Ruralmarketing

“RURAL MARKETING”
INDEX
Particular Page No
1 What is Rural Marketing? 1-2
2 Interesting Observations 3-7
3 Distributing of Rural Population In India 8-9
4 Rural Profile and Factor Behind Change in Rural Demand 10-13
5 Companies and Product Well Established in Rural Market. 14-15
6 Tapping and Problems of Rural Marketing 16-21
7 Expert Opinion 22-34
8 Rural Marketing strategies 35-43
9 Super Star Show 44-45
10 FMCG Sector in Rural Markets 46-50
11 Nirma Story 51-63
12 Hindustan Lever Limited 64-72
13 Conclusion 73-78
14 Bibliography 79-83
1

Reviving The Untouched Rational Arrival Of Lusture
RURAL MARKETING
("EXPLORE RURAL MARKETS DONOT EXPLOIT THEM ")
The concept "RURAL" and "MARKETING", though used very
frequently in various forums, have eluded any precise and non-
controversial definitions. When we join them, the resulting concept "Rural
Marketing" means different things to different persons. This confusion
leads to distorted understanding of the problems of rural marketing, poor
diagnosis and, more often than not, poor prescriptions.
The Indian rural market with its vast size and demand base offers great
opportunities to marketers. Two-thirds of country consumers live in rural
areas and almost half of the national income is generated here. It is only
natural that rural markets form an important part of the total market of
India. Our nation is classified in around 450 districts, and approximately
630000 villages, which can be sorted in different parameters such as
literacy levels, accessibility, income levels, penetration, distances from
nearest towns, etc.
3

The success of a brand in the Indian rural market is as unpredictable as
rain. It has always been difficult to gauge the rural market. Many brands,
which should have been successful, have failed miserably. More often than
not, people attribute rural market success to luck. Therefore, marketers
need to understand the social dynamics and attitude variations within each
village though nationally it follows a consistent pattern.
Rural marketing and urban marketing are identical as regards basic
marketing structure. However, rural markets and rural marketing have
special features and dilemmas as compared to urban markets. The rural
markets offer a great scope for a concentrated marketing effort because of
the recent increase in the rural incomes and the likelihood that such
incomes will increase faster because of better production and higher prices
for agricultural commodities.
The rural markets dominate Indian marketing scene and need special
attention for the expansion of marketing activities and for providing better
life and welfare to the rural people.
Given the development, which has taken place in the rural areas under the
five-year plans and other special programmes, today the rural market
offers a vast untapped potential. Development programs in the field of
agriculture and allied activities, health education, communication, rural
electrification etc have improved the lifestyles of poor and the illiterate and
some market agencies forecast the rural demand will super cede the urban
demand in the near future.
4

INTERESTING
OBSERVATION
ABOUT
RURAL MARKETING
5

The horizon is a mirage to an explorer, who sees Opportunities
beyond
BOUNDARIES?
BELIEVE IT FRIEND!
Interesting observations
♦ Census Definition
75% of the rural working male population is engaged in agricultural
related activities Population density of less than400persons/sq.km does
not fall under a Municipal Corporation or Cantonment Board
♦ The Rural Opportunity
Total population of India is over 1 billion.
6

distribution of indian rural population
0 20 40 60 80
0 20 40 60 80 100 120
TOTAL
RURAL
URBAN
MEDIA REACH
7

0 5 10 15 20 25 30 35
OTHERS
CINEMA
RADIO
SATEILITE
TV
PRESS
Series1
Number of villages north india
0 0 0 0 0 0
6,769
16,997
12,428
25 199
112,803
0
20000
40000
60000
80000
100000
120000
8

Number of Villages in West India
360
40,412 37,889
71 24
37,910
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
goa
m
aharashtra
rajasthan
dadra
&
nagarhavelidam
an
&
diu
westbengal
Series1
Number of Villages in East & Central India
0 0 0 0 0 0 0 0 0 0 0 0
24,685
57,513
18,028
71,526
2,1825,484
698 1,216
46,986
447 855 3,6490
10000
20000
30000
40000
50000
60000
70000
80000
9

Number of Villages in South India
0
5,000
10,000
15,000
20,000
25,000
30,000
laks
hadweeppondicherry
tam
ilnadu
adam
an&
nicobar
karnataka
kerala
andhra
pradesh
Series1
10

PENETRATION OF PRODUCT IN RURAL MARKET
DISTRIBUTION OF
RURAL POPULATION
IN INDIA
Distribution of rural population in India
India's rural market is characterized by its vast spread - over 5, 76, 000
villages with a total population exceeding 620 million. 1, 45,098 villages or
23% of total villages have population less than 200. Another 21% have
population between 200 and 500.A 13,113 villages have population over
5,000.
Of these 9,988 villages or 76% are in seven states - Uttar Pradesh, Bihar,
West Bengal, Maharashtra, Andhra Pradesh, Kerala and Tamil Nadu.
Kerala is characterized by large villages; 1,259 out of the 1,384 have
population over 5,000. While the average population in Kerala is 15,475 per
village, for rest of the country the figure is 954. Overall, literacy rate (7 years
and above) in rural India is 45%: literacy among men is 58% and among
women is 31%.
There are a total of 3,697,527 shops (retail outlets) in the rural sector,
leading to an average of 5.85 shops per village. Number of shops per village
is lowest, around 1.5 - in Himachal Pradesh, Arunachal Pradesh and
Meghalaya. On the other extreme, Kerala has the largest number of shops -
192 per village. In Punjab, West Bengal, Goa, Gujarat, Andhra Pradesh,
11

Tamil Nadu and Pond cherry there are 7 or more shops per village.
Haats operate once a week or more often in 41,888 villages. 45% of the
villages with haats are in the east, 27% in north, 20% in west and 8% in
south. At the national level, Uttar Pradesh and Bihar have the
maximum number of haats, i.e., 25% and 18% respectively. In Uttar
Pradesh, Bihar, West Bengal and Maharashtra, villages holding haats form
10% of total villages in the respective states. The data indicates that with
establishment of (permanent) shops, haats are moving out.
At an all India level 2,09,360, villages or 33% of total villages are connected
by pucca roads. This proportion is maximum at 57% in south zone and
minimum at 20% in east zone. Almost all villages in Punjab, Kerala and
Pondicherry are connected by pucca roads.
There are only 7,271 villages with railway stations. This forms 1.2% of
total villages. Kerala is the best state in this regard with 8% of villages
having a railway station.
Five percent of the total villages have a bank within the village. As on 31
March 1995, the bank deposits and advances in the rural banks were Rs.
481.19 billion and Rs. 242.78 billion, respectively. This works out to - per
capita deposits and advances figures of Rs.773 and Rs.390,
Respectively.
In Rural India, there are 79,448 doctors. This implies that there are 12.76
doctors per hundred thousand of rural population. The distribution of
12

number of doctors over the zones is seen to be 30% each in north, east and
west and only 10% in south.
There are 15,039 hospitals in Rural India. This works out to 2.4 hospitals
per 100 villages
13

RURAL PROFILE
AND
FACTOR BEHIND
WELCOME CHANGE IN
RURAL DEMAND
14

A PIONEERING VENTURE THATMIRRORS AN
ENTERPRISING SPIRIT
Rural Market Profile
• Large and scattered markets: The rural markets of India are large and
scattered in the sense that it consist of over 63 crore consumers from 5,
70,000 villages spread throughout the country.
• Major Income from agriculture: nearly 60% of the rural income is from
agriculture. Hence, rural prosperity is tied with agriculture prosperity.
During the harvest season, the demand for consumer goods in villages goes
up.
• Low standard of living: the consumer in the village areas do have a low
standard of living because of low literacy, low per capita income, social
backwardness, low saving, etc
• Traditional outlook: the rural consumer values old customs and traditions.
A change is beginning to take place in their outlook because of growth in
literacy rate mass media in the rural areas.
• Diverse socio-economic background: rural consumers have diverse socio-
economic background. This is different in different parts of the country.
This brings diversity among rural customers and market.
15

• Changing demand pattern: the demand pattern for rural consumers is fast
changing. There is a new and growing demand for toiletries, ready-made
garments, cosmetics, packaging foodstuffs, etc. this change is due to the
increase in rural income.
• Infrastructure facilities: The infrastructure facilities like roads,
warehouses, and communication system financial facilities are inadequate
infrastructure facilities.
• Saving habits: the saving habit of rural community is increasing in recent
years as a result of efforts put by the co-operative and commercial banks.
16

