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Rural and Agricultural Marketing
Module 1,2,3,4,5 – Rural marketing
Module 6,7 – Agricultural Marketing
Total – 7 modules, 40 session, each session
of 60 min
References:
1)Pradeep Kashyap and Siddhartha, 2008
edition, The rural marketing book
2) C.S.G. Krishnamacharyulu and Lalitha
Ramakrishna, 2009 edition, Rural
Rural Marketing
Have a look at rural India….
Have a look at rural India….
Kuccha house in rural India
Pucca house in rural India
`
Camel cart
Bullock cart
Boats being used in Kerala
Cycle rickshaw
Snapshot of Rural India
Population ( 2001 census) M- 380 mn, F- 362 mn Urban/rural – 28%
/ 72%
No. of villages 638,365
Total No. of Inhabited villages 593,145
Rural literacy 59%
Avg population per village 1,161
% of working rural population 42
Cultivators % 40
Agricultural laborers % 33
Household Industry workers % 4
Other workers % 23
Rural India a Promising market place….
• 1990 – decision to liberalize?????
• Consequence -----
Arrival of many MNC’s
Proliferation of brands
Intense competition
Saturation of urban market
All the above lead to search for green pastures
Some MNC’s which have forayed in rural India are
HUL, Coca-Cola, LG Electronics, Britannia, HDFC Standard Life,
Philips, Colgate Palmolive and the telecom companies.
Taxonomy of rural Market
• Consumer market
• Industrial market
• Service Markets
Interesting Case:
Hindustan Unilever launches ‘Brooke Bond Sehatmand’, a Tea
with Vitamins - An innovation for the masses, with
guaranteed vitamins in each cup, to help every family live a
healthier life and help address micro nutrient deficiency
–- this abhiyaan seeks to bring together NGOs, gram panchayats
and various governmental and non-governmental bodies to
educate people on the importance and sources of nutrition,
health and vitamins across villages.
• Promising potential market of 742 mn Indian rural consumers
• Yet to taste the fruits of modernity
• Explosion in the buying capacity
• Fuelled by good growth registered in 1990s as result of 13
consecutive good monsoons (barring 2002 and 2003).
• 600% increase in the Five year plan outlay for rural
development programme from 8th
to 10th
• 41 mn KCC issued and cumulative credit card amounting to
Rs. 97,700 cr were sanctioned (Kisan Credit Card Scheme
(KCC) aims at providing adequate and timely support from the
banking system to the farmers for their short-term credit
needs for cultivation of crops. This mainly helps farmer for
purchase of inputs etc.,during the cropping season. Credit
card scheme proposed to introduce flexibility to the system
and improve cost efficiency)
• National Council for Applied Economic Research (NCAER )
1998 reports that the consuming class households ( annual
income between 45k to 215K ) in rural India equals the
number in urban India.
• It is a well known fact that disposable income in rural areas is
much higher because food, shelter, primary education and
health are virtually free, whereas in urban India 60 to 70% is
spent on these necessities.
• HUL declared that half its annual sales of Rs 11,700 cr come
from rural India. This situation is similar for companies
manufacturing dry cells, wrist watches, cassette recorders,
soaps, tea and many other product categories.
Impressive facts
• 42,000 rural
supermarkets ( haats)
• In 2001-02, LIC sold 55% of its
policies in rural India.
• Of the 20lac BSNL mobile phone
connection, 50% are in small towns
and villages
• 5.22 lac had a village public
telephone as of march 2004
• The billing per cell in small towns in
AP is higher than the billing in the
Hyderabad city.
• Of the 2 cr signed for rediffmail,
60% are from small towns. Of the
one lac who have transacted on
rediff online shopping, 50% are
from small towns.
• Internet access in semi-urban and
rural India has increased through
sanchar dhabas of bsnl, operating
in 3,617 out of 6,332 blocks in the
country.
Defining Rural Markets
• Out of 6.4 lac villages, only 20, 000 villages have population
more than 5000.
• FMCG companies define rural as any place with a population
upto 20, 000
• Durable and agri-input companies would consider town with
a population below 50,000 as rural.
Understanding rural consumers
• A farmer in rural Punjab is much more progressive than his
counter part in Bihar
• A farmer in Karnataka is far more educated than one in
Rajasthan
• In urban family, husband, wife and children are involved in
buying process
• But in village, men make the purchase decision. Women lack
mobility and have little contact with market
• Urban individual is free to take independent purchase
decision, in a village because of strong social structures,
including caste consideration and low literacy levels,
community decision making is quite common.
New influencers
• Sarpanch/pradhan
• School teacher
• Rural Youths
Products
• Rural cooking is done on ground, pressure cookers to
have handles on both sides
• Electrical gadgets - withstand wide voltage
fluctuation – kerosene run refrigerators
• Demand for detergents that are capable of
generating sufficient lather even in hard water
• Washing machine able to operate without the facility
of running water
• Freshness drive the need to buy small pack sizes so
that even higher unit prizes for small packs are
perceived as value for money.
Pressure cooker with handles on both
sides
Kerosene run refrigerator
Detergent powder which can be used in
hard water
Rural Distribution
• As per IMRB study, 90 percent of durables are
purchased from 20,000 + population towns..
• Each distributor would have a supply network
of 100 + outlets in 50 odd locations which can
cover all villages upto 2000 + population
category.
Rural communication
• There is a strong need to build reassurance
and trust about product quality, service
support and company credentials. This is done
trough face- to – face, touch, feel and talk
modes at Haats, melas and mandis.
• AICDA model
Developing rural market through IT
• 4000 choupals of ITC cover 20,000 villages in 4
states
• Same kiosk is been used for reverse trading
• STD revolution has changed the stocking
pattern of village shops. Earlier, shop keeper
send order on a post card.
