Rural Marketing

Module I Rural marketing an overview, principles of marketing as relevant to rural marketing changing concept of marketing, profiles of urban/ customers and differences in their characteristics.
Rural is driven from a Latin words rrlis which means Country side Rural Market : The census of India defines rural as any habitation with a population density of less then 400 per sq km, where at least 75 % of the male population is engaged in agriculture and where there exists no multiplicity or board. Of the nearly 6.4 Lakh villages in India, only 20,000 villages have population more then 5000 Rural Marketing: Rural marketing involves the process of developing, pricing, promoting, distributing rural specific product and a service leading to exchange between rural and urban market which satisfies consumer demand and also achieves organizational objectives. It is a two-way marketing process wherein the transactions can be: Urban to Rural: A major part of rural marketing falls into this category. It involves the selling of products and services by urban marketers in rural areas. These include: Pesticides, FMCG Products, Consumer durables, etc. Rural to Urban: 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: 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. These include selling of agricultural tools, cattle, carts and others to another village in its proximity.

Profile of Rural Marketing

1. Fast changing pattern and demand During the last decade the rural consumers were in need for low end products which would meet their basic demands and necessities. But of lately due to change in technology rather advancement in technology the demand for people have also changed and the buying pattern which initially comprised of basic products have now shifted to luxurious products. 2. Large and scattered market In the 1st place, in terms of number of consumers, the rural market of India is a very large market ; it consists of more the 600 million consumers. The second aspect is that geographically, it is a vast market. Practically the role of India, barring the metropolitan cities and towns constitute the market. It is also highly scattered market: the consumers are scattered over 5,70,000 villages spread through the length and breath of the country. In terms of business generated too, it is a big market; 22000 crore rupees worth of non-food consumer goods are being sold per year in the market at present. 3. Heterogeneous market It is not as if the whole of rural India can be taken as one homogenous entity. There is a great deal of difference among the various states in this regard. The study provides development index points for each state in the country collected village level data on various parameters such as availability of health and education facilities, the nature of facilities, availability of public transport, electricity transmission, banks, post offices, water supply and so on. Aweigh was decided upon for each facility, by type, based on the relative importance of that facility in industry to the extent of development reached by that village. The study has demonstrated that while the average village in India has 33development index points, Keralas average 88; Bihars is just 22; MP, Rajasthan and UP are close to Bihar; and states like Maharashtra, Haryana, Karnataka range between 40 and 50. 4. Demand, Seasonal and Agriculture Dependent Regarding the nature of demand for various products, it can be seen that the demand is heavily dependent on agriculture. And as a natural corollary, it is seasonal in character. It is irregular as well, since agriculture in many parts of India still depends on the vagaries of the monsoon. Rural demand is not only harvest linked but also festival linked the festivals often coinciding with the harvest. 5. Characterized by Great Diversity The rural consumer of India are also vastly diverse in terms of religious social, cultural and linguistic factors. 6. Steady Growth Despite Inhibiting Factors Despite several inhibiting factors, the rural market of India has grown steadily through the years. This is evident from the data presented earlier. Not only has the market grown in quantitative terms, but qualitatively too, it has undergone significant change. Many new products have made their entry in to their rural market basket. The upper segment in particular have started buying and using variety consumer products which were till recently unknown in the rural. In fact the impression that the rural market is confined to certain traditional consumer product and agri-inputs has totally lost its validity in todays context

Characteristics of rural markets

1. Large number of consumers: According to the 1991 census, the rural population constitutes about 74% ofthe total population in our country. While the population went from 55 crores(1971) to 85 crores (1991), the rural-urban proportion have remained more or less the same as in 1971. There are states like U.P, M.P, Bihar, Rajasthan and Orissa where rural population varies from 80 to 90 percent. Therefore a large population gives an opportunity for marketing a variety of goods and services. However income and purchasing power play a major role in determining the demand in rural areas. 2. Occupation pattern: Agriculture and related activities continue to be the main occupation for majority of the rural population. Land is the major source of income for about 77%of the population. Others are engaged in business (10%), non-agriculture labour (9%), salary earners (2%) and not gainfully employed (2%). It is evident that rural prosperity depends upon growth and development of agriculture. 3. Literacy level: It has been estimated that the rural literacy level is 36% compared to 62% in urban areas. Literacy is one of the important factors in developing awareness and knowledge about technological changes As many as 16 major languages are spoken adding to the complexities in rural communication. 4. Low standard of living: Low income, low purchasing power, overall social and economic backwardness lead to low standard of living. In general a rural consumer spends less on non-food items. 5. Media reach: The media reach in rural household is low. Statistics indicates that the reach of Print media is 10%, followed by TV 31%, Radio 32% and Cinema 36%.Therefore the marketer has to consider rural specific promotion media and methods to reach the villagers. 6. Communication facilities: About 20% of the six lakh villages are without telephone facility even today. This includes Rajasthan (17600 villages), MP (14200 villages), Maharashtra (12000 villages), Gujarat (7000 villages), and AP, Assam, Orissa about 6000villages each. (Source: The Indian Express dated 30.3.2003). 7. Transportation facilities: About 50% of the markets are not connected by road. Most of the roads are kachha and become unusable during rainy season. Many farmers use bullock cart for transporting their produce from village to the market. This means of transport is time consuming. 8. Rural electrification: The main objective is to provide electricity for agricultural operations and for small industries in rural areas. About 5 lakh villages (77%) have electric suppliant this has increased the demand for electric supply and this has increased the demand for electric motors, pumps and agricultural machinery. 9. Medical facilities: Medical facilities are quite inadequate and the villagers have to travel long distances for getting medical treatment. 10. Distance: Village nearer to towns has elements of the urban life. Interior villages are more traditional 3

ATTRACTIVENESS OF RURAL MARKET

Large population Rising prosperity Growth in consumption Life cycle changes Life cycle advantages Market growth rate higher than urban Rural marketing is not expensive Remoteness is no longer a problem

Challenges in Indian Rural Markets

There are several roadblocks that make it difficult to progress in the rural market. Marketers encounter a number of problems like dealing with physical distribution, logistics, proper and effective deployment of sales force and effective marketing communication when they enter rural markets. The major problems are listed below. 1. Standard of living: The number of people below the poverty line is more in rural markets. Thus the market is also underdeveloped and marketing strategies have to be different from those used in urban marketing. 2. 3. Low literacy levels: The low literacy levels in rural areas leads to a problem of communication. Print media has less utility compared to the other media of communication. Low per capita income: Agriculture is the main source of income and hence spending capacity depends upon the agriculture produce. Demand may not be stable or regular.

4. Transportation and warehousing: Transportation is one of the biggest challenges in rural markets. As far as road transportation is concerned, about 50% of Indian villages are connected by roads. However, the rest of the rural markets do not even have a proper road linkage which makes physical distribution a tough task. Many villages are located in hilly terrains that make it difficult to connect them through roads. Most marketers use tractors or bullock carts in rural areas to distribute their products. Warehousing is another major problem in rural areas, as there is hardly any organized agency to look after the storage issue. The services rendered by central warehousing corporation and state warehousing corporations are limited only to urban and suburban areas. 5. Ineffective distribution channels: The distribution chain is not very well organized and requires a large number of intermediaries, which in turn increases the cost and creates administrative problems. Due to lack of proper infrastructure, manufacturers are reluctant to open outlets in these areas. They are mainly dependent on dealers, who are not easily available for rural areas. This is a challenge to the marketers.

