Sr.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 26 27 28

Title
Executive summary Meaning & definition of Rural Marketing Rural Marketing Feature & evaluation of Rural Marketing Nature & scope of Rural Marketing Rural marketing transactional & developmental Rural pricing objectives Classification of Rural Consumer Attractiveness of Rural Market Rural v/s Urban Marketing-summary Problem of Rural Marketing New marketing mix for selling to Rural Indians Significance of Distribution Advertising in Rural India Fast Moving Consumer Goods Background & History What are FMCG Growth prospects of FMCG in rural India Pillars of FMCG & Distribution & Retailing FMCG consumption in Rural India Focus on Urban categories & premium brand Rural Media Increase brand awareness & needs of FMCG in rural areas Developing effective Rural Marketing strategies Advantages to the sector & Market opportunities Rural Promotion & Advertising 1.Tiger Biscuits 2. Parachute Oil Rural & Urban consumer detail profile Advertising & Promotion ( Colgate)

Pg. No.
2-3 4-5 6-7 8-12 13-15 16-18 19 20 21-26 27-29 30-31 32-34 35 36-37 38-39 40 41 42-44 45-47 48-49 50 51-52 53-54 55-56 57-59 60-61 62-64

EXECUTIVE SUMMARY
It is often said that markets are made not found. This is especially true for the rural market in India. It is a market for truly creative marketer. Rural marketing is distinct specialization of marketing discipline, which encompasses a customized application of marketing tools & strategies to understand the psyche of rural consumers in terms of needs, tailoring the products to meet such need & effectively delivering them to enable a profitable exchange of goods & services to & from the rural market. Already rural market is proving to be vital for the growth of most companies. Take the largest FMCG Compa ny in the country, Hindustan Lever more than half its annual sales of Rs.11, 700 crores comes from the rural market. The term rural marketing is synthesis of two words - Rural & Marketing. Rural India is evolving, is dynamic & has stood on its own for centu ries Rural Indias population is more than one tenth of the world population, hence, important to India & the World. The rural market consists of more than 100 million households with a total population of about 740 million. In spite of being larger in siz e, rural areas are characterised by low per capita income, low literacy, and average agricultural productivity & low level of industrialisation. Only FMCG companies, with deep pockets, unflinching rural commitment & staying power can play this rura l game at the market. But as stated by C.K. Prahlad, The future lies with companies, who see the poor as their customer. It is a high- risk area, but with the promise of a large customer following as a prize for those who succeed. The Key to reducing the risk is to understand the market, consumer needs & behaviour. The rural market is still an area of darkness for India entrepreneurs, an idea that is vast in size, but a amorphous in detail. & yet, it represents the largest potential market in the country, with over 75% of the population. It is a market with potential, but the marketers need to have a long term vision & commitment. The marketer can expect results in the time frame of 10 to 20 years. As these results are not going to come very fast, an approach of gradually building the rural market, in phases, is needed to be successful. Fast moving consumer goods (FMCG) have attracted Indian

villagers when the urban demand for goods is getting saturated. The manufacturing companies look at th is development as an opportunity. Large FMCG companies including Multinational companies (MNC,s) are planning their own strategies to enter this large & developing rural market. The marketing Strategies have to be tailor made to suit the rural condition. Leading companies in the FMCG sector in India have taken up a development approach to nourish this new market. The companies are Hindustan Lever Limited (HLL), Nirma, Godrej, Proctor & Gamble, Reckett & Colemn, Karnataka soaps & detergent limited. HLL has done considerable pioneering work in developing FMCG products for the rural market & initiating collaborative & innovative strategies.

MEANING OF RURAL MARKETING

Rural marketing means marketing activities in the rural areas where favourable infrastructure may not be available. Rural marketing and urban marketing are identical as regard their basic marketing structure. However, rural markets and rural marketing have special features and problem as compared to urban markets. The rural market offer a greater scope for a concentrated marketing effort because of the recent increase in the rural income and the likelihood that such income will increase faster because of better production and higher prices for agricultural commodities. The rural markets dominate Indian marketing secene and need special attention for the expansion. Today the rural market offer a vast untapped potentials, programmes in the fields of agriculture and allied activities, health, education, communication, rural electrification, etc. Have improve the life styles of rural population and some market agencies forecast that the rural demand will supercede the urban demand in the near future. Estimate are that rural market is growing twise as fast as the urban market for durable product like wrist -watches, fans, television, video cassette recorders, and also non durables like nail polish, lipstick, ice -cream , shampoo. Rural marketing has become the latest mantra of most corporate. Companies like Hindustan unilever, britania, colgate Palmolive and even multinational companies like coca-cola, pepsi, LG, Philips and cavin car are all eyeing to get hold of the rural market.

DEFINATION OF RURAL MARKETING :

According to Thomson the study of rural marketing comprises of all operations, and the agencies conducting them, involved in the movement of farm product food, raw material and their derivatives such as textiles from the farms to the final consumer and the effect of such operation on producer, middlemen and consumers. According to national commission on agriculture, Rural marketing is a process which start with a decision to produce a saleable farm commodity and it involve all the aspect of market structure or system, both functional and institutional based on technical and economic consideration, and include pre and post harvest operation assembling, grading, storage transportation and distribution.

DEFINATION OF RURAL
Government agencies from IRDA & NCAER define rural as villages with a population of less than 5,000 with a 75% of the male population engaged in agricultural etc.

What Rural Means?

Marketers today define rural as people living a different lifestyle as opposed to that of those who have settled in the bigger cities and towns. Rural is basically, a mindset. Those who possess it are rural and those who do no t, are urban. FMCG recognize rural India by certain characteristics. These are: low population numbers, low median income, poor infrastructure [roads, electricity, communications], and agrarian rather than industrial activity. Such rural areas are within the sphere of influence of neighboring cities and metros. This influence determines their aspiration lev els and their viability as markets for many FMCG companies.

