A project report on

Academic year: 2010-11 BHARATI COLLEGE Teacher Incharge: Mrs. Himanshu Garg Mentor: Ms Minakshi Paliwal Submitted by: Disha Sharma Roll No.: 506

Declaration
I, Disha Sharma, Roll No-506, a student of Bharati College, pursuing B.Com (H) Second Year, hereby declare that I have completed my project titled Rural Marketing in the academic year 2010-11. The project is based on my understanding of the subject and has not been copied from any published source or website.

___________________ Signature of the student (Disha Sharma)

Acknowledgements
I am grateful to the University of Delhi for providing its students a valuable opportunity to widen their knowledge and research on a topic of their choice. I extend my sincere thanks to my Teacher incharge, Mrs. Himanshu Garg and Mentor- Ms. Minakshi Paliwal for the encouragement, guidance and time invested with me for the development of my project. I feel highly obliged for the efforts, which she took in answering my queries. Also, I would like to thank my parents and friends who provided me unstinted support and invaluable suggestions for the improvement of the project.

Brand India
India is one of the fastest growing economies of the world. Once perceived as a land of snake charmers, today, it enjoys a position of respect in the world community. India has established its leadership in IT and knowledge based industry globally. Brand India is shaped not only by the IT sector, but also industry. Bigwigs such as TATA, Mahindra, Suzlon, Reliance are global entities today. India no longer boycotts foreign-made goods but buys out the companies that make them. It is also being touted as one of the worlds greatest holiday destination, offering massages, marriages and medical tourism. Along with the rapidly declining age profile, it has the fastest growing population of workers and consumers. Our sports stars such as Sachin Tendulkar, Vishwanathan Anand, Paes-Bhupathi have done their fair share in contributing to this brand. The IPL in itself has made the world look at us in disbelief. Bollywood produces 1000 feature films per year and the wide-spread Indian diaspora has ensured that the spotlight turns to India. The performance of the Indian economy during the economic crisis of 2008 has also made the developed economies wonder about the brand that is India. Brand India is not a homogenous block but a cafeteria of sub-brands like brand Ludhiana, brand Bangalore and brand Hyderabad. These views were expressed by Jairam Ramesh, economist and member of Rajya Sabha in his presentation, Changing image of Brand India-implications for Marketers in the special sessionPerspective on Brand India in the CII Brand Summit 2005 in Chennai. He said that marketers who do not understand the incredible diversity in terms of its culture and income would quickly come to grief as they do not submit to ground economic realities. Brand India is in transition and is undergoing transformation socially, politically and demographically. Though being the largest democracy, cheap labour, the bling in Bollywood, the Cricket icon Sachin Tendulkar, yoga and architectural marvels like the Taj Mahal can not be ignored but also, the caste politics, poverty, illiteracy, lack of basic infrastructure have to be given their due share in defining Brand India. They are still a part and parcel of our lives. Marketers have to be realistic and understand all such facets of life, not only in urban India but also rural India which presents further challenges.

Demographics
Population: India occupies 2.4 % of area of the world and is the second largest nation in terms of population size. It has a population of 1.1 billion, which is around16% of the total world population. With its current rate of population growth (2.11% approximately), India will soon replace China as the most populous nation of the world. Rural and Urban Population: Around 70% population of India lives in villages. But this ratio of Rural/Urban population is changing fast due to factors such as migration. Literacy rate: Overall literacy has gone up from 18.3% in 1951 to 64.8% in 2001. This means that over 35% of Indians were illiterate in 2001. In the urban areas however, the literacy rate was relatively high at 80% in 2001 than in rural areas where it was less than 60%. Also, literacy rates vary widely in different states and regions. Employment: According to the National Sample Survey Organisation (NSSO), unemployment amounted to 34 million person years in 2004-05 and unemployment rate was 8.3% on the Current Daily Status basis. Various schemes have been initiated to remove unemployment such as selfemployment programmes for rural areas, wage employment programmes and Mahatma Gandhi National Rural Employment Guarantee Act-2005. Growth rate: The Indian economy is the twelfth largest in USD exchange terms. It is the second fastest growing economy in the world. Indias GDP has touched USD 1.25 trillion mark. The service sector contributed 54% of the GDP in 2007-08. However, this rapid growth has not been inclusive in nature. It has not been accompanied by a just and equitable distribution of wealth among all sections of the population. The Indian rural economy: Seventy percent of Indias population lives in around six lakh villages. 56% of income, 64% of expenditure and 33% of savings come from rural India. At the highest income level, there are 1.6 million rural households as against 2.3 million households in urban areas. The rural populace is primarily engaged with agriculture, directly or indirectly. Many languages and dialects prevail in different parts of the country. Divisions on the basis of caste, community and other factors continue to exist.

