UNIVERSITY OF MUMBAI

PROJECT ON

RURAL MARKETING – ITC

SUBMITTEDIn Partial Fulfillment of the requirements

For the Award of the Degree of Bachelor of Management

BY

NEHA MIRAJKAR

PROJECT GUIDE

PROF. V.S. GOPAL

BACHELOR OF MANAGEMENT STUDIES

SEMESTER V

(2009-10)

V.E.S. COLLEGE OF ARTS, SCIENCE & COMMERCE,

SINDHI SOCIETY, CHEMBUR, MUMBAI – 400071.

DECLARATION

I, ____________________________, the student of Bachelor of Management

Studies - Semester V (2009-10) hereby declare that I have completed this project

on _________________________________

________.

The information submitted is true & original to the best of my knowledge.

Student’s Signature

( )

CERTIFICATE

This is to certify that Mr. _______________________________ of

Bachelor of Management Studies - Semester V (2009-10) has successfully

completed the project on ______________________

_______________________under the guidance of ___________

___________.

Course Coordinator Principal

Mrs. A. MARTINA Dr. (Mrs) J. K. PHADNIS

Project Guide/ Internal Examiner

PROF. V.S. GOPAL

External Examiner

ACKNOWLEDGEMENT

Before we get into thick of things, I would like to add a few words of appreciation for the

people who have been a part of this project right from its inception. The writing of this project has

been one of the significant academic challenges I have faced and without the support, patience, and

guidance of the people involved, this task would not have been completed. It is to them I owe my

deepest gratitude.

It gives me Immense pleasure in presenting this project report on "RURAL MARKETING –

ITC” It has been my privilege to have a team of project guide who have assisted me from the

commencement of this project. The success of this project is a result of sheer hard work, and

determination put in by me with the help of my project guide. I hereby take this opportunity to add a

special note of thanks for PROF. V.S. GOPAL, who undertook to act as my mentor despite his

many other academic and professional commitments. His wisdom, knowledge, and commitment to

the highest standards inspired and motivated me. Without his insight, support, and energy, this

project wouldn't have kick-started and neither would have reached fruitfulness.

I also feel heartiest sense of obligation to my library staff members & seniors, who helped me in

collection of data & resource material & also in its processing as well as in drafting

manuscript. The project is dedicated to all those people, who helped me while doing this

project.

OBJECTIVE

1. Understanding e-Choupal concept which, implement in practical market by ITC Ltd.

2. To know e-business concept & in this processing and all activities.

3. Understand all activities as well as challenges, problems and solution & various roll which

act in this business especially for rural market.

4. To know profile of ITC Ltd. and their business, product, award, reward, business strategy,

marketing strategies, etc.

5. Improve our own general knowledge about this company & this business concept.

6. To learn business skill this can help in future.

EXECUTIVE SUMMARY

In country over 70% of the total population live in villages. There are states like U.P,

M.P, Bihar, Rajasthan and Orissa where rural population varies form 80 to 90 per cent. Agriculture

and agriculture related activities contribute to about 75% of the income in rural areas.The general

impression is that the rural markets have potential only for agricultural inputs like seeds, fertilizers

and pesticides, cattle feed and agricultural machinery. More than 50% of the national income is

generated in rural India and there are opportunities to market modern goods and services in rural

areas and also market agricultural products in urban areas.

While rural markets offer big attractions to the marketers, it is not easy to enter the market

and take a sizeable share of the market within a short period. This is due to low literacy, low income,

seasonal demand and problems with regards to transportation, communication and distribution

channel. Further there are different groups based on religion, caste, education, income and age.

There is a need to understand the rural markets in terms of buyer behaviour, attitudes, beliefs and

aspirations of people.

Today in 21 century e-business & e-commerce initiative have become popular but it may

be rather difficult to think of poor illiterate farmer in a centre position dusty villages of India making

e-business a part of their daily lives.In Indian village may not have basic facilities such as electricity,

telephone, & transportation facilities? In India have 75% proportion of farmer & in that huge are

illiterate & not aware of existence of computer, let alone the internet & e-business. However large

number of illiterate farmers group conduct e-commerce transaction easily in the year of 2002 with

the help of innovative & revolutioning concept of e-Choupal which introducing by ITC Ltd.

