Rural Marketing

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Making Inroads into the hinterlands

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Rural Marketing

  1. 1. MANAGEMENT RESEARCH PROJECT REPORT On “Making Inroads into Hinterland (Rural Marketing)” By Shobit Gupta 1|Making Inroads Into Hinterland
  2. 2. MANAGEMENT RESEARCH PROJECT REPORT On “Making Inroads into Hinterland (Rural Marketing)” SUBMITTED TO: SUBMITTED BY: Prof. Pooja Arora Shobit Gupta IBS-Chandigarh 08BS0003166 2|Making Inroads Into Hinterland
  3. 3. A report submitted to Prof. Pooja Arora in partial fulfillment of requirements of MBA program ACKNOWLEDGEMENTS It gives me great satisfaction on completion of Management Research Project entitled “Making Inroads into Hinterland (Rural Marketing)” On the submission of my project report I would like to express my sincere gratitude to my guide Prof. Pooja Arora (ICFAI Business School, Chandigarh) for mentoring me and taking active interest throughout the project. I am again deeply indebted to Prof. Pooja Arora for sharing his insights on the topics and for being a constant source of inspiration & courage during the entire project work. She was always available, correcting mistakes, intelligently directing me to proper sources of information advising to aim for simplicity, brevity, clarity and accuracy. I am indeed thankful to her for his valuable guidance. I would like to thank entire faculty members for sharing their immense experience and extending their support in carrying out this project work. I am greatly acknowledged for their kind help. 3|Making Inroads Into Hinterland
  4. 4. Table of Contents 1. ABSTRACT ................................................................................................................................................. 7 2. INTRODUCTION ......................................................................................................................................... 8 3. OBJECTIVE OF THE PROJECT.................................................................................................................... 10 5. METHODOLOGY ...................................................................................................................................... 11 a) Research Design .............................................................................................................................. 11 b) Method of data Collection ................................................................................................................ 11 6. RURAL MARKETING ................................................................................................................................ 11 6.1 RURAL MARKETING ........................................................................................................................... 11 6.2 DIAGNOSIS OF THE FAIL URES ...................................................................................................... 13 6.3 ATTRACTIVENESS OF RURAL MARKET ............................................................................................ 16 6.4 RURAL V/s URBAN MARKETING ........................................................................................................ 19 6.5 DIFFERENCES IN URBAN-RURAL MARKET RESEARCH ....................................................................... 20 6.6 SELECTING & ATTRACTING NEW MARKETS ...................................................................................... 21 6.7 PRICING ............................................................................................................................................. 22 Pricing Frame-Work ............................................................................................................................ 23 Cost-based Methods ........................................................................................................................... 24 Competition – Based Pricing Methods ............................................................................................... 24 Demand-based pricing Methods......................................................................................................... 25 Price in Marketing Mix ........................................................................................................................ 26 Skimming Vs Penetration Strategies ................................................................................................... 26 7. PROMOTIONAL STRATEGY ..................................................................................................................... 27 EXPLORING MEDIA .............................................................................................................................. 27 DESIGNING RIGHT PROMOTION STRATEGY ....................................................................................... 28 7.1 DESIGNING PROMOTION .................................................................................................................. 29 (a) Communication objectives: ............................................................................................................... 29 (b) Message content: .............................................................................................................................. 30 (c) Message structure ............................................................................................................................. 30 (d) Message format:................................................................................................................................ 31 (e) Message source: ................................................................................................................................ 31 (f) Selecting the Channels: ...................................................................................................................... 32 4|Making Inroads Into Hinterland
  5. 5. Personal Channels ............................................................................................................................... 32 Distribute products for interaction ..................................................................................................... 33 Create Opinion leaders ....................................................................................................................... 33 Advertising with interactivity .............................................................................................................. 34 Train middlemen ................................................................................................................................. 34 Tele links for online transaction.......................................................................................................... 35 Non-Persona, Channels ....................................................................................................................... 35 (g) Deciding on Promotion Mix ............................................................................................................... 36 (i) Contests and Demonstrations: ....................................................................................................... 36 (ii) Sampling: ....................................................................................................................................... 36 (iii) Installment Schemes: .................................................................................................................... 37 7.3 DISTRIBUTION STRATEGY .................................................................................................................. 38 7.4 THE OLD SETUP ................................................................................................................................. 39 1. Wholesalers:................................................................................................................................... 39 2. Retailers ......................................................................................................................................... 39 3. Vans ................................................................................................................................................ 41 4. Weekly Haats & Bazaars................................................................................................................. 41 5. Melas and Fairs .............................................................................................................................. 42 7.5 THE NEW PLAYERS ............................................................................................................................ 43 1. Unofficial Channels......................................................................................................................... 43 2. Cooperative Society ....................................................................................................................... 43 3. Public Distribution System (PDS).................................................................................................... 44 4. Petrol Pumps .................................................................................................................................. 44 5. Agricultural Input Dealers .............................................................................................................. 44 6. NGOs .............................................................................................................................................. 44 7. Barefoot Salesmen ......................................................................................................................... 45 8. Syndicated Distribution .................................................................................................................. 45 7.6 NEW APPROACHES............................................................................................................................ 46 1. Distribution Trends ........................................................................................................................ 46 2. Direct To Home Selling ................................................................................................................... 46 3. Relationship Marketing .................................................................................................................. 47 5|Making Inroads Into Hinterland