Agri-Portal
E-choupal
Rural markets : The way ahead
• Companies need to adapt 4 A’s – awareness,
acceptability, availability and affordability.( Jo
Dikhta hai, wohi bikta hai)
• Anything that has a value in exchange
• Affordability - Small packs - Re 1, 2, 3
• Upward push – taking rural people from
poverty to prosperity will lead to greatly
increased purchasing power.
New approaches to rural communication
• Ad campaign by Coca-cola ‘ Thanda Matalab Coca-Cola’
• HLL – ‘Project Shakti’
• ITC’s – ‘e-choupal’
• AIDA model
• Attention – Puppet shows, drama, message on moving objects,
Giant cutouts
• Interest – Wall paintings, direct mail
• Desire – Tableau(Philips used parades of people dressed up as
electric bulbs or batteries in rural areas), audio visual vans, POP,
Demos, contests
• Action – Haats and Melas
Project Shakti
SHAKTI - Changing Lives in
Rural India
HUL: Project Shakti business model
overview
• Due to the recent government measures like waiver of loans,
national rural employment guarantee scheme and increasing
minimum support price, disposable income in rural India has
been rapidly increasing. However, rural markets present their
own sets of problems. These include poor infrastructure,
dispersed settlements, lack of education and a virtually
nonexistent medium for communication. Furthermore,
retailers cannot be present in all the centres as many of them
are so small that it makes them economically unfeasible.
• Hindustan Unilever Limited (HUL) to tap this market conceived of
Project Shakti. This project was started in 2001 with the aim of
increasing the company’s rural distribution reach as well as
providing rural women with income-generating opportunities. This
is a case where the social goals are helping achieve business goals.
• The recruitment of a Shakti Entrepreneur or Shakti Amma
(SA) begins with the executives of HUL identifying the uncovered
village. The representative of the company meets the panchayat
and the village head and identify the woman who they believe will
be suitable as a SA. After training she is asked to put up Rs 20,000
as investment which is used to buy products for selling. The
products are then sold door-to-door or through petty shops at
home. On an average a Shakti Amma makes a 10% margin on the
products she sells.
• An initiative which helps support Project Shakti is the Shakti
Vani programme. Under this programme, trained
communicators visit schools and village congregations to
drive messages on sanitation, good hygiene practices and
women empowerment. This serves as a rural communication
vehicle and helps the SA in their sales.
• The main advantage of the Shakti programme for HUL is
having more feet on the ground. Shakti Ammas are able to
reach far flung areas, which were economically unviable for
the company to tap on its own, besides being a brand
ambassador for the company. Moreover, the company has
ready consumers in the SAs who become users of the
products besides selling them.
• Although the company has been successful in the initiative
and has been scaling up, it faces problems from time to time
for which it comes up with innovative solutions. For example,
a problem faced by HUL was that the SAs were more inclined
to stay at home and sell rather than going from door to door
since there is a stigma attached to direct selling. Moreover,
men were not liable to go to a woman’s house and buy
products. The company countered this problem by hosting
Shakti Days. Here an artificial market place was created with
music and promotion and the ladies were able to sell their
products in a few hours without encountering any stigma or
bias.
• OTHER ACTIVITIES:
To improve the business skills of the SHG women, extensive training programmes
are being held. Such workshops have already covered a large number of Shakti
Entrepreneurs in Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Uttar
Pradesh, Tamilnadu, Chattisgarh and Orissa
•
As part of their training programme, all HUL Management
Trainees spend about 4 weeks on Project Shakti in rural
areas with NGOs or SHGs. Assignments include business process
consulting for nascent enterprises engaged in the manufacture of
products such as spices and hosiery items.
• This model has been the growth driver for HUL and presently
about half of HUL’s FMCG sales come from rural markets. The
Shakti network at the end of 2008 was 45,000 Ammas
covering 100,000+ villages across 15 states reaching 3 m
homes. The long term aim of the company is to have 100,000
Ammas covering 500,000 villages and reaching 600 m people.
We feel that with this initiative, HUL has been successful in
maintaining its distribution reach advantage over its
competitors. This programme will help provide HUL with a
growing customer base which will benefit the company for
years to come.
Participated States
• Andhra Pradesh
• Karnataka
• Madhya Gujarat
• Chhattisgarh
• Maharashtra
• Orissa
• Punjab
• Rajasthan
• Tamilnadu
• Uttar Pradesh
• West Bengal
• Bihar
• Haryana
• Jharkha
Strategies…
• HLL – Lifebuoy and wheel – wall paintings. This concept is also used by
sellers of cement and asbestos.
• BASF – puppet shows – awareness about its fertilizers
• HLL – Giant cutouts – lifebuoy – during boat race in Kerala which is held as
a part of Onam
• Castrol – rural West Bengal – painted both the sides of motor which used
to ferry people
• Khaitan fans – shades of bullock and horse carts to advt their products
• HLL – Vim bar challenge – demonstrated how efficient Vim bar is in
cleaning utensils
• Colgate palmolive – audio visual vans – promote colgate toothpaste
• FMCG companies – utilized melas and haats to reach out rural consumers
Colgate Palmolive India limited
Creating demand in rural areas
In order to create new demand for oral care products,
CPIL has increased their reach in rural areas. It is
converting non-users to users through various sales
promotion measures such as small volume low priced
sachets, distribution of free toothbrushes, Rural Van
Programmes, among other things, especially in rural
areas. Rural areas contribute to 35 per cent of
Colgate’s sales.
Rural Initiatives by different
corporate….
• Airtel has tied up with Indian Farmers Fertiliser Cooperative
Limited (IFFCO) to reach farmers directly. Farmers will receive
free voice messages twice daily on farming techniques,
weather forecasts, dairy farming, rural health initiatives,
fertilizer availability, loan information and market rates.
Additionally, farmers can also call a dedicated helpline,
manned by experts from various fields, to get answers to
their queries.
• Reliance Communications has introduced low tariff initiative
like the Grameen Programme for rural subscribers.
• SREI Sahaj e-Village Ltd will set up 25,000 IT kiosks to be
known as common service centres (CSC) across West Bengal,
Bihar, Orissa, Assam, Uttar Pradesh and Tamil Nadu, by 2010.
