Advances In Management ,,,

"Vol. 4 (8) Aug. (2011)

Case Study:

Fortune in Rural India -An Overview

Kulkarni Preeti M.
Navjeevan Institute of Management, Nasik 422 008 (M.S.), INDIA preetimaheshk@gmail.com

Abstract Marketing Management always deals in the ever changing marketing environment. The rural environment is in paradigm shifls and management needs to deal with the changing consumer behavior, TJie basic challenge in front of the rural marketer is to deal with the rural consumer who is undergoing transformation. Many marketers perceive that the rural markets are the protrusions of the urban slums or poor markets. The truth is that the rural consumer's concept of value is different from the urb^n consumers. The culture of rural is not of display of the wealth and modality. The symptoms of modernity are different than the urban counterparts. The rural consumer purchases only when it is extremely needed by them, not because of tempting promotional offers. The rural market in India is quite charming and demanding in spite of all the difficulties exi.sting. Tlie potential is enormous. Even though, these markets have imperfection, they also have tremendous opportunities which should be availed by the marketers. The marketers have to come up with innovative ideas to win the customers. Keywords: Rural paradigm shifts. markets, rural consumer behavior.

twice as many "lower income households" in rural areas as in urban areas. There were 2.3 million "highest income" households in urban areas as against 1.6 million in rural areas. NCAER projections indicated that the number of "middle income and above" households was expected to grow to 111 million in rural India by 2007, compared to 59 million in urban India. Gone are the days when a rural consumer had to go to a nearby town or city to buy a branded product. The growing power of the rural consumer is forcing big companies to flock to rural markets.' The rural markets of today are the most promising one for the marketers as various reports pointed out that the urban markets are getting saturated. The Indian FMCG sector, with a market size of US$ 25 billion (2(X)7-O8 retail sales), constitutes 2.15 per cent of India's GDP. A wellestablished distribution network spread across six million retail outlets (including two million in 5,160 towns and four million in 627,000 villages), low penetration levels, low operating costs and competition between the organized and unorganized segments are key characteristics of this sector. Rural India accounts for close to one-third of the total consumption pie. Robust consumption in the rural economy is a key driver of India's sustained growth. The penetration of companies into rural north India increased from 9.5 per cent in 2000 to 46 per cent in 2008, due to companies selling their products in small packets or sachets. FMCG companies are devising exclusive rural marketing strategies to tap the rural consumer base. Table 1 Revenue generated from rural markets of India Company Hindustan Unilever Ltd (HUL) Dabur India Ltd. Category Household Personal products % sales from rural markets
45 40

Introduction
If one wants to see and experience the real India, it is in the rural India. Near about 11 percent of the world's population resides in the rural parts of India. The huge population mountain is the point of attraction for many companies. In case of India, urbanization is not uniform, the market mosaic shows the patches and pockets pattern. There are stratums which are completely urban and some are extremely rural. It is a hot topic of discussion in the corporate houses to go rural. The reason behind is shrinking urban markets and push towards rural. In the early 2000s, around 700 million people, (70% of the Indian population) lived in 627,000 villages, in rural areas. Of this, 90% were concentrated in villages with population less than 2000. Today, real growth is taking place in the rural-urban markets or in the 13,113 villages with a population of more than 5,000. According to a study conducted in 2001 by the National Council for Applied Economic Research (NCAER), there were as many "middle income and above" households in rural areas as there were in urban areas. There were almost (43)

A large number of FMCG companies derive a significant proportion of their overall sales from outside the top few 100 towns and cities, which reflects the growing economic importance of India's rural consumer base. With more than 33 per cent of the Indian consumer base present in rural areas, the rural market will be a key growth driver for FMCG majors planning to expand their domestic business. It