Rural marketing
Rural marketing involves the conduct of business activities enabling flow of manufactured or processed goods from urban sector to rural regions of the country. Rural marketing in Indian economy can be classified under two broad categories. These are: The market for consumer goods that comprise of both durable and non-durable goods. The market for agricultural inputs that include fertilizers, pesticides, seeds, and so on. In this project, the rural market for consumer goods has been analysed. The following quotes show the relevance of rural marketing today, especially in developing economies like India. Quote Unquote The future lies with those companies who see the poor as their customers. - C K Prahalad To get rich, sell to the poor. - Pradeep Kashyap

Rural consumer
Rural India is a mass of 144 million households with over 730 million people. In the Census of India 2001, the definition of urban area adopted is as follows: (a) All statutory places with a municipality, corporation, cantonment board or notified town area committee, etc. (b) A place satisfying the following three criteria simultaneously: i) ii) iii) a minimum population of 5,000 at least 75 per cent of male working population engaged in nonagricultural pursuits; and a density of population of at least 400 per sq. km. (1,000 per sq. mile).

Thus, rural area would be a place having population of less than 5000, more than 25 percent of male population engaged in agricultural pursuits and a density of population of less than 400 per sq. km. Some other definitions are: Organisation Planning Commission LG Electronics NABARD Definition Towns upto 15,000 population are considered rural. All places other than the seven metro cities. All locations with a population upto 10,000 considered rural.

Analysis of rural market

The mental models etched in most minds are that of a rural India still stuck in the dark ages. Anecdotal evidence shows very visible signs of marked modernity and progress, consumer durable and non-durable product sales to rural areas show steady increases, yet census data corroborates the stuck in the dark ages description of rural India. Only 25% of rural households have access to tap water (compared with 70% in urban India); 45% have no electricity in urban households; while 52% have semi-pucca houses (compared with 80% in urban areas having pucca houses). Thus, it can be said that the truth lies somewhere in between. Hence, a need to build new mental models about rural India today is felt. Some features of the market are: a) 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. b) Rural India isnt a single homogenous block; it is heterogeneous. It describes many disparate parts in many stages of development, driven by different forces. The rural parts of Uttarakhand, Gujarat and Bihar are all different in character. c) Rural India is engaged in all kinds of occupations. The rural consumer could be a bank clerk commuting to the nearest town or an agricultural labourer. However, over 52% of Indias work force is directly engaged in agriculture according to estimates made in 2008-09. d) With road connectivity so widespread, the notion that rural Indians are stuck in the hinterland, and unexposed to the developments around them, simply isnt true anymore. Children and women commute farther for their schools and for their shopping, respectively. e) While rural India is exposed to all new things urban, it still has a low level of traditional education, making rural Indians a different kind of consumers. 26% of rural Indias chief wage earners (CWEs) are illiterate compared with 8% in urban India. 7% of rural CWEs are graduates compared with 29% in urban India. f) Rural India has an average per capita income that is half of urban India. Extrapolating from income data from NCAER, we know that 21.7% of the rural population is below the poverty line; for urban populations, the incidence of poverty is 20.8%, not much lower. It is just that this translates into three times as many poor households in rural India, a whopping 160 million people at least. The rural numbers are large and rural India harbours as many rich households as urban India. g) With the initiation of various rural development programmes there have been an upsurge of employment opportunities for the rural poor.

h) The steps taken by the Government of India to initiate proper irrigation, infrastructural developments, prevention of flood, grants for fertilizers, and various schemes to cut down the poverty line have improved the condition of the rural masses. According to estimates, the percentage of households earning less than USD1 was as high as 96% in 1985, which is estimated to come down to 29% by 2025. Similarly, the percentage of households earning within USD2 to USD5 is expected to increase from 1% in 1985 to 20% by 2025. The main steps taken are: i) Increase in Minimum Support Price (MSP): Record food grain production (218.2 million tonnes for 2009-10) and the increase in MSP in the last couple of years have increased purchasing power in rural and semi-urban areas of the country. National Rural Employment Guarantee Scheme (NREGS): The primary objective of NREGS is to provide gainful employment to nearly 45 million rural families (mainly landless labourers) that live below the poverty line. The scheme guarantees 100 days of employment (in a financial year) to every household from which volunteers participate. It has resulted in a rise in minimum wages in many states, with the average wage rise being around 32%. Sixth Pay Commission: According to estimates, 52% of the employees who benefited from the Sixth Pay Commission live in "C" and unclassified cities. Under the pay commission, the average salary has been increased by 21 %, which entails an additional government expenditure of INR 80 billion every year in addition to a one-time payment of arrears for 2 years, which is estimated at INR 180 billion. Farm Loan Waiver: The government has waived agricultural loans to the extent of 100% for around 30 million small and marginal farmers and 25% for other farmers. These farmers also became eligible for fresh agricultural loans. The total cost to the government for these waivers is estimated to be INR 720 billion.

