A project report on rural marketing

Marketing strategies redefined “ go rural “

INTRODUCTION TO RURAL MARKETGONE ARE the days when a rural consumer went to a nearby city to buy

branded products and services. Time was when only a select household

consumed branded goods, be it toothpaste or soap. There were days when

big companies flocked to rural markets to establish their brands. Today, rural

markets are critical for every marketer - be it for a branded shampoo or an

automobile.

To open a business daily or business magazine today, you will read about

some company or other announcing its intention to `go rural'. Is going rural

that simple? Apart from the distribution nightmare of reaching the products to

rural markets, with 13 major languages and thousands of dialects, 1,700

ethnic groups and hundreds of caste groups, reaching the right

communication to the rural community is mind-boggling.

A number of today's marketers who believe that consumers in rural India are

less demanding and easily satisfied are in for a rude shock. It is high time

these marketers realize that an indiscriminate marketing strategy, a replication

of that used for the urban customer, will not work with his rural counterpart.

The latter have a different set of priorities, which necessitates a different

approach, both in terms of developing appropriate products to suit them and

using appropriate communication strategies, which they will comprehend

better.

There is a debate in some quarters that the rural market is mature enough to

understand communication developed for urban markets, especially in the

case of FMCGs. This is partly true, if the communication is such that it makes

the product promise in a simple and easy-to-understand style.


It is also true that the section of rural society, which is exposed to urban

lifestyles because of employment, is beginning to appreciate and understand

all types of communication aimed at it. But they are in small numbers and the

vast majority of rural folks, even today, cannot understand clever

communication. What to communicate and how to communicate to the rural

audience is a subject which must be understood clearly before any attempt to

develop a communication package aimed at them is undertaken.

“Real India lies in Rural India”, ‘India is a land of ‘villages’, ‘Rural economy

is the backbone of the Indian economy’, ‘India lies in its villages’, etc, are the

perpetual and common slogans. India is predominantly an Agricultural

Economy and the rural markets hold immense potentials for any company to

expand.

Thus the next word after “expanding sales” today is “targeting the rural

markets”. Also, intensified competitions in the urban-markets have resulted in

increase in costs but not higher market share and profits. This has resulted in

change of focus by a host of organizations. Thus, rural bazaars are becoming

more important than urban markets and many organisations have realized

that in a host of product classes the winners of tomorrow are going to be

those who focus on rural India. Industrial giants and other savvy small to

medium firms are awakening to the potential of India’s jackpot rural market of

nearly 733 million consumers, more than twice the population of the USA. It

has thus become very necessary to study the rural markets because this

market, which is mostly underestimated, is drastically changing.


CHAPTER II

Background of Rural Marketing

It was in the late 1960s and 1970s that rural marketing became a topic of

general discussion. The Green Revolution and the consequent pockets of

rural prosperity that appeared on its wake awakened many manufacturers to

the new purchasing power. The NCAER’s Market Information Survey of

Households (MISH) shows that the 1980’s saw a rapid improvement in the

distribution of income in the rural as compared with urban India. In 1989-90,

the number of households with income over Rs. 25,000/- per annum was 9

million (around 50 million people), and above Rs. 12,500 per annum was 35

million households (around 160 million people).

However, aggressive Rural Marketing is not a recent activity. With the Green

Revolution, companies like Siemens with a package of products for water

drilling marketers of fertilizers, pesticides, seeds, bicycles, etc., were followed

by manufacturers of motorcycles, and many others who took their products to

the rural consumers.

Earlier, consumers who were illiterate or unable to read English created

symbols to identify their favourite products-Red Soap for Lifebuoy, Palm tree

for Dalda, etc. Manufacturers now began to deliberately build symbols and

colours into their products to enable identification of their brands.

Nineties was a phase when the advocates of rural marketing convinced

corporate India that villages were big, this decade is differentiating between

companies that can unlock the potential of the rural market and those that

cannot.


Today rural population is 7,41,660,293, while that of urban India is

285,354,954 (Census of India 2001). There is a 241 million strong working

population, spread across 6.38 lakh villages in the rural hinterlands. The rural

population has been dependent primarily on agriculture as their main source

of income. However, after 50 years of independence, and the advent of

industrialization, the agriculturally skewed income of rural India is steadily

normalizing. Horticulture and fishery are also fast becoming income-

generating activities in rural India.

Activity 1972-73 1993-94

Agriculture 85.6 78.0

Mining 0.3 0.6

Manufacturing 5.4 7.1

Construction 1.4 2.3

Trade 2.5 4.4

Transport 0.6 1.4

Services 4.1 5.8

Table: Profile of the Rural Working Class (%)

Particulars North South East West

Villages with >5,000 people 2,00,106 73,585 1,81,982 1,35,936

Villages with Pucca Roads 78,217 45,102 41,348 44,693

Villages with number of outlets 9,75,111 9,80,728 10,89,603 6,51,285

Villages with number of haats 11,436 3,167 18,905 8,380


CHAPTER III

What is rural marketing?

‘Rural marketing is a process of developing, pricing, promoting, distributing

rural specific goods and services leading to exchanges between urban and

rural markets, which satisfies consumer demand and also achieves

organizational objectives’.

Rural marketing involves a two way marketing process, however, the

prevailing flow of goods and services from rural to rural areas cannot be

undervalued.

The process should be able to straddle the attitudinal and socio-economic

disparity between the urban and rural customers.

URBAN TO RURAL (U 2 R)

A major part of rural marketing falls into this category. It includes the

transactions of urban marketers who sell their goods and services in rural

areas. The following are some of the important items, which are sold in rural

areas and manufactured in urban areas: pesticides, fertilizers, seeds, FMCG

products, tractors, bicycles, consumer durables, etc.

URBAN RURAL

RURAL URBAN

RURAL RURAL


RURAL TO URBAN (R 2 U)

Transactions in this category basically fall under agricultural marketing where

a rural producer seeks to sell his produce in an urban market. An agent or a

middleman plays a crucial role in the marketing process. The following are

some of the important items sold from the rural to urban areas: seeds, fruits

and vegetables, milk and related products, forest produce, spices, etc.

RURAL TO RURAL (R 2 R)

This includes the activities that take place between two villages in close

proximity to each other. The transactions relate to the areas of expertise the

particular village has. The items in this category include: agricultural tools,

handicrafts and bullock carts, dress materials, etc.


CHAPTER IV

RURAL MARKET ENVIRONMENT

► Untapped Potential

Rural markets offer a great potential for marketing branded goods and

services for two reasons:

→ The large number of consumers. A pointer to this is the larger

volume of sales of certain products in rural areas as compared to the sales of

the same products in urban areas.

→ Largely untapped markets. The penetration levels for many

products are low in rural areas.

► Market Size and Penetration

The estimated size of India’s rural market stated as the percentage of world

population is 12.2 percent. This means 12.2 percent of the world’s consumers

live in rural India. In numbers, this works out to about 120 million households.

In India, the rural households form about 72 percent of the total households.

This is a huge market by world standards.

Rural consumers own only 52 percent of available consumer durables, even

though they form 72 percent of the total households in India. On an average,

rural household own three consumer durables as compared to seven

consumer durables owned by an average urban household (NCAER, 1998).

The gap clearly indicates the untapped potential among the large number of

rural households.

► Increasing Income and Purchasing Power

The agricultural development programs of the government have helped to

increase income in the agricultural sector. These in turn have created greater

purchasing power in rural markets. Households in the lower income group

have reduced while there is a strong growth in the number of households in

upper middle and higher income households.


► Accessibility of Markets

The attraction of a market depends not only on its potential but also on its

accessibility. A market that cannot be exploited is a case of “sour grapes”.

Development of infrastructural facilities and marketing institutions has

increased the accessibility of these markets.

The road network has facilitated a systemized product distribution system to

villages. In the past, companies relied on a ‘trickle down’ of stocks to the

buyer in interior villages that resulted from the active participation of channel

members. In this system, the village retailer made fortnightly purchase visits

to a bigger retailer in the nearest tehsil (sub-division of a district) level town.

The large retailer in the tehsil town procures goods from district headquarters.

The district headquarters were therefore the terminal point of the company

distribution channel.

Today, an increasing number of companies are supplying village markets

directly. Increasing direct contacts to villages helps product promotion and

availability of the product in the village shop. Marketers of durable goods use

direct contacts as a means to promote and attract rural consumers to dealer

points in large feeder villages or towns. Feeder villages or towns are locations

from where a large number of interior villages get their products. Delivery-

cum-promotion vans traversing 8 to 10 villages a day and covering haats or

mandis, is the widely used method of direct control in rural areas.

► Competition in Urban Markets

Intensified competition in urban markets increases costs and reduces market

share. The rural markets are therefore increasingly attractive in relation to

urban markets. The automobile market brings this out clearly. Rajdoot

motorcycles, Bajaj scooters or Ambassador Cars find ready acceptance in

rural markets as compared to urban markets where there is a proliferation of

brands.