  6. 6. 8. PRODUCT STRATEGY ............................................................................................................................... 49 (i) Based on Tangibility ............................................................................................................................ 49 (ii) Based on the purpose of use ............................................................................................................. 49 (iii) Basedonthefunctionallifeoftheproduct ............................................................................................ 49 (iv) Based on habits ................................................................................................................................. 50 (v) Based on the price and quality .......................................................................................................... 50 (vi) Based on product development ....................................................................................................... 51 (vii) Based on brand hierarchy level........................................................................................................ 51 8.1 CONCEPT AND SIGNIFICANCE OF PRODUCT STRATEGY ................................................................... 52 (i) Achieves Product – Market Fit: - .................................................................................................... 52 (ii) Encourages Innovativeness: - ........................................................................................................ 52 (iii) Provides Competitive Edge: - ........................................................................................................ 52 (iv) Makes Better Use Of Resources: - ................................................................................................ 52 1. Length of product line: -...................................................................................................................... 54 2. Line Pruning: - ..................................................................................................................................... 55 3. Line Modernization: - .......................................................................................................................... 55 CASE STUDIES .............................................................................................................................................. 57 COCA – COLA INDIA ................................................................................................................................ 57 TATA SALT ............................................................................................................................................... 59 COLGATE ................................................................................................................................................. 62 CASPER .................................................................................................................................................... 64 9. CONCLUSION ........................................................................................................................................... 67 10. REFERENCES ......................................................................................................................................... 69 6|Making Inroads Into Hinterland
  7. 7. 1. ABSTRACT Rural Markets have seen a big boom in terms of opportunities they provide to the corporate sector in India. Rural India had a share of over 55 per cent in total consumption of FMCGs (Fast Moving Consumer Goods), and had a growth of about 14 per cent per annum during the period 1992-93 to 1997-98. This seems to be a fairly good growth by any standard. The rural market’s contribution to the total national market had gone up from 28 per cent in 1985 to 40 per cent in 1990. The size of rural market in 1992 was of the order of Rs. 40,000 crores, made- up of Rs. 22,000 crores for non-food items and Rs. 18,000 crores for food items. During the period 1992-93 to 1997-98 consumption of FMCGs had grown at a rate of 14 per cent per annum. According to data furnished by National Council for Applied Economic Research (NCAER) clearly showed a great rural market boom. The Chief Economist of NCAER (based on this data) clarified “that rural growth rates have already outpaced urban ones and will continue to do so through the next decade. So, a presence in the rural market will not remain a choice, but a necessity”. The companies will have no choice but to go rural if they must survive. Findings of the study conducted by NCAER in1998-99 showed that, (i) Rural markets for group I durables (less than Rs. 1000 in value: items like transistors, pressure cookers, wrist-watches, bicycles, etc.) are bigger than urban markets already; predicted that (ii) rural markets for group II durables (Rs. 1001- Rs. 6000 in value: items like B&W TVs, sewing machines, mixers, cassette recorders) will be bigger than urban markets by 2001-02; (iii) for group III durables (Rs. 6001 or more in value: like color TVs, refrigerators two-wheelers and washing machines) rural markets will be smaller than urban ones, even in 2006-07; and showed that (iv) rural market growth rates are faster than urban ones, even on the larger bases of group I & II. The NCAER data also showed that India is now seeing a dramatic shift towards prosperity in rural households. It predicted that the lowest income class will shrink from more than 60% in1994-95 to 20% in 2006-07. The higher income classes will be more than double. Rural economy has triggered. Ten good rains in a row from 1980-81 to have 1998-99) boosted food grain production. Procurement prices have also been rising. This implies growing rural prosperity and demand for goods. The NCAER data clearly showed that Rural FMCG (Fast 7|Making Inroads Into Hinterland
  8. 8. Moving Consumer Goods) market will boom. Some impressive facts about rural sector: I. The number of rural supermarkets (haats) in India 42,000 exceeds the total number of retail chain stores in the US (35,000). II. In 2001-02, LIC sold 55 percent of its policies in rural India. III. Of the two million BSNL mobile phone connections, 50 per cent are in rural IV. Of the 20 million who have signed up for Rediffmail, 60 per cent are from small towns. Of the one lakh who have transacted on Rediff online shopping site, 50 per cent are from small towns. V. 24 million Kisan Credit Cards (KCC) issued in rural areas exceeds the 17.7 million credit plus debit cards issued in urban India. A whopping Rs. 52,000 crore has been sanctioned under the KCC scheme. VI. The number of middle and higher income families (Having Rs. 70,000 plus annual income) in rural (21.7 million) and urban (24.2 million) is nearly the same. 2. INTRODUCTION The footfalls in the villages are getting louder and louder as companies scramble to woo the rural consumers. Villages are no longer an abstraction, but fashionable in marketing terms. From talking endlessly about potential growth, companies are now actively cultivating the rural markets. And why not? Consider the market; out of five lakh villages in India only one lakh have been tapped so far. What has made the rural consumers so attractive to companies now? After all, the 122-million village households were not created overnight. The answer is simple. The urban market is getting saturated while villagers are flush with 'disposable income' thanks to bountiful harvests in the last four years. It is this income that the companies are raring to cash in on. The estimate speaks of the potential volume of business that can be generated in rural Indian markets. The estimate is about three times that of the European market. 8|Making Inroads Into Hinterland
  9. 9.  Hindustan Lever's 'Operation Bharat' will reach 22 million new households in the villages by the end of the year.  Every area that has a police station will soon boast a Godrej dealer & service center.  BPL is planning to add 13,000 active dealers this year to its existing network of 15,000 throughout the country. A dramatic change is in progress. Villagers who used to crack open peanut 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 are a rare sight; so is the case with twigs of niim (neem) and babul (babool) tree. Today, the ultra bright shine of Colgate or some other international brand of toothpaste holds more appeal than the traditional methods of cleaning teeth. Even the native expressions of cleaning teeth, such as daatun karnaa and musaag laganaa, are endangered to being replaced by new expressions such as paste karnaa, 'to brush teeth with paste'. Even a simple query such as “Where are you from?” is not free from the overtones of marketization and globalization in rural discourse. Consumerism and globalization is invading parts of India where, as some would venture to say, time seems to have ceased for centuries. Yet there has not been substantial progress in this area. It can be seen that now 73% of India’s total population is rural. Though over the last decade, there has been a marginal reduction in the rural population expressed as a percentage of total population, there has been a steady growth in rural population in terms of absolute numbers. And, it had reached 74 crore by 2001. In terms of households, the rural market consists of more than 12 crore households, forming over 70 per cent of the total households in the country. Urban population in India is concentrated in 3200 cities and towns whereas the rural population is scattered across 630,000 villages. Even the FMCG giant, HLL, directly reaches only 70,000 villages of the country. This goes to prove that the rural market is scattered over a large area and is very difficult to penetrate. 9|Making Inroads Into Hinterland
