the interiors of rural India.

CWS/
SWCs Three-tier rural
Warehousing
Set-up

CO-OPERATIVES

RURAL GODOWNS

At the apex level, Central warehousing corporation (CWC) and State

warehousing corporations (SWCs) do not provide their services beyond the district level.
They reach only up to the nodal points or major markets centers. In the middle tiers are
the co-operatives at the mandi level. Then there are rural godowns, which are owned by
panchayat heads. All these provide warehousing facilities only to their own members. As
a result it is a big problem for a company to store its goods in rural areas. Companies like
HLL and ITC have feet of delivery vans for rural distribution. It is better for companies
to have their own mobile warehouses rather than to depend on central godowns. Thereby
they can save the cost of constructing warehouses of their own.

2) Channels of distribution: Channels play a pivotal role in marketing by performing a

number of vital distribution functions. Firms rely on marketing channels to
generate customer satisfaction and to achieve differentiation over the competition.
Channels are thus a vital source of competitive advantage for the firm. The
following are some problems of rural channels of distribution:
(a) Multiple Tiers, Higher Costs and Administrative problems: In the first
place, the rural distribution chain requires a larger number of tiers, compared to
the urban one. The long distances to be covered from the product points and the
scattered locations of the consuming households cause this situation. At the
minimum, the rural distribution chain needs the village-level shopkeeper, the
mandi-level distributor and the wholesaler/ stockist in the town. And on top of
them are the manufacturers’ own warehouses/branch office operations at selected
centers in the marketing territory. Such multiple tiers and scattered outfits push up
costs and make channel management a major problem. It becomes expensive as
well as unmanageable.
(b) Non-Availability of Dealers: Another problem is the availability of
dealers. Many firms find that there are a limited number of suitable dealers. Even
if the firm is willing to start from scratch and try out rank new comers, the choice
of candidates is really limited.
(c) Poor Viability of retail outlets: Retail sales outlets in the rural markets
suffer from poor viability. A familiar paradox in rural distribution is that the
manufacturer incurs additional expenses on distribution; still the retail outlets find
that the business is unremunerative. The scattered nature of the market and the
multiplicity of the tiers in the chain use up the additional funds. Moreover, the
business volume is not enough to sustain the profitability of all the groups and the
retail outlet suffers the most.
(d) Inadequate Bank Facilities: Distribution in rural markets is also
handicapped due to lack of adequate banking and credit facilities. Rural outlets
need banking support for three important purposes:
• To facilitate remittances to principals and to get fast replenishment of
stocks.
• To receive supplies ‘through bank’ (retiring documents with the bank)
• To facilitate credit from banks.
As banking facilities are inadequate in rural areas, rural dealers are
handicapped in all these aspects. It is estimated that there is only one bank branch
for every fifth village.
(e) Inadequate credit facilities: Inadequacy of institutional/ Bank credit is another
constraint. Rural outlets are unable to carry adequate stocks due to lack of credit
facilities. Thus there is a vicious circle of lack of credit facilities leading to
adequate stocking and loss of business, finally resulting in poor viability of
 outlets. In order to tackle the problem of channels of distribution effectively, a
marketer needs to implement the following strategies: -
• Relying on private village shops- For a large variety of consumer
products, private shops are the main channels in the rural markets. They are also the
cheapest and the most convenient channel to align with. Considering the many
constraints that the village shopkeeper in India has to operate under. He is forced to deal
in a large number of products in order to make his operations viable.
• Satellite distribution- The concept of satellite distribution is strongly
recommended to penetrate the rural market. Stockists are appointed in major towns and
feeder towns. They, by and large, discharge the following functions: financing,
warehousing, sub- distribution. Depending on the size of the stockists and the product
line, these functions are performed with varying degrees of competence. They function as
authorized retailers or franchised dealers of the company and are recognized officially as
forming part of the company’s marketing network, operating through the stockists. The
manufacturer supplies goods to the stockists either on a consignment or on cash or a
credit purchase basis. The stockists take care of distribution on the terms and conditions
determined by the manufacturer or agreed upon by the parties. The volume of business
done by the retailers vary, partly because of their location and partly because of their own
capacity for doing business.

Hubs and Spokes Model:

Please turn over

HUBS AND SPOKES MODEL:

 S
1 S
2

A2

S S
4 3 S
2 S
3
S
1 S
2 Whol
esaler A3
town

A1 S
1 S
S 4
4
S S
3 S 2
1
A4
S
S 3
4

A1-A4 semi-wholesale S1-S4 satellite markets

This process continues as long as the market and consumption level keep
expending and the supply also catches up. At any point of time, a certain number of
retail points always hover round particular stockists. Hence the system is known as
the ‘satellite distribution system’. The advantage of this system is that market
penetration takes place in the interiors of rural markets without the manufacturer
having to expand his direct stock point network.
• Syndicated distribution- channels of distribution are a major problem for
a new company targeting the rural market for the first time. The biggest problem a new
company faces is that there to many levels in the channels (multiple-tier), and setting up a
distribution channel for rural markets is a costly proposition. Coca-cola India purchased
by the Parle brands (thumbs up, Limca, etc.) for Rs.550 crores in 1993 mainly to use
Parle’s existing distribution network. But small companies cannot afford to buy another
company for distribution. The solution for small companies is to tie up with a leading
company the already has a presence in the rural market to distribute products through its
distribution network. The golden rule is the small companies should not deal in the same
product that the leading company sells. A successful model of syndicated distribution is
P&G using the rural distribution network of Marico to sell Ariel, Tide, etc. in the initial
stages, Cavincare uses distribution network of Amrutanjan Pain Balm for its Chik
Shampoo.

