Rural marketing

What is rural market?

Bulk of India population live in villages. With the increase in purchasing
power and the demand for wide variety of products by the farmers , the rural
market offers new and greater opportun8ities to manufactures of several
consumer and industrial products in India. But to tap this vast expanding market,
companies need to develop effective marketing and advertising strategies based
on their study and understanding of rural consumer behaviour.

What is the rural market in the Indian context?

There could be several approaches in defining the Indian rural market. It
will not be an exaggeration if the whole of India, excluding the metropolitan’s
cities, the various district headquarter and large Industrial Township, is
considered as the rural market. Alternately all villages with a population of less
than say, 40,000 or 50,000 can be considered as forming the rural market.

Definition of rural market (old definition)

Which is not urban
What is urban?
Urban means:
All locations with:
• Municipality
• Corporation
• Cantonment board or
• Notified town area
All other locations satisfying the criteria:
• Minimum population of 5,000
• At least 75% of the male work force engaged in non agricultural activities
• A population density over 400 per sq km

Rural market (new definition)

• One having population of less than 5,000
• 75% of male population engaged in agriculture
• 2/3 of a country’s consumer live in rural area
• 50% of national income is generated by the rural population

Country is classified in:

• 593 districts and 638000 villages
 • Out of the above 32% can be reached by paccka road
• 68% of rural market list untapped for net accessibility
• 3.8 million retail outlets in rural India averaging 5.8 shops per village
(including hats, stalls, snacks that sells A to Z goods)

Characteristics of rural market

The rural market of India consists of about 80% of the population of the
country. Apparently therefore, in term of the number of people, the Indian rural
market is almost twice as larger as the entire market of U.S.A or U.S.S.R. the
market is not only large, but very much scattered geographically. It is also as
diverged as it is scattered it exhibited linguistic, religion and cultural diversities
and economic disparities, and hence it can easily be considered as more
complex than the market of a continent as a whole.
The market is generally undeveloped as the people who constitute the
market are so. Poor standard of living, low per capital income and economic,
social and cultural backwardness are the characteristics of the market. The
literacy level is generally law even though this varies from one art of the country
to the other.
Another important feature of the rural market is that, at least in the present
contest, it is largely agricultural oriented.
Here again the much heard of “green revolution” and the resultant
prosperity is confined to a few select areas in the country. As a consequence, the
effective demand based for a large variety of consumer items as well as the
wealth generating inputs is confined to selected pockets and not spread over the
rural markets
Satellite system
A concept that has come to be none as satellite distribution system is
strongly recommended for adoption in penetrating the rural market. The system
works as follows:
Stokist get appointed in major towns and the feeder towns. They by and
large, discharge the following functions
(a) Financing
(b) Warehousing
(c) Sub-distribution
Depending on the size of the stockiest and the product line, the above functions
are performing various degrees of perfection.
Retailers in and around the feeder town get attached to these stokist.
In some cases they function as authories retailers or franchise dealers of the
company and are recognized officially as forming as part of the marketing
network operating through the stokist. In other cases, they are not franchised
dealers, but by custom form the part of the stockiest network.
The manufacturer supplies goods to the stockiest either on
consignment bases or on cash or credit purchase bases. Te stockiest take care
of the sub distribution job on the terms and conditions determined by the
manufacturer or agreed upon by the parties. Often the stockiest operate their
own delivery van to take care of the secondary transport and local delivery jobs.
They are fully responsible for the financial implications.
The retailers vary largely among themselves in their volume of
business, partly because of their location and partly because of their own
capacities for doing business. Over a period of time some retailers grow in
stature and impo5rtance. If such retail points also coincide with centers of
demand and transportation within the feeder town area the retail points get
elevated at the appropriate as stockiest [points. The area of operation of the
original stockiest ofcource shrinks on account of this but care is taken to see that
his volume of business does not shrink. This is achieved with considerable ease,
in practice, on account of the ever-enlarging demand as well as increased market
penetration. If 15 or 20 retailers were operating as part of the original stockiest
network, 5 or 6 of them get elevated over the period of time as stockiest. Fresh
retail points get established simultaneously, out of whom some get attached to
the original stockiest and others to new stockiest depending on location, service
convenience and other factors.
This process continues so long as the market and consumption level
keeps expanding and the supply also catches up. Just like the second generation
stockiest, a set of third generation stockiest gets established with the passage of
time. At any point of time enough number of retail points always hover round a
particular stockiest. Hence the system is known as the satellite distribution
system. The satellites can have their own satellite too!
The main advantage of this system is that market penetration takes
place in the interior so the rural market without the manufacturer having to
expand his direct stock point network. If care is taken to see that the motivation
of the stockiest is not destroyed due to overzealous and premature expansion of
the network, the system will indeed bring ample rewards in terms of increased
sales and laser distribution cost.
 About the survey
Summary
Our group of 7 students went to vasai road (east) to conduct a survey
on the baby products used in rural area named as gokhivare. This area is
situated nearly about 20 km from the railway station. The people here are
not much literate, there are at least 25% of the population literacy, hence
there is much scope for penetrating into this area for the companies by
proper marketing and pricing strategies. This village is further divided into 7
different parts. These villages are as follows:

