Rural marketing


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I am glad to share my views on Rural Marketing and it’s opportunities and challenges.

- Ravi Guntaka

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Rural marketing

  2. 2. An eminent personality once asked a gathering – If you see a woman in a village milking a cow, do you see an opportunity? Most did not reply and the ones who did reply, replied in the negative. But that is exactly where Dr. Varghese Kurien saw an opportunity and it gave birth to one of the most successful organizations of India - AMUL Rural Marketing
  3. 3. <ul><li>&quot;The future lies with those companies who see the poor as their customers.&quot; </li></ul><ul><li>- C. K. Prahalad Addressing Indian CEOs, Jan 2000. </li></ul><ul><li>&quot;Rural India is the DNA of Hindustan Lever.” </li></ul><ul><li>- Harish Manwani Non- Executive Chairman, HUL. </li></ul>
  4. 4. The need to look at rural markets : <ul><li>Rural India constitutes the ‘heart of India’. </li></ul><ul><li>A high potential and untapped of 742 million rural consumers live in 6,38365 villages across India. </li></ul><ul><li>The “Green Revolution” has in turn, brought a socioeconomic revolution in Indian villages. </li></ul><ul><li>'Go rural' is the slogan of marketing gurus after analyzing the socio-economic changes in villages. </li></ul>
  5. 5. RURAL ECONOMY - INCORRECT ASSUMPTIONS <ul><li>Rural India is an economy comprising only agricultural and nothing else; therefore </li></ul><ul><li>Rural consumers = Farmers, Farm-Related Labour and Other Services. </li></ul><ul><li>Definition: Rural Marketing involves delivering manufactured or processed inputs or services to rural producers or consumers. </li></ul><ul><li>Thus a special marketing strategy emerged known as Rural Marketing. </li></ul>
  6. 6. The Indian Markets *Compounded annual growth rate Source: ACNielsen ORG-MARG Table:1 25% of urban consumes 70% 75% of rural consumes 30% FACTS ABOUT RURAL MARKET
  7. 7. STATE -WISE RURAL MARKET SIZE Table: 2 Source: Business Today, April5,2009.
  8. 8. Rural v/s Urban: Table: 3 Source: Business Today, April5,2009. Chart: 1 Source: BT
  9. 9. Low penetration rate in rural: <ul><li>It indicate low penetration rate in rural areas, so its provide huge opportunities for the marketers. </li></ul>Table: 4 Source: Business Today, April5,2009.
  10. 10. What makes Rural marketing attractive? <ul><li>Untapped rural potential: </li></ul><ul><li>It contributes 1/3rd of India’s total savings. </li></ul><ul><li>60% of national demand for various product categories. </li></ul><ul><li>If the rural income rose by 1%, then the spending power of consumers will increase by rs.10,000cr. </li></ul><ul><li>Significant Income Growth: </li></ul><ul><li>The share of Non-Agricultural Income has increase. </li></ul><ul><li>Govt’s minimum support prices for food grains alone have risen by 30-90% in two years. </li></ul>
  11. 11. <ul><li>Improvement in social indicators: </li></ul><ul><li>Rural literacy level improves from 36% to 59% in past two decades. </li></ul><ul><li>Percentage of BPL families declined from 40% to 27%. </li></ul><ul><li>Improvement in infrastructure: </li></ul><ul><li>Improved rural roads, courtesy Bharat Nirman project. </li></ul><ul><li>More than 90% village are electrified. </li></ul><ul><li>Rural telephone density has up by 300% in last 10 years. </li></ul>
  12. 12. <ul><li>Synergy in rural marketing (1+1>2): </li></ul><ul><li>In India, there are more than 29% (650million) people in ‘Bottom Of the Pyramid’ (BOP) segment. Out of them, 75% live in rural areas. </li></ul><ul><li>Rural marketing strategies is </li></ul><ul><li>cater to the BOP segment not </li></ul><ul><li>only in the rural market but also </li></ul><ul><li>urban market. </li></ul><ul><li>* source : Fortune at the bottom of the </li></ul><ul><li>pyramid, C.K.Prahalad </li></ul>The Indian economic pyramid
  13. 13. Case 1: HUL pure-it <ul><li>HUL launched an innovative product ‘pure-it’ a </li></ul><ul><li>water Purifier brand. </li></ul><ul><li>Pure-it is available at economical price for the </li></ul><ul><li>rural consumer as there is no clean drinking </li></ul><ul><li>water in villages. </li></ul><ul><li>Strategy: “Corporate social responsibility means </li></ul><ul><li>come up with business models to cater to the BOP” </li></ul>HUL, pure-it