3.3 Strategies of Rural Distribution:

Strategies of Rural
Distribution

Integrated Combining Rural National &

Marketing IN & OUT Supermarkets Regional Chain
Outlets operations Stores

3.4 Statement of the Problem of Rural Marketing:

Although the rural market offer a vast potential but we cannot forget to
recognize the fact that it is not easy to operate there. Rural marketing is a time consuming
affair and requires considerable investments in terms of evolving appropriate strategies.
The major problems faced by companies targeting rural markets are:

1) Deprived People and Deprived Markets:

 Rural people are tradition-bound and fatalistic.
 They strongly believe in old customs, traditions, habits, taboos and practices.
 They also face significant deprivation of basic human needs.

2) Lack of Proper Physical Communication Facilities:

 Communication with these villages is difficult and highly expensive.
 Moreover 300,000 villages in the country have no access to telephones.
 Even today, most villages are inaccessible during the monsoons.

3) Transport:
 Many rural areas are not connected by rail transport.
 At least 50% of the roads are poorly surfaced, some are totally destroyed and many
are severely damaged due to monsoons and lack of servicing during years.
 This lead to isolation of the interior villages. And the use of bullock carts looks
inevitable for many years into the future.

4) Many Languages and Dialects:

 The number of languages and dialects vary widely from state to state, region to
region, and probably from district to district.
 It is difficult for marketers to design promotional strategies in different languages and
local dialects.
 These rural areas also lack telecommunication facilities adding to the problems faced
by the marketers in the distribution of goods and services.

5) Dispersed Markets:
 Rural populations are scattered over a large land area and it is almost impossible to
ensure the availability of a brand all over the country.
 Rural buyers aren’t concentrated unlike urban buyers.
 Advertising in such a highly heterogeneous market, which is widely spread, is very
expensive.

6) Low Per Capita Income:

 Even though 26% of GDP is generated in rural areas, it is shared by 76% of the
population.
 So, per capita incomes are low. Moreover demand for goods in rural markets depends
upon the agricultural situation, which depends upon the monsoon to a large extent.
 Therefore demand is not stable or regular.

7) Low Levels of Literacy:

 Literacy rates are low in rural areas compared to urban areas.
 This lead to the problem of communication.
 The print medium is ineffective in rural areas since its reach is poor.

8) Prevalence of Spurious Brands and Seasonal Demand:

 For any branded product there are a multitude of ‘local variants’, which are cheaper
and therefore more desirable for villagers.
 Rural people are cautious about there buying decisions.
 They like to give a product a trial, and buy it again only after getting personal
satisfaction.

9) Different Way of Thinking:

 There is a vast difference in the lifestyles of rural and urban people.
 An urban customer is given many more choices than his rural counterpart.
 A rural customer has two to three brands to choose from, whereas an urban
counterpart has more choices. It’s only a difference in the way of thinking.
 The rural customer lives fairly simply as compared to his urban counterpart.
 Life in rural areas is still governed by customs and traditions and people do not easily
adopt new practices.
 10) Distribution Problem:
 Effective distribution requires a village-level shopkeeper, mandi/ taluka-level
wholesaler or preferred dealer, a distributor or stockist at the district level and a
company owned depot or consignment distribution at the state level.
 So many tiers increase the cost of distribution.
 There are more macro-level concerns about purchasing power parity, per capita
household expenditure and regional and cultural variances.
 These all problems taken together make up the great hurdle that one can ill-afford to
either ignore or take for granted.
 Infrastructure also poses a major problem when a marketer thinks of targeting rural
markets.

11) Narrow Consumption Basket:

 According to NCAER’s India Market Demographics Report, 1998, almost 55% of the
FMCG produced in the country were consumed by the villagers between 1992-1993
and 1997-1998, with annual average growth rate of 14%.
 These figures are estimated on a narrow consumption basket of about 20 most
expendable goods and do not signify either the potential size of the market nor the
dynamics of the product preferences and life cycles.
 Chapter.4 A Brief Profile of Hindustan Lever Limited

4.1 Introduction
4.2 Present Scenario
4.3 HLL’s Initiative in Corporate Social Responsibility
4.4 Introduction to SHAKTI
4.5 Expectations of Shakti in Future

A Brief Profile of Hindustan Lever Limited (HLL)

4.1 Introduction:

Hindustan Lever Limited (HLL) is India's largest fast moving consumer

goods company, with leadership in Home & Personal Care Products and Foods &
Beverages. HLL's brands spread across 20 distinct consumer categories, touch the lives
of two out of three Indians. They endow the company with a scale of combined volumes
of about 4 million tonnes and sales of Rs.10,000 crores.

The mission that inspires HLL's 36,000 employees, including about 1,350
managers, is to "add vitality to life".

With 35 Power Brands, HLL meets everyday needs for nutrition, hygiene, and
personal care with brands that help people feel good, look good and get more out of life.
HLL’s parent company, Unilever, holds 51.55% of the equity. A Fortune 500
transnational, Unilever sells Foods and Home and Personal Care brands in about 100
countries worldwide. The rest of the share holding is distributed among 3,80,000
individual shareholders and financial institutions.

