Leadership analysis of the tobacco sector of ITC limited in Rajasthan through rural penetration
Rural Marketing in India with Case Studies of LG and ITC
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RuralMarketing
Presented by:
Bulbul Sharma
Tanvi Gupta
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Contents
Rural marketing What makes rural marketing
attractive Myths about Rural Market Challenges and Strategies for
Rural Marketing Case Studies
LG ITC e-Choupal
Conclusion
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Rural Marketing
On account of green revolution, the rural areas are consuming a large quantity of industrial and urban manufactured products. Thus a special marketing strategy emerged known as Rural Marketing.
Rural Marketing involves delivering manufactured or
processed inputs or services to rural producers or consumers.
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What makes Rural marketing attractive Untapped rural potential
- 6,27,000 villages across the country
- account for 70% of population
- 60% of National demand for various product categories
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Expansion of middle income household
-According to NCAER study, there are as many 'middle income and above' households in the rural areas as there are in the urban areas.
-There are almost twice as many 'lower middle income' households in rural areas as in the urban areas.
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Improvement in Social Indicators -No. of “pucca” houses doubled from 22% to 41%
-No. of “Kuccha” houses halved from 41% to 23%
-Percentage of BPL families declined from 46% to 27%
-Rural literacy level improved from 36% to 59% in past two decades
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Improvement in Infrastructure
- In 50 years,40% villages have been connected by road, in next 10 years another 30% would be connected
-More than 90% villages are electrified, though only 44% rural homes have electric connections
-Rural telephone density has gone up by 300% in the last 10 years
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Low penetration rate -Low penetration rates in rural areas, so there are many
marketing opportunities –
Durables Urban Rural
CTV 30.4 4.8
Refrigerator 33.5 3.5
FMCGs Urban Rural
Shampoo 66.3 35.4
Toothpaste 82.2 55.6
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Myths About Rural Market
Rural Market Is a Homogeneous Mass
Disposable Income Is Low
Individuals Decide About Purchases
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Myth 1: Rural Market Is a Homogeneous Mass
REALITY Heterogeneous population
16 languages
State wise variations in rural demographics Literacy (Kerala 90%, Bihar 44%) Population below poverty line (Orissa 48%, Punjab 6%)
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Myth 2: Disposable Income Is Low
REALITY
Number of middle class HHs (annual income Rs 45,000- 2,15,000) Rural 27.4 million Urban 29.5 million
Per Capita Annual Income Rural Rs 9,481 Urban Rs 19,407 TotalRs 12,128
Source: NCAER,2002
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Myth 3: Individuals Decide About Purchases
REALITY
Decision making process is collective
Purchase process-influencer, decider, buyer, pays can all be different. So marketers must brand message at several levels
Rural youth brings brand knowledge to HH
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Challenges and Strategies
Availability
Affordability
Acceptability
Awareness
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Availability
Challenge:
Regularly reach products to the far-flung villages.
India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas
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Strategies
Strive to reach at least 13,113 villages with a population of more than 5,000
Trade off the distribution cost with incremental market penetration.
Can reach the rural market by the following ways:
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`
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Contd….
Hindustan Lever, to serve remote village,use autorickshaws, bullock-carts and even boats in the backwaters of Kerala.
Coca-Cola, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas.
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Affordability
Challenge: to provide at cheaper price
Strategies:
Introduce small unit packs.
Godrej introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh — the so-called `Bimaru' States.
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Contd….
Coca-Cola has addressed the affordability issue by
introducing the returnable 200-ml glass bottle priced at Rs 5.
Hindustan Lever, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm.
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Acceptability
Challenge: to gain acceptability for the product or service
Strategies:
Offer products or services that suit the rural market
Easy to understand
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Contd..
Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice boxes — a tin box for new outlets and thermocol box for seasonal outlets.
HDFC tied up with non-governmental organisations and offered reasonably-priced policies in the nature of group insurance covers.
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Awareness
Challenge: less exposure to the world, low literacy rate
Strategies:
Opinion leaders play a key role in popularizing products and influence in rural market so choose the appropriate opinion leader
Can use the following promotional methods:
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Personal Interface
One on One contact programs are extremely efficient manner to reach the Rural Consumer
Provides an opportunity to Demonstrate Induce Trial Educate
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Events -Using Culture to touch a chord
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Events -Folk entertainment
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Events : Melas
An opportunity to present Brand Stories using better Display tools Large Screens Animations
Melas can be used for Retail Sales Points Sampling Exercise Demonstration
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Haats -Presence in the Market
42000 rural haats (supermarkets)
4500+ Visitors per haat. Average
Sales per day US$ 5000
300+ Sales outlets/haat.
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Case Studies
LG
Established in 1997, LG Electronics India Pvt. Ltd., is a wholly owned subsidiary of LG Electronics, South Korea.
LG found the untapped potential in the rural market in India and to encash the opportunity it comes with rural marketing strategy.
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4 A’s of Rural Marketing
Availability- Place 65 Remote Area Offices under
the branch offices that empowered to directly link for orders.
230 service centers.
2,600 mobile authorized service personnel for villages having residents below 10,000.
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Affordability- Price
1998, LG launched its first low priced TV for rural consumers
-Sampoorna- Rs.3000 -Cineplus- RS 4900
Acceptability- Product-LG came out with Hindi and regional language menus
on its TVs.
-Introduced the low-priced “Cineplus” and “sampoorna” for the rural market.
-LG was the first brand to introduce gaming in TVs.
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Awareness-Promotion
-Mobile Vans
-Exhibition
-Road Shows
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ITC e-Choupal
ITC is one of India's foremost private sector companies diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Branded Apparel,Greeting Cards and other FMCG products.
Its International Business Division (ITC IBD) was created in
1990 as an agricultural trading company
In 1998, after competition forced , ITC-IBD taken the challenges to use information technology to change the rules of the game and create a competitive business.
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Strategy
Use the Information Technology
Places computers with Internet access in rural farming villages
Each e-Choupal costs between US $3,000 and US $6,000 to set up and about US $100 per year to maintain.
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Contd…
The farmers use the computer to access daily closing prices on local mandis
The farmers can also know about weather forecast (local) and best practices in the world from e-Choupal website.
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Contd…
Use the e-Choupal to order seed, fertilizer, and other productsAt harvest time,
ITC offers to buy the crop directly from any farmer at the previous days closing price
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Conclusion
“Rural market has an untapped potential like rain but it is different from the urban market so it requires the different marketing strategies and marketer has to meet the challenges to be successful in rural market.”
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