► Consumer Behavior Changes

Increased literacy and greater awareness in rural markets create new

demands and discriminating buyers. This is observed more in the younger

generation. In villages today, this segment of buyers consumes a large variety

of products, both durables and non-durables. There is a visible increase in the


consumption and use of a variety of products, which is easily observed. The

younger generations appears to seek variety and are more discriminating

buyers. The young adult in a village likes to sport a fashionable watch. The

preferred brand of toilet soap for the youth is not necessarily Lifebuoy, the

brand preferred by the elders.


CHAPTER V

CHANGING PATTERNS IN RURAL DEMAND - REASONS

To gain from a market where demand is expected to grow from 11% in 1995-

96 to 21% in 2006-07, marketers have to come to terms with the poor

transport and communications that characterizes this market far more quickly

and competitively than before.

► New Employment Opportunities

Government schemes like IRDP (Integrated Rural Development Programme),

JRY (Jawahar Rozgar Yojana) and TRYSEM (Training Rural Youth for Self

Employment) have created new employment opportunities in Rural India. Co-

operative banks and Public sector banks are extending loans to rural people,

thereby creating job opportunities for them. As a result very few rural people

are now flocking to urban centres. This creates more purchasing power for the

people.

► Green Revolution

The vision of Dr. Swami Nathan, the father of the green revolution to achieve

self-sufficiency in food grain production in 1995, gave a major breakthrough in

food grain production by the use of scientific methods in agriculture. At

present, Rural India generates 299 million tones annually.

► Various Government Policies

The government’s stress on self-sufficiency resulted in various schemes like

Operation Flood (White Revolution), Blue Revolution, Yellow Revolution, etc.

resulted in the production of 15 million tones of milk per annum.


► Better credit facilities through banks

With co-operative banks taking the lead in the rural areas, every village has

access to short, medium, long-term loans from these banks. The credit

facilities extended by public sector banks through Kisan Credit Cards help the

farmers to but seeds, fertilizers and every consumer goods on installments.

► Green Card / Credit Card for farmers

The government initiated credit cards for farmers through public sector banks.

Canara bank and Andhra bank were the pioneers in the launch of the Kisan

Credit Card. The farmer had a choice to take short or medium term loans

through these credit cards to buy seeds, fertilizers, etc. This enabled him to

produce more and thereby increase his income.

► Improved exports due to Export Policy

The new Export Policy 2000 paves the way for open market (OGL- Open

General License System) status for agriculture. The World Trade

Organization’s (WTO) Policy for agro-exports has increased exports of Indian

agricultural produce thereby increasing incomes of the rural population.

► Remittances from Indians working abroad

These remittances are a sizeable contribution to growing rural income &

purchasing power.

► Expectation Revolution among Rural Masses

Expectation Revolution brought about a powerful change in the environmental

dynamics.

Awareness Kindled Strengthened Earn Consume

of the their their motivation more more

rural people hopes to work


► Political & Social changes through favourable Government

policies

The Indian Government launched a number of schemes like IRDP (Integrated

Rural Development Programme) and REP (Rural Electrification Programme)

in the 1970’s, which gave a boost to the agrarian economy. This resulted in

changes in people’s habits and social life. REP gave impetus to the

development of consumer durable industry.

► Marketing Efforts

FMCG players like HLL, Marico Industries, Colgate Palmolive, Britannia

Industries, etc. have been gung-ho about rural marketing. MNC’s in consumer

durables like Samsung, LG are designing products targeted at rural

customers. These companies are changing the lifestyles of rural Indians.

► Media

Mass Media has created increased demand for goods and services in rural

areas. Smart marketers are employing the right mix of conventional and non-

conventional media to create increased demand for products. The role cable

television has been noteworthy in bringing about the change in rural people’s

mindset and influencing their lifestyles.


CHAPTER VI

RURAL CUSTOMER PROFILE

The rural customer shows distinctive characteristics, which makes him

different from the urban buyers.

► Education Profile

Nearly 45% of the rural Indians are literate (men 59%, women 31%). The rural

customer has much lesser education than his/her urban counterpart.

Generally, the maximum education that one sees among rural areas is still

primary school or high school level. Though rural literacy programmes have

made significant headway, we are still confronted with a customer who is

illiterate. This comes in the way of the marketer using print media and

handbills to promote the product. Visual displays and phonetics become

important in promoting the product in the rural areas. Demonstration on

product usage and even on how to use it becomes integral to the marketer’s

promotion strategy.

► Low income levels

Though rural incomes have grown manifold in the last one decade, still an

average rural consumer has a much lower income than his or her urban

counterpart. Still a large part of his income goes to provide the basic

necessities, leaving smaller income to be spent on other consumer goods.

This makes the rural consumer more price sensitive than the urban consumer.

Marketers have evolved various strategies to lower the final prices. One such

strategy is designing special products as reflected by Hindustan Levers

strategy of developing Sunlight Detergent Powder and the other in even

reducing the size of the product. Another aspect of this low income is that an

average rural customer buys a single unit of the product and not in bulk.


► Occupations

Typically, in the rural area one finds that the principal occupation is farming,

trading, crafts, and other odd jobs like plumbing, electric works, etc. One also

finds primary health workers and teachers in the rural areas. Since farming,

animal husbandry and poultry farming are the principal occupations we find

that even here we have different types of farmers. The basis for

differentiation is obviously their size and ownership of land. We have their

consumption patterns differ mainly because of their income levels. For

example, a large or a big farmer will have almost everything that an urban

consumer will have. He is an affluent farmer and represents the highest end

of the rural income continuum.

► Reference Groups

Typically in rural area, the reference groups are the primary health workers,

doctors, teachers and the Panchayat members. One may even observe that

the village trader or the grocery shop owner, commonly called the “baniya” or

the “mahajan”, may also be an important influencer in the rural customers

decision-making. This is because the trader extends credit to the farmers.

Today, another person is also considered as a change agent and that is the

rural bank’s officer or manager. A marketer needs to be aware of these

influences that can effect a change in the rural customers consumption

patterns.

► Media Habits

A rural customer is fond of music and folklore. In a state like Maharashtra the

rural theatre called “Tamasha” has held sway with the people. Likewise,

“Nautanki” in which the artists are a part of the audience entertains the rural

Uttar Pradesh. Today, television and radio are important forms of media,

which hold the attention of rural folks, so is the video. Radio Programmes

reach almost 95% of the Indian population, while television programmes is

now as high as 85%.

As we mentioned earlier because of a low education level print media does

not have that much of an impact as the audio and the audiovisual media does.


► Importance of customs

Basic cultural values have not yet faded in rural India. Buying decisions are

still made by the eldest male member in the rural family whereas even

children influence buying decisions in urban areas. Further, buying decisions

are highly influenced by social customs, traditions and beliefs in the rural

markets. Many rural purchases require collective social sanction, unheard off

in urban areas.

The rural attitude towards consumption has been traditionally based on the

values of restrain and self-denial. But the high exposure to T.V advertising in

recent years where brands are working relentlessly to loosen this restraint by

communicating escape/release and self-confidence messages is having its

effect, particularly on the youth. But Caste and family are still paramount in

rural life.

But we should bear in mind that with more and more marketers eyeing for a

piece of the rural cake, the awareness of the rural consumer is on the rise. He

is moving towards branded purchases and is becoming more and more

demanding in his purchase decisions.


CHAPTER VII

The Problem Areas in Rural Marketing

Where the rural market does offer a vast untapped potential, it should also be

recognized that it is not that easy to operate in rural market because of

several attendant problems. Rural marketing is thus a time consuming affair

and requires considerable investments in terms of evolving appropriate

strategies with a view to tackle the problems.

► Underdeveloped People and Underdeveloped Markets

The number of people below poverty line has not decreased in any

appreciable manner. Thus underdeveloped people and consequently

underdeveloped market by and large characterize the rural markets. Vast

majorities of the rural people are tradition bound, fatalistic and believe in old

customs, traditions, habits, taboos and practices.

► Vastness and uneven spread

The number of villages in India is more than 6 lacs. Again, the villages are not

uniform in size. Nearly 50% of the villages have a population of less than 500

persons which account for 20% of the rural population. This type of

distribution of population warrants appropriate strategies to decide the extend

of coverage of rural market.

► Lack of Proper Physical Communication Facilities

Nearly fifty percent of the villages in the country do not have all weather road.

Physical communication of these villages is highly expensive. Even today

most villages in the eastern parts of the country are inaccessible during the

monsoon. Moreover, 3,00,000 villages in the country have no access to

telephones. Local telecom companies are working with the Department of

Telecommunications (DOT) to provide service in rural areas at local costs

which could be a costly affair considering the underdeveloped infrastructure.


► Low Growth Rate

The slowdown in the economy is of serious concern to everyone in

Government, industry and every other sector of the economy. Our GDP

growth target for the Tenth Plan is 7.7%, rising to 8.1% in the subsequent

one. Today we are at a 6% level, which is itself below the current Plan. Even

more worrying is the fact that our growth rate has been trending down for the

last 3 years. The sectoral components of this slowdown are very telling.

