Marketing to Rural India:Making the Ends Meet

Introduction

Rural India is potentially the largest segment of the Indian market.

Executives have long recognized that to build real sales volumes they will have to reach outside the big cities.

Case highlights the emerging trends in rural market Case is also about the initiatives taken by companies

Like HUL and ITC to target Rural segment› Project Shakti and E-Choupal have been making inroads

into rural India for years

Facts of Rural India According to MART

› Rural India buys 46% of all soft drinks sold, 49% of motorcycles, 59% of cigarettes and 11% of rural women use lipstick.

According to NCAER › Rural households form 71.7% of the total

households in the country.› Spending in this segment is growing rapidly and

consumption patterns are closing in on those of urban India.

Cont.. Companies such as Unilever, Phillips and Nestle have long

been known to India's rustic dukaandaars, or merchants. Rural marketing involves persuading people to try and adopt

products they may not have used before› Colgate has to build toothpaste by convincing› Coca-Cola is growing at 37% in rural markets, compared

with 24% in urban areas. In rural India low penetration rates can be attributed to three

major factors› Low income levels› inadequate infrastructure facilities› different lifestyles.

Project Shakti : Empowering Women Consumers

The objectives of Project Shakti› To create income-generating capabilities for under

privileged rural women by providing a small-scale enterprise opportunity, and to improve rural living standards with greater awareness of health and hygiene

In 2001, with rural self-help groups (SHGs) started to educate rural women, while also making them part of the company's marketing network

This micro-enterprise offers low risks and high returns Direct-to-home distributors A typical Shakti distributor sells products worth Rs 10,000-

15,000 a month & earn Rs 700-1,000

Cont..

The Shakti model was piloted in 50 villages of the Nalgonda district in Andhra Pradesh.› Now it has created 26,000 women distributors covering

80,000 villages.› By 2010, the goal is to recruit 100,000 Shakti distributors

covering 500,000 of India's more than 600,000 villages› Shakti project includes Shakti Vani (or voice), a social

awareness program, and iShakti, a community portal

Advantages to rural Women from Project Shakti

Increase in income Education to children Social Recognition to rural women Knowledge about health and Hygiene Knowledge of urban areas Enhancement of purchasing power ICICI partnership gave micro credit

ITCs E-Choupal ITC's enhanced distribution network came from the

recognition that the existing agri-produce distribution channels› The company exports various agricultural products --

soybean, rice and wheat› In 2000, ITC embarked on an initiative to deploy

technology to reengineer the procurement of soybeans from rural India

E Choupal’s connectivity - both physical and informational -- between the farmer and the market that it facilitated has allowed ITC to use it for distribution of goods and services from the market to the farmer

Cont..

The E Choupal infrastructure consists of:› A kiosk with Internet access in the house of a trained farmer, called a

Sanchalak› A warehousing hub managed by the former middleman, called a

Samyojak. › A collaborative network of companies orchestrated by ITC with a pan-

India presence In 2004, ITC introduced the Choupal Sagar

› A rural retail outlet at the hub.› First was set up at Sehore in Madhya Pradesh.› This is 7,000 sq. ft. mall sells consumer goods as well as agri-products

Advantages of E-Choupal to rural people

Better content of information Transport Cost Knowledge to access technology Weighing Accuracy Transaction Durations

Room for all

Indian rural market is huge just to strengthen the distribution

Reliance Infocomm, a mobile services provider. Its network now encompasses 240,000 towns and villages, accounting for 42% of the rural population

Godrej Aadhaar -- plans to set up 1,000 stores across India in the next five years.

Conclusion

Success of HUL & ITC depicts many other MNC widen their base in rural markets.

From the Goenkas to the Gulabchands, from the Tatas to the Thapars, every major Indian business group has plans to move into the hinterland

The battle for rural wallets will include not just European and U.S. multinationals but also fast-growing Indian companies.

According to Raju, marketing to rural customers often

involves building categories by persuading them to try and adopt products they may not have

used before. "A company like Colgate has to build toothpaste as a category, which means

convincing people to change to toothpaste instead of using neem twigs to clean their teeth, which

was the traditional practice," he says. "This is difficult to do and requires patience and investment

Companies that have figured this out are doing better in the villages than in the cities. Soft drinks

giant Coca-Cola is growing at 37% in rural markets, compared with 24% in urban areas.

According to Hansa Research, a market research firm that has published a Guide to Indian

Markets 2006, the penetration of consumer durables has risen sharply in India's villages between