A

RESEARCH PROJECT REPORT

ON
“Marketing Practices by FMCG Companies
for Rural Market”

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF
MASTER OF BUSINESS ADMINISTRATION DEGREE
PROGRAMME
(2017-2019)

INSTITUTE OF BUSINESS MANAGEMENT

C.S.J.M UNIVERSITY KANPUR

SUBMITTED TO:- SUBMITTED BY:-

Prof. Mukesh Ranga Deepak kr yadav

Roll No.-7121009

MBA (B.E)4TH SEM

Page 1
 D E C LA R AT I O N

I, Deepak kr yadav, a student of MBA (B.E.) IVth Sem. at CSJM University, Kanpur
hereby declare that I have completed the research report on the topic of “Marketing
Practices by FMCG Companies for Rural Market” in the academic year 2017-2019.
The information submitted is herein is true, to the best of my knowledge.

Deepak kr yadav
Roll No:- 7121009
M.B.A(B.E.)- IVth SEM

ACKNOWLEDGEMENT

Page 2
 At the first instance, I would Like to take this opportunity to express my sincere
gratitude and respect to although who helped me throughout the duration of this project.
I would like to thank my teacher has been a source of inspiration for the completion of this
project.
The input given by them have been of immense have to me. They helped me get practical
exposure in the domain of banking, thus enhancing my knowledge and abilities.
I would like to acknowledge my deep sense of gratitude for providing this help and support
throughout my research period.
They guided me and gave valuable time throughout the preparation of report.
However, I take the responsibility of my shortcoming.

CONTENTS

Page 3
PAGE
CH-0 ABSTRACT 4

CH-1 LITERATURE REVIEW 7

CH-2 RURAL MARKETING- INDIAN PERSPECTIVE 14

CH-3 ANALYSIS OF THE RURAL MARKET IN INDIA 17

CH-4 EVOLUTION OF INDIAN AND RURAL MARKETING 19

CH-5 PROBLEMS OF RURAL MARKETING 26

CH-6 STRATEGIES FOR SELLING IN RURAL INDIA

28

CH-7 RECOMMENDED STRATEGIES FOR RURAL MARKETING

32

CH-8 ADVERTISING IN RURAL INDIA

34

CH-9 PRICING BY FMCG IN INDIA

35

CH-10 PILLARS OF FMCG

39

A-MARKETING
B-MARKETING REASEARCH
C-MARKET SEGMENTATION AND POSITIONING
D-ADVERTISING AND PROMOTION

CH-11 FMCG CONSUMPTION IN RURAL INDIA 49

CH-12 DATA INTERPRETATION

55

CH-13 CONSUMER DEMOGRAPHICS 66

CH-14 BIBLIOGRAPH
70

Page 4
 CHAPTER-0

ABSTRACT

A thorough understanding of the rural markets has become an important aspect of

marketing in the Indian marketing environment today. This attraction towards the rural
markets is primarily due to the colossal size of the varied demands of the 230 million rural
people. In fact, the rural markets are expanding in India at such a rapid pace that they have
overtaken the growth in urban markets. This rate of growth of the rural market segment is
however not the only factor that has driven marketing managers to go rural. The other
compelling factor is the fact that the urban markets are becoming increasingly complex,
competitive and saturated.

The vast untapped potential of the rural markets is growing at a rapid pace. The policies of
the government largely favour rural development programmes. The rural market is
emerging stronger with a slow but an increase in disposable income of the rural people. In
addition, better procurement prices fixed for the various crops and better yields due to many
research programmes have also contributed to the strengthening of the rural markets. Thus,
with the rural markets bulging in both size and volume, any marketing manager will be
missing a great potential opportunity if he does not go rural.

This however raises a fundamental problem of fathoming the differences between urban
and rural markets in India. Rural and urban markets in our country are so very diverse in
nature, that urban marketing programmes just cannot be successfully extended to the rural
markets. The buying behavior demonstrated by the rural Indian differs tremendously when

Page 5
compared to the typical urban Indian. Further, the values, aspirations and needs of the rural
people vastly differ from that of the urban population. Buying decisions are still made by
the one who is oldest male member in the rural family whereas children influence buying
decisions in urban areas. Further, buying decisions are highly influenced by social customs,
traditions and beliefs in the rural markets.

Another contrasting feature is the precision in the assessment of purchasing power of the
consumers. In urban markets, income levels are generally used to measure purchasing
power and markets are segmented accordingly. However, this measure is not adequate for
defining the purchasing power in rural areas because of the single fact that rural incomes
are grossly underestimated. Farmers and rural artisans are paid in cash as well as in kind.
However, while reporting their incomes, they report only cash earnings, which then affects
the calculation of their purchasing power. This is the reason why marketers are often
surprised to find that their products are sometimes consumed by people who, according to
their surveys and estimates do not have the purchasing power to do so. Every marketing
manager must therefore make an attempt to understand the rural consumer better so that he
can plan his strategies in such a manner that they produce the desired results.

For most companies wanting to enter the rural markets, distribution causes a serious
problem. Distribution costs and non availability of retail outlets are major problems that
are faced by the marketers these days. But if one takes a closer look at the characteristics
of the rural market, it will be made clear that distribution is not a problem at all.

In rural India, annual melas are organised with a religious and festive importance are quite
popular and provide a very good platform for distribution. Rural markets come alive at
these melas and people visit them to make several purchases by rural people. According to
the Indian Market Research Bureau, around 8000 melas are being held in rural India
annually. Besides these melas, rural markets have the practice of fixing specific days in a
week as Market Days when exchange of goods and services are carried out. This is yet
other potential low cost distribution channel which is available to the marketers. Also,

Page 6
every region consisting of several villages is generally served by one satellite town where
people prefer to go to buy their durable commodities. If marketing managers use these
towns they will be able to cover a large section of the rural population very easily.

While planning strategies that are promotional in rural markets, marketers should be very
careful in choosing the vehicle used for communication. They must remember that only
16% of the rural population has access to a vernacular newspaper. Although television is
undoubtedly a powerful medium, the audio visuals must be planned to convey a right
message to the rural folk. The marketers must try to rely on the rich people and traditional
media forms like puppet shows and folk dances to which the rural consumers are familiar
to and are comfortable, for putting a high impact on product campaigns.

Thus, a radical change in attitudes of marketers towards the vibrant and burgeoning rural
markets is called for, so they can successfully impress on the 230 million rural consumers
spread over approximately six hundred thousand villages in rural India.

CHAPTER-1

REVIEW OF LITERATURE

LITERATURE REVIEW

(I) ‘Strategies For Rural Marketing By an Organization’

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 effort ITC has made to retain many aspects of the existing

Page 7
production system, including retaining the integral importance of local partners, the
company’s commitment to transparency, and the report and fairness with which both
farmers and local partners are treated.

(II) The Marketing Mastermind, Hindustan Lever rural marketing

Initiatives by "A Mukund" Marketing Mastermind has given the
perspectives in which HLL has approached towards rural markets.

Promotion of brands in rural markets requires the special measures. Due to the social
and backward condition the personal selling efforts have a challenging role to play in this
regard. The word of mouth is an important message carrier in rural areas. Infect the opinion
leaders are the most influencing part of promotion strategy of rural promotion efforts. The
experience of agricultural input industry can act as a guideline for the marketing efforts of
consumer durable and non-durable companies. Relevance of Mass Media is also a very
important factor.

(III) The Economic Times (2003), "The rural market likes it strong" the
strength of rural markets for Indian companies. Financial express,
June 19, 2000 has published the strategy about FMCG majors,
HLL, Marico Industries, Colgate Palmolive have formula had for
rural markets.

The Indian established Industries have the advantages, which MNC don't enjoy in
this regard. The strong Indian brands have strong brand equity, consumer demand-pull and
efficient and dedicated dealer network which have been created over a period of time. The
rural market has a grip of strong country shops, which affect the sale of various products
in rural market. The companies are trying to trigger growth in rural areas. They are
identifying the fact that rural people are now in the better position with disposable income.
The low rate finance availability has also increased the affordability of purchasing the
costly products by the rural people. Marketer should understand the price sensitivity of a

Page 8
consumer in a rural area. This paper is therefore an attempt to promote the brand image in
the rural market.

(IV) RURAL MARKETING A CRITICAL REVIEW

‘Go rural’ is the slogan of marketing gurus after analyzing the socio-economic changes in
villages. The Rural population is nearly three times the urban, so that Rural consumers
have become the prime target market for consumer durable and non-durable products, food,
construction, electrical, electronics, automobiles, banks, insurance companies and other
sectors besides hundred per cent of agri-input products such as seeds, fertilizers, pesticides
and farm machinery. The Indian rural market today accounts for only about Rs 8 billion of
the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of the total share. So clearly
there seems to be a long way ahead. Although a lot is spoken about the immense potential
of the unexplored rural market, advertisers and companies find it easier to vie for a share
of the already divided urban pie.

The success of a brand in the Indian rural market is as unpredictable as rain. It has always
been difficult to gauge the rural market. Many brands, which should have been successful,
have failed miserably. More often than not, people attribute rural market success to luck.
Therefore, marketers need to understand the social dynamics and attitude variations within
each village though nationally it follows a consistent pattern looking at the challenges and
the opportunities which rural markets offer to the marketers it can be said that the future is
very promising for those who can understand the dynamics of rural markets and exploit
them to their best advantage. A radical change in attitudes of marketers towards the vibrant
and burgeoning rural markets is called for, so they can successfully impress on the 230
million rural consumers spread over approximately six hundred thousand villages in rural
India.

Page 9
 (V) Creating brands for rural India

Rural markets are delicately powerful. Certain adaptations are required to cater to the rural
masses; they have unique expectation and warrant changes in all four parameters of
product, price, promotion and distribution.

A lot is already emphasized on adapting the product and price in terms of packaging,
flavouring, etc and in sachets, priced to suit the economic status of the rural India in sizes
like Rs.5 packs and Re.1 packs that are perceived to be of value for money. This is a typical
penetration strategy that promises to convert the first time customers to repeated customers.

The promotion strategies and distribution strategies are of paramount importance. Ad

makers have learnt to leverage the benefits of improved infrastructure and media reach.
The television airs advertisements to lure rural masses, and they are sure it reaches the
target audience, because majority of rural India possesses and is glued to TV sets!

Distributing small and medium sized packets thro poor roads, over long distances, into
deep pockets of rural India and getting the stockiest to trust the mobility is a Herculean
task. Giving the confidence those advertisements will support. Sales force is being trained
to win the confidence of opinion leaders. Opinion leaders play an important role in
popularizing the brand. They sometimes play the role of entry barriers for new products.

