A SEMINAR REPORT ON Changing scenario of rural marketing with special reference to HUL and ITC

2010-2011

Submitted by: Deependra Singh Rathore MBA II Semester Subodh Institute of Management & Career Studies
(DEPARTMENT OF MANAGEMENT STUDIES)

Rambagh Circle, Jaipur

ACKNOWLEDGEMENT
. I express my sincere thanks to my project guide, Mrs. Priti Gupta faculty, Department of Management Studies, Subodh Institute of Management &

Career Studies, for guiding me right from the inception till the successful
completion of the project. I sincerely acknowledge him for extending his valuable guidance, support for literature, critical reviews of project and the report and above all the moral support he/she/they had provided to me with all stages of this project. I would also like to thank the supporting staff of Department of Management Studies, Subodh Institute of Management & Career Studies, for their help and cooperation throughout our project.

Signature of student Deependra Singh Rathore

Table of contents

1. Preface 2. Executive summary 3. Industry profile 4. Objectives, scope and purpose 5. Research Methodology
6. Core Study: Findings, Data & Analysis

7. Conclusion 8. Recommendations 9. Limitations 10. Bibliography

Preface
In India the rural economy India is a land of diversity and about 70% of the Indian population lives in villages. These villages contribute in the economic development of the nation through the production of food grains, vegetables, fruits, etc. Export of these agricultural commodities result in the generation of capital and earnings of foreign exchange. There are 600,000 villages in India. 25% of all villages account for 65% of the total rural population. So we can contact 65% of 680 million or 700 million population by simply contacting 150000 villages which shows the huge potential of this market. Indian rural market has a vast size and demand base. Contributes nearly half of the countrys GDP and the size of the rural market in durables and FMCG is bigger than its urban counterpart. In recent times Rural Marketing has emerged as an important internal sub-division within marketing discipline particularly in the context of a large rural economy like India. But questions like Is there any difference between rural marketing and mainstream marketing? have not been answered satisfactorily. Through the course, the participants will be introduced to a more holistic perspective of rural marketing which includes not only urban-to-rural marketing, but also touches issues of intra-rural marketing and rural-to-urban marketing. The developmental angle to rural marketing is also addressed. In recent years, rural markets have acquired significance, as the overall growth of the economy has resulted into substantial increase in the purchasing power of the rural communities. Rural areas are evolving into strategic market for companies which include not only domestic but MNCs too. There is great potential that lies in rural market. More and more stress is therefore being given on marketing products. It is very interesting to notice that the rural markets are at par with the urban markets. The credit for this scenario goes to the marketing policies. ITC e-Choupal is the greatest example of information technology in rural marketing. Launched in June 2000, 'e-Choupal', has already become the largest initiative in all internet-based interventions in rural India. ITC followed a different media/communication strategy which is more elaborate and extensive in rural marketing so far, which benefits both the farmers and the organization. The strategy use the Information Technology and bridge the information and service gap in rural India which gives an edge to market its products like seeds, fertilizers and pesticides and other products like consumer goods etc.

They use the e-Choupal to order seed, fertilizer, and other products such as consumer good from ITC or its partners, at prices lower than those available from village traders. In this Paper we discuss about the role of IT in rural market, eChou pal, different strategy, vision and planning behind the e-Chou pal. Also rural market is getting an importance because of the saturation of the urban market. As due to the competition in the urban market, the market is more or so saturated as most of the capacity of the purchasers have been targeted by the marketers. So the marketers are looking for extending their product categories to an unexplored market i.e. the rural market. This has also led to the CSR activities being done by the corporate to help the poor people attain some wealth to spend on their product categories. Here we can think of HLL (now, HUL) initiatives in the rural India. One of such project is the Project Shakti, which is not only helping their company attain some revenue but also helping the poor women of the village to attain some money which is surely going to increase their purchasing power. Also this will increase their brand loyalty as well as recognition in that area. Similarly we can think of the ITC E-Chou pal, which is helping the poor farmers get all the information about the weather as well as the market price of the food grains they are producing. In other view these activities are also helping the companies increase their brand value. So as it is given above the significance of the rural market has increased due to the saturation of the urban market as well as in such conditions the company which will lead the way will be benefited as shown by the success of HUL and ITC initiatives. ITC Limited (BSE: 500875) public conglomerate company headquartered in Kolkata, India.[1] Its turnover is $6 billion and a market capitalization of over $30 Billion. The company has its registered office in Kolkata. It started off as the Imperial Tobacco Company, and shares ancestry with Imperial Tobacco of the United Kingdom, but it is now fully independent, and was rechristened to Indian Tobacco Company in 1970 and then to I.T.C. Limited in 1974 The company is currently headed by Yogesh Chander Deveshwar. It employs over 26,000 people at more than 60 locations across India and is listed on Forbes 2000. ITC Limited completed 100 years on 24 August 2010. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery.

Executive summary
In 1990s HUL set a target of contacting 16 million new villages house holds by 1999. The study talks about the HULs rural initiatives like Project stream line, Project Shakti etc. In 1910s ITC set ain India and connect the rural market. And start the program in villages e-chopal. Traditionally, HUL & ITC used both wholesaler and retailers to penetrate the rural markets. Delivery vans covered small towns and villages. These vans induced retailers to stock HUL & ITC product and advertising material in their shops. Company strongly focuses the sales, marketing and production of the Power-brand, in the rural market. HUL & ITC initial initiative was in the form of Project stream Line that was introduced in selected states in 1998. Project stream line addresses the problem of rural distribution system to enhance HUL & ITC control on the rural supply chain as well as to increase the no. of rural retail outlets. The sub-stockist performed the role driving distribution in the neighboring villages using unconventional means like: Bullock-carts and Tractors. As a part of the project HUL & itc aim at providing higher quality services to consumer in terms of frequency, full-line availability and credit. In mid 1998 company launched another campaign called Project Bharat to be carried out by the end of 1998. Project Bharat AND ITC was a direct marketing exercise undertaking to address the issue of awareness, attitudes and habits of rural consumers increase the penetration level of HUL & ITC. HUL's major brands included Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, Kwality Wall's etc. These were manufactured over 40 factories across the country . In 2002, ITC set up a network of internet-based kiosks, e-choupals, to help the farmers in their procurement process. The initiative began with the soya growers in Madhya Pradesh and then expanded to cotton, tobacco, shrimp etc. Starting with six e-choupals in June 2000, ITC's Internet-based, rural initiative had linked 6,000 Indian villages with around 1,200 e-choupals by 2002. The setting up of each e-choupal entails an investment of Rs 1-3 lakh .The objectives behind echoupals was to allow single place procurement and purchase point, allowing farmers to sell their products directly to ITC on the basis of updated current prices prevailing in the market. This eliminated middlemen and thus helped ITC to cut its costs.

Under Project Bharat HUL vans visited villages and sold small packs consisting of low unit price pack each of its detergent, toothpaste, face cream and telcom powder for the Rs.15. During the sales company representative also explained to the people how to use these products with the help of video show. However the company realized that the sampling campaign was not enough to attract first time user. Therefore, It roled out a follow up program called the Integrated rural promotion van which further enhanced the awareness about the HUL products in villages with the population about 2000. Another program targeted with a population of less then 2000 was launched understanding program, the company provided self employment opportunity to villages through self help group. It was operated like direct to home distributor where in groups of 15-20 villages who were below the poverty line. (Those people whose monthly income less then 750 per month) were provided with an opportunity to take micro products from banks. Using this money villagers could by HULs product and sell them to consumers thereby generating income as well as employment for themselves. In May 1999 the company tied up with various NGOs, UNDEP to increase awareness about health shy gene in villages

INTRODUCTION DEFINITION:OF RURAL MARKETING

According to National Commission on Agricultural: Rural marketing is a process which starts with a decision to preferable farm commodity and it involves all the aspects of market structure or system, both functional and institutions, based on technical considerations and includes pre and post harvest operations, assembling, grading, storage, transportation and distribution. Seventy percent of Indias population, of approximately 700 million people, lives in rural areas (moorthi, 2002). As of the 2000 census, this equates to just under 2.5 times the population of the us. A location is defined as rural if at least 75 percent of the population is agrarian. With such a large number of potential consumers, it is clear why multinational corporations would like to successfully penetrate the rural Indian marker.