"AAPKA SWAGAT HA1"!
Factors behind the welcome change in rural demand
• New employment / new income due to rural development and agriculture
advancement
A technological breakthrough has taken place in Indian agriculture. Rural
India derived considerable benefit from the green revolution. Today, rural
India generates 185 million tonnes of food grains per year and substantial
output of various other agricultural products. In addition, it produces 15
billion eggs, 90 m broilers and 50 m tonnes of milk per annum. Obviously, in
recent years, a wealth generating process is on in rural India. This massive
investment has generated new employment, new income and new purchasing
power among the rural habitats.
• Expectation revolution among rural masses
The expectation revolution among the rural folk completed the process.
More than the green revolution, the revolution of 'rising expectations' of the
rural people influenced the marketing environment of rural India. It
enlarged the desires as well as awareness of the rural people; it kindled their
hopes; it strengthened their motivation to work, earn and consume.
17

COMPANIES
AND
PRODUCT ALREADY
WELL ESTABLISHED
IN RURAL MARKET
18

Companies targeting rural markets in India
Company Product
Bajaj electrical Home appliances
Colgate Palmolive Dental cream
Dabur India
i
Chawanprash
Electolux Refrigerators
Eveready India Batteries
Godrej soaps Toilet soaps
Hero cycles Bicycles
Hero Honda motors Motorbikes, mopeds
Hll Personal products
Jk dairy Dairy whitener
Koshika telecom Cellular services
LG CTVs
Mahaan foods Pickles, vadis, papads
Maharaja Home appliances
Marico Hair oil
Nippo batteries Batteries
Phillips India Consumer durables
Titan industries Watches
United phosphorus Pesticides
Videocon Consumer durables
19

PRODUCT CATEGORIES ALREADY WELL
ESTABLISHED IN THE RURAL MARKETS:
• A number of categories of the products have already been well established
in the rural markets of India. The important ones among them are:
• Textile of different kinds.
• Bathing soaps, washing soaps and detergents - Lux, Nirma, Surf.
• Medicines and hygiene products - Cipla products.
• Cooking Utensils
• Toothpowder/toothpaste - Colgate.
• Razor Hades - Topaz
• Package tea - Red Label.
• Other beverages, including alcoholic beverages - Coca-cola, Allied
Domaeq products.
• Ornaments and Jewellery - Local shops
• Tobacco and tobacco products - Gai Chap Tambaku, Panama
Cigarettes, Shambhaji Chap 555 bidi.
• Entertainment goods, transistors, radios, tape recorders, TVs - BPL
electronic appliances.
• Agriculture inputs like the fertilizers, pesticides - Godrej Agro vet
• Agriculture capital goods such as tractors, trailers, harvesters, pump sets,
pipes and pipe fittings
• Bicycles, motorcycles and scooters - Hero Honda, Bajaj.
20

TAPPING AND
THE PROBLEM
AREAS IN
RURAL MARKETING
21

Willingness is a reservoir of limitless possibilities.
Tapping the Rural Markets.
While the rural markets of India certainly offer a big attraction to
marketers, it would be totally naive to think that any firm could easily enter
the market and walk away with a sizeable share of it. A firm seeking a share
of this market has to work for it, as the market bristles with a variety of
problems.
The enterprise has to grapple with these problems and find innovative
solutions to them. In fact, only because a few pioneering firms correctly
understood these problems and came up with the innovative solutions to
them, that we now see a wonderful trends of growth in rural markets. What
are these problems? How are they peculiar to the rural market?
The problem areas in the rural marketing
The main problem areas in the rural marketing are:
(1) Physical distributions
(2)Channel distributions
(3) Promotion & marketing communication
22

1. MANAGING PHYSICAL DISTRIBUTION IN RURAL
MARKETS
The special problems in physical distribution in the rural context relate to:
• Transportation
• Warehousing
• Communication
• Transportation problems
Transportation infrastructure is quite poor in India. Though India has the
fourth largest railway system in the world, many parts of the rural India
remain outside the rail network. As regards the road transport, nearly 50% of
the 576,000 villages in the country are not connected by the roads at all. The
Government had planned to connect at the least the bigger villages, i.e. Villages
with a population of 1500 and above, with all-weather roads by 1990. Even this
limited objective is not yet accomplished. Many parts of the rural India have
only kacha roads and many parts of the rural interiors are much unconnected
by the roads with any mundi level town. Because of these problems in
accessibility, delivery of products and services continues to be difficult in rural
areas.
• Warehousing problems:
In warehousing, too, there are special problems in the rural context.
23

Business firms find it quite difficult to get suitable godowns in many part of
rural India. In addition, there is no public warehousing agency in the interiors
or the rural India. The Central Warehousing Corporation (CWC), which
constitutes the top tier public warehousing in India, does not extend their
network of warehouses to rural parts. They go only up to the nodal points or
network warehouses to the rural market centers. The warehouses at mundi
level are mostly owned by co-operatives. As such, the business firm has to
manage with CWC network, which stops with the nodal points, or it has to
establish its won depots or stock points run by its own stockiest. Of course, in
such cases, the commercial advantages of the operating through a warehousing
agency like CWC are lost to the firm.
• Communication Problems
Communication infrastructure, considering of the posts and the telegraph and
telephones, is quite inadequate in rural areas. Since communication is [the
first requirements of the efficient marketing, lack of proper
communication infrastructure poses difficulties, especially in physical
distribution.
24

2. CHANNEL MANAGEMENT IN RURAL MARKETS
Organizing an effective distribution channel is second major task in rural
marketing. This task to is beset with many unique problems.
Following are some of the problems located so far in channel
management in rural markets.
• Multiple tiers, Higher cost and Administrative Problems
In the first place, the distribution chain in rural context requires a larger
number of tiers, compared with rural context. The long distances to be
covered from the product points and the scattered locations of the
consuming household cause this situation. At the minimum, the
distribution chain in the rural context needs the village level shopkeepers
the mundi level distributor and the wholesaler/stockiest in the town. And
the top of them, it involves the manufacturers own warehouses/branch
office operation at selected centers in the marketing territory. Such
multiple tiers and scattered outfits push up costs and make channel
management a major problem area.
• Scope for manufacturers' own outlets limited
The scope of manufacturer’s direct outlets such as showrooms or depots is
25

quite limited in rural markets unlike in rural context. It becomes expensive
as well as unmanageable. Dependence of the firm on intermediaries is very
much enhanced in the rural context as direct outlets are often ruled out.
But controlling such a vast network of intermediaries is a difficult task.
Control is mostly indirect. And because of these factors, the firm has to be
more careful while selecting the channel members in the rural context.
• Non availability of dealers
In addition, there is a problem of availability of dealers. Many firms find
that availability of suitable dealers is limited. Even if the firm is willing to
serve from scratch and try out-ranking new comers, the choice of
candidates is limited.
• Poor viability of the retail outlets
Moreover, sales outlets in the rural markets at the retail level suffer from
poor viability. A familiar paradox in rural distribution is that
the manufacturers incurs additional expenditure on distribution and still
the retail outlets find that the business is unremunerative to them! The
scattered nature of the markets and the multiplicity of the tiers in the chain
use up the additional funds the manufacturer is prepared to part with. And
no additional remuneration accrues to any of the groups. Moreover, the
business volume is not adequate to sustain the profitability of all the groups
and the retail tier is the worst sufferer.
26

3. MARKETING COMMUNICATION IN RURAL MARKETS.
Marketing communication and promotion too poses problems in rural
markets. There are many constraints emanating from profile of the audience
and the availability of media.
The literacy rate among the rural consumers being low, the printed word
has limited use, in the rural context. In addition to the low level of literacy,
the tradition bound nature of the rural people, the cultural barriers and
taboos and their overall economic backwardness add to the difficulty of the
communication task. The situation is further compounded by the linguistic
diversity. Rural communication has to necessarily be bin the local language
and idiom. The constraints of media further compound the difficulty.
It has been estimated that all organized media put together can reach 30%
of the rural population of India. T.V is the ideal medium for communicating
with the rural masses. But its reach in the rural areas is limited even today.
As regards the print media, the various publications reach only 18% of the
rural population even in areas reached, the circulation is limited. And as
already mentioned the low literacy level of the rural population acts as
further inhibitor in the use of the print media in rural communication.
Cinema is relatively more accessible.
27

EXPERTS OPINION
{Interview with Mr. Dalveer Singh- VP OGILVY OUT REACH (Rural
Marketing Division of O&M) and Pradeep Kashyap }
ALL ABOUT EXPERTS ……….AT ONE GLANCE
EXPERTS OPINION
INTERVIEW WITH MR. DALVEER SINGH - VP, OGILVY
OUTREACH (RURAL MARKETING DIVISION OF O&M) by Gaurav
Gupta of MDI
Q. Do you think there are any significant difference between the urban and
the rural markets today?
A. Not only today - but there has been a vast difference between the two
markets for a long time now. The difference is not only between urban and
rural but also within the rural areas — between regions, states and districts.
There is a difference in the media reach, the education levels, in the culture
and the type of products that the two markets are exposed to and this leads to
a difference in the two markets.
Q. How do look at the situation 5 years from now?
A. With technology coming in, mass media reach and the literacy levels going
up - this divide is expected top reduce.
28