(VI) History of FMCG in India

In India, companies like ITC, HLL, Colgate, Cadbury and Nestle have been a
dominant force in the FMCG sector well supported by relatively less competition and
high entry barriers (import duty was high). These companies were, therefore, able to
charge a premium for their products. In this context, the margins were also on the
higher side. With the gradual opening up of the economy over the last decade, FMCG
companies have been forced to fight for a market share. In the process, margins have

Page 10
been compromised, more so in the last six years (FMCG sector witnessed decline in
demand).

NESTLE INDIA

Nestlé India is a subsidiary of Nestlé S.A. of Switzerland. With six factories and a large
number of co-packers, Nestlé India is a vibrant Company that provides consumers in India
with products of global standards and is committed to long-term sustainable growth and
shareholder satisfaction.
After India’s independence in 1947, the economic policies of the Indian Government
emphazised the need for local production. Nestlé responded to India’s aspirations by
forming a company in India and set up its first factory in 1961 at Moga, Punjab, where the
Government wanted Nestlé to develop the milk economy. Progress in Moga required the
introduction of Nestlé’s Agricultural Services to educate, advise and help the farmer in a
variety of aspects. From increasing the milk yield of their cows through improved dairy
farming methods, to irrigation, scientific crop management practices and helping with the
procurement of bank loans. Nestlé set up milk collection centres that would not only ensure
prompt collection and pay fair prices, but also instil amongst the community, a confidence
in the dairy business. Progress involved the creation of prosperity on an on-going and
sustainable basis that has resulted in not just the transformation of Moga into a prosperous
and vibrant milk district today, but a thriving hub of industrial activity, as well. For more
on Nestlé Agricultural Services.

Hindustan Unilever Limited (HUL)

Page 11
 The Global arm of Hindustan Unilevers Limited is Unilever's and its mission is to
add Vitality to life. Their products meet everyday needs for nutrition, hygiene, and personal
care with brands that help people feel good, look good and get more out of life.

HUL has deep roots in local cultures and markets around the world which gives them a
strong relationship with their consumers, which are the foundation for their future growth.
They benefit from there wealth of knowledge and international expertise to the service the
local consumers - a truly multi-local multinational.

HUL believes that an organization’s worth is also in the service it renders to the
community. HUL is focusing on health & hygiene education, women empowerment, and
water management. It is also involved in education and rehabilitation of special or
underprivileged children, care for the destitute and HIV-positive, and rural development.

COLGATE PAMOLIVE INDIA LTD

From a modest start in 1937, when hand-carts were used to distribute Colgate Dental
Cream, Colgate-Palmolive (India) today has one of the widest distribution networks in
India. is a household name in India with one out of two consumers using a modern
dentifrice. Consistently superior quality, innovation and value for money products
emerging out of advanced technology employed, has enabled Colgate to be voted ‘The
Most Trusted Brand’ in India across all brands

Page 12
BRITANNIA

Britannia strode into the 21st Century as one of India's biggest brands and the pre-
eminent food brand of the country. It was equally recognized for its innovative approach
to products and marketing: the Lagaan Match was voted India's most successful
promotional activity of the year 2001 while the delicious Britannia 50-50 Maska-Chaska
became India's most successful product launch. In 2002, Britannia's New Business
Division formed a joint venture with Fonterra, the world's second largest Dairy Company

NIRMA

Nirma is one of the few names - which is instantly recognized as a true Indian brand,
which took on mighty multinationals and rewrote the marketing rules to win the heart of
princess, i.e. the consumer.

India is a one of the largest consumer economy, with burgeoning middle class pie. In such
a widespread, diverse marketplace, Nirma aptly concentrated all its efforts towards creating
and building a strong consumer preference towards its ‘value-for-money’ products.

Page 13
 CHAPTER-2

RURAL MARKETING - INDIAN PERSPECTIVE

What’s different about rural marketing?

Price have influencing role . Companies have, in fact, launched lower-priced

products targeted at the rural market. Some time back, Escorts Yamaha had priced its
model YD 125 at Rs 30,000 to clear the stock and the scheme was a runaway hit. Besides
pricing, the second most important thing is repetition of communication to increase recall
value.
The repetition should not be too soon as it then tends to get monotonous, nor should it be
too long. The ideal time is after one month and before three months. This helps establish
the image of the companies and allows the target audience to differentiate products. This
is important because of the widespread prevalence of spurious products in the rural market.
Innovative tools should focus on providing entertainment along with delivering the
message. In this regard, our concepts like rural mobile fairs, caravans, screens at the
Kumbh Mela etc have been well received by the consumers.

The Indian rural market have vast size and also demand offers provide great
opportunities to marketers. Two-thirds of Indian consumers live in these rural areas and
estimated almost half of the national income is generated fromthese rural areas. It is very
natural that rural markets consist an important part of the total market of India. Our nation
is having around 450 districts, which consist approximately 630000 villages which having
there own parameters such as literacy rate, , income levels, accesbility, connectivity with
nearest towns, etc.

The success mantra for a brand in the Indian rural market is still as unpredictable as
rain. It always seems difficult to gauge the rural market. Many companies, who should

Page 14
have been successful as they tried very hard, have failed very miserably. People’s attribute
in rural market success to luck. Therefore, marketers should understand the social aspects
and attitude changes within each village, but nationally it follows a consistent pattern.

While the rural market provide a big attraction to the marketers, it would be simple to
think that any FMCG company can easily move into the market and go away with sizable
share. Actually the market abound with variety of problems. The main problems facing
rural marketing are:

 Physical Distribution
 Channel Management
 Promotion and Marketing Communication

The problems of physical distribution and channel management adversely affect the
service as well as the cost aspect. The existing market structure dwell of primary rural
market and retail outlet. The structure includes stock points in the feeder towns to service
these retail outlets at village levels. But sometimes it becomes very difficult to maintaining
the necessitate service level for the delivery of the product at retail level.

One of the way could be using company delivery vans which can serve two purposes-
it can take the products to the customers in every nook and corner of the market and it also
enables the firm to establish direct contact with them and thereby facilitate sales promotion.
However, only the big giants can afford this channel. The companies having relatively
fewer resources can make joint distribution, where a joint venture estanlished between non-
competitive marketers to facilitate distribution.

As a general rule, rural marketing have more intensive personal and door to door
selling efforts compared with urban marketing. Marketers should understand the mentality
of the rural consumers and then perform accordingly. To effectively tap the rural market a
brand must associate itself with the same things the rural folks do. This can be possibly
done by utilizing the various rural local media to reach them in their own language and in
large numbers so that the brand can be establish association with the countless rituals,
celebrations, festivals, and other activities where they socialy assemble.

Page 15
 One very good example can be quoted of Escorts, where they concentrate on deeper
penetration .In September-98 they established rural marketing sales. They did not depend
on T.V or print advertisements rather give effort on focused approach depending on
geographical and market parameters like fares, melas etc. Looking at the ‘kachha’ roads of
village they positioned their mobike as tough vehicle. They present advertisements showed
Dharmendra riding Escort vehicle with the punch line ‘Jandar Sawari, Shandar Sawari’.
And as a result, they hit sales of 95000 vehicles annually.

One more example, which can be quoted best , example of HUL. A last year HUL
started ‘Operation Bharat’ to capture the rural markets. Under this campaign HUL passed
out, low–priced free sample packets of its toothpaste, fairness cream, Clinic plus shampoo
and hair oil, and Ponds cream to approxmatily twenty million households.

Hence ,looking at the threats and the opportunities which rural markets provide to the
marketers it can be understand that the future will very promising for those who can
understand the aspects of rural markets and use them to their best advantage.

Page 16
 CHAPTER-3

ANALYSIS OF THE RURAL MARKET IN INDIA

Rural market of India consists of about 80% of the population of the country. Apparently
in terms of the number of people, the Indian rural market is almost twice as large as the
entire market of USA or Russia. This market is not only large, but very much scattered
geographically. It is also as diverse as it is scattered. It exhibits linguistic, regional 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 rural market scene has undergone a steady and encouraging change over the last
three decades. Inspite of several barriers to faster growth, the growth has not only been
quantitative, but also qualitative. This change has been possible because of new
employment opportunities and new sources of income made available through rural
development programmes which have resulted in green and white revolutions and a
revolution in rising expectations of rural masses.

The rural buyers in India provide a tremendous range of .contradictions and paradoxes
which baffles the urban-based marketing people and, even more so, the foreign observers.
Rural consumers are less homogeneous than compare to their urban counterparts and
different from region to region.

The rural market is made up of two broad components i.e., the market for consumption
goods and the market for agricultural inputs. The rural markets are by and large less
exploited. Another important features of the rural market is that at least in the present
context, it is largely agriculture oriented. Green revolution and the consequent prosperity
is restrict to very few selected areas in the country. As a result, the effective demand for
consumer items has not spread all over rural India. Income generated from the money sent

Page 17
by the members of their families employed in towns and abroad also helped the rural people
to spend more on consumer goods.

It has been noted that the rural consumer is discerning and the rural market vibrant. At
the current rate of growth it will soon outstrip urban market. Surveys and audits for a
number of consumer products and services have, over the years, clearly highlighted the
emerging importance of this sector.

The rural market is no more sleeping. 'Go Rural' Is the latest slogan. Rural consumption
of all products is growing by leaps and bounds, since the urban market has reached near
saturation levels in a number of categories.

In short, the sheer size of the rural population will serve as a large potential demand base
for a variety of products:

Page 18
 CHAPTER-4

EVOLUTION OF INDIAN RURAL MARKETING

EVOLUTION STAGES:

 STAGE I : AGRICULTURAL MARKETING

 STAGE II : RURAL INPUTS MARKETING

 STAGE III : RURAL MARKETING

FLOW OF GOODS

 STAGE I : AGRICULTURAL MARKETING

RURAL TO URBAN

 STAGE II : RURAL INPUTS MARKETING

URBAN TO RURAL

 STAGE III : RURAL MARKETING

Page 19
 URBAN /RURAL TO RURAL

TYPE OF PRODUCTS:

 STAGE I : AGRICULTURAL MARKETING

AGRICULTURAL PRODUCE

 STAGE II : RURAL INPUTS MARKETING

AGRI. INPUTS LIKE SEEDS,MACHINES,

FERTILISERS ETC

 STAGE III :RURAL MARKETING

CONSUMER DURABLES, FMCG,CONSUMABLES FOR

CONSUMPTION AND PRODUCTION ETC

RURAL CLASSIFICATION

CONSUMER MARKET: ALL KINDS OF CONSUMMABLES, FOOD

PRODUCTS, TOILETRIES, COSMETICS, TEXTILES,

Page 20
 FOOT WEAR ETC WATCHES, BICYCLES,

RADIO, TV, KITCHEN APPLIANCES, FURNITURE,

SEWING MACHINE, TWO WHEELER ETC.