Agricultural growth has dropped to 0.9% from an average of 3.9% in the

1980's and 3.3% in the 90's. Industrial growth too has slowed to below 6%

from 6.6% in the last decade. We believe there is an urgent need to lift overall

GDP growth sustainable by addressing a central issue - the slowdown in rural

incomes.

► Low Per Capita Income

Even though about 33-35% of gross domestic product is generated in the

rural areas it is shared by 74% of the population. Hence the per capita

incomes are low compared to the urban areas. High costs in finance is a

stumbling block while higher purchase is unheard of, the small town culture

works against financing of products. The sprawling unorganized market offers

prices that the organized industry finds difficult to match. Many existing

product lines continue to be too expensive or irrelevant.

► Many languages and dialects

The number of languages and dialects vary widely from state to state, region

to region and probably from district to district. Messages have to delivered in

local languages and dialects. Even though the number of recognized

languages is only 16, the dialects are estimated to be around 850.

► Low levels of literacy

Literacy rate is low in rural areas as compared to urban areas. This again

leads to problem of communication. Print medium becomes ineffective and to

an extend irrelevant in rural areas since its reach is poor.


► Different way of thinking

There is a vast difference in the lifestyles of the people. The rural customer

usually has 2 or 3 brands to choose from whereas the urban one has many

more choices. The rural customer has fairly simple thinking as compared to

his urban counterpart. Life in rural areas is still governed by customs and

traditions and people do not easily adopt new practices.

► Transport

Many rural areas are not connected by rail transport. Around 68% of the rural

roads have been poorly surfaced, and many are totally destroyed or severely

damaged by the monsoon and remain unserviceable leaving interior villages

isolated. Though it would be desirable to connect all villages by all-weather

roads, use of bullock carts is inevitable for many years.

► Distribution problem

Rural markets typically signify complex logistical challenges that directly

translate into high distribution cost. Coupled with relatively slower growth of

incremental demand and lack of adequate institutional mechanism for retail

operations, margins are squeezed to the utmost. Infrastructure also poses a

major problem when a marketer thinks of targeting the rural markets.

► Market organisation and staff

The size of the market organisation and staff is very important, to have an

effective control. Comparatively, catering to rural market will involve large

marketing organisation and staff. Most of the manufacturers cannot effort

huge investments in terms of personnel and also keep an effective control on

it.

► Media for Rural Communication

Among the mass media at some point of time in the late 50's and 60's radio

was considered to be a potential medium for communication to the rural

people. Another mass media is television and cinemas it has been observed

that cinema viewing habits in rural areas is very satisfactory were ever

available. Again statistics indicate that the rural areas account for hardly 2000

to 3500 mobile theatres, which is far less when compared to the number of

villages.


Exploring the available media

Promotion media may be classified broadly into 3 categories:

Mass Media Local Media Personalized Media

Radio Haats, Melas, Fairs Direct Communication

Cinema Wall Paintings Dealers

Press Hoardings Sales Persons

TV Leaflets Researchers

Video Vans

Folk Media

Animal Parade

Transit Media

► MASS MEDIA

A medium is called mass media when it reaches 50 million people. A rural

market is difficult to reach. Their exposure to mass media is very less. Further

a universalized communication, which comes through mass media, would

become ineffective when it comes to rural audience since they are

heterogeneous – varying from region to region.

Let us examine the utility of mass media.

→ Radio

Irrespective of the literacy levels of the people, topography and geographical

location of the area of residence, the radio reaches rural people easily. It

continues to be the principal source of information by habit and choice for

many rural people.


→ Cinema

The cinema is the theatres attract good number of people and provide an

opportunity to disseminate product information by way of short one or two reel

advertising films. These films are exhibited just before the start of the movie

and during interval time.

→ Press/Print media

Newspapers, magazines and other publications have both reach and access

problems in rural areas. Very few households subscribe to magazines and

newspapers. Literacy levels are also low. Thus press is not a very good media

for promotion.

→ Television

Ogilvy Rural dismisses the talk of huge TV audiences in rural India. According

to them, media exposure in rural areas is just about 50%. Half are secondary

viewers and many watch TV just for 5minutes per week. TV exposure would

just about touch 100 million people, of which only 30-40 million would really

get impacted.

► LOCAL MEDIA

Though mass media is powerful it does not work as effectively as the local

media.

→ Haats & Melas

It is the countries oldest tradition and holds the key to solving the problems. It

is called the weekly mobile supermarkets of rural India.

Facts & Figures: -

→ Over 47,000 haats and 25,000 melas are held annually.

→ The average daily sale at a Haat is about Rs.2.25 Lakhs

→ Annual sales at melas amount to Rs.3, 500 Crores.

→ Over half the shoppers at haats have shopping lists.

→ More than 10,000 melas draw visitors from all over India.


→ Nearly half the outlets at melas are for manufactured goods.

→ Haats is a better opportunity for promotion after brand building has

been done at Mela.

→ Melas are organized after harvest season, so the villager has enough

money, which he will be ready to spend.

→ Demonstration at Haat is essential to convert customers at haats since

their attitude is far more utilitarian than that of visitors to a fair.

→ Wall Paintings

Wall Paintings are an effective and economical medium for advertising in rural

areas. They are silent unlike traditional theatre .A speech or film comes to an

end, but wall painting stays as long as the weather allows it to.

Retailer normally welcomes paintings of their shops, walls, and name boards.

Since it makes the shop look cleaner and better. To get one's wall painted

with the product messages is seemed as a status symbol.

The message should be simple, direct and clear. It should be peaked up

during the festival and post harvest season. To derive maximum mileage their

usage needs to be planned meticulously.

→ Folk Theatre

Folk theatres are mainly short and rhythmic in form. The simple tunes help in

informing and educating the people in informal and interesting manner. It has

been used as an effective medium for social protest against injustice,

exploitation and oppression.


→ Puppetry

Puppetry is the indigenous theatre of India. From time immortal it has been

the most popular form and well-appreciated form of entertainment available to

the village people. It is an inexpensive activity. In rural India puppetry is a

source of livelihood, avenue for entertainment and creative expression, which

is ritually sacred and meaningful as a means of social communication and

vehicle of social transformation.

Indian Institute of mass communication, New Delhi made a study of

comparative impact of puppetry and documentary films, in two villages near

Delhi. People in both the villages responded more favorably to the puppet

shows then the films.

→ Video Van

The pioneer of the medium in India was Sadhna Bharadwaj, Director, and

Video on Wheels. It started commercial operations in 1989. This is a vehicle

that goes to selected villages and towns on weekly markets days to

communicate the benefits of the product. Its repertoire includes audio, video,

film playback equipment, etc.

→ Animal Parade

Companies can resort to parading of animals with the banners highlighting the

product messages. For example, in the Pushkar mela held annually in

Rajasthan, the camels participating in the camel race are painted with colours

or have banners displayed on them like blue for Rin, green for Wheel

detergent, etc.

→ Mobile Displays

Dabur used this novel way of communication. It selected a cluster of 300

villages in Banda district and sent in 3 bowling alleys. The bowling pins

represented the various germs that Chawanprash protects against.


→ Hoardings

They are of 2 types – stationary and mobile. Large sized hoardings placed at

strategic locations have a huge impact.

► PERSONALIZED MEDIA

→ Direct Contact

Direct contact is a face-to-face relationship with people individually and with

groups such as the Panchayats and other village groups. Such contact helps

in arousing the villager's interest in their own problem and motivating them

towards self-development.

HLL is going in for direct marketing in an attempt to attract first-time users.

HLL has launched a door-to-door campaign selling hampers of its detergent,

toothpaste and talcum powder for Rs 15.

Companies can also establish contact with their customers in several other

ways using conventional channels like dealers, salesperson and researchers

and non-conventional channels like telephone and Internet.


CHAPTER VIII

INTERESTING OBSERVATIONS

India's rural market is characterized by its vast spread –

► Over 6,38,365 villages with a total population exceeding 733

million.

→ 145,098 villages have population less than 200

→ 1,70,475 have population between 200 and 500

→ 3,50,000 villages have population between 500 and 2000.

→ 60,000 villages have population between 2000 and 5000.

► A total of 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 total of

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 59% 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, Tamil

Nadu and Pondicherry there are 7 or more shops per village. Data on rural

consumer buying behaviour indicates that the rural retailer influences 35% of

purchase occasions.


► In India, there are 50,000 Haats catering to villages having

population over 2000 people. Haats operate once a week or more often in a

total of 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.85% of rural

population prefer buying at Haats.

► At an all India level, pucca roads connect 209,360 villages or

33% of total villages. This proportion is maximum at 57% in south zone and

minimum at 20% in east zone. Pucca roads connect almost all villages in

Punjab, Kerala and Pondicherry.

► 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.

► 5% of the total villages have a bank within the village. As on

31st 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 a total of 79,448 doctors. This implies

that there are 12.76 doctors per hundred thousand of rural population.

→ The distribution of number of doctors over the zones is

seen to be 30% each in north, east and west and only 10% in south.

► There are a total of 15,039 hospitals in Rural India. This works

out to 2.4 hospitals per 100 villages.