1. Khalchi ali
2. Shinde ali
3. Baudhwada
4. Bhatpada
5. Devipada
6. Lagipada
7. VINAY.
And many other minute huts
The data and other information for the project were collected from this
area. In this project we would try to show that how the people of these rural
villages spend their life. Other queries covered under this project are:

• What are the products used for small child under the age group of 1-5
years?

• Which are the companies (local/branded) that have penetrated into

the rural area for sale of their products?

• What are the marketing strategies adopted for the promotion of such
products?

• What are the prices and quantity of their products?

• How do people choose to use a particular product?

The people and children
90% of the people are below poverty line. Their poverty is such that
they cannot even fulfill their basic necessities like food, clothing and shelter. The
situation is very bad and needs much improvement. They live in huts given on
rental basis from 500-1000.The people of this village do jobs like running
rickshaws, labour work etc to feed their family every day. The monthly income of
the people here are around 100-400 Rs. Per month. Hence their purchasing
power is also very low. The common man’s main income depends on agriculture
as it is seasonal and depends only on monsoons. The crop grown in this area is
mainly rice. Some of the families have animals like cow, buffaloes whose milk is
sold and income is earned. About 75% of the families are below poverty line and
cannot met their day-to-day bread.
Around 76% of the children are born at their homes itself, as they
don’t have the capacity to pay hospitalities. Special lady (dai) does the delivery of
the child. Another reason is that hospitals are far away and the roads are not
proper.
PRODUCTS
The people here are illiterate and hence they don’t have the proper
knowledge of which product to be used and which not, they just go for the
product which the neighbors use or a educated person recommends them. Only
few people go to the doctor for the product recommendation. Mostly the people
go for the price which suits them i.e. they purchase the product which have fewer
prices. The products purchased by them lasts for almost 1.5 weeks to 3 weeks.
The different products used as per our survey are:
Products brand no of people using

Soap
Johnson & Johnson J&J 88
Wipro Wipro 28
Hamam HLL 20
Lux HLL 14
Lifebuoy HLL 18
Jo local 22
Naam local 34

OIL
Parachute 72
Coco care 28
Dabur lal tel 40
Rai tel 16
Purnima local 58
Parasun local 30

POWDER
J&J 88
Ponds 80
Red rose 16
Santoor 12

GRIPE WATER
Sishuwin 24
Wood words 44
KAJAL
Jai 136
Home made

FOOD
Home made 128
Cerelac 10
Farex 6
Milk & Parle G 64
Mother Milk 20
Package Food 12

Competition (product wise)

There are many companies who have penetrated this rural market such as
HLL, WIPRO, J&J etc. the competition is very sever and many more companies
are trying to penetrate this rural market such as PONDS, PARLE-G etc. all the
companies are interested to attract the rural consumer and obtain monopoly in
the market. There are marketing strategies as well as pricing strategies to sell
their product. HLL is the leading baby product seller in the rural area but J&J
Company is also concentrating in this area as they see that there is much scope
for their product.

