Rural Marketing

INTERNATIONAL SCHOOL OF BUSINESS & MEDIA
POST GRADUATE PROGRAMME IN BUSINESS MANAGEMENT DISSERTATION ON RURAL MARKETING
IN INDIA
SUBMITTED BY: PRANAV THAPAR (11102) MARKETING SPECIALIZATION (PGPBM 2010-12)
GUIDED BY: PROF. SUNNY ARORA
RURAL MARKETING IN INDIA
CERTIFICATE
This is to certify that the dissertation work on the topic Rural Marketing in India has been completed and submitted on ____________ in partial fulfillment of the requirement for the award of the certificate for the Post Graduate Programme in Business Management. This dissertation work has been done under the guidance of Prof. Sunny Arora.
Prof. Sunny Arora
ACKNOWLEDGEMENT
I take this opportunity to express my profound and sincere gratitude to International School of Business & Media, Pune for providing me with the opportunity to explore the corridors of the Corporate World and gather invaluable information & practical experience via such project of dissertation in Marketing. The satisfaction of the successful completion of any task would be incomplete without the expression of gratitude to the people who made it possible. I acknowledge all those who have guided and encouraged me in making of this project. I take this opportunity to express a deep sense of gratitude and sincere thanks to my dissertation guide Prof. Sunny Arora. His constant guidance, advice and encouragement have helped me in completing this project successfully.
Pranav Thapar
TABLE OF CONTENT
INTRODUCTION 5 RURAL INCOME 8 PRODUCT & USES 9 PARTNERING10 BUY-OUT.11 IMPORTING12 WHY GO RURAL....13 FEATURES OF RURAL MARKETING21 PROBLEMS IN RURAL MARKETING22 THE 4 As.24 DISTRIBUTION NETWORKS.26 STRATEGIES..27 BOTTOM OF PYRAMID..32 CASE STUDY 1: AKASHGANGA.34 CASE STUDY 2: ITC E-CHOUPAL..35 ANALYSIS & OPPORTUNITIES...40 FUTURE41 CONCLUSION44 BIBLIOGRAPHY45
INTRODUCTION
For quite some time now, the lure of rural India has been the subject of animated discussion in corporate suites. And there is a good reason too. With urban markets getting saturated for several categories of consumer goods and with rising rural incomes, marketing executives are fanning out and discovering the strengths of the large rural markets as they try to enlarge their markets. Today, the idea has grown out of its infancy and dominates discussions in any corporate boardroom strategy session. Adi Godrej, chairman of the Godrej group that is in a range of businesses from real estate and personal care to agri-foods, has no hesitation proclaiming, It is a myth that rural consumers are not brand and quality conscious. A survey by the National Council for Applied Economic Research (NCAER), India's premier economic research entity, recently confirmed that rise in rural incomes is keeping pace with urban incomes. From 55 to 58 per cent of the average urban income in 1994-95, the average rural income has gone up to 63 to 64 per cent by 2001-02 and touched almost 66 per cent in 200405. The rural middle class is growing at 12 per cent against the 13 per cent growth of its urban counterpart. Even better, the upper income class those with household incomes of over Rs one million [$22,700] per annum is projected to go up to 21 million by 2009-10 from four million in 2001-02. It will have a 22 to 23 per cent rural component. Higher rural incomes have meant larger markets. Already, the rural tilt is beginning to show. A study by the Chennai-based Francis Kanoi Marketing Planning Services says that the rural market for FMCG is worth $14.4 billion, far ahead of the market for tractors and agri-inputs which is estimated at $10 billion. Rural India also accounts for sales of $1.7 billion for cars, scooters and bikes and over one billion dollars of durables. In total, that represents a market worth a whopping $27 billion. It is no wonder that even MNCs have cottoned on to the idea of a resurgent rural India waiting to happen. Four years ago, Coke ventured into the hinterland. Now Coke's rural growth of 37 per cent far outstrips its urban growth of 24 per cent. Coke is not the first MNC to have cottoned on to the rural lure. Its global rival PepsiCo took a wider approach to the business when it was given permission to set up shop in India in the late 1980s and investment in food processing and farming was a pre-condition for entry. The company imported a state-of-the art tomato processing plant from Italy to Punjab. In five years, productivity improved from 16 tonnes to 52 tonnes per hectare and there was a tomato glut in the state. Farmers weren't complaining because even though prices fell, their incomes increased because of the huge jump in productivity. Pepsi is now heralding a citrus plantation drive in the state and other parts of the country for its brand of Tropicana fruit juices, to replace imported fruit. Hindustan Lever Ltd, the $2.3 billion Indian subsidiary of Unilever, the country's largest FMCG Company, has also got on the bandwagon. It's Project Shakti uses self-help groups across the country to push Lever products deeper into the hinterland. Its four-pronged programme creates income-generating capabilities for underprivileged rural women; improves rural quality of life by spreading
awareness of best practices in health and hygiene; empowers the rural community by creating access to relevant information through community portals and it also works with NGOs to spread literacy. There are currently over 15,000 Shakti entrepreneurs, most of them women, in 61,400 villages across 12 states. By the end of 2010, Shakti aims to have 100,000 Shakti entrepreneurs covering 500,000 of Indias 640,000 villages, touching the lives of over 600 million people. With such an emphasis on rural marketing, consumption patterns are changing and it signals a change in the regulatory environment. Vertical integration of the food market from farm to firm to fork becomes the best way to achieve efficiency and serve the interest of every stakeholder in the chain the farmer, the processor, the retailer and the consumer. As Ashok Gulati of the US-based International Food Policy Research Institute put it, the future of Indian agriculture in general and the farmer in particular depends on the how soon they can become globally competitive. Indian economic policy realizes this. Between the 8th (1992-97) and the 10th (2002-07) Five Year Plans, successive governments have tripled the spending on rural development from $6.82 billion to $20.2 billion. All this potential has got India's big business houses rushing to enter and expand rural businesses. Telecom giant Sunil Mittal, chairman of the $2 billion mobile telephony major Bharti Tele- Ventures, is another unabashed ag-bearer of the 'go rural' strategy. He is confident that the next 'explosive' phase of demand for cellular connections is going to come from the villages. In an interesting business diversification, he has tied up with the legendary Rothschilds of Europe for a $51 million food processing venture and export of fruits and vegetables. We can replicate our pre-eminence in IT agriculture and transform the country into a global food basket, he points out. Mittal's initial investments include an agriculture research centre and model farm in Punjab. If the hinterland has caught the attention of Mittal, among the country's most recent entrants to the ranks of big business, it has also not escaped the radar of the oldest business house, the $17 billion Tata group, which has consolidated its rural operations. The group's two companies, Tata Chemicals and Rallis India, ran separate rural initiatives till 2003. Tata Chemicals ran a chain called Tata Kisan Kendra, which ordered farmers a host of products and services ranging from agri inputs to financing to advisory services. Rallis, on the other hand, was partnering ICICI Bank and Hindustan Lever in ordering deals to farmers that covered operations from the pre-harvest to post-harvest stage. In 2004, the two operations were merged and Tata Kisan Sansar, a network of one stop shops providing everything from inputs to know-how to loans, was launched. Today, the Tata Kisan Sansar has 421 franchisee-run centers in three states and reaches out to over 3.6 million farmers. Like the Tatas, the $2.6 billion Mahindra group has successfully established a synergy between its current businesses and the planned rural forays. Its flagship, Mahindra & Mahindra Ltd is India's largest farm equipment company. Its subsidiary, Mahindra Shubhlabh Services, has operations in 11 states, and leverages the strong Mahindra brand, the 700,000-strong Mahindra tractor customer base and
the 400-plus dealer network, to provide a complete range of products and services to improve farm productivity and establish market linkages to the commodity market chain. Its retailing arm, Mahindra Krishi Vihar, has been instrumental in increasing the groundnut yield in Rajasthan through a new seed sourced from the state of Maharashtra, and it has also introduced a new variety of grapes in Maharashtra. Says Vikram Puri, head of Mahindra Shubhlabh Services, Almost 80 per cent of the farmers registered with us have less than five acres land. We are making farming an attractive proposition through three basic guiding steps growing what the market requires, improving the crop yield and decreasing the cost of crop production. The activities of Mahindra Shubhlabh Services have attracted the attention of the International Finance Corporation, the financial arm of the World Bank, which recently picked up a 27 per cent stake in the company. Rural India accounts for a market worth $27 billion. No wonder even MNCs have cottoned on to the idea of a resurgent rural India.
RURAL INCOME
With an average income equivalent to $42 per month ($504 dollars per year), rural Indians have a very low disposable income. Most rural homes have minimal storage space and no refrigeration. Very few people own or have access to cars. As a result, rural Indian purchasing habits tend to be of an earn today, spend today mentality. Rather than buying in bulk, which would mean paying more for large quantity upfront, rural Indians tend to buy what they need for short segments of time. These factors result in consumers buying products locally, as well as on daily basis. In addition to the fact that income levels are low, rural incomes also vary greatly depending on monsoons. When a monsoon hits, this devastates the livelihood of most rural consumers because they are dependent on agricultural work for income. Corporations are also directly affected because this makes it difficult to predict demand.
PRDUCTS AND USES