► In India there are 1,34,582 PACS (Primary Agricultural Credit

Co-operative Society).


ITC- e-CHOUPAL


THE CONCEPT

WHAT IS A CHOUPAL?

In Hindi choupal means a village place where people gather, gossip,

smoke hookah, discuss or interact with each other. There may be a

Sanchalak or leader who heads the proceedings.

WHAT IS AN e–CHOUPAL?

When a choupal is equipped with a computer & internet

connectivity it is called an e-choupal. Since power is a cause for concern in

rural areas it involves backing the computer with solar power.

ITC’S e-CHOUPAL: -

The project e-Choupal is ITC’s unique click & mortar initiative. e-

Choupal is an ITC platform for carrying out trade at a number of locations.

The e-Choupal redefines choupal, which as mentioned earlier, is the Hindi

word for village square where elders meet to discuss matters of

importance. The all-important letter in the word is "e". It stands for a

computer with an Internet connection for farmers to gather around and

interact not just among themselves but with people anywhere in the


country and even beyond.

It begins with ITC installing a computer with solar-charged

batteries for power and a VSAT (Very Small Aperture Terminal)

Internet connection in selected villages in the house of one of their key

links called the Sanchalak. The computer's functioning is freed from the

notorious power and telecom facilities at the village level. e-Choupal

delivers real-time information and customized knowledge to improve the

farmer's decision-making ability, thereby better aligning farm output to

market demands; securing better quality, productivity and improved price

discovery.ITC accumulates information regarding:

Weather,

Modern farming practices

And market prices etc.

From sources like the Meteorological Department; Agro-universities,

mandis (regional markets) etc., and upload all information on to the

e-Choupal web site.

This helps the farmers to gather Information regarding weather and

scientific farming helps farmers to select the right crop and improve the

productivity of their farms. Availability of market information helps

farmers to become market oriented.


They know what price ITC is quoting and the price prevalent in the

local market, thereby helping better price realization for farmers. If the

farmer decides to sell to ITC, the Sanchalak works as the aggregator of the

small farmer’s produce to sell them to ITC. The Sanchalak also aggregates

the farmers’ input purchase orders for various items like seeds, pesticides

and places them directly with the suppliers through the internet and thus

facilitates the supply of high quality farm inputs as well as the purchase of

farm produce at the farmers’ doorstep with the help of intermediaries.

All information is customized according to the local farmer’s

requirements and provided in the local language through computer set up

by ITC in the Sanchalak’s house.

Thus the e-choupal model helps aggregate demand in the nature of

a virtual producers' co-operative, in the process facilitating access to

higher quality farm inputs at lower costs for the farmer. The e-Choupal

initiative also creates a direct marketing channel, eliminating wasteful

intermediation and multiple handling, thus reducing transaction costs and

making logistics efficient. The e-Choupal project is already benefiting over

3.5 million farmers.

e-CHOUPAL AT A GLANCE

Commencement of initiative: 2000

• States covered: 9

• Villages covered: 36,000

• e-Choupal installations: 6000

• Empowered e-farmers: 3.5 million


ITC OPERATES THE e-CHOUPAL THROUGH: -

‘THE SANYOJAK’

The Sanyojak is the main link between ITC and the Sanchalaks.

Each Sanyojak acts as a co-coordinator for an e-choupal hub which

consists of around 50 odd e-choupals. He is either a former ‘Mandi’ dealer

or a local ITC product dealer. The Sanyojak earns a certain commission on

every e-choupal deal.

‘THE SANCHALAK’

The Sanchalak is a lead farmer, who acts as the interface between

the computer and the acts as the interface between the computer and the

farmer. He operates the computer on behalf of ITC, but exclusively for

farmers. The Sanchalak also known as the ‘Pratinidhi’ is the most

important link between the Sanyojak and the farmers. Sanchalaks are

required to take a public oath of serving their community without

discrimination and sign a social contract to spend a part of the income

they earn from e-choupal on community welfare.

As stated earlier, all the information to be uploaded on the e-choupal site

is customized according to the local farmer’s requirements and provided

in the local language through the computer set up by ITC in the

Sanchalak’s house. The Sanchalak accesses this information and

facilitates its dissemination to the farmers.

These Sanchalaks are considered to be the most important link

in the whole chain as it is the sanchalak who interacts with the farmers.

Within 2-3 years of implementing e-choupal, these Sanchalaks have


earned a certain status. They have become agents of change as the

farmers now consult the Sanchalak for all critical decisions.

ITC provides the farmer

appropriate documentation which records

the quantity and quality of his

output. Payment is instant.

ITC's mobile vans take the message of e-Choupal to new

villages. Thereafter, virtual helpdesks enable the farmer

to find solutions to his problems through online

interactions. ITC has set up VSAT links to overcome connectivity problems.

MARKETING STRATEGIES

As stated earlier, to a large extent, it is the Sanchalak’s

influence on the farmers that can turn the sales in ITC’s favor or the

opposite way. Hence one of the most important things ITC needed to

consider before entering the market was the strategy they needed to use

to promote their project.

ITC realized the importance of the role the Sanchalak can play in

helping their project become successful.

This is clear from their whole idea of appointing one of the farmers/

villagers as the Sanchalak. They knew very well that if they appointed


some outsider as the Sanchalak, the farmers may have not taken to the

project in the same way due to the presence of an outsider. But,

appointing someone from the village would only re-emphasize the fact

that e-choupal was here only by the farmers and also only, for the

farmers. Also, even the smallest of farmers would be comfortable in

speaking to the Sanchalak rather than some outsider.

Once, ITC developed this strategy to assure the farmers, they had

to develop a strategy to ensure that the Sanchalaks would convince the

farmers to sell their produce to ITC and also buy ITC products. Hence, for

every quintal of produce sold to ITC through an e-choupal, the Sanchalak,

get Rs. 5. Also, in 2003-2004; ITC had distributed Rs. 3 crore as

commission.

Besides this, every Sanchalak also gets a commission for every

product bought by the farmers from ITC. Also, the farmers who sell their

produce to ITC are required to follow a certain, minimum quality standard.

When the quality of their produce exceeds this required minimum

specification, then, they are given a certain discount on any product they

would like to buy from the ITC Company.

Hence the ITC Company has implemented various steps which are

mutually beneficial to both, the company and the farmers.

But ultimately, it is upto the Sanchalak who can maximize his profits

as well as the farmer’s. But while doing this he has to retain the trust of

his villagers as he becomes responsible for all the transactions which take

place with ITC.

Thus ITC has developed a very good system, where they provide

the farmers with every possible facility and service, but at the same time;

the farmer is free to sell his produce to whomever he wants.

CHAUPAL SAGAR


Chaupal Sagar is one of the first organized retail forays into the

hinterland. One of the first Chaupal Sagars was soft-launched in a small

village in Madhya Pradesh, 40 km. from Bhopal. The company had

promised to open 1,000 rural malls in India and this is one of the first. It is

located just next to the ITC warehouse where the farmers bring in their

produce to sell to ITC. The whole idea behind this is that the farmer will be

tempted to go visit the Sagar Chaupal once he has money in his hands

and also, his money will be spent in a wise manner.

The Chaupal Sagar has opted for self service, stocking its

merchandise on shelves lining the neat aisles, it stocks a breadth of

products no supermarket can. It offers almost everything - from

toothpastes to televisions, hair oils to motorcycles, mixer-grinders to water

pumps, shirts to fertilizers; mostly all of them being national products like

Marico, LG, Philips, torches from Eveready, shirts from ITC's apparel

business, bikes from TVS, and tractors from Eicher etc and many other

companies ITC has tied up with. It is a very sharply thought-out rural store.

Next to Chaupal Sagar, ITC is setting


up a bank, a cafeteria and a learning room to offer more services to farmers

One of the main reasons why ITC started on this foray is with the

hope of capturing the rural folks' out-of-village shopping. The warehouse is

one part of its strategy, obviously. But the farmers will come here only

after every harvest. To ensure that they keep coming to Chaupal Sagar

even at other times, the company is offering a slew of other goodies.

Another building is coming up next to the main warehouse. When

completed, it will house a bank, a cafeteria, apart from an insurance office

and a learning centre. ITC has tied up with agro-institutes to offer farmer

training programmes. Then, plots of land have been earmarked to display

large agricultural machinery like threshers. Other parcels of land have

been earmarked for pesticide and fertilizer companies for demonstrating

their products. A petrol pump is coming up as well.

ITC is tentatively planning to open another 4-6 malls this year and

not more than that, as it is waiting to see how well the malls do.

If these malls are picked up well by the rural Indians, not only will

ITC prosper, but even the rural areas will prosper. Already, with the advent

of e-Choupal, many of the rural areas are prospering; thus increasing the

buying capacity, which will thus encourage new entrepreneurs to focus on

rural India as well.

AGENDA FOR THE NEXT DECADE


• States to be covered: 15

• Villages to be covered: 1, 00,000

• e-Choupals to be installed: 20,000

• Farmers to be e-empowered: 10 million


‘SHAKTI-EMPOWERING WOMEN IN RURAL INDIA’

The term Shakti refers to empowering women in rural India.