Rural Marketing
Rural marketing involves the process of developing, pricing, promoting, distributing rural specific product and a service leading to exchange between rural and urban market which satisfies consumer demand and also achieves organizational objectives. It is a two-way marketing process wherein the transactions can be: RURAL URBAN RURAL RURAL URBAN RURAL

1. Urban to Rural: A major part of rural marketing falls into this category. It involves the selling of products and services by urban marketers in rural areas. These include: Pesticides, FMCG Products, Consumer durables, etc. 2. Rural to Urban: Transactions in this category basically fall under agricultural marketing where a rural producer seeks to sell his produce in an urban market. An agent or a middleman plays a crucial role in the marketing process. The following are some of the important items sold from the rural to urb an areas: seeds, fruits and vegetables, milk and related products, forest produce, spices, etc. 3. Rural to Rural: This includes the activities that take place between two villages in close proximity to each other. The transactions relate to the areas of exp ertise the particular village has. These include selling of agricultural tools, cattle, carts and others to another village in its proximity. Rural marketing requires the understanding of the complexities. Indian agricultural industry has been growing at a tremendous pace in the last few decades. The rural areas are consuming a large number of industrial and urban manufactured products. The rural agricultural production

and consumption process plays a predominant role in developing the Indian economy. This has designed a new way for understanding a new process called Rural Marketing. The concept of rural marketing has to be distinguished from Agricultural marketing. Marketing is the process of identifying and satisfying customers needs and providing them with adequate after sales service. Rural marketing is different from agricultural marketing, which signifies marketing of rural products to the urban consumer or institutional markets. Rural marketing basically deals with delivering manufactured or processed inputs or services to rural producers, the demand for which is basically a derived outcome. Rural marketing scientists also term it as developmental marketing, as the process of rural marketing involves an urban to rural activity, whi ch in turn is characterised by various peculiarities in terms of nature of market, products and processes. Rural marketing differs from agricultural or consumer products marketing in terms of the nature of transactions, which includes participants, products, modalities, norms and outcomes. The participants in case of Rural Marketing would also be different they include input manufacturers, dealers, farmers, opinion makers, government agencies and traders.

FEATURES OF RURAL MARKETING

a) Large and Scattered: According to the 2001 census, indias total population was 1027 million out of which the rural population was about 74.20 million i.e 72% of the total population . The rural population and markets are highly scattered over a wide geographical area. b) Large number of Consumers: Rural population forms a major portion of the Indian population. About 70% of the Indians reside in rural areas. In other words, for every consumer in urban area, there are three of them in rural areas. c) Major Income from Agriculture: Nearly 60% of the rural income is from agriculture. Hence rural prosperity is tied with agricultural prosperity. During the harvest season, the demand for consumer goods in villages goes up. The population securing income from non-agriculture sector is now increasing due to the rural development programmes. d) Low Standard of living: The consumer in the village areas have a low standard of living because of low literacy, low per capita income, social backwardness, low saving, etc. e) Traditional Outlook: The rural consumer VALUES OLD CUSTOM AND TRADITIONS. A charge is beginning to take place in their outlook because of GROWTH IN LITERACY RATE AND MASS MEDIA. f) Diverse Socio-economic Background: Rural consumer have diverse a socio-economic background. This is different in different parts of the country. This brings diversity among rural customers and market.

g) Changing Demand Pattern: The demand pattern of the rural consumer is fast changing. There is a new and growing demand for toiletries, ready-made garments, cosmetics, packaged foodstuffs, etc. credit facility are also being extended by public sector banks through Kisan Credit Cards which help the farmers to buy seeds, fertilisers and even consumer goods. h) Infrastructure Facility : the Infrastructure facility like roads, warehouses, communication system are inadequate in the rural areas. Hence physical distribution b ecome costly. i) Saving Habits: The saving habit of the rural community is increasing in the recent years as a result of the efforts put by co-operative and commercial banks. j) Media Reach: The rich of the print media in rural areas appears to be very poor except in certain pockets of the country. It is estimated that the reach of print media is 10% followed by T.V. 31%, radio 32%, and cinema 33%. k) Communication Facility: As per the data published in the Indian Express about 20% of the six lac vill ages are without telephone facility even today. This include Maharashtra, Rajasthan, Gujarat, Assam, Orissa and Andhra Pradesh. l) Rural Electrification: Rural electrification has been gonig on in a big way. According to the available information 5,09,620 villages which is about 88% now Have electricity connection. The remaining are in the process of being electrified.

Evolution of Rural Marketing

PHASE ORIGIN Before Mid1960 (from independence to green revolution) Mid- Sixties (Green revolution to Preliberalization period) Mid- Nineties (Postliberalization period on 20th century) FUNCTION MAJOR PRODUCTS SOURCE MARKE
T

DESTINATIO N MARKET

Agricultural Marketing

Agricultural Produce Rural Urban

II

Marketing Of Agricultural Inputs

Agricultural Inputs

Urban

Rural

III

Rural Marketing

Consumables And Durables For Consumption & Production

Urban & Rural

Rural

IV

21st century

Developmen tal marketing

All products & services

Urban & Rural

Urban & Rural

1. Phase I ( from Independence to Green Revolution): Before the advent of the Green revolution, the nature of rural market was altogether different. Rural marketing then referred to the marketing of rural products in rural & urban products. 2. Phase II (Green Revolution to Pre-liberalization period): During these times, due to the advent & spread of the Green Revolution, rural marketing represented marketing of agriculture inputs in rural markets & marketing of rural produce in urban areas.

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3. Phase III (Post-liberalization period on 20th century): The third phase of rural marketing started after the liberalization of the Indian economy. In this period, rural marketing represented the emerging, distinct activity of attracting & serving rural markets to fulfill the need & wants of rural households, peoples & their occupations. 4. Phase IV (21st century): Learning from its rural marketing experiences after the independence, the corporate world has finally realized the quick-fix solutions & piecemeal approaches will deliver only limited results in the rural markets. And, if an organization wants to tap the real potential of the rural market, it needs to make a long-term commitment with this market. Its approach & strategies must not focus in just selling products & services, but t hey should also aim at creating an environment for this to happen. The objective of rural marketing in the current phase is the improvement of the quality of life by satisfying the needs & wants of the customers, not through atand -alone products or services, but by presenting comprehensive & integrated solutions which might involve a set of inter -related products & services. Till recently, the focus of m arketers in India was the urban consumer and by large number specific efforts were made to reach the rural markets. But now it is felt that with the tempo of development accelerating in rural India, coupled with increase in purchasing power, because of scientific agriculture, the changin g life style and consumption pattern of villagers with increase in education, social mobility, improved means of transportations and communication and other penetrations of mass media such as television and its various satellite channels have exposed rural India to the outside world

and hence their outlook to life has also changed. Because of all these factors, rural India in now attracting more and more marketers. Rural marketing has become the latest mantra of most corporate. Companies like Hindustan Le ver, Colgate Palmolive, Britannia and even Multinational Companies

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(MNCs) like Pepsi, Coca Cola, L.G., Philips, Cavin Kare are all eyeing rural markets to capture the large Indian market. Coming to the frame work of Rural Marketing, Rural Marketing broadly involves reaching the rural customer, understanding their needs and wants, supply of goods and services to meet their requirements, carrying out after sales service that leads to customer satisfaction and repeat purchase/sales.