Before a company considers entering the rural market, understanding the types of products and packages that rural Indians typically use is crucial. For example, urban Indian consumers would typically use toothpaste for brushing their teeth, while most rural Indians prefer using tooth powder (Balu 2001). As a company seeking to enter Indias market with an oral care product, this would be an important fact to know and consider during both the product and package development stages. Similarly, Hindustan Lever Ltd. (HLL), the Indian subsidiary of Dutch-based Unilever, discovered that rural Indians tend to use the same soap for washing everything from hair to their bodies to clothing (if they use any soap at all). Because HLL manufactures products including various soaps and detergents, HHL product and packaging development processes have taken this rural habit into account by designing all-in-one soaps (Balu, 2001). By taking into account the low disposable incomes and the unique product and package needs of this market, consumer products that are designed and packaged for this market have great potential.
PARTNERING
The first and best option for aligning with the Indian industry is for the multinational to partner with an Indian company that is already successfully producing and selling a similar type of product. In doing so, the new company can take advantage of the manufacturing facilities and distribution networks that are already in place rather than having to start from scratch. As a result of Indias colonial experience when it was controlled by Britain, many Indians have a profound mistrust of foreign brands (Luce, 2002). By creating a partnership with an Indian company plays down the foreign factor and helps to dispel some of this mistrust. Hindustan Lever is a multinational corporation that has found success with this method of aligning with industry. By partnering with local entrepreneurs who own and manage their own plants, Hindustan Lever is able to manufacture their products with minimal amounts of fixed capital. In these partnerships, the entrepreneurs agree to devote their plants capacity to manufacturing only Hindustan Lever products.
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BUY-OUT
A second alternative for aligning a new industry to enter Indias rural market is to buy out a local Indian manufacturer. As with partnering, buying out a local manufacturer gives a company the ability to capitalize on existing manufacturing facilities and distribution networks. The disadvantage is that Indian consumers may view this negatively. Coca-Cola is an example of a Multinational corporation that tried buying out a local distributor. In 1992, Coca-Cola made its second appearance to the Indian market. In an attempt to eliminate its biggest competitor, Coca-Cola acquired Thumbs Up, the local market leader in cola. When Coca-Cola tried to exchange its own brand on the regular Thumbs Up distribution network, Indian consumers looked unfavorably upon Coca-Cola. The company has been struggling ever since.
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IMPORTING
Additionally, companies can enter Indias rural market by importing products from manufacturing locations overseas. Importing has only been a viable means of getting consumer goods into India for just over ten years, when trade restrictions were eased (Luce, 2002). However, there are several disadvantages to this method of marketing to rural India. Without a manufacturing facility in India, a company has no ties to Indias already challenging distribution network, thus making sales even more difficult. In addition, Indian consumers tend to feel more loyalty and trust toward locally made products. The aforementioned Thumbs Up and Coca-Cola scenario also illustrates this fact. Though Thumbs Up is a cola of lower quality that Coke, it is a locally made Indian brand that rural consumers can relate with. Consequently, Coca-Cola is third behind Pepsi and Thumbs Up in the Indian soft drinks market (Luce, 2002). Partnering with or buying out an existing Indian company, as well as importing from overseas, are all viable ways to get packaged consumer goods into rural India. Based on the past experiences of multinational corporations entering the market, partnering is the most successful option.
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WHY GO RURAL
In late May, when India's GDP numbers were released, many were happily surprised. In the fourth quarter of the fiscal year (January-March 2009), the economy grew 5.8% against expectations of less than 5%. For the year, growth was 6.7%, less than the 9% recorded in 20072008, but still very respectable during a global downturn. Multinational banks and brokerage houses rushed back to their spreadsheets to raise their growth forecasts for 2009-2010. But why were the estimates so pessimistic in the first place? A possible explanation is that most analysts work in cities, and their views are colored by what is happening around them and in the corporate world. That picture has been bleak: During the last quarter of 2008-2009, manufacturing shrank 1.4%. In contrast, agriculture grew 2.7%. The feel-good factor in urban India is returning only now with a new, stable government and a sharp jump in the Bombay Stock Exchange Sensitive Index (Sensex). In the villages and small towns, it has been a very different picture. "The rural market is insulated from the global meltdown," says Harish Bijoor, CEO of brand and business strategy consultants Harish Bijoor Consults. "The rural part of our economy has been untouched by credit cards and mortgages as known in the West." The slowdown experienced by India on account of the IT (information technology), real estate, financial services and automobile sectors was an urban phenomenon," says Ajay Gupta, founder and CEO of ruralnaukri.com, which focuses on jobs in the rural sector."However, the negative impact of all this on urban India has been more than offset by encouraging performance in rural areas. The rural economy has provided a cushion. Overall sentiment in the country was different from other parts of the world where each household had at least one person with a pink slip. Several factors have led to an increase in rural purchasing power," says Pankaj Gupta, practice head, consumer & retail, Tata Strategic Management Group. "The increase in procurement prices [the government sets the minimum support price -- MSP -- for many farm products has contributed to a rise in rural demand. A series of good harvests on the back of several good monsoons boosted rural employment in agricultural and allied activities. Government schemes like NREGS [National Rural Employment Guarantee Scheme, which guarantees 100 days of employment to one member of every rural household] reduced rural underemployment and raised wages. Also, farmers benefited from loan waivers [introduced in the last Union Budget]. The increase in rural purchasing power is reflected in rural growth across a number of
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categories. For example, in the financial year 2009 [April-March], FMCG [fast moving consumer goods] rural volume growth is estimated to be 5% to 12% higher than urban growth across a number of categories.
Some academics agree with these upbeat views of a rural resurgence. "Policy measures like the waiver of agricultural loans to the tune of US$13.9 billion and the NREGS have really put cheer into the rural economy," says Devi Singh, director of the Indian institute of Management Lucknow (IIML). "The Bharat Nirman program with an outlay of US$34.84 billion for improving rural infrastructure is another step that has helped the rural economy. To some extent, the growth of organized retail can also be held responsible for the rural economy's growth, as this has ensured that farmers get a better price for agricultural produce. The MSP set by the government has been rising further, fuelling rural growth by putting more money into the hands of the rural population." Singh adds a caveat, however. "While the statement that the Indian economy has been saved from the slowdown due to rural growth is true to a certain extent, this is not the only factor," he says. "India's growth has been fuelled more by domestic demand than exports. Also Indian spending and saving habits differ from other parts of the world. Indians by their very nature always save for their future and this holds them in good stead during times of crisis. The Indian buyer is more finance conscious than his global peer. The Indian banking system, due to the socalled non-reforms, is actually more resilient and the level of delinquencies is far lower than in other parts of the world." Some observers are skeptical about the durability of rural demand. "There is a worrying groundswell of optimism that rural consumers will come to the rescue of an Indian economy which is in the midst of a sharp slowdown. This optimism may be misplaced," suggest consumer behavior expert Rama Bijapurkar and Rajesh Shukla, a senior fellow at the National Council for Applied Economic Research. Writing in business daily Mint, they continue: "Hearing phrases such as 'rural renaissance' or 'rural India to the rescue' makes us nervous. Such talk bears overtones of the 'Great Indian Middle Class' story of the 1990s, where we declared victory at least a decade before we should have." Their question: How sustainable, stable and volatilityfree is the growth in income and consumption?
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Bijapurkar and Shukla note that "periodically, India has seen a consumption spurt because of a one-time burst of a combination of events. This recent spurt seems no different. Over the past four years, the monsoon has been good; the support prices for crops have grown at 10% to 15% CAGR [compounded annual growth rate] in 2005-2008 compared with 2.5% to 4% in 20022005. In addition to a healthy flow of farm credit, there has been a one-time loan write-off of US$13.9 billion as well as a sizeable cash outlay from the NREGS. This doesn't show intrinsic growth in rural India: This growth is, instead, owing to a combination of acts of God and acts of government. What we must never do is make the same mistake with rural India that Western multinationals make with India as a whole -- assume that it will evolve the same way with a 10year lag. The rural Indian market and consumer call for sophisticated new marketing strategies and paradigms, not a transplant of old ideas."
Even as this debate continues, the term "rural" is being re-defined. "'Rural' is difficult to define anymore," says Bijoor of Bijoor Consults. "Typically, from an Indian census point of view, rural has been defined with a 'deprivation' orientation, rural being a landmass without access to continuous electricity, water, the stock market. There has been a correction in this view, however. Marketers today define rural as people living a different lifestyle as opposed to that of those who have settled in the bigger cities and towns. Rural is defined as pastoral in nature and as a mass of people who relate their income closely to the lands they till or use to raise their cattle and livestock. I, personally, define rural differently. I believe rural is a mindset. Those who possess it are rural and those who do not are urban. To that extent, in Bangalore city, just off the old airport road, are a whole set of people who live by farming on their lands. If you visit their homes, their lifestyles are totally rural. Similarly, there are people who live in villages, who have access to the best of it all. These are urban folk. Rural is not a geography; it is a mindset." Definitions for rural India abound while the most convenient remains, 'anything that is not urban'," says Gupta of ruralnaukri.com. Singh of IIML adds: "Rural India comprises all places that are not urban." This definition by exclusion for what is the much larger part of the country has its roots in the government's own approach. "The Census of India defines urban India," says Gupta of TSMG. "Urban India constitutes places with a population of more than 5,000, a population density above 400 per square kilometer, all statutory towns, that is, all places with a municipal corporation, municipal board, cantonment board, notified area council, etc. and with 75% of the male working population engaged in non-agricultural employment. All non-urban is rural.