INDUSTRIAL MARKET: AGRICULTURAL AND ALLIED ACTIVITIES,

FARMING, COTTAGE INDUSTRIES, HEALTH

CENTRE, SCHOOL, COOPERATIVE, PANCHAYAT,

OFFICE ETC. SEEDS, FERTILISERS, PESTICIDES,

TRACTORS ANIMAL FEED, ETC

SERVICES MARKETS: REPAIRS, TRANSPORT, BANKING, CREDIT,

INSURANCE HEALTHCARE, EDUCATION,

COMMUNICATION , POWER ETC.

Page 21
 ATTRACTIVENESS OF RURAL MARKET

- LARGE POPULATION

- RAISING PROSPERITY

- GROWTH IN CONSUMPTION

- LIFE-STYLE CHANGES

- LIFE CYCLE ADVANTAGES

- MARKET GROWTH RATES HIGHER THAN URBAN

- RURAL MARKETING IS NOT EXPENSIVE

- REMOTENESS IS NO LONGER A PROBLEM.

Page 22
 DIFFERENCE BETWEEN RURAL AND URBAN MARKETING

ASPECT URBAN RURAL

PHILOSOPHY MARKETING MARKETING AND

SOCIETAL AND SOCIETAL, DEVELOPMENT,
GREEN,RELATIONSHIP RELATIONSHIP

MARKET

DEMAND HIGH LOW

COMPETITION ORG SECTOR UNORG.SECTOR

CONSUMERS

LOCATION CONCENTRATED WIDELY SPREAD

LITERACY HIGH LOW
INCOME HIGH LOW
EXPENDITURE PLANNED,EVEN SEASONAL
NEEDS HIGH LEVEL LOW LEVEL
INNOVATION ADOPTION FASTER SLOW

PRODUCTS

AWARENESS HIGH LOW

CONCEPT KNOWN LESS KNOWN
POSITIONING EASY DIFFICULT
USAGE METHOD EASILY GRASPED DIFFICULT TO GRASP
QUALITY PREFERENCE GOOD MODERATE
FEATURES IMPORTANT LESS IMPORTANT

Page 23
PRICE

SENSITIVE YES VERY MUCH

LEVEL DESIRED MEDIUM-HIGH LOW-MEDIUM

DISTRIBUTION

CHANNELS MULTI VILL SHOPS, SHANDIES,

HAATS, YATRAS
TRANSPORT FACILITIES GOOD AVERAGE
PRODUCT AVAILABILITY HIGH LIMITED

Page 24
PROMOTION
ADVERTISING ALL TV,RADIO, MULTI
LINGUAL
PERSONAL SELLING DOOR 2 DOOR OCCASSIONALLY
FREQUENTLY

SALES PROMOTION ALL GIFTS,DISCOUNTS,DEMO

PUBLICITY GOOD OPPORTUNITIES LOW

FACTORS CONTRIBUTING TO RURAL BOOM

The marketing boom in the rural areas is caused by such factors as increased
discretionary income, marketable surplus of product, like vegetables and eggs, rural
development schemes, unproved infrastructure, increased retailing and retailers, increased
awareness with information explosion, expanding TV networks, liberalised Government
policies for rural development, emphasis on rural markets by companies, new cadre of
entrepreneurship, competitive and creative sales promotion, packaging revolution and,
changing life styles in the rural areas. .

Page 25
 CHAPTER-5

PROBLEMS OF RURAL MARKETING

In the Indian context, rural marketing is 4 complex subject. For a business

organisation, rural marketing is beset with a number of problems. The prices of rural
marketing poses many problems due to the vastness of the country and a high potentiality
for providing an effective marketing system.

Besides, a few other problems stem from the under developed markets and illiterate
and gullible people constitute the major segment of the markets. More purchasing power
is not enough. It is not enough to have some consumption pioneers. The activation of
buying on a wide scale is an essential precondition for the exploitation of the rural market.

It is now unanimously accepted that the rural salesmanship in India has been
insufficient and inadequate and out of proportion to the agriculture revolution. This calls
for strong bias in favour of raising the rural demand as against the urban demand. The
traditional marketing activities of promotion, distribution, sales and servicing, undertaken
so far in the urban and semi-urban contexts are to be extended to cover a much wider area
in a rural environment by introducing appropriate innovation, selection and adoption. There
are about 5,76,000 villages in India, 79 percent of them with a population of less then
1,000 each.

MAJOR PROBLEMS IN TAPPING THE RURAL MARKET

1. High distribution costs

2. High initial market development expenditure

3. Inability of the small retailer to carry stock without adequate credit facility

4. Generating effective demand for manufactured foods

5. Wholesale and dealer network problems

Page 26
6. Mass communication and promotion problems

7. Banking and credit problems

8. Management and sales managing problems

9. Market research problems

10. Inadequate infrastructure facilities (lack of physical distribution, roads warehouses

and media availability)

11. Highly scattered and less populated markets

12. Low per capita and poor standards of living, social, economic and cultural back-

wardness of the rural masses

13. Lower exposure to different product categories and brands

14. Cultural difference between urban based marketers and rural constumers.

The development of the rural market will involve additional cost both in terms of
promotion and distribution. In rural marketing, often it is not promotion of a brand that is
crucial, but creating an awareness concerning a particular product field, for instance,
fertilizers and pesticides.

Urban and semi-urban based salesmen are not able to tap the full potential in the villages.
Here, it may be suggested that the marketers may select and employ the educated
unemployed from villages.

CHALLENGES

Rural market in India is very large and fast growing consumer market with over
75% of the population residing in rural and semi-urban areas. With the increase in
competition and saturation of urban market, corporates are now working hard to tap the
potential of rural market to increase their market shares. Business Managers are devising
aggressive marketing and promotional strategies to create brand consciousness and loyalty
among the rural consumers. On the other hand, with the increase in disposable income the
rural consumers are more brands sensitive and willing to pay for quality. To tap this market

Page 27
potential and increasing brand consciousness among rural consumers, major corporates are
today organising campaigns and participating in rural hats, melas and exhibitions for
market promotions, visibility and brand building

CHAPTER-6
STRATEGIES FOR SELLING IN RURAL INDIA

OPPORTUNITY

The Indian rural market with its vast size and demand base offers a huge opportunity
that MNCs cannot afford to ignore. With approxmatily 128 million households, the rural
population is almost three times the urban.

As a result of the growing wealthiness, powered by good monsoons and the increase
in agricultural production to 200 million tonnes from 176 million tonnes in 1991, Rural
India has a large consuming class with 41 per cent of India's middle-class and 58 per cent
of the total disposable income.

The importance of the rural market for FMCG and marketers is underlined by the
fact that the rural market includes for close to 70 per cent of toilet-soap sell and 38 per cent
of all two-wheeler purchased.

The rural market includes the sale of half the total market for TV sets, , pressure
cookers, bicycles, washing soap, blades, salt , toothpowder and tea, . the rural market for
FMCG products is seems to grow much faster than compare to their urban counterpart.

THE 4A APPROACH

The rural market may be alluring but it is not without its problems: Low per capita
disposable incomes that is half the urban disposable income; large number of daily wage
earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to
harvests and festivals and special occasions; poor roads; power problems; and
inaccessibility to conventional advertising media.

However, the rural customer is not unlike his urban counterpart in many aspects.

Page 28
 The more daring MNCs are meeting the consequent challenges of availability,
affordability, acceptability and awareness (the so-called 4 As)

(I) AVAILABILITY

The first challenge is to ensure availability of the product or service. India's 627,000
villages are scattered over 3.2 million sq km; 700 million Indians may still live in rural
areas, know about them is not easy. However, the state of road is poor, it is an even bigger
challenge to regularly supply products to the far-flung villages. Any serious marketer must
hit to reach at least 13,113 villages having a population of more than 5,000. Marketers must
decline the distribution cost with the incremental market penetration. Over the many years,
India's largest MNC, Hindustan Unilever, a subsidiary of Unilever, has built a strong
distribution channel system which helps its brands reach to the interiors most of the rural
market. To provide the service to remote village, stockists use autorickshaws and manual
rickshaw sometimes , bullock-carts and even boats in the backwaters of Kerala. Coca-Cola,
which counted rural India as a future growth driver, has provide a hub and spoken
distribution model to arrive the villages. To ensure full advantage, the company provide
supplies, twice in a week, large distributors those who act as hubs. These distributors and
dealers appoint and supply, once in a week, smaller distributors in adjoining areas. LG
Electronics considers all cities and towns other than the seven metros cities of india as rural
and semi-urban market. To capture these untouched country markets, LG has set up 45
local area offices and 59 rural/remote area offices.

(II) AFFORDABILITY

The second big challenge is to ensure affordability of the product or service. With low
consumable incomes, products need to be quote at the affordable price to the rural
customer, most of whom are depend on daily wages. Some companies have understand the
affordability problem by opening small unit packs. Godrej recently launched three brands
of Cinthol, Fair Glow and Godrej in small 50-gm packs, priced at Rs 4-5 meant specifically
for Madhya Pradesh, Bihar and Uttar Pradesh — the so-called `Bimaru' States.

Hindustan Unilever, among all the first MNCs to understand the potential of India's
rural market, has introducsed a variant of its largest selling soap brand, Lifebuoy at Rs 2
for 50 gm. This is done to mainly target the rural market. Coca-Cola has explained the
affordability issue in good manner by introducing the returnable 200-ml glass bottle priced
only at Rs 5. The initiative has worked: now 80% of new drinkers come from the rural
markets. Coca-Cola has also introduced Sun fill which is a powdered soft-drink
concentrate. The ready-to-mix and Sunfill is available in a two kind of sachet, a single-
serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm cost of Rs 15.

Page 29
 (III) ACCEPTABILITY

The third challenge is also difficult to gain acceptability for the product or service
offered. Therefore, there is a need to introduce products that suit the rural market. First
company which has reaped huge profit by doing so is LG Electronics. In 1998, it introduced
a customised TV for the rural people and christened it Sampoorna. It was a recorded hit
selling 100,000 sets in very first year. Because of the less supply of the electricity and lack
of refrigerators in the rural areas, Coca-Colintroduced low-cost ice boxes — a tin boxes
for new outlets and thermocol boxes for seasonal outlets.

The insurance companies that provide tailor-made products for the rural market have
performed well. HDFC STANDARD LIFE has topped private insurers by giving policies
worth Rs 3.5 crore in total period. The company collaborated with non-governmental
organisations and providing reasonably-priced policies in the form of group insurance
covers.

(IV)AWARENESS

With large parts of rural India is not accessible to conventional advertising media —
only 41 per cent rural households have access to TV — building awareness is also another
challenge. Fortunately, however, the rural consumer also has the same likes as the urban
consumer — watching movies and listening music — and for both the urban and rural
consumer, the family is the important or key unit of identity. However, the rural customers
expressions different from his urban counterpart. For the farmer outing is confined to local
fairs and festivals and watching TV is confined to the state-owned Doordarshan.
Consumption of branded products is not common rather treated as a special treat or
indulgence.