  10. 10. Nearly 60 % of the rural income comes from agriculture. Hence rural prosperity and disposable income with rural consumers is linked largely with agriculture. 50 % of the households in the rural economy are in the income category of less than Rs. 25000 per annum, but about 14% of the households have an annual income that exceeds Rs. 50,000. The 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 policies of the government largely favor rural development programs. This is clearly highlighted by the fact that the outlay for rural development has risen from Rs 14000 crore in the 7th plan to Rs 30000 crore in the 8th plan period. In addition, better procurement prices fixed for the various crops and better yields due to many research programs have also contributed to the strengthening of the rural markets. This attraction towards the rural markets is primarily due to the enormous variation in the demands of approximately 740 million rural people. 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. 'Rural markets are future battlegrounds' 3. OBJECTIVE OF THE PROJECT "Any task without sound objectives is like Tree without roots". Similarly in case of any research study undertaken, initially the objectives of the same are determined and accordingly the further steps are taken on. A research study may have many objectives but all these objectives revolve around one major objective which is the focus of the study. In this study, the focus is on the emergence of rural markets as the most happening market on which every marketer has an eye. And so this study will be based on studying the emergence of rural market in various contexts. The following are the objectives of this research study:- 10 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  11. 11.  To study the emergence of rural markets in the context of India.  To study the present scenario of rural marketing in India.  To study the role of advertisement in rural India.  To study the constraints in marketing communication in rural India.  To study the future prospects of rural markets.  To study the challenges faced by rural marketers in India.  To study the reasons of popularity of rural markets in India. 5. METHODOLOGY a) Research Design: On the basis of fundamental objectives of research, our study is a type of Descriptive Research: Descriptive research, also known as statistical research, describes data and characteristics about the population or phenomenon being studied. Descriptive research answers the questions who, what, where, when and how. Although the data description is factual, accurate and systematic, the research cannot describe what caused a situation. Thus, descriptive research cannot be used to create a causal relationship, where one variable affects another. The objective of my research is to describe things such as the market potential for a product or the demographics and attitude of rural consumer who buy the product. b) Method of data Collection Secondary Data: Large amount of secondary data is available in the forms of articles, manuals and previously conducted researches on the similar topic. Also, the data thus gathered will help in identifying key parameters to examine through further exploration and thus will help in defining the objectives. 6. RURAL MARKETING 6.1 RURAL MARKETING Quite clearly, large Indian companies have begun looking at rural markets seriously. Some of them are even developing exclusive marketing strategies to tap this huge mass of consumers. 11 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  12. 12. Of India's one billion plus population, nearly 70 per cent live in non-urban or rural areas. According to a National Council for Applied Economic Research (NCAER) study, there are as many "middle income and above" households in rural areas as there are in urban areas. There are almost twice as many "lower middle income" households in rural areas as in urban. According to NCAER's projections, the number of middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. In Urban India, the same is expected to grow from 46 million to 59 million. Hence the absolute size of middle and high income households in Rural India is expected to be nearly double that of Urban India. Percentage Distribution of household, population and income HOUSEHOLDS POPULATION INCOME RURAL 73.6 74.6 55.6 URBAN 27.4 25.4 44.4 ALL INDIA 100 100 100 Thus we see that Rural India contributes almost 56% to the National Income as against 44% contributed by Urban India. Although it is contributed by 75% of the total population, which has its own challenges like how to sell small quantities to large base of consumers. Percentage Of Population Below Poverty Line By Rural-Urban Location State Wise (1999-2000) STATES RURAL URBAN ALL-INDIA 36.35 28.76 ANDHRA PRADESH 25.48 32.28 ASSAM 61.78 12.48 BIHAR 58.85 45.10 GUJARAT 26.22 21.70 HARYANA 14.86 13.79 KARNATAKA 38.50 24.55 KERALA 26.50 31.89 MADHYA PRADESH 39.35 46.29 MAHARASTRA 50.00 32.16 ORISSA 62.67 34.27 12 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  13. 13. PUNJAB 14.24 6.74 RAJASTHAN 15.01 24.36 TAMIL NADU 39.37 29.82 UTTAR PRADESH 29.87 36.39 WEST BENGAL 55.16 16.74 Thus the Situation has further worsened as per the Report on Human Development Index. 6.2 DIAGNOSIS OF THE FAILURES The apparent disparity requires introspection to identify the gaps, which can then be bridged between rural & urban India. a) Relative share (%) against GDP Sector 1950-51 1995-96 Agriculture 56 29 Manufacturing 15 29 Transport & Trade 11 20 Banking 9 11 Administration (Services) 9 11 Growth rates in different sectors of economy Particulars 1990-91 91-92 92-93 94-95 Growth In Real GDP % 5.2 1.1 4.3 4.3 Growth In Agriculture Production % 3.0 -1.9 2.9 2.9 Growth In Industrial Production % 8.3 0.6 2.3 4.1 b) Subsistence Orientation of Agriculture I. Productivity is low II. Land degradation c) Failure of Land Reforms I. Failure of redistribution of land in favor of poor. II. Large numbers of workers dependent on agriculture leading to low labor productivity. 13 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  14. 14. III. Splitting of families and rise in population has shrunk the size of operational land holding. IV. Landlessness is increasing forcing more and more people joining labor market every year. d) Inadequate Food Supplies I. At national level India is self-sufficient but inadequate at the household level. II. Increase in food production mainly due to few crops like wheat & rice but production of bajra, barley etc has declined considerably (as these are the corps used by poor in rural India). e) Slow G r o w t h of Infrastructure I. Still 40% of India’s villages are without proper roads. II. 1.8 Lac villages do not have primary schools within 1 km. III. 4.5 Lac villages have drinking water problem. f) Inadequate Inputs I. Research extension systems are weak, no direct link between scientists and farmers. II. Problems faced in the timely availability of improved seeds, fertilizers and pesticides in required quantity. III. Credit is major constraint, which adversely affects adoption of new technologies especially by the small farmers. g) Slow Down Of Rural Industrialization The rural industrialization has slowed down although the expenditure on rural industries increased from Rs.42/- crores (1st plan) to Rs.6334/- crores (8th plan). However %age of allocation decreased from 2.1% to 1.6%. Plan outlay on rural industrialization (Rs. Crore) PUBLIC SECTOR RURAL PLAN OUTLAY INDUSTRY % 14 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  15. 15. I 1960 42 2.1 II 4672 187 4.0 III 8577 241 2.8 IV 15779 293 1.9 V 39426 592 1.5 VI 97500 1780 1.8 VII 180000 2753 1.5 VIII 434100 6334 1.6 Rural Marketing: A silent revolution is sweeping the Indian countryside. It has compelled marketing whizkids to go rural. The marketing battlefield has shifted from the cities to the villages. “Go Rural” seems to be the latest slogan. Adi Godrej of Godrej soaps says: “The rural consumer is discerning and the rural market is vibrant. At the current rate of growth it will soon outstrip the urban market. The rural market is not sleeping any longer.” C. K. Prahlad, the management guru observes: “Selling to the poor may be more profitable than selling to you and me. This is where the future is. Opportunities are everywhere. The digital divide is not about lack of opportunity, it is about the lack of imagination.” Evolution of Rural Marketing MAJOR SOURCE DESTINATION PHASE ORIGIN FUNCTION PRODUCTS MARKET MARKET Before Agricultural Agricultural I Rural Urban Mid-1960 Marketing Produce Marketing Of Mid- Agricultural II Agricultural Urban Rural Sixties Inputs Inputs Consumables And Mid- Rural Urban III Durables For Rural Nineties Marketing Rural Consumption & Production 15 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  16. 16. 6.3 ATTRACTIVENESS OF RURAL MARKET 1) Large population 2) Rising propensity 3) Growth in consumption 4) Life cycle changes 5) Life cycle advantages 6) Market growth rate higher than urban 7) Rural marketing is not expensive 8) Remoteness is no longer a problem 1. Large Population: The rural population is large and its growth rate is also high. Despite the rural urban migration, the rural areas continue to be the place of living majority of Indians. 