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Such definitions leave marketers cold. "The traditional definition of rural may be of little use to marketers in terms of providing consumer insights," says S. Ramesh Kumar, professor of marketing at the Indian Institute of Management, Bangalore (IIMB). "Given the diversity of culture and lifestyle/aspirational changes that are taking place across non-metro consumers, the non-metro areas need to be segmented into tiers of varying urban orientation using psychographic and lifestyle analysis along with demographics. The digital 1 or 0 type of urban and rural definitions is unlikely to yield consumer behavior nuances. For example, district headquarters [towns] in Tamil Nadu are likely to be significantly different from those in Karnataka or Maharashtra. Many others agree that census-style definitions are no longer enough. "My understanding of rural India is a less developed countryside where the infrastructure is primitive, houses are of mud or brick but rarely painted well, the primary source of livelihood is agriculture, employment opportunities in the organized sector are negligible, eating choices are restricted to home-cooked, simple food, schools are far away, health facilities are rudimentary and -importantly -- the youth, while energetic and ambitious, are to be seen playing cards the whole day," says Gupta of ruralnaukri.com. "We recognize rural India by certain characteristics," says B.N. Garudachar, general manager, corporate communication and investor relations at Voltas, a Tata group company in airconditioning and engineering services. "These are: low population numbers, low median income, poor infrastructure [roads, electricity, communications], and agrarian rather than industrial activity. Such rural areas are within the sphere of influence of neighboring cities and metros. This influence determines their aspiration levels and their viability as markets. View it as you may, few people dispute that the rural market is massive. According to Singh, 12.2% of the world's consumers live in India. "Rural households form 72% of the total households. This puts the rural market at roughly 720 million customers." Gupta of TSMG extrapolates the Census 2001 numbers and comes up with an estimate of 790 million. "Total income in rural India (about 43% of total national income) is expected to increase from around US$220 billion in 2004-2005 to US$425 billion by 2010-2011, a CAGR of 12%," he says. Bijoor explains that this is entirely disposable income unlike what it would be in urban India. "If a farmer in rural Holenarsipura earns US$1, all of it is his to dispose off as he pleases. The same income in the hands of an urban person, who is possibly a tech worker, is actually not US$1 of disposable income. It is most likely 67 cents; the rest goes as tax. The farm economy, with zerotax on farm income, creates far more disposable income. Buying power in the hands of the rural rich is higher than the buying power of the urban rich."
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Gupta of ruralnaukri.com provides some telling statistics. "The purchasing power of rural India is more than half for fast moving consumer goods [US$17 billion]," he says. "The durables and automobile sectors contribute US$2.5 billion each, and agri-inputs (including tractors) about US$1 billion. Some 42 million rural households [use] banking services against 27 million urban households. There are 41 million Kisan credit cardholders [credit cards issued to farmers for purchase of agricultural goods] against some 22 million card users in urban markets. Be it automobile, telecom, insurance, retail, real estate or banking, the future drivers of growth are rural. No marketer can afford to ignore the possibilities of rural India. Bijoor adds some growth numbers. "Our rural folk have bought a lot more of FMCG; this part of the market has grown at a robust rate of 23% [last year]," he says. "As durables shrink in urban India, the rural market is witnessing a 15% growth rate. Some 60% of the durables market lies in rural India. Telecom in rural India is growing at 31%." It depends on the product, of course. "Just the sheer population numbers don't mean very much from a marketing point of view," saysGarudacharofVoltas. Across product categories, however, there seems to be a lot of action. Media -- particularly TV - has been a great leveler. Even in small villages, people who have seen the urban lifestyle on television seem to want similar goods and services. Companies have realized this and are going allouttotapthislatentdemand. Consider some examples: The State Bank of India (SBI) has started a zero-balance bank account program for villagers. Called the SBI Tiny account, there are no physical branches or officials, just a paid volunteer who is equipped with a small box and a cell phone. The box enables biometric measurements (fingerprints), at the time of opening the account to confirm the account holder's identity. The cell phone enables communication with the zonal office to check on available balance. Payments under programs such as the NREGS and pensions are made directly to these accounts. The advantage for the villagers is that they can withdraw money from their accounts at any time of the day or night. (Withdrawals are never more than a few dollars.) SBI hopes to cover 100,000 villages by 2012. The bank has tied up with India Post for some services.
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India Post, the public sector postal network, has its own plans. It has been hard hit in urban areas because of the more efficient (though more expensive) private sector courier services. Now it is looking at consolidating its hold on the rural areas. Project Arrow has been launched to IT-enable post offices in the hinterland. A pilot project involving 500 post offices -- the country has more than 150,000 -- has been kicked off. It will focus on banking, money remittance, and transmission and delivery of information. Maruti Suzuki, India's leading automobile manufacturer, today sells 5% of its vehicles in the rural markets. The company expects this number to rise to 15% in the next two years. "This is not just our wish, but reflects market demand," says director (marketing & sales) Shuji Oishi. In telecom, service providers are making a beeline for the villages. That's where the growth in what is now the world's fastest growing mobile market lies. According to industry estimates, 70% of all new subscribers will come from rural areas. Mobile device manufacturers are also tailoring their products to this market. Nokia had earlier launched a basic handset with a torch (large parts of rural India don't have electricity) and an alarm clock. In December 2008, it went one step further with the launch of Nokia Life Tools. "Nokia Life Tools is a range of agriculture, education and entertainment services designed especially for the consumers in small towns and rural areas of emerging markets," says the company. "Aimed at providing timely and relevant information customized to the user's location and personal preferences directly on their mobile devices, Nokia Life Tools are the first step towards bridging the digital divide." The mobile phone is a new-age product; gold jewelry is as old as the hills. Here, too, there has been a rural move. According to World Gold Council figures, 60% of India's US$15 billion annual consumption of gold and gold jewelry is from rural and semi-urban areas. The Tatas have launched a mass-market jewelry brand -- GoldPlus. The Tatas train unemployed youth and send them to the villages as brand ambassadors. The problem with gold in India is that it is often adulterated. In rural areas, gold jewelry is not for ornamentation; it is a safety net for emergency situations. Thus, the Tata seal of good housekeeping is taking the brand places. "GoldPlus is an interesting example of the brand addressing the non-metro jewelry culture with its ethnic touch with regard to its designs and retailing," says Ramesh Kumar of IIMB.
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"There is substantial scope to create products that are oriented towards non-urban sectors," notes Kumar. "These can be in terms of functional appeal or cultural aspects or both. Chik shampoo created the jasmine variant [in tune with the culture of women using jasmine flowers to style their hair in a few parts of the country]. TVS mopeds created functional value in tune with the 'all purpose' vehicle culture existing in several parts of the non-metro areas. Philips is moving forward with the creation of gas stoves and lanterns that will be useful to such markets." Singh of IIML talks about pricing successes: The Chik shampoo sachets sells for 2 cents, the Parle G Tikki biscuit packs at 4 cents and the Coca-Cola 200 ml glass bottle for 10 cents. Singh notes that successes in rural areas can be transplanted to urban areas also. "The shampoo in sachets created a new product segment," he says. "All shampoo manufacturers today retail in sachets, and the demand from urban India for this category is very strong." The sachet is as much a packaging (product) strategy as a price strategy. But, asks Garudachar of Voltas, have companies done enough about the core product? The shampoo sachet is a case in point. "Villages in India have hard water," he says. "But the shampoo that you get in sachets sold in villages is the same that you get in towns. Manufacturers should have tailored the products to suit the environment." It doesn't apply across the board, of course, particularly as manufacturers have moved away from the mindset that along with cutting price, you can cut quality. "Product re-engineering was an issue five years ago," says Bijoor. "I do not believe this is an issue at all today. The quality on offer needs to be the same all over. One company tried to pass off inferior quality tea leaves in rural markets and superior quality grades for urban markets under the same brandname. This fell flat." But re-engineering is necessary in a different sense. According to Bijoor, "Companies are realizing that the urban and rural want is largely the same. However, the rural person is savvier and demands real value for money. To offer this, marketers are re-engineering products. Look at the auto segment. The urban man wants a car as does the rural man. Both have the same amount of money. The rural person, however, believes spending US$12,000 on a car is a sin. He wants it at US$3,000. The Nano is a solution. Every category needs to operate on the Nano paradigm. The needs are all the same, across rural and urban. The solutions have to be different."
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Distribution and promotional channels also need to be different for rural markets. Companies are getting their act together here, too. Private sector companies like ITC have set up the ITenabled eChoupal network, and Hindustan Unilever has project Shakti, under which women's self-help groups act as the last link of the retail chain. As mentioned earlier, India Post wants to convert itself into a retail chain for a variety of products. Even fair-price shops, which form part of the government's rationing system, are trying to expand beyond supplying just basic foods like rice and wheat. In the area of promotion, television has invaded rural India. TV reaches even very small villages through community sets. But advertising on national channels is wasteful if you are trying to target rural areas. Garudachar of Voltas says his company is trying to sell air conditioners to the rural rich. "Difficulties in penetration are due to the widespread and scattered nature of the territory," he says. "At one time, basic conservatism and diehard thrift would also have been factors, but exposure to TV has changed all that, and created aspirations where once there was resistance to change."
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FEATURES OF RURAL MARKETS
Large and Scattered market: The rural market of India is large and scattered in the sense that it consists of over 63 crore consumers from 5,70,000 villages spread throughout the country. Major income from agriculture: Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with agricultural prosperity. Low standard of living: The consumer in the village area do have a low standard of living because of low literacy, low per capita income, social backwardness, low savings, etc. Traditional Outlook: The rural consumer values old customs and tradition. They do not prefer changes. Diverse socio-economic backwardness: Rural consumers have diverse socio-economic backwardness. This is different in different parts of the country. Infrastructure Facilities: The Infrastructure Facilities like roads, warehouses, communication system, and financial facilities are inadequate in rural areas. Hence physical distribution becomes costly due to inadequate Infrastructure facilities.
The rural bazaar is booming beyond everyones expectation. This has been primarily attributed to a spurt in the purchasing capacity of farmers now enjoying an increasing marketable surplus of farm produce. In addition, an estimated induction of Rs 140 billion in the rural sector through the governments rural development schemes in the Seventh Plan and about Rs 300 billion in the Eighth Plan is also believed to have significantly contributed to the rapid growth in demand. The high incomes combined with low cost of living in the villages have meant more money to spend. And with the market providing them options, tastes are also changing.
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PROBLEMS IN RURAL MARKET