Advances In Management
is estimated that more than two-thirds of the next generation youth will come from rural India. According to a study by NCAER (National Council for Applied Economic Research), the number of middle and high income households in rtiral India is expected to grow froml30 Million to 172 Million by the end of year 2012 as compared to Urban India that is nearby 71 Million." The increase in rural purchasing power is reflected in many ways. Rural incomes have been growing at more than 7 percent over the past few years, helping to account for altnost 40 percent of India's total consumption of goods and services.** Non-food expenditures are growing at an 8.2 per cent annual compound rate. Rural households are purchasing a wide range of products cars, flat-screen televisions, microwavesthat until recently would have been beyond their reach. Some industrial sectors have seen surprising growth coming from rural consumers. Eifty percent of revenues from the fast moving consumer goods (FMCG) sector now come from rural sales. In the case of the telecom sector, subscriber base in the semi-urban and rural markets (Circle C geographies) has grown at a phenomenal 98 percent over the last five years in comparison to other circles repre.senting metros.' Rural markets can bring the prosperity to the companies. If the picture of the rural markets is so glossy then why the failures are faced by most of the companies quite successful in urban markets?. Many marketers mistakenly assume the rural markets as the replica of the urban markets. They apply the urban market strategies in the rural markets. This leads to the collapse and their growth sees the bottom in the rural markets. Then how to solve the clutter? The fewer prices, small packs and less quality syndrome has created the bumpy roads for the companies to penetrate in the rural markets. The rural consumers are not the slum dogs, the way majority of the companies treat them. They are unique and present all together different behavioral patterns. There are external as well as the internal factors which are dictating the operations of the companies in the rtiral hinterland. Table 2 and 3 present the risk elements need to be considered by any company willing to enter the rural markets of India. The grade A represents the high attention factors with some solutions while B grade represents the factors with exceptional solutions.

Vol. 4(8) Aug. (2011) superficial understanding of the rural markets is the cause of the majority of the problems for the companies. The rural markets are scattered markets. They are not homogeneous masses. Each rural market is unique and special. The rural markets are not the projections of the urban slums. Table 2 External risk factors for the companies entering in the rural markets of India Particulars Less information about the markets and consumer behavior Unavailability of skilled local talent Uneven demand Imperfect local distribution channel Pathetic infrastructure Scarce access to money market Socio cultural mosaic Lack of adequate logistic support Legal hassles Confrontation of local business communities Paradigm shifts in the consumer behavior Category Controllable Controllable Non controllable Controllable Non controllahic Controllable Non controllable Controllable Non controllable Non controllable Non controllable Grade A B A A B B A A A B A

Table 3
Internal risk factors for the companies entering in the rural markets Particulars Less experience of the rural areas Organization structure and culture Category Non controllable Controllable (iradc B A A B B A A A B

Sales force bottlenecks Controllable Doubt about the feasibility of the Non controllable rural market conditions Large window period Huge investment Leadership qualities and motivational ability of the management Local competition Imitated goods Non controllable Non controllable Controllable Non controllable Non controllable

Understanding consumers

the

rural

markets

and

Rural markets are the living markets; they are growing and ever changing. The marketers who want the effective penetration and reach in the rural markets need to understand the ever-changing nature of the rural markets. Rural markets are in the phase of paradigm shifts. The

Untapped rural markets are still untapped markets. There are many commodities which are not used by the rural consumers e.g. all the rural consumers are not using the

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. - I ny

Advances In Management

K'-;.??-?

'- -' * ' '

Vol.4(8) Aug. (2011)

through structured questionnaire. The seven different districts from Maharashtra are selected. The sample is collected from 70 different villages having population near 5000.

shampoo. The rural markets are ignored and underserved but they aie not aloof markets. The rural retailers are traditional in the practice they are not following the sophisticated techniques of marketing. The rural media is underutilized. 12. 1 Rural consumers are in the stage of metamorphosis the changing paradigm making them goaded for the change. The rural consumer of today is not like the ancestors. They are adapting the faster speed of growth. They are intelligent. Gone are the days when anyone can fool the rural." The rural middle class is growing at 12 per cent against the 13 per cent growth of its urban counterpart. The upper income class with household incomes of over Rs. one million [$22,700] per annum is projected to go up to 21 million by 2009-10 from four million in 2001-02. It will have a 22 to 23 per cent rural component. Higher rural incomes have meant larger markets. Already, the rural tilt is beginning to show. A study by the Chennai-based Francis Kanoi Marketing Planning Services says that the rural market for FMCG is worth $14.4 billion.""

Hypothesis
Null hypothesis 1: There is no potential in the rural areas. Null hypothesis 2: No more organized efforts are required to understand the rural markets. Hair oil related data were collected through survey from 70 different villages from seven different districts of Maharashtra. The research tool used was structured questionnaire. Table 4 shows the observed values of the hair oil brand spread across the Maharashtra and table 5 shows the expected values. The result of chi squarer is that the observed value is greater than the table value so the null hypotheses are rejected and the alternative hypothesis is accepted. At 95% level of confidence table value of Chi square at n=36 is 50.999. Chi square value observed is 297.9067 which is greater than table value. Hence Null hypothesis number 2 which is 'No more organised efforts are needed to understand the rural markets" is rejected.