Many languages and diversity in culture: Factors like cultural congruence, different behaviour and language of the respective areas make it difficult to handle the customers. Traits among the sales force are required to match the various requirements of these specific areas. 7. Lack of communication system: Quick communication is the need of the hour for smooth conduct of business, but it continues to be a far cry in rural areas due to lack of communication facilities like telegraph and telecommunication systems etc. The literacy rate in the rural areas is rather low and consumers behaviour in these areas is traditional, which may be a problem for effective communication. 6. 8. Spurious brands: Cost is an important factor that determines purchasing decision in rural areas. A lot of spurious brands or look-alikes are available, providing a low cost option to the rural customer. Many a time the rural customer may not be aware of the difference due to illiteracy. 9. Seasonal demand: Demand may be seasonal due to dependency on agricultural income. Harvest season might see an increase in disposable income and hence more purchasing power. 10. Dispersed markets: Rural population is highly dispersed and requires a lot of marketing efforts in terms of distribution and communication.

Strategies for Rural Marketing

Decentralizing rural markets by detaching them from the urban bases. A give-and-take twoway approach should replace the present one-way exploitation. The salesman in rural markets should be selected from the educated unemployed villagers, trained well and appointed as salesmen. The town-to-villages shuttling salesmen are to be replaced by stationary salesman in villages. Companies should also adequately concentrate on educating the villagers to save them from spurious goods and services. Rural markets are laggards in picking up new products. This will help the companies to phase their marketing efforts. This will also help to sell inventories of products out dated in urban markets.

RURAL VS URBAN MARKETING-SUMMARY

ASPECT PHILOSOPHY
A) B)

URBAN Marketing & Societal Concepts & Relationship Marketing

RURAL Marketing & Societal Concepts, Development Marketing & Relationship Marketing

MARKET DEMAND C) COMPETITION CONSUMERS LOCATION LITERACY INCOME EXPENDITURE NEEDS INNOVATION/ADOPTION PRODUCT AWARENESS CONCEPT POSITIONING USAGE METHOD QUALITY PREFERENCE PRICE SENSITIVE
LEVEL DESIRED DISTRIBUTION

High Among Units In Organized Sector Concentrated High High Planned, Even High Level Faster High Known Easy Easily Grasped Good Yes Medium-high Wholesalers, stockists, retailer,

Low Mostly From Unorganized Units

Widely Spread Low Low Seasonal, Variation Low Level Slow Low Less Known Difficult Difficult To Grasp Moderate Very much Medium-low Village shops, Haats

CHANNELS

supermarket, specialty stores, & authorised showrooms Good High Print, audio visual media, Average Limited TV, radio, print media to some extent. More languages Occasionally Gifts, price discounts Less opportunities

TRANSPORT FACILITIES PRODUCT AVAILABILITY PROMOTION ADVERTISING PERSONAL SELLING SALES PROMOTION PUBLICITY

outdoors, exhibitions etc. few languages Door-to-door, frequently Contests, gifts, price discount Good opportunities

MARKETING MIX Challenges Availability: the First challenge is to ensure the availability of the product.
Indias 638000 villages are spread oven 3.3 million sq km; 742 million Indian may live in rural areas but finding them is not easy. They are highly dispersed. Given the poor infrastructure, it is a greater challenge to regularly reach products to the far-flung villages. Marketer should plan accordingly and strive to reach these markets on a regular basis. Marketers must trade off the distribution cost with incremental market penetration. India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system which helps its brands reach the interiors of the rural market. To service remote village, stockists use auto rickshaws, bullockcarts and even boats in the backwaters of Kerala. Coca-Cola, which considers rural India as a future growth driver, 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. LG Electronics has set up 45 area offices and 59 rural/remote area offices to cater to these potential markets.

Affordability: The second major challenge is to ensure affordability of the product or service.

With low disposable incomes, products need to be affordable to the rural consumer, most of who are on daily wages. A solution to this has been introduction of unit packs by some companies. This ensures greater affordability. Most of the shampoos are available in smaller packs. Fair and lovely was launched in a smaller pack. Colgate toothpaste launched its smaller packs to cater to the traveling segment and the rural consumers. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs. Hindustan Lever has launched a variant of its largest selling soap brand, Lifebuoy. Coca-Cola has addressed the affordability issue by introducing the smaller bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. A series of advertisement for this was rune showing people from diverse backgrounds featuring Aamir Khan. Godraj recently introduce 3 brands of cinthol, fair glow in 50 gm packs, priced Rs 4-5 meant specially for MP, Bihar, And UP. The so called BIMARU states

Acceptability: The next challenge is to gain acceptability for the product or service. Therefore,
there is a need to offer products that suit the rural market. LG Electronics have reaped rich dividends by doing so. In 1998, it developed a customized TV for the rural market named Sampoorna. It was a runway hit selling 100,000 sets in the very first year.

 Coca-Cola provided low-cost ice boxes in the rural areas due to the lack of electricity and refrigerators. It also provided a tin box for new outlets and thermocol box for seasonal outlets.

Awareness:

A large part of rural India is inaccessible to conventional advertising media. Only 41 per cent rural households have access to TV. Building awareness is another challenge in rural marketing. A common factor between the rural and the urban consumer is the interest for movies and music. Family is the key unit of identity for both the urban and rural consumer. However, the rural consumer expressions differ from his urban counterpart. For a rural consumer, outing is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Consumption of branded products is treated as a special treat or indulgence. Hindustan Lever has its own company-organized media. These are promotional events organized by stockists. Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language. Coca-Cola uses a combination of TV, cinema and radio to reach the rural households. It has also used banners, posters and tapped all the local forms of entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media. LG Electronics uses vans and road shows to reach rural customers. The company uses local language advertising. Philips India uses wall writing and radio advertising to drive its growth in rural areas.

4Ps Solution
A product is the heart of rural marketing. It is a need satisfying entity to a rural consumer. The following have to be kept in mind while the marketer makes a decision on the product. The product for the rural markets has to be simple, easy to use and provide after sales service or maintenance. The product has to be packed for low price and convenient usage. The pack has to be easily understood by the rural consumer. The information on the pack is preferred in local language communicating the functional benefit of the product. A rural customer is price sensitive and shops for value. This is mainly because of his lower income levels than his urban counterparts. Hence the marketer has to find ways of making the product affordable to the rural consumer. Distribution of products is one of the biggest challenges of rural marketing. There are CWC (Central Warehousing Corporation) and SWCS (State Warehousing Corporations) set up in rural areas to store and distribute products. All these tiers provide warehousing facilities only to their own members. Hence it is a big problem for a company to store its goods in rural areas. Rural communication can be through Conventional media or through a non-conventional media. The most common conventional media include: Print, Cinema, Television and Print. The Nonconventional media include: Theatre, Posters, Haats and Melas.