Hindustan Unilever relies heavily on its own company-organised media. These are
some promotional events organised by dealers. Godrej Consumer Products, which is trying
to push its soap brands into the far interior areas, uses radio to reach deeper to local people
in their language.

Coca-Cola brand uses a combination three TV, cinema and radio to reach 53.6 per
cent of rural households. It doubled its budget on advertising on Doordarshan, which alone
has reach to 41 per cent of rural households. This brand has also used banners, posters and
grabbed all the local forms of entertainment. Since price is the key issue in the rural areas,
Coca-Cola advertising stressed itsnew `magical' price point of Rs 5 per bottle in all media..
LG Electronics uses different way it uses vans and road shows to reach rural customers.
The company also uses local language in advertising. Philips India adopt wall writing and
radio advertising to gain its growth in rural areas.

The main dilemma for MNCs ready to tap the large and fast-growing rural market
whether they achieve this without hurting the company's profit margins. Mr Carlo Donati,

Page 30
Chairman and Managing-Director, Nestle, while admitting that his company's product
range is mainly designed for the urban consumers, cautions companies from plunging
headlong into the rural market to capturing rural consumers can be expensive. "Any
generalisation" says Mr Donati, "about the rural India you could be wrong and one should
first focus on high GDP growth areas, be it urban, semi-urban(town) or rural."

Page 31
 CHAPTER-7

RECOMMENDED STRATEGIES FOR RURAL

MARKETING

The past practices of treating rural markets as appendages of the urban market
is not correct, since rural markets have their own independent existence, and if cultivated
well could turn into a generator of profit for the marketers. But the rural markets can be
exploited by ruralising them, rather than treating them as convenient extensions of the
urban market. To expand the market by grabbing the countryside, more and more MNCs
are plunder into India's rural markets. Among those that have made some headway are
Hindustan Unilever, Coca-Cola, LG Electronics, Britannia, Standard Life, Philips, Colgate
,Palmolive and the foreign-invested telecom companies.

The focus should be on infecting marketing culture into the villages. The educated
unemployed youth of the near by villages could be trained to wrok for this mission.

Overcoming the income variability

Savvy firms create innovative opportunities for the rural segments that are lagging
behind in purchasing power. The local distribution for Akai in India, Baron International,
realized that the market for new television sets are primarily urban. However, there was a
considerable inertia when it came to replacing a working TV set of a previous
generation.But Baron also knew that there existed a market, primarily rural, for used
televisions. Rural retailers can only purchased traded-in sets from urban dealers. Urban
consumers can got something for their old TV sets, urban retailers made their own margins
from selling the traded-in sets, rural retailers also made a profit on used TVs and rural
consumers were provided TV sets they could easily afford.consequently, Baron’s sales
increased by 1500%

Wider competition for a product

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

Page 32
not just with Pepsi, but with a broad set of purchases that the rural consumers consider as
“treats”.

Preference for Low Unit Packs (LUP)

Trial is often encouraged by Low Unit Packs (LUP) or sachets. The sachet packaging
strategy caught the popular FMCG imagination in the early 1990s and it

Basic strategies as per the above mentioned :-

1. DECENTRALISING RURAL MARKETS

Decentralizing the Rural Market by detaching them from the urban bases. A give-and-take
two-way approach should replace the present one-way exploitation

2. SELECTION OF THE SALESMAN

The salesman in rural markets should be selected from the educated unemployed villagers,
trained well and appointed as salesmen. The town-to-villages shuttling salesmen are to be
replaced by stationary salesman in villages "

3. EDUCATE THE VILLAGERS

Companies should also adequately concentrate on educating the villagers to save them
from spurious goods and services .

4. NEW PRODUCTS MARKET

Rural markets are laggards in picking up new products. This pshyc will help the companies
to frame their marketing efforts accordingly. This will help to sell inventories of products
which is out dated in urban markets.

Page 33
 CHAPTER-8

ADVERTISING IN RURAL INDIA

MARKETING COMMUNICATION, LANGUAGE, AND CONSUMERISM.

A dramatical change is in the progress. Villagers who used to crack open peanut M
& M candies, eat the nut and throw away the shell are now demanding chocolate candies
that will melt in their mouths, not in their hands. Charcoal-cleaned teeth is not a common
sight; so is the case with twigs of niim (neem) and babul (babool) tree. Today, the bright
shine of Colgate or other international brand of toothpaste have more appeal than the
traditional methods of cleaning teeth. Even the native methods of cleaning teeth, such as
daatun karnaa and musaag lagaanaa, are also being replaced by new methods such as
paste karnaa, 'to brush teeth with paste'. Even a very simple query such as: Where are you
from? is not free the overtones of marketization and globalization in the rural discourse.
Globalization and consumerism and is occupying parts of India where, some would venture
to say, time seems to have ceased for centuries.

These small villages and small towns, which were once inconsequential dots on the
maps, are now getting the attention from global marketing giants and media planners.
Thanks to globalization, economic liberalization, IT revolution, female power, and
improving infrastructure, middle class of rural India today has more disposable income
than urban India. Rural marketing is getting new heights in addition to rural advertising.

Rural India shows the heart of India. Approximately 80% of Indian lives in over ahalf
of million villages (627,000), generating more than half of the national income. Based on
the interviews with consumers, media giants, and analysis of case studies, following
insights can be derived:

Various facets of rural media (conventional and non-conventional) and integrated

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

 Art of crafting messages to meet rural tastes and sensibilities. In particular, uniquely
Indian media forms such as video van technology, which has changed the face of
not only marketing but also political campaigning. Rural markets (haat) which are
the mobile McDonald's or Walmarts of India.
 Targeting women and religious groups in addition to rural population.
 Marketing taboo products such as 'bidi', cigarettes, sanitary supplies, and other such
products.
 Globalization and its effects on product naming, product monitoring, rural
discourse and media forms.
 Creativity and deception, together with guidelines for advertisers and marketers.

Page 34
 CHAPTER-9
PRICING BY FMCG COMPANIES

It's a volume-value game. Most Indian FMCG majors knows this very well. That
is why FMCG companies are gearing up for bigger advertisement and sales promotion
campaigns aimed at the rural buyer. high-pitch rural marketing exercise involves
repositioning of brands, repackaging of products and re-pricing them, all with considering
the rural wallets. The companies has been working constantly on extending its parallel rural
sales and distribution networks, which already finds a place among the industry’s top three.
Concerns be over the inability of rural markets to meet the soaring of rural ambitions of
the Indian FMCG majors. Is the perception that industry majors such as Hindustan Lever
are on the verge of diluting their rural focus true? Does the urban customer featured
hihghlighted on the cover of Hindustan Lever’s 1998 annual report reflect this shifting
focus? It is a tactical shifting, it is a trade-off between value and volume, between the
urban and the rural market". For, focusing all out of one of these markets at the cost of the
other could be big mistake . That is why a few FMCG companies are not putting in efforts
to go for the rural market. Instance of the case of Cadbury. The company has clarified that
it is not entering the rural market, at least for now. Meanwhile, Marico is trying harder to
get into the market of premium-end hair-oil . What do all these point at? Rural marketing
could open the doors of opportunities, but the path is paved with thorns. One major
limitation here is this that most FMCG players just do not have the critical size to start rural
marketing. That is why the most of FMCG players are expected to be concentrate both on
rural marketing and urban marketing: focus on the urban markets for value and, focus on
rural marketing for volumes. One result-oriented marketing strategy here is this: offer
value-additions to existing product lines to lure the urban consumer and alongside offer the
rural consumer wide-ranging choices within a single product category in a bid to generate
high volumes.

There are lot more problems existing in rural marketing. Success in rural market
calls for a sound network and a deep understanding of the rural mentality. Rural
consumer’s are price-sensitive and this is something that the FMCG players should be alive
to. Rural income are largely determined by the condition of monsoon and therefore rural
demand is not a steady horse to ride on. This makes rural marketing a uncertain. It is more
like a gamble for FMCG minors who do not have a clutch of strong brands across product
segments. These FMCG minorss are not able to cross-subsidize their products and go for
product experimentation. The result: FMCG minors have a limited reach, are not able to
erect entry barriers and have no ways to minimize the impact from loss of sale
opportunities. The diverse rural market calls for multi distribution networks, efficient
logistics and friendly infrastructure.

Another issue is the stark difference in the characteristics of the consumers. The
consumers stand apart as two different markets as is evident from their current consumption
baskets, and their attitude towards essential and luxury items. In addition, although the

Page 35
evolution is towards a better lifestyle therefore product and brand choice is there in both
these markets, the rate of evolution is highly different.

The real test will lies ahead. One major hindrance in rural marketing is: whether an
FMCG player will be able to provide the best price and aspirational values to the rural
consumer ,who has a peculiar tendency to emitate his urban counterpart. So, what should
FMCG players do now? These should not only price that products competitively, but also
provide their rural prospects maximum value for money. Certainly, reaching to 3.33 million
retail outlets is like an uphill task. The only way for Indian FMCG players to: put in place
an aggressive cost structure, which will enable them to offer low-price and value-for-
money products. But then, FMCG is a low-margin business with a high cost of raw
materials. Take the case of Marico: its material cost works out to a high level of 59 per
cent on sales. Therein lies the rural marketing paradox. However, the customer-centric and
the market-savvy FMCG companies have always been chased prospects when they
perceive there is a latent demand. For example, Hindustan Lever’s Rin, Surf and Lux
detergent are available even in India’s most interior villages. Hindustan Lever had been
given shape to its rural strategies , a few years ago when it perceived that its urban market
was going down due to an industrial slowdown.HUL s Operation Bharat that mainly
focused on personal care products made the most of surging rural incomes. These result
was there for every one to see. The company has able to clock in double-digit profits every
three years and gain double-digit revenues every four years. Like Britannia with its Tiger
brand of biscuits and Colgate-Palmolive with its low-priced and conveniently packaged
products designed for the rural people have been other pioneers in the rural marketing.
Thus, Britannia and Colgate-Palmolive have been able to derive more than 30 percent of
their revenues from rural markets.

Sure, there is a lot of income in rural India. But, there are obstacles. The main
obstacle is that the rural customer is still evolving. Only FMCGs with deeper pockets,
unblinking rural commitment and staying in power can enjoy this rural game. Cost of
setting up a huge retail network has saw many casulaties, the notable being the P&G which
abandoned its plan to fight the likes of Lever in the rural segment on its own. Instead, it is
aiming to piggyback on the Marico Industries which has got a strong presence in these
markets through its flagship brand "Parachute". The FMCG stalwart Hindustan Lever has
started its ambitious project "Project Shakti", a five-month old marketing initiative
involving women belonging to micro-credit self-help groups (SHGs) in the Nalgonda
district of Andhra Pradesh, similar to the highly successful experiment Bangladesh's
Grameen Bank used in rural areas of the country.