HLL is India's largest marketer of Soaps, Detergents and Home Care

products. It has the country’s largest Personal Products business, leading in Shampoos,
Skin Care Products, Colour Cosmetics and Deodorants. HLL is also the market leader in
Tea, Processed Coffee, branded Wheat Flour, Tomato Products, and Ice cream, Soups,
Jams and Squashes. HLL is also one of the country's biggest exporters and has been
recognized as a Golden Super Star Trading House by the Government of India; it is a net
foreign exchange earner. HLL is India's largest exporter of branded fast moving
consumer goods. HLL is also driving exports in chosen areas where India has a
competitive advantage – Marine Products, Basmati Rice, Castor Oil and its Derivatives.
It is India's largest exporter of Marine products, and one of the largest global players in
castor.

4.2 Present Scenario:

 Largest FMCG Company: Hindustan Lever Limited (HLL) is India's largest Fast
Moving Consumer Goods Company, touching the lives of two out of three Indians
with over 20 distinct categories in Home & Personal Care Products and Foods &
Beverages. They endow the company with a scale of combined volumes of about 4
million tonnes and sales of Rs.10,000 crores. HLL is also one of the country's largest
exporters. The Government of India has recognized it as a Golden Super Star Trading
House.
 HLL's brands: HLL’s major brands like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair
& Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond,
Kissan, Knorr-Annapurna, and Kwality Wall's – are household names across the
country. They span many categories - soaps, detergents, personal products, tea,
coffee, branded staples, ice cream and culinary products.
 Factories: They are manufactured in close to 80 factories. The operations involve
over 2,000 suppliers and associates.
 HLL's distribution network: It comprises of about 7,000 redistribution stockists, and it
directly covers the entire urban population, and about 250 million rural consumers.
HLL’s distribution network is recognized as one of its key strengths which helps
reach out its products across the length and breadth of this vast country. The need for
a strong distribution network is imperative, since HLL’s corporate purpose is “to
meet the everyday needs of people everywhere.”
 Technologies: HLL has traditionally been a company, which incorporates latest
technology in all its operations. The Hindustan Lever Research Center (HLRC) was
set up in 1958, and now has facilities in Mumbai and Bangalore. HLRC and the
Global Technology Centers in India have over 200 highly qualified scientists and
technologists, many with post-doctoral experience acquired in the US and Europe.
 Social Services: HLL believes that an organization’s worth is also in the service it
renders to the community. HLL is focusing on health & hygiene education, women
empowerment, and water management. It is also involved in education and
rehabilitation of special or underprivileged children, care for the destitute and HIV-
positive, and rural development. HLL has also responded in case of national
calamities / adversities and contributes through various welfare measures, most recent
being the village built by HLL in earthquake affected Gujarat, and relief &
rehabilitation after the Tsunami caused devastation in South India.
 Over the last three years the company has embarked on an ambitious programme,
Shakti.
 Through Shakti, HLL is creating micro-enterprise opportunities for rural women,
thereby improving their livelihood and the standard of living in rural communities.
 Shakti also includes health and hygiene education through the Shakti Vani
Programme, and creating access to relevant information through the I-Shakti
community portal.
 The programme now covers about 50,000 villages in 12 states. HLL's vision is to take
this programme to 100,000 villages impacting the lives of over a 100 million rural
Indians.
 HLL is also running a rural health programme – Lifebuoy Swasthya Chetana. The
programme endeavors to induce adoption of hygienic practices among rural Indians.
 It has already touched 70 million people in approximately 15000 villages of 8 states.
The vision is to make a billion Indians feel safe and secure.
 If Hindustan Lever straddles the Indian corporate world, it is because of being single-
minded in identifying itself with Indian aspirations and needs in every walk of life.
 And they prove it by the latest redesign done for the HLL brands LUX and Wheel:

HLL’s brands redesign:

 India’s two most popular FMCG brands got a makeover recently. HLL roped in
ELEPHANT DESIGN, a Pune based design house for the redesign strategy.
 One of them is Rs. 7500 crores-toilet soap LUX, which was redesigned for market
abroad.
 And the second one being Rs. 1000 crores detergent brand WHEEL for which all
aspects of redesign – its logo, new packaging and promotional material was done by
Elephant Design for the Indian market.
 The brief for both the brands was to make them look fresh and contemporary while
maintaining their emotional connect with the user.
 The design revamp is expected to provide a fresh impact of the FMCG giant in the
face of rigid competition in foreign and domestic markets.
 The challenge for WHEEL was to make the brand look fresher, slicker and yet reflect
its image as a value for money soap.
 The objective of redesign was to convey that an improved product was available at
the old price.
 In Wheel’s white powder now added was the Lemon-fresh “power boosters”.
 Redesigning of logo was done to make it look more meaningful and with the use of
more colours in the logo, Elephant tried to make it look more dynamic, fresh and
premium.
 The smarter green wheel on the pack creates play of dimensions; illustration on the
backside of the pack has been made in a fresh style.
 The images and expressions on the pack communicate the feeling of a good wash,
enhanced fragrance and a premium look. This all adds to the overall effect of the
revamped “WHEEL”.