Although the rural market does offer a vast untapped potential, it should also be recognized that it is not that easy to operate in rural market because of several problems. Rural marketing is thus a time consuming affair and requires considerable investments in terms of evolving appropriate strategies with a view to tackle the problems. The major problems faced are: Underdeveloped People and Underdeveloped Markets: The number of people below poverty line has not decreased in any appreciable manner. Thus underdeveloped people and consequently underdeveloped market by and large characterize the rural markets. Vast majorities of the rural people are tradition bound, fatalistic and believe in old customs, traditions, habits, taboos and practices. Lack of Proper Physical Communication Facilities: Nearly fifty percent of the villages in the country do not have all weather roads. Physical communication of these villages is highly expensive. Even today most villages in the eastern parts of the country are inaccessible during the monsoon. Media for Rural Communication: Among the mass media at some point of time in the late 50s and 60s radio was considered to be a potential medium for communication to the rural people. Another mass media is television and cinemas. Statistics indicate that the rural areas account for hardly 2000 to 3500 mobile theatres, which is far less when compared to the number of villages. 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. The messages have to be delivered in the local languages and dialects. Even though the number of recognized languages is only 16, the dialects are estimated to be around 850.
Dispersed Market: Rural areas are scattered and it is next to impossible to ensure the availability of a brand all over the country. Seven Indian states account for 76% of the countrys rural retail outlets, the total number of which is placed at around 3.7 million. Advertising in such a highly heterogeneous market, which is widely spread, is very expensive.
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Low Per Capita Income: Even though about 33-35% of gross domestic product is generated in the rural areas it is shared by 74% of the population. Hence the per capita incomes are low compared to the urban areas.
Low Levels of Literacy: The literacy rate is low in rural areas as compared to urban areas. This again leads to problem of communication for promotion purposes. Print medium becomes ineffective and to an extent irrelevant in rural areas since its reach is poor and so is the level of literacy.
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 to villagers.
Different way of thinking: There is a vast difference in the lifestyles of the people. The kind of choices of brands that an urban customer enjoys is different from the choices available to the rural customer. The rural customer usually has 2 or 3 brands to choose from whereas the urban one has multiple choices. The difference is also in the way of thinking. The rural customer has a fairly simple thinking as compared to the urban counterpart.
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THE 4As OF RURAL MARKETING