2. Rising Rural Propensity: Income Group 1994-95 2000-01 2006-07 Above Rs. 100,000 1.6% 3.8% 5.6% Rs. 77,001-100,000 2.7% 4.7% 5.8% Rs. 50,001-77,000 8.3% 13.0% 22.4% Rs. 25,001-50,000 26.0% 41.1% 44.6% Rs.25,000 & Below 61.4% 37.4% 20.2% 3. Growth in consumption: Per Capita Household Expenditure (Rs.) Level No. States Expenditure Punjab 614 Kerala 604 High Haryana 546 (Above Rs 382/-) 7 Rajasthan 452 16 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  17. 17. Gujarat 416 Andhra Pradesh 386 Maharashtra 384 West Bengal 382 Orissa 381 Average (Rs. 382/-) 5 Tamil Naidu 381 Uttar Pradesh 373 Karnataka 365 Assam 338 3 Low Madhya Pradesh 326 (Below Rs. 382/-) Bihar 289 4. Life style changes: Income vs. usage of packed consumer goods (% of household using) Monthly Household Income (Rs.) Goods Up to 350 351 –750 751 –1500 1501 + Washing Bars 60 78 86 91 Toilet Soaps 57 72 89 93 Tooth Paste/Powder 22 36 65 85 Talcum Powder 20 25 41 63 Tea Packaged 22 30 48 64 This shows how consumption is increasing with increase in income level. 17 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  18. 18. 5. Life cycle Advantage: Stages in Life Cycle Product Urban Market Growth Rate % Rural Popular soaps Maturity 2 Growth Premium soaps Late growth 11 Early Washing powder Late growth 6 Early growth Skin creams Maturity 1.1 Growth growth Talcum powder Maturity 4 Growth 6. Market growth rates higher: Growth rates of the FMCG market and the durable market are higher in rural areas for many products. The rural market share will be more than 50% for the products like toilet soaps, body talcum powder, cooking medium (oil), cooking medium (vanaspati), tea, cigarettes and hair oil. 7. Rural marketing is not expensive: Conventional wisdom dictates that since rural consumers are dispersed, reaching them is costly. However, new research indicates that the selling in Rural India is not expensive. According to one research it costs roughly Rs.1 Crore to promote a consumer durable inside a state. This includes the expenses of advertising in vernacular newspapers, television spots, in- cinema advertising, radio, van operations and merchandising and point of purchase promotion. Campaign like this, which can reach millions, costs twice as much in urban area. 8. Remoteness is no longer a problem: Remoteness in a problem but not insurmountable. The rural distribution is not much developed for the reasons,  Lack of proper infrastructure such as all-weather roads, electrification and sanitation, and  Lack of marketer’s imagination and initiative. Marketers have so far, failed in analyzing the rural side and exploiting rural India’s traditional selling system- Haats & Melas. Their near obsession with just duplicating the urban-type network and that too with very limited success, has kept them blind to the potential of these two outlets. 18 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  19. 19. 6.4 RURAL V/s URBAN MARKETING NO. ASPECT URBAN RURAL Marketing & Societal Marketing & Societal Concepts, Concepts & Relationship Development Marketing & 1 PHILOSOPHY Marketing Relationship Marketing MARKET DEMAND High Low COMPETITION Among Units In Mostly From LOCATION Concentrated Widely Spread 2 Organized Sector Unorganized Units LITERACY High Low INCOME High Low EXPENDITURE Planned, Even Seasonal, Variation NEEDS High Level Low Level INNOVATION/ADOPTION Faster Slow PRODUCT AWARENESS High Low CONCEPT Known Less Known 3 POSITIONING Easy Difficult USAGE METHOD Easily Grasped Difficult To Grasp QUALITY PREFERENCE Good Moderate PRICE 4 SENSITIVE Yes Very much LEVEL DESIRED Medium-high Medium-low DISTRIBUTION Wholesalers, stockists, Village shops, retailer, supermarket, 5 CHANNELS specialty stores, & “Haats” authorised showrooms TRANSPORT FACILITIES Good Average PRODUCT AVAILABILITY High Limited PROMOTION Print, audio visual media, TV, radio, print media to some outdoors, exhibitions etc. extent. More languages ADVERTISING few languages 6 Door-to-door, frequently Occasionally PERSONAL SELLING Contests, gifts, price Gifts, price discounts discount SALES PROMOTION PUBLICITY Good opportunities Less opportunities 19 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  20. 20. 6.5 DIFFERENCES IN URBAN-RURAL MARKET RESEARCH ASPECT URBAN RURAL Literate, brand aware, Semiliterate or illiterate, brand unaware, individual respond difficult to get individual responses, RESPONDENTS individually generally group responses Willing to respond, have time pressures, spares little time for Hesitant but devotes time. TIME researcher Tough to access: Geographical ACCESSIBILITY Easy to access, though many distances and psychological suffer from research fatigue apprehension are barriers Do not speak to outsiders easily Internal data, syndicate SECONDARY DATA research, published media, Very few sources and less data SOURCE many sources and large data Large number of middlemen, PRIMARY DATA experts, sales force, Less number of all categories SOURCES consumers opinion leaders Respondents form relatively Heterogeneous groups. Income and homogenous group. Income SAMPLING land holding be carefully applied can be a criterion Use of sophisticated instruments, style and Requires simplified instruments. admiration. Respondents comfortable with colors DATA COLLECTION Respondents comfortable & pictures. with numbers ratings. 20 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  21. 21. 6.6 SELECTING & ATTRACTING NEW MARKETS Selecting and attracting markets involves three decisions viz., segmenting, targeting and positioning. I. Segmentation is the process of dividing or categorizing market into different groups based on one or more variables. II. Targeting is selecting the market segment, which can be served efficiently and profitably. It is deciding on market coverage strategy. III. Positioning is a market attraction strategy, which involves placing the brand in the minds of the customers in the target market. The various steps included in the market coverage and attraction process are: DECISION ACTIONS SEGMENTATION Identification of various bases for segmenting the market. Developing profiles of the marketing segments. TARGETING Evaluating the market segment for their attractiveness. Deciding the market coverage strategy Identifying a set of possible competitive advantages of the brand POSITIONING Selecting the right competitive advantage Communicating the chosen competitive advantage to the target customers Segmentation is the process of identifying & establishing alternative market segments. Next step that is targeting involves is evaluation, selection & coverage.  Evaluation of segments (following criteria may be applied): A. Profitability - relevant information required is: a. Sales volume b. Distribution cost c. Promotion cost d. Sales revenue e. Profit margins B. Attractiveness C. Growth rate D. Company objectives 21 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  22. 22.  Selection of segments  Coverage of segments Segmentation Type Of Marketing Coverage Strategy Zero Mass Undifferentiated Substantial Segmented Differentiated Selective Niche Concentrated Choosing a Coverage Strategy VARIABLE STRATEGY UNDIFFERENTIATED DIFFERENTIATED CONCENTRATED RESOURCES Moderate Large Limited PRODUCT VARIABILITY Less More Less PRODUCT LIFE CYCLE STAGE Introduction Growth Introduction MARKET VIABILITY Less High High Positioning Positioning is the act of finding a place in the minds of consumers and locating a brand therein. Positioning involves: I. Identifying the difference of the offer vis-à-vis competitor’s offer. II. Selecting the differences that have greater competitive advantage. III. Communicating such advantages effectively to the target audience. 6.7 PRICING Among the four A’s of rural marketing viz.  Affordability  Availability  Awareness  Acceptabilit Affordability is the major determinant of consumption. Affordability is determined by two factors o Incomes of the consumer o Prices of the products or services 22 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  23. 23. Pricing Frame-Work S.No. Situation Major Factors Approach Method 1 New Product introduction Demand Cost-oriented Cost-plus or mark- -Elastic Demand-oriented up, Penetration, -Inelastic Skimming 2 Product-life cycle (short) Cost Demand Cost-oriented Payback/capital Competition recovery, Rate of return 3 Growing markets Cost Cost-oriented Cost plus, mark-up Experience curve 4 Mature markets Competition Competition- Leader pricing, Stiff competition oriented Competitive pricing (bidding), Going rate pricing 5 Growing/mature markets. Demand Demand-oriented Discriminatory, Discerning buyers Differential, Perceived value, Psychological, Value pricing 6 Product-mix promotion Demand Cost Demand-oriented Product-line, Competition Optional feature, Image Captive product, Two-part, Product bundling 7 Distribution to scattered Geographical Cost-oriented Geographical Customers Cost pricing 8 Motivating channel Competition Competition- Discount pricing Channel oriented members Approaches to pricing would be based on one or more of the following bases: 1 Cost 2 Competition 3 Demand Various methods of pricing are discussed in the following tables: 23 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  24. 