Product Mix:
 HLL

Home & Personal car Food & Beverages

Personal wash: oral care: Foods:

Lux Pepsodent Kwality walls
Lifebuoy Close-up
Liril
Hamam
Breeze Beverages:
Dove Tea: Coffee:
Peers Brook bond Bru
Rexona Lipton
3 Roses tea
Hair care: Colour cosmetics: A1 tea
Sunsilk naturals Lakme
Clinic plus
Nihar

Skin care: Ayurvedic personal &

Fair & lovely health care:
Ponds Ayush

Laundry:
Surf excel
Rin
Wheel

4.3 HLL’s initiative in Corporate Social Responsibility:

 Corporate Social Responsibility (CSR) in Hindustan Lever Limited (HLL) is rooted

in its Corporate Purpose - the belief that "to succeed requires the highest standards of
corporate behavior towards our employees, consumers and the societies and world in
which we live".
 HLL's CSR philosophy is embedded in its commitment to all stakeholders -
consumers, employees, the environment and the society that the organization operates
in.
 HLL believes that it is this commitment, which will deliver sustainable, profitable
growth.
 HLL's key CSR initiatives are undertaken with a long-term view. Initiatives that are
sustainable have long-term benefits and an ongoing business purpose.
 As early as in the 1950s, HLL focused on import substitution when balance of
payments was an issue.
 Since the 1980s, most of HLL's investments have been in designated backward areas
and zero-industry districts, spreading industrialization.
 HLL has revived sick industries and has developed local entrepreneurship.
 HLL is also involved in a number of community support activities, like education and
rehabilitation of special or underprivileged children, care for the destitute and HIV-
positive, and rural development.
 In recognition of these initiatives, HLL received the prestigious TERI-CSR Special
Award for the year 2002-03 from “The Energy and Resources Institute (TERI)”,
which was established in 1974.
 TERI is world famous for its commitment to and initiatives in every aspect of
sustainable development.

HLL is also a socially responsible company in running programmes for the sake of the
society, namely:

 Greening barrens
 Shakti
 Lifebuoy swasthya chetana
 Fair & lovely foundation
 Happy homes
 Yashodadham

4.4 Introduction to Shakti:

 Hindustan Lever Limited’s (HLL’s) rural self-help group initiative to push the
penetration of its products deeper has paid off.
 In terms of contribution to HLL’s rural sales, 10% -- 15% comes from this initiative,
which was launched two years back. The rural market constitutes over 40% of HLL’s
total sales of about Rs.10,000 crores.
 In terms of incremental gains, the company now reaches out to around 10,000
villages. In general, rural women in India were underprivileged and required a
sustainable source of income.
 NGO’s (Non-Government Organization), governmental bodies and other institutions
have been working to improve the status of rural women.
 “SHAKTI” is a pioneering effort in creating livelihoods for rural women, organized
in Self-Help Groups (SHGs), and improving living standards in rural India.
 Shakti provides critically needed additional income to these women and their
families, by equipping and training them to become an extended arm of the
company's operation.
 Started in 2001, Shakti has already been extended to about 50,000 villages in 12
states - Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Tamil Nadu,
Chattisgarh, Uttar Pradesh, Orissa, Punjab, Rajasthan, Maharashtra and West Bengal.
 The respective state governments and several NGOs are actively involved in
supporting the rural initiative of HLL.
 Shakti already has about 13,000 women entrepreneurs in its fold.
 A typical Shakti entrepreneur earns a sustainable income of about Rs.700 -Rs.1,000
per month, which is double their average household income.
 Shakti is thus creating opportunities for rural women to live in improved conditions
and with dignity.
 In addition, it involves health and hygiene programmes, which help to improve the
standard of living of the rural community.
 Shakti's ambit already covers about 15 million rural population. Plans are also being
drawn up to bring in partners involved in agriculture, health, insurance and education
to catalyze overall rural development.
 Shakti Vani is a social communication programme where women are trained in health
and hygiene issues; village communities are addressed through meetings at schools,
village baithaks, SHG meetings and other social fora.
 In 2004, Shakti Vani has covered 10,000 villages in Madhya Pradesh, Chattisgarh and
Karnataka.

HLL has formulated a strategy for rural markets known as ‘Operation Bharat’.

OPERATION BHARAT – HLL’s Rural Product strategy:

 HLL launched “Operation Bharat” in the year 1997to create brand awareness for its
rural brands.
 The strategy also involved promoting the sales of its special packs for rural areas.
 HLL provided hampers at discounted prices of Rs. 5, Rs. 10, Rs. 15 and Rs. 20, each
of which had a clinic shampoo bottle, a tube each of Pepsodent and Fair & Lovely,
and Pond’s Dream flower Talc, in different sizes and combinations.
 The idea behind this is to have a product each for hair care, dental care, skin care and
body care.
 Consumers were also made aware of the benefits of using HLL products, and the
affordability of the pack sizes on offer.
 The project thus successfully addressed issues of awareness, attitudes and habits.
 Hopefully, as consumers in rural areas get exposed to such value-added, value-for-
money, alternatives, they will continue to buy the different categories of products.
 Operation Bharat is now targeting 65,000 villages and the strategy has proved to be
successful for HLL.
 Its long-term strategy is to target 1.5 lakhs villages by the year 2005.