The objective of Project Shakti is to create income-generating

capabilities for underprivileged rural women, by providing a

sustainable micro enterprise opportunity, and to improve rural living

standards through health and hygiene awareness.

The Company behind the creation and success

of Shakti: -

HLL i.e. Hindustan Lever Limited; one of India’s largest

companies is the brain behind ‘project Shakti.’

Hindustan Lever Limited (HLL) is India's largest fast moving consumer

goods company with leadership in Home & Personal Care Products and

Foods & Beverages. HLL's brands, spread across 20 distinct consumer

categories, touch the lives of two out of three Indians.

If Hindustan Lever straddles the Indian corporate world, it is because of

being single-minded in identifying itself with Indian aspirations and needs

in every walk of life.

HLL's INITIATIVE IN RURAL DEVELOPEMENT:


Over the decades, while HLL has benefited from the developments

in the country, it has contributed equally to these developments .The

company’s main contributions include

developing and using relevant

technologies, stimulating

industrialization, boosting exports,

adding value to agriculture and

generating productive employment

and income opportunities.

THE IDEA BEHIND PROJECT SHAKTI

Despite being the largest consumer product marketer, HLL's much-

admired distribution machinery was directly servicing less than a fifth of

India's villages. This was the fallout of uneconomical last-mile logistics.

The business generated by retailers in these half a million villages was

less than that incurred by the company to service them. That meant Lever

could not reach out to nearly 87 per cent of India's villages, which have a

population of 2,000 or less. Retailers in these villages relied on the

wholesale channel - easily one of the most cost-effective mass distribution

systems. So products did get through, but only fast-moving brands like

Life-buoy. Without a direct distribution system in place, Lever knew that

only a handful of its brands would reach rural shop shelves.

CATALYSING PROSPERITY IN INDIAN VILLAGES

Under the project, HLL offers a range of mass-market

products to the SHGs, which are relevant to rural customers. HLL is


investing significantly in resources who work with the women on

the field and provide them with on-the-job training and support.

This is a key factor in ensuring the stabilization of their fledgling

businesses.

HLL imparts the necessary training to these groups on the basics of

enterprise management, which the women need to manage their

enterprises. For the SHG women, this translates into a much-

needed, sustainable income contributing towards better living and

prosperity. Armed with micro-credit, women from SHGs become

direct-to-home distributors in rural markets.

RISK-FREE MICRO ENTERPRISE THAT YIELDS

HIGH RETURNS

A typical Shakti entrepreneur conducts a steady business

which gives her an income in excess of Rs.1,000 per month on a

sustainable basis. As most of these women live below the poverty

line, and hail from extremely small villages (with populations of less

than 2000), this earning is very significant, and almost twice the

amount of their previous household income.

For most of these families, Project Shakti is enabling families to live

with dignity, with real freedom from want.

In addition to money, there is a marked change in the woman's

status within the household, with a much greater say in decision-


making. This results in better health and hygiene, education of the

children, especially the girl child, and an overall betterment in

living standards.

The most powerful aspect about this model is that it creates a win-

win partnership between HLL and the consumers, some of whom will

depend on the organization for their livelihood, and builds a self-

sustaining cycle of growth for all.

HOW IT ALL STARTED

HLL has operated Project Shakti through these self-help groups; AP

was chosen for the pilot project as its has the most number and better

established SHGs - there are about 4.36 lakh SHGs in AP covering nearly

58.29 lakh rural women. C.S. Ramalakshmi, Commissioner, Women

Empowerment & Self employment, Govt of AP, points out that AP alone

has about half of the SHGs organised in the country.

Five years ago, Sujathamma had joined a self-help group (SHG),

formed by the district rural

development authority. The likes of

Sujathamma, among the first Shakti

entrepreneurs, have been chosen

from these SHGs. She, HLL officials

explain, is a shining example of the

success of the model - Sujathamma,

on an initial loan of Rs 10,000 from

her SHG to start the enterprise, has a turnover of Rs 10,000-Rs 25,000 a

month earns a profit of Rs 750-Rs 2,000 a month, an average return of 8

per cent. Besides, she now also sells staples, sugar, edible oil and a

variety of other household items.

OBJECTIVES OF HLL SHAKTI:

To create income-generating capability among underprivileged rural

women by providing a sustainable micro-enterprise opportunity to

them.


To improve rural living standards through health and hygiene

education.

Avail micro-credit from government/banks/loans for Self Help

Groups; (SHG) and a stable “income-generation activity” offered by

HLL will stimulate wealth creation in the village.

Women from SHGs have to operate like rural direct to home sales

distributors for HLL products.

SOME OF THE PRODUCTS SOLD THROUGH

PROJECT SHAKTI

HLL has developed low-cost value-for-money branded products, like

Wheel. The company has also taken initiatives to create markets even for

apparently premium products, by offering them in pack sizes, like sachets,

whose unit prices are within the reach of rural consumers. For example,

initiated in the 1980s, sachets (Rs.2, Re.1, or 50 paise) today constitute

about 55% of Hindustan Lever's shampoo sales.

HLL has responded to the trend with low unit price packs of even

other products –

Lux at Rs.5,

Lifebuoy at Rs.2,

Surf Excel sachet at Rs.1.50,

Pond's Talc at Rs.5,

Pepsodent toothpaste at Rs. 5,

Fair & Lovely Skin Cream at Rs.5,

HOW DOES IT WORKS

Typically, a woman from a SHG selected as a Shakti entrepreneur

receives stocks at her doorstep from the HLL rural distributor and sells

direct to consumers as well as to retailers in the village.

Each Shakti entrepreneur services 6-10 villages in the population

strata of 1,000-2,000 people

Typically, a Shakti entrepreneur sets off with 4-5 chief brands from

the HLL portfolio - Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic


Plus. These are the core brands; they layer it with whatever else is in

demand like talcum powder or Vaseline during winters. These brands

apart, other brands which find favour with a rural audience are: Lux,

Ponds, Nihar and 3 Roses tea. Typically, unit packs are small. All the

brands are national and HLL is cool to the idea of creating a rural-specific

brand as it will only scatter the advertising media effort for the brands. To

get started the Shakti woman borrows from her SHG and the company

itself chooses only one person. With training and hand-holding by the

company for the first three months, she begins her door-to-door journey

selling her wares.

A typical Shakti entrepreneur conducts business of around

Rs.10,000 – Rs. 15,000 per month, which gives her an income of about Rs

700 - Rs.1000 per month on a sustainable basis. As most of these women

are from below the poverty line, and live in extremely small villages (less

than 2000 population), this earning is very significant, and is almost

double of their past household income.

The impact is slow and HLL too is not expecting any quick returns

on this project. HLL contributes 20 per cent of the total FMCG

business in the country. So, clearly, the onus is on HLL to grow the

market. Returns may not happen in the next five years, but a lot of

consumer understanding and insights comes from an exercise like Project

Shakti, which in turn can lead to product innovation. The full benefit of

Project Shakti will be realized after some years.

Hindustan Lever will further strengthen its rural distribution through

mutually beneficial alliances with rural Self Help Groups (SHGs). Over the

last five years, financial institutions, NGOs and government organisations

are working closely to establish SHGs, whose objective is to alleviate

poverty through sustainable income-generating activities. Since 2001,

Hindustan Lever is implementing Project Shakti, whereby SHGs are being

offered the option of distributing relevant products of the company as a

sustainable income-generating activity. The model hinges on a powerful

win-win relationship; the SHG engages in an activity which brings

sustainable income, while Hindustan Lever gets an interface to interact

and transact with the rural consumer. HLL's vision for Project Shakti is to

scale it up across the country by 2005, creating about 25000 Shakti


entrepreneurs, covering 100,000 villages, and touching the lives of 100

million rural consumers. Begun with 50 groups in Nalgonda district of

Andhra Pradesh, with the support of local authorities, the project has been

extended, as of now, to about 50,000 villages in 12 states. A typical Shakti

entrepreneur conducts business of around Rs.10,000 - Rs 15,000 per

month, which gives her an income of about Rs 700 - Rs.1000 per month on

a sustainable basis. As most of these women are from below the poverty

line, and live in extremely small villages (less than 2000 population), this

earning is very significant, and is almost double of their past household

income. The full benefit of Project Shakti will be realised after some years.

I-SHAKTI

A key factor that has inhibited the development of rural

India has been lack of access to critical information and services.


Given India’s large geography and weak infrastructure, it is often

difficult to reach out to the rural areas. In order to impact both

livelihood opportunities and living standards of rural communities ‘I-

Shakti’ - an IT-based rural information service has been developed to

provide information and services to meet rural needs in agriculture,

education, vocational training, health and hygiene.

The premise of the I-Shakti model is to provide need based

demand driven information and services across a large variety of

sectors that impact the daily livelihood opportunities and living

standards of the village community.