24. Cost-based Methods Method Description Cost-plus or Mark-up All associated costs of production are computed. Prices are fixed by making up a fixed percentage over average or marginal costs. Marginal cost or Contribution Price is determined to recover marginal cost and make a contribution to the firm. Target return Prices are set in anticipation of earning a desired target return on investment. Pay back method (capital recovery) Price is determined to enable the firm to Cover all costs and capital investment within a specific time period. Experience curve An experience curve represents the relationship between costs and cumulative experience. With learning, costs decline and allow fixation of lower prices. Competition – Based Pricing Methods Method Description Leader pricing Some product items may be priced low, to attract customers and to generate more overall demand for other items. Competitive pricing It matches the market prices of competitors. It is reactive. Going rate pricing (Follow the crowd/leader) Firm prices its products at the same level or below the prices of leading competitors. Sealed bid pricing In industrial marketing, open or closed bids are invited. Firms quote their prices, anticipating what the competitor would quote. 24 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  25. 25. Demand-based pricing Methods Method Description Discrimination / Differential / Variable / Products are sold at two or more prices based on Flexible customer segment, product-form, image, location and time. Perceived-value Based on perceived value of each component of the product, the price is estimated and employed. Psychological Based on attitudes of consumers in quality- price relationship, (high price indicates high quality) odd prices (convey the notation of a discount or bargain) and reference (a price on an average considered right for a product), prices are determined. Value Pricing t o generate value satisfaction to consumers. Every Day Low Pricing (EDPL) charges l o w p r i c e s o n a l l d a y s . High-low pricing charges higher prices o n ever day basis but lower prices during special promotion period. Pricing strategy has to pass through three tests of effectiveness I. Is it in tune with the expectations of customer? II. Is it consistent with other P’s of marketing strategy? III. Is it competitive enough to give the target market share? Consumer Categories (Rural C o n s u m e r ) Category Annual Income Life Style Quality conscious Over Rs. 1,50,001 Very rich Value conscious Rs. 45,001 – 1,50,000 Consuming class Price Conscious Rs. 22,001 – Rs. 45,000 Climbers Rs. 16,001 – Rs. 22,000 Aspirants Below Rs. 16,000 Destitute 25 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  26. 26. Price in Marketing Mix S.No. Rural Consumers Product Price Promotion Place 1. Quality conscious, Premium High High Show rooms, Malls, Concerned with Product hyper General and Functional benefits, Fancy stores Value for money 2. Value conscious Mass Medium High General and fancy Price sensitive, Product stores, super Concern for markets, Kirana, Functional benefits paan shops and No frills. Value for money Haats. 3. Price conscious Spurious Low No Kirana, paan shops No concern for quality Products and Haats Skimming Vs Penetration Strategies Factor Skimming Use if: Penetration Use if: Price elasticity of primary demand Inelastic Elastic Price elasticity of selective demand Inelastic Elastic Cost of production and marketing Higher Lower relative to potential competitors Economies of Scale No Yes Ease with which competitors will Difficult for them to Easy entry enter the market enter Rate at which the consumer will New concept (slow) Known concept (fast) accept the concept Market segments based on price Exist. Can be taken one Mass market exits segment at a time The firm’s resources to produce and Small or restricted Large market product 26 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  27. 27. 7. PROMOTIONAL STRATEGY Promotion has become the biggest challenge, to rural marketers today. Rural marketers have to skillfully communicate with a much larger but scattered audience characterized by variations in language, culture and lifestyles. Poor message comprehension and low media exposure only add to the problem of communication through mass media. The requirement is three folds: 1. To explore the available media at the different locations. 2. To develop region-specific consumer profiles to understand the characteristics of target market. 3. To design right communication and motivation strategies to induce target audience to buy the product. EXPLORING MEDIA Promotion media may be classified broadly into three categories: Mass media, local media and personalized media. The various media vehicles are given below. Mass Media Local Media Personalized Media Radio Haats, Melas, Fairs Direct Communication Cinema Wall Paintings Dealers Press Hoardings Sales Persons TV Leaflets Video Researchers Vans Folk Media Animal Parade Transit Media Mass media like TV are gaining ground in the rural market through regional channels but one cannot deny the importance of the Local and Personalized media. With the low cost of Local media and its effectiveness it is gaining importance in the rural markets. 27 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  28. 28. DESIGNING RIGHT PROMOTION STRATEGY In designing the right promotion, the considerations are: Approach Same or different Design (i) Message Rational or emotional or moral (ii) Media Mass, local, customized one-to-one (iii) Communications Advertising, sales promotion, publicity and personal selling. Budget allocation Media mix Approach: Same or Different? The controversy regarding the validity of a universal approach to attract urban and rural consumers may continue for some years to come. Until all the rural areas are almost equally urbanized, marketers have to pay heed to the voice of experts. Based on its survey findings, A.P. Lintas advocates: “In mass media, a different idiom for rural India is not required. The chasm between rural and urban India is narrowing”. Ogilvy Rural Communication Network (ORCN) considers rural specific promotion is necessary. “Advertisements for the rural markets must be relevant to those markets if they are to create brand awareness and penetration. For advertisements to succeed, companies have to adopt the principle of multi-national companies i.e., think global and act local.” These two viewpoints are valid, as they represent two different markets of evolving rural markets. It is for the individual marketing manager to find out the applicability of the views. When we observe the practices of leading consumer companies, we find that they are following a more localized and personalized approach in the selection of media and designing 28 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  29. 29. of messages. The time has perhaps come for advertising agencies to look into issues specific to the regions and also at the products, to succeed in the large rural markets. 7.1 DESIGNING PROMOTION The process of designing promotion mix with appropriate message, media and promotions is not an easy task. It involves the following steps. a) Determining communication objectives. b) Creating message content or appeals. c) Evolving message structure. d) Developing message format. e) Choosing message source. f) Selecting the channel. g) Deciding on promotion mix. h) Establishing promotion budget. (a) Communication objectives: After analyzing the characteristics of target audience and identifying available media, the next step is Setting Communication objectives. The market may seek one or more of the following objectives. 1. To achieve awareness among a certain percentage of target audience. 2. To improve product knowledge among target customers. 3. To strengthen liking or preference to buy the product. 4. To persuade the consumers to buy the product. In urban markets the emphasis is on brand switching and promoting more usage. But in the rural markets, many companies are rightly emphasizing on brand awareness building objective. This is the route for more and regular sales according to HLL, Philips, Godrej and Dabur. In 1990, TVS launched TVS-50 XL as a value-for-money vehicle. This venture was supported by massive advertising campaigns on television to increase awareness of the brand. By then, many villages had TV and TVS spent around Rs.1.5 crore on the Namma Ooru Vandi (our own vehicle) commercial which showed people from various walks of life swearing by TVS-50 XL. 29 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  30. 30. (b) Message content: Messages are to be created to induce, inform and persuade target a udien ce . There should be a theme, an appeal or a unique selling proposition (USP) touching the heart and stimulating the mind. There are three types of appeals: rational, emotional and moral. They are briefly explained and illustrated in the following table: APPEAL ASPECTS EXAMPLES Rational Benefits: Quality, value, Hero Honda Fill it, shut it. Forget it. Three performance, etc. rose tea: color, taste and flavor Emotional Positive: humor, love, pride and joy Prestige pressure cooker: Those who love their wife cannot say no to Prestige pressure cooker Negative: Fear, guilt, and shame Onida: Neighbors envy, owner’s pride Moral Right behavior, social causes Aids campaign. Fight cancer Campaign (c) Message structure: The arrangement of the message in an appropriate order for presentation is as important as message formulation. The message is structured by words sentences and paragraphs. It can be:  Tall or short  Linear or non-linear Tall structures become essential when a marketer desires to explain the product benefits or company's standing on an issue. Generally, for product promotion short structures with brief messages will be more effective. In the case of rural, pictorial presentations make better impact than verbal descriptions, since their ability to read and understand is limited. Linear stories work well with rural consumers unlike urban consumers, they cannot process non-linear messages. Simple logic, sequential ordering of thoughts, easy to understand arguments and clearly drawn conclusions, are essential to make communication 30 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  31. 