Features of Indian Rural Markets

Large, Diverse and Scattered Market: Rural market in India is large, and scattered into a number of regions. There may be less number of shops available to market products. Major Income of Rural consumers is from Agriculture: Rural Prosperity is tied with agriculture prosperity. In the event of a crop failure, the income of the rural masses is directly affected. Standard of Living and rising disposable income of the rural customers: It is known that majority of the rural population lives below poverty line and has low literacy rate, low per capital income, societal backwardness, low savings, etc. But the new tax structure, good monsoon, government regulation on pricing has created disposable incomes. Today the rural customer spends money to get value and is aware of the happening around him. Traditional Outlook: Villages develop slowly and have a traditional outlook. Change is a continuous process but most rural people accept change gradually. This is gradually changing due to literacy especially in the youth who have begun to change the outlook in the villages. Rising literacy levels: It is documented that approximately 45% of rural Indians are literate. Hence awareness has increases and the farmers are

well-informed about the world around them. They are also educating themselves on the new technology around them and aspiring for a better lifestyle. Infrastructure Facilities: The infrastructure facilities like cemented roads, warehouses, communication system, and financial facilities are inadequate in rural areas. Hence physical distribution is a challenge to marketers who have found innovative ways to market their products. As part of planned economic development, the government is making continuous efforts towards rural development. In this age of liberalization, privatization and globalization, rural market offers a big attraction to the marketers to explore markets that are untapped.

Overview
With 742 million people living in 6,38,000 villages over an area of approximately 32.00,000 sq km of land spread across 35 states and union territories- what have is a colossal rural market beckoning the marketer. If these figures are not daunting enough consider this: we have more than 18 languages and 650 dialects spoken in India with the accent changing distinctly from region to region within the same state. So is the case with the food habits, culture, income levels, literacy and exposure to media thereby proving to be one of the most diversified and heterogeneous of markets on a global scale? In the past few years, rural markets have gained significance, as the growth of Indian economy has resulted into substantial increase in the purchasing power of the rural communities. Leaving aside, a few metropolitan cities, all the districts and industrial townships are connected with rural markets. Rural areas are consuming a large quantity of industrial and urban manufactured products. The rural regions comprise of the maximum consumers within the country and generate more than half of the country's income. In this context, a special marketing strategy, namely, rural marketing has emerged. The concept of rural marketing is often found to form ambiguity with agricultural marketing. Agricultural marketing involves marketing of produce of the rural areas to urban or industrial consumers, whereas rural marketing denotes marketing of manufactured of processed inputs or services to rural producers or consumers. Some of the important characteristics of Rural Marketing in India are being listed below:

Various rural development programmes have increased the employment opportunities for the rural poor.It is neither exploited nor is it completely explored.

The rural market in India is vast and scattered and offers a plethora of opportunities in comparison to the urban sector. It covers the maximum population and regions and thereby, the maximum number of consumers. The income level and literacy is low along with the range of traditional values and superstitious beliefs that have always been a major impediment in the progression of this sector. The steps taken by the Government of India to initiate proper irrigation, infrastructural developments, grants for fertilizers, and various schemes to cut down the poverty line have improved the condition of the rural masses.

In recent years, rural markets have acquired significance, as the overall growth of the economy has resulted into substantial increase in the purchasing power of the rural communities. Rural areas are evolving into strategic market for companies which include not only domestic but MNCs too. There is great potential that lies in rural market. More and more stress is therefore being given on marketing products. It is very interesting to notice that the rural markets are at par with the urban markets. The credit for this scenario goes to the marketing policies. ITC e-Choupal is the greatest example of information technology in rural marketing. Launched in June 2000, 'e-Choupal', has already become the largest initiative in all internet-based interventions in rural India. ITC followed a different media/communication strategy which is more elaborate and extensive in rural marketing so far, which benefits both the farmers and the organization. The strategy use the Information Technology and bridge the information and service gap in rural India which gives an edge to market its products like seeds, fertilizers and pesticides and other products like consumer goods etc. They use the e-Choupal to order seed, fertilizer, and other products such as consumer good from ITC or its partners, at prices lower than those available from village traders. In this Paper we discuss about the role of IT in rural market, eChou pal, different strategy, vision and planning behind the e-Chou pal.

Issue
HUL and ITC is targeting rural market to account for a major share of its revenue.the extensive distribution network paired with its innovative products and its effective pricing can capture the huge interest of rural markets. at the same time the penetration levels of FMCG in the rural market is less, which along with higher firm output and firm prices can offer a huge growth potential for HUL and ITC.

Impact/Relative of issue
With successful rural marketing projects like Project Shakti and e-chopal .the main emphasis of HUL and ITC s strategy has been to focus on penetrating the market down the line and focusing on price point. Hindustan Lever ITC relies heavily on its own company organized media. These promotional events organized by stockists

Objectives , Scope of study

Scope of study
Mutual benefits of rural entrepreneurs It will benefit farmers and rural communities Creation of opportunities for the rural entrepreneurs for product differentiation and innovation by offering them choice Rural products can participate in the benefit of globalization

Objectives and Goals

E-Chou pal aims to provide Indian farmers ready access to crop-specific realtime information and customized knowledge in their native language. By doing so, ITC wants to improves the farmers' decision-making ability, thereby helping them to better align their farm output to the projected demand in Indian and international markets HUL, are to create "income-generating capabilities for underprivileged rural women by providing a sustainable micro-enterprise opportunity" and to improve rural living standards through "health and hygiene awareness". For HUL, it is "enlightened self-interest". Creating opportunities to increase rural family incomes puts more money in their hands to purchase the range of daily consumption products - from soaps to toothpastes - that HLL makes. It also enables HUL access hitherto unexplored rural hinterlands. Says Sehgal, "We looked at several models of rural distribution, even at the Grameen Bank model in Bangladesh, before we decided on the pilot in Nalgonda to figure out this model. Now the model has been refined based on our learning here and we expect to roll out quickly in other states."

Research and Methodology

It is a descriptive research study.

Title of the study

The study is emphasized on the changing scenario of rural market with special reference HUL and ITC. Study focused on the way how the HUL and ITC attract rural customers towards itself by launching low price products.

Descriptive Research

It is more rigid than exploratory research and seeks to describe users of a product, determine the proportion of the population that uses a product, or predict future demand for a product. As opposed to exploratory research, descriptive research should define questions, people surveyed, and the method of analysis prior to beginning of data collection.

CORE STUDY

Indian Rural Market An Overview

The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000 villages, which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc.

Few Facts
70 % of India's population lives in 627000 villages in rural areas. According to the NCAER study, there are almost twice as many 'lower middle income' households in rural areas as in the urban areas.

At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas. Middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. In urban India, the same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural India is expected to be double that of urban India.

Opportunity
The above figures are a clear indication that the rural markets offer the great potential to help the India Inc which has reached the plateau of their business curve in urban India to bank upon the volume-driven growth. The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban.

As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tones in 1991, rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income. The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased. The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster than the urban counterpart.

The 4A Approach
The rural market may be alluring but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions; poor roads; power problems; and inaccessibility to conventional advertising media. However, the rural consumer is not unlike his urban counterpart in many ways. The more daring MNCs are meeting the consequent challenges of availability, affordability, acceptability and awareness (the so-called 4 As).

Availability
The first challenge is to ensure availability of the product or service. India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. However, given the poor state of roads, it is an even greater challenge to regularly reach products to the far-flung villages. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Marketers must trade off the distribution cost with incremental market penetration. Over the years, 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, bullock-carts and even boats in the backwaters of Kerela. Study on buying behaviour of rural consumer indicates that the rural retailers influences 35% of purchase occasions. Therefore sheer product availability can affect decision of brand choice, volumes and market share. Some of the FMCG giants like HUL and ITC took out project streamline to significantly enhance the control on the rural supply chain through a network of rural sub-stockists, who are based in the villages only. Apart from this to acquire further edge in distribution HUL started Project Shakti and ITC stared e-chopal in partnership with Self Help groups of rural women.

Affordability
The second 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 whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at the rural market.

Acceptability
The third challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market.