The purpose of e-Choupal implementing is net working the village via internet & procuring

agriculture product from farmer for export. ITC started with just six e-Choupals in June 2000. ITC

had managed to establish 1200 e-Choupal centers in approximately 6500 village across 14 states

within next five to seven year. e-CHOUPAL An example of the successful application of ITC is the

e-Choupal experiment kicked off by diversified tobacco giant ITC. ITC has designed and set up

internet kiosks called e-Choupals tosupport its agricultural product supply chain.The e-Choupals are

totally owned and set up by ITC with the operators not having any investment or risk of their

own.There are four kinds of e-Choupals tailored for shrimps, coffee,wheat and soyabeans. The focus

is on creating internet access for global market information to guide production and supplydecisions.

It provides price information and thus, price certainty to the farmers. In addition, the farmers get

access to operational information, developed by ITC experts, pertaining to cropping, seeds, fertilisers

etc. These gains are shared roughly equally between ITC and individual farmers. The longer-term

goal is to use e-Choupals as sales points for soyabean oil and a range of other consumer goods. ITC

has also set up its first rural mallnear Bhopal, where it distributes products of other FMCGmajors as

well.

E-choupal offers farm-related services like training soil testing, product quality

certification, medical and clinical services, cafeteria and fuel station. Over 6,200 e-choupals are

there in 10 states covering 40,000 villages reaching over 4 million farmers, ITC plans to scale the

same to over 20,000 e-choupals in 15 states covering over a lakh villages benefiting close to 10

million farmers.

THE CIGARETTES TO BISCUITS maker, ITC has claimed many headlines in

recent times for its foray in FMCG and packaged foods business to spruce up its tobacco-laden brand

imagery and create new growth areas. But what gave it more brownie points than these initiatives,

has been its well itched-out rural foray with e-choupal and choupal Saagar.

INDEX

Contents Pages no.

1) INTRODUCTION TO RURAL MARKET

2) RURAL MARKETING

3) CHANGING PATTERNS IN RURAL DEMAND

– REASONS4) RURAL CUSTOMER PROFILE

5) THE PROBLEM AREAS IN RURAL

MARKETING

6) MOTIVATING THE RURAL CONSUMER7) ITC COMPANY PROFILE

8) AGARBATTIS IN RURAL MARKET

9) ITC- e-CHOUPAL

10) MARKETING STRATEGIES

11) THE SOCIAL IMPACT OF E-CHOUPAL

12) CHAUPAL SAGAR

13) CONCLUSION

CHAPTER I

INTRODUCTION TO RURAL MARKET

GONE 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? 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.

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 as 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.

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.

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)

URBAN RURAL

RURAL URBAN

RURAL RURAL

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.

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 II

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 put 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.

► 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.

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.

► Occupation

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.

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.

Potential and Changing Pattern of Rural Marketing

Consumer products where rural consumption is more than urban consumption are

Bicycles 80% Rural 20% Urban

Safety razor blades 67% Rural 33% Urban

Silk Clothing 59% Rural 41% Urban

Books & Stationery 55% Rural 45% Urban

Woolen Clothing 53% Rural 47% Urban

Other Consumables 53% Rural 47% Urban

Generators 95% Rural 05% Urban

Products where rural consumption growth rates are higher as compared to urban markets

are as follows:

1. Packed Tea

2. Alcoholic Beverages

3. Tobacco Products

4. Medicines

5. Detergent Powder

6. Soap Cake/Bar

7. Detergent Cake/Bar

Tapping the Rural Market Problems

While the rural market of India certainly offers a big attraction to marketers, it would

be totally naive to think that any firm can 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 away 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 understand these problems

and came up with innovative solutions to them, that we now see a wonderful trend of growth in rural

markets.

What are these problems? How are they peculiar to the rural market? And how does a

firm solve them?