The I-Shakti kiosk will be operated by the Shakti

Entrepreneur, which further strengthens the relationship we have

already cultivated and builds new capacity. HLL expects that the

information provided would improve the productivity of the rural

community and unlock economic and social progress.

‘I-Shakti’ kiosks have been set up in 8 villages in Andhra

Pradesh, and have been functional since August 2003. The kiosks

have received an overwhelming response from the local populace.

During the launch of these kiosks, important village members like

the Sarpanch, schoolteacher and doctor are invited to help reinforce

relationships with the villagers.

The kiosks remain open from 9 a.m. to 7 p.m., six days of the

week. To enable access to the services, users have to register

themselves first and obtain the unique registration number. An id


card with the registration number is provided for use every time

they visit the kiosk.

The kiosks offer information chiefly in the form of audio-

visuals in the following areas:

Health & Hygiene

E-Governance

Education

Agriculture

Employment

Legal services

Veterinary services

The information provided in the above areas is culled from the

best available resources, taking additional care to ensure that

information, especially in areas like agriculture, is locally relevant

and includes inputs from home-grown experts. These experts are

also available on request, to help provide solutions to problems

raised by users through a query mailing system.

THE VISION

'I-Shakti’ has also tied up with Azim Premji Foundation to

deliver innovative educational modules to students of classes VIII-XII

through the kiosk. Local schoolteachers have also been involved in

the process. A similar partnership is in place with Tata Adult Literacy

for adult education.

Through I-Shakti kiosks, ICICI Bank and HLL will work together to

provide a new delivery channel for rural India, which offers a

multitude of products and services to the rural customer. In the first

phase, Life and General Insurance will be offered through this

channel. Other financial services including Investment products

(Equity, Mutual Funds, Bonds) ICICI Bank Pure Gold (gold coins),


Personal Credit, Rural Savings Accounts and Remittances will be

introduced subsequently.

FUTURE OF PROJECT SHAKTI

The I-Shakti vision is to scale up operations to 1500 kiosks by 2005,

delivering information services to over 10 million rural people across 7500

villages. I-Shakti’s strength’s lies in the unparalleled reach it offers in

reaching out to the rural populace. The need for such services across most

of India’s villages is beyond doubt and the benefits immense.

One of the plans is to allow companies, which do not compete with

HLL to get into the Shakti Network to sell their products. There have been

talks on with various companies selling batteries, mopeds and insurance

companies for LIC policies. The most powerful aspect of about this model

is that it creates a win-win situation for HLL and its consumers, some of

whom will also draw on the organization for their livelihood, and it builds a

self sustaining virtuous cycle of growth for all.


Lifebuoy

INTRODUCTION

Lifebuoy Swasthya Chetna is an HLL initiative in rural health and

hygiene, launched in 2002, which has covered more than 17,000 villages

across the country. Lifebuoy Swasthya Chetna was conceived by HLL as a

hygiene practice to combat preventable diseases with a high mortality

rate in rural areas like diarrhea in rural India.

Diarrhoea causes over three million deaths a year worldwide,

mostly among children under five years old. To put that into perspective,

that is the equivalent of one child dying every ten seconds.

Unilever is one of the world’s major soap manufacturers, with

brands such as Lifebuoy, Lux and Dove. The company is no stranger to the

life protecting potential hand washing with soap can have on poor

communities. Soap was the product on which Lever Brothers, one of

Unilever’s two founding companies, was built. The company found that the

widespread availability of good quality, low-cost, branded soap can do

much to improve levels of hygiene in rural India.

While Unilever has supported hygiene education programmes in

India for many years, in 2002 the Lifebuoy brand team decided that, to

have any real impact on reducing diarrhea disease, something bigger was

needed. Much bigger. It was decided to create a new programme with the

bold objective of educating 200 million Indians – 20 per cent of the


population – to wash their hands with soap after defecating and to achieve

this goal within five years. The campaign, called Swasthya Chetna,

meaning ‘Health Awakening’, is the single largest rural health and hygiene

education programme ever undertaken in India.

INDUSTRY REVIEW

Lifebuoy has a sizeable share of the Indian soap market; and so, in

order to conquer the entire Indian market, the company could simply

focus its attention on persuading the millions of Indians who currently use

soap made by its competitors to switch to Lifebuoy. For Unilever to build

its business in India over the long term, though, it must attract new

consumers, including the estimated 70 million people who never use soap.

SWASTHYA CHETNA (‘HEALTH AWAKENING’)

“Swasthya Chetna is not about philanthropy. It’s a marketing

programme with social benefits”, explains Hindustan Lever Lifebuoy Brand

Manager Harpreet- Singh Tibb.

The Swasthya Chetna programme started in 2002 in the eight

Indian states where deaths from diarrhea diseases are highest and soap

sales are lowest. In its first year 9,000 villages were visited by 150 teams

of outreach workers speaking seven dialects and with leaflets and posters

printed in four languages. In 2003, another 9,000 villages were added,

including Gangijoodi, and in 2004 the emphasis was on introducing new

phases to these 18,000 villages. By the end of 2004 the campaign had

reached 70 million people, including 20 million children at a cost to

Hindustan Lever of 22.25 million.

While Hindustan Lever has committed to funding Swasthya Chetna

for five years at a cost of 24.5 million, the company has already started to

see a return on its investment. In 2003-4 sales of Lifebuoy grew by 20%,


with particularly strong sales in the eight states where the programme

operates.

MARKETING MIX

PRODUCT

As stated earlier, Diarrhea causes over three million deaths a

year worldwide, mostly among children under five years old. In India this is

important, because diarrhea, caused by invisible germs, is the second

largest cause of death among children below the age of 5. The

Swasthya Chetna project will help reduce incidence of such diseases, by

raising awareness of preventive hygienic practices.

Key facts: -

Today Lifebuoy is mainly sold in Asia and parts of Africa. It is market

leader in every Asian market where it is sold.

Lifebuoy soap has been proven in laboratories to provide 100% more

effective germ protection than ordinary soaps.

To date, 70 million people in rural India alone have experienced the

pioneering, Lifebuoy sponsored Health Education programme – the single

largest private hygiene education programme in the world.

Nearly half of the Lifebuoy brand's consumption is in rural Asia, where

most of the population lives on less than US$1 per day.


DISTRIBUTION

Hindustan Lever's distribution network is recognized as one of its

key strengths. Its focus is not only to enable easy access to their brands,

but also to touch consumers with a three-way convergence - of product

availability, brand communication, and higher levels of brand

experience.

HLL's products, manufactured across the country, are distributed

through a network of about 7,000 redistribution stockists covering about

one million retail outlets. The distribution network covers the rural

population as well.

HLL has also revamped its sales organization in the rural markets to

fully meet the emerging needs and increased purchasing power of the

rural population. The company has brought all markets with populations of

below 50,000 under one rural sales organization. The team comprises an

exclusive sales force and exclusive redistribution stockists, under the

charge of dedicated managers. The team focuses on building superior

availability, while enabling brand building in the deepest interiors. HLL's

distribution network in rural India already directly covers about 50,000

villages, reaching about 250 million consumers, through about 6000 sub-

stockists.

Generating awareness pays dividends only when steps are taken to

ensure constant availability of products. In rural India particularly,

availability determines volumes and market share, because the consumer

usually purchases what is available at the outlet, influenced very largely

by the retailer.


Therefore, over the decades, Hindustan Lever has progressively

strengthened its distribution reach in rural India, which today has about

33 lakh outlets. Direct rural distribution in Hindustan Lever began with

the coverage of villages adjacent to small towns. The company's

stockists in these towns were made to use their infrastructure to distribute

products to outlets in these villages. But this distribution mode could only

be extended to villages connected with motorable roads, and it could

cover about 25% of the rural population by 1995.

Therefore in 1998, Hindustan Lever launched Project Streamline to

further extend its distribution reach. Under this initiative, the company

identifies sub-stockists in a large village, connected by motorable road

to a small town. This sub-stockist in turn distributes the company's

products to outlets in adjacent smaller villages using transportation

suitable to interconnecting roads, like cycles, scooters or the age-old

bullock cart. Hindustan Lever is thus trying to circumvent the barrier of

motorable roads. As a result, the distribution network, as of now, directly

covers about 50,000 villages, reaching about 250 million consumers.

The company simultaneously uses the wholesale channel, suitably

incentivising them to distribute company products.

HLL has in the recent past established a common distribution

system in rural areas for all its products. Given the number of brands and

their packs the rural retailer usually requires, one HLL representative can

take all the products from the company portfolio that he needs. This

common distribution system is now fully operational, under one Regional

Sales Manager exclusively dedicated to rural markets of each region of the

country.

PROMOTION

To ensure that the Swasthya Chetna initiative has a sustainable

impact, the Lifebuoy team worked with advisers to develop a multistage

programme, designed to involve and educate whole rural communities.