SOAP: The competition is very high in soap products as many companies have
come up with this product and gained success in attracting the customers. There
is a high time for HLL and WIPRO as there are many local brands available in
the rural market. Johnson and Johnson leads the market as their marketing and
pricing strategies are very well planned, which has attracted the customers. The
capacity of the people here to spend money is very low and hence they mostly
opt for low priced items. Single soap is used for at least 2-3 months. The people
prefer NAAM the local brand manufactured in the rural area as they are the
workers in the factory and know well about the product.

OIL: Non-brand/local manufacturer captures the oil market. The sellers

sometimes force the customers to buy the local brand. Many a times the price of
the local brand is quite low and the customers get attracted towards local brand.
Local brands such as PRABHAT, PARASUN, INDO, PANCHATANTRA has
captured 33% of the total market. The PARACHUTE brand of is on the 2nd
position and has captured 30% of the market. The people here know that
DABUR LAL TEL is very good for the babies but unfortunately they are not able
to purchase as the cost is very high. This brand captures 17% of the total market
share. A home made product known as RAI TEL is mostly preferred by the
people, as it is prepared easily at no higher cost.

POWDER: Johnson & Johnson the leading market shareowner has no problem
by its competitors, as their marketing and pricing strategies are very good. This
company is in this market for several years and very well knows the need of the
rural consumers. J&J powder is well known in this area and most people prefer to
use this product, as the price is very less. One pack of J&J powder is used at
least 4-5 months.

GRIPE WATER: there is not much competition as there are only two products
under consideration. 80% of the people do not prefer to give gripe water to their
child as they are not much aware of this product. Some people use the product
by consulting their doctors.

KAJAL: JAI kajal is in the rural market from 1973 and leads the market in rural
as well as urban area. About 80% of the people make KAJAL in their home as
they are very safe and economical. Some people use JAI kajal for their children
and some do not use at all.

STRATEGIES ADOPTED BY:

HINDUSTAN LEVER LIMITED
1. EMPOWERMENT OF WOMEN (creating income generating opportunities
for women)
PROJECT SHAKTI, their rural initiative, seeks to empower
underprivileged rural women by providing them the opportunity to generate
income. But as importantly, what it provides them is new found dignity and
self-respect.
Supported by micro credit, these women form self-help groups and
HLL’S rural direct-to-home distributors. This in turn helps them increase
their reach, penetration and competition with rural consumers. This
initiative has so far benefited women in 4750 villages in Andhra pradesh,
Karnataka and Gujarat touching about 7.5 million rural people. It has been
widely supported by various developmental bodies and the government.
Their vision is to change the lives of women in one-lakh villages by
making them shakti dealers. This provides economic opportunities for the
underprivileged while creating a distribution and communication channel for
our brands to access untapped rural markets with a consumer base of over
100 million Indians.
2. REHABILIATION (helping the underprivileged and specially challenged
children lead a normal life)
ASHA DAAN in mumbai is a home for poorest of the poor. Managed
by the missionaries of charity, it is actively supported by and operates form
premises given by us. It has been home to over 20,000 people since 1976.
it provides care and compassion as well as food, shelter and medication to
the homeless, sick, infants and HIV+ patients.
ANKUR in doom dooma plantations- Assam, KAPPAGAM and
ANBAGGAM in their Tamil nadu plantations are aimed at physically and
mentally challenged children. The projects provide educational, therapeutic,
vocational and recreational inputs which help the children to be self-reliant
and engage in some fruitful occupation.
Their projects have been widely appreciated and ANKUR has also
received the lawrie group worldaware award for social progress from HRH
princess royal in London.

