A CASE STUDY ON RURAL MARKETING

“READY TO RULE RURAL INDIA”

A Report Submitted in partial fulfillment of the

Requirements for the award of the Degree of

MASTER OF BUSINEES ADMINISTRATION

OF THE

P.B. SIDDHARTHA PG DEPARTMENT

Submitted by

G. RAVI

ROLL NO: Y85338

DEPARTEMENT OF BUSINESS ADMINISTRATON

P.B. SIDDHARTHA COLLEGE OF ARTS&SCIENCE

(Affiliated to Acharya Nagarjuna University)

VIJAYAWADA

(2008 – 2010)

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Rural India constitutes ‘the heart of India’, generating more than half the

national income. According to the National Council of Applied Economic

Research (NCAER), with about 74% of its population living in its villages. India

has perhaps the largest potential rural market in the world.

A potential of 742 million rural consumers live in 6,38365 villages across

India. Rising incomes, improving infrastructure, and favorable government policies

offer huge potential for rural marketing.

“If you see a woman in a village milking a cow, do you see an opportunity?

but that is exactly where Dr. Varghese kurien saw an opportunity and it gave birth to

one of the most successful organizations in India-Amul .”

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The need to look at rural markets:

The “Green Revolution” has in turn, brought a socioeconomic revolution in

Indian villages. On account of the green revolution the rural areas are consuming a

large quantity of not just the essential commodities but premium products as well.

The younger generation in rural areas is now spending more on personal care and

grooming products.

The above data [table 1] indicates, the Indian rural market with its vast demand

base, offers great opportunities to companies. FMCGs demand in India nearly 53%

comes from the rural market. For consumer durables the figure is 59%, these results has

evidently helped, going by the significant share contributed by rural areas to the total

revenue of several leading consumer product companies. [Table-2]

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Rural markets are already proving vital for company’s growth, clearly indicating

that these markets can not be ignored by big players.

Industry analysts have projected that urban households will grow by 4%

while their rural counterparts are expected to grow 11% by 2009-10, implying that if

the rural income rise by 1%, then the spending power of consumers will increase by

about Rs.10,000cr. According to FICCI, by the end of 2025, rural consumption is

expected to nearly three times of what it is today.

There is no denying the fact that Indian market is the fastest growing

market in the world and the fact is that about 60% of the market considered rural

market is yet to turn into a real market.

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What is Rural Market?

According to the Census of India 2001, there are more than 4,000 towns in the

country. It has classified them into six categories, class-I towns with one lake and

above population , Class-II towns with 50,000-99,999 population, Class-III towns

with 20,000-50,000 population and Class-IV towns with 10,000-19,999 population.

It is mainly Hindustan Unilever and ITC, most FMCG and consumer durable

companies, define Class-II and III towns that are rural.[table-3]

From this above data one can analyze the economics of cost involved in rural

distribution coverage.

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Rural Marketing Challenges:

Poor Infrastructure

Non-availability of shops

High levels of poverty

Unemployment

Poor literacy rate

Poor media penetration

Skeptical customers (less use new brand )

Rigid social customs

According to Dr. MS. Swaminathan of the

swaminathan Research Foundation, rural areas can only be

developed if the financial, structural, economic and social

aspects are addressed in a holistic manner. This is possible

if these areas are supported by adequate funds, equipments, infrastructure and

education.

Indian consumers are poor but not backward. The future lies with those

companies who see the poor as their customers. Companies should focus on

creative solution and product engineering to reduce their costs and offer tremendous

‘life time value’ to the ‘Bottom of the Pyramid’ customers. Effective rural

marketing is one and only solution to reach the BOP segment.

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Rural Marketing Strategies:

Rural marketing concept is a customer-centered ‘sence and respond’

philosophy. The following section deals with how MNC’s and local companies

have successfully established themselves in the rural market.

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[1] Product Strategy: The rural consumer is very conscious about getting ‘value for money’. Low

price, high quality and multiple uses is basic principles rural product design.

Case 1: Nokia 1100

Nokia 1100 has so penetrated in to the rural market.

Nokia had to stop its production of 1100 because as its own

product has become its toughest competitor. Nokia’s

low-end cell phones are used as radios, alarm - clocks and

flash lights by the rural customers.

Strategy: “digital convergence at the bottom of market”

Case 2 : LG sampoorna TV

LG Electronics launched a customized TV

sampoorna’. A more important aspect of customization

is to make TV set which can appeal to local needs,

it facilitated on screen display in vernacular language

like Hindi, Tamil and Bengali. selling 1,00,000 sets in the

very first year.