• ITC's e-Chapual has been a great developmental initiative
which has also added value to its own agricultural products. It
comprises improving the lives of farmers and villagers.
• HDFC has started a 'village adoption' scheme to improve the
investment climate in Indian villages.
• Mahindra Shubhlabh, the agricultural business arm of
Mahindra & Mahindra, aims to use especially cultured seeds
to improve contract-farming productivity.
• DCM Shriram provides information services through its chain
of Krishi Vikas Kendras, which have now evolved into Hariyali
Kisan Bazaars.
• Hindustan Petroleum has started community kitchen
programmes in some Indian villages.
• ICICI Bank has launched an ambitious rural banking and
agribusiness initiative.
• The Byrraju Foundation's GramIT programme has generated a
rural BPO model. It aims to employ rural people in the ITES
(IT-enabled services) industry, and to create profit for the
entrepreneurs or cooperatives running the BPOs.
Goals of Marketing
Enterprise Marketing
Profitability Sales revenue maximization
Cost minimization
Growth Sales growth maximization
Product development
Market penetration
Market development
Diversification
Market standing Innovation
Market leadership
Consumer satisfaction
Image Brand image
Company image
Evolution of rural marketing
Phase Origin Function Major
products
Source
market
Destination
market
I Since
Independen
ce
Agricultural
marketing
Agricultural
produce
Rural Urban
II Mid sixties Marketing of
agricultural
inputs
Agricultural
inputs
Urban Rural
III Mid-
Nineties
Rural
marketing
Consumable
s and
durables for
consumptio
n and
production
Urban
Rural
Rural
Rural marketing before 1960s
From/To Rural Urban
Urban Agricultural inputs –
consumables
Not relevant
Rural Artisan services and
products
Agricultural produces
Agricultural inputs included fertilizers, seeds and
pesticide
Local marketing included bamboo baskets, ropes,
window and door frames, household earthen and small
agricultural tools like ploughs by sellers like black smith,
carpenters, cobblers and pot makers
Agricultural produces like food grains and industrial
inputs like cotton, oil seeds, sugarcane etc
Rural marketing in phase II (1960s
-1990s)
From/To Rural Urban
Urban Agricultural inputs Not relevant
Rural Artisan services and
products
Agricultural produce
Formation of agencies gained momentum - KVIC,
Gujarat Cooperative societies and APCO fabrics
( Andhra Pradesh state handloom weavers cooperative
societies
Village industries flourished and products like
handicrafts, handloom textiles, soaps, safety matches,
crackers etc hit the urban market on a large scale.
Rural market in Phase III (1990s to
the present)
From/To Rural
Urban Occupational inputs: Consumables and
durables
Household goods:: Consumables and
durables
Rural Artisan services and products
Durables included tractors, harvesters, power tillers, pump sets, oil
engines, electric motors
Rural marketing can be defined as a function which manages all
those activities involved in assessing, stimulating and converting
the purchasing power into an effective demand for specific
products and services, and moving them to the people in rural area
to create satisfaction and a standard of living to them and thereby
achieves the goals of the organization
Nature of rural market
Transactional Vs Development marketing
Sl. No Aspect Transactional Development
1 Concept Consumer
orientation,
marketing
concept
Society orientation, societal
concept
2 Role Stimulating
and
conventional
marketing
Catalytic and transformation
agent
3 Focus Product-
market fit
Social change
4 Key task Product
innovations
and
communicatio
ns
Social innovation and
communication
Transactional Vs Development
marketing
Sl No. Aspect Transactional Development
5 Nature of activity Commercial Socio-cultural,
economic
6 Participants Corporate
enterprise, sellers
Government,
voluntary agencies,
corporate
enterprises,
benefactors
7 Offer Products and
services
Development
projects/schemes/p
rogrammes
8 Target group Buyers Beneficiaries and
buyers
9 Communication Functional Developmental
Transactional Vs Development
marketing
Sl No. Aspect Transactional Development
10 Goal Profits
Customer
satisfaction
Market
development
Corporate image
11 Time-frame Short-medium Medium-long
12 Motivation Profit motive
Business policy
Service-motive
Ideological or Public
policy
Taxonomy of Rural Market
a) Consumer market
Constituents : Individuals and households
Products : Consumables: Food products,
toiletries, cosmetics, textiles and garments,
foot wear etc
Durables: Watches, bicycles, Radio, TV, Kitchen
appliances, furniture, sewing machines, two
wheelers etc
Taxonomy of Rural Market
b) Industrial market
Constituents : Agricultural and allied activities, food
processing, poultry farming, fishing, animal
husbandry, cottage industries, health center,
school, cooperatives, NGO’s, etc.
Products: Consumable: Seeds, fertilizers, pesticides,
animal feed, fishnets, medicines, petrol/diesel,
engine oil etc
Durables: Tillers, Threshers, tractors, pump sets,
generators, harvesters, boats etc
Grape harvester
Taxonomy of Rural Market
c) Service market
Constituents : Individual, households, offices
and production firms
Services : Repairs, transport, banking, credit,
insurance, healthcare, education,
communication, power etc.
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
Large population
Aspect males females total
Population 367,240 344,640 711,880
Work force 27,370 121,820 393,190
Rising rural prosperity
Income groups 2006-07 (%)
Above 1,00,000 5.6
Rs 77,001-10,000 5.8
Rs 50,00-77,000 22.4
Rs 25,00-50,000 44.6
Rs 25,000 and below 20.2
Rural Consumption….
• 6% of the soft drinks sales happen in the rural areas.
• Rural India accounts for 49% of motorcycle sales.
• Rural India accounts for 59% of Cigarettes sales.
• 53% of FMCG sales happen at Rural India.
• Talcum powder is used by more than 25% of rural
India.
• Lipsticks are used by more than 11% of the rural
women and less than 22% of the urban women.
• Close to 10% of Maruti Suzuki’s sales come from the
rural market.