Q. In what way is the rural customer different from the urban
customer?
A, The difference is in things like — how do you celebrate New Year, how do
you celebrate birthdays? Small things like these are celebrated in a completely
different manner when the rural and the urban customers are concerned.
There is a vast difference in the lifestyles of the people in the two regions. The
kind of choices of brands that an urban customer enjoys is different from the
choices available to the rural counterparts. The rural customer usually has 2
or 3 brands to choose from whereas the urban one has multiple choices. The
difference is also in the way of thinking. The rural customer has a simple
thinking as compared to its urban counterpart.
Q. What kind of strategy differences do we see when marketers tackle with the
two sets of customers apart from the differences in price. How are the other P's
in the mix handled by them?
A. The strategy revolves around what attracts the rural customer to a product.
For example - Packaging. Now the rural customers are usually daily wage
earners and they do not have monthly incomes like the ones in the urban areas
have. So the packaging is in smaller units and lesser-priced packs that they can
afford given their kind of income streams. Then a thing like the colour that
attracts him is also important.
Another important factor is Convenience. An example is what Colgate did to its
tooth powder packaging. Firstly - it made sachets as was required by their
income streams. Secondly - since many households don't have proper
29

bathrooms and only have a window or things like that to keep such things -- it
was wise to cap this sachet for convenience of storage while use. So this is what
they did.
There is also a difference in the kind of media mix that is used to convey the
messages to the rural customers. We need to use different models and means to
reach them as what appeals to the urban customer may not appeal to him due
to varying lifestyles. The communication and the design of it are also different,
as what attracts one need not attract the other as well. So again, even if the
media reaches him, there might not be an impact as it may fail to attract him as
fails to connect to it due to the lifestyles being different. Then there is the case
of product availability that again has different strategies. The concept of
supermarkets coming up in urban areas is not the same as in rural areas. There
the concept of Haats is more prevalent.
Q, What does the marketer need to know to understand the rural
markets?
A. The biggest thing is that there is lack of any research into the consumer
behavior of the rural areas. There is considerable amount of data on the urban
consumer regarding things like ~ who is the influencer, who is the buyer, how
do they go and buy, how much money do they spend on their purchases, etc. but
on the rural front - the effort has started to happen now. Therefore, we need to
understand the buyer.
Also, whatever little understanding we have is not for the entire industry. There
is no collective effort. Some people have spent time in the rural markets,
carried out studies and have understood the rural behavior, but their works
30

have not been passed or known to the rest of the industry. So, an in depth
understanding of the consumer is one key area that the industry needs to work
Second is — what appeals to him, what is the right kind of products for him.
For example - can I sell the same Lux or the same Tata Tea that I sell to the
urban customer to the rural as well? What needs to be the difference in the
marketing mix when we try to sell the same commodity to the 2 different
sections.
There are vast differences in the rural areas as well. There are some 5,76,000
villages and some 525 districts and each 1 is different from the other. The
geographical spread is not as homogeneous as it is with the urban areas owing
to vast cultural differences.
So an in depth understanding of the areas is what is required.
Q. What needs to be known about the rural markets and the distribution
channels that are prevalent there?
A. One of the grey areas that need to be probed more into is the Trade — that
is the retailer. When an urban consumer goes to shop — he has many options in
front of him (around 10 to 15 in some cases) as are displayed in the store.
However, for the rural customer these choices are limited.
Therefore, the retailer plays a very big role here. The rural customer goes to
the same shop always to buy his things. And there is a very strong bonding in
terms of trust between the two. The buying behavior is also such that the
customer does not ask for the things by brand but like — "paanch rupey waali
chaye dena". Now it is on the retailer to push whatever brand he wants to push
31

as they can influence the buyer very easily and very strongly on the preferences.
Unfortunately, we have not spent enough money and time on understanding the
rural markets in a collective way. As we need to understand the consumer, we
need to do the same thing for the retailer, as he is a chief influencer in the
buying decision.
Q. Please cite some examples where a different marketing mix was used to
promote the same product in the rural and the urban markets.
A. There is an example in innovative media. It was used to push products in
personal wash like Lux and Lifebuoy and fabric wash items like Rin and
Wheel. For both, washing and for taking bath - one requires water. Now for
rural markets, there are three sources of water - wells, hand pumps and ponds.
For the first in the history of advertising - these were branded. Special stickers
were put on the hand pumps, the walls of the wells were lined with advertising
tiles and tinplates were put on all the trees surrounding the ponds.
The idea was to advertise not only at the point of purchase but also at the time
of consumption. Therefore, the customer could also see the advertising when he
was bathing or washing. Now, the customers who bought these brands got a
sense of satisfaction by seeing their choice being advertised in these places while
a question was put in the minds of the customers who had bought other brands.
Therefore, this innovative strategy worked quite well.
Therefore, to understand the way the rural markets work — we need to go to
these markets and spend time there in understanding them. We live in
surroundings where the things are completely different from what the rural
customer experiences. And we cannot understand him unless we go and spend
32

time there. Things like what time does he get up, etc need to be studied and
customer needs to be understood. In addition, these studies need to be passed
on so others can also benefit from the ground works done and enhance them
further.
RURAL PEOPLE LOOK UP TO URBANITES
INTERVIEW WITH MR DALVEER SINGH - VP, OGLLVY OUTREACH
RURAL MARKETING DIVISION OF O&M tells A&M (Advertising &
Marketing) about how haats and melas are an effective platform to penetrate
rural markets, and the on-going rural revolution.
After a decade and a half in corporate marketing, Pradeep Kasha tiloved to
rural development, before specializing in rural marketing. Ten years ago, he
conceived the idea of 'Gramshree Melas' to promote rural markets in urban
areas through buyer-seWer meets. He did India's iiisi survey on haats and
melas. Besides studying rural marketing, he is also into teaching and
consultancy. He runs MART (Marketing and Research Team), which
undertakes primary research and provides services to corporate, NGOs, the
government and so on.
Interview
Q. Rural marketing is in sharp focus now. What is driving this?
A. Ten consecutive good monsoons leading to bumper harvests, doubling of
procurement price for paddy and wheat in the last decade, a four-fold
33

increase in outlay for rural development from the Seventh to the Ninth Plan
and the change in lifestyle due to the proliferation of TV has caused the rural
boom. Farmers are flush with funds, their aspirations aroused.
Q. How do attitudes and beliefs influence rural purchase behavior?
A. Urban buyer behavior is individual-driven whereas in areas, decision-akmg
is a collective process. For example if the village is now ready to lift from tooth
powder to toothpaste or the village wants to mechanize farming and someone
is keen to buy a tractor, the process may start from the village headman who
represents the pinnacle of the collective or it will be discussed in the
panchayat.
Secondly, rural buyers take a long time to decide on a particular Irand, but
once they are convinced, they are more brands loyal than their Jcounterparts
are. And here too, the collective principle works. That is why we you have
Nirma villages. And Wheel villages Escorts villages, indicating mat the
majority respects the consensus decision. Thirdly, it is an urban myth that
rural people do not buy quality. Rural buyers are equally quality [conscious,
but value for money is of paramount importance and functionality mi the
product, rather than the frills, appeals to them because servicing is a major
hassle in remote areas.
Q. Does cultural diversity in different rural pockets necessitate different
product strategies?
A. Until now, the rural market was considered a homogenous mass, as was the
Indian urban market, till some 20 years ago. As economies evolve,, consumer
34

choice and requirements get more focused. This calls for segmenting,
targeting and positioning. Since rural markets have started growing rapidly in
the 90s, marketers need to evolve strategies for different strategic regions, if
they want to improve penetration.
Q. How can haats and melas be properly used by marketers? Are they been
effectively used?
A. In India, 47000 haats are held and they cater to almost all villages. They
offer a ready distribution network and are steady, cheap and appropriate.
The average visitor turnout is 4,500. Participation fee is a few rupees only.
Haats can be used effectively for promotion, demonstration and sampling of
daily need products. Of the 25000 melas held, only about 5000 are commercial
in nature. Melas work best for introducing new brands and building brands
through the organization of events at the venue. It is only in the last three to
four years that corporate have woken to the potential of haats and melas for
creating brand awareness and sales. But no commercial company, to my
knowledge, has used this channel effectively so far. We worked with IDE
(International Development Enterprises) India used huts and melas as the
main instrument for promotion, demonstration and sale of the treadle pump,
a minor irrigation device. Sales went up from less than 10,000 in 1996 to about
1, 00,000 last year.
Q. How can marketers overcome remoteness? Is there a way out for them?
A. Remoteness is a problem, but insurmountable, if understood properly.
India has 6.3 lakh villages. 50% of the villages are very small, having a
population of less than 500, with limited purchasing power and many of them
35

do not have even a single shop. The next category (with populations of 501-
2000), numbering 2.5 lakh has around five shops each, but sales are still not
good enough for a favorable distribution cost benefit equation.
Companies, therefore, need to focus on villages with populations of 2000 or
more (and there are 60,000 of them), and on the high potential 501-2000
population category villages. For instance, FMCG companies can cover as
many as 1,00,000 villages by appointing 2000 stockiest in towns with
populations of 20,000. Each stockiest can conveniently redistribute products
to 50 locations around the town. For durables, the distribution issue is much
more manageable because 90% of products are bought in these 2000 small or
large town markets.
Q. What could be best possible media mix for brand building among rural
consumers?
A. Melas offer excellent opportunities for creating an event for brand
building. Haats too can be used, though to a lesser extent. Print media is least
affected because of low literacy levels. Radio listening is not as popular in the
villages as most urban marketers believe it to be. TV is effective but
continuous availability of electricity is a problem in most rural homes. In any
case, only 35% homes have electric connection. Outdoor media like wall
paintings with high visual content are highly effective. Rural India is
essentially an oral culture (memorizing and reciting of Vedas and scriptures is
common place) and hence interactive folk media such as puppetry, jatras and
street theatre are very relevant. It has been used effectively by the
development sector to promote social messages. Corporate need to consider
these traditional media seriously.
36