31. effective. (d) Message format: The components of the message and their presentation are important aspects in message design. Different media provide different opportunities to format the messages. Media Format aspects Print ad Headline, copy, illustration and color Radio Words, voice quality and vocalization TV/Person Words, voice quality, vocalization and body Language Pictures, dramatizing voices, attractive expressions and color have more influence on rural consumers. (e) Message source: If both, the person delivering the ~ and the message are credible the message will achieve the objectives set for it. As such, marketers not only make efforts to create appropriate messages but also try to choose attractive, popular or expert sources. The credibility of a source is determined by three factors.  Expertise  Trustworthiness  Likability The Table below illustrates the use of celebrities, professionals, common persons or elderly persons to endorse the products. BRAND CELEBRITY CHARACTERISTIC IMAGE Agni tea Sridevi Attractiveness Energy Horlicks Couple, elderly Trustworthiness Dependable Tea Ustad Expertise Skilled 31 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  32. 32. Cine stars Govinda and Dharmendra have more of a rural following. Escorts promoted its motor cycle with the testimony of Dharmendra. Escorts have marketed ifs big-wheeled Rajdoot with an understanding of the rural psyche, It did not advertise in the TV or press, It adopted a focused approach, relying on geography and market parameters like fairs, melas and so on. The advertising managed by Head Start (an ad agency) was designed to excite the rural customer by Concentrating on what appealed to him. The result: unforgetful Dharmendra and his Jaandar Sawari, Shandar Sawari. (f) Selecting the Channels: Communication channels are of two types: personal and non- personal. Mass communication is to be seen as a two-step-flow -of communication process. Messages of marketer's flow from mass media (TV, press, and radio) to people who are exposed to them. They become opinion leaders and through word-of-mouth disseminate information to the less informed people. The personal and non-personal channels include the following. CHANNEL SUB-CHANNELS CONSTITUENTS Personal Advocate channels Sales people. Social workers. Expert channels Professionals (Doctors, Bank manager) Social channels Neighbors, friends, family members and associates Non- personal Media Print, TV, radio. Direct mail, websites, Hoardings, posters Events Sports, music, festivals, melas, jataras, Haats. Personal Channels: Personal influences have a significant role in the rural markets. Here buyers are less exposed to media, and more community bonded. They sock opinions before 32 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  33. 33. making final decisions. Companies can activate several sources to influence rural consumers.  Distribute products through retail outlets, which facilitate interaction.  Create opinion leaders by supplying certain people with products on attractive terms, or work through community influential such as local political leaders, doctors, teachers, etc.  Develop advertising that has high conversational value or interactivity.  Train middlemen in interacting with consumers.  Establish Tele links for online transactions. Distribute products for interaction: Companies are realizing that distribution is not an exercise in mere physical placement of products. It goes beyond; it needs to be animated by people and atmosphere. Distribution will be effective when the consumers: I. Find the outlet a familiar place for a confident entry. II. Find the ambience appealing being compatible with their style of living and reflects their aspirational needs. III. Find the interaction with the retailer and his personnel pleasant and helpful. MAL (Maharaja Appliances Ltd.) launched its campaign Bonus – a range of home appliances to cater to the needs of rural consumers. The advertising outlay cost Rs. 2 crore. It was spent mainly on wall paintings, in-shop posters and dailies. The advertising was extremely specialized as the products were to be sold at Kirana stores, instead of large intimidating showrooms. The importance of such strategies are that a close connection with the villagers, needs and preferences are more likely to be established if the local vendor of vegetables and the like pushes the brand. Continuous interaction will allow the vendor to gauge the response to Bonus. Create Opinion leaders: Social norms and mores impact the rural consumers in ways different from their urban counterpart. It is found that decisions are mostly opinion- driven. They value social conformance in their decisions. As they live in communities, they prefer to have social sanction for their actions. That is why there are brand villages- Escort village. 33 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  34. 34. Nirma villages, etc. Wisdom of the elders, suggestions of the leaders, and advice of the educated are sought with high regard by the rural consumers. As such, the Panchayat head, the school teacher, the doctor, and elderly persons play a crucial role in the decision making process. Accordingly, some companies have started giving more importance to positive word-of-mouth campaigning through opinion leaders. When Asian Paints launched Utsav range during the pre-Diwali season, the salesman selected the opinion leaders in villages and painted the village post office or library or the house of the mukhiya to demonstrate that the paint does not peel off. Moreover, the salesman organized meets at the local dealers, where the village painters were invited. The Reckitt & Colman (India) has tied up with non-government organizations (NGOs), which, in turn, educate consumers about the hygienic aspects of Dettol vis-à-vis haldi. Advertising with interactivity: Advertisements in newspapers and magazines have limited value in rural areas. More than the radio, TV can impact rural audience by its audio-visual effects. Compared to these ads, live demonstrations, programs like story telling (Harikatha, Burrakatha, etc) or skits will be more powerful media as they provide scope for direct interaction with the audience. Brooke Bond L ip t o n In d ia Lt d . (BBLI) started a n all In d ia c a mp aign . To build awareness for its Kadak Chhap tea it added local flavor to its campaign. A local magician was brought in to deliver the message under the garb of a skit. An element of interactivity was added to the skit with one of the local boys enacting the role of the underdog Nathoo, who kills the evil guys after he has had a strong cup of Kadak Chaap. At the end of the shows everybody is given a sample pack. Train middlemen: For a company to stay in the forefront. Its representatives should be strong communicators. Their ability to inform and convince the consumers is significant as the rural consumers are increasingly exposed to as many brands options as the urbanites but with less education less media exposure and less experience Measures are 34 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  35. 35. necessary to improve among middlemen the knowledge of products and skills of persuasion. Usha conducts biannual dealership conferences and workshops. Corporate Vision in New Delhi, an outfit that trains sales force for companies like Hero Honda, Indo National that are limbering up for a grand rural assault. They advocate the way sales team approach the rural market. Tele links for online transaction: The information revolution is also sweeping the countryside. The remote rural villages scattered far and wide are now being Tele linked with the world. Villages are becoming netizens. Companies are talking an advantage of this new proposition. In one respect Aragonda is a village like most others: disease is rampant and health care facilities are practically non-existent. In March 2000, the health care tycoon C. Prathap Reddy, Chairman of the Apollo Group of hospitals set up a Rs. 10 crore, 50-bed multi-specialty rural hospital there with the country’s first Tele medicine center at a cost of Rs. 17 lakhs. Now diagnosis and consultation are available to patients in villages at the same speed and cost at which it is offered to the city dwellers. Non-Persona, Channels: When it comes to selecting a media, one has to keep in mind that mass media reaches barely 30 per cent of the rural audience. It makes little sense to use this to reach out to the rural consumers, unless it is used as a supplementary tool. Infact, the m aj or s our ces o f i nform at i on gat hering and entertainment for the rural consumer continue to be local events and the best way would be to physically reach out to them by becoming a part of their daily life. Companies that have attempted to use local idioms to convey product message in a meaningful context had more success. For its Tiger brand, Brooke Bond Lipton India Ltd. Often creates Sherdil Jawano Ka Adda within its stalls. The Adda offers the local men a chance to test their strength at the grip machine. To increase the traffic to the stalls the decor is changed regularly. Company hires announcers to lure villagers by offering special price-off, discounts and tree gifts. 35 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  36. 