Each Company is making their way to Rural India. Most of them have studied the market and Analyzed the things over there and ready to fight at Rural India. There are some of the companies which have already written their success stories in Rural market. Companies like HUL, ITC, LG, Mahindra have given a new format for rural marketing. They have done a great job. So, the marketing is always have the difference in Urban and rural, which makes the companies to think over the Marketing mix. Marketing mix is such an element in rural market which gives the sense to think of marketing activities. This 4A model is similar to the 4P model of Marketing mix, the difference it shows is main streamline and Rural Market. 4A perceived to be more customer oriented. The 4A's are Affordability, Availability, Awareness, and Acceptability. 1. Affordability: Here Affordability does not mean that cheaper products should me made and marketed, the meaning is to reach the customer by satisfying their needs. The designing of the product should match the needs of the customer. The Customer should not think that they cannot buy it, that means it should be in their buying capacity. The income earned in rural markets is from different ways , so by keeping this in mind most of the companies should design the product in such a way that it reaches the customer. 2. Availability: The greatest problem in the rural market is to reach the customer or retailer. Its the logistics way to make the product available there . Once it reaches the retailers shelf then there will not be any problem. This is because there will be lesser number of brands available at market and the Influence or image/ Relationship of the retailer makes the difference. The companies should work out to reach the customer in time. Most of the products are promoted well but by the time it reaches the customer it gets late. So reaching the market should be considered. 3. Awareness: The Awareness program should be in such a manner that it should reach the customers mindset. The main way of reaching the customer is through the commercials on media like TV, Radio and Outdoor . The awareness programs should be conducted at the area ( Junction) where the village heads meet or in other way the meeting place at the villages. The awareness program should be in such a way that it should contain some message to the audience, there should be some concern for them and their place. The promotional activities should be good in the local language.
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Apart from this there are some things which the company should think of, such as Colour of the product, Packaging , logo and slogan so on. This should be in such a way that by looking at the product only the customer should feel that they can go for that , and they should be in such a position to differentiate the product form the copy cat one. 4. Acceptability: The most important theme of Marketing Mix is Acceptability. The customer should think that they can buy the product by putting an extra money on that. They should feel that the product is designed as per their needs and it should deliver a great solution to the customer. They should think that the product gives some value to them , and it should serve the purpose what they are planning to buy for. The customer should feel the comfort with the product and there should not be any hesitation to go for it. So, by these four components of Marketing mix the company can reach the rural market. The companies which have worked it well they have done their best in the rural market. The companies like LG and HUL have changed the dynamics of rural market. So it is important for the companies to think on their marketing mix and make a competitive analysis to go for the market .
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DISTRIBUTION NETWORKS
Rural markets have always been an intriguing segment for businesses. While these markets bring huge potential for growth and expansion, achieving sustainable volumes and optimal distribution networks in the remote rural areas, is often a huge challenge for businesses. Today, Hindustan Unilever, ITC and CavinKare are some of the bigger names that have reasonably penetrated these markets; although across a few product segments only, such as personal care and detergents. In most small villages, with populations of 5000 and under, purchasing behavior continues to be localized and is largely driven through familiarity with product and supplier. This should not come as a surprise, since vendors in these villages often need low product volumes and are required to travel to the nearest towns to procure over 80% of their stock requirements. Given the low volumes and the distances needed to travel, most vendors tend to settle for localized product options. Rural retail distribution firms such as United Villages in Rajasthan are working through an innovative mobile application based approach to tackle the distribution challenges in these remote rural markets. They have deployed mobilebased applications to enable businesses to gain a deeper understanding of customer preferences and consequently market their products better. Presently, multi-brand FMCG companies like Hindustan Unilever are driving their rural marketing programmes through incentives and schemes, and as mentioned earlier, have met with reasonable success across some segments. Technology driven approaches such as the one designed by United Villages help create access for small and mid-sized companies, and possibly even niche players, to rural markets. The concept adopted by United Villages is simple - the firm uses field sales staff from within/near these remote villages, which visit local customers and note their orders for products, in a mobile device. The order requests are then routed to United Villages' central distribution network in Jaipur, via a mobile phone. At the central hub in Jaipur, the orders received are processed, and United Villages' staff put together individual grocery baskets, which are then delivered direct to the customers, in neatly packed boxes. The economics of retailing in rural India is rather complicated, mainly due to the significant supply chain bottlenecks in the rural retail industry. The mobile application based distribution approach as driven by United Villages certainly has the potential to clear out some of the key issues associated with supply chain processes in rural marketing, and if managed well, can create a huge rural retailing opportunity, bringing the biggest of brands into our most remote villages.
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STRATEGIES
BY COMMUNICATING AND CHANGING QUALITY PERCEPTION Companies are coming up with new technology and they are properly communicating it to the customer. There is a trade-off between Quality a customer perceives and a company wants to communicate. Thus, this positioning of technology is very crucial. The perception of the Indian about the desired product is changing. Now they know the difference between the products and the utilities derived out of it. As a rural Indian customer always wanted value for money with the changed perception, one can notice difference in current market scenario. BY PROPER COMMUNICATION IN INDIAN LANGUAGE The companies have realized the importance of proper communication in local language for promoting their products. They have started selling the concept of quality with proper communication. Their main focus is to change the Indian customer outlook about quality. With their promotion, rural customer started asking for value for money. BY TARGET CHANGING PERCEPTION If one go to villages they will see that villagers using Toothpaste, even when they can use Neem or Babool sticks or Gudakhu, villagers are using soaps like Nima rose, Breeze, Cinthol etc. even when they can use locally manufactured very low priced soaps. Villagers are constantly looking forward for new branded products. What can one infer from these incidents, is the paradigm changing and customer no longer price sensitive? Indian customer was never price sensitive, but they want value for money. They are ready to pay premium for the product if the product is offering some extra utility for the premium. BY UNDERSTANDING CULTURAL AND SOCIAL VALUES Companies have recognized that social and cultural values have a very strong hold on the people. Cultural values play major role in deciding what to buy. Moreover, rural people are emotional and sensitive. Thus, to promote their brands, they are exploiting social and cultural values.
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BY PROVIDING WHAT CUSTOMER WANT The customers want value for money. They do not see any value in frills associated with the products. They aim for the basic functionality. However, if the seller provides frills free of cost they are happy with that. They are happy with such a high technology that can fulfill their need. As "Motorola" has launched, seven models of Cellular Phones of high technology but none took off. On the other hand, "Nokia" has launched a simple product, which has captured the market.
BY PROMOTING PRODUCTS WITH INDIAN MODELS AND ACTORS Companies are picking up Indian models, actors for advertisements as this helps them to show themselves as an Indian company. Diana Hyden and Shahrukh Khan are chosen as a brand ambassador for MNC quartz clock maker "OMEGA" even though when they have models like Cindy Crawford. BY ASSOCIATING THEMSELVES WITH INDIA MNCs are associating themselves with India by talking about India, by explicitly saying that they are Indian. MTV during Independence Day and Republic daytime make their logo with Indian tri-color. Nokia has designed a new cellular phone 5110, with the India tri-color and a ringing tone of "Sare Jahan se achcha". BY PROMOTING INDIAN SPORTS TEAM Companies are promoting Indian sports teams so that they can associate themselves with India. With this, they influence Indian mindset. LG has launched a campaign "LG ki Dua, all the best". ITC is promoting Indian cricket team for years; during world cup they have launched a campaign "Jeeta hai jitega apna Hindustan India India India". Similarly, Whirlpool has also launched a campaign during world cup. BY TALKING ABOUT A NORMAL INDIAN Companies are now talking about normal India. It is a normal tendency of an Indian to try to associate him/her with the product. If he/she can visualize himself/herself with the product, he /she become loyal to it. That is why companies like Daewoo based their advertisements on a normal Indian family.
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BY DEVELOPING RURAL-SPECIFIC PRODUCTS Many companies are developing rural-specific products. Keeping into consideration the requirements, a firm develops these products. Electrolux is working on a made-for India fridge designed to serve basic purposes: chill drinking water, keep cooked food fresh, and to withstand long power cuts. BY GIVING INDIAN WORDS FOR BRANDS Companies use Indian words for brands. Like LG has used India brand name "Sampoorna" for its newly launched TV. The word is a part of the Bengali, Hindi, Marathi and Tamil tongue. In the past one year, LG has sold one lakh 20-inch Sampoorna TVs, all in towns with a population of around 10,000. By the end of 1999, roughly 12Thats Rs 114 crore worth of TV sets sold in the villages in a year. BY ACQUIRING INDIAN BRANDS As Indian brands are operating in India for a long time and they enjoy a good reputation in India. MNCs have found that it is much easier for them to operate in India if they acquire an Established Indian Brand. Electrolux has acquired two Indian brands Kelvinator and Allwyn this has gave them the well-established distribution channel. As well as trust of people, as people believe these brands. Similarly Coke has acquired Thumps up, Gold Spot, Citra and Limca so that they can kill these brands, but later on they realized that to survive in the market and to compete with their competitor they have to rejuvenate these brands. BY EFFECTIVE MEDIA COMMUNICATION Media Rural marketing is being used by companies. They can either go for the traditional media or the modern media. The traditional media include melas, puppetry, folk theatre etc. While the modern media includes TV, radio, e-chaupal. LIC uses puppets to educate rural masses about its insurance policies. Govt of India uses puppetry in its campaigns to press ahead social issues. Brook Bond Lipton India ltd used magicians effectively for launch of Kadak Chap Tea in Etawah district. In between such a show, the lights are switched o_ and a torch is ashed in the dark (EVEREADYs tact). ITC's e-chaupal (chaupal is the common place where villagers gather) has been the most elaborate and extensive venture in this field so far. Conceived by ITC's international business division and launched in 2000, the e-chaupal project has since grown to around 2,700 chaupals covering a population of around 1.2 million in five states Madhya Pradesh, Karnataka, Andhra Pradesh, Uttar Pradesh and Maharashtra.
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Rural marketing requires the understanding of the complexities and this article reviews some of the key issues. Indian agricultural industry has been growing at a tremendous pace in the last few decades. The rural areas are consuming a large number of industrial and urban manufactured products. The rural agricultural production and consumption process plays a predominant role in developing the Indian economy. This has designed a new way for understanding a new process called Rural Marketing. The concept of rural marketing has to be distinguished from Agricultural marketing. Marketing is the process of identifying and satisfying customers needs and providing them with adequate after sales service. Rural marketing is different from agricultural marketing, which signifies marketing of rural products to the urban consumer or institutional markets. Rural marketing basically deals with delivering manufactured or processed inputs or services to rural producers, the demand for which is basically a derived outcome. Rural marketing scientists also term it as developmental marketing, as the process of rural marketing involves an urban to rural activity, which in turn is characterized by various peculiarities in terms of nature of market, products and processes. Rural marketing differs from agricultural or consumer products marketing in terms of the nature of transactions, which includes participants, products, modalities, norms and outcomes. The participants in case of Rural Marketing would also be different they include input manufacturers, dealers, farmers, opinion makers, government agencies and traders. The existing approach to the rural markets has viewed the markets as a homogeneous one, but in practice, there is a significant buyer and user difference across regions as well as within that requires a differential treatment of the marketing problems. These differences could be in terms of the type of farmers, type of crops and other agro-climatic conditions. One has to understand the market norms in agricultural input so as to devise good marketing strategies and to avoid unethical practices, which distort the marketing environment. Many of the inputs used for production process have implications for food, health and environmental sectors. Rural marketing needs to combine concerns for profit with a concern for the society, besides being titled towards profit. Rural market for agricultural inputs is a case of market pull and not market push. Most of the jobs of marketing and selling is left to the local dealers and retailers. The market for input gets interlocked with other markets like output, consumer goods, money and labour. The importance of rural marketing can be understood from the fact that today modern inputs i.e. diesel, electricity, fertilizers, pesticides, seeds account for as much as 70 Green Revolution areas. Further the percentages were higher at 81of land. Strategic aspects Rural marketing in India is not much developed there are many hindrances in the area of market, product design and positioning, pricing, distribution and promotion. Companies need to understand rural marketing in a broader manner not only to survive and grow in their business, but also a means to the development of the rural economy. One has to have a strategic view of the rural markets so as to know and understand the markets well. In the context of rural marketing one has to understand the manipulation of marketing mix has to be
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properly understood in terms of product usage. Product usage is central to price, distribution, promotion, branding, company image and more important farmer economics, thus any strategy in rural marketing should be given due attention and importance by understanding the product usage, all elements of marketing mix can be better organized and managed. BY ADOPTING LOCALISED WAY OF DISTRIBUTING Proper distribution channels are recognized by companies. The distribution channel could be a Big scale Super markets, they thought that a similar system can be grown in India. However, they were wrong, soon they realized that to succeed in India they have to reach the nook and the corner of the country. They have to reach the "local Paan wala, Local Baniya" only they can succeed. MNC shoe giants, Adidas, Reebok, Nike started with exclusive stores but soon they realized that they do not enjoy much Brand Equity in India, and to capture the market share in India they have to go the local market shoe sellers. They have to reach to local cities with low priced products. BY ASSOCIATING THEMSELVES WITH INDIAN CELEBRITIES MNCs have realized that in India celebrities enjoyed a great popularity so they now associate themselves with Indian celebrities. Recently Luxor Writing Instruments Ltd. a JV of Gillette and Luxor has launched 500 "Gajgamini" range of Parker Sonnet Hussain special edition fountain pens, priced at Rs. 5000. This pen is signed by Mr. Makbul Fida Hussain a renowned painter who has created "Gajgamini" range of paintings. Companies are promoting players like Bhaichung Bhutia, who is promoted by Reebok, so that they can associate their name with players like him and get popularity. MELAS Melas are places where villagers gather once in a while for shopping. Companies take advantage of such events to market their products. Dabur uses these events to sell products like JANAM GHUTI (Gripe water). NCAER estimates that around half of items sold in these melas are FMCG products and consumer durables. Escorts also displays its products like tractors and Motorcycles in such melas. PAINTINGS A picture is worth thousand words. The message is simple and clean. Rural people like the sight of bright colors. COKE, PEPSI and TATA traders advertise their products through paintings.
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BOTTOM OF PYRAMID
The Bottom of the Pyramid (BoP) has emerged as a dominant concept in business, propelled by C.K Prahalads The Fortune at the Bottom of the Pyramid. The BoP is the largest, but poorest socio-economic group. In global terms, there are 3.7 billion people who are largely excluded from formal markets, the group earns less than $2 per day and 60% of the 3.7 billion people live in China and India. Given the enormous attention the concept has attracted, it has the potential to impact the worlds billions of poor people. India in particular has created a mark on the global map with the concept and has been successful in changing the perception of India from a manufacturing and back-end process hub to a research and innovation Hub. The Indian and Multinational corporations have not only limited innovative solutions for the Indian market but are now taking these innovations to international platform and are treating India as a BoP Innovation and Research Hub.
Mitti Cool Refrigerator The Year 2010 saw many new innovations coming from corporations like Tata, Hindustan Unilever (Indian Subsidiary of Unilever), Godrej & Boyce, Narayana Hrudayalaya, and Vortex among others who have been working on innovative offerings to the BoP. The concept has been simple with working on a design and product with prior knowledge of the cost rather than the other way round and providing high quality and value for money propositions. The most remarkable innovation of Tata Swach range of Water Purifiers from Tata Chemicals-A Tata Group Company satisfying the essential necessity of purified water for the BoP for as low as Rs.499 ($10). This innovation not only provided a source of potable drinking water but also provided a low cost solution to the already existing purifiers in the Indian market without the need of electricity, which is a scarce resource in India.
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Another landmark innovation was in the area of refrigerator from Godrej & Boyce called ChotuKool. It provides all the functionality of a normal refrigerator but can run on a battery and doesnt need continuous power supply unlike the traditional refrigerator. Priced at Rs.3250 ($69), weighing just 3-4Kgs and works on just 20 parts as compared to over 200 parts in a traditional refrigerator it is the ultimate game changer, not only for the BoP but also for top of the pyramid consumers who could utilize it for camping and other leisure activities. It also provides an opportunity to the rural population to become the last mile connectivity of their supply chain and provides $3/refrigerator commission to the rural agent. Narayana Hrudayalaya, The world renowned Heart Institute is setting up an ultra low cost Hospital near Mysore which will be a super-specialty hospital to provide medical treatments at a very low cost. The hospital wont be investing much in the infrastructure with the help of prefabricated material in the construction. The Intensive Care unit will be the only department to have concrete structure which will help this 300 bedded hospital to be constructed at a minimal cost of Rs.16 crore. The Hospital intends to extend this cost cuttings and provide medical services at a low cost wherein a Heart Operation which costs around Rs.2,00,000 will eventually cost Rs.50,000 to the end customer in this hospital. Vortex is a startup incubated at Indian Institute of Technology, Chennai which has been successful in making rural banking a reality with the low cost ATM. The startup has over 6 patents registered and operates at a low cost at the same time the machine is able to work at ambient temperatures of up to 50 degree Celsius unlike the traditional machines which are high on power consumption as well as needs air conditioning system to keep it cool. The company has also brought in Solar ATM and Biometric ATM now under its portfolio for catering to the rural needs. Apart from the latest ground breaking innovations for the BoP, The earlier innovations have been a runaway success like the sachets of Shampoo priced at Rs.1/Rs.2. The budget business hotel chain, Ginger Hotel from Indian Hotels, Project Shakti from Hindustan Unilever who has got the rural Self Help Groups (SHG) to act as its last mile connectivity in rural India and now has a commanding position in the Indian Rural market, The Nokia Life Tools from the Nokia India which has empowered the rural India with basic information, and not to be forgotten the world renowned Tata Nano, the Wonder car known for its marvelous engineering. Government on their part has been providing a lot of subsidies for rural initiatives and promoting programs like Financial Inclusion, Unique Identification (UIDAI), Internet and mobile connectivity for the BoP.
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Case Study-1: AKASHGANGA