After seeking permission from village elders, the Swasthya

Chetna teams, consisting of a health development officer and an

assistant, visit village schools to teach children about germs and the

importance of hand washing with soap. To drive the message home,


children are invited to take part in a ‘glow germ’ demonstration. This

involves applying a white powder to the palms of hands, then washing

with water only. Hands are then held under an ultra-violet light and the

powder glows where dirt remains, showing that hand washing without

soap is not enough. The children then repeat the process, this time using

soap, only to discover the UV light shows no trace of the powder – a

simple but highly effective demonstration. Some weeks later the school

puts on a Swasthya Diwas (‘Day’) show for parents, village elders and

the community,

acting out sketches and songs that extol the virtues of hand washing with

soap. In the third phase, the Swasthya Chetna team visits every house

in the village, inviting mothers of young children to attend a health

education session at which the hand washing message is reinforced and

local health workers give children a height and weight check-up.

The next phase involves recruiting schoolchildren, parents and

other villagers as volunteers to start up health clubs that, in turn,

organize events such as community bathing at the pond villagers use for

washing. The whole process, from initial contact to self-managed health

club, takes two to three years. While this represents a significant time

investment, it is felt this is essential to ensure the hand washing habit

becomes part of everyday life.

PRICING: -


To help people on low incomes afford to buy soap, an 18 gram bar

of Lifebuoy soap has been introduced, enough for one person to wash

their hands once a day for 10 weeks. This sells for two rupees,

equivalent to the price of four cups of tea or enough wheat for a meal

for one person. Once the Swasthya Chetna program is implemented and

people become aware, they are ready to spend this price on a soap of a

Lifebuoy. Hence the pricing strategies of Lifebuoy were effectively

designed in accordance with its promotional campaign.

FUTURE OF LIFEBUOY SWASTHYA CHETNA: -

The vision of this on-going project is to make a billion Indians feel

safe and secure by focusing on their health and hygiene needs. It is too

soon to say what the impact has been on community health or the

programme’s long-term sustainability, but the campaign has prompted a

lot of media interest in India and discussions are taking place with the

Indian government at national level about extending the programme to

other states and beyond Lifebuoy’s initial five-year commitment.

Started in 2002, the programme has as of now covered about

15000 villages in 8 states - Uttar Pradesh, Bihar, Jharkhand, West

Bengal, Orissa, Madhya Pradesh, Chattisgarh and Maharashtra; it has

already touched about 70 million people, imparting hygiene education to

over 25 million children.


The Sapat Group of companies founded in 1897, consists of

diversified businesses in tea. The various Indian manufacturing units are

located in and around Nashik, with its marketing office and IT facilities

located at Mumbai. Sapat has been one of the very first companyies to

launch the rural marketing van scheme. It was also the first to introduce a

low unit pack (LUP) range as well as the flavored tea range in India. With

innovation strategies over the last decade the company has grown five

times touching a turnover of almost Rs100cr., making it the largest packet

tea company in the Rs500cr tea market of Maharashtra. Currently, Sapat

has over 250 distributors in Maharashtra and plans to expand to other tea

drinking states.

When Parivar tea was being developed, the Maharashtra tea market

was mainly dust tea and leaf tea. (After tea leaves are picked, they

are dried and fermented to make granules. The bigger granules

are packed as leaf tea while smaller granules are passed off as

dust tea). Say around 1800tons of dust and similar volume of leaf. Also,

there were many competitors who had products in both these categories.

When the Sapat Company did a price sensitivity analysis, they found that

the dust tea users were willing to pay lot more for getting a leaf tea if it

was strong and also, the products available as leaf were not strong. So

Parivar Tea was created.

TEA INDUSTRY


The overall tea market in India consists of premium tea which are

the top end which are mostly in tea bags etc. Then there are the popular

tea at two levels, one is the higher popular that is Society, Taj Mahal and

then you have Red Label, Double Diamond or Sapat Parivar. Below that is

the economy segment where there are a number of brands, which are like

Goodricke and a whole lot of regional / local players in that market.

Whereas the dust tea market, has a premium dust and a low dust

segment.

MARKETING MIX

PRODUCT

The Sapat Company launched its new brand of leaf tea, Parivar, in

1999-2000 The Sapat Parivar Family Blend is a unique 'marriage' of large

and small grain CTC teas for exceptional flavor and strength.

Its fast-moving brand, Parivar, has helped the company shoot up

the rankings, making it one of the fastest-growing top 10 tea companies in

India in 2004. While the industry grew by 1% in volume in 2004, Sapat

grew by 41%.

DISTRIBUTION

One of the most difficult tasks for any company working in the rural

areas is the distribution. The Sapat Company knew that the villagers

wouldn’t take likely to a company salesman and so the company made a

research and found that each village had a population of youth with

spare time on their hands. Sapat recruited these young men, all of


whom met one simple precondition -- they had to pass their twelfth

grade and possess decent communication skills. The youth called CAs

(communication agents) played the role of brand ambassadors in their

villages. The company used its brand name, Parivar, which means family,

to good effect. The CAs visited every house and welcomed residents to be

a part of the Parivar. To supervise the efforts of its CA network, the

company established a team of auditors who verified the work of the CAs.

These auditors were village elders.

PROMOTION

The company knew that television gives little reach in the rural

regions. Products advertised on outdoor hoardings are perceived as costly

in the rural areas.

So Sapat created Parivar-branded nameplates on which the CAs

wrote the household's name. Families who agreed to fix this nameplate on

their doors were given a free sample pack of tea. Soon, most families in a

village wanted to have their names written on Parivar's metal nameplate.

The company contacted close to 500,000 households across 1,600 villages

in Maharashtra through this programme. Sapat executives claim that this

initiative earned them some brownie points. Villagers began to look at

Parivar as a bonding factor, as the entire village started showing off

uniform nameplates.

Having put its name on the doors, the company decided to get into

the mind of rural consumers. This was best done through village schools,

given that teachers and principals are largely appreciated by the

community. The CAs contacted school principals and handed them

quiz sheets that were distributed to students. The questions covered


subjects ranging from politics, mathematics and tea habits. Students were

given erasers and sample packets of tea when they returned these

questionnaires. At the same time, the company vans visited villages

distributing discount coupons.

Sapat also enlisted the support of its stockists and retailers with

extra incentives. In all household deliveries, retailers were asked to deliver

only Parivar tea packs.

With Pariver Tea, the company hit on an insight: that the Indian

tea drinker loved to slurp when drinking tea.” So the company

produced advertising using the ‘Surr ke piyo’ line, which gave

consumers the social sanction to enjoy their tea while slurping it.

The company, in a bid to tackle the problem of consumer resistance

(which is often seen in the rural areas) offered a money-back guarantee

to dissatisfied customers. It backed this offer with a complimentary

packet of Britannia's Tiger biscuits, as tea with biscuits is a perfect fit

across the country. To ensure repeat purchases, used packs of Parivar

tea could be redeemed at retail shops, for discounts on the subsequent

purchase.

PRICING

As said earlier the largest-selling variety of tea in the rural markets

(60%) is ‘dust’ tea, as it was considered to be cheaper and stronger.

Sapat, however, felt the time was ripe to convert the markets to ‘leaf’ tea.

Hence the real challenge was now to take on the dust brands which

were cheaper than leaf tea, and to not only convert and upgrade, but also

get consumers to pay extra for it. Each 1 kg. pack of Parivar tea is

priced at Rs. 159 as compared to the other brands which are priced at Rs.

125 per kilo.

Even though the Parivar tea brand was priced much higher

than the other brands, it was not only accepted but was also more

preferred because of its uniqueness. The taste was catered to;

keeping in mind the customer’s needs (the rural Indian consumer likes his

leaf tea to be strong and so Sapat created such a tea). Also, the marketing

strategies framed, all-together made Parivar Tea a unique and preferred

brand.


CONCLUSION

At present, Sapat earns 60 per cent of its revenue from Parivar. In

2004, the company entered the markets of Madhya Pradesh also. For

Sapat, the eighth largest tea-maker in the country, gunning for the top slot

might be a distant dream. But for now, the villages in Maharashtra have

given it enough reason to throw a tea party.

Parivar Tea is one of those products which show that only pricing is

not an important factor. In spite of being a tad costlier than the other

products, its effective marketing and distribution strategies helped this

unique product to reach the position it is at, right now.

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Coca – Cola:In India, Coca-Cola was the leading soft drink till 1977 when govt.

policies necessitated its departure. Coca-Cola made its return to the

country in 1993 and made significant investments to ensure that the

beverage is available to more and more people, even in the remote and

inaccessible parts of the nation.

As we all know, where there is a consumer, there is a producer &

this results into completion. Bigger the player, the harder it plays. In such

a situation brand identity is very strong. It takes a long time to make the

brand identity famous.

Coca – Cola has its beginning in 1981 & since then has been one of

the three most dominant players in this soft drink industry.

COKE’S VENTURE INTO THE RURAL MARKET


Coca Cola India (CCI) suffered a humiliating loss of 400 Million USD

in the 2000 and a flat 2001. The flat sales in the urban areas made it clear

for the CCI that they would have to shift focus to the untapped rural

markets. Sanjeev Gupta, the deputy president of Coca Cola India realizing

the potential of the rural market, restructured the strategies and targeted

the common man of the village which resulted in a spectacular growth of

35 % in urban areas as compared to the 65 % growth in rural areas.