The recent price cuts by FMCG giants, Hindustan Unilevers Ltd (HUL) and Procter
and Gamble (P&G) proves, once again, that the Indian market still, by and large, supports
only volumes, not value propositions. No matter how hard one may try and brand a product
price sensitiviness over rules the brand preference — if its not quoted right price, it's just
not going to generate sufficient volumes.

Realisation has touched to P&G — although a bit late and but now it wants to
become more 'affordable'. By cut down prices from nearly 25 to 50 per cent on its two

Page 36
detergent brands, Tide and Ariel, P&G has not only redefine the
balance of brand power in India, but has also hurt HUL — and
itself — where it hurts the most … its bottom line.

As the two traditional rivals in the global FMCG market carry out their rivalry in
India, their share values have toppled; P&G which has launched the price war seen at 14
per cent decline in its share price, the HUL stock fell 19 per cent on the same day. The
share of an uninvolved Nirma, too, was brought down by eight per cent.

P&G's move from the premium niche to the mass based, is indeed a proactive
marketing work. But, as industry watchers point out, HUL's reaction in slashing its prices
is merely an attempt to protect its turf. If so, is 'marketing' really about how low you can
price your product?

Concepts like 'market research', 'value', 'branding' and 'loyalty' seem to have been
dumped with HUL's counter offensive of a price cut of its own. The rationale, in HUL's
words, is to face competition without blinking.

Till recently, the price war was restricted to HUL and P&G. Now, to round off the
probability that customer loyalties will shift with price cuts, even smaller players have
entered the market. Henkel Spic has cut down the prices on its detergent brand Henko
Stainchampion by 15 per cent to Rs.75 per kg.

With revenues already hard to generate and margins under tight pressure, this decision
is going to prove expensive for HUL. Analysts estimated that the price cuts will cost HUL
between Rs120 and 150 crore.

As a market leader in almost all the major product lines that it operates in, HUL did
what it had to do. But then, as a market leader with a share of40 per cent of the detergents
market, as opposed to P&G's 10 per cent, isn't the onus of growing the market on the market
leader?

The small sachet was an innovative stroke of marketing genius that reduced product
differentiation and changed the growth of the detergents market. Today, sachet sales made
about 15-20 per cent of the detergents market. But innovation seems to have deserted the
soaps and detergents industry ever since.

With penetration at it's highest and the market saturated, the Rs4,000-crore detergents
market has been stagnating for almost five years. Compounding this problem are the

Page 37
 smaller players like Ghari detergents, who offer products of similar
quality, at almost half the price.

On the face of it, the price cuts seem logical. Lower prices should get new users into the
market and propel others to upgrade

from the not-so-premium brands to Tide, Ariel or Surf Excel. P&G saw the volumes of its
sachet sales almost tripling when it halved the prices on the 20-gram packs of Tide and
Ariel, to Re 1 and Rs 1.50 respectively, in September 2003.

But will price cuts on larger packs prove equally successful? And if not, then will
there be another round of price cuts? HUL, at least, has definitely ruled that out, saying
there was "no room for more price cuts on Surf Excel".

A further round of price cuts indeed seems unlikely for both manufacturers since raw
material costs have been rising. The Consumer Guidance Society of India has already
initiated a probe, to find out if there has been any degradation in the quality of products to
enable the current round of price cuts.

Everybody knows that India is a 'volumes' market, and as marketers, both HUL and
P&G understand that pricing and distribution are the key to success. But unless marketers
come up with something radical, cutting prices will only get them thus far and no further.
A sustained growth will be hard to come by, and players will just have to make do with a
shrinking pie.

What is needed now from the rivals is something like a 'sachet', a conceptual
breakthrough, to stimulate fresh growth

Page 38
 CHAPTER-10

PILLARS OF FAST MOVING CONSUMER GOODS

The Fast Moving Consumer Goods (FMCG) business is built on two pillars - Brands and
Distribution. The under given is the comprehensive conceptual coverage of these and other
key marketing concepts

1. BRANDING

2. VALUATION OF BRANDS

3. DISTRIBUTION

4. MARKETING

5. MARKET RESEARCH

6. MARKET SEGMENTATION AND POSITIONING

7. ADVERTISING AND PROMOTIONS

Page 39
BRANDING

What is a brand ?

A brand is name, term, sign, symbol or design or a combination of them which is intended
to identify the goods or services of one seller or group of sellers and to differentiate them
from those of competitors’

A Trade mark is "a brand or a part of brand that is given legal protection because it is
capable of exclusive appropriation."

Manufacturers can use their own brands (known as Manufacturers’ brands) or brands of
their distributors (Distributors’ brands).

Why branding?

Manufacturers/ distributors use brand names for a variety of reasons from simple
identification purposes to having legal protection for unique features of the products from
imitations and help consumers recognize certain quality parameters. In some cases, brands
are just used to endow the product with unique story and character which itself can be a
basis for product differentiation.

Special importance of brands for FMCG products

While brands can represent all types of goods or entities, they have special importance for
FMCG products. Brand equities are stronger in FMCG products as the consumer is
reluctant to try unknown brands/ unbranded products for the following reasons

 these products individually account for a small part of household spending.

 most of these products are personal use
 In many cases, it is difficult to differentiate a product on technical or functional
grounds and therefore the consumer is reluctant to switch to an unknown brand.
 Successful brands generate strong cash flows, which enable the owner of the brand
to reinvest a part of it in the form of aggressive advertisements/ promotions. This
reinforces the perceived superiority of a brand.

How can a brand be created ?

FMCG companies spends enormous sums on building a brand equity by way of

-advertisements/publicity
-freesamples
-lowentryprice
- promotions (schemes for dealers, consumers etc)

Page 40
Advertisement and promotion can induce trials but for sustained loyalty, the manufacturer
has to offer superior quality and value for money. Most successful brands are founded on
a chance discovery of a new product/ process or assiduous research and development work.
Major players invest in R&D on their existing brands and improve the product quality
continuously to maintain their edge over competitors.

Branding strategies

a) Individual brands Vs Umbrella brands

Individual brand has its own identity and the corporate or common name is not used to
promote its equity. In case umbrella brand, there is a generic brand with association of
some values. For instance, Hindustan Lever follows individual branding strategy and has
several brands in the same category such as Lux, Liril, Rexona soaps etc. Competitor Nirma
has mainly followed the umbrella branding strategy such as Nirma Bath, Nirma Beauty,
Nirma Super, Nirma Shikakai soap etc. Only recently, the company for the first time
diverted from its strategy of umbrella branding with the launch of Nima.

Advantages of Individual branding strategy are

 Some of the products which flop in the market, do not have negative spill over
impact on other brands. For example, Nirma is associated with popular end of
products, which becomes a major deterrent for its expansion in the premium
segment.
 Consumers looking for a change are offered distinctly new brands by the same
manufacturer.

But individual branding requires expensive advertisements and brand building exercises.
Also, each new brand does not benefit from the positive perceptions of earlier brands.

Page 41
In umbrella branding, manufacturers have advantage of

 Establishing a new product quickly with association of quality/ benefits of the

mother brand (a classic case in Indian context has been Godrej).
 No need for name research, expensive advertisement for creating brand names,
recognition and preference.

b) Brand extensions

Brand extensions are used for a group of products such as Clinic Plus Shampoo, Clinic All
Clear., Clinic Plus hair oil or Close Up Renew, Close Up Oxyfresh, Close Up Sensation,
etc. The brand has some unique USP and there are cosmetic/ functional variations in the
extensions. The strategy is to build upon initial success of a brand entry by creating flanker
it ems and minor variants of the basic brand. Brand extensions may be used within
product categories (In some products like shampoos, there can be natural variants such as
shampoo for normal hair, dry hair or for specific problem solving like anti-dandruff). It
may also be used for different product segments (eg Sunsilk brand being extended to hair
oil)

c) Multi brands

Marketer introduces brands mostly in large markets, which compete with each other in
almost the same segment. In multi branding, there is cannibalization but overall result is
greater market share. Net incremental market share is enough to justify the investment in
the new brand. For instance Hindustan Lever has several brands (Lux, Breeze, Hamam,
Rexona, etc) in the same category ie toilet soaps.

Accounting for brand expenses

Expenses incurred by way of advertisements, free samples, promotions etc are treated as
revenue expenditure by accountants, as they do not create any tangible assets. The
intangible assets created in the form of a brand pays back in the form of repeat buying and
pricing power over a long period of time. An established brand is a precious asset and when
sold, fetches a price several times the value of tangible assets required to manufacture the
product.

There is no generally accepted methodology for valuing and accounting for brands. Also,
all methods recommended for valuing brands suffer from lack of objectivity and
consistency. There is considerable risk as expenses incurred on a unsuccessful brand has
to be written off almost entirely. But the same are paid back several times in case of
successful brands. In case of FMCG companies, assets are considerably understated as
they do not include value of brands. Inclusion of brands in assets will - dilute return on
networth - reduce gearing ratio.

It can be argued that high return on networth shown by established companies is overstated
as assets (ie Brands) are understated. Similarly, in case of companies in investment phase,

Page 42
making extensive investment in new brands, would exhibit depressed return on networth
as investment in brands is being written off, pulling down the profits.

Some companies defer writing off a part of the expenditure for brand building. The
expenditure not written off in the year is treated as deferred revenue expenditure.

VALUATION OF BRANDS

Valuation of brands

Value of a brand is represented by the incremental cash flow resulting from a product with
a brand versus a product without a brand name or with weaker brand name.

Brand valuation is a complex process and involves a lot of subjectivity. There are no widely
accepted techniques of brand valuation. There are several considerations which cannot be
standardized or quantified such as

 To pre-empt competition from taking over a brand

 Synergy with the company acquiring existing brands/ businesses
 Strategic entry into a new product category
 Prevent damage to existing brands. Many a times stiff competition results in price
cutting, aggressive promotions, lower margins for all the competing brands.
 Confidence in the acquirer of the brand to rejuvenate a languishing brand.

Value of an acquired brand

In case of an acquired brand, price paid for the brand over and above the value of tangible
assets, represents value of the brand. For accounting purposes consideration paid for the
brand is typically broken up as follows :

1. Goodwill
2. Trademark and patents
3. Technology and knowhow
4. Non compete agreement

Some of the popular methods for valuation of brands are discussed below :

Bert technique (Intra-brand Plc) values brands based on following factors. It gives scores
on each factor and values the brand as multiple of sales/ earnings based on the aggregate
score.

- USPs of the brand

- Stability of the brand
- Markets namely the industry in which the brand is in use.
- Internationality of the brand commanding a higher weightage than a local brand.

Page 43
- The long term trends of the brands
- Brands receiving consistent investment are more valuable.
- Legal protection commanded by brands through registration and trade mark laws.
- Quality of support received by the brands.

Cost basis - The valuation is done by aggregating all costs incurred on a brand from the
conception stage. These costs include market survey, research & development, launch and
subsequent advertising expenditures. These costs are adjusted for inflation and present
values are calculated. Then adjustments are made to provide for discount in case of a
declining trend in the product life cycle or premium in case of ascending trend in market
share and product life cycle.