4.5 Expectation of Shakti in Future:

 An organization, which successfully stands the test of time, is one that transforms
itself in line with changes in the environment.
 Hindustan Lever’s continued success in India over the past 75 years is marked by
conscious transformations, building on the past and reshaping for the future.
 In Foods, they see enormous growth potentially in leading the evolution of consumers
to branded and processed foods.
 Over the last few years they have focused on putting in place the building blocks of a
strong Foods business.
 They recognized that changing food habits would require considerable investment,
which the current business simply could not afford. Therefore they divested the non-
value added parts like Vanaspati.
 They have consolidated their portfolio and improved the gross margins by over 13%
through product mix and cost reduction.
 They have also cleared the supply chain of all old stock and geared up for fresh
availability on shelf. The foods business will now invest for growth through relevant
innovation.
 Over the next 10 years, per capita income in India is likely to touch China’s current
levels. At those levels, the FMCG market will be over Rs. 1,00,000 crores from a
current value of Rs. 40,000 crores. This is an opportunity that they well poised to
seize.
 They choose to focus on 35 power brands covering all consumer appeal and price
segments. They are already seeing the benefits; six brands – Brooke bond, Lifebuoy,
Lux, Fair & Lovely, Rin and Wheel – have emerged as mega brands in the last five
years, each with sales of more than Rs. 500 crores.
 Perhaps the most significant change has been to move their brands beyond merely
making functional claims to playing a bigger and deeper role in the lives of
consumers.
 Today lifebuoy, their oldest brand, has grown at over 15% for the last three years.
 They have strengthened this and reinvented the way they manage their distribution
channels and customers.
 The sales structure has been transformed to leverage scale and build expertise in
servicing Modern Trade and Rural Markets.
 They have also delayered their sales force to improve their response times and service
levels.
 It has been extended to 60,000 villages in 12 states, already touching 75 million
people. By the end of the year, Shakti will cover 100 million people.
 To ensure that HLL remains competitive in the long-term, they have made significant
investments in product quality, pricing and marketing.
 As mentioned earlier, the investment in product quality alone has been in excess of
Rs. 4000 crores, or 5% of their sales.
 In addition there is a cost of defending their market position.
 They have made this trade-off necessary that market share is the best means of
sustaining future profits.
 Over time their stronger market positions will surely lead to greater long-term profit.
 Despite these significant investments to strength the long-term competitiveness and
the costs of defending there strong market position, they still remain one of the most
profitable companies in the country.
 HLL's vision for Shakti is to scale it up across the country, covering 100,000 villages
and touching the lives of 100 million rural consumers.
 Given the success of the initiative, the company is now planning to expand Project
Shakti in 400 districts by 2006.
 HLL will cover 100 districts through Project Shakti by the end of this calendar year.
 I-Shakti, the Internet-based rural information service, has been launched in Andhra
Pradesh, in association with the Andhra Pradesh Government's ‘Rajiv Internet Village
Programme’.
 The service is now available in Nalgonda, Vishakapatnam, West Godavari and East
Godavari districts.
 I-Shakti has been developed to provide information and services to meet rural needs
in medical health and hygiene, agriculture, animal husbandry, education, vocational
training and employment and women's empowerment.
 The vision is to have 3,500 kiosks across the state. HLL want to spread the use of
Internet through I-Shakti not only in Andhra Pradesh but also throughout India.
 Chapter.5 A Case Study on HLL’s Project Shakti

5.1 Introduction to Shakti

5.2 The Objectives of Shakti
5.3 The Idea of Shakti to Achieve
5.4 The Motto of the Shakti Sandesh
5.5 Business Activity of Shakti
5.6 Achievement Model of Project Shakti
5.7 The Reasons for Shakti to Start
5.8 Shakti – The Present Scenario
5.9 The Ways of Development: I-Shakti
5.10 The Expectations of Market towards Project Shakti
5.11 Channel of distribution used by HLL
 A Case Study on HLL’s Project Shakti

5.1 Introduction to Shakti:

 Hindustan Lever Limited (HLL) and its constituent companies have been in India
since 1931.
 Over these decades, while HLL has benefited from the developments in the country,
it has contributed equally to these developments.
 HLL has consciously woven India's imperatives with the company's strategies and
operations.
 The company’s main contributions include developing and using relevant
technologies, stimulating industrialization, boosting exports, adding value to
agriculture and generating productive employment and income opportunities.
 HLL has been proactively engaged in rural development since 1976 with the initiation
of the Integrated Rural Development Programme in the Etah district of Uttar Pradesh,
in tandem with the company’s dairy operations.
 This Programme now covers 500 villages in the district. Subsequently, the factories
that HLL continued establishing in less-developed regions of the country have been
engaged in similar programmes in adjacent villages.
 These factory- centered activities mainly focus on training farmers, animal
husbandry, generating alternative income, health, hygiene and infrastructure
development.
 The company has acquired a wealth of experience and learning from these activities.

 The principal issue in rural development is to create income-generating opportunities

for the rural population.
 Such initiatives are successful and sustainable when linked with the company’s core
business and is mutually beneficial to both the population for whom the programme is
intended and for the company.
 Based on these insights, HLL launched Project Shakti in the Year 2001, in keeping with
the purpose of integrating business interests with National interests.
5.2 The Objectives of Shakti:

• To create income- generating capabilities among underprivileged rural women by

providing a sustainable micro- enterprise opportunity for them.
• To improve rural living standards through health and hygiene education.

5.3 The Idea of Shakti to Achieve:

• Avail micro- credit from government/ banks/ loans for self help groups, and a
stable “income- generating activity” offered by HLL will stimulate wealth
creation in the village.
• Women from self- help groups to operate like rural direct-to-home sales
distributors for HLL products.