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MARKRTING STRATEGIES TO CAPTURE RURAL INDIA

SEGMENTATION OF RURAL MARKET The first step is to develop & implement any strategy for the rural market should include the appropriate segmentation of the rural market. The important thing is that appropriate segmentation basis need to be applied. Different product categories have different rural markets to cater to & these can be selected by applying different criteria of segmentation. The organization can do the following thing to start with: o Focus on select markets. o Focus on select villages.
BY PROPER COMMUNICATION IN INDIAN LANGUAGE

The companies have realized the importance of proper communication in local language for promoting their products. They have started selling the concept of quality with proper communication. Their main focus is to change the Indian customer outlook about quality. With their promotion, rural customer started asking for value for money.
BY UNDERSTANDING CULTURAL AND SOCIAL VALUES

Companies have recognized that social and cultural values have a very strong hold on the people. Cultural values play major role in deciding what to buy. Moreover, rural people are emotional and sensitive. Thus, to promote their brands, they are exploiting social and cultural values.
BY PROVIDING WHAT CUSTOMER WANT

The customers want value for money. They do not see any value in frills associated with the products. They aim for the basic functionality. However, if the seller provides frills free of cost they are happy with that. They are happy with such a high technology that can fulfil their need. As "Motorola" has launched, seven models of Cellular Phones of high technology but none took off. On the other hand, "Nokia" has launched a simple product, which has captured the market.
BY DEVELOPING RURAL-SPECIFIC PRODUCTS

Many companies are developing rural-specific products. Keeping into consideration the requirements, a firm develops these products. Electrolux is working on a made-for India fridge designed to serve basic purposes: chill drinking water, keep cooked food fresh, and to withstand long power cuts.
BY GIVING INDIAN WORDS FOR BRANDS

Companies use Indian words for brands. Like LG has used India brand name "Sampoorna" for its newly launched TV. The word is a part of the Bengali, Hindi, Marathi and Tamil tongue. In the past one year, LG has sold one lakh 20-inch Sampoorna TVs, all in towns with a population of around 10,000. 11

 BY EFFECTIVE MEDIA COMMUNICATION

Media Rural marketing is being used by companies. They can either go for the traditional media or the modern media. The traditional media include melas, puppetry, folk theatre etc. while the modern media includes TV, radio, and e-chaupal. LIC uses puppets to educate rural masses about its insurance policies. Govt of India uses puppetry in its campaigns to press ahead social issues. Brook Bond Lipton India ltd used magicians electively for launch of Kadak Chap Tea in Etawah district. In between such a show, the lights are switched of and a torch is flashed in the dark (EVEREADYs tact).
MELAS

Melas are places where villagers gather once in a while for shopping. Companies take advantage of such events to market their products. Dabur uses these events to sell products like JANAM GHUTI (Gripe water). NCAER estimates that around half of items sold in these melas are FMCG products and consumer durables. Escorts also display its products like tractors and motorcycles in such melas.

OTHER Strategies for Rural Marketing

Decentralizing rural markets by detaching them from the urban bases. A giveand-take two-way approach should replace the present one-way exploitation. The salesman in rural markets should be selected from the educated unemployed villagers, trained well and appointed as salesmen. The town-tovillages shuttling salesmen are to be replaced by stationary salesman in villages. Companies should also adequately concentrate on educating the villagers to save them from spurious goods and services. Rural markets are laggards in picking up new products. This will help the companies to phase their marketing efforts. This will also help to sell inventories of products out dated in urban markets.

STP
Selecting and attracting markets involves three key decisions, viz., segmenting, targeting and positioning. Segmenting is the process of dividing or categorizing market into different groups based on one or more variables. Targeting is selecting the market segments, which can be served efficiently and profitability. It is, deciding on market coverage strategies. Positioning is a market attraction strategy, which involves placing the brand in the minds of the customers in the target market. The various steps involved in the market coverage and attraction process are:

Decision

Segmentation Targeting Positioning customers

1. Identification of various bases for segmenting market 2. Developing profiles of the market segments 3. Evaluating the market segments for their attractiveness 4. Deciding the market coverage strategy 5. Communicating the chosen competitive advantage to the 6. Identifying a set of possible competitive advantages of the brand 12

Actions

7. Selecting the right competitive advantage

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PRODUCT STRATAGIES
The Rural market is not a homogenous set of customers with preferences frozen in time. When developing products in any category, marketers must identify the typical rural specific needs. Urban products cannot be dumped onto rural markets without modifications. Tailor-made products are better received by the rural audience as the consumers feel empowered and tend to identify with the offering Product Intended for rural Market should be Simple, Easy to use, Visually identifiable and Affordable The rural customer judge the offering on the basis of 3 basics elements 1) The Product Feature and Quality 2) The Service Mix and quality 3) The Appropriateness of the offerings Price Rural Product includes FMCGs : Toilet soaps, washing cake, tooth powder, etc Consumer Durables: Pressure cooker, pan, bicycle, table fan etc Agricultural Goods : Seeds, fertilizer, pesticides, insectidies and implements (tractor, threshers), dairy, poultry, fishery etc Services : Telecom, Transport, health care, banking, insurance, education Mahindra MaXX, HPCL 5Kg Gas Cylinder, Vardaan Bidi , Jalsodhak Water purifier, Philips Mahasangram are the few Success in rural market The basic product strategies of different companies in the market arena are as follows: (i) Leader Product innovation strategy Quality improvement strategy Multi-brand strategy Brand extension strategy Superior service strategy Image building strategy ii) Challenger Cheaper goods strategy Prestige goods strategy Economy goods strategy, and Reacting or Pro-acting in the above strategies of a leader on a high or moderate level iii) Follower Innovative imitation strategy, and Other strategies of leader and challenger maintaining low profile iv) Nicher High quality strategy Narrow product line Superior service, and 14

 Indifference to other companies as none of them is a competitor. From the above list, we can take the following strategies for the consideration of marketers. i) Identity Strategies Commodity strategy Branding strategy ii) Customer Value Strategies Mass product strategy Premium product strategy (iii) Innovation Strategies Rural common Special for rural iv) Quality Strategies Quality improvement strategy Spurious goods strategy v) Packaging Strategies vi) Brand Strategies Based on the price and quality 2 types of goods are identified: Mass product (cheaper and economy goods) Premium product (superior goods) Cheaper goods are those, which are characterized by, low quality and low price. They perform core functions but lack certain attributes, which make their use less comfortable, less pleasant and less desirable. e.g. Nirma washing powder is cheap good. The package is poor. Powder spills over. When the powder is mixed in water, burning sensation is felt in the skin and palms. Economy goods are products with all necessary functional features but no fancy features. Its price and quality are fairly reasonable. In case of durables, its operating and maintenance expenditures are low. As such, they are money savers while being need e.g. T.v without remote etc. Premium goods are such products, which appeals to the ego of the buyer. They are described as, goods for premium consumption. e.g. Jewellery, cars etc.