Awareness
Mass media is able to reach only to 57% of the rural population. Creating awareness then, means utilizing targeted, unconventional media including ambient media .For generating awareness, events like fairs and festivals, Haats, etc., are used as occasions for brand communication. Cinema vans, shop-fronts, walls and wells are other media vehicles that have been utilized to increase brand and pack visibility. Ideas like putting stickers on the hand pumps, walls of the wells putting on tin plates on al the tree surrounding the pond are some of the innovative media used by personal wash like Lux and Lifebuoy and fabric wash items like Rin and Wheel. Idea was to advertise not only at the point of purchase but also at the time of consumption. With large parts of rural India inaccessible to conventional advertising media only 41 per cent rural households have access to TV - building awareness is another challenge. Fortunately, however, the rural consumer has the same likes as the urban consumer - movies and music - and for both the urban and rural

consumer, the family is the key unit of identity. However, the rural consumer expressions differ from his urban counterpart. Outing for the former 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 relies heavily on its own company-organised media. These are promotional events organised by stockists. ITC Limited is one of India's leading diversified conglomerates. Traditionally a tobacco and cigarette producer, it has grown into a conglomerate dealing in hotels, packaging, agribusiness, information technology, and fast moving consumer goods (FMCGs). ITC initiated its e-Chou pal project in 2000 to streamline its dealings with Indian farmers. This is a project on a massive scale that ultimately aims to cover every sixth Indian village. Each Chou pal covers around six villages and 36,000 villages have been covered to date in Madhya Pradesh, Uttar Pradesh, Maharashtra, Rajasthan, Karnataka, and Andhra Pradesh.

The HUL Marketing Effort: Transition to Rural Market

HUL's competitive advantage generated from three sources. First it's strong well established brands, second, its local manufacturing capacity and supply chain and third its vast sales and distribution system. It was soon felt that HUL's sales and distribution system which had protected it from competitors would be soon replicated by its rivals and to maintain its edge, the company had to increase its reach beyond the urban markets. So far the operations of HUL included more than 2,000 suppliers and associates. The distribution network, consisted of 4,000 stockists, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers . Typically, the goods produced in each of the HUL's 40 factories were sent to a depot with the help of a carrying and forwarding agent (CFA). The company had its depot in every state of the country. The CFA was a third party and got servicing fee for stock and delivery of the products. In each town, there was a redistribution stockiest (RS) who took the goods from the CFA and sell them to retail outlets. By the late 1990s, the HUL management realized certain problems with the existing sales model. First, the model was not viable for small towns with small population and small business. HUL found it expensive to appoint one stockiest exclusively for each town. Secondly, the retail revolution in the country changes the pattern the customers shop. Large retail self service shops were established. In the response of these problems, HUL redesigned its sales and distribution channel and the new system was known as 'diamond model' in the

company. At the top end of the diamond, there were the self service retail stores which constituted 10% of the total FMCG market. The middle, fatter part of the diamond represented the profit-center based sales team. In the bottom of the pyramid was the rural marketing and distribution which accounted for 20% of the business . Almost three-fourth of the total 1.2 billion Indian population resided in the rural areas and majority of them had a very low per capita income (around 44% of that of urban India) . Urban market had reached the saturation point, thus changing focus on rural India. In comparison to just 5,161 towns in India there are 6,38,365 villages in India [Exhibit I]. Moreover, more than 70% of India's population lived in villages and made a big market for the FMCG industry because of increasing disposal incomes and awareness level..

The 4Ps of Rural Marketing

Most of the companies treat rural market as a dumping ground for the lower end products designed for an urban audience. But, this scenario is slowly changing and importance is given to the need of the rural consumer. Hence it is important to understand the 4Ps of rural marketing with respect to a rural consumer.

1. Product
A product is the heart of rural marketing. It is a need satisfying entity to a rural consumer. NCAER has classified consumer goods into 3 categories. These categories cover most of the products from Rs. 100 to Rs. 20000 and above. Category I Category II Category III Pressure Cookers 2-in-1 (mono) C TVs (S) Pressure Pans 2-in-1 (stereo) C TVs (R) Mono Cassette Recorders B and W TV (S) VCRs/ VCPs Wrist watches (mechanical) B and W TV (R) Scooters Wrist watches (quartz) Instant Geyser Mopeds Radio/Transistors Storage Geysers Motor Cycles Electric irons Sewing Machines Refrigerators Ceiling Fans Vacuum Cleaners Washing Machines Table Fans Mixer/grinders Bicycles the hierarchy depends on the needs of the rural consumers. Most of the products under category 1 are of immediate use to the family. Category 2 products reduce the strain of the households and also act as a source of entertainment. Category 3 is a combination of means to supplement income. Rural branding aims at creating and disseminating the brand name so that it is easily understood and recognized by the rural consumers. In rural markets, brands are almost non-existent. They identify FMCG by three things: 1. Color, 2. Visuals of animals and birds and 3. Numbers.

So a 555, 777, hara goli, pila hathi, lal saboon, saphead dantmanjan are the Kind of terms with which they identify brands. Hence it is very important for us to understand that a lot needs to be done in terms of communications, media, marketing and branding. There are a number of cases which suggest that to sell brands in the rural market, it is necessary to simultaneously educate the consumers. If you have to create brand communication, marketing efforts must be supported by education. 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.

2. Pricing
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. Banks offer loans for tractors, pump sets, television sets and so on to make the product affordable to a rural consumer. Smaller unit packs are preferred in the case of FMCG products to offer at lower prices. The product packaging and presentation offers scope for keeping the price low. Educable packs or refills are also preferred and are seen as value addition.

3. Placement or Distribution
Distribution of products is one of the biggest challenges of rural marketing. There are WC (Central Warehousing Corporation) and SWCS (State Warehousing Corporations) set up in rural areas to store and distribute products. A three tier rural warehousing setup exists: A. CWC/SWCs B. Co-operatives C. Rural Godsons CWC and SWCs reach up to the district levels. The co-operatives are at the mandi evel. The Rural Godowns are at the village level wherein they are owned by panchayat heads. 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. There are some problems of rural distribution: Transportation has not been fully developed. Lack of proper channels of communication like telephone, postal services, and so on pose a lot of problem to marketer to service the retailer as it is difficult to the retailers to place order for goods. Storage of goods in rural areas is also a problem for the marketers. Multiple tiers push up the costs and channel management is a

major problem for marketers due to lot of middlemen in the process. Availability of suitable dealer. Poor viability of rural outlets. Rural outlets need banking support for remittances to principals, get fast replenishment of stocks, receive supplies through bank and facilitate credit. This gets handicapped due to inadequate bank facilities. There are a lot of private shops in the rural sector. The rural consumers are classified into the following groups based on their economic status: The Affluent Group: They are cash rich farmers and a very few in number. They have affordability but not form a demand base large enough for marketing firms to depend on. Wheat farmers in Punjab and rice merchants of Andhra Pradesh fall in this group. The Middle Class: This is one of the largest segments for manufactured goods and is fast expanding. Farmers cultivating sugar cane in UP and Karnataka fall in this category. The Poor: This constitutes a huge segment. Purchasing power is less, but strength is more. They receive the grants from government and reap the benefits of many such schemes and may move towards the middle class. The farmers of Bihar and Orissa fall under this category.

Challenges of marketing in Rural area

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.

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.

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.

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.

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.

Use of Internet
New information technology infrastructure, especially the wireless internet, provides an excellent opportunity to establish direct contact with rural consumers. It can provide inexpensive way to develop distribution channel in rural areas as has been demonstrated by the success of ITC's e-Choupal, HUL, TARAhaat, Ruralbazaar, to name a few.

Applications in current industry scenario

Over the last five years, some consumer product companies have recognized the potential of rural markets and invested time and resources to tap into this opportunity - understanding and segmenting the consumer, based on their spends and lifestyles.

Some companies have re-engineered products, pricing and packaging to customize features and value relevant for these markets. For instance, LG has Sampoorna, a customized TV; Godrej soaps have introduced 50-gm packs and Samsung has launched Guru - a mobile that can be charged with solar energy. Some players have developed new communication and distribution channels within the hinterland (HUL's Project Shakti; Tata Tea's 'Gaon Chalo') and some have created completely new products The Union Budget for 2010-11 has hiked the allocation under the National Rural Employment Guarantee Act (NREGA) to US$ 8.71 billion in 2010-11, giving a boost to the rural economy. Hindustan Unilever Ltd (HUL) is going beyond the Shakti Ammas to drive penetration in the rural markets. After witnessing a good monsoon which might lead to increased rural spending, HUL is planning to bring out branded packs called Bharat,' targeted at the rural hinterland pegged at Rs 25. Considering nearly half the FMCG behemoth's turnover (Rs 17,524 crore) comes from the rural markets, it is now ready to have customised branded packs with lowerpriced SKUs to cater specifically to them. According to industry sources, HUL is now in talks with rural marketing agencies to create a Bharat Pack.' The pack would comprise smaller SKUs costing Rs 4-5, and consist of toothpaste, shampoos, powder and soaps. In the recent past, HUL has already tried to drive economies of scale by bringing in its entire portfolio that range from giving demos on Lifebuoy soap to highlighting the grease-cutting technologies of Vim. HUL is choosing to reach out State by State and today has managed to reach out to 50,000 to 60,000 villages already. Its microfinance programme under Shakti already covers over one lakh villages across 15 States, and reaches over 30 lakh households every month.