Market value - Valuation at market price (the best bidder quote) can be at divergence from
the fundamental value of the brand. For instance, a large company may pay an abnormally
high price to protect its major brand or remove a nuisance from the market or derive
synergies in its existing business. Such valuations are subjective.

Earnings model - In this method, valuation is done by identifying, separating and

quantifying earnings that can be attributed to the brand and capitalizing these earnings at a
suitable discounting rate. The multiple would depend on several factors such as category
growth prospect, emerging competition and brand’s relative position, edge in terms of
technology, strength of loyalty to the brand etc.

Some case studies on brand valuation, acquisitions and transfers

Brand valuation

1. Infosys brand valuation

Brand takeovers

1. Cibaca takeover by Colgate

2. Lakme takeover by Hindustan Lever

3. Captain Cook and Tarla Dalal by International Bestfoods

Brand transfers

1. Marico

2. Navneet

Page 44
DISTRIBUTION

Distribution channels and network

Marketing or Distribution channel refers to the set of marketing intermediaries which

manufacturers link together to reach their products to the ultimate consumers. Depending
on the product, nature of market and manufacturers’ resources/strategy, there can be one
or more links between the manufacturer and consumer.

a. Manufacturer - Retailers
b. Manufacturer - Wholesalers - Retailers
c. Manufacturer - Stockists - Wholesalers - Retailers .

Why use distribution channels

There are several benefits for a manufacturer particularly in case of consumer goods to rely
on these marketing intermediaries rather than develop one’s own distribution network.

 Efficiency in performing the basic marketing task by these intermediaries who

through their experience, specialization, knowledge of local conditions, contacts
and scale, offer services which manufacturers can scarcely do on their own.
 Cost advantage most of these intermediaries in India are family owned outfits.
Their cost of operations and overheads are substantially lower.
 Focus : Manufacturers can concentrate on their core activity and optimize return
on assets.

Retailing

In India, there are over 5 million retail outlets dispersed all over the country. The retailing
industry provides employment to over 18mn people. 1 out of every 25 families in India is
engaged in the business of retailing. Ownership and management are predominantly family
controlled. However in sharp contrast to developed countries, unit average size of a retail
outlet in India is very small.

Organized retailing, however, has been a recent phenomenon and is relatively

undeveloped. There are no large super market chains/ shopping malls. Consumers are
unwilling to pay a premium for convenience shopping as their counterparts in the western
countries do. While small chain stores called Apna Bazaars and Sahakari Bhandaars, which
offer products at reasonable prices have been fairly popular, Department Stores and Food
Stores are slowly gaining popularity. A large number of corporates have recently ventured
into retailing.

The retail outlet in India can be broadly categorized as follows:

Page 45
 Grocery stores
General purpose stores
Food stores
Pan bidi shops
Chemist/ drug stores
Cold chains
Others

The relative share of grocers dropped from over 50% in the early 90's to 35% in the late
90's. Chemist outlets on the other hand, have been expanding their product range to include
high margin FMCG products from shampoos to ketchup. Panwallas are also emerging as
full fledged consumer product outlets.

Table : Growth in retail outlets (m nos)

Year Urban Rural Total

1978 0.58 1.76 2.35
1984 0.75 2.02 2.77
1990 0.94 2.42 3.36
1996 1.80 3.33 5.13

Composition of urban outlets

Grocers 34.7%
Cosmetic stores 4.0%
Chemist 6.3%
Food Stores 6.6%
General Stores 14.4%
Pan + stores 17.0%
Others 17.0%

Composition of rural outlets

Grocers 55.6%
General stores 13.5%
Chemist 3.3%
Others 27.6%

Page 46
 MARKETING

Marketing

Direct marketing

In direct marketing manufacturers reach the consumers directly. Direct marketing can be
undertaken in several ways such as mail order, own retail outlets, mobile vans etc. A new
innovative approach to direct marketing viz Multilevel marketing, is becoming
increasingly popular. Also gaining ground slowly is E-tailing ie selling products through
the internet.

Multilevel marketing model

Multi level marketing refers to direct marketing through an ever-increasing number of

direct distributors. Independent distributors sell products directly to the consumers and
appoint new distributors and train them. The distributor earns commission at two levels,
one is his/ her own commission and two a proportion of commission earned by other
distributors appointed by him/ her. None of these distributors are employees of the
company.

Distributors are not allowed to sell these products to retailers. The company saves about
25% of realizations by eliminating retail channel, which is shared with distributors.

The company insists that the distributors should take prior appointment with the consumer.
Personal interaction is not only convenient but adds value as customer get valuable advice
on the product and how to use it. This helps in creating awareness and removing
misconceptions like cosmetics are harmful for the skin.

Direct marketing (multi level approach) in personal care products is extremely popular
abroad. In Brazil, about 60% of personal care products are sold through direct marketing.
In India, direct marketing has been slowly growing. Word of mouth has a strong impact on
purchase decision of a consumer, specially in personal care and cosmetic products. Direct
marketing has mainly been undertaken by the new MNC entrants (notably Oriflame,
Avon). Hindustan Lever has also recently launched a new personal product brand Aviance
which is sold directly to consumers exclusively by trained beauty specialists. Direct
marketing has also been extensively used in marketing of household appliances like
Vacuum cleaners. However given the widely spread geographical area in India, direct
marketing cannot be easily used to build aan extensive national reach and is more likely to
be used as a supplementary channel.

Page 47
 MARKET SEGMENTATION AND POSITIONING
A market is defined as individuals, organizations with purchasing power, and desire/
willingness to purchase. Markets can be categorized based on the buyers as follows :

Producers market trade in raw material, equipment, supplies, machines etc.

Reseller market trade in finished goods, services from producers

Consumer market : refers to market where end consumer buys the products for personal or
household use. Consumer market can be bifurcated into durables and non-durables
markets. The non-durable products are also known as fast moving consumer goods.

Market segmentation

Markets comprise of heterogeneous segments of consumers. Market segmentation refers

to process of identifying a group of buyers with similar buying desires and requirements.
Each segment is targeted by the marketeer with a distinct marketing mix.

Broadly markets can be segmented on the following basis :

Geographic : location, nations, states, cities, rural, urban areas etc

Demographic variables such as age, sex, family size, marital status, income, occupation,
education, family life cycle, religion, nationality, social class.

Psychographic variables such as lifestyles, personality, buying motivation, product

knowledge.

Benefits segmentation divides the market along buying motives. For instance, in case of
toothpastes, benefits could be decay prevention, white teeth, fresh breath, good taste, low
price etc.

Within a segment, there can be further segmentation such as a market segmented along
geographic areas can be further segmented on the basis on income and so on.

Income segmentation

Income segmentation is one of the most popular and convenient way of segmenting the
market. Consumers can be broadly divided into low income, middle income and high
income group. Most FMCG products are also segmented along the target consumer
segments in economy, popular and premium categories. Price differential between popular
and premium products is significantly higher than what would be warranted by
manufacturing cost differentials. Marketeers create product differentiations with focussed
advertisement/ promotions and superior packaging also.

Page 48
 CHAPTER-11

FMCG CONSUMPTION IN RURAL INDIA

Here the rain gods still play havoc with one's dreams. The dusty village path winds past a
cluster of slumbering cottages and leads one to a weekly rural bazaar or haat, brimming
over with din, bustle and transaction. This is where the real India resides. Telephone is a
luxury here. Electricity, if at all, comes here only in fits and starts. And a delivery by road
may take any stretch of time.

However, things are changing fast now. Thanks to the increasing literacy level and
media explosion, people are becoming conscious about their lifestyles and about their
rights to live a better life. Brand consciousness is increasing. This, clubbed with increasing
disposable income of rural households, has made the rural consumer more demanding and
choosier in his purchase behaviour than ever before. And the dusky village damsel has now
learned to pine for a satin rose.

The rural market in India offers a tremendous market potential. A one percent increase
in India's rural income translates to a whoppin Rs 10,000 crore of buying power. Nearly
two-thirds of all middle-income households in India are in rural areas. And close to half of
the nation’s buying potential lies in its villages. Thus for the country's marketers, small and
big, rural reach is increasing and is rapidly becoming their most important route to growth.
Realizing this, Corporate India is now busy investing a noticeable chunk of its marketing
budget to target the rural market.

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

Company Household penetration

HUL 88%
Nirma Chemical Works 56%
Colgate Palmolive 33%
Parle Foods 31%
Malhotra marketing 27%
% volume of local
Category
brands/unbranded
Washing cakes/bars 88%
Tea 56%
Salt 33%

Page 49
Of the expenditure on consumer goods in rural household, approximately, 44% is on food
articles such as biscuits, tea, coffee and salt, 20% on toiletries, 13% on washing material,
10% on cosmetics, 4% on OTC products and 9% on other consumables. A number of
category products have established themselves strongly in the rural households.
It is clear that in the villages low-priced brands are well accepted and one might feel that a
larger chunk of the purchases made in rural market can be attributed to local/ unbranded
players. Surprisingly, the unbranded/local component contributes to a substantial portion
of the volume of only a few of the highly immersed categories.

Category Brand with highest

Category
Penetration penetration
Toilet Soap Lifebuoy
Washing cakes/Bars 91%
Wheel
Edible oil 88%
Double iran
Tea 84%
mustard
Washin powder / 77%
Lipton Taaza
liquid 70%
Nirma
Salt 64%
Tata Salt
Biscuits 61%
Parle G

INCREASING BRAND AWARENESS

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

Page 50
FOCUS ON URBAN CATEGORIES

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

PREMIUM BRANDS

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

Category Household Penetration

Skin creams 18%
Talcum Powders 15%

the skin care category, Fair & Lovely fairness cream, with a penetration of 75%, accounts
for 60% of the skin care market in rural India. It also enjoys the undistinguished patronage
of 58% of its user households. Both Pond's and Fair & Lovely are enjoying a monopoly in
the rural markets in their respective categories.

Rural India does not escape trying out the premium brands at high prices. A study indicated
that a majority of the premium brand users are using the brand for the first time. Similarly
0.9% of the talcum powder-using families have started using Denim talc and 0.7% of the
shampoo using households started using Pantene. Surveys also reveal that trials are not
restricted to the more affluent echelon of the villages. The experimenting households are
more-or-less evenly spread across the various socio-economic clusters of the rural market.
This should further encourage the marketers to focus their attention on rural buyers.

Brand Penetration of category users

Surf 6.2%
Ariel 4.5%
Pantene 1.8%
Denim 1.8%

Page 51
The rural youths are more open to fresh concepts as against their elderly family members.
Their difference in choice of products/brands with the seniors of the households often leads
to a “dual-usage” of product categories. As an instance, 20% of the households using tooth
powder also use tooth paste. Similarly, many of the households using premium brands also
use mass market brands. For example, while 15% of Surf and 12% of Ariel using families
also use Nirma detergent, 3% of Denim users use Pond's Dreamflower talc and 18% of
Pantene using households use Clinic shampoo as well.