ii)

iii)

iv)

The above data tells us that we must never make the same mistake with rural India that Western multinationals make with India as a whole - assume that it will evolve the same way with a 10-year lag. The rural Indian market and consumer calls for sophisticated new marketing strategies and paradigms, not a transplant of old ideas.

Rural consumer market

The rural consumer market, which grew 25 percent in 2008, is expected to reach US$ 425 billion in 2010-11, according to a research paper prepared by CII-Technopak, in November 2009. The figures are expected to double the 2004-05 market size of US$ 220 billion. Rural India purchases not only fast moving consumer goods (FMCGs), but also consumer durables such as mobile phones, television sets, automobiles and services such as insurance contracts. It generally purchases small packs, low unit price being more important than economy. It is becoming increasingly brand conscious. Even expensive brands like Close-Up, Marie biscuits, Sunsilk shampoo are doing well because of extensive distribution. Certain brands are doing well even without much advertising support- Ghadi detergent powder and Chik shampoo being examples. Thus, distribution and pricing are the key mantras to success in rural markets. MART, the specialist rural marketing and rural development consultancy has found that 53 per cent of FMCG sales lie in the rural areas, as do 59 per cent of consumer durable sales. Of two million BSNL mobile connections, 50 per cent went to small towns and villages, of 20 million Rediffmail subscriptions, 60 per cent came from small towns, so did half the transactions on Rediff's shopping site. Below is an analysis of different industries and their presence in the rural sector. FMCG According to market researcher Nielsen, demand for personal care products grew faster in rural areas than urban areas during the perion January-May 2010. In shampoos, rural demand grew by 10.7 per cent in value terms, while in urban markets, it rose by 6.8 per cent. Similarly, toothpaste sales grew by 9.1 per cent in rural India and by 4.4 per cent in urban markets. Several FMCG companies such as Godrej Consumer Products, Dabur, Marico and Hindustan Unilever have increased their hiring in rural India and small towns in order to establish a rural connect and increase visibility. Companies such as HUL and ITC have engaged in Corporate Social Responsibility (CSR) initiatives like Project Shakti and E-Chaupal respectively to create brand loyalty and help poor people attain some wealth to spend on their product categories. Retail The rural retail market is currently estimated at US$ 112 billion, or around 40 per cent of the Indian retail market, according to a study paper, The Rise of Rural India. Castrol India is pushing its rural sales by building up a distribution infrastructure to reach out to all villages. It plans to take its products to six lakh villages with a population of less than 5,000; today it reaches only 5000-7000 towns and villages. Currently, HUL products reach approximately 250,000 rural retail outlets and the company intends to reach 750,000 outlets in nearly two years time.

Automobiles The purchasing power in rural India is on the rise, mainly because of the governments role. It has announced various schemes for the people such as farm loan waiver; NREGA has also led to increase in purchasing power. Owing to such an increase in income and purchasing power, car sales have been increasing. Maruti Suzuki, Toyota Kirloskar Motor, Yamaha, Mahindra & Mahindra are all present in rural India. Sales range from Nano to Scorpio. Tata Motors is also making efforts to sell its pick up truck Ace in rural markets. It has tied up with 117 public sector, gramin(rural) and co-operative banks to help small entrepreneurs buy the vehicle. Telecom India is a huge market and none of the service providers can dare to ignore its potential. India, with about 464.82 million mobile phone connections (as of June, 2009), is the third largest telecommunication network in the world and the second largest in terms of number of wireless connections. The mobile market in rural India has significant potential, with number of subscribers anticipated to grow at a CAGR of around 32% during 2009 to 2012. It is forecasted that sales of mobile handsets in rural India will grow at CAGR of around 17% from 2009 to 2012. The rural market is a good business proposition for cellular operators and handset manufacturers as mobile phone penetration is very low in this area. Cellular operators who had launched their services in B and C class cities have received overwhelming response. The growth in these areas is almost triple as compared to the stagnant growth in metros. The penetration level of mobile phones in rural India has reached 6,000-odd villages, which is still less than 1% . If one had to carry this number forward and take the other operators into account, on a rough estimate, the total rural market for cellular operators would work out to around Rs 20,000 crore. Thus, we can see that rural India is an opportunity no one wants to miss. It is attracting major corporate entities. It is showing that it has the power and yes, the rural Indian customer is also the King.