The existing problems in rural marketing are:

a. Physical Distance

b. Language/Culture

c. Accessibility

d. Money/Expensive

e. Lack of Human Resource

f. Competition

g. Technology

h. Rules & Regulation

i. Lack of Information

j. Size of the Market

k. Buying Power

l. Image

Major Problems in Tapping the Rural Markets and the possible

solutions are as follows:

1. Managing Physical Distribution In Rural Markets

The main problems in physical distribution in the rural context relate to:

a. Transportation:

→ Inadequate railways

→ Bad or no roads

→ Immediate carriers or cargo operators

Eg. Accidents in India 1per day and 1 in 4 days complete loss to property and some life

b. Warehousing Problems

→ No electricity (only 35% of India have electricity)

→ Unavailability of godowns

→ Marketing purposes

c. Communication Problems

→ Only 3% of India is connected by phones

→ Unreliable post and telegraph facility

1947 – 1 postman for 9000 people

2000 – 1 postman for 47000 people

Transportation problems

Transportation infrastructure is quite poor in rural India. Though India has the 4th largest

railway system in the world, many parts of the rural India remain outside the rail network. As

regards road transport, nearly 50% of the 576000 villages in the country are not connected by roads

at all. Many parts in rural India have only kacha roads and many parts of the rural interiors are

totally unconnected by roads with any mandi level town. As regards carriers, the most common

mode is the animal drawn cart. 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. Business firms find it

quite difficult to get suitable godowns in many parts of rural India. And there is no public

warehousing agency in the interiors of rural India. The central warehousing corporation (CWC) and

the state warehousing corporation (SWC’s) which constitute the top tier in public warehousing in

India, do not extend their network of warehouses to the rural parts. They go only upto the nodal

points or major market centers. The warehouses at the mundi level which constitute the second tier

in the warehousing chain are mostly owned by cooperatives. And the same is the case with rural

godwons, which form the third tier. None of these tiers function as public warehousing agencies ;

they provide the warehousing service only to their members. As such, a business firm has to manage

with the CWC/SWC network which stops with the nodal points, or it has to establish its own depots

or stock points run by its stockists / distributors. Of course, in such cases, the commercial advantages

of operating through a public warehousing agency like CWC/SWC are lost to the firm.

Communication problems

Communication infrastructure, consisting of posts and telegraph and telephones, is quite

inadequate in rural areas. Since communication is the first requirement of efficient marketing, lack

of proper communication infrastructure poses difficulties, especially in physical distribution.

Cost-Service Dilemma Gets More Acute

The effect of these problems on the physical distribution front is certainly felt by any

business firm venturing into the rural market. They adversely affect the service aspect as well as the

cost aspect. Maintaining the required service level in the delivery of the products at the retail level

becomes very difficult. At the same time, physical distribution costs get escalated with 80 per cent

Of the total rural consumers living in the 'less than 1,000 people' category of villages. The scattered

nature of the market and its distance from the urban based production points, compound the

difficulty arising from the constraints in transportation, warehousing and communication.

Larger pipeline stocks and bigger inventories in warehouses are the natural outcomes

of these constraints. It means higher costs of transportation, higher inventory carrying costs and

transit and storage losses. And as we will see in detail in the next section, costs of distribution

channels too are much higher in the rural context. Consequently, the total distribution cost per unit

is higher by as much as 50 per cent on an average in the rural market, as compared to the urban

market. In fact, the experiences of some companies operating in the rural market show that the cost

of distribution in rural areas is two and a half times that of urban areas.

MOTIVATING THE RURAL CONSUMER

What works in the urban market may not in the rural areas that are with respect to

marketing. Pesticide used by the farmers are same or similar to what are used in urban

households but have to be packed or packaged and distributed differently due to the

differentiation in usage. Also pricing becomes a factor here. Similarly water is the universal

commodity i.e. either piped or bottled for the urban consumer and canalled or irrigated for the

rural farmer. Therefore the marketer must bring the right product to suit the needs of the rural

consumer. In this connection the following can be considered motivating.

1. Packaging:

Unlike the Eg., given earlier the rural consumer prefers smaller packages this is because

→ The rural consumer buys in low quantity due to low purchasing power.

→ Secondly the rural consumer may be trying out the product and doesn’t like to be saddled by

the larger quantities.

While designing the packages, the color, design and quality of the pack is of great

importance. The rural consumer may prefer a pack with either dark or bright or both dark and

bright colors in a contrasting combination. He may also prefer packs that have fancied designs.

As far as the quality of the pack is concerned he may not mind medicour packaging and even no

packaging if this results in lower prices.