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Based on product development Innovations Imitations (novelties, copycat) Innovations: - innovate products rule the market. An innovate firm will surely succeed. However, it should be careful in making technical innovations in tune with changing market behaviors. Imitations: - imitations may result in two types of goods depending upon the purpose, commitment and competence of imitator. A poor imitator will end up in producing deceptive, spurious, fake copy cat products. On the other hand, the competent imitator may even produce an improved version of the original product.

Product Strategies
The specific strategies, which can be employed to develop or modify the products to targets the rural market, can be classified as follows:

.1. Small unit packing: Given the low per capita income & purchasing habits of the rural consumers, small unit packages stand a good chance of acceptance in rural market. Single serve packets or sachets are enormously popular in India. They allow consumers to buy only what they need, experiment with new products, & conserve cash at the same time. This method has been tested by products life shampoos, pickles, biscuits, Vicks cough drops in single tablets, tooth paste, etc. Small packings stand a good chance of acceptance in rural markets. The advantage is that the price is low and the rural consumer can easily afford it. Also the Red Label Rs. 3.00 pack has more sales as compared to the large pack. This is because it is very affordable for the lower income group with the deepest market reach making easy access to the end user satisfying him. The small unit packings will definitely attract a large number of rural consumers. 2. New product designs: Keeping in view the rural life style the manufacturer and the marketing men can think in terms of new product designs. The rural product usage environment is tough because of rough handling, rough roads & frequent power fluctuations. Thus, all these environmental factors must be considered while developing the products meant for rural audience. Nokias 1100 model is a very good example of a customized model for rural markets. Its design has been modified to protect it against rough usage in rural environment; it is dust resistant & has a small torch light in view of the frequent power cuts in rural India. It is also introduces messaging in Hindi language now, in some of the economically priced models in order to cater to the semi-urban or rural consumers. This is in real terms, thinking global & acting local. 3. Sturdy products: Sturdiness of a product is an important factor for rural consumers. The product should be sturdy enough to stand rough handling, transportation & storage. The experience of torch light dry battery cell manufacturers supports this because the rural consumers preferred dry battery cells which are heavier than the lighter ones. For them, heavier weight meant that it has more over and durability. Sturdiness of a product either or appearance is an important for the rural consumers. 16

4. Utility oriented products: The rural consumers are more concerned with utility of the product and its appearance Philips India Ltd. Developed and introduced a low cost medium wave receiver named BAHADUR during the early seventies. Initially the sales were good but declined subsequently. On investigation it was found that the rural consumer bought radios not only for information and news but also for entertainment. 5. Brand name: For identification, the rural consumers do give their own brand name on the name of an item. The fertilizers companies normally use a logo on the fertilizer bags though fertilizers have to be sold only on generic names. A brand name or a logo is very important for a rural consumer for it can be easily remembered. Many a times rural consumers ask for peeli tikki in case of conventional and detergent washing soap. Nirma made a peeli tikki especially for those peeli tikki users who might have experienced better cleanliness with the yellow colored bar as compared to the blue one although the actual difference is only of the color. e.g.: Coca-Cola targeted the whole Indian rural market with the positioning of Thanda Matlab CocaCola advertisements because most of the villagers say when wanting a drink refer to it as Thanda so Coca-cola used that word.

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PRICING Strategies
Among the four As of rural marketing viz. Affordability, Availability, Awareness & Acceptability Affordability is the major determinant of consumption. Affordability is determined by two factors 1 Incomes of the consumer 2 Prices of the products or services As such the corporate will have to adopt a two pronged strategy of boosting incomes of rural consumers through Development Marketing and adopting pricing policies and methods that make products affordable. Price is a multi-dimensional concept To company, it is revenue generator. To the consumers, it is their cost of purchase as well as cost of living. To the economy, it is the mechanism by which the resources are allocated.

Factors influencing the price

b) a) Internal Factors: Cost, Pricing Objective External Factors: Customers, Suppliers, Competitors Cost Factor: Promotion as a cost factor The Use of mass media is not as effective in rural because TV penetration os low and Press Reach is limited. To bring down this communication cost , companies make use of collective platforms like Haats, melas and mandis, places whee large number of people turn out on their own Credit-based transactions increase cost HLL has made sustained efforts to tap rural market by investing in an innovative distribution channel (Shakti), customized promotion (operation bharat) communication strategy.

Pricing Objectives
Profit maximization in the long run Company should develop the market by introducing the product at a low price with low profits through penetration pricing of product. For Example , they should sell shampoos in sachets Minimum returns on sales turnover It is difficult to make instant profits in rural market. Therefore, initially a company seta pricing strategies to recover the cost incurred. Deeper penetration of the market Here the objective is market expansion, so company launches its product at lower price Keeping with competition Here objective is market expansion so the company launches its product at a lower price

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Pricing strategies
1. Low cost/ cheap products: This follows from the product strategy. The price can be kept low by low unit packagings like paisa pack of tea, shampoo sachets, vicks 5 grams tin, etc. this is a common strategy widely adopted by many manufacturing and marketing concerns. 2. Refill packs / Reusable packaging: In urban areas most of the health drinks are available. The containers can be put to multipurpose uses. Such measures can a significant impact in the rural market. For example, the rural people can efficiently reuse the plastic bottle of hair oil. Similarly the packages of edible oil, tea, coffee, ghee etc can be reused. Pet jars free with the Hasmukhrai and Co Tea, Ariel Super Compact. 3. Application of value engineering: in food industry, Soya protein is being used instead of milk protein. Milk protein is expensive while Soya protein is cheaper, but the nutrition content of both is the same. The basic aim is to reduce the value of the product, so that a larger segment can afford it, thus, expanding the market. 4. Large volume-low margins (Rapid or slow penetration strategy): Marketers have to focus on generating large volumes & not big profit margins on individual products. If they price their product at a level which can lead to good volumes, then they can still generate good returns on the capital employed. 5. Overall efficiency & passing on benefits to consumers: For rural products, the strategy should be to cut down the production, distribution & advertising costs & passing on these benefits to the customers to further increase the turnover. Most often, it has been observed that advertising has less to do with product sales in the rural areas. If an organization gets the price point right, then it can work in rural market. 6. Low volume-low price strategy: This strategy of reducing prices by reducing the package size in order to make it appear more affordable, is delivering very good results for a large number of FMCG product categories, in the rural markets of India. In categories where maintaining the price point is extremely critical, this strategy is delivering very good results. 7. Ensuring price compliance: Rural retailers, most of the times, charges more than the MRP. The manufacture has to ensure price compliance either through promotional campaigns, as was done by Coca Cola, or by ensuring the availability of products at the retail outlets directly.