RURAL MARKETING – THE “HINDUSTAN UNILEVER LIMITED

PRESPECTIVE

THE CHALLENGE

Around 700 million people, or 70% of India's population, live in 6,27,000 villages
in rural areas. 90% of the rural population is concentrated in villages with a population of
less than 2000.

The statistics is daunting. Particularly for companies, such as HUL, which market
Packaged Mass Consumer Goods (PMCG) of everyday use, the size of the rural market
makes it essential to tap.

Indeed, we have traditionally focused on the rural market. Several of company's

major business categories, such as Fabric Wash, Personal Wash and Beverages, already
get over 50% of their sales from rural areas. Our distribution system is the best amongst
PMCG companies.

But the company also recognize that there is much more that needs to be done. To
service rural markets, the key issues that need to be addressed are availability, awareness
and overcoming prevalent attitudes and habits.

EXTENDING AVAILABILITY

Data on rural consumer buying behavior indicates that the rural retailer influences 35%
of purchase occasions. Therefore, product availability can determine brand choice,
volumes and market share.

Project Streamline was conceptualised to significantly enhance HUL’s control on the

rural supply chain through a network of rural sub-stockists, who are based in these very
villages. As part of the project, higher quality servicing, in terms of frequency, credit and
full-line availability, would be provided to rural trade. Thereby, giving the company a
substantial competitive edge over the next decade.

Page 52
The principle of Project Streamline is to leverage HUL’s scale and organisational
synergy to increase reach in rural markets. The pivot of Streamline is the Rural
Distributor (RD), who has15-20 rural sub-stockists attached to him. Each of these sub-
stockists is located in a rural area. The sub-stockist then performs the role of driving
distribution in neighbouring villages using unconventional means of transport such as
tractor, bullock cart, et al.

From 1998, the project has been rolled out in select states of the country where the
terrain or poor stage of market development typically makes any distribution system
unviable. The Streamline system has extended direct HUL reach in these markets to
about 37% of India's rural population from 25% in 1995. Most important, the number of
HUL brands and SKUs stocked by village retailers has gone up significantly. Having
done that, the project now aims to expand the company’s coverage to 50% of rural
population by 2003.

Distribution will acquire a further edge with Project Shakti, HUL's partnership with
Self Help Groups of rural women. The project kicked off in 2001, has already covered
over 5000 villages in 52 districts of Andhra Pradesh, Karnataka Madhya Pradesh and
Gujarat, and is being progressively extended. The purpose is to reach over 100,000
villages, thereby touching about 100 million consumers. The SHGs have chosen to adopt
distribution of HUL's products as a business venture, armed with training from HUL and
support from government agencies concerned and NGOs. A typical Shakti woman
entrepreneur conducts business of around Rs.15000 per month, which gives her a
monthly income in excess of Rs.1000 on a sustainable basis. Most of these women are
below the poverty line, and live in very small villages (less than 2000 population, this
earning is very important, and is almost double of their past household income. For HUL,
the project is bringing new villages under direct distribution coverage. Plans are being
drawn up to cover more states, and provide products/services in agriculture, health,
insurance and education. This will both catalyse holistic rural development and also help
the SHGs generate even more income. This model creates a symbiotic partnership
between HUL and the consumers those who belong to HUL, some of whom will also
draw on the company for their livelihood, and helps build a self-sustaining virtuous cycle
of growth.

INFLUENCING AFFORDABILITY

Project Streamline focused on extending distribution, and Project Bharat's influence

was restricted to raising penetration and awareness levels. On the anvil, is a new rural
programme, which will reach villages with a population below 2000 and influence income
as well.

This path-breaking venture aims to facilitate the doubling of HUL’s share of the
rural consumer's wallet in three years. The model is unique in that it influences all the
variables that influence growth. This model triples physical reach, doubles communication
reach, creates a platform for influencing attitude changes and raising incomes.

Page 53
 The company’s rural growth engine raises incomes of rural families by channel
intervention through rural Self-Help Groups (SHG), which operate like direct-to-home
distributors. The model consists of groups of (15-20) villagers below the poverty line
(Rs.750 per month) taking micro-credit from banks, and using that to buy HUL products,
which they will then directly sell to consumers. In the process, generating employment and
incomes for themselves, and increasing the reach of our products.

HUL is tying up with various Non-Governmental Organizations, United Nations'

Development Programme (UNDP), and voluntary organizations to propagate health and
hygiene messages. The goal is to reach 2,35,000 villages up from the current 85,000; 75%
of the population up from 43% today; and a message reach of 65% up from the current TV
reach of 33%. In the process the company aim to increase access, influence attitudes, create
a channel to raise awareness of its brands and catalyse affluence in rural India.

ENHANCING AWARENESS

Mass media reaches only 57% of the rural population. Generating awareness, then, means
utilising targeted, unconventional media including ambient media. HUL has been utilising
events such as fairs and festivals, haats, et al, as occasions for brand communication.
Cinema vans, shop-fronts, walls and wells are other media vehicles that the company has
utilised to heighten brand and pack visibility.

OVERCOMING ATTITUDES AND HABITS

Creating distributive reach is not sufficient to tap the rural markets. Market
development can be a difficult task because in rural India, both consumption and
penetration is low. For instance, only three out of 10 people in rural areas use toothpaste
or talcum powder, or shampoo and skin care products, and only six use washing powders.
Even in categories with high penetration, such as soaps, consumption is once per five
bathing occasions.
Project Bharat, the first and largest rural home-to-home operation to have ever been
mounted by any company, sought to address many of these issues. The operation was
conducted in high-potential districts of the country. The exercise was started by HUL’s
Personal Products Division in 1998, and covered 13 million households by the end of
1999. In the course of the operation, company vans visited villages across the country and
distributed sample packs comprising a low-unit-price pack each of shampoo, talcum
powder, toothpaste and skin cream priced at Rs. 15. The distribution was supported by
explanation of product usage and a video show, which was interspersed with product
communication. Thus HUL generated awareness of its product categories and the
availability of affordable packs. Consumers were also made aware of the superior
benefits of using our products vis-à-vis their current habits, and the affordability of the
pack sizes on offer. The project, thus, successfully addressed issues of awareness,
attitudes and habits.
CHAPTER-12
DATA INTERPRETATION
Page 54
Rural India constitutes ‘the heart of India’, generating more than half the
national income. According to the National Council of Applied Economic Research
(NCAER), with about 74% of its population living in its villages. India has perhaps
the largest potential rural market in the world.
A potential of 742 million rural consumers live in 6,38365 villages across India.
Rising incomes, improving infrastructure, and favorable government policies offer
huge potential for rural marketing.
“If you see a woman in a village milking a cow, do you see an opportunity?
but that is exactly where Dr. Varghese kurien saw an opportunity and it gave birth to
one of the most successful organizations in India-Amul .”

The need to look at rural markets:

The “Green Revolution” has in turn, brought a socioeconomic revolution in

Indian villages. On account of the green revolution the rural areas are consuming a
large quantity of not just the essential commodities but premium products as well.
The younger generation in rural areas is now spending more on personal care and
grooming products.

Page 55
The above data [table 1] indicates, the Indian rural market with its vast demand
base, offers great opportunities to companies. FMCGs demand in India nearly 53%
comes from the rural market. For consumer durables the figure is 59%, these results has
evidently helped, going by the significant share contributed by rural areas to the total
revenue of several leading consumer product companies. [Table-2]

Rural markets are already proving vital for company’s growth, clearly indicating
that these markets can not be ignored by big players.Industry analysts have projected that
urban households will grow by 4% while their rural counterparts are expected to
grow 11% by 2009-10, implying that if the rural income rise by 1%, then the spending
power of consumers will increase by about Rs.10,000cr. According to FICCI, by the end
of 2025, rural consumption is expected to nearly three times of what it is today.There is

Page 56
no denying the fact that Indian market is the fastest growing market in the world and the
fact is that about 60% of the market considered rural market is yet to turn into a real
market.

What is Rural Market?

According to the Census of India 2001, there are more than 4,000 towns in the
country. It has classified them into six categories, class-I towns with one lake and
above population , Class-II towns with 50,000-99,999 population, Class-III towns
with 20,000-50,000 population and Class-IV towns with 10,000-19,999 population.
It is mainly Hindustan Unilever and ITC, most FMCG and consumer durable
companies, define Class-II and III towns that are rural.[table-3]

From this above data one can analyze the economics of cost involved in rural
distribution coverage.

Rural Marketing Challenges:

Poor Infrastructure
Non-availability of shops
High levels of poverty
Unemployment
Poor literacy rate
Poor media penetration
Skeptical customers (less use new brand )
Rigid social customs
According to Dr. MS. Swaminathan of the swaminathan Research Foundation,
rural areas can only be developed if the financial, structural, economic and social
aspects are addressed in a holistic manner. This is possible if these areas are
From this above data one can analyze the economics of cost involved in rural
distribution coverage.

Rural Marketing Challenges:

Poor Infrastructure
Non-availability of shops
High levels of poverty
Unemployment
Poor literacy rate
Poor media penetration

Page 57
 Skeptical customers (less use new brand )
Rigid social customs

According to Dr. MS. Swaminathan of the swaminathan Research Foundation,

rural areas can only be developed if the financial, structural, economic and social
aspects are addressed in a holistic manner. This is possible if these areas are
supported by adequate funds, equipments, infrastructure and education.
Indian consumers are poor but not backward. The future lies with those
companies who see the poor as their customers. Companies should focus on
creative solution and product engineering to reduce their costs and offer tremendous
‘life time value’ to the ‘Bottom of the Pyramid’ customers. Effective rural
marketing is one and only solution to reach the BOP segment

Rural Marketing Strategies:

Rural marketing concept is a customer-centered ‘sence and respond’
philosophy. The following section deals with how MNC’s and local companies have
successfully established themselves in the rural market.

[1] Product Strategy:

Page 58
The rural consumer is very conscious about getting ‘value for money’. Low
price, high quality and multiple uses is basic principles rural product design.

Case 1: HUL Breeze 2-in-1

HUL developed a combined soap and shampoo
that was cost-effective and also less harsh on hair than
ordinary soaps. HUL launched the new soap-cum
shampoo ‘Breeze 2-in-1’

Strategy: “value-added product would create a loyal customer”

Case 2: HUL pure-it [a water purifier brand]

HUL launched a innovative product ‘pure-it’ a
water Purifier brand. Pure-it is available at economical
price for the rural consumer as there is no clean drinking
water in villages.