This case study is about a product and service named Akashganga sold by a small, entrepreneurial business named Shree Kamadhenu Electronics Private Ltd. (SKEPL). Akashganga is for dairy farmers and it is intended to enable to them to increase their efficiency and productivity. The Indian diary industry is plagued by several problems, the major ones being low productivity of Indian cows, the delays in processing milk, low quality caused by manual handling, corruption and mismanagement, and, of course, endemic dilution of milk with water. Akashganga attempts to alleviate some of these issues. Akashganga is a computerized system. When a farmer gets milk into the collection point, it's weighed and the amount of fat measured and immediately an entry is made on the farmer's swipe card. The money can be collected immediately. This is marked contrast to the previous system where the financial calculation was done later to avoid holding up the queue of farmers ready for milking; the calculation was done by hand and was somewhat complicated. With the new system, calculation is done automatically which makes it possible to pay the farmer on the spot rather than having him wait for a couple of days. Also the potential for cheating is reduced. An entry is made electronically on the farmer's swipe card. When SKEPL wanted to market this service, it ran up against the skepticism of the Indian rural people against unproven technology. This is the classic catch-22 situation as the farmer does not trust the tool till he tries it, and is reluctant to try it till he trusts it. SKEPL got around this problem by offering free trials and delayed payment schemes stretching up to several months. The company also provided responsive and efficient after-sales service. It established a service network covering the rural areas, and typically would attend to a compliant within a few hours of receiving it. It's important to note that the company's local presence whether for marketing, sales or service helped tremendously, since the villagers would not be disposed to make a journey to a town or city to learn about their products. The company also used a name Akashganga that Indian villagers can relate to. This helped earn the trust of the villagers. Also, Shree Kamadhenu Electronics used local people for marketing, sales, service, etc. This was a very important factor that helped the farmers relate to and trust the company. Of course, the company had a solution that was superior in terms of time, transparency, fairness, etc, and that played a big role in their success. As a result of these factors, SKEPL gained a threshold in this large market and earned respect among farmers.
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Case-Study-2: ITC e-Choupal