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Consumer Characteristics
Category Quality conscious Value Conscious Price Conscious Annual Income Over Rs. 1,50,001 Life style Very Rich

Rs.45,001-1,50,000 Consuming class Rs.22,001Rs.45000 Climbers

Price in Marketing Mix

Rural Consumers Product Price Promotion High Place Show rooms, Maals,

Quality conscious Premium Product High concerned with functional benefits value for money Value conscious Mass Products Medium Price sensitive concern with functional benefits Price conscious Spurious products Low

High

General and fancy stores paan shops and haats Kirana, paan shops and haats

No

Types of Pricing Strategies

Coinage Pricing Captive Product Pricing Optional Product Pricing Low Pricing Product Product Bundle Pricing Penetration Pricing Special Event Pricing

Coinage Pricing It is one of the most common pricing strategy used in rural markets for FMCG brands. Companies have adopted this pricing in order to avoid problems caused by shortage of change. Here the packs are small in size and are meant only for one time consumption or for weeks consumption. Coinage pricing have been used to be easy to communicate to consumers. For Ex, sunsilk sachets coinage pricing

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Optional Product Pricing It is that pricing strategy where optional products are being charged along with the main products. This strategy helps to bring those customers who are not at all inclined towards high ticketed products though they have sufficient resources to make the purchase. Many consumer durables companies are using this pricing strategy to penetrate the market. Ex: LG adopted Optional Product Pricing, Adopted a twin pronged strategy in rural areas that have worked brilliantly. They have launched two sets of TVs for rural markets. One is Sampoorna LG TV which is of Rs 3000. Second is Cineplus LG TV which is for RS 4900. LG is the fist brand in rural areas who have adopted an optional pricing strategy by providing various games in their TVs in continuation of its association with cricket. Low Pricing Product Nowadays companies have introduced low point price packs so that their products are basically included in the daily basket of purchases of the wage earners. This pricing strategy helps mostly FMCG companies in not earning high sales and revenue but in generating high market share in rural markets. Ex: nestle sold Maggie in small packs with just Rs 5, Kitkat with just Rs 2 Product Bundle Pricing Combining several products and offering the bundle at a reduced price. This pricing strategy is common during the time of inflation. This strategy helps the companies to generate sales and to attract customers in highly competitive market. This strategy is used during festival seasons by durable goods manufactures. Ex: HLL launched a combo pack comprising a Clinic shampoo bottle, a tube each of pepsodent and Fair & Lovely and Ponds Dream Flower Talc for rural areas. HLL provided hampers at discounted prices of Rs. 5 Rs.10 and Rs.20 each in different sizes and combinations. The project was aimed at addressing issues of consumers awareness, attitudes and habits As consumers in rural areas were exposed to and became familiar with such value added value for money alternatives. Special Event Pricing This pricing strategy is basically used by those companies who offer products at special prices during certain seasons to draw more customers. This strategy is more used by consumer durables companies such as :Refrigrators and Air Conditioners in summer and room heaters in winters. For rural areas this type of pricing is basically done at the time of harvest, or during the wedding seasons or during festivals like Diwali , Pongal and during Durga Pooja. Ex: Hero honda run a van campaign before the harvest season in rural areas and took bookings against the token deposit of Rs 500 and gave free watches in return. 21

Product Form Pricing This form of pricing strategy is common among rural retailers. People in rural areas are selling loose items at higher price compared to the pack price. Ex: Loose Cigarette, Coil, Matchstick, Bread etc Videcon :Pricing Strategy Videcon was one of the first companies to enter the rural market with a plethora of products in the home appliances. It attacks market leader Phillips by launching a radio set for Rs.180(the Phillips radio set cost Rs.250) and grabbed a major chunk of the market. Low Priced shampoo Cavinkare realized that for a family of five members at rs.2 per sachet and minimum of four hair washes per person per month would mean a Rs. 40 spend for a shampoo . Many rural families cannot be afford expense.

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Distribution Strategy
Many companies view the rural markets as great opportunity for expanding their sales but find distribution as a major problem. Unfortunately, it is almost impossible to transplant strategies which work successfully in urban markets onto rural markets, namely, extensive retailing and sustained pull generation through mass media advertising. The road blocks to reach the rural customers are: Lack of adequate transport facilities. Large distances between villages. Lack of pucca roads connecting villages to nearest townships. Lack of proper retail outlets Lack of mass media infrastructure.

The marketers were of the opinion that the villagers would come to nearby towns and buy the products that they want. What has been found is that if we have to serve the rural consumer we will have to take our products to him through the channels that he is using and some innovative ways of getting to him. The following distribution strategies formulated for the rural category. 1. Coverage of villages with 2000 and above population: Ideally, coverage of villages with up to 2000 and above population could be the break-even point for a distribution setup. By doing so the percentage of villages covered comes to only 10% of all the villages, but the rural population covered will be substantial, to the extent of about 40 to 45 percent. With a distribution network in about 55,000 villages, which have a population of 2000 persons & above each, one can cover about 25 crores rural consumers. This strategy is good to begin with & then subsequently, villages with lesser populations can be added. 2. Segmentation: the number of villages in India is huge & it is not viable to contact & serve all villages directly. Therefore, companies or distributors can carefully examine the market potential of different villages & target the villages that can be served in a financially viable manner through an organized distribution effort. 3. Use of co-operative societies: There are over 3 lacks co-operative societies operating in rural areas for different purposes like marketing cooperatives, farmers service cooperatives and other multipurpose cooperatives. These cooperatives have an arrangement for centralized procurement and distribution through their respective state level federation. Such state level federation can be motivated to procure and distribute consumables items and low value durable items to the members to the society for serving to the rural consumers. Many of the societies extend credit to the members for purchases. 4. Utilization of public distributory system: The PDS in the country is fairly well organized. The revamped PDS places more emphasis on reaching remote rural areas like the hills and tribals. The purpose of PDS is to make available essential commodities like food grains, sugar, kerosene, edible oils and others to the consumers at a reasonable price. The shops that distribute these commodities are called fair price shops. These shops are run by the state civil Supplies Corporation, 23