Q. Which role models suit different products in rural context?
A. For lifestyle and aspirational products the role model for rural audiences
could be the same as for urban, say a Tendulkar or a Shah Rukh, as cricket
and films are equally popular. But for specifically rural products like
fertilizers, tractors or pump sets, a better and more convincing model could
be the Tradhan'. Because he is considered wiser than the rest. A teacher
would be ideal for promotion of watches. For products which have been newly
introduced in rural areas, someone ho has an experience of city living, such as
an armed force person or a person working in an office, a factory, could make
a good role model as he is expected to be better informed.
Q. How effective is a promotion undertaken by marketers?
A. Most marketers have been using expensive vans for village promotions.
Parking the van at local haats brings better results because large crowds can
be targeted. Companies are also organizing events at melas. But in many
cases, the ambience they create does not correspond to the worldview of the
villagers- the models are urban and the dialect is not colloquial enough nor is
the story line familiar. Companies can learn a lot from NGOs who have done
an excellent job of promoting social messages in rural India.
Q, How do marketers fight fakes, when the legal mechanism does not seem to
be of much use?
A. Selling spurious or fake goods is not a criminal offence, and under civil
■law, it can take years before an offender is booked. And though awareness
Bevels are high, thanks to T.V, the product is not available at outlets for
37

■many categories. This happens because the company hasn't yet reached out
to those places. The only practical way to deal with fakes is to improve I
distribution and make your product available in as many places as possible, I
including haats. The highest incident of fakes is at haats as these have been
neglected.
Q. How should marketers reorient themselves when reaching out to rural
markets?
A. Top management commitment to increasing tap rural markets already
exists. The lower levels, who look after implementation, have exposure mostly
to urban markets. A deeper understanding of rural milieu is needed, for
which people with proper exposure are required. Rural people look upto
urbamtes and, hence, the behaviour of marketers, while conducting business
in villages, should be respectful and humble. Rural India is a network of
relationships- family, social, economic and cultural. Relationship- marketing
H a term, which has become popular West only in recent years, whereas
mobile traders, selling a variety of products by visiting the same homes for
years, have been practicing relationship marketing for centuries in India.
Rural buyers take a long time to make up their minds to buy but once they do,
they do not change in a hurry. Therefore, marketers need to learn to exercise
more patience in dealing with the less educated rural traders.
Q. Do market researchers presently operate in rural areas has the right tols
tools to measure the rural pulse?
A. Most of the research techniques in use today have come from the more-
educated Western-world, some of which may not be relevant for the rural
consumers. Associations with colours and symbols work well as per our
38

experience. The individual interview technique may suffer from some
limitations, as rural people believe in participatory approaches. More work
needs to be done in this area and we can learn a lot from NGOs and social
scientists who have a closer interaction with rural people. Specific needs need
to be developed.
Q. You've spent years promoting rural products in urban areas. Is there a
ready market for rural products?
A. Most raw material for industries and all food for urban consumption come
from our villages. Hand-made products have their own uniqueness and,
therefore, do not necessarily differ from inferior quality perception, as is
definitely the case with factory-made products. Handicrafts, handlooms,
agarbattis and a host of other products find a ready market in urban India
and abroad. KVIC (Khadi and Village Industries Commission) alone sells
products worth Rs. 4,000 crore from its network of 16,000 retail outlets (next
only to the 22,000 outlets of McDonald's worldwide). Its surprising to know
that the rural non-farm sector employs more than the whole of the corporate
India.
Q. Which marketers come in mid for rural penetration? A rural product
that have achieved urban acceptance?
A. HLL, ITC, Wimco, Eveready, Dabur and a few others have done a great
job or rural penetration over the years. But in more recent times, Nirma
washing powder, Tiger biscuits (Britannia) and Ruf 'n' Tuf jeans (Arvind),
have managed to reach rural markets successfully. But regional players have
a strong presence than national companies in rural markets because of region-
specific strategies. In the rural to urban category, Amul, Lijjat, Camp co, Co-
39

Optex and KVIC products have achieved high urban acceptance.
RURAL MARKETING
STRATEGIES
40

CREATION IS A TRADITION AND TECHNOLOGY A
WAY OF LIFE
RURAL MARKETING STRATEGIES
An appropriate segmentation of highly heterogeneous rural market and
identification of the needs and wants of different segments will form the very
basis for rural marketing strategies.For the rural market, strategies for the
4P's of the marketing mix would be an ideal one.
(A) PRODUCT SRATEGIES:
41

The following are the product strategies for the rural market and rural
Consumers:
Small unit packing: This method has been tested by products life
shampoos, pickles, biscuits, Vicks cough drops in single tablets, tooth paste,
etc. Small packing stands a good chance of acceptance in rural markets. The
advantage is that the price is low and the rural consumer can easily afford it.
In addition, the Red Label Rs. 3.00 pack has more sales as compared to the
large pack. This is because it is very affordable for the lower income group
with the deepest market reach making easy access to the end user satisfying
him.
The small unit packing will definitely attract a large number of rural
consumers.
(2)New product designs:
Keeping in view the rural life style, the manufacturer and the marketing men
can think in terms of new product designs. For e.g. PVC shoes and chappals
can be considered sited ideally for rural consumers due to the adverse
working conditions. The price of P.V.C items is also low and affordable.
(3) Sturdy products:
Sturdiness of a product is an important factor for rural consumers. The
experience of torch light dry battery cell manufacturers support this because
the rural consumers preferred dry battery cells which are headier than the
lighter ones. For them, heavier weight meant that it has more over and
42

durability. Sturdiness of a product either or appearance is an important for
the rural consumers.
(4)Utility oriented products:
The rural consumers are more concerned with utility of the product and its
appearance Philips India Ltd. Developed and introduced a low cost medium
wave receiver named BAHADUR during the early seventies. Initially the sales
were good but declined subsequently.
On investigation, it was found that the rural consumer bought radios not only
for information and news but also for entertainment.
(5)Brand name:
For identification, the rural consumers do give their own brand name on the
name of an item. The fertilizers companies normally use a logo on the
fertilizer bags though fertilizers have to be sold only on generic names. A
brand name or a logo is very important for a rural consumer for it can be
easily remembered. Many a times rural consumers ask for peeli tikki in case
of conventional and detergent washing soap. Nirma made a peeli tikki
specially for those peeli tikki users who might have experienced better
cleanliness with the yellow colored bar as compared to the blue one although
the actual difference is only of the color.
(B) PRICING STATEGIES:
43

Pricing strategies are linked to the product strategies. The product packaging
and presentation also keeps the price low to suit the rural consumer.
Some of the pricing strategies are discussed below:
(l)Low cost/ cheap products:
The price can be kept low by low unit packing like paisa pack of tea, shampoo
sachets, Vicks 5 grams tin, etc. this is a common strategy widely adopted by
many manufacturing and marketing concerns,
(2)Refill packs / Reusable packaging:
In urban areas, most of the health drinks are available. The containers can be
put to multipurpose uses. Such measures can a significant impact in the rural
market. For example, the rural people can efficiently reuse the plastic bottle
of hair oil. Similarly, the packages of edible oil, tea, coffee, ghee etc can be
reused. Pet jars free with the Hasmukhrai and Co Tea, Ariel Super Compact.
(3)Application of value engineering:
In food industry, Soya protein is being used instead of milk protein. Milk
protein is expensive while Soya protein is cheaper, but the nutrition content of
both is the same. The basic aim is to reduce the value of the product, so that a
larger segment can afford it, thus, expanding the market.
(C) DISTRIBUTION STRATEGIES:
While it is necessary to formulate specific strategies for distribution in rural
44