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Nature of Rural Market

a) 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. b) 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. c) 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. d) 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. e) 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. f) 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.

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SCOPE OF RURAL MARKETING IN INDIA:

a) Higher purchasing power: These as been an increase in purchasing power of Rural population due to increase in economic activities during the p lanned rural development. Heavy outlay of resources on irrigation, fertilizers, agricultural equipments and agroprocessing industry has been made. Saving habits in rural people has also increased. This too contributes in higher purchasing power. b) Change in rural markets: There has been an increase in demand for durable and non-durable like table fans, radio, mopeds, soaps, etc. by rural consumers. This provides a ready market for the producers and expansion of rural market. c) Media exposure: Before, only outdoor media was the medium to attract rural consumers. Now information about new product is given through netwo rks programmes on TV, outdoor publicity and mobile advertisements to the rural consumer. d) Decision making: Women in rural areas are beginnin g to take fast decision for purchases. Studies reveal that 72.3% decision are taken jointly in a family. With education and mass media, the role of children is also changing. e) Growing urbanisation: Today rural India is characterised by growing urbanisation. Marketers can now introduce products designed specifically for rural consumers, as there has been a better understanding of rural consumer and his habits. f) Infrastructural facility: Substantial increase is also seen in the improvement of Infrastruct ural facility. Although it is not available according to the need of the people but banking facilities, electricity, all weather roads, etc. has helped in improvement of the status of people. This gives tremendous opportunities for marketer as now they can reach rural buyer and communicate more effectively about their products.

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g) Rise of alert buyer: Literacy level of rural india is being steadily increasing with the launching of adult literacy scheme. Language barrier has been disappearing. Rural consumer now think differently and decide fro available alternatives. now rural consumer can defend themselves with the help of increased awareness.

h) Opinion Leaders: The one who acquires, processes and interprets information is an opinion leader. Opinion leader help in interpretation of information to others to help them for arriving at a correct decision. Educated people have taken up the role of being opinion leaders. Friends and relatives who have some experience in buying the product act as User Endorsers and provide the necessary information.

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Rural marketing transactional or developmental

The role of rural marketing as such is more developmental than transactional. It is more a process of delivering better standard of living and quality of life to the rural environment taking into consideration the prevailing village milieu. Transactional Vs Developmental: For better comprehension of this role let us distinguish development marketing and transactional marketing. Table brings out the diffe rences in brief. Transactional Vs Development Marketing Sr.No. 1. Aspect Concept Transactional Consumer orientation, Marketing concept Stimulating and conversional marketing Product-market fit Product innovations and communications Commercial Development Society orientation, societal concept

2.

Role

Catalytic and transformation agent Social change Social innovations and communications Socio-cultural, economic Government, voluntary agencies, corporate enterprises, benefactors

3. 4.

Focus Key task

5.

Nature of activity Participan ts

6.

Corporate enterprises, Sellers

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7.

Offer

Products and services

Development projects/schemes/ program Beneficiaries and buyers Developmental Market development Corporate Image

8. 9. 10.

Target group Communic ation Goal

Buyers Functional Profits Customer satisfaction Brand image

11. 12.

TimeFrame Motivatio n

Short-medium Profit-motive Business policy

Medium-Long Service-motive Ideological or Public policy

Model: The model of rural marketing represents a combination of the transactional and developmental approaches. Rural marketing process is both a catalyst as well as an outcome of the general rural development process. Initiation and management of social and economic change in the rural sector is the cor e of the rural marketing process. It becomes in this process both benefactor and beneficiary. Innovation is the essence of marketing. Innovative methods of social change for successful transformation of traditional society are virtual. Such a change narrows the rural-urban divide. The process of transformation can be only evolutionary and not revolutionary. The growth of the rural market can be a planned evolutionary process

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based on strategic instruments of change rather than constitute just short-term opportunities for commercial gains. The exposure of ruralites to a variety of marketing transactions during the change process puts them in the role of beneficiaries than of just `buyers' of modern inputs and infrastructural services. Communication is the vital element of rural marketing. It should serve to resolve social conflicts, encourage cooperation and strengthen competitive spirit during interactions between rural and urban as well as within rural areas. Another critical point for communication is the point of conversion of ruralite from an "induced beneficiary" to an "autonomous buyer".

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RURAL PRICING OBJECTIVES

Deeper penetration of market: Basically rural markets are adopted for deeper penetration and expansion because of its size. Hence the pricing objectives are different for rural and urban markets. E.g. VIM washing bar is Rs. 15 (400 gm) in the urban market but it is offered for Rs. 4 (200 gm) in rural markets. Long run profit maximisation: A company enters in rural market should wait for success in long run. Hence penetration-pricing strategy is the best option. Recover distribution cost: The pricing objective of a rural marketer should recover the costs involved in distribution alongwith production cost and dealer margin. Competing pricing: Rural marketer should study the pricing strategy of its competitors and accordingly fix its prices. Increaser sales and market share: The pricing objectives should be such that it boosts the sales in rural markets. E.g. Anchor white toothpaste launched with much lower price than the leading brands and captured the market.

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Classification of Rural Consumers

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

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 middleclass. The farmers of Bihar and Orissa fall under this category.

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Attractiveness of rural market

a) Large Population: The rural population is large and its growth rate is also high. Despite the rural urban migration, the rural areas continue to be the place of living majority of Indians. b) Rising Rural Propensity: 1994-95 1.6 2.7 8.3 26.0 61.4 200001 3.8 4.7 13.0 41.1 37.4 200607 5.6 5.8 22.4 44.6 20.2

Income Group Above Rs. 100,000 RS. 77,001100,000 RS. 50,00177,000 RS. 25,00150,000 RS.25,000 &
BELOW

Thus we see that population between income level of Rs. 25,000- 77,000 will increase from 34.3% in 1994-95 to 67.0% in 2006-07. The rural consuming class is increasing by about 3-4% per annum, which roughly translates into 1.2 million new consumers yearly.

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c) Growth in consumption: PER CAPITA HOUSEHOLD

EXPENDITURE

(IS RS.)

LEVEL

NO.