List of products & brands

In FMCG, ITC and HUl has a strong presence in:

Cigarettes: W. D. & H. O. Wills, Gold Flake Kings, Gold Flake Premium, Navy Cut, Insignia, India Kings, Classic (Verve, Menthol, Menthol Rush, Regular, Mild & Ultra Mild), 555, Benson & Hedges, Silk Cut, Scissors, Capstan, Berkeley, Bristol, Lucky Strike, Players and Flake.

Foods: (Kitchens of India; Ashirvaad; Minto; Sunfeast; Candyman; Bingo; Yippee, Sunfeast Pasta brands in Ready to Eat, Staples, Biscuits, Confectionery, Noodles and Snack Foods);

Apparel: (Wills Lifestyle and John Players brands);

Personal care: (Fiama di Wills; Vivel; Essenza di Wills; Superia; Vivel di Wills brands of products in perfumes, haircare and skincare)[2] Stationery: (Classmate and Paperkraft brands) Safety Matches and Agarbattis: [Ship (through ownership of WIMCO); iKno; Mangaldeep; Aim brands]

Other businesses include:

Hotels: ITC's hotels (under brands including ITC Hotel /Welcomhotel) have evolved into being India's second largest hotel chain with over 80 hotels throughout the country. ITC is also the exclusive franchisee in India of two brands owned by Sheraton International Inc.- The Luxury Collection and Sheraton which ITC uses in association with its own brands in the luxury 5 star segment. Brands in the hospitality sector owned and operated by its subsidiaries include Fortune and Welcomheritage brands.

Paperboard, Specialty Paper, Graphic and other Paper; Packaging and Printing for diverse international and Indian clientele. InfoTech (through its near-wholly owned subsidiary ITC InfoTech India Limited which is a SEI CMM Level 5 company) HULs VIM bar, fair nd lovely, Rin and so on.

Rural initiatives
ITC's Agri-Business is India's second largest exporter of agricultural products. ITC is one of the India's biggest foreign exchange earners (US $ 2 billion in the last decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance its competitiveness by empowering Indian farmers through the power of the Internet. This transformational strategy, which has already become the subject matter of a case study at Harvard Business School, is expected to progressively create for ITC a huge rural distribution infrastructure, significantly enhancing the Company's marketing reach. The company places computers with Internet access in rural farming villages; the e-Choupals serve as both a social gathering place for exchange of information (choupal means gathering place in Hindi) and an e-commerce hub. What began as an effort to re-engineer the procurement process for soy, tobacco, wheat, shrimp, and other cropping systems in rural India has also created a highly profitable distribution and product design channel for the companyan e-

commerce platform that is also a low-cost fulfillment system focused on the needs of rural India. The e-Choupal system has also catalyzed rural transformation that is helping to alleviate rural isolation, create more transparency for farmers, and improve their productivity and incomes.

HLL product /Brand profile

Personal care
1. 2. 3. 4. skin care: fair&lovely,ponds oral care: pepsodent,close up hair care: sunsilk,clinic plus deodorant: axe

Soap & Detergent

1. fabric wash : surf,Rin,wheel 2. personal wash : lifebuoy,lux,breeze 3. household care : vim

Food & Bewerages

1. ice cream : quality walls-cornetto 2. ice cream : quality walls-feast 3. ice cream : quality walls-max

Popular Foods
1. 2. 3. 4. 5. 6. 7. 8. Annapurna Kissan Brook bond three roses Brook bond Red Label Brook bond A-one Brook bond Tajmahal Lipton Tazza Lippton Yellow label

HUL Project Shakti to cover all Rural India

Consumer products giant Hindustan Lever Ltd (HLL) is quietly working on a mammoth task of reaching out to the last rural consumer in the deepest part of India's hinterland. The mission: to deepen its roots and cover the whole of rural India by the end of 2005. The vehicle: Project Shakti. As part of its new ventures, Project Shakti had initially started operating in rural parts of Andhra Pradesh, empowering women through self-help groups to increase awareness of HLL's products. The project has now been extended to Madhya Pradesh, Gujarat, Karnataka, Tamil Nadu, Chattissgarh, Uttar Pradesh and Orissa, which, as planned, will cover 100 million rural population. "Project Shakti will be our vehicle to deepen our rural reach to the entire rural India,"said by MS Banga, chairman, HLL, told FE. HLL has married its rural penetration programme with Project Shakti to achieve better results, as coverage through the stockist route will not be as effective as using the rural women folk as agents for marketing its products, in a manner which is similar to door-to-door sellig "In 10 years from today, Project Shakti will contribute in a major way to HLL's sales," said Mr Banga. HLL currently draws a larger sales contribution from the urban market, of about 60 per cent, even as the Rs 10,138 crore maker of Lifebuoy, Surf Excel and Lux is considered to have the largest rural backbone its key strength among consumer product companies. Launch of this major mega offensive to increase rural penetration to 100 per cent would eventually lead to HLL's sales contribution coming from the rural market to go well beyond 50 per cent. Statistics show that there are over six lakh villages in India, with a population of over 650 million. The multinational had about six years back launched Project Bharat, a massive rural sampling initiative in two phases. According to Mr Banga, the current plan will be at a much more larger scale as compared to Project Bharat. The company had earlier also launched Operation Streamline to further increase its rural reach with the help of rural sub-stockists. It had appointed 6,000 such sub-stockists, with the distribution network directly covering about 50,000 villages reaching about 250 million consumers. Since 70 per cent of the country's population resides in rural India, penetration into this critical market is every marketer's dream.

Brand extension of HUL

Hindustan Lever Limited (HUL) Plans to lead the development of the branded food market by upgrading consumers from unbranded commodities to superior branded products. By doing this, the company hopes that the popular food division would emerge as the largest division of the company.Relentless creativity leading to innovation will be the companys strategy for its growth. The company currently markets the Kissan Annapurna iodized salt and wheat atta in the Indian market. The company also plans to extend the Kissan brand into a whole range of food products..

(a) MultiBranding: A company may introduce several brands in a product

line with different features to appeal to different categories in the same customer group. Many FMCG companies follow this strategy.

Benefits include:
Flanking of the major brand Occupying more shelf space of retailers Gaining more profits

Disadvantages include:
Each brand may have a small market share Cannibalization of some brands of the company High development costs as many brands are to be developed.

Company Product Group Multi-brands

HLL Soaps Lifebuoy, Liril, Lux Godrej Soaps Cinthol, Ganga, Marvel, Fair flow

(b) CoBranding: Today, we find offers with two or more brands of the same
company or different companies. When a marketer offers one brand with another brand of the same company or another company it is called co-branding. Such offers may take two different forms(i) Ingredient co-branding (ii) Product co-branding Ingredient co-branding takes place when The maker of the parts. to he visible to the market and to gain image for the brand, insists on publicizing it. The part is important and the maker has an image that enhances the consumer acceptance of the ultimate product, and when

 Competitors are following such practices

(c) Brand Image/Equity Management:

When brands are effectively managed they acquire value and become assets with good-will. Effective brand image management involves. Enhancing brand personality Protecting brand identity.

(d) Brand personality: Like a person then, brand is a psychosocial being

having an appearance, emotional feelings and rational behaviors. Brand personality can therefore be described at three levels.

(e) Sensory: How would the brand see, smell, taste, touch, and hear if it is a
person? What are its demographics? Is it having an attractive and socially acceptable personality? EmotionalIf a brand were to become an emotion what would it be? What are the underlying subjective, non-functional, emotions of the brand? Is it trustworthy? Is it a desirable companion?