areas, the characteristic of the product - whether it is consumable or durable,
the life of the product and other factors have to keep in mind.
The following strategies formulated for the rural category.
(1) Coverage of villages with 2000 and above population:
Ideally, coverage of villages with up to 2000 and above population could be
the break-even point for a distribution setup. By doing so the percentage of
villages covered comes to only 10% of all the rural population covered will be
substantial. With improved communication facilities, it is possible to
reach distribution vas to these villages.
(2) Use of co-operative societies:
There are over three lacks co-operative societies operating in rural areas for
different purposes like marketing cooperatives, farmers service cooperatives
and other multipurpose cooperatives. These cooperatives have an
arrangement for centralized procurement and distribution through their
respective state level federation. Such state level federation can be motivated
to procure and distribute consumable items and low value durable items to
the members to the society for serving to the rural consumers. Many of the
societies extend credit to the members for purchases.
(3)Utilization of public distributory system:
The PDS in the country is well organized. The revamped PDS places more
emphasis on reaching remote rural areas like the hills and tribal. The purpose
45

of PDS is to make available essential commodities like food grains, sugar,
kerosene, edible oils and others to the consumers at a reasonable price. The
shops that distribute these commodities are called fair price shops. These
shops are run by the state civil Supplies Corporation, co-operatives as well as
private entrepreneurs. Here again there is an arrangement for centralized
procurement and distribution. The manufacturing and marketing men
should explore effective utilizations of PDS.
(4) Utilization of multipurpose distribution centers by petroleum/oil
companies:
In order to cater to the rural areas the petroleum/oil companies have evolved
a concept of multipurpose distribution centers in rural areas. In addition to
petrol/dies el, lubricants, these outlet also stock consumables agricultural
inputs like fertilizers, pesticides and seeds. It is estimated that there are about
450 such outlets in operation in the country. The rural consumers who have
tractors, oil-engine pump sets and mopeds frequent these outlets for their
requirement. These outlets can be profitably utilized for selling consumables
and durable items also.
(5)Distribution up to feeder markcts/mandi towns:
Keeping in view the ■ hierarchy of markets for the rural consumers, the
feeder markets and ' mandi towns offer excellent scope for distribution.
The rural customers visit these towns at regular intervals not only for selling
the agricultural
produce but also for purchasing cloth, jewelry, hardware, radios, torch cells
46

and other durables and consumer products. From the feeder markets and
mandi, towns the stockiest or wholesaler can arrange for distribution to the
village shops in the interior places. This distribution can be done by mopeds,
cycles, bullock-carts, camelbacks etc. depending upon the township.
(6) Shandies/Haaths/Jathras/Melas:
These are places where the rural consumers congregate as a rule. While
shandies/heaths are held a particular day every week, Jathras and melas are
held once or twice a year for longer durations. They are normally timed with
religious festivals. Such places attract large number of itinerant merchants.
Only temporary shops come up selling goods of all kinds. It can be beneficial
for companies to organize sales of their product at such places.
Promotion can be taken, as there will be ready captive audience. For
convincing the manufacturing and marketing man with regard to the
importance of these places from rural marketing point of view a visit to such
places is necessary. It is estimated that over 5,000 fairs are held in the country
and the estimated attendance is about 100 million rural consumers. Biggest
fair 'Pushkar Mela' is estimated to attract over 10 million people. There are
50 such big rural fairs held in various parts of country, which attract urbanite
also like 'Mankanavillaku' in Malappara in Kerela, Kumbh Mela at
Haridwar in U.P. 'Periya Kirthigai' at 1 Tiruparunkunaram in Tamil Nadu.
(7)Agricultural Input Dealers:
Fertilizers should be made available to the farmers within the range of 4-5 km
from their residence, as per the essential commodities act. This is why there
are about 2 lakh fertilizer dealers in the country, both in cooperative &
47

private sector. Example of Varana Nagar in Maharashtra proved an eye
opener in this regard where the sugar and milk co-operatives have totally
changed the life style of people. The supermarket in Varana Nagar caters
exclusively to rural
consumers. Similarly, a co-operative supermarket called 'Chintamani' in
Coimbatore (T.N) arranges free transit of rural consumers to the
supermarket of their purchases.
D) PROMOTIONAL STRATEGIES:
The promotion measure should be cost effective due to the low literacy rate of
the rural population. Word of mouth is an important message carrier in the
rural areas and "opinion leader" play a significant role in influencing the
prospective rural consumers about accepting or rejecting a product or a
brand. There are other attributes in the promotion strategy which are
explained as under:
(1)Mass media:
In the present world mass media is a powerful medium of communication.
The following are the mass media generally used:
• Television.
• Cinema
• Radio
• Print media: Handbills and Booklets, posters, stickers, banners, etc.
48

(2)Personal selling and opinion leaders:
In personal selling it is required that the potential users are identified and
awareness is created among them about the product, its features, uses and
benefits. This can be achieved only by personal selling by highly motivated
sales person. In fact, the word of mouth information holds lot validity in rural
areas even today. This is the reason why opinion leaders and word of mouth
are thriving among rural consumers. An opinion leader in rural areas can be
defined as a person who is considered knowledgeable and is consulted by
others and his advice is normally followed. The opinion leaders may be big
landlords or politicians or progressive farmers.
(3)Special campaigns:
During crop harvest and marketing seasons it is beneficial to take up special
promotion campaigns in rural areas. Tractor 1 owners (tonee) conducted by
MRF Limited is one such example. Brooks Bond carries out marches in rural
areas with band, music and caparisoned elephants to promote their brand of
tea.
49

SUPER STAR SHOW
Philips India was among the first consumer durables companies to hit [lie
rural market with its Bahadur brand of Transistors in the 1950s. But
somewhere down the line, the rural focus was gone. However, in the mid-1998,
Philips felt the need to improve its market share in upcountry markets. It
decided to launch a special project in Tamil Nadu and Andra Pradesh at a
total cost of Rs. 5 Crore.
Rural consumers need to be seen as 'different' and 'not inferior'. It is with this
belief that Philips approached rural buyers in Tamil Nadu and Andra
Pradesh. "The idea was to present Philips in a relevant manner to the rural
consumer, position it as a truly International brand, the way a rural buyer
would understand it, "says V.Swaminathan, Philips general manager
(distribution & rural marketing) at its consumer electronics department
division. So Philips held road shows, van promotions, merchandising etc. in
villages with populations of about 5000.
The Chennai-based Anugrah-Mandison was roped in to help. Together they
created a special campaign "Enga veettu superstar" (the super sfar of our
house) for the Tamil Nadu market. The word "Super" is an integral part of
51

the Tamil. Even cine idol Rajnikant is popularly known as a "Superstar". The
campaign became a major hit. In Andra Pradesh, the campaign was redrafted
in Telgu as "Maa into megastar". Popular cine actor Chiranjeevi is referred
to as the "megastar" in the state.
During the exercise, Philips painted 1 lakh square ft of wall area in Tamil
Nadu and Andhra Pradesh. Four ads campaigns- 2 for B&W (Black &White)
TV and 1 each of C (Colour) TV and audio systems- were created in Tamil
and Telugu. These were executed in cinemas, theatres and through video vans
(68% of people in Tamil Nadu watch films and 81% in Andhra). The
electronic media ads were slickly used. Philips did not compromise on the
production values.
The storyboard was created keeping in mind the way of life. Girls in small
towns and villages often embroided the cloth which covers the Revision sets in
the house. The ad shows one such girl spreading the embroidered cloth
waiting for her in Dubai to return with a CTV. Of course, he does not bring
the CTV and explains that Philips makes excellent TVs in India. Predictably,
a Philips TV is brought home and lovingly covered could easily relate to the
story.
In the ad film for Andhra Pradesh, Philips used popular singer S P
Balasubramanyam. The ad showed star complementing his son for buying an
excellent Philips TV.
The results of the entire exercise: sales rose by between 25% and 30% in these
states in the last 6 months. Now, Philips is extending the exercise to Uttar
Pradesh and Maharashtra.
52

THE FUTURE STAND FOR EXPECTANCE
FMCG-SECTOR
The FMCG sector, especially in India, has a very hazy definition. It generally
means clubbing most consumer goods items under one categoiy. It I usually
refers to the aggregation the following categories.
• Household products (like Fabric Care Household Care, Hair Care Oral
Care)
• Agro products Food processing (Dairy Sugar Tea Edible oil/fats)
• Branded Foods Health Beverages Soft Drinks Staple foods Bakery
products Chocolates Snack food Culinary products Ice cream and Coffee)
• Tobacco products (Tobacco/Pan products Cigarette, bidis)
• Branded Tea
From time to time, the FMCG sector has been referred to by many different
nomenclatures .It was once called the CPG sector and now the PMCG sector.
By whatever name this sector is called, the importance of this sector cannot be
53

overemphasized. In fact, the significance of this sector can be gauged from the
fact that by definition FMCG is India’s Second largest industry on the basis of :
• Sales
• Tax paid
• Number of people employed
Given below is a brief summary about the origins and the progress of the
FMCG industry in India.
THE ICE AGES
Dabur was one of the first players in the Indian fast moving consumer goods
(FMCG) scene. That was about 115 years ago when the term FMCG had not
yet gained currency. The focus then was on providing consumer son a large
scale.
THE MIDDLE AGES (the 50'S)
At the time of India's independence there were many multinationals like HLL,
Colgate and Nestle. Out of these companies, only HLL had a domestic
production base. For other MNCs, the domestic market was too small and the
purchasing power of people was too low to entail any serious investment
decisions.
SWINGING SIXTIES (60'S)
54