About ITC-IBD ITC is one of India's foremost private sector companies with a market capitalization of over US $14 billion and a turnover of US $3 billion. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Branded Apparel, Greeting Cards and other FMCG products. Its International Business Division (ITC IBD) was created in 1990 as an agricultural trading company; it now generates US $150 million in revenues annually. Initially, the agricultural commodity trading business was small compared to international players. By 1996, the opening up of the Indian market had brought in international competition. Large international companies had better margin-to-risk ratios because of wider options for risk management and arbitrage. For an Indian company to replicate the operating model of such multinational corporations would have required a massive horizontal and vertical expansion. In 1998, after competition forced ITC to explore the options of sale, merger, and closure of IBD, ITC ultimately decided to retain the business. The ITC-IBD taken the challenges to use information technology to change the rules of the game and create a competitive business that did not need a large asset base. Today, IBD is a US $150 million company that trades in commodities such as feed ingredients, food-grains, coffee, black pepper, edible nuts, marine products, and processed fruits. ITC e-Choupal and the Strategy ITC followed a different media/communication strategy which is more elaborate and extensive in rural marketing so far, which benefits both the farmers and the organization. The strategies is use the Information Technology and bridge the information and service gap in rural INDIA which gives an edge to market its products like seeds, fertilizers and pesticides and other products like consumer goods. With this strategy it can also enhance its competitiveness in global market for agri exports. A pure trading model does not require much capital investment. The e-Choupal model, in contrast, has required that ITC make significant investments to create and maintain its own IT network in rural India and to identify and train a local farmer to manage each e-Choupal.
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The company has initiated an e-Choupal effort that places computers with Internet access in rural farming villages; the e-Choupals serve as both a social gathering place for exchange of information (choupal means gathering place in Hindi) and an e-commerce hub. The computer, typically housed in the farmers house, is linked to the Internet via phone lines or, increasingly, by a VSAT connection, and serves an average of 600 farmers in 10 surrounding villages within about a _ve kilometer radius. Each e-Choupal costs between US $3,000 and US $6,000 to set up and about US $100 per year to maintain. Using the system costs farmers nothing, but the host farmer, called a sanchalak, incurs some operating costs and is obligated by a public oath to serve the entire community; the sanchalak benefits from increased prestige and a commission paid him for all e-Choupal transactions. The farmers can use the computer to access daily closing prices on local mandis (government mandated markets), as well as to track global price trends or find information about new farming techniques either directly or, because many farmers are illiterate, via the sanchalak (the village farmer who runs the e-Choupal and acts as ITCs representative in the village). In addition they can also know about weather forecast (local) and best practices in the world from e-Choupal website. They also use the e-Choupal to order seed, fertilizer, and other products such as consumer goods from ITC or its partners, at prices lower than those available from village traders; the sanchalak typically aggregates the village demand for these products and transmits the order to an ITC representative. At harvest time, ITC offers to buy the crop directly from any farmer at the previous days closing price; the farmer then transports his crop to an ITC processing center, where the crop is weighed electronically and assessed for quality. The farmer is then paid for the crop and a transport fee. Launched in June 2000, 'e-Choupal', has already become the largest initiative among all Internet-based interventions in rural India. 'e-Choupal' services today reach out to more than 3.5 million farmers growing a range of crops - soyabean, coffee, wheat, rice, pulses, and shrimp in over 31,000 villages through 5200 kiosks across six states (Madhya Pradesh, Karnataka, Andhra Pradesh, Uttar Pradesh, Maharashtra and Rajasthan).
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Figure 1: Transactional costs under Mandi & e-Choupal system Operational costs and comparison with Mandis
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Vision and Planning Behind the e-Choupals Implementing and managing e-Choupals is a significant departure from commodities trading. Through its tobacco business, ITC has worked in Indian agriculture for decades, from research to procurement to distribution. ITCs translation of the tactical and strategic challenges it faced and its social commitment into a business model demonstrates a deep understanding of both agrarian systems and modern management. The principles followed in implementing the eChoupals are Re-engineer, Not Reconstruct Present Mandi systems have some success factors in it. ITC decided to build e-Choupal on existing system. Already ITC has trading agents in local mandis for its tobacco business. It retained the efficient providers and created roles for inefficient people. It recruits and engages members of landscape thereby making their expertise available to ITC. With this principle ITC can avoid the reinventing the system in areas where it can add no value with its presence i.e., in areas where efficient agents are there. Address the Whole, Not Just One Part The farmers various activities range from procuring inputs to selling produce. Currently, the village trader services the spectrum of farmers needs. He is a centralized provider of cash, seed, fertilizer, pesticides, and also the only marketing channel. As a result, the trader enjoys two competitive benefits. First, his intimate knowledge of the farmer and village dynamics allow him to accurately assess and manage risk. Second, he reduces overall transaction costs by aggregating services. The linked transactions reduce the farmers overall cost in the short term, but create a cycle of exploitative dependency in the long-term. Rural development efforts thus far have focused only on individual pieces rather than what the entire community needs. Cooperatives have tried to provide agricultural inputs, rural banks have tried to provide credit, and mandis have tried to create a better marketing channel. These efforts cannot compete against the traders bundled offer. Functioning as a viable procurement alternative, therefore, must eventually address a range of needs, not just the marketing channel. ITC e-Chopal provide services as a bundle what the entire agricultural community needs.
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An IT-Driven Solution Delivery of real-time information independent of the transaction. In the mandi system, delivery, pricing, and sales happen simultaneously, thus binding the farmer to an agent. E-Choupal was seen as a medium of delivering critical market information independent of the mandi, thus allowing the farmer an empowered choice of where and when to sell his crop. Risk analysis & challenges Radical shifts in computing access will break community-based business models. The sanchalaks are ITCs partners in the community, and as their power and numbers increase, there is a threat of unionization and rent extraction. The scope of the operation: the diversity of activities required of every operative and the speed of expansion create real threats to efficient management. If ITC fails to fulfill the aspirations of farmers, they will look elsewhere for satisfaction.
1) 2) 3) 4)
Strategies to be followed a) Adopt the ability to determine the grades of the crop (grains) in the field which commands the price premium for the crop. e.g.: Wheat. b) Build the concept of traceability into the supply chain which will allow addressing the food safety concerns. e.g.: For perishables such as shrimps, which decay quickly with in short period of time, it needs to define standards of production and product quality. c) Provide the service as market-place for commodities where ITC is not a sole buyer. It will reduce the operational cost of e-Choupal such as IT infrastructure and transaction costs. e.g.: coffee grains. d) Marketing value added products and services to rural INDIA, in addition to marketing agri inputs, through e-Choupal system. e) Sourcing IT-enabled services from rural INDIA. Telemedicine, ecotourism, traditional medicine and traditional crafts are some of the services that can be sourced from rural INDIA. Conclusion ITC e-Choupal, an innovative strategy which is elaborative and extensive in rural markets so far. Critical factors in the apparent success of the venture are ITCs extensive knowledge of agriculture, the e_ort ITC has made to retain many aspects of the existing production system, including retaining the integral importance of local partners, the companys commitment to transparency, and the respect and fairness with which both farmers and local partners are treated.
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ANALYSIS & OPPORTUNITIES