Selling in Rural India

A HARSH summer sun beats down mercilessly on the drive to Nalgonda district in Andhra Pradesh. The rocky landscape is parched, scorched by successive years of drought. The destination is Peddakaparthy village, 65 kms from Hyderabad, and the seat of a brave new experiment by fast moving consumer goods major, Hindustan Lever Ltd (HLL), undaunted by the vagaries of nature, a group of village women are attempting to bring about a transformation in their lives. Through a combination of micro-credit and training in enterprise management, these women from self-help groups have turned direct-to-home distributors of a range of HLL products and helping the company plumb hitherto unexplored rural hinterlands. From the time HLL's new distribution model, named Project Shakti, was piloted in Nalgonda district in 2001, it has been scaled up and extended to over 5,000 villages in 52 districts in AP, Karnataka, Gujarat and Madhya Pradesh with around 1,000 women entrepreneurs in its fold. The vision is ambitious: to create by 2010 about 11,000 Shakti entrepreneurs covering one lakh villages and touching the lives of 100 million rural consumers. The benefits and working of project shakti are: Catalyst was part of a media team that HLL invited to visit Peddakaparthy village to see Project Shakti at work. The team visits the house of Jella Sujathamma, whose spouse is a weaver who weaves the famous Pochampally sarees of AP. However, her income was not enough for her family, which includes three children. Five years ago, Sujathamma had joined a self-help group (SHG), formed by the district rural development authority. HLL has operated Project Shakti through these self-help groups; AP was chosen for the pilot project as its has the most

number and better established SHGs - there are about 4.36 lakh SHGs in AP covering nearly 58.29 lakh rural women. C.S. Ramalakshmi, Commissioner, Women Empowerment & Self employment, Govt of AP, points out that AP alone has about half of the SHGs organised in the country. Says Pradeep Kashyap, Managing Director, Marketing & Research Team (MART): "This network has ensured that AP is the incubator for all our experiments in working out new models of distribution of FMCGs and other products." MART, an organization which works in the social sector, implements the on-ground activities for many companies wanting to work the rural sector, including HLL. The likes of Sujathamma, among the first Shakti entrepreneurs, have been chosen from these SHGs. She, HLL officials explain, is a shining example of the success of the model - Sujathamma, on an initial loan of Rs 10,000 from her SHG to start the enterprise, has a turnover of Rs 10,000-Rs 25,000 a month earns a profit of Rs 750-Rs 2,000 a month, an average return of 8 per cent. Besides, she now also sells staples, sugar, edible oil and a variety of other household items. The Indian rural market with its vast size and demand base offers a huge Opportunity that MNCs cannot afford to ignore. To expand the market by tapping the countryside, more and more MNCs are foraying into India's rural markets. Among those that have made some headway are Hindustan Lever, Coca-Cola, LG Electronics, Britannia, Standard Life, Philips, Colgate Palmolive and the foreign-invested telecom companies.

I shakti

The Current Scenario

The model was piloted in Nalgonda district of Andhra Pradesh in 50 villages in the year 2000. The Government of Andhra Pradesh took the pioneering step of supporting the initiative by enabling linkages with the network of DWACRA Groups of rural women set up for their development and self-employment. Most

SHG women view Project Shakti as a powerful business proposition and are keen participants in it. It has since been extended to in Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal with the total strength of over 40,000 Shakti Entrepreneurs. Other activities: To improve the business skills of the SHG women, Extensive training programmes are being held. Such workshops have already covered a large number of Shakti Entrepreneurs in Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Uttar Pradesh, Tamil Nadu, Chhattisgarh and Orissa. As part of their training programme, all HUL Management Trainees spend about 4 weeks on Project Shakti in rural areas with NGOs or SHGs. Assignments include business process consulting for nascent enterprises engaged in the manufacture of products such as spices and hosiery items. A key factor that has inhibited the development of rural India has been lack of access to critical information and services. As we know, India has large geography and weak infrastructure; it is often difficult to reach out to the rural areas. In order to impact both livelihood opportunities and living standards of rural communities i-Shakti - an IT-based rural information service has been developed to provide information and services to meet rural needs in agriculture, education, vocational training, health and hygiene. The premise of the i-Shakti model is to provide need based demand driven information and services across a large variety of sectors that impact the daily livelihood opportunities and living standards of the village community. The i-Shakti kiosk will be operated by the Shakti Entrepreneur, which further strengthens the relationship we have already cultivated and builds new capacity. HUL expects that the information provided would improve the productivity of the rural community and unlock economic and social progress. Introduction e-Choupal is an initiative of ITC Limited (a large multi business conglomerate in India) to link directly with rural farmers for procurement of agricultural / aquaculture produce like soybeans, wheat, coffee, etc. The company has initiated an e-Choupal effort that places computers with Internet access in rural farming villages; the e-Choupals serve as both a social gathering place for exchange of information (choupal means gathering place in Hindi) and an ecommerce hub. e-Choupal is a Hindi word which means village meeting place. Market is a meeting place where vendors and customers come together to do transactions. e-Choupal is avirtual market place where farmers can transact directly with a processor and can realize better price for their produce. e-Choupal has the advantages of the market but spans very large varieties of vendors and customers. Geographical distances do not restrict participation in the e-Choupal. The main disadvantage of conventional market is that information asymmetry is

inherent in the market where as e- Choupal provides for transparent transactions. This enables the participation of smaller as well as larger players. Elimination of some layers of intermediaries allows for larger share of profits to reach the lower end of value chain. The main attractiveness of e-Choupal is that it can be used for connecting large producers/small producers and small users/large users, thereby eliminating the need for hierarchy of brokers. Internet is used as a low transaction cost backbone for communication. Physical delivery of produce to the processor is still done through the existing intermediaries. e-Choupal does not attempt total elimination of intermediaries, as intermediaries are indispensable in economy like India where intermediaries are adding value to the every step of value chain at a low cost. Intermediaries have the expertise in storage, transportation, quality assessment and counter party risk reduction, which are difficult to replicate. e SHG Bank Linkage A most notable milestone in the SHG movement was when NABARD launched the pilot phase of the SHG Bank Linkage programme in February 1992. This was the first instance of mature SHGs that were directly financed by a commercial bank. The informal thrift and credit groups of poor were recognized as bankable clients. Soon after, the RBI advised commercial banks to consider lending to SHGs as part of their rural credit operations thus creating SHG Bank Linkage. The linking of SHGs with the financial sector was good for both sides. The banks were able to tap into a large market, namely the low-income households, transactions costs were low and repayment rates were high. The SHGs were able to scale up their operations with more financing and they had access to more credit products.

Advantages of SHGs (Self Help Groups)

An economically poor individual gains strength as part of a group. Besides, financing through SHGs reduces transaction costs for both lenders and borrowers. While lenders have to handle only a single SHG account instead of a large number of small-sized individual accounts, borrowers as part of an SHG cut down expenses on travel (to & from the branch and other places) for completing paper work and on the loss of workdays in canvassing for loans. In other words the organization provides micro loans and a package of services, including self help groups (SHG) for economic empowerment, education, sharing lessons learned and presumably networking. Additionally, they are used to create an ecosystem for wealth creation and bear some elements of self-organizing, given they are bottom up in nature. These groups can help overcome some of the pitfalls of launching a new business and are sometimes integrated as part of the overall debt repayment model.

Vision and Planning Behind the e-Choupals

Implementing and managing e-Choupals is a significant departure from commodities trading. Through its tobacco business, ITC has worked agriculture for decades, from research to procurement to distribution. ITC stranslation of the tactical and strategic challenges it faced and its social commitment into a business model demonstrates a deep understanding of both agrarian systems and modern management. The principles followed in implementing the e-Choupals are-

Re-engineer, Not Reconstruct

Present Mandi system have some success factors in it. ITC decided to build e Choupal on existing system. Already ITC has trading agents in local mandis for its tobacco business. It retained the e_cient providers and created roles for ine_cient people. It recruites and engages members of landscape thereby making their expertise available to ITC. With this principle ITC can avoid the reinventing the system in areas where it can add no value with its presence i.e., in areas where e_cient agents are there.