3. INTEGRATED RURAL DEVELOPMENT (improving the quality of life in

backward areas)
Providing development opportunities in backward areas is an
important part of our philosophy. 28 of their plants are located in the most
underdeveloped regions of India spread across 11 political states. Apart
from providing local employment they have also made efforts in the
development of surrounding villages through their INTEGRATED RURAL
DEVELOPMENT program.
Communities in over 500 backward villages adjacent to our
plants in locations like ETAH and ORAI in Uttar pradesh, have benefited
through IRD their initiative span adult literacy, animal husbandry, modern
farming, infrastructure development, education and medical care.
IRD is also an internal part of our business leadership training
program, enabling every trainee to get an in-depth understanding of rural
lifestyles, conditions, opportunities and challenges. Their involvement
through this has made all their managers more sensitive to the needs and
aspirations of rural area.
RURAL CONNECTIVITY
Using the network of rural women’s self help groups, the rural connectivity
model reaches our products and communication to villages hitherto not reached.
The model piloted channel intervention called project shakti in nalgonda, Andhra
pradesh in 2001 where self help groups were appointed as shakti dealers
distributing HLL goods directly to consumers. Partnerships with several NGO’s
and the state government were forged to facilitate the process. The result of the
pilot were very encouraging as shakti led to gains in our market share, higher
consumption of their categories and increased levels of brand awareness in this
markets.
During 2002, the model was extended across the states of Andhra
pradesh, Karnataka and in parts of Gujarat. Project shakti now works over 6000
SHG’s covering 4750 villages touching over 1.5 million households. In 2003, it
will be rolled out to over 100 districts in Uttar pradesh and Madhya pradesh.
Work is currently in progress on the I-shakti pilot, an information dissemination
service for rural needs delivered through an IT platform.
Project Shakti is an excellent case of win-win relationship between the
SHG’s and the company. While the company benefits by reaching out to these
hitherto untouched markets, the SHG’s get a low risk and sustainable income
opportunity. The Shakti dealer generates an income of over Rs 10 per month;
more than double their existing household income. It also gives the SHG’s a
social identity and the confidence to undertake larger business. This channel has
become a source of genuine and correctly priced products for the villagers. Over
the next 3 years shakti will be operational in 30,000 villages across 8 states and
touching the lives of 10 million households.

THE DISTRIBUTION CHANNEL:

In as much as the manufacturer cannot on his own look after the
distribution right upto the village point middlemen become absolutely essential in
the rural context. Also in view of the distance involved and the different sizes of
purchases involved, the number of links in the distribution chain or the tiers of the
distribution cannels also increases in the rural market. The retailer in the village,
the semi wholesaler or authorized dealer at the block level, and the wholesaler or
stockiest in the feeder town level all form the forward elements of the physical
distribution chain while the manufacturer’s own stock points, both regional and
branch operation from the backward elements of the chain.
When the manufacturer is not directly operating the forward elements of the
channel he can excise the direct control only on a small portion of the total
distribution system. On the remaining parts of the system, he can only exercise
indirect control. It is in this context that the choice of the cannel and its links as
well, as the choice of individual dealers stockiest and their training development,
motivation, etc, becomes a vital important part of the distribution and marketing
job in the rural environment.
The illogical concept that “middlemen are parasites” should not prejudice
the marketer’s decision on distribution channel the test question should be
: What are the functions to be performed?
Who can perform this function effectively and a lowest possible cost?
Who can give the required service?
To get a bunch of competent dealers in the rural market is more difficult
than in the urban market. Selection is to be made largely from among the
following categories
a) Members of the traditional trading community;
b) Traditional money lenders with willingness to branch off to trade;
c) Former land owners who want to branch off to business;
d) Educated and technically trained unemployed youth with some financial
capacity.
Suitable men have to be selected appointed and trained from the
above categories depending on the product line and other related factors
It is prudent to depend on the traditional channel; of distribution with
minor adaptations to suit the specific requirements. By and large, the stockiest
play a vital role in warehousing and sub distribution. The rural markets may have
to be expanded largely around the stockiest. Semi wholesalers and retailers will
take care of the selling and block level and at the village level.

AWARENESS
MEDIA: This form of awareness is very difficult as 80% of the families do
not have television. The companies find it very difficult to advertise their product
for awareness of the people. There is a big screen in the village where movies
are shown once a week or month that is time when the companies go for
advertising their product as many villagers come to watch the movie. In this type
of advertising there is very sever competition as the local brands also contribute
to the advertisement. The big brand companies find it difficult to cope with the
local brand as the names of local brands are very easy to remember. As media
awareness is not possible the companies go in for other marketing strategies.
Some of them are listed below:
MELAS: Melas play a significant role in rural market in awaking the
customers about the new product. Villagers are mostly attracted towards these
melas and buy their product at the same time. The melas are held for at least 10-
15 days. In these melas there are many products for display the customers are
the king in the market they choose the product the like the most. Most of the
company’s products are sold in the melas.