As it is clear from the examples taken, for the product to be successful in rural market, it has to be customized for that particular market. Each product needs individual attention and success in one market cannot be emulated in other markets. Most important factors that work for a product are right brand promise that is relevant for the local population and discreet brand visualization. Brand visualization would include factors like name of the product in local language, color combination according to local settings and a tag line, which delivers the message which is easily understood by the people. Companies need to identify the opinion leader in each area and target him as the first point of contact for villagers. One potential area that companies need to tap is advertizing the local events like bullock races, melas or festivals. Another way is to advertize in places where people commune like hand pumps, ponds or haats.
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FUTURE OF RURAL MARKETING

The Indian rural market is a complex mosaic of mind-sets, cultures, and lifestyles. While education, employment, income, agricultural land ownership may still be the major deciding factors accounting for social differentiation, they do not yield reciprocal cohort behavioral patterns, with respect to consumption patterns, purchasing decisions and priorities of product ownership. At 125.2 million (1999-00), India has more rural households than all households in Western Hemisphere combined. Half of India 's GDP comes from rural and semi-urban areas. The per capita annual income in rural India is Rs 9,481, against urban India 's Rs 19,407. But, lower education and housing expenses makes the disposable income almost equable. Rural markets represent a distinct dynamic in how they come into being and make unique demands on how the product is designed and how the brand is positioned and promoted. Greater the strategic attention to these unique demands, assure greater the chances of product's success in the rural market. Fringe acceptance of consumer products or brands is no indication of market potential. It actually would only result in higher incidence of brand and product mortality as more firms try to choke those segments with competing brands. The effort has to be directed towards reaching out to more and more of rural population offering them the products which they find value for money and are converted to brand loyalist in due course of time. But the hurdles faced are plenty. Distribution and presence of counterfeits products being among the most important. So the emphasis has to come in the form of innovative strategies in not only promoting the product and the brand to the villagers but also making it available once the pull effect starts working at its fullest. Also partnership with retailers at the rural level must be formulated to tackle counterfeits, which dilute the hardearned brand equity. High distribution costs, high initial market development expenditure, lack of market research, thinly populated and widely spread villages in the Indian mainland make it difficult for the marketer to deliver the goods at reasonable costs. Mass Communication and promotion programs which eventually lead to brand building are difficult to achieve which ultimately results in low level of exposure to different product categories and product brands in the presence of counterfeits and spurious products all around the rural market and at times you have more than a dozen substitutes for a branded product.
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An essential element of rural marketing is wide distribution of products. In fact, the successes of Chik shampoo, the second largest shampoo brand, and Ghadi detergent, the third largest detergent brand, show that distribution, more than advertising, is the key of building volumes. HLL with its best distribution network reaches just over 1 lakh villages in total of 6.38 lakh villages. Solution lies in the formation of marketing agencies, delivering the value of old saying United we stand, Divided we fall. Our organizations and academic institutions are built on a competitive culture in which withholding information is a powerful asset. But rural marketing needs collaboration. The traditional command/military structure of corporations operating in urban markets must change at strategic, executive and operational decision-making levels. It's a rational choice for all companies to pool in their meager resources to form an independent agency to make a distribution and logistics network. These agencies would run as separate entities or companies with seed capital from the participants. This newly formed agency would deliver products of partnering companies in the most cost effective manner with maximum utilization of space available in cargo trucks. An otherwise cost inefficient route would suddenly become very attractive for 12-15 companies combining their cargos. This is based on hypothesis that fully loaded 10 ton delivery truck is cheaper than 20 half filled 1 ton trucks, deployed by as many different companies. Distributing agency would drive its profits from the pre-fixed common distributor margins, making agency totally impartial. Agency would maximize its profits by allocating the best mix of products as well as correct service route and by carrying the products timely, pulled by the demand by village Kirana Wala . Being profit driven, Agencies would handle the most demanded products by Kirana Wala and can even add or drop existing brands. So a heavily advertised product would ultimately capture maximum space in the cargo truck as well as on shopkeeper's shelf. Variable margins depending on the cargo space would make it suitable for all companies to distribute from shampoo sachets to television sets. The participating companies using sophisticated warehousing systems would service warehouses. Another major plague of rural marketing has been widespread availability of fakes. Shopkeeper plays a very important role here, as consumer asks for things, not brands like Laal wala sabun dena, Lal Dant Manjan Dena. To counter this nuisance agency would certify specific village Kirana Wala as Genuine Products Store. Failure to comply at surprise checks would result in immediate termination of contract.
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In return, Agency would provide special incentives to these stores with better margins, up gradation of store and longer credit period. In this way more and more stores can be brought in the preference bracket, mitigating the danger of stores selling cheap fakes. Store advertisement campaigns could be funded by the agency like reaching every village household through free sample sachets using local school children. Special incentives could be given to all genuine product stores on reaching sales target. Genuine Product Stores could be collectively advertised at the end of every participating company's advertisement, educating people about them. There is huge potential and definitely there is lot of money in rural India but the smart thing would be to weigh in the roadblocks as carefully as possible. The companies entering rural market must do so for strategic reasons and not for tactical gains as rural consumer is still a closed book. It is only through unwavering commitment that the companies can make a dent in the market. However it is beyond doubt that the treat rural markets are not dumping grounds for low-end products basically designed for an urban audience. The winning strategy is to design rural specific products as well as to leverage on combined resources of all otherwise competing companies.
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CONCLUSION
With an approximate population of 700 million people, the rural Indian market is important for multinational corporations to tap. Although rural Indians need to purchase consumer goods just as their Western counterparts do, rural Indian consumers have a different set of needs that must be met by both package and product. Spending time researching the rural Indian consumer as well as the market before diving in can help to prevent unnecessary struggles and failures. If the opportunity exists, partnering with an existing Indian company upon market entry can provide several key advantages to a company. Understanding the available distribution networks in rural India is crucial to making a successful entry into the rural Indian market. Packages need to be designed to withstand more distribution abuse due to poor roads and more primitive modes of transportation. Finally, when creating a package for rural India, small sizes allow consumers to try new products. It also caters to the fact that most rural Indians have low disposable incomes and little storage space at home. By applying these lessons that have been learned from multinational corporations in the past, the task of entering the rural Indian market should be promising.
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BIBLIOGRAPHY
Rural marketing: environment, problems and strategies (2nd edition) by T P Gopalswamy. Causes in rural marketing: an integrated approach (1st edition) by CSG Krishnamurthy and Lalithha Ramakrishnan. Rural marketing: targeting the non urban consumer (1st edition) by Sanal Kumar Velayudhan. The rural marketing book (1st edition) by Pradeep Kashyap and Siddharth Rout.
REFERENCES
www.google.com Business world Indian journal of marketing Business week ICFAI journal
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INTERNATIONAL SCHOOL OF BUSINESS & MEDIA

POST GRADUATE PROGRAMME IN BUSINESS MANAGEMENT DISSERTATION ON RURAL MARKETING

SUBMITTED BY: PRANAV THAPAR (11102) MARKETING SPECIALIZATION (PGPBM 2010-12)

GUIDED BY: PROF. SUNNY ARORA

RURAL MARKETING IN INDIA

Prof. Sunny Arora

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

PRDUCTS AND USES

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

FEATURES OF RURAL MARKETS

RURAL MARKETING IN INDIA

PROBLEMS IN RURAL MARKET

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

THE 4As OF RURAL MARKETING

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

Case Study-1: AKASHGANGA

RURAL MARKETING IN INDIA

Case-Study-2: ITC e-Choupal

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

ANALYSIS & OPPORTUNITIES

RURAL MARKETING IN INDIA

FUTURE OF RURAL MARKETING

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

RURAL MARKETING IN INDIA

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