STATES Punjab Kerala Haryana

EXPENDITUR
E

614 604 546 452 416 386 384 382 381 381 373 365 338 326 289

High (Above Rs 382/-)

Rajasthan Gujarat Andhra Pradesh Maharastra West Bengal Orissa

Average 5 (Rs. 382/-)

Tamil Naidu Uttar Pradesh Karnataka Assam

Low (Below Rs. 382/-)

Madhya Pradesh Bihar

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Distribution households income wise (projection in Rs Crore) 2001 02 INCOME

GROUPS

2006 07 RURAL % 26.9 64.2 88.7 71.4 TOTA

L

RURAL TOTAL NO. 0.07 7.73 5.09 12.89

NO. 0.12 10.32 3.52 13.96

% 23.1 61.8 95.7 66.7

HIGH MIDDLE LOW TOTAL

0.26 12.04 5.7 18.04

0.52 16.72 3.68 20.90

Spending pattern (Rural Households in Rs.) Item FOOD ARTICLES TOILETRIES WASHING MATERIAL COSMETICS OTC PRODUCTS OTHERS TOTAL % 44 20 13 10 4 9 RICH 147 67 43 33 13 30 333 POOR 73 33 22 17 6 15 166 AVERAGE 95 43 28 21 9 19 215

Average rural household spends on consumables excluding food grains, milk & vegetables are Rs. 215/ -.

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d) Life style changes: Income vs. usage of packed consumer goods (% of household using) MONTHLY Goods WASHING CAKES/BARS TOILET SOAPS TOOTH PASTE/POWDER TALCUM POWDER TEA (PACKAGED) UP TO 350 60 57 22 20 22
HOUSEHOLD INCOME (RS.)

351 750 78 72 36 25 30

751 1500 86 89 65 41 48

1501 + 91 93 85 63 64

e) Life cycle advantage: STAGES PRODUCT URBAN

IN LIFE CYCLE

MARKET GROWTH RATE % 2 11 6 1.1 4

RURAL

Popular soaps Premium soaps Washing powder Skin creams Talcum powder

Maturity Late growth Late growth Maturity Maturity

Growth Early growth Early growth Growth Growth

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f)

Market growth rates higher: Growth rates of the FMCG market and the durable market are higher in rural areas for many products. The rural market share will be more than 50% for the products like toilet soaps, body talcum powder, cooking medium (oil), cooking medium (vanaspati), tea, cigarettes and hair oil.

g) Rural marketing is not expensive: Conventional wisdom dictates that since rural consumers are dispersed, reaching them is costly. However, new research indicates that the selling in Rural India is not expensive. According to one research it costs roughly Rs.1 Crore to promote a consumer durable inside a state. This includes the expenses of advertising in vernacular newspapers, television spots, in-cinema advertising, radio, van operations and merchandising and point of purchase promotion. Campaign like this, which can reach millions, costs twice as much in urban area. h) Remoteness is no longer a problem: Remoteness in a problem but not insurmountable. The rural distribution is not much developed for the reasons, Lack of proper infrastructure such as all -weather roads, electrification and sanitation, and Lack of marketers imagination and initiative. Marketers have so fa r, failed in analyzing the rural side and exploiting rural Indias traditional selling system Haats & Melas.Their near obsession with just duplicating the urban-type network and that too with very limited success, has kept them blind to the potential of t hese two outlets.

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Rural Vs Urban Marketing -Summary

N O. 1 Aspect URBAN Marketing & Societal Concepts & Relationship Marketing RURAL Marketing & Societal Concepts, Development Marketing & Relationship Marketing Low Mostly From Unorganized Units Widely Spread Low Low Seasonal, Variation Low Level Slow

Philosophy

a) MARKET b) DEMAND c) COMPETITION High Among Units In Organized Sector Concentrated High High Planned, Even High Level Faster

CONSUMERS LOCATION LITERACY INCOME EXPENDITURE NEEDS INNOVATION/AD

OPTION

PRODUCT AWARENESS CONCEPT POSITIONING USAGE METHOD High Known Easy Easily Grasped Low Less Known Difficult Difficult To Grasp

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QUALITY PREFERENCE 4 PRICE Sensitive level desired 5

DISTRIBUTION

Good

Moderate

Yes Medium-high

Very much Medium-low

Channels

Transport Facilities PRODUCT AVAILABILITY 6 Promotion

Wholesalers, stockists, retailer, supermarket, specialty stores, & authorised showrooms Good High

Village shops, Haats

Average Limited

Advertising

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

TV, radio, print media to some extent. More languages Occasionally Gifts, price discounts Less opportunities

Personal Selling Sales Promotion Publicity

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PROBLEM S OF RURAL MARKETING

a) Under-developed people and under-developed market: The agricultural technology has tried to developed the people and the market in the rural areas. Unfortunately, the impact of technology is not felt uniformly throughout the country. But there are large areas and groups of people who have remained beyon d the technological break through. b) Transportation problem: transportation infrastructure is very poor in the rural areas. Though India has the fourth largest railway system in the world, many part of the rural india remain outside the railway network. Many parts in rural India have only kacha road and many part of the rural interiors are totally unconnected by roads. c) Many language and dialects: the number of languages and dialects varl widely from state to state, region to region and probably from d istrict to district. Even though the number of recognised languages are only 16, the number of dialects is estimated to be around 850. d) Communication Problem: communication infrastructure consisting of post and telegraph and telephone is quite inadequate in rural areas. Inadequate communication poses many hurdles in rural marketing . since communication is the first requirement of efficient marketing, lack of proper communication infrastructure poses difficulties. e) Warehousing problem: business firms find it quite difficult to get suitable godowns in many parts of rural India. The central warehousing corporation and the state warehousing corporation do not extend their network of warehouse to the rural parts. f) Market organisation and staff: To have an effective control the size of the market organisation and staff is very important. Catering to rural market will involve large marketing organisation and staff. How many manufacturer and marketing men can afford such huge investment in term of personal and also keep an effective control.

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g) Product positioning: In a highly heterogeneous market, product positioning become very difficult. Otherwise the product range should be very wide. The very product positioning limits the market to particular segment of consumers. While positioning is possible in case of durables, positioning of consumables does pose problems. h) Hierarchy of markets: the rural consumer have identified market places for different items of their requirement. So there cannot be a uniform distribution pattern for all the products. It was seen that 90% of the farmers visited the nearest town, where an agricultural produce assembling market was situated at least once a quarter for either selling the product. i) Vastness and uneven spread: the number of villages in India is more than five lakhs. Again the villages are not uniform in size nearly 60% of the villages have a population of less than 500 persons which account for 20% of the rural population. This type of distribution of population warrants appropriate strategies. j) Low-per capita income: Even though about 33 to 35% of GDP is generated in rural areas, it is shared by 74% of the population. Hence, the per -capita income is low as compared to urban areas. The rural popul ation presents a highly heterogeneous scene. Given the low per-capita income and population spread in the villages what will rural consumer purchase from a village shop.