 Address the Whole, Not Just One Part

The farmers various activities range from procuring inputs to selling produce. Currently, the village trader services the spectrum of farmers needs. He is a centralized provider of cash, seed, fertilizer, pesticides, and also the only marketing channel. As a result, the trader enjoys two competitive bene_ts. First, his intimate knowledge of the farmer and village dynamics allow him to accurately assess and manage risk. Second, he reduces overall transaction costs by aggregating services. The linked transactions reduce the farmers overall cost in the short term, but create a cycle of exploitative dependency in the longterm. Rural development e_orts thus far have focused only on individual pieces rather than what the entire community needs. Cooperatives have tried to provide agricultural inputs, rural banks have tried to provide credit, and mandis have tried to create a better marketing channel. These e_orts cannot compete against the traders bundled o_er. Functioningas a viable procurement alternative, therefore, must eventually address a range of needs, not just the marketing channel. ITC eChopal provide services as a bundle what the entire agricultural community needs.

An IT-Driven Solution
Delivery of real-time information independent of the transaction. In the mandi system, delivery, pricing, and sales happen simultaneously, thus binding the farmer to an agent. E-Choupal was seen as a medium of delivering critical market information independent of the mandi, thus allowing the farmer an empowered choice of where and when to sell his crop.

Risk analysis & challenges

1. Radical shifts in computing access will break community-based business models. 2. The sanchalaks are ITCs partners in the community, and as their power and numbers increase, there is a threat of unionization and rent extraction. 3. The scope of the operation: the diversity of activities required ofevery operative and the speed of expansion create real threats toe_cient management. 4. If ITC fails to ful_ll the aspirations of farmers, they will look elsewhere for satisfaction.

Woking of Project Shakti

Typically, a woman from a SHG selected as a Shakti entrepreneur receives stocks at her doorstep from the HLL rural distributor and sells direct to consumers as well as to retailers in the village.

Each Shakti entrepreneur services 6-10 villages in the population strata of 1,0002,000 people Typically, as Sehgal points out, a Shakti entrepreneur sets off with 4-5 chief brands from the HLL portfolio - Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic Plus. "These are the core brands, they we layer it with whatever else is in demand like talcum powder or Vaseline during winters," elaborates Sehgal. These brands apart, other brands which find favour with a rural audience are: Lux, Ponds, Nihar and 3 Roses tea. Typically, unit packs are small. All the brands are national and HLL is cool to the idea of creating a rural-specific brand as it will only dissipate the advertising media effort for the brands. To get started the Shakti woman borrows from her SHG and the company itself chooses only one person. With training and hand-holding by the company for the first three months, she begins her door-to-door journey selling her wares. The impact is slow and HLL too is not expecting any quick returns on this project. In Andhra, so far, since the experiment began, HLL has seen 15 per cent incremental sales from rural Andhra, which contributes 50 per cent to overall sales from Andhra of HLL products. But analysts see this rural foray as something the company has got to do. As Nikhil Vora, Sr. Vice President of research group ASK Raymond James explains, if there is one company take on the onus of developing the rural markets, it's HLL. Says he: "HLL contributes 20 per cent of the total FMCG business in the country. So, clearly, the onus is on HLL to grow the market. Returns may not happen in the next five years, but a lot of consumer understanding and insights comes from an exercise like Project Shakti, which in turn can lead to product innovation." An analyst with a leading brokerage points out that a lot of HLL's rural initiatives in the recent past have not paid off because of poor rural incomes. But, a monsoon revival and greater rural incomes can mean payback time for projects like Shakti. "Large companies like HLL have to push greater into rural areas. Brand loyalty is declining among urban consumers; they're looking mostly for consumer promos; regional brands too are snapping at their heels. So, to attain growth, going rural has become an imperative," she says. Concurs K.N. Siva Subramanian, Sr. Vice President, Franklin Templeton India Ltd: "The (HLL) management had recognised the impending saturation of the urban markets some time back and launched aggressive plans to capture the rural markets. However, a slowdown in the agricultural sector resulted in rural incomes remaining flat and affecting sales. We believe that by targeting lower price points and further expanding the distribution network, companies can tap the potential of rural markets. Initiatives like Project Shakti will help them in establishing and consolidating their base in rural markets." Regional brands, or even larger FMCG companies, do not have the kind of distribution reach that HLL has established and in the long run, that could prove a winner for HLL, according to analysts.

Vision and Planning Behind the e-Choupals

Implementing and managing e-Choupals is a significant departure from commodities trading. Through its tobacco business, ITC has worked agriculture for decades, from research to procurement to distribution. ITCs translation of the tactical and strategic challenges it faced and its social commitment into a business model demonstrates a deep understanding of both agrarian systems and modern management. The principles followed inimplementing the eChoupals are-

Re-engineer, Not Reconstruct

Present Mandi system have some success factors in it. ITC decided to build eChoupal on existing system. Already ITC has trading agents in local mandis for its tobacco business. It retained the e_cient providers and created roles for ine_cient people. It recruites and engages members of landscape thereby making their expertise available to ITC. With this principle ITC can avoid the reinventing the system in areas where it can add no value with its presence i.e., in areas where e_cient agents are there.

Address the Whole, Not Just One Part

The farmers various activities range from procuring inputs to selling produce. Currently, the village trader services the spectrum of farmers needs. He is a centralized provider of cash, seed, fertilizer, pesticides, and also the only marketing channel. As a result, the trader enjoys two competitive bene_ts. First, his intimate knowledge of the farmer and village dynamics allow him to accurately assess and manage risk. Second, he reduces overall transaction costs by aggregating services. The linked transactions reduce the farmers overall cost in the short term, but create a cycle of exploitative dependency in the long-term. Rural development e_orts thus far have focused only on individual pieces rather than what the entire community needs. Cooperatives have tried to provide agricultural inputs, rural banks have tried to provide credit, and mandis have tried to create a better marketing channel. These e_orts cannot compete against the traders bundled o_er. Functioning as a viable procurement alternative, therefore, must eventually address a range of needs, not just the marketing channel. ITC e-Chopal provide services as a bundle what the entire agricultural community needs.

An IT-Driven Solution
Delivery of real-time information independent of the transaction. In the mandi system, delivery, pricing, and sales happen simultaneously, thus binding the farmer to an agent. E-Choupal was seen as a medium of delivering critical

market information independent of the mandi, thus allowing the farmer an empowered choice of where and when to sell his crop.

Risk analysis & challenges

1. Radical shifts in computing access will break community-based business models. 2. The sanchalaks are ITCs partners in the community, and as their\ power and numbers increase, there is a threat of unionization and rent extraction. 3. The scope of the operation: the diversity of activities required of every operative and the speed of expansion create real threats to e_cient management. 4. If ITC fails to full the aspirations of farmers, they will look elsewhere for satisfaction.

Strategies to be followed
(1). Adopt the ability to determine the grades of the crop (grains) in the eld which commands the price premium for the crop. e.g: Wheat (2). Build the concept of traceability into the supply chain which will allow to address the food safety concerns. e.g: For perishables such as shrimps, which decays quickly within short period of time, it need to done standards of production and product quality. (3). Provide the service as market-place for commodities where ITC is not a sole buyer. It will reduce the operational cost of e-Choupal such as IT infrastructure and transaction costs. e.g: co_ee grains. (4). Marketing value added products and services to rural INDIA, in addition to marketing agri inputs, through e-Choupal system. (5). Sourcing IT-enabled services from rural INDIA. Telemedicine, ecotourism , traditional medicine and traditional crafts are some of the services that can be sourced from rural INDIA.

Features of Indian Rural Markets:

 Large, Diverse and Scattered Market: Rural market in India is large, and scattered into a number of regions. There may be less number of shops available to market products. Major Income of Rural consumers is from Agriculture: Rural Prosperity is tied with agriculture prosperity. In the event of a crop failure, the income of the rural masses is directly affected. Standard of Living and rising disposable income of the rural customers: It is known that majority of the rural population lives below poverty line and has low literacy rate, low per capital income, societal backwardness, low savings, etc. But the new tax structure, good monsoon, government regulation on pricing has created disposable incomes. Today the rural customer spends money to get value and is aware of the happening around him. Traditional Outlook: Villages develop slowly and have a traditional outlook. Change is a continuous process but most rural people accept change gradually. This is gradually changing due to literacy especially in the youth who have begun to change the outlook in the villages. Rising literacy levels: It is documented that approximately 45% of rural Indians are literate. Hence awareness has increases and the farmers are well-informed about the world around them. They are also educating themselves on the new technology around them and aspiring for a better lifestyle. Diverse Socioeconomic background: Due to dispersion of geographical areas and uneven land fertility, rural people have disparate socioeconomic background, which ultimately affects the rural market. Infrastructure Facilities: The infrastructure facilities like cemented roads, warehouses, communication system, and financial facilities are inadequate in rural areas. Hence physical distribution is a challenge to marketers who have found innovative ways to market their products. As part of planned economic development, the government is making continuous efforts towards rural development. In this age of liberalization, privatization and globalization, rural market offers a big attraction to the marketers to explore markets that are untapped.