• Hero Honda, on its part, had 50% of its sales
coming from rural market in FY’09.
• Rural India has a large consuming class with 41%
of India’s middle-class and 58% of the total
disposable income accounting for consumption.
• By 2010 rural India will consume 60% of the
goods produced in the country.
• In 20 years, rural Indian Market will be larger
than the total consumer markets in countries
such as South Korea or Canada today, & almost 4
times the size of today’s urban Indian market.
Life style changes
Category Penetration (%) Brand with higher
penetration
Toilet soap 91 Lifebuoy
Washing cakes/bars 88 Wheel
Edible oil 84 Double herian mustard
tea 77 Lipton tata
Washing powder/liquid 70 Nirma
salt 64 Tata salt
biscuits 61 Parle g
Org-Marg, June 1999
Life cycle advantage
Product urban Market growth
rate (%)
rural Market growth
rate (%)
Popular soaps Maturity 2 Growth 40
Premium soaps Late growth 11 Early growth 67
Washing
powders
Late growth 6 Early growth 60
Skin creams Maturity 1.1 Early growth 9.9
Talcum powder Maturity 4 Growth 3.1
Market growth rate higher than urban
Category Growth (%) Rural market share (2006)
Toilet soap 13.4 62.4
Body talcum powder 23.65 54.
Toothpaste 23.5 45.1
Cooking medium (oil) 10.91 73.4
tea 10.97 61.9
Health beverages 28.54 39.8
Electric bulbs 9.4 31.7
Electric tubes 10.15 38.7
Cigarettes 13.09 65.6
Packaged biscuits 6.79 46.2
Hair oil/cream 30.85 59.7
Rural marketing is not
expensive
• Case of Dabur
Historically dabur used wall paintings and mobile vans to
sell labels like lal dantamanjun, chywanprash and hajmola.
In july and august 2000, it decided to do something novel
to promote chywanprash. It selected a cluster of 300
villages in banda district and sent in three mobile bowling
alleys. The bowling pins represented the various germs
that chywanprash protects against. The exercise cost
around rs 2 lacs. It drew a 2 lac crowd- roughly 667
individual per village- at contract cost of rs 1 per
individual.
It also distributed Hanumanchalisa and calendars along with
ayurvedic products to build the association with brand.
Amitabh – brand ambassador – quality, consistency and
traditional yet contemporary.
Remoteness is no longer a
problem
• Remoteness is a problem but not
insurmountable – the rural distribution is not
developed for the following reasons
• Lack of proper infrastructure
• Lack of marketers imagination and initiative
• Ex: Selling points for electric fan in urban
areas are close to 18,000 whereas the number
of outlets for diesel/electric pump sets,
primarily a rural farm product is less than 3000
• Marketers have failed in exploiting Indian’s
traditional selling system – haats and melas
• Ex: IDE ( international development
enterprise) india has used haats and melas as
the main instrument for promotion,
demonstration of the treaddle pump, a minor
irrigation device. Sales went up from less
10,000 in 1996 to about 1,00,000 in 1999.
Salient Features of 3. 5 inch
Surface Treadle Pump (STP)
Sales potential of haats and
melas
Number of haats 47,000
Average per day sales in haats Rs. 2,23,000
Average outlet per haat 314
Average visitors to a haat 4,580 (covers 5 villages)
Average sales per outlet in a haat Rs. 874
Number of commercial melas 5000
Sales per day in a mela Rs. 25 lakh
Size of rural markets
Estimated annual size: Rural market
FMCG Rs. 60,000 cr
Durables Rs. 5000 cr
Agri-inputs (incl tractors) Rs. 45, 000 cr
2/4 wheelers Rs. 8000 cr
Total Rs. 1,23,000 cr
Source: Francis kanoi 2002
Rural Challenges….
Though rural markets are a huge attraction to marketers, it is
not easy to enter the market and take a sizeable share of the
market, in the short time due to the following reasons.
• Low Literacy
• There are not enough opportunities for education in rural
areas. The literacy level is as low (36%) when compared to all-
India average of 52%.
• Seasonal Demand
• Demand for goods in rural markets depends upon agricultural
situation, as agriculture is the main source of income.
Agriculture to a large extent depends upon monsoon and,
therefore, the demand or buying capacity is not stable or
regular.
• Transportation
• Many rural areas are not connected by rail transport. Kacha
roads become unserviceable during the monsoon and interior
villages get isolated.
• Distribution
• An effective distribution system requires village-level
shopkeeper, Mandal/ Taluka- level wholesaler or preferred
dealer, distributor or stockiest at district level and company-
owned depot or consignment distribution at state level. The
presence of too many tiers in the distribution system
increases the cost of distribution.
• Communication Problems
• Facilities such as telephone, fax and telegram are rather poor
in rural areas.
• Traditional Life
• Life in rural areas is still governed by customs and traditions
and people do not easily adapt new practices. For example,
even rich and educated class of farmers does not wear jeans
or branded shoes.
• Buying Decisions
• Rural consumers are cautious in buying and decisions are
slow and delayed. They like to give a trial and only after being
personally satisfied, do they buy the product.
• Media for Promotions
• Television has made a great impact and large audience has
been exposed to this medium. Radio reaches large population
in rural areas at a relatively low cost. However, reach of
formal media is low in rural households; therefore, the
market has to undertake specific sales promotion activities in
rural areas like participating in melas or fairs.
• Career in Rural Market
• While rural marketing offers a challenging career, a rural sales
person should require certain qualifications and specialized
talent.
• Cultural Factors
• Culture is a system of shared values, beliefs and perceptions
that influence the behavior of consumers. There are different
groups based on religion, caste, occupation, income, age,
education and politics and each group exerts influence on the
behavior of people in villages.
• There is a belief among rural people that experience is more
important than formal education and they respect
salespersons who can offer practical solutions to their
problems. Therefore, it is desirable that sales persons,
especially those who have been brought up in cities are given
a thorough training consisting of both theory and practical
aspects of village life. The training will help these sales
persons to align themselves with the market realities and
settle down smoothly in their jobs.