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New Marketing Mix for Selling toRural Indians

Product
The Rural market is not a homogenous set of customers with preferences frozen in time. When developing products in any category, marketers must identify the typical rural specific needs. Urban products cannot be dumped onto rural markets without modifications. Tailor-made products are better received by the rural audience as the consumers feel empowered and tend to dentify with the offering. For instance, shampoos or soaps with distinctive, strong rose or jasmine perfumes are very popular with the rural women in South India. The urban women do not identify as strongly with these perfumes. Sachetization is also a distinctly rural-driven phenomenon. As demand in several categories is being created, intensity of use is quite low. On average, rural folk would use a shampoo only once a week. Habits take time to change and making unit sachet packs affordable is the key to inducing trial and purchase. Systematic, in-depth research that can help understand the depths of the mind of the villagers, their buying criteria, purchase patterns and purchasing power are an essential input while developing rural specific products or services.

Pricing
Every marketer must realize that the rural consumer is not a miser. He is not simply looking for the cheapest product in every category. He understands and demands value for money in every purchase that he makes. Pricing therefore is a direct function of factors inclu ding cost-benefit advantage and opportunity cost. Pricing offered to consumers should be for value offerings that are affordable. Price sensitivity is extremely high and comparison with competitive prices is common. Consumers seem to create narrow psycholo gical price bands in their minds for product groups and price elasticity beyond the extreme price points is very high. The perceived utility or value of the product or service is the ultimate decision making factor. It is certain however, that buying cheap is not the primary objective. Rather, it is buying smart. A study revealed that the average rural consumer takes approximately 2 years

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to decide on buying a watch! He will not do so unless he is totally convinced that he is getting value for Money. Impulse buys and purchases for conspicuous consumption are also extremely few and far Between considering the value for money factor that reigns supreme in most rural purchase decisions. It must be remembered that the rural consumer does not have a budget problem. He has a cash flow problem. This is because the village folk receive funds only twice a year. At these times, he is capable of making high volume purchases. At all times, however, the unit price is critical and so is the pack size. Because of this, in the lean season when there is a cash flow crunch, marketers need to provide financial products, schemes or solutions that suit the needs of the rural population.

Promotions & Advertising

There are a lot of barriers that militate against homogenous media and message delivery. These barriers stem from the fact that rural markets vary immensely in terms of tastes, habits and preferences leading to different expectations of every segment of the population. However, one fact is certain across all areas. The rural consumer likes to touch and feel a product before making a choice. Demonstrations are undoubtedly the most effective promotional tool that shapes purchase decisions of the rural population. Demonstrations establish the credentials of any new technology used in developing the product. In todays information era, it is very important for companies to wise up on emerging technologies. It has in fact become a medium to attract larger audiences for a product demonstration. Technology must be used to prep are a database of customers and their requirements. The use of video using mobile vans and even large screen video walls at events should be arranged. Youth power is becoming increasingly evident in villages. Rural youth bring brand knowledge to the househ olds. This has forced several companies to change the focus and positioning of their products and services towards this segment that is growing in absolute number and relative influence.

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There are other attributes in the promotion strategy which are explained as under: 1. Mass media: In the present world mass media is a powerful medium of communication. The following are the mass media generally used: Television. Cinema Radio Print media: Handbills and Booklets, posters, stickers, banners, etc.

2. Personal selling and opinion leaders: In personal selling it is required that the potential users are identified and awareness is created among them about the product, its features, uses and benefits. This can be achieved only by personal selling by highly motivated sales person. In fact the word of mouth information holds lot validity in rural areas even today. This is the reason why opinion leaders and word of mouth are thriving among rural consumers. An opinion leader in rural areas can be defined as a person who is considered to be knowledgeable and is consulted by others and his advice is normally followed. The opinion leaders may be big landlords or politicians or progressive farmers. 3. Special campaigns: During crop harvest and marketing seasons it is beneficial to take up special promotion campaigns in rural areas. Tractor owners (tonee) conducted by MRF Limited is one such example. Brooks Bond carries out marches in rural areas with band, music and caparisoned elephants to promote their bran d of tea.

Place
place is the major reason behind the evolution of rural marketing as a distinct discipline. A village as a place for promotion, distribution & consumption is very different from a town or city, thus the general marketing theories cant be applied directly in rural markets. Reaching the right place is the toughest part in todays rural marketing, as most of the products reach up to the nearest to wnships of

32

any village, but due to higher distribution costs, these products fails to reach the village as the distribution channel fails to put in the required efforts. Most of the times, the rural retailers themselves go to the urban areas to procure these goods. Rural markets imply complex logistical challenges that show up as high distribution costs.

Significance of Distribution
No matter how well devised a companys product, pricing or promotion strategy, the most crucial link in ensuring the success of rural marketing efforts is distribution. Distribution must be strengthened and this would raise investment cost barriers for new entrants. In Rural India, the selection and use of distribution channels is a nightmare. The reason for this is very clear when we consider that on an average, Urban and Rural India both have approximately 3 million retail outlets. However, Urban India has only 4,000 towns where these outlets are located. On the other hand, Rural Indias 3 million outlets are located in 6.3 lakh villages. Thus, marketers are faced with the problem of feeding 3 million shops located in vastly diverse areas each of which records an average sale of only Rs.5,000 per outlet. Further compounding this problem is the fact that even this meagre sale is mostly on credit. The diversity in the distribution of shops is the self limiting factor in terms of servicing the rural distribution network.

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ADVERTISING

IN

RURAL

INDIA

LANGUAGE, MARKETING COMMUNICATION, AND CONSUMERISM.

A dramatic change is in progress in rural India. Villagers who used to crack open peanut , eat thenut and throw the shell away are now demanding candies that will melt in their mouth. Charcoal-cleaned teeth are also a rare sight now; so is the case with Niim (neem) and babul (babool) tree.Today, the bright shine of Colgate or some other international toothpaste like Pepsodent, etc.holds more demand than the conventional methods of cleaning teeth like coal, etc. Even the localexpressions of cleaning teeth, such as daatun karnaa, are endangered to being replaced by newterminology such as paste karnaa, 'to brush teeth'. These villages and small towns, which were once negligible dots on maps, are now getting the interest of universal marketing giants and media planners. Thanks to globalization, economic liberalization, IT revolution, female power, and improving infrastructure, middle class rural India today has more disposable income than urban India. Rural marketing is also gaining new heigh tsin addition to rural advertising.
Rural India represents the heart of India. Approximately 79% of India lives in over 6 lakh villages (6,27,000), generating

more than half of the annual national income. Following insights can be derived: A range of facets of rural media and integrated marketing communication. In addition to rural market conversation, media forms such as wall paintings, calendar advertising,outdoor advertising, print, radio and television advertising. Art of crafting messages to meet rural t astes and sensibilities. In particular, uniquelyIndian media forms such as video van technology, which has changed the face of not onlymarketing but also political campaigning. Rural markets (haats) which are the mobileMcDonald's or Walmart of India. Targeting women and religious groups in addition to rural population.