36. (g) Deciding on Promotion Mix: Besides advertising, a company may utilize one or more of the promotional tools. For example, sales promotion, direct marketing, publicity and personal selling. (i) Contests and Demonstrations: In 1991, TVS made its moped TVS-50 XL more powerful. To demonstrate this, and to get the maximum number of people or to a TVS-50 XL, a contest was held. The XL managed to carry 19 people, a payload of over 1000 kg and still able to run. TVS used this as a road show in many villages, to demonstrate its load bearing capacity. Ambience (ad agency) created a commercial on this. (ii) Sampling: Generally, people tend to be conformists. The propensity to try a new product is less among people, particularly in the rural areas. Besides Advertising, there should be some promotional measures to induce consumers to buy the products. Sampling as a promo tool does this job. While advertising creates awareness, distribution of samples achieves both brand awareness and conviction. The efficacy of sampling in rural areas is, however, debatable. Marketers have varied experiences and different opinions. They are summarized here: AGAINST Conversion lags: Conversion does not take place easily and immediately. It is a long process. A case in point could be Kellogg’s, which took .1 long times [0 convert urban dwellers to take to breakfast cereals. So, one can imagine the time it would take to convert rural folk to brands. HLL in its operation BHARAT project supplied hampers for Rs. 5, 10, 15 and 20, each of which had a Clinic Shampoo bottle, a tube each of Pepsodent and Fair & Lovely, and Pond's Dream Flower talc, in different sizes and combinations. It presented solutions to hair care, dental care, skin cares and body care. As many as 160 vans were employed but the operation did not add new users as HLL had envisioned. 36 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  37. 37. Brand registration: The purpose of sampling is not brand sales. It is brand registration. Brand registration is vital in the rural perspective because it may then spread to other products under the same brand umbrella, such as Clinic Plus, hitching a ride on the benefits awareness of Clinic shampoo. Sampling goes a long way in the registration of the brands the minds of the rural folk. Brand Conversion: With more number of brands competing for the attention of rural consumers. Conversion to a better brand in the same category is a rather difficult proposition. So sampling is perhaps the only way to achieve this conversion the expected immediate effect of sampling, therefore, is brand registration. Even this requires the support of sales promotion measures to make the brand a talk of the village. HLL, for Lifebuoy, integrated a value proposition by distributing height charts to about 9000 schools and Laxmi calendars to 18,000 shops in as many as 4000 villages to make every one talk about Lifebuoy. The height charts were added to attract younger generation, the decision- makers in many a rural household. (iii) Installment Schemes: Rural consumer would not have much use for a monthly installment finance scheme as in an agrarian economy, income is generated primarily at harvest time. However, there are some success cases. In 1990, the price of the moped TVS-50 XL was around Rs. 8000. At that time, consumer finance schemes were not widely available. In the rural areas, the financier was the local moneylender who charged exorbitant interest rates. Seeing that, TVS introduced the Rs. 399 scheme. This was the first time that a vehicle was available on installments of Rs. 399 for a 24-month period. It appealed to the rural, customer because he could now buy a two- wheeler at a down payment of less than Rs. 400. There was a spurt in sales from 6000 units a month to 10,000 units per month. The company also roped in local moneylenders to act as financiers for the moped. TVS charged an interest rate of 14 per cent, while the moneylenders could arrange upto 18 per cent. The only stipulation laid down by the company was that the initial amount could not exceed Rs. 399. The scheme continued and in 1998 the installments were raised to Rs. 666 per month. 37 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  38. 38. This view is gaining strength with increasing competition among companies and the growing power of retailers. They are finding it difficult to retain shelf space and displays in the retail outlets the current view as such, is: "If you depend entirely on your wholesalers now, you are bound to lose your market to the competitor. There is no substitute for stretching direct communication to the farthest". In the rural context, personal one-to-one communication is effective. Such relations can be established through sales persons and mailers. Brushing aside wholesales and dealers, companies now have "direct points of contact" with retailers and sub-retailers. Videocon is focusing on making its presence literally felt in the villages. The mechanics of the company, take a round of the villages twice a week to assure the villagers of after sales service as an important component of consumer durables For this purpose, the company employed 1800 engineers. (h) Communication budget: There should be an objective analysis of the goals and tasks of communication for determining the size and allocations of budget. The rural advertising budget of companies is generally between Rs. 6 and Rs. 15 crore. Though it does not seem much, according to an expert, Rs. 10 crore spent in the villages achieves the same visibility as Rs 50 crore in the towns and cities. MNCs like Samsung are spending Rs. 40 crore on advertising in semi-urban areas. 7.3 DISTRIBUTION STRATEGY Many companies view the rural markets as great opportunity for expanding their sales but find distribution as a major problem. Unfortunately, it is almost impossible to transplant strategies which work successfully in urban markets onto rural markets, namely, extensive retailing and sustained pull generation through mass media advertising. The road blocks to reach the rural customers are:  Lack of adequate transport facilities.  Large distances between villages.  Lack of pucca roads connecting villages to nearest townships. 38 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  39. 39.  Lack of proper retail outlets  Lack of mass media infrastructure. The marketers were of the opinion that the villagers would come to nearby towns and buy the products that they want. What has been found is that if we have to serve the rural consumer we will have to take our products to him through the channels that he is using and some innovative ways of getting to him. 7.4 THE OLD SETUP The historically available people & places for distribution include: - Whole seller, Retailer, Vans, Weekly Haats, Bazaars. 1. Wholesalers: The Indian wholesaler is principally a Galla – Kirana (food-grain) merchant who sustains the belief that business is speculative rather than distributive in character. He is a trader / commodity merchant rather than a distributor and therefore tends to support a brand during boom and withdraw support during slump. The reason for this speculative character and dormant role of wholesalers are: -  Indian market was largely sellers’ market. There was no need for active sales growth.  Companies laid more emphasis or retailers in urban areas, who are very large in number. As a result of retail based distribution was weakened.  Rural markets were neglected by many. The occurrence of retail outlets was low. Therefore many companies were dependent on wholesalers. The current need is to activate and develop wholesaler of the adjoining market as a distributor of products to rural retail outlets and build his loyalties to the company. 2. Retailers Village retailers have traditionally been among the most mobile of rural residents. Often doubling up as money lenders. Their multi – person interaction in the closed village society. As result retailers play a significant 39 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  40. 40. role. I. Credibility: -  He enjoys the confidence of the villagers.  His views are accepted and followed by the rural people whose awareness and media exposure levels are low.  The urban retailer is not trusted.  He is seen as a businessman with profit motto.  His view points are evaluated with other sources of information. II. Influence leader: -  His role as influence leader is indisputable. From tender twig of neem to washing powder retailer testimony has been vital part of the product adoption process.  The role of urban retailer is weak.  The urban consumers have numerous sources of information.  Although retailer’s opinion is sought it may not be 100% believed and followed. III. Brand promoter: -  In rural market retailers remains the deciding factor to sell particular brand.  Retailers helps in identification and selection of brands, there is less influence of shelf displays and point of purchase promotion.  Presence of spurious brands is an ample testimony to this view.  The urban retailer has a limited role as a brand promoter.  He cannot directly, recommend the brands.  He is to intelligently drive home his recommendations, as urban consumers do not trust him completely.  It is through shelf displays and incentive offers that he has to push the brands. IV. Relationship marketer: -  Village retailer practices relationship marketing.  He caters to a set of buyers who have income from immovable land resources and would be static over a much longer time span.  The relationship could extend beyond three generations, backed by historical 40 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  41. 41. credibility of the retailer as a product referral.  On the contrary, the urban retailers have to make an effort to adopt relationship marketing.  His customer’s base comprises largely the mobile service class prone to shift residence at least once, if not more, in less than a decade. This limits the time span and perspective of the retailer – customer relationship. V. Harbinger of change: -  In an environment relatively isolated from external developments, he has been harbinger of change.  He is one of the main sources of information and opinion as well as supplier of product and services. 3. Vans: Mobile vans long since, have an important place in distribution and promotion of the products in villages. JK Dairy launched whitener ‘Dairy Top’ in small 50 gm. sachets priced at Rs. 6.50. It decided to make a concerted foray into rural India in 1996. It hired vans to penetrate the rural interior, each van traveling around 125 km a day, 25 days a month. 