• Rural market has a tremendous potential that is yet to be
tapped. A small increase in rural income, results in an
exponential increase in buying power.

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Rural and Agricultural Marketing Modules

  • 1. Rural and Agricultural Marketing Module 1,2,3,4,5 – Rural marketing Module 6,7 – Agricultural Marketing Total – 7 modules, 40 session, each session of 60 min References: 1)Pradeep Kashyap and Siddhartha, 2008 edition, The rural marketing book 2) C.S.G. Krishnamacharyulu and Lalitha Ramakrishna, 2009 edition, Rural
  • 3. Have a look at rural India….
  • 4. Have a look at rural India….
  • 5. Kuccha house in rural India
  • 6. Pucca house in rural India
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  • 23. Boats being used in Kerala
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  • 38. Snapshot of Rural India Population ( 2001 census) M- 380 mn, F- 362 mn Urban/rural – 28% / 72% No. of villages 638,365 Total No. of Inhabited villages 593,145 Rural literacy 59% Avg population per village 1,161 % of working rural population 42 Cultivators % 40 Agricultural laborers % 33 Household Industry workers % 4 Other workers % 23
  • 39. Rural India a Promising market place…. • 1990 – decision to liberalize????? • Consequence ----- Arrival of many MNC’s Proliferation of brands Intense competition Saturation of urban market All the above lead to search for green pastures Some MNC’s which have forayed in rural India are HUL, Coca-Cola, LG Electronics, Britannia, HDFC Standard Life, Philips, Colgate Palmolive and the telecom companies.
  • 40. Taxonomy of rural Market • Consumer market • Industrial market • Service Markets
  • 41. Interesting Case: Hindustan Unilever launches ‘Brooke Bond Sehatmand’, a Tea with Vitamins - An innovation for the masses, with guaranteed vitamins in each cup, to help every family live a healthier life and help address micro nutrient deficiency –- this abhiyaan seeks to bring together NGOs, gram panchayats and various governmental and non-governmental bodies to educate people on the importance and sources of nutrition, health and vitamins across villages.
  • 42. • Promising potential market of 742 mn Indian rural consumers • Yet to taste the fruits of modernity • Explosion in the buying capacity • Fuelled by good growth registered in 1990s as result of 13 consecutive good monsoons (barring 2002 and 2003). • 600% increase in the Five year plan outlay for rural development programme from 8th to 10th
  • 43. • 41 mn KCC issued and cumulative credit card amounting to Rs. 97,700 cr were sanctioned (Kisan Credit Card Scheme (KCC) aims at providing adequate and timely support from the banking system to the farmers for their short-term credit needs for cultivation of crops. This mainly helps farmer for purchase of inputs etc.,during the cropping season. Credit card scheme proposed to introduce flexibility to the system and improve cost efficiency)
  • 44. • National Council for Applied Economic Research (NCAER ) 1998 reports that the consuming class households ( annual income between 45k to 215K ) in rural India equals the number in urban India. • It is a well known fact that disposable income in rural areas is much higher because food, shelter, primary education and health are virtually free, whereas in urban India 60 to 70% is spent on these necessities. • HUL declared that half its annual sales of Rs 11,700 cr come from rural India. This situation is similar for companies manufacturing dry cells, wrist watches, cassette recorders, soaps, tea and many other product categories.
  • 45. Impressive facts • 42,000 rural supermarkets ( haats)
  • 46. • In 2001-02, LIC sold 55% of its policies in rural India. • Of the 20lac BSNL mobile phone connection, 50% are in small towns and villages • 5.22 lac had a village public telephone as of march 2004 • The billing per cell in small towns in AP is higher than the billing in the Hyderabad city. • Of the 2 cr signed for rediffmail, 60% are from small towns. Of the one lac who have transacted on rediff online shopping, 50% are from small towns. • Internet access in semi-urban and rural India has increased through sanchar dhabas of bsnl, operating in 3,617 out of 6,332 blocks in the country.
  • 47. Defining Rural Markets • Out of 6.4 lac villages, only 20, 000 villages have population more than 5000. • FMCG companies define rural as any place with a population upto 20, 000 • Durable and agri-input companies would consider town with a population below 50,000 as rural.
  • 48. Understanding rural consumers • A farmer in rural Punjab is much more progressive than his counter part in Bihar • A farmer in Karnataka is far more educated than one in Rajasthan • In urban family, husband, wife and children are involved in buying process • But in village, men make the purchase decision. Women lack mobility and have little contact with market • Urban individual is free to take independent purchase decision, in a village because of strong social structures, including caste consideration and low literacy levels, community decision making is quite common.
  • 49. New influencers • Sarpanch/pradhan • School teacher • Rural Youths
  • 50. Products • Rural cooking is done on ground, pressure cookers to have handles on both sides • Electrical gadgets - withstand wide voltage fluctuation – kerosene run refrigerators • Demand for detergents that are capable of generating sufficient lather even in hard water • Washing machine able to operate without the facility of running water • Freshness drive the need to buy small pack sizes so that even higher unit prizes for small packs are perceived as value for money.
  • 51. Pressure cooker with handles on both sides
  • 53. Detergent powder which can be used in hard water
  • 54. Rural Distribution • As per IMRB study, 90 percent of durables are purchased from 20,000 + population towns.. • Each distributor would have a supply network of 100 + outlets in 50 odd locations which can cover all villages upto 2000 + population category.
  • 55. Rural communication • There is a strong need to build reassurance and trust about product quality, service support and company credentials. This is done trough face- to – face, touch, feel and talk modes at Haats, melas and mandis. • AICDA model
  • 56. Developing rural market through IT • 4000 choupals of ITC cover 20,000 villages in 4 states • Same kiosk is been used for reverse trading • STD revolution has changed the stocking pattern of village shops. Earlier, shop keeper send order on a post card.