Research Methodology
The researcher used stratified random sampling for collecting the data. The data are collected by a survey method

Table 4 Hair Oil Brands -Observed Values Hair Oil Brand Aurangabad Kolhapur Nagpur Nanded Nashik Pune Ratnagiri Total Any 12 0 9 4 0 0 19 44 Local 2 62 0 9 23 6 5 107 Parachute 72 40 83 64 74 77 61 471 Vatika 9 0 4 3 1 2 8 27 Dabur 3 0 4 0 0 0 3 10 Do not use 0 0 I 0 0 0 1 2 Mise 4 6 0 2 14 8 4 38 Total 102 108 101 82 112 93 101 699

Table 5 Hair Oil Brands -Expected Values Hair Oil Brand Aurangabad Kolhapur Nagpur Nanded Na.shik Pune Ratnagiri Total Any 6.4206 6.7983 6.3577 5.1617 7.0501 5.8541 6.3577 44 Local 15.6137 16.5322 15.4607 12.5522 17.1445 14.2361 15.4607 107 Parachute 68.7296 72.7725 68.0558 55.2532 75.4678 62.6652 68.0558 471 Vatika 3.9399 4.1717 3.9013 3.1674 4.3262 3.5923 3.9013 27 Dabur 1.4592 1.5451 1.4449 1.1731 1.6023 1.3305 1.4449 10 Do not use 0.2918 0.3090 0.2890 0.2346 0.3205 0.2661 0.2890 2 Mise 5.5451 5.8712 5.4907 4.4578 6.0887 5.0558 5.4907 38 Total 102 108 101 82 112 93 101 699

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Advances In Management

;
urban consumption of 2002-03.

Vol. 4(8) Aug. (2011)

Table 6 Per Capita Consumption of Hair Oil

Hair oil per capita consumption Less than 47 ml Between 48 to l(X)ml Between 101 to 150 mi Between 151 to 200 ml Between 201 to 250 ml Between 251 to 300 ml More than 301 ml % of Respondents
0 6 11 15 II 19 38 100

Thus Null hypothesis number I. which is, "there is no potential in rural market' is rejected. Chi-Square for Shampoo: The rural India is getting more and more aware about the hair care products like shampoo. The observed values for the shampoo are shown in table and expected values are shown in table 4.31. In case of shampoos the observed values are greaur than the table value which shows that the alternate hypothesis shall be accepted and the null shall be rejected. At 95% level of confidence table value of Chi square at n=48 is 65.171. Chi square value observed is 183.9336 which is greater than table value. Hence Null hypothesis number 2 which is 'No more organised efforts are needed to understand the rural markets' is rejected.

Morcthati 301 ml 38%

Between 48 to 100 ml 6% Between 101 to 150 ml 11% Between 151 to 200 mi 15% Between 201 to 250 ml
11%

Per Capita Consumption of Shampoo:

As per data available on "www.authorstream.com/ Presentation/Siro-40589-industry-shampoo-PresentationCovers-FMCG-Products-Typical-Characteristics-shampoEntertainment-ppt-powerpoint/' published on 13th Jan 08 accessed on 16th Dec 2009, per capita consumption of shampoo in India is 13 ml compared to other developing countries like Indonesia which consumes 160 ml and Thailand 300 ml. Thus in Maharashtra apart from 26 per cent of non users of shampoo, more than 39 per cent are still consuming less than Indonesia. Thailand market with 300 ml per capita consumption is much ahead than Indian rural market in ca.se of shampoo, hence there is huge potential for growth in rural market along with unexplored markets in the form of non users for shampoo in rural Maharashtra. Thus Null hypothesis number 1, which is, 'there is no potential in rural market" is rejected.^"'

Bcween 251 to 300 ml 19%

Fig. 1: Per Capita Consumption of Hair Oil Per Capita Consumption of Hair Oil
As per ORG for period 2002-03 the consumption of hair oil for urban area was 21 lgms and for rural area it was 47 gms. But below chart shows that even in 2007-08 there are still 31 per cent respondents who are lagging behind the

Table 7 Shampoo Brands -Observed Values Shampoo Brand Aurangabad Kolhapur Nagpur Nanded Nashik Pune Rutnagiri I otal Clinic Plus
33 41 38 22 40 35 36 245