Impact of globalization
Globalization will have its impact on rural India also. It will be slow. It will have its impact on target groups like farmers, youth and women. Farmers, today 'keep in touch' with the latest information and also look up what is happening globally. Price movements and products' availability in the international market place seem to drive their local business strategies. On youth its impact is on knowledge and information and while on women it still depends on the socio-economic

aspect. The marketers who understand the rural consumer and fine tune their strategy are sure to reap benefits in the coming years. The leadership in any product or service is linked to leadership in the rural India except for few lifestylebased products, which depend on urban India mainly. There has been a substantial increase in the penetration of consumer durables in the Indian rural sector. One thirds of the premium luxury goods are now sold in the rural market. Two thirds of the middle-income households are now in the rural market.

Digital transformation
The following have been some of the initiatives of e-choupal: ITC began the silent e-volution of rural India with soya growers in the villages of Madhya Pradesh. For the first time, the stereotype image of the farmer on his bullock cart made way for the e-farmer, browsing the e-Choupal website. Farmers now log on to the site through Internet kiosks in their villages to order high quality agri-inputs, get information on best farming practices, prevailing market prices for their crops at home and abroad and the weather forecast all in the local language. In the very first full season of e-Choupal operations in Madhya Pradesh, soya farmers sold nearly 50,000 tons of their produce through the e- Choupal Internet platform, which has more than doubled since then. The result marks the beginning of a transparent and cost-effective marketing channel. Farmers grow wheat across several agro-climatic zones, producing grains of varying grades. Though these grades had the potential to meet diverse consumer preferences, the benefit never trickled down to the farmers, because all varieties were aggregated as one average quality in the mandis. ITC's eChoupal intervention helped the farmers discover the best price for their quality at the village itself. The site also provides farmers with specialised knowledge for customising their produce to the right consumer segments. The new storage and handling system preserves the identity of different varieties right through the 'farm-gate to dinner-plate' supply chain encouraging the farmers to raise their quality standards and attract higher prices. ITCs Aqua Care Centre in Kakinada, Andhra Pradesh, has revolutionized the concept of shrimp seed testing. Its sophisticated laboratory detects the deadly White Spot virus in the shrimp seed and advises farmers on appropriate remedial action. echoupal.com has become popular among coffee growers as an effective platform for global trade. Coffee planters in India have for years been tossed between the highs and lows of the international coffee market. The information needed to manage risks in the volatile global coffee market, price updates and prevalent trends in coffee trading were just not available to them. Launch of eChoupal.com has equipped India's coffee planters with appropriate knowledge base and risk management tools. The site arms them with the latest prices

posted on commodity exchanges like CSCE in New York and LIFFE in London. Planters have access to technical analysis by experts to help them comprehend trends, trading ranges and chart patterns in simple language. 'Parity Chart' and the 'Calculator' on the site convert the coffee prices quoted in international auctions into raw coffee equivalent for the benefit of the small growers in India. Tradersnet, a special link on the site, brings together a large number of coffee planters, traders and roasters, creating a virtual market for transparent price discovery. ITC empowers Indian coffee growers with expert knowledge in logistics and risk management, thereby enabling them to face global competition. ITC has shown how the rural market can be tapped for mutual benefit of the customer and the marketer. Hence, a Rural Information System caters mainly to agricultural marketing. All the above examples give us an idea of what the government and other organizations are doing to help in agricultural marketing.

Multistage Price Determination Process:

The marketing manager knows that the 'cost-plus a reasonable profit' doctrine is self-defeating. Pricing strategy must be based on the consumer (on the demand side), just as strategies on product distribution and promotion are based on the consumer. Of course, costs (the supply side) are not forgotten but they are given proper place in the pricing process. Pricing process must start in the market, in the circle of exchange. Decisions on pricing are taken in the light of marketing opportunities, competition and many other variables influencing pricing. The price decisions must take into account all factors affecting both demand price and supply price. The price determination process involves the following steps: 1. Market segmentation, 2. Estimate of total demand, 3. Market share, 4. Designing the marketing mix, 5. Estimate of total costs, 6. Selecting pricing policies, 7. Determining pricing strategies, 8. Developing the price structure! 1. Market Segmentation: On the basis of market opportunity analysis and assessment of firms' strengths and weaknesses marketers will find out specific marketing targets in the form of appropriate market segments. There should be a perfect match or a kind of marriage between the firm and its market. Marketers will have firm decisions on: (a) the type of products to be produced or sold, (b) the kind of service to be rendered, (c) the costs of operations to be estimated, and (d) the types of customers or market segments sought. 2.Estimate of Demand: Marketers will estimate total demand for the products. It will be based on sales forecast, channel opinions and degree of competition in the market. Prices of comparable rival products can guide us in pricing our products. We can determine market potential by trying different prices in different test markets. Once we know the expected prices, we can compute sales volume at several prices.

3.The Market Share: Marketers will choose a brand image and" the desired
market share on the basis of competitive reaction. Market planners must know exactly what his rivals are charging. Level of competitive pricing enables the firm to price above, below, or at par and such a decision is easier in many cases. Higher initial price may be preferred if you anticipate a smaller market share, whereas if you expect a much larger market share for your brand, you will have to prefer relatively lower price. Proper pricing strategy is evolved to reach the expected market share either through skimming price or through penetration price or through a compromise, i.e., fair trading, or fair price to cover cost of goods, operating expenses and normal profit margin. 4. The Marketing Mix: The overall marketing strategy is based on an integrated approach to all the elements of marketing mix. It covers: l. Productmarket strategy, 2. promotion strategy, 3. pricing strategy, and 4. Distribution strategy. All elements of the marketing mix are essential to the overall success of the firm. Marketers will have to assign an appropriate role to price as an element of the marketing mix. Price plays an important role in relation to and in support of other elements of the marketing mix. Promotional strategy will affect pricing decisions. The design of the marketing mix can indicate the role to be played by pricing in relation to promotion and distribution p strategic element of the marketing mix as it influences the quality perception and enables product or brand positioning. It is also a good tactical variable. Changes in price can be made much faster than in any other variable of marketing mix. Hence, price has a good tactical value. 5. Estimate of Costs: Straight cost-plus pricing is not desirable always as it is not sensitive to demand. Marketing must take into account all relevant costs as well as price elasticity of demand, if necessary, through market tests. 6. Pricing Policies: Price policies provide the general framework within which managerial decisions are made on pricing. Pricing policies are guidelines to carry out pricing strategy. Pricing policy may desire to meet competition or we may have pricing above or below the competition. We may have fixed or flexible pricing policies. Pricing policies must change and adapt themselves with the changing objectives and changing environment. 7. Pricing Strategies: Pricing policies are general guidelines for recurrent and routine issues in marketing. Strategy is a plan of action (a movement or counter movement) to adjust with changing conditions of the market place. New and unanticipated developments may occur, e.g., price-cut by rivals, government regulations e.g., (mandatory Environment Audit) economic recession, fluctuations in purchasing power of consumers, changes in consumer demand, and so on. Situations like these demand special attention and relevant adjustments in our pricing policies and procedures.

8. The Price Structure: Developing the price structure on the basis of pricing
policies and strategies is the final step in price determination process. The priceolicies. Price structure will now define selling prices for all products and permissible discounts and allowances to be given to middlemen as well as various types of buyers. In recent years, rural markets of India have acquired significance, as the overall growth of the Indian economy has resulted into substantial increase in the purchasing power rural communities. On account of green revolution, the rural areas are consuming a large quantity of industrial and urban manufactured products. In this context, a special marketing strategy, namely, rural marketing has emerged. But often, rural marketing is confused withagricult ural marketing the latter denotes marketing of produce of the rural areas to the urban consumers or industrial consumers, whereas rural marketing involves delivering manufactured or processed inputs or services to rural producers or consumers.

ARKRTING STRATEGIES TO CAPTURE RURAL INDIA BY COMMUNICATING AND CHANGING QUALITY PERCEPTION:
Companies are coming up with new technology and they are properly communicating it to the customer. There is a trade of between Quality a customer perceives and a company wants to communicate. Thus, this positioning of technology is very crucial. The perception of the Indian about the desired product is changing. Now they know the difference between the products and the utilities derived out of it. As a rural Indian customer always wanted value for money with the changed perception, one can notice difference in current market scenario.