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Marketing taboo products such as 'bidi', cigarettes, sanitary supplies, and other such products. Globalization and its effects on product naming, product monitoring, rural discourse andmed ia forms. Creativity and deception, together with guidelines for advertisers and marketers. Information structures and logic of rural ads. Ads as a social barometer of changing relationships and value systems.

Fast Moving Consumer GoodsBackground

The FMCG sector has always been the cornerstone of the Indian economy. Although, the sector has been in existence for quite a long time now, it began to take shape only during the last fiftyyears. To date, the Indian FMCG industry suffers from a definition al dilemma. In fact, theindustry is yet to materialize in terms of definition and market size, among others. Generally,FMCG refers to consumer non-durable goods required for frequent and daily use. The sector touches every aspect of human life. Perhaps, defining an industry whose scope is so vast is notan easy job. Post-reforms, the FMCG industry's growth has been hinging around the rural population whichhas witnessed considerable rise in disposable incomes. Consequently, the rural markets have also been witnessing strong competition in almost all the consumer product categories. Another reason which has led to rise in this trend is that the saturation in urban markets has come in mostof the consumer non-durable goods categories i.e. the FMCG category. This has led to theindustry players striving for greater rural penetration as a future growth vehicle, the area whichaccounts for almost 70% of the total Indian households. The FMCG sector consists mainly of sub segments viz. a.) Personal care, b.) Oral care and c.)Household products. This can be further sub-divided into oral care, soaps and

35

detergents, beautycosmetics, hair care products, Health and Hygiene products, food and dairy-based products,cigarettes, and tea and beverages. Of late, there seems to be a liberal approach towards brandingof the companies/products as FMCG; companies in businesses like paints (Asian Paints),adhesives (Fevicol) too are being labeled as FMCG stocks in the stock market parlance.So far, it has been dominating graph for the MNCs operating in the Indian FMCG industry.Domestic companies are only now beginning to make their presence felt in the industry. It hastaken tremendous consumer insight for the FMCG players to reach where they are today. But,the journey seems to have just now begun. The majority of the rural populace are yet to getaccess to the items of daily usage or FMCG products like toothpastes, soaps and shampoos.

History of FMCG in India

In India, companies like ITC, HLL, Colgate, Cadbury and Nestle have been a dominant force in the FMCG sector well supported by relatively less competition and high entry barriers (import duty was high). These companies were, therefore, able to charge a premium for their products. In this context, the margins were also on the higher side. With the gradual opening up of the economy over the last decade, FMCG companies have been forced to fight for a market share. In the process, margins have been compromised, more so in the last six years (FMCG sector witnessed decline in demand). Only FMCG companies, with deep pockets, unflinching rural commitment & staying power can play this rural game at the market. But as stated by C.K. Prahlad, The future lies with companies, who see the poor as their customer. It is a high- risk area, but with the promise of a large customer following as a prize for those who succeed. The Key to reducing the risk is to understand the market, consumer needs & behaviour. The rural market is still an area of darkness for India entrepreneurs, an idea that is vast in size, but a amorphous in detail. & yet, it represents the largest potential market in the country, with over 75% of the population. It is a market with potential, but the marketers need to have a long term vision & commitment. The marketer can expect results in the time frame of 10 to 20 years. As these results are not going to come very fast,

36

an approach of gradually building the rural market, in phases, is needed to be successful. Fast moving consumer goods (FMCG) have attracted Indian villagers when the urban demand for goods is getting saturated. The manufacturing companies look at this development as an opportunity. Large FMCG companies including Multinational companies (MNC,s) are planning their own strategies to enter this large & developing rural market. The marketing Strategies have to be tailor made to suit the rural condition. Leading companies in the FMCG sector in India have taken up a development approach to nourish this new market. The companies are Hindustan Lever Limited (HLL), Nirma, Godrej, P roctor & Gamble, Reckett & Colemn, Karnataka soaps & detergent limited. HLL has done considerable pioneering work in developing FMCG products for the rural market & initiating collaborative & innovative strategies.

What are FMCG Goods?

We regularly talk about things like butter, potato chips, toothpastes, razors, household care products, packaged food and beverages, etc. But do we know under which category these things come? They are called FMCGs. FMCG is an acronym for Fast Moving Consumer Goods, which re fer to things that we buy from local supermarkets on daily basis, the things that have high turnover and are relatively cheaper. Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and household accessories and extends to certain ele ctronic goods. These items are meant for daily use of frequent consumption and have a high return. The sector is divided into two distinct segments - the premium segment catering mostly to the urban upper middle class and the popular segment with prices as low as 40% of the premium segment, catering to mass segments in urban

37

and rural markets. The premium segment is less price sensitive and more brand conscious. The industry is volume driven and is characterized by low margins. The products are branded and backed by marketing, heavy advertising, slick packaging and strong distribution networks. Also, raw material prices play an important role in determining the pricing of the final product. FMCG's growth story started following the deregulation of Indian economy in early 1990s which saw dismantling of the 'license raj', resulting in a spurt in new companies and entry of a number of foreign brands. With relatively lesser capital and technological requirements, a number of new brands emerged domestically as well while the relaxed FDI conditions led to induction of many global players in the segment. Both these factors resulted in leading to rapid development of the FMCG market in India. Riding

Growth Prospects of FMCG in Rural India

With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG compani es. Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i.e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near fut ure. It is expected that the rural income will rise in future, boosting purchasing power in the countryside. However, the demand in urban areas would be the key growth driver over the long term. Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their

38

position in terms of consumption. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. How ever, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas.

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PILLARS OF FAST MOVING CONSUMER GOODS

The Fast Moving Consumer Goods (FMCG) business is built on two concrete pillars i.e. Brandand Distribution. Now let us study the comprehensive conceptual coverage of these pillars andthe other key concepts of marketing
MARKETING ADVERTISING AND PROMOTION MARKETING RESEARCH BRANDING DISTRIBUTION MARKET SEGMENTATION AND POSITIONING VALUATION OF THE BRANDS

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DISTRIBUTION
Distribution channels and network Marketing or Distribution channel refers to the set of marketing intermediaries which themanufacturers link together to reach their products to the ultimate consumers. Depending on the product, nature of market and manufacturers resources/strategy, there can be one or more links between the manufacturer and consumer. They can be like a Manufacturer - Retailers Manufacturer - Wholesalers - Retailers. Manufacturer - Stockists - Wholesalers Retailers. Why do we use distribution channels?