  • 59. Rural markets : The way ahead • Companies need to adapt 4 A’s – awareness, acceptability, availability and affordability.( Jo Dikhta hai, wohi bikta hai) • Anything that has a value in exchange • Affordability - Small packs - Re 1, 2, 3 • Upward push – taking rural people from poverty to prosperity will lead to greatly increased purchasing power.
  • 60. New approaches to rural communication • Ad campaign by Coca-cola ‘ Thanda Matalab Coca-Cola’ • HLL – ‘Project Shakti’ • ITC’s – ‘e-choupal’ • AIDA model • Attention – Puppet shows, drama, message on moving objects, Giant cutouts • Interest – Wall paintings, direct mail • Desire – Tableau(Philips used parades of people dressed up as electric bulbs or batteries in rural areas), audio visual vans, POP, Demos, contests • Action – Haats and Melas
  • 61. Project Shakti SHAKTI - Changing Lives in Rural India
  • 62.
  • 63. HUL: Project Shakti business model overview • Due to the recent government measures like waiver of loans, national rural employment guarantee scheme and increasing minimum support price, disposable income in rural India has been rapidly increasing. However, rural markets present their own sets of problems. These include poor infrastructure, dispersed settlements, lack of education and a virtually nonexistent medium for communication. Furthermore, retailers cannot be present in all the centres as many of them are so small that it makes them economically unfeasible.
  • 64. • Hindustan Unilever Limited (HUL) to tap this market conceived of Project Shakti. This project was started in 2001 with the aim of increasing the company’s rural distribution reach as well as providing rural women with income-generating opportunities. This is a case where the social goals are helping achieve business goals. • The recruitment of a Shakti Entrepreneur or Shakti Amma (SA) begins with the executives of HUL identifying the uncovered village. The representative of the company meets the panchayat and the village head and identify the woman who they believe will be suitable as a SA. After training she is asked to put up Rs 20,000 as investment which is used to buy products for selling. The products are then sold door-to-door or through petty shops at home. On an average a Shakti Amma makes a 10% margin on the products she sells.
  • 65. • An initiative which helps support Project Shakti is the Shakti Vani programme. Under this programme, trained communicators visit schools and village congregations to drive messages on sanitation, good hygiene practices and women empowerment. This serves as a rural communication vehicle and helps the SA in their sales. • The main advantage of the Shakti programme for HUL is having more feet on the ground. Shakti Ammas are able to reach far flung areas, which were economically unviable for the company to tap on its own, besides being a brand ambassador for the company. Moreover, the company has ready consumers in the SAs who become users of the products besides selling them.
  • 66. • Although the company has been successful in the initiative and has been scaling up, it faces problems from time to time for which it comes up with innovative solutions. For example, a problem faced by HUL was that the SAs were more inclined to stay at home and sell rather than going from door to door since there is a stigma attached to direct selling. Moreover, men were not liable to go to a woman’s house and buy products. The company countered this problem by hosting Shakti Days. Here an artificial market place was created with music and promotion and the ladies were able to sell their products in a few hours without encountering any stigma or bias.
  • 67. • OTHER ACTIVITIES: To improve the business skills of the SHG women, extensive training programmes are being held. Such workshops have already covered a large number of Shakti Entrepreneurs in Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Uttar Pradesh, Tamilnadu, Chattisgarh and Orissa • As part of their training programme, all HUL Management Trainees spend about 4 weeks on Project Shakti in rural areas with NGOs or SHGs. Assignments include business process consulting for nascent enterprises engaged in the manufacture of products such as spices and hosiery items.
  • 68. • This model has been the growth driver for HUL and presently about half of HUL’s FMCG sales come from rural markets. The Shakti network at the end of 2008 was 45,000 Ammas covering 100,000+ villages across 15 states reaching 3 m homes. The long term aim of the company is to have 100,000 Ammas covering 500,000 villages and reaching 600 m people. We feel that with this initiative, HUL has been successful in maintaining its distribution reach advantage over its competitors. This programme will help provide HUL with a growing customer base which will benefit the company for years to come.
  • 69. Participated States • Andhra Pradesh • Karnataka • Madhya Gujarat • Chhattisgarh • Maharashtra • Orissa • Punjab • Rajasthan • Tamilnadu • Uttar Pradesh • West Bengal • Bihar • Haryana • Jharkha
  • 70. Strategies… • HLL – Lifebuoy and wheel – wall paintings. This concept is also used by sellers of cement and asbestos. • BASF – puppet shows – awareness about its fertilizers • HLL – Giant cutouts – lifebuoy – during boat race in Kerala which is held as a part of Onam • Castrol – rural West Bengal – painted both the sides of motor which used to ferry people • Khaitan fans – shades of bullock and horse carts to advt their products • HLL – Vim bar challenge – demonstrated how efficient Vim bar is in cleaning utensils • Colgate palmolive – audio visual vans – promote colgate toothpaste • FMCG companies – utilized melas and haats to reach out rural consumers
  • 71. Colgate Palmolive India limited Creating demand in rural areas In order to create new demand for oral care products, CPIL has increased their reach in rural areas. It is converting non-users to users through various sales promotion measures such as small volume low priced sachets, distribution of free toothbrushes, Rural Van Programmes, among other things, especially in rural areas. Rural areas contribute to 35 per cent of Colgate’s sales.
  • 72. Rural Initiatives by different corporate…. • Airtel has tied up with Indian Farmers Fertiliser Cooperative Limited (IFFCO) to reach farmers directly. Farmers will receive free voice messages twice daily on farming techniques, weather forecasts, dairy farming, rural health initiatives, fertilizer availability, loan information and market rates. Additionally, farmers can also call a dedicated helpline, manned by experts from various fields, to get answers to their queries. • Reliance Communications has introduced low tariff initiative like the Grameen Programme for rural subscribers. • SREI Sahaj e-Village Ltd will set up 25,000 IT kiosks to be known as common service centres (CSC) across West Bengal, Bihar, Orissa, Assam, Uttar Pradesh and Tamil Nadu, by 2010.