Chic k
13 1 24 26 13 0 13 90

Head& Shoulder
4 7

Pantene
14 3 11 4

Vatika
0 3 0 8

Shikakai variants
0 7 0 4 5 5 0 21

Nyle
1 0 0 1

Any Other
19 6 3 15 9 11 26 89

None
18 35 18 10

Total
102 103 101 94 113 96

7
4 7

0 2
8

9 7
0 27

1
0 1 4

29 25
12 147

II 6 46

102
711

42

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Advances In Management
Table 8 Shampoo Brands -Expected Values Shampoo Brand Aurangabad Kolhapur Nagpur Nanded Nashik Pune Ratnagiri Total Clinic Plus 35.1477 35.4923 34.8031 32.3910 38.9381 33.0802 35.1477 245 Chick
12.9114 13.0380 12.7848 11.8987 14.3038 12.1519 12.9114

Vol. 4 (8) Aug. (2011)

Head& Shoulder 6.5992 6.6639 6.5345 6.0816 7.3108 6.2110 6.5992 46

Pantene 6.0253 6.0844 5.9662 5.5527 6.6751 5.6709 6.0253 42

Vatika 3.8734 3.9114 3.8354 3.5696 4.2911 3.6456 3.8734 27

Shikakai variants 3.0127 3.0422 2.9831 2.7764 3.3376 2.8354 3.0127 21

Nyle 0.5738 0.5795 0.5682 0.5288 0.6357 0.5401 0.5738 4

Any Other 12.7679 12.8931 12.6428 11.7665 14.1449 12.0169 12.7679 89

None 21.0886 21.2954 20.8819 19.4346 23.3629 19.8481 21.0886 147

Total 102 103 101 94 113 96 102 711

90

Table 9 Per Capita Consumption of Shampoo Per capita consumption of shampoo Do not use shampoo less than 50 ml between 51 & 100 ml between 101 & 200 ml More than 200 ml
More than 200 ml 9% between 101 & 200 ml 26% less than 50 ml 14%

% of Respondents 26 14 25 26 9 100
Do not use shampoo 26%

dominates the Indian hair care market with 48% share while Shampoo & Hair colorants form 38% and 11% share respectively. Styling and Perms & Relaxers category are still at a nascent stage and contributes only miniscule 3% of the hair care market. Due to its strong presence in hair oil segment, domestic player Marico with its Parachute brand leads the Indian hair care market with around 19% share. Unilever is the close second and controls around 17% share of the Indian hair care market. Dabur, Procter & Gamble, Cavin Kare and Godrej are other key players in the Indian hair care market. The chi square result rejects both the null hypotheses and accepts the alternates' hypotheses that "There is a potential in the rural areas. Organised efforts are required to understand the rural markets."

Table 10 Profile of rural consumer

The youth of the rural area is different than the middle and age old. The consumer of rural area is aware about many things but not hundred percent. | They are literate in vernacular language. They may not be able to differentiate between the spell alike goods. Not interested in inventory of the products. Small size packs are preferred for many commodities. The value system is different in the rural areas. Rural consumers are concerned about the quality of the product. The rural purchase is maximum time need based purchase. The value conception of the rural is associated with quality at affordable price. The rural consumer needs freedom of quantity.

between 51 & 100 ml 25%

Fig. 2: Per Capita Consumption of Shampoo

Currently, according to Data monitor, Indian hair care market is valued at INR 7000 crores (US$ 1625 million) for the year 2009. However, the excitement in the industry lies in its enormous untapped potential. Developed economies of the world such as USA, UK, and Japan etc. have per capita expenditure in the range of $25-$40 per annum. At percapita-expenditure of less than $2, India lies behind even amongst emerging markets such as Russia, Brazil etc. Traditional usage of hair oil for nurturing and hair styling makes it the biggest segment in the Indian hair care market. Due to this. Conditioner category (including hair oil)

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Advances In Management
enlists consumers. After studying the rural consumer, the researcher the following characteristics' of the rural

Vol. 4 (8) Aug. (2011) Made for rural products Indianised brand name like shudh, sampurna. dandi, Annapurna Local way of distribution Use advance technology

Strategies for the companies to penetrate into the rural markets

Companies need to position the product in the market with the help of socio cultural factors. In the rural markets the socio cultural acceptance of the product is very important. It is also observed that majority of the companies adapt less price or economy pricing strategy. The price based on value is needed in the rural areas. The rural consumer also thinks about the quality proposition while selecting the product. Majority of times the rural consumer demands the product in the rupee units like "ek rupaye wala arial.' These tendencies need to be taken into the consideration for designing the pricing strategy. The rural areas are no more in spread its magic on the rural media .scale developed by the TV is most appreciated media country. the media darks. TV has parts of the India. The researcher indicates that in the rural parts of the

The role of the intermediaries plays a very crucial because they work as the physical distributer as well as promoter in case of rural India. Rural retailer plays unique role as advisor, family friend and micro creditor.