There are several benefits of using distribution channels for a manufacturer particularly in case of consumer goods. Efficiency- in performing the basic task of marketing by these intermediaries who through their experience, specialization, knowledge of local conditions, contacts and scale, offer services which manufacturers can scarcely do on their own. Cost advantage- most of these intermediaries in India are family owned outfits. Their cost of operations and overheads are substantially lower. Focus- Manufacturers can concentrate on their core activity and optimize return on assets.

RETAILING
In India, there are over 5 million retail outlets . The retailing industry provides employment toover 18mn people in India. 1 out of every 25 families in India is engaged in retailing. Ownershipand management are predominantly family controlled in retailing. However in sharp contrast todeveloped countries, the unit average size of a retail outlet in India is very small. Organized retailing has been a recent phenomenon and is relatively undeveloped. There are nolarge super market

41

chains/ shopping malls. Consumers are unwilling to pay a premium for convenience shopping as their counterparts in the western countries do. Wh ile small chain storescalled Apna Bazaars and Sahakari Bhandaars, which offer products at reasonable prices have been fairly popular, Department Stores and Food Stores are slowly gaining popularity. A largenumber of corporates have recently ventured into retailing.The retail outlet in India can be broadly categorized as follows:
Grocery stores General purpose stores Food stores Pan bidi shops Chemist/ drug stores Cold chains Others

The relative share of grocers dropped from over 50% in the early 90's to 35% in the late 90's.Chemist outlets on the other hand, have been expanding their product range to include highmargin FMCG products from shampoos to ketchup. Panwallas are also emergi ng as full fledgedconsumer product outlets.

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FMCG CONSUMTION IN RURAL INDIA

In the Indian Rural market the rain gods still play with one's dreams. Weekly rural bazaar or hat, brim over with din, bustle and transaction. This is where the real India resides. Telephone is kind of a luxury here. Electricity, if at all, comes here only for short durations. And a delivery byroad may take a very long time.However, things have started changing fast now. Thanks to the increasing level of literacy andmedia explosion, the rural people are becoming conscious about their lifestyles and about their rights to live a better life. Brand consciousness is also on the rise. This, together with increasingdisposable income of rural households, has made the rural populatio n more demanding andchoosier in their buying behavior than ever before.The rural India offers a huge market potential. A mere percent increase in India's rural incometranslates to a Rs 10,000 crore of buying power. Nearly two -thirds of all middleincomehouseholds in the country reside in rural India. And close to half of India's total buying potentiallies in its villages. Thus for the country's marketers, rural reach is on the rise and is fast becoming their most important route to growth. Realizing this, Corporate India is now investinga sizeable portion of its marketing budget to target the rural consumers.

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FMCG

CONSUMPTION

Organizations like Hindustan Lever Ltd., Nirma Chemical Works, Colgate Palmolive, Parlefoods and Malhotra Marketing have carved inroads into the heart of rural markets. Variouscategories of products have been able to spread their tentacles deep into the rural market andachieved significant recognition in the country households. And, in the process, the region al brands, local brands and the other unbranded offerings got displaced by the leading brands. Company HUL Nirma Chemical Works Chemical Works Colgate Palmolive Parle Foods Malhotra marketing Category% unbranded Washing cakes/bars Tea Salt Household penetration 88% 56% 33% 31% 27% volume of local brands/ 88% 56% 33%

Of the expenditure on consumer goods in rural household, approximately, 44% is on foodarticles such as biscuits, tea, coffee and salt, 20% on toiletries, 13% on washing material, 10% oncosmetics, 4% on OTC products and 9% on other consumables. A number of category productshave established themselves firmly in the rural households.

It is evident that in the villages low -priced brands are well accepted and one might feel that alarger proportion of the

44

purchases made in rural market can be attributed to local/ unbranded players. Surprisingly, however, the unbranded/local component contributes to a substantial portion of the volume of only a few of the highly penetrated categories. Category Penetration Category Brand with highest penetration 91% 88% 84% 77% 70% 64% 61%

Toilet Soap lifeboy Washing cakes/Bars wheel Edible oil Double Iron mustard Tea Liptoon taza Washing powder / liquid Nirma Salt Tata salt Biscuits Parle G

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FOCUS

ON

URBAN

CATEGORIES

Though the commodity products have greater penetration, traditionally urban categories such asskin creams and talcum powder have also made a mark. While the urban talcum powder market suffered a de-growth, the rural talcum powder market darted ahead. Similarly, growth of rural skin cream market was at par with that of urban skin cream market. This clearly indicated thatafter being considered urban for a long time, some categories are now wearing a rural face. And,in many a case, it is the rural market that is actually driving the growth of category.

PREMIUM

BRANDS

Pond's is the leader in the talcum powder category with a penetration of 65% and volume contribution of 56%. Its rivals viz. Nycil and Liril are trailing far behind. Moreover, 60% of the Pond's users have purchased no other brand i.e. they are 100% brand loyal. This reflects the strength of the brand in rural bazaar. Category Household Penetration Skin creams 18% Talcum Powders 15% the skin care category, Fair & Lovely fairness cream, with a penetration of 75%, accounts for 60% of the skin care market in rural India. It also enjoys the undistinguished patronage of 58%of its user households. Both Pond's and Fair & Lovely are enjoying a monopoly in the ruralmarkets in their respective categories. Rural India is not averse to trying out the premium brands at high prices. A study indicated that amajority of the premium brand users are using the brand for the first time. Similarly 0.9% of thetalcum powder-using families have started using Denim talc and 0.7% of the shampoo usinghouseholds started using Pantene. Surveys also reveal that trials are not restricted to the moreaffluent echelon of the villages. The experimenting households are more -or-less evenly spreadacross the various socio -economic clusters of the rural market. This should further encourage the marketers to focus their attention on rural buyers.

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Brand Surf Ariel Pantene Denim

Penetration of category users 6.2% 4.5% 1.8% 1.8%

The rural youths are more open to fresh concepts as against their elderly family members. Their difference in choice of products/brands with the seniors of the households often leads to a dual-usage of product categories. As an instance, 20% of the households using tooth powder also usetooth paste. Similarly, many of the households using premium brands also use mass market brands. For example, while 15% of Surf and 12% of Ariel using families also use Nirmadetergent, 3% of Denim users use Pond's Dreamflower talc and 18% of Pantene usinghouseholds use Clinic shampoo as well.