2. Product Quality:

It is of utmost importance. The dimensions of the quality that are to be considered

are durability, features and serviceability in that order. In no way, the marketer must ever even

think of sacrificing quality or manipulating its winning combination dimensions. This is because

the fragile rural consumer may loose faith in the product and may either resort to alternative

brands or traditional products. The new product should not only excite him but also satisfy him.

3. Pricing:

The product pricing must be reasonable and must depend upon the quality of the

product. Distributing to various rural areas is very expensive. However the cost of this should not

be transferred under any circumstances on to the rural buyer. It should be noted here that the

rural consumer is highly price sensitive and competition is not between competitors but with the

fact of “no-use”.

4. Branding:

The rural consumer prefers to buy nationally advertised brands as compared to

local brands. They consider or perceive powerful national brands to have more value than locally

available brands. Naming a particular brand is an important activity. Brand names should be such

that the rural consumers don’t find it difficult to pronounce and remember. Short, sweet and

simple brand names can work wonders with the rural market. At times marketers will try to

experiment with brand names that have local connections.

CHAPTER III

ITC COMPANY PROFILE:

ITC is one of India's foremost private sector companies with a market capitalization

of over US $ 13 billion and a turnover of US $ 3.5 billion. Rated among the World's Best Big

Companies by Forbes magazine and among India's Most Respected Companies by Business World,

ITC ranks third in pre-tax profit among India's private sector corporations.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,

Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded

Apparel, Greeting Cards, Safety Matches and other FMCG products. While ITC is an outstanding

market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-

Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods &

Confectionery, Branded Apparel and Greeting Cards.

As one of India's most valuable and respected corporations, ITC is widely perceived

to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a

commitment beyond the market". In his own words: "ITC believes that its aspiration to create

enduring value for the nation provides the motive force to sustain growing shareholder value. ITC

practices this philosophy by not only driving each of its businesses towards international

competitiveness but by also consciously contributing to enhancing the competitiveness of the Larger

value chain of it is a part.

“ITC wants to create a high-quality low-cost fulfillment channel for rural India. The e-Choupal

was the first step in the last mile towards complete backward integration. But it's also the first

mile on a new information highway around which multiple suppliers and buyers can converge. It

is transformational in its implications and can make a huge contribution towards rural well-

being."

- -Y.C.Deveshwar,Chairman,ITC.

ITC's diversified status originates from its corporate strategy aimed at creating

multiple drivers of growth anchored on its time-tested core competencies: unmatched distribution

reach, superior brand-building capabilities, effective supply chain management and acknowledged

service skills in hoteliering. Over time, the strategic forays into new businesses are expected to

garner a significant share of these emerging high-growth markets in India.

ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC

is one of the country's biggest foreign exchange earners (US $ 2.4 billion in the last decade). The

Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance its

competitiveness by empowering Indian farmers through the power of the Internet. This

transformational strategy, which has already become the subject matter of a case study at Harvard

Business School, is expected to progressively create for ITC a huge rural distribution infrastructure,

significantly enhancing the Company's marketing reach.

ITC employs over 20,000 people at more than 60 locations across India. Ranked

among India's most valuable companies by the 'Business Today' magazine, ITC continuously

endeavors to enhance its wealth generating capabilities in a globalizing environment to consistently

reward more than 4,67,000 shareholders, fulfill the aspirations of its stakeholders and meet societal

expectations. This over-arching vision of the company is expressively captured in its corporate

positioning statement: "Enduring Value. For the nation. For the Shareholder."

Background Note

The 'Imperial Tobacco Company of India Limited' was incorporated on August 24,

1910 in Kolkata, India by British American Tobacco (BAT). The name of the company was changed

to I.T.C (Indian Tobacco Company) Limited in 1974 and later 'ITC Limited' (the dots were removed)

on September 18, 2001.

ITC PRODUCT:

Cigarette:

ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it has

a leadership position in every segment of the market. Its brands include Insignia, India Kings,

Gold Flake, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake.

Foods:

ITC made its entry into the branded & packaged Foods business in August 2001 with the

launch of the Kitchens of India brand with brand launches in the Confectionery, Staples and

Snack Foods segments. ITC's world famous restaurants like the Bukhara and the Dum Pukht

and other products like Aashirvaad, Sunfeast, Mint-O.