Strategy: “thinking locally, succeeding globally”

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Case 3: HUL Breeze 2-in-1

HUL developed a combined soap and shampoo

that was cost-effective and also less harsh on hair than

ordinary soaps. HUL launched the new soap-cum

shampoo ‘Breeze 2-in-1’

Strategy: “value-added product would create a loyal customer”

Case 4: HUL pure-it [a water purifier brand]

HUL launched a innovative product ‘pure-it’ a

water Purifier brand. Pure-it is available at economical

price for the rural consumer as there is no clean drinking

water in villages.

Strategy: “Corporate social responsibility means

come up with business models to cater to the BOP”

Case 5: TATA Nano

Tata Motors launched ultra low cost Nano. Nano is a

low-end ‘rural car’, hence its creates a new segment of

people of buying car. It is a victory for all those who have

been advocating making available cheaper products for

customers at the BOP.

Strategy: “we needed to create a safer journey of transporting a family”

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Suggestions:

Innovative product designs and packaging.

Avoid the marketing myopia, which means the costumer will have the same

need but will want the new product.

Application of value engineering, which means costly metal being replaced

by cheaper reinforced plastic. This technique does not sacrifice the

functional efficiency of a product but lower the product price.

Using chinese product design strategy and raw material.

Be care full on product duplicates and using security features.

Marketers must often understanding rural customer’s needs and aspirations

even better than customers themselves do and creating products and services that

meet existing and latent needs, now and in the future. A fair amount of research is

required to understand the latent needs and desires of rural customers and provide

suitable products.

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[2] Price Strategy:

Rural markets are low price high volume growth markets. The rural markets

being intensely price-sensitive in comparison to urban markets, reaching at a lower

cost is a major challenge.

Case 1: Nirma

Nirma’s yellow detergent powder- a mass- market

Phenomenon. Nirma’s low price policy has penetrated into

the deepest rural markets in India.

Strategy: “value- for- money”

Case 2: Cavinkare’s Chik shampoo

Cavinkare launched Chik in 50 paise sachets. Cavinkare

targeted rural and small town customers who used soaps to

wash their hair. it became the market leader in the rural

markets with over 50% market share. It create a

‘sachet revolution’.

Strategy: “low unit price packs.” (LUP)

Case 3: Mc Donald’s The Indian customers seek high value for every rupee spent . so Mc Donald’s has been highlighting the “Happy price menu- Rs. 20” to shackle entry barriers appeal to Indian customers.

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Strategy: “highlighting the value being delivered for a small . price”.

Case 4: P&G price cut strategy

P&G in 2004 started price cut strategy in their

detergent brands. P&G’s increase in the market share was

more at the cost of the low-priced detergents. There was

a 200% increase in Tide after the price cut .

Strategy: bring in the required ‘Economies of Scale’ which would lead to

profitability.

Case 5: Britannia Tiger biscuits

Britannia also tasted success because of small

affordable packaging of ‘Tiger’ biscuits it is specially design

to the rural market, it’s helping the poor become consumers.

Strategy: “low price strategy is begun to appeal target segment”

Case 6: Nestlé’s Maggi

Nestle’s rural initiatives have largely been based on

Price-led initiatives. Brand such as Maggi noodles are

priced at Rs.5. It helped Nestle in making in roads in to

rural market.

Strategy: “small pack - lower price”

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Case 7: Marico parachute

Marico launched ‘parachute mini’ a bottle shaped

small pack being sold at an MRP of RS.1, 20 ml parachute

a RS 5 that enables loose oil users ad to parachute.

Strategy: “consumers to trail out the products with very little risk”

Suggestions:

Use backward and forward integration.

Using value-based pricing strategy . That means fixing of price, starting

with customer and end with product.

Use psychological tricky pricing strategies. That means method of odd

number pricing etc.

Effective total quality management is helps to low price high quality

product.

Companies should focus on creative solutions and product engineering to

reduce their cost. Second, the company can design basic models minus frills to save

cost.

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[3] Promotion Strategy:

The challenge is to create communication that would help the rural

consumer in recognizing brands, logos, visuals and colors. To effectively tap the

rural markets, a brand must associate with their culture and personality.

Case 1: Idea cellular

Idea’s aggressive promotion campaigns ‘what an idea sirjee’

ad creates a real rural feel came through Strong advertisement.

Strategy: spreading a social message “each one has aimed at the

changing someone’s life for better”

Case 2: Coca-cola

Coca-cola ad ‘thanda matlab coca-cola’ caught

attention of the rural consumers so much. Aamir khan

playing foot sic with village bells.

Strategy: “Using a renowned celebrity from in rural background”

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Case 3: Godrej

Godrej uses radio to reach to the local people in their language and push

its soap in interior and remote areas.

Strategy: “low-cost marketing technique to gain maximum result”

Case 4: HUL Lifebuoy

HUL launched a direct rural contact program called

‘Lifebuoy Swasthya Chetana’ campaign, made sales goes

up by 20% in 17,000 villages.