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 TARGET CHANGING PERCEPTION:

If one go to villages they will see that villagers using Toothpaste, even when they can use Neem or Babool sticks or Gudakhu, villagers are using soaps like Nima rose, Breeze, Cinthol etc. even when they can use locally manufactured very low priced soaps. Villagers are constantly looking forward for new branded products. What can one infer from these incidents, is the paradigm changing and customer no longer price sensitive? Indian customer was never price sensitive, but they want value for money. They are ready to pay premium for the product if the product is offering some extra utility for the premium.

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 fulfill 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 PROMOTING PRODUCTS WITH INDIAN MODELS AND ACTORS:

Companies are picking up Indian models, actors for advertisements as this helps them to show themselves as an Indian company. Diana Hyden and Shahrukh Khan are chosen as a brand ambassador for MNC quartz clock maker "OMEGA" even though when they have models like Cindy Crawford.

BY ASSOCIATING THEMSELVES WITH INDIA:

MNCs are associating themselves with India by talking about India, by explicitly saying that they are Indian. M-TVduring Independence Day and Republic daytime make their logo with Indian tri-color. Nokia has designed a new cellular phone 5110, with the India tri- colour and a ringing tone of "Sare Jahan se achcha".

BY PROMOTING INDIAN SPORTS TEAM:

Companies are promoting Indian sports teams so that they can associate themselves with India. With this, they influence Indian mindset. LG has launched a campaign "LG ki Dua, all the best". ITC is promoting Indian cricket team for years; during world cup they have launched a campaign "Jeeta hai jitega apna Hindustan India India India". Similarly, Whirlpool has also launched a campaign during world cup.

BY TALKING ABOUT A NORMAL INDIAN:

Companies are now talking about normal India. It is a normal tendency of an Indian to try to associate him/her with the product. If he/she can visualize himself/herself with the product, he /she become loyal to it. That is why companies like Daewoo based their advertisements on a normal Indian family.

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.

BY ACQUIRING INDIAN BRANDS:

As Indian brands are operating in India for a long time and they enjoy a good reputation in India. MNCs have found that it is much easier for them to operate in India if they acquire an Established Indian Brand. Electrolux has acquired two Indian brands Kelvinator and Allwyn this has gave them the well-established distribution channel. As well as trust of people, as people believe these brands. Similarly Coke has acquired Thumps up, Gold Spot, Citra and Limca so that they can kill these brands, but later on they realized that to survive in the market and to compete with their competitor they have to rejuvenate these brands.

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, 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).

BY ADOPTING LOCALISED WAY OF DISTRIBUTING:

Proper distribution channels are recognized by companies. The distribution channel could be big scale Super markets; they thought that a similar system can be grown in India. However, they were wrong; soon they realized that to succeed in India they have to reach the nook and the corner of the country. They have to reach the "local Paan wala, Local Baniya" only they can succeed. MNC shoe giants, Adidas, Reebok, and Nike started with exclusive stores but soon they realized that they do not enjoy much Brand Equity in India, and to capture the market share in India they have to go the local market shoe sellers. They have to reach to local cities with low priced products.

BY ASSOCIATING THEMSELVES WITH INDIAN CELEBRITIES:

MNCs have realized that in India celebrities enjoyed a great popularity so they now associate themselves with Indian celebrities. Recently Luxor Writing Instruments Ltd. a JV of Gillette and Luxor has launched 500 "Gajgamini" range of Parker Sonnet Hussain special edition fountain pens,priced at Rs. 5000. This pen is signed by Mr. Makbul Fida Hussain a renowned painter who has created "Gajgamini" range of paintings. Companies are promoting players like Bhaichung Bhutia, who is promoted by Reebok, so that they can associate their name with players like him and get popularity.

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.

Findings, Data & Analysis

Rural purchasing power has grown faster than urban in the last six quarters Faster growth in rural is not limited to penetration; today the rural consumers frequency of consumption is growing faster as well, demonstrating their entrenchment in these categories

Instant noodle sales are growing nearly twice as fast in rural India compared to urban in both penetration and frequency Seemingly urbane brands in categories like deodorant and fabric softener are growing much faster in rural India than urban

Several FMCG firms, including ITC and HULhave been registering faster and higher growth 1`in the sales of their goods in the rural markets as compared to the urban markets. Some of the FMCG companies such as Godrej Consumer Products, Dabur, Marico and Hindustan Unilever (HUL) have increased their hiring in rural India and small towns in order to establish a local connect and increase visibility. Swiss FMCG giant, Nestle plans to make further inroads into the rural markets. The company has asked its sales team to deliver "6,000 new sales points every month in rural areas" to expand its presence in Indian villages, according to Antonio Helio Waszyk, Chairman and Managing Director, Nestle India. At present, rural consumers spend about US$ 9 billion per annum on FMCG items and product categories such as instant noodles, deodorant and fabric, with the pace of consumption growing much faster than urban areas, as per the findings Much-needed, sustainable income contributing towards better living and Prosperity. Risk-free micro enterprise that yields high returns. A typical Shakti entrepreneur conducts a steady business which gives her an income in excess of Rs.1,000 per month on a sustainable basis. As most of these women live below the poverty line, and hail from extremely small villages (with populations of less than 2000), this earning is very significant, and almost twice the amount of their previous household income. For most of these families, Project Shakti is enabling families to live with dignity, with real freedom from

want. In addition to money, there is a marked change in the woman's status within the household, with a much greater say in decision-making. This results in better health and hygiene, education of the children, especially the girl child, and an overall betterment in living standards. The most powerful aspect about this model is that it creates a win-win partnership between HUL and the consumers, some of whom will depend on the organization for their livelihood, and builds a self-sustaining cycle of growth for all.

CONCLUSION
E-Chou pals deliver relevant technology in the hands of the farmers, which can improve the economic condition of the entire village. E-Chou pal is one of the very few ICT projects in India that has effectively utilized e-commerce transactions for poverty alleviation. One of the key lessons is that ICT can reduce the number of middlemen involved between agriculture commodity producers and final consumers. Another key factor is that very simple technology solutions are available to create networks in rural areas, which can function as virtual agricultural commodity market places. ITC e-Choupal, an innovative strategy which is elaborative and extensive in rural markets sofar. Critical factors in the apparent success of the venture are ITCs extensive knowledge of agriculture, the e_ort ITC has made to retain many aspects of the existing production system, including retaining the integral importance of local partners, the companys commitment to transparency, and the respect and fairness with which both farmers and local partners are treated.

SWOT Analysis Strengths of HUL and ITC

Strong and well differentiated brands with leading share positions Distinctly placed products providing reach to every segment of society Consumer understanding and systems for building consumer insight Integrated supply chain and well spread manufacturing units Distribution structure with wide reach,high quality coverage. The launch of project shakti and e-chopal has helped HUL and ITC to create brand awareness and extensive reach in rural India Access to unilever global technology , capability and sharing of best practices from other unilever companies

Well placed to take advantage of growth in rural India and lower strata of the society through shakti

Weakness
Price positioning in some categories allowes for low price competition like amul captured kwalitys ,market Limited success in changing eating habits of people Competitors focusing on a particular product and eating up HULs share like nirma focusing of soap and detergents. Many competitors of ITC products.

Opportunities
Growing consumer base due to increasing income levels and new consumers from lower strata of the society Untapped market in branded ayurvedic medicines and other such consumer products Opportunity in food sector, changing consumer tastes. Expansion of horizons towards more and more countries.

Threats
Unfavourable raw material prices due to inflation , reducing profitability Heavy on slaught of competition in the core-categories from emerging players like DMG will result in higher advertising expenditure Spurious/counterfeit products in rural areas and small towns Reduction in rural income of consumers due to high inflation

Limitations of study
Customers perception is not always static. They frequently change

their attitude. No face to face contact with customer what type of product they prefer No field study and no making questionnaire No sufficient time to collect actual data and analysis it Lack of magazine, journals and primary source of data

BIBLIOGRAPHY

BOOKS: Magazines like: business today. Icfai journal: Marketing Mastermind, Advertising xpress. Marketing Management books like: v. s. Rama Swamy, S Namakumari

WEBSITES:

www.google.co.in www.wikipedia.com www.management paradise.com www.hllshakti.coms