co-operatives as well as private entrepreneurs. Here again there is an arrangement for centralized procurement and distribution. The manufacturing and marketing men should explore effective utilization of PDS. 5. Utilization of multipurpose distribution centers by petroleum/oil companies: In order to cater to the rural areas the petroleum/oil companies have evolved a concept of multipurpose distribution centers in rural areas. In addition to petrol/diesel, lubricants, these outlets also stock consumables agricultural inputs like fertilizers, pesticides and seeds. It is estimated that there are about 450 such outlets in operation in the country. The rural consumer who has tractors, oil-engine pump sets and mopeds frequent these outlets for their requirement. These outlets can be profitably utilized for selling consumables and durable items also. 6. Distribution up to feeder markets/mandi towns: Keeping in view the hierarchy of markets for the rural consumers, the feeder markets and mandi towns offer excellent scope for distribution. The rural customers visit these towns at regular intervals not only for selling the agricultural produce but also for purchasing cloth, jewelry, hardware, radios, torch cells and other durables and consumer products. From the feeder markets and mandi towns the stockiest or wholesaler can arrange for distribution to the village shops in the interior places. This distribution can be done by mopeds, cycles, bullock-carts, camelbacks etc. depending upon the township. 7. Shandies/Haaths/Jathras/Melas: These are places where the rural consumers congregate as a rule. While shandies/heaths are held a particular day every week, Jathras and melas are held once or twice a year for longer durations. They are normally timed with religious festivals. Such places attract large number of itinerant merchants. Only temporary shops come up selling goods of all kinds. It can be beneficial for companies to organize sales of their product at such places. Promotion can be taken, as there will be ready captive audience. For convincing the manufacturing and marketing man with regard to the importance of these places from rural marketing point of view a visit to such places is necessary. It is estimated that over 5,000 fairs are held in the country and the estimated attendance is about 100 million rural consumers. Biggest fair Pushkar Mela is estimated to attract over 10 million people. There are 50 such big rural fairs held in various parts of country, which attract urbanite also like Mankanavillaku in Malappara in Kerela, Kumbh Mela at Hardwar in U.P. Periya Kirthigai at Tiruparunkunaram in Tamil Nadu. Merits: Convenience: The entire market can be related to large departmental stores in cities, where the advantage is a one-stop shopping exercise. These outlets crop up every week, providing consumers immense choice and prices. Attractive: The weekend shopping is not only convenient but also entertaining. The markets start early and will be over by lunch. Afterwards, there will be entertainment. In respect of transactions, it is an attractive place to those who want to buy second hand durables and to those who prefer barter transactions. Further the freshness of the produce, buying in bulk for, a week and the bargaining advantage attract the frugal and weeklong hard working rural folk. Availability: It is a market for everyone and for everything. Household goods, clothes, durables, jewellery, cattle, machinery, farming equipment, raw materials and a host of products are available.

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8. Agricultural Input Dealers: Fertilizers should be made available to the farmers within the range of 4-5 km from their residence, as per the essential commodities act. This is why there are about 2 lakh fertilizer dealers in the country, both in cooperative & private sector. Example of Varana Nagar in Maharashtra proved an eye opener in this regard where the sugar and milk co-operatives have totally changed the life style of people. The supermarket in Varana Nagar caters exclusively to rural consumers. Similarly a co-operative supermarket called Chintamani in Coimbatore (T.N) arranges free transit of rural consumers to the supermarket of their purchases. 9. Joint distribution by Non-competing Companies: As the cost of distributing the products in the rural market through distribution vans can be unviable for a single company, different noncompeting companies can come together to jointly operate distribution vans for the rural market. This will enable them to share the cost of operating the van & on account of the sharing of the cost by four or five companies; the entire operation can become financially viable for all the players. 10. Personal Selling Network: It is very successful distribution channel being developed by companies like HUL. It adds a personal touch to the marketing, as the salesmen are the resident of the village or community itself, making it easier to sell the product & maximise sales for the company.

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Promotion strategies
Promotion is the process of marketing communication to inform, persuade, remind and influence consumers or users in favor of your product or service. Customized promotional media & messages need to be developed by the organizations to effectively target the rural market. The following strategies can be considered while developing promotional campaigns for the rural markets: 1. Think Global Act Local Rural population is diverse, but the commonalities of their ethos & simple living habits need to be understood for advertising to succeed. For that, the theme of the advertisement needs to revolve among universal themes, such as family-love. But the context, storyline, language & idioms should be such that the rural audience of different rural market segments can relate to. 2. Think in Local Idiom This is the need of the advertising professionals who can think like the rural people. The only we can have insights like Thanda matlab Coca Cola. There should be the use of language writers who understands the rural & regional pulse better. 3. Simplicity & Clarity All promotional messages targeted at rural audience need to be simple & clear, which can be easily understood, & they should not include any confusing elements. It is preferable that it has only a few propositions at a time. Bombarding rural consumers with too much, in less time can easily confuse them & leave them bewildered. Promotional message should highlight only the functional values of the product & explains how those values can make the consumers life even better & solve any of his problems. 4. Narrative Story Style The promotional message can be delivered in the form of an entertaining story with a message depicting how the brand delivers larger good to the family & society. The theme of the story line can be about how the product can solve the problems of the rural consumers. 5. Choice of Brand Ambassador Brand Ambassador for the rural markets need to be picked carefully as urban successes might not get replicated in the rural markets. That is why Govinda in the Mirinda as boosted the sales of the drink in the rural markets. An organization might spend a lot of money in hiring a brand ambassador only to find out later that it had little impact on the rural consumer.

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Media Vehicles
Through the rural markets offer big attractions to the marketers, one of the most important questions frequently asked is How do we reach the large rural population through different media and methods? Mass Media Radio Cinema Press TV Local Media Haats, Melas, Fairs Wall Paintings Hoardings Leaflets Video Vans Folk Media Animal Parade Transit Media Personalized Media Direct Communication Dealers Sales Persons Researchers

Formal media

It includes Press and print, TV, Cinema, Radio, and Point of purchase and Outdoor advertisement. Reach of formal media is low in rural households (Print: 18%, TV: 27%, Cinema: 30%, and Radio: 37%) and therefore the marketer has to consider the following points: Newspapers and magazines:

English newspapers and magazines have negligible circulation in rural areas. However local language newspapers and magazines are becoming popular among educated facilities in rural areas. Examples: Newspapers: Eenadu in A.P., Dina Thanthi in Tamil Nadu, Punjab Kesari in the North, Loksatta in Maharashtra and Tamil magazine Kumudam are very popular in rural areas. Television:

It has made a great impact and large audience has been exposed to this medium. HLL has been using TV to communicate with the rural masses. Lifebuoy, Lux, Nihar oil etc are some of the products advertised via television. Regional TV channels have become very popular especially in Southern states. Examples: SUN TV is very popular even in rural areas in Tamil Nadu and Asianet is a preferred regional channel in Kerala. Many consumer goods companies and fertilizer companies are using these TV channels to reach the rural customer. Radio:

Radio reaches large population in rural areas at a relatively low cost. Example: Colgate, Jyoti Labs, Zandu Balm, Zuari industries are some of the companies using radio communication programme. There are specific programmes for farmers like Farm and Home/Krishi Darshan in regional languages. The farmers have a habit of listening to regional news/agricultural news in the morning and the late evening. The advertisement has to be released during this time to get maximum coverage in rural areas. Another advantage is that the radio commercial can be prepared at short 27

notice to meet the changing needs of the rural folk. Example: Release of a pesticide ad at the time of outbreak of a pest or disease in crops. Wall paintings: It is an effective and economical medium for communication in rural areas, since it stays there for a long time depending upon the weather conditions. The cost of painting one square foot area is just Rs.10. Retailers welcome painting of their shops so that the shop will look better. Walls of farm houses, shops and schools are ideal places for painting and the company need not have to pay any rent for the same. The walls have to be painted at least one or two feet from ground level. It is better to take permission of the owner. Very often the owner takes responsibility for taking care of the wall painting. Painting to be avoided during election time and rainy season. The matter should be in the form of pictures, slogans for catching the attention of people. Companies marketing TV, fans, branded coffee/tea, toothpaste, pesticides, fertilizers etc. use wall painting as promotion medium in rural areas.