Strategy: “lifebuoy has always been positioned on the platform of health and .

hygiene”

Case 5: MRF Bullock cart Tyres

MRF introduced nylon tyres for bullock carts with

real life pahalwans. MRF use the communication through

wall paintings in villages association with the muscleman

symbol,(i.e.,Pahalwan=Muscleman).The result was that the

MRF bullock cart tyres became the brand leader in this

segment .

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Strategy: “Rural consumers understands symbols better and looks for .

endorsement by icons”

Case 6: HUL Vim

HUL launched a dish washing bar Vim. HUL Started to

communicated the brand in rural area through public

challenging campaigns. In this campaigns is succeed people

washing utensils with sand are being educated to shift to dish

washing bars.

Strategy: “Brand awareness creates people using local unbranded products to

national brands”

Case 7: Dabur Chyawanprash

Dabur Chyawanprash was able communicate its core

benefits of energy and immunity by involving locals in a game

of bowling wherein, the nine pins, symbolizing various diseases,

were demolished by a chyawanprash ball.

Strategy: “For a brand to succeed in India, its communication and image must

respect Indian values and serve to uphold them”.

Case 8: HUL Surf

Surf used the ‘Lalita ji; campaign to communicate the

message of ‘getting more for your money’ to housewives

and this message is well received by them.

Strategy: “value for money need not necessarily mean cheap”

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Suggestions:

Provide social outlet campaigns, the outlet provide free to any one, what

brand they choose. Its creates a ‘trust factors’ to the consumers.

Be care full on retail margins other wise they promoted local brands.

Face-to-face ‘below the line’ touch, that means feel and talk mode at heats,

melas and mandis.

To capture the local sprit in the communication. Using local language.

Patience is the name of the game. That means a rural consumer is not in a

hurry and you can take your time in communicating the message.

Developed a website, which gathers valuable feedback from satisfied

customers and also display the total amount saved by consumers with the

product impact.

World-of-mouth communication strategy works better in rural markets

as these markets enjoy limited reach media. Once people become familiar with

these products, they would perceive them as necessities.

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[4] Distribution strategy:

Planning physical distribution, managing logistics and controlling

marketing communication are major impediments for entering rural markets. The

distribution structure involves stock points in feeder towns to service these retail

outlets at the village levels.

Case 1: Coca - Cola

Coca -Cola is a pioneer company in distribution

network. Coca-Cola has evolved a ‘hub and spoke’

distribution model for effectively reaching and serving

rural markets. Coca-Cola provides low-cost ice boxes to

the small distributors in rural areas because of the lack

of the electricity. In this marketing strategy a wake up call

for coke’s rural focus.

Strategy: “Coke is available where, even water is not available”

Case 2: HUL

Hindustan unilever, the pioneer and a large

player in India’s FMCG market. HUL is the first company

to step into the Indian rural marketing. HUL launched

‘operation stream line’, distributed HUL’s products in villages

using unconventional transport like ‘bullock carts’, ‘tractors’

and cycles. Today HUL’s products touch the lives of two out of

every three Indians.

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Strategy: “HUL product can reach a place, where you can not reach”

Suggestions:

Best solution for enter into the rural markets, that is the company should

start the production in rural areas. Then it is easy to distribute and also its

increase the local sprit.

Tie’up with public distribution system (Fair Price Shops). In our country,

the public distribution system is fairly well organized. The revamped PDS

places more emphasis on reaching remote rural areas of hills and tribaks. So

FMCG companies collaborated with the PDS to utilize its well-established

sales and distribution network in the rural markets.

Develop rural shopping malls. Rural shopping malls act as a two-way supply

chain. While selling goods to the farmers and also buy their farm produce.

Use a combination of wholesalers and retailers to penetrate every nook and

corner of rural market.

Going paces ahead of small packs and sachets’ the corporate world is now

coming out with ‘Rural Malls’ and ‘Self help groups’ as channel partners to

promote consumer products in rural India. Unilever and ITC are working towards

increasing their visibility and reach through marketing - cum social responsibility

projects such as ‘shakti and e-choupal’ respectively.

Conclusion:

A silent revolution is sweeping the Indian countryside. It has

compelled marketing whizkids to go rural. The marketing battle fields has shifted

from the cities to the villages, but in this battle both consumers and companies are

winners, it is a win-win situation. ‘Go Rural’ seems to the latest slogan. Stop

depending on research number. Go and meet up with a million villagers and ask

what they want. Create the products and services that is relevant to their needs.

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Thus, it is quite clear value-for-money offerings companies could convert luxuries

in to necessities for the Indian rural consumers.

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