The sixties were not too exciting in the Indian context particularly the FMCG
sector In spite of the fact that many more MNC's set up shop in India with a
local manufacturing base the scene wasn't too bright. This was because the
government accorded a misplaced emphasis on the concept of sufficiency and
due to the heavy influence of socialist philosophy the rural inclination of the
government was to frown upon the capitalist multinationals.
HE DARK AGES (70'S)
With a socialist government at the helm and the exploits of a rabble-rousing
firebrand by the name of George Fernandes, the MNC's didn't stand I chance.
A statute was promulgated to restrict the equity stake of foreign ■Investment to
40%, that straw broke the camel's back. Coke and IBM decided that they had
had enough and they left India. The only major FMCG ■NC (that's quite a
mouthful) that stayed put was Unilever. It somehow managed to retain a 51%
stake by complying with certain government regulations. There weren't too
many players in the FMCG scene that was laminated by a few big players.
Which meant that there wasn’t enough Choice for the consumers?
LIBERALISATION (THE 90'S)
After the introduction of reforms by the Narasimha Rao - Manmohan Singh
duo the MNC's returned in droves. This period was marked by the creation I
new categories and also new sub categories within existing categories. Demand
was created where there was none by innovative sales and marketing strategies.
With a burgeoning middle class that had the required purchasing power the
MNC's were faced with the enviable prospect of a growing market that was not
55

yet completely explored. There was a renewed emphasis on the distribution
network.
• More than anything else the nineties will be remembered for the
acquisitions of brands .The acquirers were usually multinationals or those with
huge resources.
FUTURE TRENDS
Its crystal ball gazing time. Even though the Indian FMCG sector is still in the
developing stage, a few distinct trends are discernible. They are:
The super rich category-
with the entry of more and more multinationals and changes in the aspirational
levels of people and their lifestyles, a new category is emerging. This is a niche
market where the volumes will be low since these products cater only to the
super rich but the pricing will be such that the profit margins will be greater. A
cosmetic is an example of one such segment.
Rural marketing-
India still lives in its villages. And many FMCG's have realized this fact. With
the urban segment becoming more and more crowded and a huge untapped
rural market yet to be explored the focus has shifted. Even though the
purchasing power of the average rural person is not comparable with his more
affluent urban cousin the MNC's are hoping that the larger market (read larger
56

sales volumes) will compensate for this. The companies that have jumped into
the go rural bandwagon are
• Hindustan Lever
• Marico Industries
• Colgate-Palmolive
• Britannia Industries
Newer products –
The coming days will see an introduction of many new products. Through
aggressive promotional campaign efforts will be made to create demand for
these products. Also innovative packaging will be able to increase demand. The
latest craze is for sachets. Even Jams are now available in sachets!
Influx of the MNC's-
With India opening up, more and more MNC's will set up shop in India. And
with their deep pockets we will see many more acquisitions and then the stage
will be set for a battle royal where big conglomerates will slug it out for
progressively decreasing market shares.
Aggressive promotional Strategies-
this sector is oriented towards greater sales volume since the profit margins are
not very large. And with the influx of more and more entrants in this field,
more players will be vying for a diminishing market share. This will lead to an
57

all out war between the top players for capturing the attention of the
consumers. We will witness more innovative promotional strategies as well as
aggressive marketing to woo the consumer.
COMPANIES TARGETTING
RURAL MARKETS
NIRMA
(Detergents & Soap Making Industries)
58

The Big Small Giant - Karsanbhai K. Patel
NIRMA STORY
The Nirma story began in 1969, when Mr. Karsanbhai. K. Patel rolled out the
first bag of Phosphate free Synthetic Detergent Powder, signaling the launch of
Nirma. And that first bag of Nirma was destined to change the Indian detergent
industry hitherto dominated by multinational players offering high priced
products to a small segment of the population.
Within a short span of three decades, Nirma Offering high quality products at
unbeatably low prices. In the process, Nirma has helped expand the entire
soaps and detergents market to a level of Rs. 82 billion. Today, Nirma has an
Rs.17 billion share in this market and has been acknowledged as a marketing
miracle. This has been possible through its focus on cost effectiveness by
integrating latest technology manufacturing facilities with innovative
marketing strategies to create excellent brands
THE BEGINNING
"The narrative is simple. At the fag end of the sixties, Mr. Karsanbhai. K.
Patel, a 25-year-old Lab Assistant from the Geology & Mining Dept of the
Government of Gujarat, started a small-scale business that offered a quality
detergent powder, Using indigenous technology, at a third of the prevailing
price, without compromising on the product. The rest is history, and the
product, named Nirma after his daughter, Nirupama, went on to occupy its
place in the sun, amidst phenomenal market penetration, volumes and share.
60

His detergent powder was made of an innovative formulation, which global
detergent giants were at last compelled to copy. Additionally, his detergent was
phosphate free and hence environment friendly and above all tfye process was
labour intensive, which offered large-scale employment.
NIRMA – INTRODUCTION
Nirma is an over Rs. 17 billion brand with a leadership presence in Detergents,
Soaps and Personal Care Products, offering employment to over 15,000 people.
Mr. Karsanbhai introduced the Brand. K. Patel in 1969.
Making phosphate free synthetic detergent powder by hand and selling it at Rs.
3/- per kg, when the lowest priced detergent brand was Rs. 13/-. This value-for-
money plank revolutionized the industry and made fabric wash detergents
available to the masses.
Today, Nirma sells over 800,000 tonnes of its detergent products annually,
giving it a 35% share of the Indian market, which is the world is second largest
fabric washes products market. This makes Nirma India's largest detergent
marketer and one of the world's biggest detergent brands. ■a though Nirma
was a late entrant in 1990 in the highly competitive p soaps market, it is already
the second largest manufacturer, selling close to 1.06,000 MT of bathing soaps
in 1999-00.
Nirma's philosophy of providing quality products at the best prices has led to
investment in the latest technologies for our multi-locational I manufacturing
facilities, with full-scale integrated complexes at Mandali -Mehsana,
Ahmedabad, Baroda, Bhavnagar, Kanpur and Indore. To have a ipeater
61

control on the quality and price of its raw materials, Nirma has undertaken
backward integration_into manufacture of Industrial Products ilk Soda Ash,
Linear Alkyl Benzene (LAB), Alfa Olefin Sulphonates ■OS), Fatty Acid,
Glycerine and Sulphuric Acid.
It is very likely that the successful state of affairs will continue, but for IK. K.
Patel, the best reward of all, as he often says, will continue to be the smile on the
face of a satisfied buyer."
MOVING FORWARD THROUGH BACKWARD INTEGRA TION
By manufacturing their own raw material, in the form of Linear Alkyl Benzene
(LAB) and Soda ash, Nirma will be offering more value to its buyers. The Rs.
4.5 billion LAB manufacturing plant at Savli (the most modern in India and the
Second best in the world), was set up in minimum lime and cost; once again
showing astute management skills. The Rs.12.5 billion soda ash plant in
Bhavnagar district will have its own captive power plant. Together, both plants
will control 85% of the raw material cost
A lesser-known fact about Nirma is its investment in the finest I technology,
unique in India. The toilet soaps plant is the most modern in ■India, and the
second most advanced in the world. It also has the largest soap I manufacturing
facility in the country, under a single roof A state-of-the-art packaging plant
(another first in Gujarat) will cater to a staggering 1.2 million polythene bags
and 6 million wrappers, daily!
62

ECO-FRIENDLY& ENVIRONMENTALLYSAFE
i) At the very outset, Nirma has been a phosphate-free detergent, making it
eco-friendly.
ii) The LAB plant near Baroda is the most environment-friendly one of its
kind; Consisting of a safe HF-free process.
iii) A detergent by-product, Spent acid, is not released into the environment,
but is used as raw material in the SSP fertilizer unit.
iv) Extensive foliage covering can be found on all campuses - plants, offices,
Institutes. At the Mandali complex, alone, 1,00,000 trees can be found on a 125
Acre campus.
DISTRIBUTION STRATEGY
The Fast Moving Consumer Goods (FMCG) business requires deep pocket I
and tremendous resilience for success, more so because it is dominated by
MNCs. The success is not solely dependent on the product but on reach and
penetration as well. AME's (Alpha Marketing Enterprises) / NCCL'S (Nirma
Chemical works Limited) distribution network penetration and reach in
comparable with the best in the FMCG INDUSTRY.
63