Opportunities
A huge population: 720 million people in 630,000 villages across 3.2 million square miles to be targeted. A massive economy: Over 50% of Indias total GDP comes from rural India. Almost the same number of middle to high income households are in rural areas (21.16 million) as in urban areas (23.22 million). A parallel economy: It has the same needs as developed markets but a reduced ability to pay. Unexplored markets: The markets have untapped potential. There is substantial scope to further increase the contribution of the rural markets to the overall sales. A booming economy: Increasing purchasing power on account of green revolution, timely government help in terms of higher support prices for crops, guaranteed jobs and loan waivers to tide over droughts, floods and endemic poverty. CSR activities done by the corporates also help the poor people attain some wealth to spend on their product categories. Eg: HULs Project Shakti for the emancipation of women and ITCs e-Chaupal which provides information about weather and market price of farmers produce. Such CSR initiatives increase the brand loyalty. Exposure and increase in literacy will open the markets further. Saturation in urban markets: Urban markets are decelerating, according to the law of diminishing returns to scale and more intensive effort is required to secure an equivalent amount of sales in them as compared to under-penetrated rural areas. Rural Vs Urban Penetration of Selected Products (As a percentage of total number of households) Commodities Rural Urban Average Penetration Penertation Penetration Cars/Jeeps/Vans 1% 12% 4% Two-wheelers 11% 42% 20% Colour TV sets 12% 63% 27% Refrigerators 8% 48% 20% Washing Machines 1% 24% 8% Air-conditioners 5% 1% Fans 43% 76% 53% Bicycles 55% 60% 57% TVs (B/W or 33% 76% 46% Color) Gas stoves 19% 67% 33%

Challenges
The success of a brand in the Indian rural market is unpredictable. It has always
been difficult to gauge the rural market. More often than not, people attribute rural market success to luck. Therefore, marketers need to understand the social dynamics and attitude variations within each village, though nationally they may follow a consistent pattern. Rural markets face the critical issues of Distribution, Understanding the rural consumer, Communication and Poor infrastructure. The marketer has to strengthen the distribution and pricing strategies. The rural consumer expects value for money and owing to his unsteady income and low standard of living, increasing the household income and improving distribution are the viable strategies that have to be adopted to tap the immense potential of the market.

The 4-A Model

The 4-A model can be used to analyse the challenges in rural markets.

Availability

Awareness

4 As

Affordability

Acceptability

 Availability: Distribution strategies are of paramount importance in the rural markets. 700 million Indians may live in rural areas; finding them is not an easy job. Given the bad road conditions, it is an even greater challenge to regularly reach products to the far-flung villages. Means of transport that range from trucks, auto rickshaws, cycle rickshaws and hand carts to even camel carts in Rajasthan and mules in the hilly areas may be used to cart the products. Marketers have to develop special strategies to reach the rural markets. Eg: Coca-cola and Pepsi follow a hub and spoke model of distribution. To ensure full loads, the company depot supplies, twice a week, to large distributors which act as hubs. These distributors appoint and supply, once a week, to smaller distributors in adjoining areas. Affordability: The rural consumer is extremely price sensitive and generally with low disposable income. Products have to be affordable to the rural consumer, most of who are on daily wages. Thus, small pack sizes need to be introduced. Eg: Sachets for shampoos and returnable 200ml coca-cola glass bottles. Such small packs are perceived to be value for money. Also, the companies should consider the price of alternate products available. Eg: Soft drinks such as Coca- Cola and Pepsi would consider the price of sherbet while pricing their products. Acceptability: Once available, the major concern is to convince the customer about the need to buy the product. There is a need to offer products that suit the rural market. Eg: In 1998, LG Electronics developed a customized TV for the rural market (cheap and capable of picking up low intensity signals) and christened it Sampoorna. It was a runwayhit selling 100,000 sets in the very first year. Awareness: With large parts of rural India inaccessible to conventional advertising only 41% rural households have access to television building awareness is another challenge. Outing is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Corporates rely on word of mouth publicity, radio, melas and haats, van advertising, posters and cinema to reach the rural consumer. Advertising is generally done in the local language. Opinion leaders play an important role in popularising the brand. Also, the rural customer relates a lot to celebrities. The celebrity factor is thus introduced to attract the target market.