4. Weekly Haats & Bazaars: The haats are the oldest outlets to purchase household goods and for trade. These markets are very well organized with shopkeepers having pre-assigned spaces for them to sell their wares. A typical market is in an open field with ample space for displaying all sorts of goods. Its location changes every week. These markets have different names in different regions. But they are strikingly similar in what they sell. It is reported that there are, in all, about 47,000 haats held throughout the country. Convenience: The entire market can be related to large departmental stores in cities, where the advantage is a one-stop shopping exercise. These outlets crop up every week, providing consumers immense choice and prices. Attractive: The weekend shopping is not only convenient but also entertaining. The markets start early and will be over by lunch. Afterwards, there will be entertainment. In respect 41 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  42. 42. of transactions, it is an attractive place to those who want to buy second hand durables and to those who prefer barter transactions. Further the freshness of the produce, buying in bulk for, a week and the bargaining advantage attract the frugal and week-long hard working rural folk. Availability: It is a market for every one and for everything. Household goods, clothes, durables, jewelry, cattle, machinery, farming equipment, raw materials and a host of products are available. 5. Melas and Fairs This is another low cost distribution channel available to the marketers. It is comparable with urban events like Wills Trophy, India International Trade Fair (IITF), Sajavat or Consumex in which audience participation varies from a few thousands to a few lakh people. These melas are ancient and part of Indian cultural heritage. The Janpad Pradarshani aur Pashu mela, held every year at Etawah in Uttar Pradesh first took place in 1899, after which it was discontinued for want of patronage. It received a fresh lease of life in 1910, with grants and donations from local residents. Close to Etawah is Bulandshaar where Zila Krishi Udyogik Pradarshini is even older; it was born in 1881, as the imperial show under the aegis of then British Collector. Most of the fairs are associated with either a religious event or a festival. Among the most famous melas is the mighty Kumbh Mela at Allahabad (Triveni Sangam), Pushkar mela in Rajasthan, Kullu Dusshera mela in Himachala Pradesh, Sonepur mela in Bihar and Makar Vilakku in Kerala. People from all over the country gather to taste the wonders of India. According to the Indian Market Research Bureau (IMRB) around 8000 melas are held in rural India every year. According to Rural Scan (Quarterly Newsletter by MICA (Mudra Institute of Communications, Ahmedabad), there are on an average, 1000 melas held in a state annually. The average duration of a mela is anywhere from one to 45 days. The interesting questions are: Do these meals provide an opportunity for sales? How are they organised? At a mela there can be as many as 854 stalls. Some 18.4 per cent of these are local 42 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  43. 43. stalls (belonging to a few hundred villages), 40.8 per cent are regional (they belong to a few districts) and 40.8 per cent are national. An interesting statistic is that the share of manufactured goods at melas is around 42 per cent. Like urban events these melas need little or no prepublicity. They have come to occupy a firm position in the rural calendar of festivities. Most of the fairs are associated with a religious event or a festival. As with religious events, the dates of most fairs are determined by the Hindu calendar, not the Gregorian one. Most fairs are expressions of local need to celebrate. A villager, who has attended it since his childhood looks forward to it months in advance. A majority of the melas are held during October-November and January-April. This coincides with the Kharif and Rabi harvests when the farmer's purchasing power is high. With both money and leisure at hand, he is inclined to indulge his family with a day out at the mela. He also looks forward to updating himself on the latest farming practices and on consumer goods. Visitors to fairs are thus highly receptive to try out new products and also come with enough money to do so. 7.5 THE NEW PLAYERS Selling in rural India followed a pattern, till recently. But with the entry of new players, and the surge in rural demand, the structure and dynamics are altering. 1. Unofficial Channels Consider Hero Honda Motors. Its 360 dealers all over the country has reported the emergence of an unofficial channel of distribution – village mechanics, local real estate agents, shopkeepers who sell non-durables and so on. These people are taking motor cycles from the official dealers – usually in twos and threes – displaying them outside their premises and closing a sale. The paper work, though, is left to the dealer to complete. 2. Cooperative Society Cooperatives occupy an important place in India's rural economy, in terms of their coverage of population and their share in total supply of agricultural inputs, including credit. 43 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  44. 44. India can rightly claim to have the largest network of cooperatives in the world. By 1994, there were 3.95 lakh cooperatives. Cooperatives in 1999 account for 62 per cent of the total credit supplied in rural areas and 34 per cent of total quantity of fertilizers distributed in the country. Rural Scan reports that there are 4398 Primary Marketing Societies and 2933 Large Agricultural Multipurpose Primary Marketing Services (LAMPS) in the country. Other members are: District Level Cooperative Marketing Societies : 191 State Level Cooperative Marketing Federations : 29 Commodity Cooperative Marketing Federations : 22 Regional Cooperative Marketing Societies : 11 Generally, a cooperative exists for 2 or 3 villages. Farmer's Service Cooperatives (FSCs) is a mini super market. Such an arrangement can be tried with others. 3. Public Distribution System (PDS) The Fair price shops run by government can be utilized to sell consumables and low value durables. 4. Petrol Pumps Petrol pumps have become multi-purpose distribution centers at some places. Such concept can be effectively promoted. 5. Agricultural Input Dealers Fertilizer companies have retail outlets within a range of 5 km to any village. They offer a scope for marketers. 6. NGOs Another alternative is working with Non-Government Organizations (NGOs), which reach interiors of villages. Ideologies and methods may vary but most NGOs have programs focusing on sustainable development through providing avenue for income generation. They command substantial influence where the programs are implemented. Companies may join hands with them to mutual benefit. With NGOs undertaking distribution, 44 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  45. 45. companies realize benefits accruing from infrastructure and grass roots level networking. Also organization security would provide a buffer against delayed retail collections. From the NGOs standpoint, such association with companies could yield employment opportunities for local residents. 7. Barefoot Salesmen Companies may train sons-of-the soil to operate as barefoot salesmen. Fluency in the local dialect and familiarity with persons and terrain in the area of operation would be among the factors enhancing the efficacy of this approach. A barefoot salesman, operating on a retailer-cum-commission basis, could book orders from retailers in villages within a limited radius of his village. On aggregating orders, which permit distribution economies, he could coordinate with the area stockiest to arrange deliveries and make collections. 8. Syndicated Distribution A viable and novel approach to reach the rural markets is syndicated distribution. Under this approach, marketers of household products could group together and consider the formation of a syndicated trading organization which could jointly distribute a collective group of household products in the rural market and enjoy shared economies. The guidelines for formation of the syndicated organization may be as follows: Guidelines:  Companies willing to work together may contribute to the capital of the organization.  It could be privately held and need not be open to the public or government agencies.  The distribution by this organization may replace or supplement the existing distribution.  A formula for expense sharing is to be worked out in advance by the participating organization. 45 | M a k i n g I n r o a d s I n t o H i n t e r l a n d
  46. 46. 7.6 NEW APPROACHES 1. Distribution Trends The changes in distribution are not only baffling but also challenging. Element of sales From To Time Restricted, limited timings Unrestricted, anytime Own retail outlet, Place Anywhere occasionally public place Any product – to all Choice Limited to brands specification, unlimited choice Products, experience Sales Products relationships, achievement Customer participation Result Customer satisfaction and satisfaction 2. Direct To Home Selling  Companies are embarking on “Direct – To – Home” selling (DTH) even in rural area.  It provides one – to – one communication as well as sales without reliance on retailers. The 2 forms of DTH are: - (a) Network Marketing (b) Internet Marketing (a) Network Marketing: - is a form of direct selling. It can take place at 2 levels. Single level – distributor appoints sales persons. He earns profits on sales, made by him. Multi-level – distributor introduces another distributor (a friend or relative in general) who in turns introduces another distributor. 46 | M a k i n g I n r o a d s I n t o H i n t e r l a n d

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