GOALS: 50,000 villages—25,000 Entrepreneurs by 2005

5.4 The Motto of Shakti Sandesh:

THINK BIG. START SMALL. MOVE

FAST.

5.5 Business Activity of Shakti:

 Year 2000 found Peddakaparthy village, in the Nalgonda district of Andhra Pradesh,
in the throes of a new revolution.
 A revolution propelled by a vision to better the lives of rural women and support
them in their move towards economic independence. It was the inception of Project
Shakti.
 Today, with over 5000 entrepreneurs, Project Shakti has traversed 130 districts in
eight states.
 A journey only made possible by our spirited entrepreneurs and the steadfast support
received from numerous individuals and organizations including NGOs and SHGs.
 Project Shakti remains indebted to them and is hopeful of their continued patronage
and support.
 They aspire to have 25,000 Shakti Entrepreneurs in their midst, covering 100,000
villages and reaching 100 million rural people, by year 2005.
 As they set forth, they earnestly hope that they have made several poignant struggles
easier towards a life of dignity.
  Typically, women from a SHG selected as a Shakti entrepreneur receives stocks at
her doorstep from the HLL rural distributor and sells direct to consumers as well as to
retailers in the village.
 To get started the Shakti women borrows from her SHG and the company itself
chooses only one person from SHG.
 Each Shakti entrepreneur services 6-10 villages in the population strata of 1000-2000
people.
 Some Shakti entrepreneur selling upwards of Rs.15000 a month worth of products
can make a gross profit of over Rs.1000 a month.
 Their attempt has been to educate rural consumers on the value they can derive from
an HLL product.

5.6 Achievement Model of Project Shakti:

A Win-Win Model:

Faster turnaround of money

Better repayment rates
Social Responsibility

Bank

Income/
Investment
Income Opportunity
Generating
Activities Govt. SE*
Education/
Awareness
Efficiency and
Productivity Access to urban
Markets and
Information

HLL

Corporate Social Responsibility

Better product reach
 *Shakti Entrepreneur

5.7 The Reasons for Shakti to Start:

 The objective of Project Shakti is to create income-generating capabilities for

underprivileged rural women, by providing a sustainable micro enterprise
opportunity.
 It also aims to improve rural living standards through health and hygiene awareness.
 Following the pioneering work carried out by Grameen Bank of Bangladesh, and
several other institutions, NGOs and government bodies have been working closely,
for nearly five years, to establish Self Help Groups (SHGs) of rural women in villages
across India.
 Their experiments clearly indicate that micro-credit, when carefully targeted and well
administered can alleviate poverty significantly.
 A crucial lesson learnt was that rural upliftment depended not on successful infusion
of credit, but on its guided usage for better investment opportunities.
 This is where HLL's Project Shakti is playing a role in creating such profitable micro
enterprise opportunities for rural women.

Catalyzing prosperity in Indian villages:

 Under the project, HLL offers a range of mass-market products to the SHGs, which
are relevant to rural customers.
 HLL is investing significantly in resources that work with the women on the field and
provide them with on-the-job training and support. This is a key factor in ensuring the
stabilization of their fledgling businesses.
 HLL imparts the necessary training to these groups on the basics of enterprise
management, which the women need to manage their enterprises.
 For the SHG women, this translates into a much-needed, sustainable income
contributing towards better living and prosperity.
 Armed with micro-credit, women from SHGs become direct-to-home distributors in
rural markets.

Risk-free micro enterprise that yields high returns:

 A typical Shakti entrepreneur conducts a steady business, which gives her an income
in excess of Rs.1,000 per month on a sustainable basis.
 As most of these women live below the poverty line, and hail from extremely small
villages (with populations of less than 2000), this earning is very significant, and
almost twice the amount of their previous household income.
 For most of these families, Project Shakti is enabling families to live with dignity,
with real freedom from want.
 In addition to money, there is a marked change in the woman's status within the
household, with a much greater say in decision-making.
 This results in better health and hygiene, education of the children, especially the girl
child, and an overall betterment in living standards.
 The most powerful aspect about this model is that it creates a win-win partnership
between HLL and the consumers, some of whom will depend on the organization for
their livelihood, and builds a self-sustaining cycle of growth for all.

5.8 Shakti – The Present Scenario:

 The model was piloted in Nalgonda district of Andhra Pradesh in 50 villages in the
year 2000.
 The Government of Andhra Pradesh took the pioneering step of supporting the
initiative by enabling linkages with the network of DWACRA Groups of rural women
set up for their development and self-employment.
 Most SHG women view Project Shakti as a powerful business proposition and are
keen participants in it.
 It has since been extended to in Andhra Pradesh, Karnataka, Gujarat, Madhya
Pradesh, Uttar Pradesh, Tamil Nadu, Chattisgarh and Orissa.
 As part of their training programme, all HLL Management Trainees spend about 4
weeks on Project Shakti in rural areas with NGOs or SHGs.
 Assignments include business process consulting for nascent enterprises engaged in
the manufacture of products such as spices and hosiery items.
 HLL envisions the creation of 25,000 Shakti Entrepreneurs covering 100,000
villages, and touching the lives of 100 million rural people by the year 2005.
 In order to achieve this goal, Project Shakti plans to extend to the states of West
Bengal, Punjab and Rajasthan in addition to expanding operations in the eight
existing states.
Product Mix:
HLL