Conclusion
After considering the set of the risk factors it might be thought that the companies should not enter the rural markets. The saturation of the urban markets has created a push to the companies for entering in to the rural markets. The companies need to work on the controllable factors and minimize the risk. There is a master key for opening the gates of rural markets. The steps needed to follow are furnished below: Understand the rural markets Understand the rural consumers Understand the needs of the rural consumers Understand the value perception of the rural consumers Prepare made for rural goods Measure strategies for the rural markets Develop optimally functioning marketing mix

The researcher developed the following scale on the basis of survey done by the researcher for doctoral study. The feedbacks from the rural respondents related with the media exposure are used for development of the scale.

It is observed that TV is most appreciated medium and retailer is at the .second number. The TV is broadcasting media. It is also interesting to see retailers and friends following the TV on the scale. Communication through local language. Proper segmentation Understanding the consumer needs properly Using Indian endorsers

The rural market in India is quite fascinating and challenging in spite of all the difficulties existing. The potential is enormous. Even though, these markets have weaknesses, they also have tremendous opportunities which should be availed by the marketers. It is well known that "Markets are created and not born". The market so created should be tapped effectively. The rural consumers are

Table 11 Scale of the Media Rating Media IV Retailer Friends News papers Wall paper Others Magazine Total Per cent of Favourable response (1) 87 85 76 64 13 12 06 Frequency per day (2) 10 01 02 01 02 03 01 Total frequency (3=1x2) 870 85 152 64 26 36 6 1239 % frequency 70.22 6.86 12.27 5.17 2.1 2.9 0.5 100 Ranking of media e.Yposure 1 3 2 4 6 5 7

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Advances In Management different than the urban one. It is important for the rural marketers to understand the rural markets and consumers to be successful in the rural markets. There are companies like HUL, ITC and LG which are successful in the rural markets. The rural tiger is awaking the companies need to work on the controllable factors to face the challenge successfully.

Vol.4(8) Aug. (2011) 7. Gopalswami T.P., Rural Marketing Environment, Problems and Strategies second edition, Vikas Publishing House Pvt. Ltd. (2005) 8. Bijapurkar Rama, We Are Like That Only, Penguin group. New Delhi, India (2007) 9. Dasgupta Jayatri, Innovations in airal India -Tapping Rural Markets Concepts & Cases, ICFAI University Press (2005) 10. Gopal V.V., Rural Marketing - The road ahead- Tapping Rural Markets Concepts & Cases, ICFAI University Press (2005) 11. Rajeswari Sheth, To buy or not to buy, tndian Manageincni. June(2006) 12. Challapalli Sravanthi, The Rural Promise, August 12, The Hindu Business Line (2004) 13. Rohit Sharan A., Ram Mohan Rao and Mishra Neeraj, Call of the country side. Rural markets, tndia Today. December (2004) 14. Rao Raghavendra K., The rise and rise of regional Brands, Indian Management. Oct. (2003) 15. Jain Sweta, 'Can Power Brands Fly High? Indian Management. October, 32-43 (2003). (Received 19"^ April 2011, accepted 12* July 2011 )

References
1. NCAER (National Council for Applied Economic Research) (2000) 2. Ramkrishn Y., New perspective in Rural and Agricultural marketing, 2'"" edition, Jaico publishing house (2005) 3. Desai Vasant. Rural development in India, past, present & future, a challenge in the crisis, Himalaya Publishing House (2003) 4. Prahalad C.K., The fortune at the bottom of the pyramid, Pearson power, Wharton school publishing (2003) 5. Kashyap Pradeep and Raut Siddhartha, Rural marketing book text and cases. Biztantra new Delhi, 165 (2006) 6. Krishnammacharyulu C.S.G. and Ramakrishnan Lalitha. Rural marketing. Text and cases, Pearson Publication (2005)

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