SOFT DRINK INDUSTRY

The main production of soft drink was started in 1830’s & since then

from those experimental beginning there was an evolution until in 1781,

when the worlds first cola flavored beverage was introduced. These drinks

were called soft drinks, only to separate them from hard alcoholic drinks.

These drinks do not contain alcohol & broadly specifying these beverages,

includes a variety of regulated carbonated soft drinks, diet & caffeine free

drinks, bottled water juices, juice drinks, sport drinks & even ready to

drink tea/coffee packs. So we can say that soft drinks mean carbonated

drinks.

Today, soft drink is a more favourite refreshment drink than tea,

coffee, juice etc.

MARKETING MIX


PRODUCT

The two global majors Pepsi & Coca – Cola dominate the soft drink

industry market. Coca – Cola, which had wound up its business in 1977

from India reentered in India after 16 years later in 1993.Coca – Cola has

acquired a major soft drink market by buying out local brands like Thums

up, Limca & Gold Spot from Parle Beverages.

DISTRIBUTION

Coca-cola focused on strengthening its distribution network there.

Rural India meant reaching 6,27,000 villages spread over 32,87,263

square kms; it meant getting distributors to travel 200 kms to

reach five shops with drop sizes of less than a case.

It realized that the centralized distribution system used by the

company in the urban areas would not be suitable for rural areas. In the

centralized distribution system, the product was transported directly from

the bottling plants to retailers.


However, CCI realized that this distribution system would not work

in rural markets, as taking stock directly from bottling plants to retail

stores would be very costly due to the long distances to be covered.

CCI started making a hit list of the potential villages from various

districts. It doubled the number of outlets in rural areas from 80,000 in

2001 to 160,000 in 2003, which increased market penetration from 13

per cent to 25 per cent. To ensure full loads, large distributors

(Hubs) were appointed, and they were supplied from the company's

depot in large towns and cities. Full load supplies were offered twice

weekly against payment by demand draft. On their part, the hubs

appointed smaller distributors (Spokes) in adjoining areas.

The smaller distributors undertook fixed journey plans on a weekly

basis and supplied against cash. The distributors also hired rickshaws

(cycle operated vans) that traveled to villages daily.

HUB

(THE HUB AND SPOKE MODEL -Coca-cola distribution system in rural areas)

VILLAGE 3

VILLAGE 2

VILLAGE 1

SPOKE 1

VILLAGE 3

VILLAGE 2

VILLAGE 1

SPOKE 2


PROBLEMS FACED IN DISTRIBUTION

Problem of electricity in the rural markets

Almost half of rural India experiences large amount of power cuts

during summer and also some amount of power cuts during winter. Hence

in every village, keeping a refrigerator would not be effective in

maintaining the drinks at a temperature at which it is enjoyed the most.

To counter this problem, Coca-Cola provides low-cost ice boxes —

a tin box for new outlets and thermocol box for seasonal outlets,

throughout all the outlets located in the rural areas.

PROMOTION

The promotion strategies Coca-cola used to enter the rural market

can be given as under:

As far as the TV media is concerned, it doubled the spend on

Doordarshan, increased price compliance from 30 per cent to 50 per cent

in rural markets and reduced overall costs by 40 per cent.

Many of us can remember the advertisement with the tag line -.

'Thanda Matlab Coca-Cola’

This ad was targeted mainly at the rural and semi-urban consumers.

The series of Aamir Khan Ads on a hill station acting like a Nepali

and those in a Punjabi ad ‘Yaara da Tashana’ were a


great success and an important aspect focusing on acceptability of the

product in the rural areas.

Besides this, CCI also concentrated on 47,000 haats (weekly

markets) and 25,000 melas (fairs) held annually in various parts of the

country which are local forms of entertainment. Thus it made huge

investments in infrastructure for distribution and marketing.

PRICING

The average income of a rural worker is about Rs. 1500-1600 per

month. It brought down the average price of its products from Rs 10 to Rs

5, thereby bridging the gap between soft drinks and other local options

like tea, butter milk or lemon water.

Coca Cola launched a 200 ml bottle for just Rs.5, which is an affordable

amount on the pockets of the rural audience. The launch of the Rs 5 pack has

reaped rich dividends in terms of sales and the bottles have accounted for 50 per cent of the

company's sales in 2003.

BRAND 200ml 300ml 500ml

Coca-cola Rs.5 Rs.7 Rs. 15

BRAND 25g 200g -

Sunfill Rs.2 Rs.15 -

The initiative has paid off: Eighty per cent of new drinkers now

come from the rural markets. Coca-Cola has also introduced Sunfill, a


powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is

available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve

sachet of 200 gm priced at Rs 15.

PROBLEMS FACED FOR EFFECTIVE

PRICING: -

Purchase patterns along with AFFORDABILITY

also vary frequently due to daily wage earnings.

COKE found that there are spikes in sales during festivals, the

wedding season and during post harvest, while there are troughs during

other periods. As a rule, the retailer has to sell on credit and has to factor

in high defaults during bad monsoon years.

Look-alikes and counterfeits

The problem

Spurious manufacturers are of two kinds

in the case of Coca Cola, informs the company spokesperson. One who

manufactures a pass-off product of a similar name and the other who fills

spurious stuff into their bottles like during summer, fakes abound in cold

drinks.

Though raids have been conducted against such manufacturers, to

counter the problem, Coke has put into place another elaborate system.

WHAT IS COKE DOING ABOUT THE COUNTERFEITS AND

LOOKALIKES?

Besides, they have a large network of Route Salesmen who have a

one-to-one relationship with the retailers on their beat and keep their ear

to the ground. When these route salesmen spot suspicious activity going

on, they inform the company immediately about it.

Coca Cola is also in the process of exploring changes in its

packaging. They are trying to create technology to incorporate certain

features that will make their bottles tamper-proof.

Though Pepsi and Coke have dropped prices substantially to make

their products the flavor of the masses, spurious products still score

because of poor consumer awareness. And fake product manufacturers


reap windfalls because there are barely any input costs, no safety

standards involved, excise or taxes paid.

ConclusionMarketing according to a leading management theories Peter Druker can be

put in this way " There will be always, one can assume, be need for some

selling. But the aim of marketing is to make selling superfluous. The aim of

marketing is to know and understand the customer so well that the product or

service fits him and sell itself. Ideally, marketing should result in a customer

who is ready to buy. All that should be needed then is to make the product or

service available."

Rural India is a marketer’s dream given its tremendous potential and

increasing money power. The formula of success for companies entails a

complete shift in marketing and advertising strategies.

"To be successful in the rural market, remember- there is no unity in

diversity, but act local while thinking global."

A generic strategy can never be selected for rural marketing. The strategy as

well as the distribution channel will vary from product to product, industry to

industry. For an FMCG product, it may be imperative to reach a settlement

with a population of 5,000, were as for a durable manufacturer, a settlement

with a population of 25,000 would suffice.

The trick of the trade is to reduce the number of intermediaries, so as to cut

costs and margins. Also logistics management is crucial as it will erode into

the margins of the company and the goods will be available to the consumers

but the cost of providing it will be very high.

Innovative strategies can only be created if managers are continuously in

touch with the rural markets and they do not have urban blinkers but use their

creativity to the maximum extent. This however raises a fundamental problem

of fathoming the differences between urban and rural markets in India.


Corporate marketers should refrain from designing goods for the urban

markets and subsequently pushing them in the rural areas. The unique

consumption patterns, tastes, and the needs of the rural consumers should be

analysed at the product planning stage so that they match the needs of the

rural people. Also while planning promotional strategies in rural markets,

marketers should be very careful in choosing a medium of communication.

A radical change in the attitudes of marketers towards the vibrant and

burgeoning rural markets is called for, so that they can successfully impress

millions of rural consumers spread over six hundred thousand villages in rural

India.

In rural area we find more of a stereotype because of similar socio-economic

background. But in an urban area it is a multitude of people & personalities &

variance in income, background & lifestyle. We found that the movies, which

were hit in cities, were doing as well in the rural areas. (E.g. Lagaan, Gadar)

But movies, which are hit in rural areas, may not be successful in cities. (E.g.

Mithun movies) We also found that people in cities spend more on

entertainment than people in rural areas.

In many respects, rural marketing today is much easier than it was for the

pioneers. As just seen, markets are better connected by road and rail, with

regular bus and lorry routes. Storage capacity is better and dealers with

financial capacity do not have to be created in as many places. There is a

bank branch in the village or nearby, obviating the need for a long journey by

the rural dealer to clear the documents from the neighbouring big towns. The

rural cinema, television and radio now make it easier to communicate to the

rural consumer. There are a growing number of marketing companies that

offer their sales vans, cinema vans and video vans on hire. This helps small

companies to avoid large capital expenditures while developing rural markets.

The nature of rural consumer has to be understood.


CHAPTER IX

Bibliography

A project report on rural marketing

Documents

Transcript of A project report on rural marketing