Informal/Rural specific media

These media with effective reach and personalized communication will help in realizing the promotional objectives. Companies to suit the specific requirements of rural communication are using a variety of such media effectively and some of the more important media and methods are given below. Farm-to-Farm/House-to-House visit:

Rural people prefer face-to-face communication and farm visits facilitate two-way communication. The advantage is that the sales person can understand the needs and wants of the rural customer by directly discussing with him and answer his queries on products and services. Potential customers in the village are identified and the companys/distributors representative makes farmto-farm visits and highlight the benefits of the products. The person carries with him literature in local language and also samples of products. The person does not sell the product but only promotes the use of the product. Very often the local dealer also joins the representative in making farm-to-farm visits. The dealer clarifies the terms and conditions of sale and also makes independent follow up visits for securing orders. Example: This approach has been found to be very effective for agricultural machinery, animal health products and agricultural inputs. Many LIC agents and companies dealing with high value consumer durables have tried this method with success in rich rural areas. Group meeting:

Group meetings of rural customers as well as prospects are an important part of interpersonal media. The company is able to pass on the message regarding benefits of the products to a large number of customers through such meetings. Group meeting of key customers are conducted by banks, agricultural inputs and machinery companies in rural areas. The bankers visit an identified village, get the village people in a common place and explain the various schemes to the villagers. Such meetings could be organized in prosperous villages for promoting consumer durables and two wheelers also. Example: MRF Tyres conduct tractor owners meet in villages to discuss repairs and maintenance of tractors.

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Opinion leaders: Villagers place more emphasis on the experience of others who have used a product/brand to make purchase decision. Opinion leader is a person who is considered to be knowledgeable and is consulted by others and his advice is normally followed. Such opinion leaders could be big landlords, bank official, panchayath-president, teachers, extension workers etc. Examples: a) Mahindra Tractors use bankers as opinion leaders for their product. b) Asian Paints promoted its Utsav brand of paint by painting the village Sarpanchs house a few months prior to the launch if the branch to demonstrate that the paint does not peel off. The Melas:

Melas are of different types i.e. commodity fairs, cattle fairs and religious fairs and may be held only for a day or may extend over a week. Many companies have come out with creative ideas for participating in such melas. Examples: a) Britannia promotes Tiger Brand Biscuits through melas. b) The mahakumbh at Allahabad is the biggest mela in India. HLL has put up 14 stalls in the mela grounds for promoting Lifebuoy. Handcarts have been deployed for increasing access. The Haats:

Traditionally on certain days of week, both the sellers and buyers meet in the village to buy and sell goods and services. These are the haats that are being held regularly in all rural areas. The sellers arrive in the morning in the haat and remain till late in the evening. Next day they move to another haat. The reason being that in villages the wages are paid on weekly basis and haat is conducted on the day when the villages get their wages. For the marketer, the haat can be an ideal platform for advertising and selling of goods. By participating in haats and melas, the company can not only promote and sell the products but also understand the shared values, beliefs and perceptions of rural customers that influence his buying behaviour. Audio Visual Publicity Vans (AVP Vans):

AV unit is one of the effective tools for rural communication. The van is a mobile promotion station having facilities for screening films slides and mike publicity. The sales person makes a brief talk about situation in the village, the products and the benefits. The ad film is screened along with some popular film shots and this continues for about 30 minutes. At the end of the film show, he distributes handbills and answers queries of the customers. The whole operation takes about 1-2 hours depending upon the products under promotion, number of participants in the meeting and time taken for question and answers. The vans move to the next village for the second show. The cost of running a fully equipped AVP unit is about Rs.4000 per day and AVP van operation has to be considered as an investment for business development in rural areas. Example: Companies such as HLL, Colgate, and Phillips have made effective use of AVP vans for popularizing their products in rural areas. Field demonstration:

This is based on the extension principle seeing is believing and is one of the most effective methods to show the superiority of the companys products to the customers. A progressive farmer who is an opinion leader is selected and the demonstration is conducted in his field in the presence of a group of farmers in the village. The farmers observe the results in the field and the local dealer calls on them in their farms and persuades them to buy the particular brand of pesticide or fertilizer. Examples: a) Spraying a particular brand of an insecticide against insect pests and showing the farmer how 29

effectively the insects are controlled. b) Demonstrating the use of tractor/implements for different agricultural operations. c) Hawkins pressure cooker has demonstration representatives who carry out demos in rural households. The representative receives 1% commission for every customer who approaches the dealer via demonstrations. e) Similarly effectiveness of detergents, pressure cookers, vaccum cleaners and mosquito coils could be promoted by demonstrations in selected markets. Information centers:

They provide latest information on cultivation of crops, fertilizer application, weed, management and control of pests and diseases. Experienced agricultural graduates who make frequent visits to the field and advice farmers on modern agricultural practices manage the centers. They also provide information on farm implements, seeds, fertilizers, pesticides, diesel engines, sprayers and tractors etc. Many consumer goods companies have opened show rooms in prosperous rural areas. Example: Hero Honda has opened extension counters with show room facilities in major rural markets. Life-style marketing:

Each rural market segment has certain special features i.e. they share common life-style traits. They include village sports, religious events, prominent personalities and role models. Examples: Textile mills maintaining community gardens, Mineral water companies supplying clean drinking water during summer festivals in villages and Consumer goods companies sponsoring Kabaddi.

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DCM Hariyali Kisan Bazaar

Hariyali means Greenery in Hindi signifying Prosperity in Agriculture. Kisaan Bazaar means Farmers marketplace. DCM Shriram Consolidated Ltd. (DSCL), a leading diversified Indian corporate house with over 35 years of experience in the agri-input markets & first hand knowledge of Indian farmers, has pioneered an innovative business venture called DCM Hariyali Kisaan Bazaar. The concept was started in 2002 in Rajasthan, Uttar Pradesh, Haryana, Punjab and Uttaranchal Hariyali Kisaan Bazaar aims at providing end-to-end ground level support to the Indian farmer for improving their productivity and profitability. It aims at creating a positive impact in bringing a qualitative change and revolutionizing the farming sector. The large-format HKB outlets range between 10,000 and 15,000 square feet, while the smaller format is in the 3,000-6,000 square feet range. At present DSCL has a total number of 302 stores in eight states viz--U.P, Rajasthan, Punjab, Harayana, Chattisgarh, Maharashtra, MP and A.P Key constraints Poor migration from lab-to-land Multiple agencies involved in research, but lab results not getting replicated in the farmer field in large scale. Land Degradation 1- Intensive cultivation over the years with little importance given to nutrient replacement . 2- Practically, no use of organic and biological nutrient sources Availability of quality Agri-Inputs Unorganized retail of inputs leading to low control on quality of Inputs being supplied. Lack of last mile delivery mechanism of modern agriculture know-how & practices. "Middlemen" driven farmer interface. High cost credit. Lack of direct access to buyers of varied & high value crops. Benefits to the Farmers relevant Agri technology o Provide customised solutions to farmers. o Hand-holding farmers through implementation of new technology o Serve as a bridge between farmers & universities. Agri-Inputs o Provide a complete range of good quality inputs, Market Linkages o Access to new markets/ buyers for farmers produce Medical facility Provide complete medical facility to the farmers. Warehousing & Commodity exchanges o Providing farmers with quality warehousing facilities & access to commodity exchanges 31