Lifestyle Retailing:

ITC's Lifestyle Retailing Business Division has established a nationwide retailing presence

through its Wills Lifestyle chain of exclusive specialty stores. Beginning with its initial offering

of Wills Sport relaxed wear from the first store at South Extension, it has expanded with Wills

Classic work wear, Wills Clublife evening wear.

Greeting, Gifting, and Stationary:

ITC's stationery brands Paper Kraft & Classmate are the most widely distributed brands

across India. Paperkraft is targeted at working executives and college goers. The Classmate

range consists of notebooks, long books, drawing, etc. ITC's Greeting & Gifting products include

Expressions greeting cards and gifting products.

Agarbattis:

ITC has launched Mangaldeep Agarbattis across a wide range of fragrances like Rose,

Jasmine, Bouquet, Sandalwood, Madhur, Durbar, Tarangini, Anushri..

Hotels:

The 484-room ITC Hotel Maurya Sheraton & Towers at New Delhi is not only amongst the

leading business hotel in the country and the 386-room ITC Hotel Grand Maratha Sheraton &

Towers. Fabulous Indian meal at the Bukhara.

Safety matches:

These matches are available in unique designs and with innovative value added features. ITC's

brands like iKno, Mangal Deep, VaxLit and Delite.

AGARBATTIS IN RURAL MARKET:

As part of ITC's business strategy of creating multiple drivers of growth in the FMCG

sector, the Company has commenced marketing agarbattis (incense sticks) sourced from small-scale

and cottage units. This business leverages the core strengths of ITC in nation-wide distribution and

marketing, brand building, supply chain management, manufacture of high quality paperboards and

the creation of innovative packaging solutions to offer Indian consumers high quality agarbattis.

ITC has launched Mangaldeep Agarbattis across a wide range of fragrances like Rose,

Jasmine, Bouquet, Sandalwood, Madhur, Durbar, Tarangini, Anushri and Mogra. To offer

better value proposition to the consumer, Mangaldeep is also available in 3in1 and 5in1 varieties

giving the consumer three and five fragrances in one pack respectively. Attractively packaged, these

brands have been appropriately priced to appeal to a cross-section of consumers at various price

segments. These agarbattis are available in innovative 'Fragrance-Locked' packaging.

ITC has also entered into an MOU with the Khadi & Village Industries Commission

(KVIC) to source agarbattis from KVIC approved units, and to distribute agarbattis through the

Khadi Bhavan / Khadi Bhandar outlets across the country. This collaborative venture is expected to

result in employment generation, particularly in the semi-urban and rural areas.

ITC is also supporting an 'Agarbatti Community Participation Programme' run by the

Vyakti Vikas Kendra, a non-profit organisation founded by the renowned spiritual guru Sri Sri

Ravishankar and located near Bangalore. Over 100 village women are gaining from the training that

this organisation imparts in rolling agarbattis. ITC is also beginning to extend similar support to

other NGOs in other states like Bihar, Tripura and Andhra Pradesh, who are also setting up agarbatti

units, training village women in rolling agarbattis and employing these women in these units.

Marketing Mix:

Product:

1) ITC Limited has launched agarbattis in Indian Rural Market.

2) ITC has sold these Agarbattis in the name of ‘Spriha’ and ‘Mangaldeep’.

3) These agarbattis have got different fragrances like rose, jasmine, bouquet, sandalwood,

madhur, sambrani and nagchampa.

4) These agarbattis are available in ‘fragrance-locked’ packets.

Pricing:

1) ITC is selling these agarbattis at very low cost seeing the economy of the people

staying in rural areas at Rs five for 10 sticks for every pack.

2) ITC has also kept cost for each stick that is 75 paisa.

Place:

1) ITC has promoted this product through the melas and Haats.

2) Some agarbattis had been given to co-operative societies to help in distributing the

agarbattis to different consumers.

Promotion:

1) ITC had chosen to promote their agarbattis in rural markets hrough wall paintings in

different languages so that it should be understood by everyone.

2) ITC had also chosen formal media to promote their product by TV and Radio.

CHAPTER IV

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: 10

• Villages covered: 40,000

• e-Choupal installations: 6500

• Empowered e-farmers: 4 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.