Home & Personal care Food & Beverages

Personal wash: oral care: Foods:

Lux Pepsodent Kwality walls
Lifebuoy (Rs.1 candy)
Hamam
Breeze Beverages:
Tea:

3 Roses
A1 tea
Hair care: Colour cosmetics: Green label
Sunsilk naturals Elle 18
Clinic plus
Nihar

Skin care: Ayurvedic personal &

Fair & lovely health care:
Ayush
(New entry)
Laundry:
Surf excel
Rin
Green Wheel
5.9 The Ways of Development: I-Shakti:

 Hindustan Lever Ltd, which had launched an Internet-based rural information service
I-Shakti in Andhra Pradesh, expects to set up over 1,000 such kiosks by the end of the
year in the state.
 The company opened its 250th kiosk at Puttapaka village of Nalgonda district,
extending its services to Nalgonda, Visakhapatnam, West Godavari and East
Godavari districts.
 I-Shakti is an IT-based rural information service network that has been developed to
provide information and services to meet villagers' needs in medical, health and
hygiene, animal husbandry, agriculture, education and women's empowerment among
others.
 The programme is being rolled out in association with Andhra Pradesh's Rajiv
Internet Village Programme and it is an extension of HLL's Project Shakti.
 Meanwhile, the company was also planning to extend its reach of Project Shakti to
over 1,00,000 villages by 2005 from the present 20,000 villages in 196 districts of
Andhra Pradesh, Karnataka, Madhya Pradesh and Tamil Nadu among others.
 The scaling up will result in creating over 25,000 entrepreneurs and helping over 10
crores rural consumers.
 Project Shakti is aimed at creating incomes for under-privileged rural women by
providing a sustainable micro enterprise opportunity.

 A key factor that has inhibited the development of rural India has been lack of access
to critical information and services.
 Given India’s large geography and weak infrastructure, it is often difficult to reach
out to the rural areas.
 In order to impact both livelihood opportunities and living standards of rural
communities.
 ‘I-Shakti’- an IT-based rural information service has been developed to provide
information and services to meet rural needs in agriculture, education, vocational
training, health and hygiene.
 The premise of the I-Shakti model is to provide need based demand driven
information and services across a large variety of sectors that impact the daily
livelihood opportunities and living standards of the village community.
 The I-Shakti kiosk will be operated by the Shakti Entrepreneur, which further
strengthens the relationship we have already cultivated and builds new capacity.
 HLL expects that the information provided would improve the productivity of the
rural community and unlock economic and social progress.
 To catalyze overall rural development, HLL hopes to collaborate with mainstream
institutions (both corporate and not-for-profit organizations) that are experts in
agriculture, health, insurance, financial services and education.
 ‘I-Shakti’ kiosks have been set up in 8 villages in Andhra Pradesh, and have been
functional since August 2003.
 The kiosks have received an overwhelming response from the local populace.
 During the launch of these kiosks, important village members like the Sarpanch,
schoolteacher and doctor are invited to help reinforce relationships with the villagers.
 The kiosks remain open from 9 a.m. to 7 p.m., six days of the week. To enable access
to the services, users have to register themselves first and obtain the unique
registration number. An id card with the registration number is provided for use every
time they visit the kiosk.
 The information provided in the above areas is culled from the best available
resources, taking additional care to ensure that information, especially in areas like
agriculture, is locally relevant and includes inputs from home-grown experts.
 These experts are also available on request, to help provide solutions to problems
raised by users through a query mailing system.

A System running on Interactive dialogue:

 HLL uses a system running on interactive dialogue. Every area expert provides
content online to every satellite village. This is how Shakti entrepreneurs operate an I-
shakti kiosk.
 A farmer from the village can obtain a quick solution to a pest problem with his
crops.
 People can also send queries on health and hygiene to a local doctor for a speedy
response.
 Villagers can avail of discount coupons from the kiosk for medical treatment from
doctors operating in local areas.

This can be explained diagrammatically as:

 Please turnover:

 'I-shakti’ has also tied up with Azim Premji Foundation to deliver innovative
educational modules to students of classes VIII-XII through the kiosk. Local
schoolteachers have also been involved in the process.
 A similar partnership is in place with Tata Adult Literacy for adult education.
 Involving the locals, augments institutional knowledge with local expertise, that
greatly benefits the village community and provides them with a customized ‘web
space’ on subjects of immediate relevance.
 Information is updated on a regular basis and new sections are added.
 Feedback is sought from the users on the quality of content based on which,
improvisations have been made to satisfy user requirements.
 The system is based on an interactive dialogue technology developed & patented by
the Unilever Corporate Research Team, U.K.
 The system enables a deeper understanding of individual user needs and thereby
improves the quality of services rendered to them.
 Ogilvy Outreach and Interactive worked with HLL to develop the content for the
system, while Tessella provided key software development and support services.
 APonline, a joint venture between TCS and the Government of Andhra Pradesh,
which has the mandate to enable e-governance, services to both urban and rural
community, has tied up with I-Shakti to launch these services in rural Andhra
Pradesh.
 This is one of the first rural service delivery projects of APonline.
 The services include application forms for caste, nativity, income certificates,
agricultural grievances, and utility bill collection to name a few. Over fifty new
services will be added in the next six months.
 Through I-Shakti kiosks, ICICI Bank and HLL will work together to provide a new
delivery channel for rural India, which offers a multitude of products and services to
the rural customer.
 In the first phase, Life and General Insurance will be offered through this channel.
 Other financial services including Investment products (Equity, Mutual Funds,
Bonds) ICICI Bank Pure Gold (gold coins), Personal Credit, Rural Savings Accounts
and Remittances will be introduced subsequently.