Strategy: “Corporate social responsibility means

come up with business models to cater to the BOP”

Suggestions:
Innovative product designs and packaging.
Avoid the marketing myopia, which means the costumer will have the same
need but will want the new product.
10
Application of value engineering, which means costly metal being replaced
by cheaper reinforced plastic. This technique does not sacrifice the
functional efficiency of a product but lower the product price.
Using chinese product design strategy and raw material.
Be care full on product duplicates and using security features

Marketers must often understanding rural customer’s needs and aspirations

even better than customers themselves do and creating products and services that
meet existing and latent needs, now and in the future. A fair amount of research is
required to understand the latent needs and desires of rural customers and provide
suitable products.

[2] Price Strategy:

Page 59
Rural markets are low price high volume growth markets. The rural markets
being intensely price-sensitive in comparison to urban markets, reaching at a lower
cost is a major challenge.

Case 1: Nirma
Nirma’s yellow detergent powder- a mass- market
Phenomenon. Nirma’s low price policy has penetrated into
the deepest rural markets in India.

Strategy: “value- for- money”

Case 2: Cavinkare’s Chik shampoo

Cavinkare launched Chik in 50 paise sachets. Cavinkare

targeted rural and small town customers who used soaps to
wash their hair. it became the market leader in the rural
markets with over 50% market share. It create a
‘sachet revolution’.

Strategy: “low unit price packs.” (LUP)

Case 3: P&G price cut strategy

P&G in 2004 started price cut strategy in their
detergent brands. P&G’s increase in the market share was
more at the cost of the low-priced detergents. There was
a 200% increase in Tide after the price cut .

Strategy: bring in the required ‘Economies of Scale’ which would lead to

profitability.

Case 4: Britannia Tiger biscuits

Page 60
Britannia also tasted success because of small
affordable packaging of ‘Tiger’ biscuits it is specially design
to the rural market, it’s helping the poor become consumers.

Strategy: “low price strategy is begun to appeal target segment”

Case 5: Nestlé’s Maggi

Nestle’s rural initiatives have largely been based on
Price-led initiatives. Brand such as Maggi noodles are
priced at Rs.5. It helped Nestle in making in roads in to
rural market.

Strategy: “small pack - lower price”

Case 6: Marico parachute

Marico launched ‘parachute mini’ a bottle shaped
small pack being sold at an MRP of RS.1, 20 ml parachute
a RS 5 that enables loose oil users ad to parachute.

Strategy: “consumers to trail out the products with very little risk”

Suggestions:

Use backward and forward integration.

Using value-based pricing strategy . That means fixing of price, starting with
customer and end with product.
Use psychological tricky pricing strategies. That means method of odd
number pricing etc.
Effective total quality management is helps to low price high quality
product.
Companies should focus on creative solutions and product engineering to
reduce their cost. Second, the company can design basic models minus frills to save
cost.

[3] Promotion Strategy:

Page 61
The challenge is to create communication that would help the rural
consumer in recognizing brands, logos, visuals and colors. To effectively tap the
rural markets, a brand must associate with their culture and personality.

Case 1: Coca-cola
Coca-cola ad ‘thanda matlab coca-cola’ caught
attention of the rural consumers so much. Aamir khan
playing foot sic with village bells.

Strategy: “Using a renowned celebrity from in rural background”

Case 2: HUL Lifebuoy

HUL launched a direct rural contact program called

‘Lifebuoy Swasthya Chetana’ campaign, made sales goes
up by 20% in 17,000 villages.

Strategy: “lifebuoy has always been positioned on the platform of health and .
hygiene”

Case 3: HUL Vim

HUL launched a dish washing bar Vim. HUL Started to
communicated the brand in rural area through public
challenging campaigns. In this campaigns is succeed people
washing utensils with sand are being educated to shift to dish
washing bars.

Strategy: “Brand awareness creates people using local unbranded products to

national brands”

Case 4: Dabur Chyawanprash

Page 62
Dabur Chyawanprash was able communicate its core
benefits of energy and immunity by involving locals in a game
of bowling wherein, the nine pins, symbolizing various diseases,
were demolished by a chyawanprash ball.

Strategy: “For a brand to succeed in India, its communication and image must
respect Indian values and serve to uphold them”.

Case 5: HUL Surf

Surf used the ‘Lalita ji; campaign to communicate the
message of ‘getting more for your money’ to housewives
and this message is well received by them.

Strategy: “value for money need not necessarily mean cheap”

Suggestions:
Provide social outlet campaigns, the outlet provide free to any one, what
brand they choose. Its creates a ‘trust factors’ to the consumers.
Be care full on retail margins other wise they promoted local brands.
Face-to-face ‘below the line’ touch, that means feel and talk mode at heats,
melas and mandis.
To capture the local sprit in the communication. Using local language.
Patience is the name of the game. That means a rural consumer is not in a
hurry and you can take your time in communicating the message.
Developed a website, which gathers valuable feedback from satisfied
customers and also display the total amount saved by consumers with the
product impact.
World-of-mouth communication strategy works better in rural markets
as these markets enjoy limited reach media. Once people become familiar with
these products, they would perceive them as necessities.

Page 63
[4] Distribution strategy:

Planning physical distribution, managing logistics and controlling

marketing communication are major impediments for entering rural markets. The
distribution structure involves stock points in feeder towns to service these retail
outlets at the village levels.

Case 1: Coca - Cola

Coca -Cola is a pioneer company in distribution
network. Coca-Cola has evolved a ‘hub and spoke’
distribution model for effectively reaching and serving
rural markets. Coca-Cola provides low-cost ice boxes to
the small distributors in rural areas because of the lack
of the electricity. In this marketing strategy a wake up call
for coke’s rural focus.

Strategy: “Coke is available where, even water is not available”

Case 2: HUL
Hindustan unilever, the pioneer and a large
player in India’s FMCG market. HUL is the first company
to step into the Indian rural marketing. HUL launched
‘operation stream line’, distributed HUL’s products in villages
using unconventional transport like ‘bullock carts’, ‘tractors’
and cycles. Today HUL’s products touch the lives of two out of
every three Indians.

Strategy: “HUL product can reach a place, where you can not reach”

Suggestions:
Best solution for enter into the rural markets, that is the company should
start the production in rural areas. Then it is easy to distribute and also its
increase the local sprit.
Tie’up with public distribution system (Fair Price Shops). In our country,
the public distribution system is fairly well organized. The revamped PDS
places more emphasis on reaching remote rural areas of hills and tribaks. So
FMCG companies collaborated with the PDS to utilize its well-established
sales and distribution network in the rural markets.
Develop rural shopping malls. Rural shopping malls act as a two-way supply
chain. While selling goods to the farmers and also buy their farm produce.
Use a combination of wholesalers and retailers to penetrate every nook and

Page 64
corner of rural market.
Going paces ahead of small packs and sachets’ the corporate world is now
coming out with ‘Rural Malls’ and ‘Self help groups’ as channel partners to
promote consumer products in rural India. Unilever and ITC are working towards
increasing their visibility and reach through marketing - cum social responsibility
projects such as ‘shakti and e-choupal’ respectively.

Conclusion:
A silent revolution is sweeping the Indian countryside. It has
compelled marketing whizkids to go rural. The marketing battle fields has shifted
from the cities to the villages, but in this battle both consumers and companies are
winners, it is a win-win situation. ‘Go Rural’ seems to the latest slogan. Stop
depending on research number. Go and meet up with a million villagers and ask
what they want. Create the products and services that is relevant to their needs.
Thus, it is quite clear value-for-money offerings companies could convert luxuries
in to necessities for the Indian rural consumers.

CHAPTER-13

Page 65
 CONSUMER DEMOGRPHICS

POPULATION DISTRIBUTION
OVERALL INDIA

West (%)
1.43.4 19.7 East (%)
23.3
North (%)
South (%)
25.5
31.5 Total UT
Other states

URBAN AND RURAL DISTRIBUTION

POPULATION

100
80
60 Rural %
40 Urban %
20
0
TH
TH

IA
T

Ts
T

AS
S

D
U
R

U
E

IN
E

O
O
W

S
N

Page 66
 AGE DISTRIBUTION OF POPULATION
%

80
PERCENTAGE

65
50 1992
35 1997
20 2007
5
-10
0 to 4 5 to 14 15 to 59 60 &
Above
AGE GROUP

AGE DISTRIBUTION OF POPULATION

%

80
PERCENTAGE

65
50 1992
35 1997
20 2007
5
-10
0 to 4 5 to 14 15 to 59 60 &
Above
AGE GROUP

Q. Which of the following retail formats do you prefer to buy?

Page 67
Departmental Sore

Super Market

Convenient Stores

Kirana Stores

Q. How long you have been using brands?

<1 year

1-2 years

2-3 years

More than 3 years

Q. The frequency of purchase for the FMCGs products is:

Always

Often

Sometimes

Not sure

Q. Do you think branded products are better than unbranded products?

Yes ---- ----

No --------

Q. Do you look for various schemes for FMCG products?

Yes ---- ----

No --------

If yes which schemes?

Coupons

Price off

Page 68
Extra quantity

Lucky draws

Bundling offer

Scratch cards

Q. Would you like to switch your brand preference if you get some promotional scheme
with another brand?

Yes ---- ----

No --------

Give reason for the same.

Cost

Quality

Satisfaction

Benefits

Seasonal change

Page 69
 CHAPTER-14

BIBLIOGRAPHY

1) WWW.GOOGLE.COM

2) WWW.EEPCINDIA.COM

3) Kannan, S. (2001). Rural market – a world of opportunity. The Hindu.

4) Krishnamacharyulu Ramakrishnan (2004) Rural Marketing

Page 70
TABLE OF C
ONTENT
1.0 INTROD
UCTION1.1
Background
1-
21.2 Signific
Page 71
ance of Stud
y 31.3 Probl
em Stateme
nt 3Researc
h Question 4
Scope of Stu
dy 42.0
Page 72
THEORETICAL
APPROACH
4-
53.0 LITERA
TURE RIVIE
W 5-
94.0 METHO
DOLOGY4.1
Page 73
Research Me
thod That Wi
ll Be Used T
o Acquire Da
ta 94.2 Tech
nique Used t
o Obtain Dat
a And Analy
Page 74
zed The Dat
a 9-
105.0 FINDI
NGS5.1 Dem
ography 10-
135.2 Experi
ence Playing
Online Vide
Page 75
o Game 14-
185.3 Health
Issue 18-
215.4 Emoti
onal Reactio
n During Pla
ying Online
Video Game
Page 76
21-
265.5 Realit
y and Relati
onship 27-
315.6 Comm
itment 31-
336.0 OBSE
RVATION6.1
Page 77
 Respondent
1 33-
356.2 Respo
ndent 2 35-
376.3 Respo
ndent 3 37-
396.4 Respo
ndent 4 39-
Page 78
406.5 Respo
ndent 5 40-
417.0 CONC
LUSION 41-
478.0 RECO
MMENDATIO
N 47-
Page 79
499.0 REFER
ENCE 50-51

Page 80