 Household Goods o Provides a range of good quality household goods for the farmers family. Financial Services Access to credit, insurance & banking services . Eg. HDFC Bank, DCM Shriram tie up to offer rural banking services Hariyali Kissan Bazaar will offer normal banking services such as a savings account facility and loans to its customers, mostly farmers, through its 128 outlets ICICI Prudential Life Insurance, the largest private life insurer in India , has announced a strategic distribution tie-up with Hariyali Kisaan Bazaar, the rural business arm of DCM Shriram Consolidated Ltd (DSCL). As a partner, Hariyali Kisaan Bazaar can now distribute ICICI Prudential's protection, wealth creation, retirement solutions and health insurance products to customers across the its growing number of rural business hubs in the country. Other Products and Services: Fuels, FMCG, Consumer Goods and Durables,Apparels etc. for example, Motorola has an alliance with the Kisaan Bazaars for sales and distribution of its handsets. Hariyalis alignment with objectives of Inclusive growth 1. Investment in Rural Infrastructure Each centre, set up over 2-3 acres of land, provides need-based infrastructure to the farmers. Facilities include a warehouse for agri-inputs or farm produce, an agri-advisory centre equipped with qualified agronomists, a veterinary centre with qualified vet doctors & availability of medicines. An information centre with IT linkage to a team of scientists Availability of diesel and petrol. Addition of bank branches & ATMs to these centres will help in achieving the governments objective of taking credit to the micro level. 2. Improving farmers productivity & profitability provide 24X7 technology support through a team of dedicated qualified agronomists. critical last mile delivery of agri advise to the farmers to ensure adoption of appropriate modern agri practices. focus is on shifting farmers from subsistence to technology led commercial farming. 3. Aggregation of Farm Produce Fragmented land-holdings, a major constraint in Indian farming. Create the opportunity to aggregate farm produce & market it to buyers hitherto inaccessible to individual farmers. 4. Access to information & Use of IT Use of IT to provide online support on latest technical advancements weather forecasts mandi (market) prices fair & transparent billing to farmers Maintain extensive farmer databases with micro information about the farmers field to provide customized service to the farmers. 5. A Sustainable model for Public-Private partnership

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ITC E-choupal Common defects in agricultural marketing in India

Lack of organization Forced sales Presence of middlemen Numerous market charges Market malpractices Lack of standard weights and measures Inadequate storage No standardization of price and quality Lack of marketing finance

ITC E-Choupal
E-choupal is a Hindi word which means Village meeting place. E-choupal is a virtual market place where farmers can transact directly with a processor and can realize better price for their produce. E-choupal makes use of the; Physical transmission capabilities of current intermediaries & aggregation, Logistics, counter-party risk and Bridge financing In June 2000, ITC Limited launched e-choupal in India and now e-choupal has become the largest Internet based intervention in rural India. E-choupal and the traditional model The main attraction of e-choupal is that it connects large and small producer and users and eliminates the need of middlemen (who are essential in traditional market). E-choupal is a virtual market that brings together vendors and customers. Geographical distance no longer restricts participation of farmers. The main hurdle of traditional market is that information asymmetry is inherent in the market where as e-choupal provides for transparent transaction. The transaction time at the ITC hub is less than at the mandi i.e. 2 or 3 hours where as 1-2 days in mandi. Some more points are: Customer centric and not dependent on intermediaries. Capable of being used for many commodities & multiple transactions. Easily scalable once it is verified. Uses local talent and local people to develop local leaders. Uses all the existing institutions and legal frameworks. Scientific way of inspection, testing and weighing. 33

The e-choupal business model

The model is centered on a network of e-choupal, information centres equipped with computer connected to the Internet, locating in rural farming villages. E-choupal serves as choupal (gathering place) and an e-commerce hub. A local farmer acting as a Sanchalak (coordinator) runs the e-choupal and the computer usually is located in the sanchalaks home. ITC also incorporated a local commission agent known as the Samyojak (collaborator), into the system as the provider of logistical support.

Sanchalak
The critical element of the e-choupal system and the key to managing the geographical and cultural breath of ITCs network by recruiting a local farmer is the sanchalak. Sanchalak create trust in society and all infrastructure set up is made in his house. Sanchalak receives commission for every transaction processed through the e-choupal and also benefited from increased social status that accompanies the position a significant advantage in rural Indian life. Sanchalak act as public officer in ITC project. Sanchalak also aggregates farmers input as well as purchase orders. Sanchalak undergoes training of basic computer usage, basic business skills, quality inspection of crop product training etc.

Samyojak
The samyojak or cooperating commisssion agents also play important role. He earn income by providing logistical services that substitute for the lack of rural infrastructure by providing information and market signals on trading transaction. Samyojak is involved in ongoing operation of e-choupal system, allowing them revenue streams through providing services such as o Management of cash, o Bagging & labour at procurement hubs, o Handling of mandi paperwork as licensed principals for the retail transaction of the echoupal. ITC has plans to saturate the sector in which it works with e-choupals, such that a farmer has to travel no more than 5kms. The company expects each e-choupal to serve about 10 villages. 34

Benefits of e-choupal
A quiet digital revolution is reshaping the lives of farmers in remote Indian villages. E-choupal

Delivers real-time information Customized knowledge to farmers decision making ability Securing better quality & price The e-choupal initiative also creates a direct marketing channel, eliminating wasteful intermediation and multiple handling, thus reducing transaction cost and making logistics efficient. Digital transformation -E-choupal tried to change the stereotype image of farmers of bullock cart. Farmers now log on to the site through internet kiosks to o Order high quality input, o Get information on best farming practices, o Prevailing market prices for their crops at home and o Abroad for the weather forecast all in the local language. o The e-choupal site is also helping the farmers discover the best price of their quality at the village itself. o The site also provides farmers with specialized knowledge for customizing their produce to the right consumer segments. o The new storage and handling system preserves the identity of different varieties right through the farm gate to dinner plate supply chain. Thus, encouraging the farmers to raise their quality standards and attract higher price. Credit and Insurance - Farmers low income and difficulty in accessing credit limits the capacity to pursue opportunities within and outside the agriculture sector. o ITC e-choupal proposes the solution of this problem by making partnership with financial institutions. o E-choupal provide various types of loans like Non-cash loans for farm inputs, Loans to sanchalak (sanchalak can better manage credit risk & have better access to farmers), Direct loans to farmers based on sanchalak recommendation Insurance & risk management services etc.

Challenges
As the power is usually available for only a few hours a day at on a sporadic schedule, the echoupal computer cannot always be accessed when information is needed. Phase imbalances leads to damage of equipments. Telecommunication infrastructure in villages is poor. Telephone exchange also have limited battery backup. Illiteracy about computer in rural areas as well as rural population has low trust on electronic system. Selection of an educated, intelligent, reliable and matured person as a sanchalak. Improper knowledge about rural market. Vicious circle of intermediaries (Adatiya & Brokers). 35

Improper and complex user interface on e-choupal.

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