  14. 14. RECENT CORPORATE INITIATIVES: <ul><li>Apollo Hospital: ‘Heath Street’ it is a multi specialty rural hospital, located at aragonda village near chittor. It is the countries first tele medicine centre. </li></ul><ul><li>IFFCO & Tokio General Insurance: It has tied up insurance with fertiliser. The company offers farmers a free insurance cover worth Rs.4000 with every bag of fertiliser. </li></ul><ul><li>LG Electronics: LG recently launched a range of Super slim TVs to attract rural consumers who could not afford expensive LCD TVs. </li></ul>
  15. 15. <ul><li>Airtel & Nokia Life Tools: A farmer will able to provide information on commodity prices, weather reports, type of soil, Govt. schemes etc </li></ul><ul><li>Project Shakti (rural self-help group): HUL its project shakti is a classic example of involving women in the distribution network through empowering women. </li></ul><ul><li>Micro rural malls: Gujarat govt. has transformed its fair price shops into micro rural malls. In this malls they sell not only essential commodities but also gas cylinders, FMCG and mobile recharge etc. to cater to the diverse needs of valid ration card holders. </li></ul>
  16. 16. Rural consumer behavior: <ul><li>“ EVERY TRUISM ABOUT INDIA CAN BE CONTRADICTED BY ANOTHER TRUISM” IT IS RURAL CONSUMER INDIA. - RAMA BIJAPURKAR </li></ul><ul><li>The rural consumer is very conscious about getting value </li></ul><ul><li>for money. </li></ul><ul><li>He understands symbols and colors better, and looks for </li></ul><ul><li>endorsement by local leaders or icons. </li></ul><ul><li>He doesn’t like to pay extra for frills he cannot use. </li></ul><ul><li>He has a very high involvement in any product purchased. </li></ul>
  17. 17. CHALLENGES: <ul><li>Landholding pattern: 80% of the people hold less than 20% of the land and 20% of the land lords has 80% of the agricultural land. </li></ul><ul><li>Strategy : It shows rural market demands not only low end products but also high end products. </li></ul><ul><li>Heterogeneous population: 16 languages, state wise variations, Literacy Kerala90%; Bihar44%, BPL Orissa48%; Punjab 6%. </li></ul><ul><li>Strategy : Think locally, succeed globally. </li></ul>
  18. 18. Case-1:LG Sampoorna TV <ul><li>LG Electronics launched a customized TV Sampoorna’. </li></ul><ul><li>It facilitated on screen display in vernacular language like Hindi, Tamil and Bengali. Selling 1,00,000 sets in the very first year. </li></ul><ul><li>Strategy : </li></ul><ul><li>“ Customization of Product </li></ul><ul><li>to the local needs ” </li></ul>
  19. 19. <ul><li>Poor Infrastructure: </li></ul><ul><li>Strategy: Companies have tried to tackle the infrastructure bottlenecks with innovative strategies. </li></ul><ul><li>- “Whether it is good road or bad roads, </li></ul><ul><li>one needs our bikes to tread on”. </li></ul><ul><li>Non-availability of shops : Around 30% of the villages have no regular shops. </li></ul><ul><li>Strategy: Large scope for organized </li></ul><ul><li>rural retailers. </li></ul><ul><li>E.g.: ITC “Chopal Sagar”. </li></ul>- TVS Motors
  20. 20. <ul><li>Poor media penetration: 57% of rural households have access to mass media, 23% print media and 36% TV. </li></ul><ul><li>Strategy : coming up with a creative unconventional media. </li></ul><ul><li>Lack of communication : Result “if an insurance policy is sold without adequate communication, the customer might treat it as an obligation and later can forget to pay the renewal premium”. </li></ul><ul><li>Strategy: It is extremely important to educate the rural customers how a product fits in to the requirements of the buyer. </li></ul><ul><li>Lack of financial facilities: U rban India seems to be over-banked with more than 100% penetration, rural India lags far behind with 19% penetration. </li></ul><ul><li>Strategy: Muhammed Yunus initiative model Grameen Bank. </li></ul>
  21. 21. Rural Marketing Mix: <ul><li>The following section deals with how some MNC’s and local companies have successfully established themselves in the rural market. </li></ul>