Some other challenges are: Communication: The marketer must address the specific problems, needs, aspirations and hopes of rural folks in each region. Stories having characters they can identify with will help create greater empathy and understanding. Eg: When MRF decided to introduce bullock cart tyres with nylon and decided to call it `Pahelwan Chap Buggy Gadi Tyres,' it came up with a `Nylon Cord Breaking Contest' for pahelwans in the audience. As nylon threads don't break, it effectively demonstrated to the audience that MRF tyres come with the strength of nylon, which even the pahelwans cannot break (and `Pahelwan' also happens to be trademark of MRF Tyres). Creating understanding: Products purchased by rural consumers are at times put to such uses for which they werent made. The Godrej hair dye is used by the rural consumers for applying on their buffaloes to make them look immaculate black before displaying in the market for sale. People in the state
of Bihar feed the cattle with Horlicks as a health drink to fatten them! Similarly, people in Punjab use washing machine not for washing clothes but to make frothy lassi in huge quantities! Animals are rubbed with Iodex on their skins to relieve them from muscular pain after a day's hard work. Paints meant for houses are used on the horns of cattle for easy identification and theft prevention! If such is the result of increased sales, there is an urgent need for the companies to review their marketing strategies. The companies need to analyse the basic requirements of the customers before dumping products on rural consumers and thinking of increasing their market share. They need to create understanding in the minds of consumers regarding the actual usage of the product.

Imitations: The marketers need to protect their brand against low-cost and low- quality imitations available in the market. Eg: Phillips in place of Philips, Lax in place of Lux, any adhesive in the name of Fevicol. The marketer has to ensure that the target audience knows the difference between fake and original. Making this distinction clear becomes all the more difficult in rural areas because of low levels of literacy. Storage capacity: The storage system is generally poor leading to inadequate stocking of products. Marketers need to develop strategies to ensure that their product is readily available and not spoilt because of lack of proper warehouses. Eg: Coca-Cola provides low-cost ice boxes a tin box for new outlets and thermocol box for seasonal outlets because of the lack of electricity and refrigerators in the rural areas.

Conclusion
Rural marketing is an evolving concept. Improvements in social and economic infrastructure, along with widening reach of the corporates promise a bright future for those intending to go rural. Since the average income of a rural household is lower than that of an urban one, there is a focus on lower cost products such as Alto and Santro in passenger cars. However, like in urban areas, the rural customer does not compromise on the features and looks for value for money. Thus, the higher variant of a particular model garners more volumes than the lowest one. There is no "rural-only" product in the market. The Nano was supposed to be a rural market product, but the share of the rural market in the total number of bookings of 2,03,000 units was less than one-third. In the overall context, the rural market is still a niche segment.
It is very essential for the rural marketers to understand the psychology of the consumers in terms of their usage habits and shopping behavior along with their emotions and value systems. The integration of both technological and managerial knowledge would help them to develop the needed marketing strategies for the rural Indian markets. This will further lead to technologically superior, robust and low cost products that would be in resemblance with the Indian tradition and culture. The marketers may also consider depending more on traditional media when marketing for rural consumers. This unconventional method acts as an effective way to create awareness as mass media is unreliable as it is too glamorous and interpersonal for the rural market. Uses of skits, magic shows, and education by NGOs are some of the most preferred traditional media which the marketers can usually use as it goes well with the tastes of the rural consumers.

Its not just right pricing and packaging, but it is the ability to establish the right connect with the consumers which helps a brand to make it big in rural India. The sector offers a plethora of opportunities and poses a variety of challenges. It is not easy to succeed in rural India. The 4As should be understood carefully and appropriate marketing strategies designed to capture the targeted market share. Rural India is willing to pay and this attitude should be capitalised on. There lies immense potential in this sector. It is imperative for any firm planning to go big to eye the rural market. Gone are the days when a rural consumer would go to a nearby town or city to buy a branded product. The growing power of the rural consumers has forced big companies to flock to the rural markets.

Bibliography
Business standard The Hindu Frontline Indian Economy- Performance and Policies: Bhargava and Sethi www.ibef.org (India Brand Equity Foundation) www.fadaweb.com (Federation of Automobiles dealers Association) Decoding Rural Market Ernst & Young