  • 73. • ITC's e-Chapual has been a great developmental initiative which has also added value to its own agricultural products. It comprises improving the lives of farmers and villagers. • HDFC has started a 'village adoption' scheme to improve the investment climate in Indian villages. • Mahindra Shubhlabh, the agricultural business arm of Mahindra & Mahindra, aims to use especially cultured seeds to improve contract-farming productivity. • DCM Shriram provides information services through its chain of Krishi Vikas Kendras, which have now evolved into Hariyali Kisan Bazaars.
  • 74. • Hindustan Petroleum has started community kitchen programmes in some Indian villages. • ICICI Bank has launched an ambitious rural banking and agribusiness initiative. • The Byrraju Foundation's GramIT programme has generated a rural BPO model. It aims to employ rural people in the ITES (IT-enabled services) industry, and to create profit for the entrepreneurs or cooperatives running the BPOs.
  • 75. Goals of Marketing Enterprise Marketing Profitability Sales revenue maximization Cost minimization Growth Sales growth maximization Product development Market penetration Market development Diversification Market standing Innovation Market leadership Consumer satisfaction Image Brand image Company image
  • 76. Evolution of rural marketing Phase Origin Function Major products Source market Destination market I Since Independen ce Agricultural marketing Agricultural produce Rural Urban II Mid sixties Marketing of agricultural inputs Agricultural inputs Urban Rural III Mid- Nineties Rural marketing Consumable s and durables for consumptio n and production Urban Rural Rural
  • 77. Rural marketing before 1960s From/To Rural Urban Urban Agricultural inputs – consumables Not relevant Rural Artisan services and products Agricultural produces Agricultural inputs included fertilizers, seeds and pesticide Local marketing included bamboo baskets, ropes, window and door frames, household earthen and small agricultural tools like ploughs by sellers like black smith, carpenters, cobblers and pot makers Agricultural produces like food grains and industrial inputs like cotton, oil seeds, sugarcane etc
  • 78. Rural marketing in phase II (1960s -1990s) From/To Rural Urban Urban Agricultural inputs Not relevant Rural Artisan services and products Agricultural produce Formation of agencies gained momentum - KVIC, Gujarat Cooperative societies and APCO fabrics ( Andhra Pradesh state handloom weavers cooperative societies Village industries flourished and products like handicrafts, handloom textiles, soaps, safety matches, crackers etc hit the urban market on a large scale.
  • 79. Rural market in Phase III (1990s to the present) From/To Rural Urban Occupational inputs: Consumables and durables Household goods:: Consumables and durables Rural Artisan services and products Durables included tractors, harvesters, power tillers, pump sets, oil engines, electric motors Rural marketing can be defined as a function which manages all those activities involved in assessing, stimulating and converting the purchasing power into an effective demand for specific products and services, and moving them to the people in rural area to create satisfaction and a standard of living to them and thereby achieves the goals of the organization
  • 80. Nature of rural market Transactional Vs Development marketing Sl. No Aspect Transactional Development 1 Concept Consumer orientation, marketing concept Society orientation, societal concept 2 Role Stimulating and conventional marketing Catalytic and transformation agent 3 Focus Product- market fit Social change 4 Key task Product innovations and communicatio ns Social innovation and communication
  • 81. Transactional Vs Development marketing Sl No. Aspect Transactional Development 5 Nature of activity Commercial Socio-cultural, economic 6 Participants Corporate enterprise, sellers Government, voluntary agencies, corporate enterprises, benefactors 7 Offer Products and services Development projects/schemes/p rogrammes 8 Target group Buyers Beneficiaries and buyers 9 Communication Functional Developmental
  • 82. Transactional Vs Development marketing Sl No. Aspect Transactional Development 10 Goal Profits Customer satisfaction Market development Corporate image 11 Time-frame Short-medium Medium-long 12 Motivation Profit motive Business policy Service-motive Ideological or Public policy
  • 83. Taxonomy of Rural Market a) Consumer market Constituents : Individuals and households Products : Consumables: Food products, toiletries, cosmetics, textiles and garments, foot wear etc Durables: Watches, bicycles, Radio, TV, Kitchen appliances, furniture, sewing machines, two wheelers etc
  • 84. Taxonomy of Rural Market b) Industrial market Constituents : Agricultural and allied activities, food processing, poultry farming, fishing, animal husbandry, cottage industries, health center, school, cooperatives, NGO’s, etc. Products: Consumable: Seeds, fertilizers, pesticides, animal feed, fishnets, medicines, petrol/diesel, engine oil etc Durables: Tillers, Threshers, tractors, pump sets, generators, harvesters, boats etc
  • 86. Taxonomy of Rural Market c) Service market Constituents : Individual, households, offices and production firms Services : Repairs, transport, banking, credit, insurance, healthcare, education, communication, power etc.
  • 87. 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
  • 88. Large population Aspect males females total Population 367,240 344,640 711,880 Work force 27,370 121,820 393,190
  • 89.
  • 90. Rising rural prosperity Income groups 2006-07 (%) Above 1,00,000 5.6 Rs 77,001-10,000 5.8 Rs 50,00-77,000 22.4 Rs 25,00-50,000 44.6 Rs 25,000 and below 20.2
  • 91. Rural Consumption…. • 6% of the soft drinks sales happen in the rural areas. • Rural India accounts for 49% of motorcycle sales. • Rural India accounts for 59% of Cigarettes sales. • 53% of FMCG sales happen at Rural India. • Talcum powder is used by more than 25% of rural India. • Lipsticks are used by more than 11% of the rural women and less than 22% of the urban women. • Close to 10% of Maruti Suzuki’s sales come from the rural market.
  • 92. • Hero Honda, on its part, had 50% of its sales coming from rural market in FY’09. • Rural India has a large consuming class with 41% of India’s middle-class and 58% of the total disposable income accounting for consumption. • By 2010 rural India will consume 60% of the goods produced in the country. • In 20 years, rural Indian Market will be larger than the total consumer markets in countries such as South Korea or Canada today, & almost 4 times the size of today’s urban Indian market.