NIRMA Distribution at Work
AME / NCCL has a marketing network as follows:
• 300 Sales Force all over India
• 400 Distributors all over India
• Over 1 million Retailers
• 300 million Consumers
Nirma's efficient distribution network has given it the ability to tap even the
remotest villages where modern transportation is not available. This gives
Nirma a competitive edge in mass marketing through greater product reach
and consumer acceptance.
Effective distribution is critical for the success of any brand in the Indian
FMCG market. The country has the world's 7th largest land area (3,287,000 sq.
km.) and has over 600,000 villages and over 3,000 urban towns. This huge size
coupled with the complex nature of retailing (there is at least 1 retail outlet per
population of 380 - making India's retail index probably the lowest in the
world, and hence necessitating a strong whole-sale network)creates formidable
entry barriers for any new entrant, markets Sulphuric Acid, Oleum, Alpha
Olefin Suiphonates, Gycerine and oxygen to Industrial consumers on a regular
bases.
64

ADVERTISING STRATEGY
NCWL has been investing judiciously in advertising efforts. The umbrella
brand concept gives optimum return on advertising expenses. Careful
selections of media vehicles and consistent efforts have yielded results over a
period of time.
Over the years, the company has focused on advertising in audiovisual media
(radio, TV, Cinema halls etc.) This has been done in the belief mat in the large
and diverse Indian market place, the audio-visual medium bffers the maximum
mileage.
With the launch of premium products in the past couple of years, the company
has; moved from its earlier sole focus on middle-class housewives to more up
market themes.
MARKET
The Soaps & Detergents Industry is characterized by a number of small scale
manufacturers at one end of the spectrum and large MNC's at the other end.
Like many other countries in the world, the Detergents market is dominated by
two players with the rest being small or marginal players in the overall market.
In India, as evident from pie chart, the Detergents market is dominated by
market leader Nirma and Hindustan Lever. The market for Soaps &
Detergents has increased manifold with changing lifestyles, growing purchasing
power, increased awareness about personal hygiene, responsiveness of the
65

consumer to brands offering superior value and the spread of audio-visual
media.
HLL, 30%
NIRMA, 35%
OTHERS, 5%
SMALL
SCALE, 30%
HLL
NIRMA
OTHERS
SMALL SCALE
Others include P & G, Henkd Spic, Swastik Surfactants, Ksmataka soaps etc.
The Fabric Wash Industry in India is Characterized by (like any other non-
durable product category in India) low per capita consumption and substantial
potential in rural markets (in terms of category penetration and per capita
consumption). Per capita consumption of fabric wash products in India is just
3.2 Kg, which is very low compared to develop and some developing countries.
The Fabric Wash Industry is divided into Laundry Soaps, Synthetic Detergent
Cakes & Powder. The total production of Synthetic Detergents, Cakes & Bars
in 1996 as per the Indian Soap & Toiletries Makers* Association, Mumbai
(ISTMA) was 2,2 million tonnes, in which Nirma was the undisputed leader
with a 35% volume based share of the market.
The Toilet Soaps Industry under Personal Care products is segmented into
66

economy, popular and premium segments. The market is witness to fierce
competition from MNC's and requires substantial efforts for market
penetration and brand development, reflected by the fact that only 5% of total
production comes from the small scale sector. As per ISTMA figures, total toilet
soap production in 1996 was 520,000 tonnes.
Even though Nirma entered this market only as late as 1990 with Nirma Bath -
a Carbolic Soap, we have today garnered a 18% share in volumes, making
Nirma the second largest player We, have products in all the segments viz.
Nirma Bath, Nirma Beauty Soap which is already the third largest soap brand,
Nirma Premium and Nirma Lime Fresh and Nirma Shihakai soap.
MARKETING
The Genesis of Nirma dates back to 1969 when the first bag of STPP free
synthetic Detergent Powder rolled from lOOsq. yards room. During those days,
detergents were perceived to be luxury products and average households
used home trade laundry soaps to meet the fabric washing need. By introducing
phosphate free washing powder at Rs. 3 per kg, Shri Karsanbhai K. Patel made
detergents affordable for the average Indian consumer, thereby converting a
luxury item into a necessity product. During those years, the marketing focus
was directed towards the economy segment with Nirma yellow powder. In a
short span, Nirma washing powder was available throughout the country. This
distribution reach coupled with judicious advertising in the electronic media,
made Nirma a household name.
Core Marketing Strategy
The company's marketing strategy revolves around providing god quality
67

product at competitive prices, thereby encouraging consumer trials. Repeat
usage is ensured by providing the customer with "value for money".
After the runaway success of Nirma Washing powder in the economy segment,
the Company introduced two detergent products in the premium segment in
1994, Nirma Super Cake and Nirma super Powder, which have been well
received in the rural market.
Armed with success in the detergent market, the Company has followed the
same strategic plank of "value for money", while making its foray into the toilet
Soap market.
In 1990 the company formally launched Nirma Bath- a carbonic soap which was
well received by the market. This was followed in 1992 by the formal launch of
Nirma Beauty Soap in three colour variants - pink, green and white. In less than
5 years, Nirma Beauty Soap has become the third largest selling soap brand in
the country after Lifebuoy and Lux of Hindustan Lever. (Source: ORG
announcement in Business India, April 22-May 5, 1996)
HLL, 65%
NIRMA, 15%
OTHERS, 13%
GODREJ, 7%
HLL
NIRMA
OTHERS
GODREJ
68

Toilet Soaps
The company has by now proved its capability in manufacturing products,
which are acceptable to consumers in both mass as well as premium segments.
The Company has recently launched two premium Soaps 0 nirma Premium and
Nirma Lime Fresh, which have received encouraging response from the
consumers.
The company follows the policy of having integrated production facilities. The
company today manufacturers Sulphuric acid, Alfa Olefin Sulphonate,
Glycerine etc. at its Mandali plant. The Backward integration projects for LAB
and Soda ash, both, which are critical raw materials, are meant for captive
consumption.
With these projects, the company will not only be able to meet majority of its
total raw material requirements but also gain over supply of critical raw
materials and volatility attached therewith. This will enable the Company to
further sharpen its pricing tools.
Broadly the Company proposes the following strategies:
• Ensure presence in all segments- Premium, Popular and Economy
• Launch new products
• Attain cost competitiveness through backward integration
Price sensitive advantage
• Targeting untapped markets.
PRESENT MARKET SCENARIO AND COMPETITION
69

On account of the manufacturing process, the Soaps and Detergent Industry has
witnessed the entry of a large number of small-scale manufacturers. Presently the
industry has a number of small-scale manufacturers at one end of the spectrum
and a large Multinational Corporations at the other end. The market for Soaps
&Detergents has increased manifold with changing lifestyles, growing purchasing
power, increased awareness about personal hygiene, responsiveness to the
customer to brands offering superior value and the spread of audio-visual media.
LAUNDRY SOAPS
The production for laundry soap is exclusively reserved for the small-scale sector.
In the 10 years period 1986 to 1996, Laundry soaps production has dropped from
10 lac tpa to 7.5 lacs tpa (Source; ISTMA). The reduction of laundry soap usage is
in line with the international experience, whereby a consumer graduates from
laundry soaps to detergent cake and from there onto detergent powders which
offer better washing efficiency.
PERSONAL CARE PRODUCTS
Personal Care Products includes Toilet soaps, Shampoo, Cosmetics and Toiletries.
Nirma is currently manufacturing Toilet Soaps and Shampoo.
Like Synthetic detergent Industry, toilet Soaps Industries is also segmented into
Economies, Popular and Premium segments.
70

Almost 95% of the total production is from the large-scale sector and only 5%
comes from small-scale manufactures. Of 5.2 lakh tonnes of Toilets Soaps
produced in 1996, the split between various segments is as follows:
Carbolic Soap
Popular Toilet
Soap Premium
Toilet Soap
2.21akh(42.
3%)
2.31akh(44.
4%)
0.71akh
(13.5%).
71

FUTURE
In future, the company will endeavor to have a product in each segment of the
sqaps and detergent industry, offering the same (if not better) quality as its
competitors but at a cheaper price. The country wide network of AMEfNCCL
and the Nirma brand can be leveraged by the company for any / all of its
product launches. Forays into consumer care products The company also
proposes to enter other consumer product segments like shampoos. The
company has started test marketing its shampoo and a full fledged game plan
for this product will be evolved once the results of the seed marketing are
received the initial response to seed marketing has been encouraging. In the
future, the company proposes to focus on the following strategies:
• Presence in all segments - premium, popular and economy
• Price sensitivity advantage
• Launch of new products
• Targeting untapped markets
• Attain cost competitiveness through backward integration