THE SOCIAL IMPACT OF E-CHOUPAL

A major impact of the e-Choupal system comes from bridging the information and service gap of

rural India. Agricultural research centers (such as the Indian Council for Agricultural Research),

universities, and other agencies in India have developed several practices and technologies to

improve productivity and crop quality. The impediment to implementation has been affordable,

large-scale dissemination of this knowledge. The e-Choupal system leverages technology that can

reach a wide audience literally at the click of a mouse. The constant presence of sanchalaks, who

themselves are farmers who apply these techniques, ensures that the practices actually make their

way from the Web site to the field. Some areas about which information and services are provided

by the e-Choupal Web site and e-commerce system

include:

• Weather:

This is a very popular section on the Web site because it provides localized weather information at

the district level. Other public sources generally provide only aggregated statelevel weather

information. E-Choupal’s weather information is intelligently coupled with advice on the activities

in the agricultural lifecycle. One farmer observed that prior to e-Choupal, unreliable weather

information would result in prematurely planted seeds that would be washed out by early rains. The

availability of accurate rain information has cut losses due to weather bymore than half.

Agricultural Best Practices:

Scientific practices organized by crop type are available on the Website. Additional questions are

answered through FAQs and access to experts who respond to emails from the villages.

• Customized Quality Solutions:

After sale of a crop is completed, ITC performs laboratory testing of the sample collected. Based on

these results, farmers are given customized feedback on how they can improve crop quality and

yield.

• Intelligent Product Deployment:

Inputs such as fertilizers and pesticides are not generic in their application. The optimal application

is relative to the soil and crop. Determining these parameters requires services such as soil testing.

Past providers brought inputs but not the information and services required to make them effective.

ITC’s “full-service” approach corrects this by coupling the input sale to the information on the Web

site and services such as soil testing.

A second major area of impact stems from the ability of the e-Choupal system to open a window on

the world and thus impact the future of the villages in which they operate. Computers are bringing

the same resources to villages as they brought to urban India, and their impact is no less dramatic.

This, coupled with higher incomes and changes in farmers’ attitudes, is causing several shifts in the

social fabric of village life.

Some accounts from villages include:

• Children are using computers for schoolwork and games. A particularly poignant story is that of

Khasrod, where 2,000 local students used the local e-Choupal to print their grade sheets, saving them

days of waiting and travel time.

• Sanchalaks use the Internet to chat extensively among themselves about the status of operations

and agriculture in their villages.

• Villagers access global resources to learn about agriculture in other parts of the world and are

taking action to compete in the world outside, not merely in the local mandi.

• Youngsters in the village use computers to research the latest movies, cell-phone models, and

cricket news.

WINNERS AND LOSERS

Not everyone has benefited from the introduction of e-Choupals. Indeed, lost income and

jobs is directly connected to the overall increase in efficiency in the e-Choupal system. Some of the

players in the mandi system have suffered loss of revenue. They include:

• Commission agents:

Despite ITC’s best efforts to maintain mandi volumes and compensate commission

agents for lost income, there is little doubt that on the whole they have lower incomes as a result of

the introduction of e-Choupals.

• Mandi laborers:

The workers in the mandi who weighed and bagged produce have been severely

impacted by the drop in volume. In the Sonkach mandi, for example, some 28 tulavatis and 300

laborers have been affected. ITC’s long-term vision is to employ many of these people in the hubs in

much the same functions as they perform in the mandi.

• Bazaars near the mandi:

When farmers sold produce in the mandi, they would also make a variety of

purchases at local bazaars. This revenue has now been diverted to shops near the ITC hubs. This,

however, can be considered a diversion of revenue rather than elimination.

• Some mandi operations :

ITC still pays mandi tax for all the crops procured through e-Choupals but it now

pays the tax to the mandi nearest to the procurement center. As a result, taxes are being diverted

from several mandis to the few mandis near procurement hubs. The result of this is that regional

mandis have lost taxes that contribute to maintaining their infrastructure.

• Competing processors :

Even before the advent of the e-Choupal, the soya crushing industry suffered from

severeovercapacity (half of all capacity was excess). The efficiency pressures imposed by e Choupal

has spurred industry consolidation.

CHAPTER V

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

“Be serious; commit resources like human, money and time for rural success”

S. Shivakumar is the chief executive of ITC’s Agri business and also looks aster the highly

successful rural initiative e-choupal which has made to many case studies both in India and abroad.

Edited excerpts from an e-mail interview with him:

1) How do you look at rural market?