  • 93.
  • 94.
  • 95. Life style changes Category Penetration (%) Brand with higher penetration Toilet soap 91 Lifebuoy Washing cakes/bars 88 Wheel Edible oil 84 Double herian mustard tea 77 Lipton tata Washing powder/liquid 70 Nirma salt 64 Tata salt biscuits 61 Parle g Org-Marg, June 1999
  • 96. Life cycle advantage Product urban Market growth rate (%) rural Market growth rate (%) Popular soaps Maturity 2 Growth 40 Premium soaps Late growth 11 Early growth 67 Washing powders Late growth 6 Early growth 60 Skin creams Maturity 1.1 Early growth 9.9 Talcum powder Maturity 4 Growth 3.1
  • 97. Market growth rate higher than urban Category Growth (%) Rural market share (2006) Toilet soap 13.4 62.4 Body talcum powder 23.65 54. Toothpaste 23.5 45.1 Cooking medium (oil) 10.91 73.4 tea 10.97 61.9 Health beverages 28.54 39.8 Electric bulbs 9.4 31.7 Electric tubes 10.15 38.7 Cigarettes 13.09 65.6 Packaged biscuits 6.79 46.2 Hair oil/cream 30.85 59.7
  • 98.
  • 99.
  • 100. Rural marketing is not expensive • Case of Dabur Historically dabur used wall paintings and mobile vans to sell labels like lal dantamanjun, chywanprash and hajmola. In july and august 2000, it decided to do something novel to promote chywanprash. It selected a cluster of 300 villages in banda district and sent in three mobile bowling alleys. The bowling pins represented the various germs that chywanprash protects against. The exercise cost around rs 2 lacs. It drew a 2 lac crowd- roughly 667 individual per village- at contract cost of rs 1 per individual. It also distributed Hanumanchalisa and calendars along with ayurvedic products to build the association with brand. Amitabh – brand ambassador – quality, consistency and traditional yet contemporary.
  • 101.
  • 102.
  • 103. Remoteness is no longer a problem • Remoteness is a problem but not insurmountable – the rural distribution is not developed for the following reasons • Lack of proper infrastructure • Lack of marketers imagination and initiative • Ex: Selling points for electric fan in urban areas are close to 18,000 whereas the number of outlets for diesel/electric pump sets, primarily a rural farm product is less than 3000 • Marketers have failed in exploiting Indian’s traditional selling system – haats and melas
  • 104. • Ex: IDE ( international development enterprise) india has used haats and melas as the main instrument for promotion, demonstration of the treaddle pump, a minor irrigation device. Sales went up from less 10,000 in 1996 to about 1,00,000 in 1999.
  • 105.
  • 106. Salient Features of 3. 5 inch Surface Treadle Pump (STP)
  • 107. Sales potential of haats and melas Number of haats 47,000 Average per day sales in haats Rs. 2,23,000 Average outlet per haat 314 Average visitors to a haat 4,580 (covers 5 villages) Average sales per outlet in a haat Rs. 874 Number of commercial melas 5000 Sales per day in a mela Rs. 25 lakh
  • 108. Size of rural markets Estimated annual size: Rural market FMCG Rs. 60,000 cr Durables Rs. 5000 cr Agri-inputs (incl tractors) Rs. 45, 000 cr 2/4 wheelers Rs. 8000 cr Total Rs. 1,23,000 cr Source: Francis kanoi 2002
  • 109. Rural Challenges…. Though rural markets are a huge attraction to marketers, it is not easy to enter the market and take a sizeable share of the market, in the short time due to the following reasons. • Low Literacy • There are not enough opportunities for education in rural areas. The literacy level is as low (36%) when compared to all- India average of 52%. • Seasonal Demand • Demand for goods in rural markets depends upon agricultural situation, as agriculture is the main source of income. Agriculture to a large extent depends upon monsoon and, therefore, the demand or buying capacity is not stable or regular.
  • 110. • Transportation • Many rural areas are not connected by rail transport. Kacha roads become unserviceable during the monsoon and interior villages get isolated. • Distribution • An effective distribution system requires village-level shopkeeper, Mandal/ Taluka- level wholesaler or preferred dealer, distributor or stockiest at district level and company- owned depot or consignment distribution at state level. The presence of too many tiers in the distribution system increases the cost of distribution.
  • 111. • Communication Problems • Facilities such as telephone, fax and telegram are rather poor in rural areas. • Traditional Life • Life in rural areas is still governed by customs and traditions and people do not easily adapt new practices. For example, even rich and educated class of farmers does not wear jeans or branded shoes. • Buying Decisions • Rural consumers are cautious in buying and decisions are slow and delayed. They like to give a trial and only after being personally satisfied, do they buy the product.
  • 112. • Media for Promotions • Television has made a great impact and large audience has been exposed to this medium. Radio reaches large population in rural areas at a relatively low cost. However, reach of formal media is low in rural households; therefore, the market has to undertake specific sales promotion activities in rural areas like participating in melas or fairs. • Career in Rural Market • While rural marketing offers a challenging career, a rural sales person should require certain qualifications and specialized talent.
  • 113. • Cultural Factors • Culture is a system of shared values, beliefs and perceptions that influence the behavior of consumers. There are different groups based on religion, caste, occupation, income, age, education and politics and each group exerts influence on the behavior of people in villages.
  • 114. • There is a belief among rural people that experience is more important than formal education and they respect salespersons who can offer practical solutions to their problems. Therefore, it is desirable that sales persons, especially those who have been brought up in cities are given a thorough training consisting of both theory and practical aspects of village life. The training will help these sales persons to align themselves with the market realities and settle down smoothly in their jobs. • Rural market has a tremendous potential that is yet to be tapped. A small increase in rural income, results in an exponential increase in buying power.