5.10 The Expectations of Market towards Project Shakti:

 There are other plans brewing, one is to allow companies, which do not compete with
HLL to get onto the Shakti network to sell their products.
 Talks are on with a variety of companies selling batteries, mopeds and insurance
companies for LIC policies.
 They wanted to first stabilize the project before they can look at other companies.
 It requires somebody with scale and size to build a platform and then invite other
companies onto this platform.
 The most powerful aspect about this model is that it emphasizes in creating a win-
win partnership between HLL and its consumers, some of whom will also draw on
 the organizational for their livelihood, and it builds a self sustaining virtuous cycle of
growth for all.

 The next stage of project Shakti is even more ambitious. HLL is now in the process of
piloting “I- SHAKTI”, an IT- based rural information service that will provide
solutions to key rural needs in the areas of agriculture, education, vocational training,
health and hygiene.
 The project will be piloted in Nalgonda district again.
 Based on a hand held digital device, HLL is looking at sourcing appropriate low cost
hardware from Hewlett-packer while Unilever corporate research out of London is
developing the consumer interactivity software.
 Women in the rural areas are the catalyst of change and that is why its whole
programme keeps women in focus.
 It’s like popcorn in a machine; one burst at first and then everything begins popping.
Here too, one woman as an agent of change bursts into a movement and it is
strengthen.

5.11 Channel of Distribution used by HLL:

Generally most of the textbooks talk about the 4 level channel of distribution,
namely:
 Zero level
 One level
 Two level
 Three level

Zero level involves no middlemen, which can help companies to save upon cost.
The three level COD involves the following steps:
 Please turnover:

3 level COD:

Manufacturer

Level 1 Wholesaler

Stockist
Level 2

Retailer
Level 3

Consumer

The urban market uses this distribution channel. But in case of rural
markets, companies use a different COD, which is upto 4 levels, 6 levels or maximum, an
8 level channel. For this, we first need to understand the distance in the rural market.
 City

Project Harvest

District

Project Streamline
Village

Satellite Village

Project Shakti

Tribal Areas

Forest
 For example consider a city with a population of 20 million. To transport the goods
from city to the district, we have rail routes.
 So, we can put a warehouse at the district level. Now consider a district with a
population of around 10 lakhs EX: Ahmednagar.
 Suppose in Ahmednagar there are around 110 villages, which are accessible through
road transport. So, a warehouse can be put at a village also.
 Now take into account any village (ex: Saphale with a population of around 10,000).
 Villages are linked to satellite villages through kutcha roads. Ex: Nevasa with a
population of 2000.
 So, companies should either use bullock carts or bicycles for transport.
 Between satellite villages and tribal areas, there are only fields and the population of
tribal areas is around 200 only.
 Since there are no proper transportation facilities here, companies cannot put a
warehouse.
 Now, the only option left to reach satellite villages or tribal areas is on foot.
 So, what companies like HLL do is that they hire SHG’s to sell their products.
 Women in the SHG’s personally collect the products from the distributors in the
villages and sell it in their areas.
 Self Help Groups (SHG’s) is a group of 18-20 women coming together to market and
sell HLL’s FMCG brands. These women are known as Shakti Entrepreneurs.
 HLL have not created these SHG’s model. They only use it. Actually, these SHG’s
are MICRO CREDIT INSTITUTIONS employed by SAHARA group of companies.
This is the core business of Sahara industries.
 What HLL does is that from every SHG they select one woman as Shakti
Entrepreneur to be a representative of HLL in rural areas to sell HLL’s brands in and
around villages.
 MART (Marketing and Research Team) a private MR agency from Delhi provides
training to these SHG’s in marketing and selling products in rural areas.

Channel of Distribution adopted by HLL in Rural Markets (Project Shakti):

HLL’s clearing and
forwarding agent

RDS (Re-Distribution
Stockist)

MACTS (Mutually Aided Star sellers

MART (Marketing and Co-operative Thrift Society
Research Team)

SHG’s (Self Help Retailers

Groups)

Consumers
 Now lets see the link between the distribution system applied by HLL
and the distance in the rural markets:
It is actually the logistics management but it is known as “Channels of
Distribution”. The reason behind this can be explained diagrammatically: -

Transportation

Communication
Flow Logistics

Warehousing Supply Chain

Inventory Management

Logistics is divided into 3 parts: -

 Transportation
 Warehousing
 Supply Chain

But in case of rural markets, due to improper means of transportation there are no
warehousing facilities available in the satellite villages. That is why distribution in rural
areas is known as channels of distribution.
Link between COD and the distance in the rural markets:
The clearing and forwarding (C&F) agent is at the CITY level. There are around
3000 C&F agents in the city. Then comes the RDS, which is at District level. Further the
goods are either distributed through star sellers i.e. the distributors or the MACTS, which
is a co-operative society and both are at the village level. An MR agency “MART” assists
and trains the distributors in order to sell and market the goods. Lastly, is the distribution
in the satellite villages, which is either done by MACTS directly i.e. MACTS supply the
goods at satellite villages with the help of SHG’s and retailers.