It’s a high potential market, yet under-leveraged and relatively unexplored. I think rural

region has opportunity beyond just ‘Agri Inputs’ and ‘Cheap products’. But, there are unique

challenges posed by inadequate infrastructure. Also, growth in rural markets during Phase-I was

driven by mere “reach”. In Phase-II, deeper consumer engagement is being driven by innovation in

products, packaging and communication.

2) Please share your rural success story and the secrets of it.

Besides the traditionally successful rural marketing approach of ITC driven by innovations in

distribution of company’s cigarette brands, the new success story is the ITC e-choupal initiative. ITC

e-choupal design is based on a synergistic business model that raises rural incomes, while sourcing

agri raw material cost effectively. It serves as a platform for rural marketing, relying on new

consumers insights: unique needs, social norms, habits it also helps us in understanding the gaps in

the current product & channel alternatives.

3) How does e-choupal help drive synergy for the ITC businesses?

ITC e-choupal synergises the backend supply chain needs and the frontend consumer

engagement needs in rural India as a cost-effective and differentiated backend supply chain through

direct farm level sourcing of agri raw material for ITC’s branded foods business. E-choupal

works as a low-cost supply chain by eliminating non-value adding intermediation. As a consumer

engagement point for ITC products, e-choupal captures consumer insights through direct consumer

interaction (sampling, trials, feedback on buying & consumption behaviour).

4) Please share your various rural initiatives to create entrenchment.

We do physical engagement through presence @ Rural Haat to build awareness and

excitement around e-choupal products and services. Besides, we also hold product/categories

specific camps that focus on consumer engagement for promoting categories and brand through

trials, demonstration, advocating right usage and sampling. There is online engagement as e-choupal

portal and spreads awareness across product categories through static and interactive multimedia

content.

5) In terms of marketing, what are the challenges you faced in reaching out to rural

consumers?

It’s a heterogeneous market requiring a lot of customization but the limited consumer insights

add to the complexities of customization.

6) What do you think prevents majority of marketers from going rural?

Organisation mindset and long-term commitment is needed for success. The desire to reach

rural is often a fad that emerges when urban market slows down. The trade-off to revert to urban

looks attractive when the markets get better. Secondly, absence of a strong anchor business which

has a scale to sustain initial infrastructure cost also acts as an impediment.

7) What will be your advice to marketers going rural?

Be serious and commit resources: human, money and time. Be ready to partner: to leverage

complementary strengths and to shrink the learning curve. And lastly engage with consumers rather

than focusing on just physical reach of the products.

CONCLUSION:

Ultimately, the ball lies in the court of rural marketers. It's all about how one

approaches the market, takes up the challenge of selling products and concepts through innovative

media design and more importantly interactivity. So the fact remains that the rural market in India

has great potential, which is just waiting to be tapped. Progress has been made in this area by some,

but there seems to be a long way for marketers to go in order to derive and reap maximum benefits.

Moreover, rural India is not so poor as it used to be a decade or so back. Things are sure a changing

Thus looking at the challenges and the opportunities which rural markets offer to the marketers it can

be said that the future is very promising for those who can understand the dynamics of rural markets

and exploit them to their best advantage. A radical change in attitudes of marketers towards the

vibrant and growing rural markets is called for, so they can successfully impress on the 230 million

rural consumers spread over approximately six hundred thousand villages in rural India.

The e-Choupal model shows that a large corporation can combine a social mission and

an ambitious commercial venture; that it can play a major role in rationalizing markets and

increasing the efficiency of an agricultural system, and do so in ways that benefit farmers and rural

communities as well as company shareholders. ITC’s example also shows the key role of

information technology—in this case provided and maintained by a corporation, but used by local

farmers—in helping to bring about transparency, to increase access to information, and to catalyze

rural transformation, while enabling efficiencies and lowcost distribution that make the system

profitable and sustainable. Critical factors in the apparent success of the venture are ITC’s extensive

knowledge of agriculture, the effort ITC has made to retain many aspects of the existing production

system, including retaining the integral importance of local partners, the company’s commitment to

transparency, and the respect and fairness with which both farmers and local partners are treated.

BIBLIOGRAPHY

• www.itcportal.com

• www.itcinfotech.com

• www.bbc.com

• www.itcibd.com

• www.echoupal.com