  22. 22. Product Strategy Case-1: Nokia Vs Motorola <ul><li>Nokia has realised the needs of their customers. </li></ul><ul><li>Nokia’s low-end cell phones are used as long- life battery, pest-resistant covers, radios, alarm - clocks and flash lights by the rural customers. </li></ul><ul><li>Motorola has launched Cell Phones with high technology and more features but it didn’t reach the target market. </li></ul>
  23. 23. Product Strategy- Suggestions <ul><li>Innovative product designs and packaging. </li></ul><ul><li>Avoid the marketing myopia , that means the costumer will have the same need but will want the new product. </li></ul><ul><li>Application of value engineering . that 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. </li></ul><ul><li>Using Chinese product design strategy and raw material. </li></ul><ul><li>Be care full on product duplicates and using security features. </li></ul>
  24. 24. Price Strategy Case-2: Ariel & Chik <ul><li>Cavinkare launched Chik in 50 paise sachets. </li></ul><ul><li>Cavinkare targeted rural and small town customers who used soaps to wash their hair. </li></ul><ul><li>It created a ‘sachet revolution’. Prompting others to follow the suit. </li></ul><ul><li>P&G over estimated the Indian consuming levels. ‘Ariel’ adopted the premium pricing but it was not able to make an impact on the Indian detergent market. </li></ul>
  25. 25. <ul><li>Use backward and forward integration. </li></ul><ul><li>Using value-based pricing strategy . That means fixing of price, starting with customer and end with product. </li></ul><ul><li>Use psychological tricky pricing strategies. That means method of odd number pricing etc. </li></ul><ul><li>Effective total quality management is helps to low price high quality product. </li></ul>Price Strategy - Suggestions
  26. 26. Promotion Strategy : Case-3: Navartan oil & I dea <ul><li>Idea’ s aggressive promotion ad campaign ‘what an idea sirjee’ creates a real rural feel came through strong advertisement . </li></ul><ul><li>Abhishek playing foot sic with village bells. </li></ul><ul><li>Emami Navartan oil have launched an ad campaign with Govinda and Rambha but it didn’t catch the attention of rural consumers. </li></ul>
  27. 27. Promotion Strategy - Suggestions <ul><li>Provide social outlet campaigns , the outlet provide free to any one, what brand they choose. Its creates a ‘trust factors’ to the consumers. </li></ul><ul><li>Be care full on retail margins other wise they promoted local brands. </li></ul><ul><li>Face-to-face ‘below the line’ touch , that means feel and talk mode at heats, melas and mandis. </li></ul><ul><li>To capture the local sprit in the communication. Using local language. </li></ul><ul><li>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. </li></ul>
  28. 28. Distribution strategy : Case-4: HUL & Coca-Cola <ul><li>HUL, distributed their products through unconventional transport like ‘bullock carts’, ‘tractors’ and ‘cycles’. </li></ul><ul><li>Strategy : HUL product can reach a place, where you can not reach. </li></ul><ul><li>Coca-Cola has evolved a ‘hub and spoke’ distribution model for effectively reaching and serving rural markets. </li></ul><ul><li>Strategy : Coke is available where, even water is not available. </li></ul>
  29. 29. Distribution Strategy-Suggestions <ul><li>Best solution for enter into the rural markets, that is the company should start the production in rural areas. </li></ul><ul><li>Tie’up with public distribution system (Fair Price Shops). In our country, the public distribution system is fairly well organized. So FMCG companies collaborated with the PDS to utilize its well-established sales and distribution network in the rural markets. </li></ul><ul><li>Develop rural shopping malls. Rural shopping malls act as a two-way supply chain. </li></ul><ul><li>Develop End 2 End services and avoid the middlemen. </li></ul><ul><li>Use a combination of wholesalers and retailers to penetrate every nook and corner of rural market. </li></ul>
  30. 30. Conclusion : <ul><li>A silent revolution is sweeping the Indian countryside. 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 be the latest slogan. Go and meet the villagers and ask them what they want. Create the products and services that is relevant to their needs and it is the high time for the companies to focus, luxuries as necessities for the Indian rural customers. </li></ul>
  31. 31. Thank You. .