HLL- Hindustan Lever Limited
Hindustan Lever Limited (HLL) is India's largest fast moving consumer
goods company, with leadership in Home and Personal Care Products,
Foods and Beverages and Specialty Chemicals.
The leading business magazine, Forbes Global, has placed Hindustan Lever
at the top among the best consumer household products companies
worldwide for the current year. "Reflecting the compounding buying
power in emerging markets, the company that tops this year's A-list of
household products is neither American, nor European, but Indian/' said
Forbes.
The international magazine Far Eastern Economic Review has, for the
fourth successive year, rated HLL as India's most respected company.
Leading national publications, like The Economic Times, have also rated
HLL as one of India's most respected companies.
The vision that inspires HLL's 36,000 employees, including about 1,300
managers, is to "meet everyday needs of people everywhere – to anticipate
the aspirations of our consumers and customers and to respond creatively

and competitively with branded products and services which raise the
quality of life." This objective is achieved through the 110 brands that the
company markets.
It is an ethos HLL shares with its parent company, Unilever, which holds
51% of the equity. A Fortune 500 transnational, Unilever sells over 1000
Foods and Home and Personal Care brands through 300 subsidiary
companies in 88 countries worldwide with products on sale in a further 70.
Unilever's foods and home and personal care
brands are chosen by individual consumers 150 million times a day.
Unilever is the number one consumer goods Company in the world in
market competitiveness, according to a survey of leading international
corporations by Prof.Jean-Claude Larreche of the international business
school, INSEAD.
Business nature
HLL is India's largest marketer of Soaps and Detergents. It has the
country's largest Personal Products business, leading in Shampoos, Skin
Care Products, Colour Cosmetics, Deodorants and Fragrances. HLL is also
the market leader in Tea, Processed Coffee, branded Wheat Flour, Tomato
Products, Ice cream, Jams and Squashes.
HLL is also one of the country's five biggest exporters and has been
recognized as a Super Star Trading House by the Government of India; it
is a net foreign exchange earner. The company's Exports portfolio

comprises branded Soaps and Detergents, Personal Products, Tea and
Coffee, Basmati Rice, Castor Oil and its Derivatives, Meals/Extractions,
Leather Footwear, Marine Products, Carpets, Chemicals and Fatty Acids.
HLL is India's largest exporter of branded fast moving consumer goods. It
is India's largest exporter of Tea and is India's largest exporter of Castor
Oil. About 80% of HLL, exports go to General Currency Areas.
Cutting-edge distribution network-strategy
HLL's distribution network is recognized as one of its key strengths -that
which helps reach out its products across the length and breadth of this
vast country. The need for a strong distribution network is imperative,
since HLL's corporate purpose is "to meet the everyday needs of people
everywhere."
HLL's products, manufactured, across the country, are distributed
through a network of about 7,500 redistribution stockiest.
HLL's distribution network directly covers the entire urban population,
and reaches as far as villages with over 2000 people.
The nationwide supply chain management is supported by a satellite-based
communication system, the first such network in the fast moving consumer
goods industry. The network, which offers voice and data communication
facilities, links over 200 locations all over the country, including the head

office, branch offices, factories, depots and key redistribution stockists.
While the distribution system is quite similar for different businesses, each
of the businesses have, over the years, fine-tuned the system to meet their
objective of serving their respective customers and consumers in the most
efficient manner. The differences, therefore, lie in the manner businesses use
an existing distribution network, and the channel players involved therein,
to improve their reach and service to their customers and end users.
In a significant move, with long-term benefits, HLL has mounted an
initiative to further increase its rural reach. The distribution is being
extended to villages with less than 2000 people with the help of rural
stockists. This will double the rural reach by 2000.
Operation Streamline is also one of the major initiatives undertaken by
HLL, in recent times, to penetrate the rural markets. In the case of
Operation Streamline, the goods are distributed from the C & F Agents to
the Redistributors, who in turn pass it on to the Star Sellers. Operation
Streamline being a cross functional initiative, the Star Seller sells everything
from detergents to personal products, etc.
Hindustan Lever's Personal Products Division has also launched the
"Personal Products Prestige Club," a unique customer loyalty programme
in the fast moving consumer goods business. This programme will offer
profits, prestige and personalised service to our key accounts.

Product and process innovations
Major innovations have taken place in detergents manufacturing.
Sophisticated technology has been developed to manufacture enzyme-
incorporated powders with properties like stain and tough dirt removal. New
technology has helped manufacture concentrated powders without going
through the high-energy route of spray drying.
These powders being of high bulk density also need less packaging maferial
for a given weight compared to low bulk density powders. All the money
saved in energy conservation and processing has been reinvested in better
formulations and performance of products.
Valuable insights have also been gathered in understanding soap phases
and how soap properties such as the feel; lather, colour, appearance, size
and shape can be improved, resulting in better performance.
HLL has also developed the capability to design and manufacture
machines in-house or have them assembled by third parties as per given
specifications. This enables the company to set up plants at half the cost of
others. Such technological developments have also led to significant
improvement in productivity. The capacity of a toilet soap line has gone up
from 6,000 tonnes per annum in the early nineties to 10,000 tonnes per
annum now, while that of a detergent bar line has gone up from 7,000
tonnes per annum to 25,000 tonnes per annum now, thus substantially
increasing capital productivity.

Research in skin care has led to the formulation of a product like Fair &
Lovely Skin Cream and Lotion, which makes the skin fairer. It has now
become a global success through exports to over 30 countries. The product
is equally used by the local population of these countries, apart from those
of Indian origin.
One of the major achievements of the Foods Research Laboratory in
Bangalore has been developing a technology to manufacture Instant Tea
Powder. This has been used
to set up a 100% export-oriented plant in Etah to manufacture Instant Tea
Powder for exports to Unilever companies abroad. Research has also been
carried out to see as to how nutrition in tea can be improved and enhanced.
Significant technological breakthrough has also been achieved m the area
of Icecream. An innovative virgin board food grade packaging material has
been developed, for the first time in India, for Kwality-Wall's products.
This is a major success because the Icecream industry in India had
historically been using non-food grade recycled waste paper-based
packaging material. Another notable achievement has been development of
freezers, which can maintain an operating temperature below Minus 18
Degree Celsius, even with power cuts lasting upto eight hours. The benefit
has been extended to mobile units like vans and pushcarts.

Market leading brands
HLL markets about 110 brands (with 950 packs), most, of which have
become household names in the country. Some of the big brands in Soaps and
Detergents are Lifebuoy, the largest selling soap in India, Lux, Liril, Pears,
Hamam, Moti, Rexona, Jai, Breeze, Dove, Savlon (all soaps), International
Surf Excel, Surf, Rin, Wheel, OK, 501, Sunlight and Ala (all detergents). HLL
also markets the Domex and Vim range of Household Care Products.
In the Personal Products business, HLL's Hair Care brands are Clinic, Sun
silk, Lux and Organics shampoos and Clinic Plus, Clinic All Clear, Coco care
and Nihar Hair Oils. HLL has also recently launched New Formula Organics
Root Nourishing shampoo. In Oral Care, the HLL portfolio comprises Close-
up and Pepsodent toothpaste, toothbrushes and toothpowder. Close-up Oxy
Fresh was launched in 1999. In Skin Care, HLL markets Fair & Lovely Skin
Cream and Lotion, the largest selling Skin Care Product in India; a brand
developed in India, it is now exported to over 30 countries. The other major
Skin Care franchises are Pond's, Vaseline, Lakme and Pears. In Colour
Cosmetics, HLL market the Lakme, Orchids and Elle-18 ranges. In
Deodorants and Fragrances, the brands are Rexona, Ivana, Shie, Elle-18 and
Axe. Denim is HLL's franchise for Men's toiletries.
Hindustan Lever has recently launched the complete range of Unilever's
prestigious Calvin Klein fragrances in India. The Calvin Klein range
comprises classic brands like Obsession, Eternity, Escape,
Contradiction, and the shared cK one and cK be. Aviance, the new

international and customized Skin Care and Beauty Cosmetics portfolio of 70
products, has also been meeting with considerable success. The Aviance
range is now available directly to consumers only through trained beauty
consultants. Developed at the Unilever Beauty and Skin Innovation Centre,
USA, the Aviance range consists of the best Unilever formulations, selected
from across the world, for suitability to Indian skin types and weather
conditions. Intensively researched in India, the products bring technology
that works with the skin's natural processes, to provide high performance
beauty solutions.
The company's Foods and Beverages business consists of five master brands -
Brooke Bond and Lipton for Tea and Coffee, Kissan for Tomato-based
Products, Jams and Squashes, Kissan Annapurna for Branded Staples and
Quality-Wall's for Ice-cream.
HLL is the world's largest packet Tea marketer. Seven HLL Tea brands -
Red Label, Taaza, Al, 3 Roses, Super Dust, Top Star and Ruby Dust - are
among the top ten tea brands in the country. HLL also markets Yellow Label
and Green Label teas. The company has recently launched New Lipton Taaza
- FX Tazgi dust tea.
The Kissan range of Culinary Products comprises Jams, Squashes, Tomato
Ketchup Sauces, Puree, and Cooking Pastes. The business is backed

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