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RURAL

MEDIA

Urban consumers shop daily and have 365 opportunities a year to switch brands while the ruralcustomers who buy their goods in weekly haats have only 54 opportunities. Attempts to reachrural buyers, even once during the cycle to ensure repeat purchase, make point of purchaseadvertising indispensable. This requires a significant reorientation in the allocati on of fundsacross media for Indian rural market. For example, outdoor advertising accounts for over 7% of all media expenditures in India, while it only accounts for 0.8% in the USA.Rural buyers living in fragmented small groups distributed across vast distances have limitedaccess to the media. Also, the existence of a multiplicity of languages and varying level of illiteracy complicates the task of communication. To overcome some of these challenges,Hindustan Unilever pioneered the concept of video vans which travel from village to villagescreening films in the local language with advertisements for Hindustan Unilever's products. Thecompany also provides product usage demonstrations to the audience as written instructions onthe pack may be illegible to the consumers who are either illiterate or do not understand thedialect at all.Where mass media is used, variability at times, back fire. On re -entering India in the 1990s, CocaCola decided to reinvest massively on a TV advertising campaign of slick commercial s, rich incolor. But the effect was somewhere lost because almost 60% of all TVs were still black andwhite.However, in the recent past, the improvement in terms of technology has allowed the cable andsatellite networks to increase their reach across the In dian countryside thus exposing a ruralconsumer to a lifestyle that was beyond his imaginable dreams. And this increasing awarenesshas led to a noteworthy change in his buying behaviour and consumption patterns.While the urban Indian market is getting incre asingly competitive and saturated, the Indian ruralmarket is blooming with increasing disposable incomes of the households, thus promising a far better scope for growth for the marketers of FMCG products. Hence, with the shifting dynamicsof the present market situation, now it is the turn of the rural consumers to dictate the terms tothe manufacturers. And this reinforces the need for marketers to formulate a well designedstrategy to enter and exploit the huge potential offered by the Indian rural market.

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INCREASING BRAND AWARENESS

In the rural families, studies indicate a slow but determined shift in the use of categories. There is a remarkable improvement in the form of products used. For instance, households are up grading from indigenous teeth-cleaning ingredients to tooth powder and tooth -pastes, from traditional mosquito repellant to coils and mats. There is also a visible shift from local and unbranded products to national brands. They are also shifting from low -priced brands to premium brands.

NEED OF FMCG IN RURAL AREAS

After years of growth derived primarily from the urban markets, the FMCG companies have now realized that India lies in its rural villages. So much so that rural marketing has become the latest marketing mantra of most FMCG majors. With extensive competiti on not only from MNCs but also from the numerous regional players and the lure of an untapped market has driven the marketers to chalk out bold new strategies for targeting the rural consumer in a big way. To gauge the extent of shift in focus of the FMCG giants just sample this: recently Godrej Consumer Products Ltd (GCPL) did something that it hadn't done before; it introduced smaller pack sizes of some of its soaps and put them on the market for Rs 5. And FMCG giant HLL has just launched a green variant of Lifebuoy soap, which, it hopes will be a winner in the rural areas. Also, don't be too surprised if you village folk having their hair washed and dyed as they are only taking advantage of the live demonstrations conducted by Chennai -based CavinKare Products. So it is clear that rural markets have caught the eyes of FMCG marketers and it is being targeted through experiments in a big way. Over 70% of Indias 1 billion plus population lives in around 627,000 villages in ru ral areas. This simply shows the great potentiality rural India has to bring the much-needed volumes and help the FMCG companies to bank upon the volumedriven growth. Also, the rural market has been growing steadily over the years and is now bigger than the urban market for FMCGs (53%

49

share of the total market) with an annual size in value terms currently estimated at around 50,000 crores. It is a definite boon in disguise for the FMCG majors who have already reached the plateau of their business curve in urban India and are desperately seeking new ways to increase sales. To drive home the potential of rural India just consider some of these impressive facts about the rural sector. As per the National Council for Applied Economic Research (NCAER) study, th ere are as many 'middle income and above' households in the rural areas as there are in the urban areas. There are almost twice as many 'lower middle income' households in rural areas as in the urban areas. At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas. According to the NCAER projections, the number of 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.

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DEVELOPING EFFECTIVE RURAL MARKETING STRATEGY

The winning strategy is to focus on the core competency such as technological expertise to design specific products for the rural economy. The most remarkable example in this context is the launch of sachets which has transformed the rural market considerably as packaging in smaller units and lesser-priced packs increases th e products affordability. Also companies like HLL and Nestle who have adopted this strategy have benefited tremendously. Another case is of Britannia with its Tiger brand of low priced and conveniently packaged biscuits becoming a great success story in rural markets. Along with the cultural dynamics, the needs and latent feelings of the rural people have to be well understood before launching products in rural segments. Marketers would do well to first understand this and then designing products accordingly. For example, Cadburys has launched ChocoBix, a chocolate flavored biscuit which is based on the consumer insight that rural mothers opt for biscuits rather than chocolates for their children. Another very important factor that needs to be looked at is the proliferation of spurious products. Rural masses are illiterate people and they identify a product by its packaging (color, visuals, size etc.). So it becomes very easy for counterfeit products to eat into the market share of established reputed brands. The retailer also gets a larger profit on selling the counterfeits rather than the genuine products and hence is biased towards the fakes. Brands such as "Jifeboy", "Bonds Talcum", "Funny & Lovely" etc., which are doing the rounds of rural markets, pose considerable challenge to rural marketers. The rural market remains quite price -sensitive and thus squeezing costs at every stage is of vital importance. Some FMCG giants like HLL are in process of enhancing their 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 HLL has started Project Shakti in partnership with Self Help groups of rural women. A very significant step for change could be an effort to directly tap the haats, mandis, melas and local bazaars which provide an opportunity of promoting the brand in front of a large congregation of rural consumers.

51

Finally an effective rural strategy for FMCG companies must include the use of traditional media for creating awareness about their products in the rural markets. The traditional media, with its effective reach, powerful input and personalized communication system will help in realizing the goal. The advantages of traditional media which make it a powerful marketing communication channel are: accessibility is high, it involves more then one sense, interest arousal capability is high and minimum cost. Brooke Bond Lipton India Ltd (BBLIL) markets its rural brands through magic shows and skits. Barring a few, notable exceptions, rural marketing in India is still about a van campaign, a badly-made commercial, a few painted walls and the occasional participation in village haats and melas. But then, "rural" means different things to different people: from 500,000 people for consumer durables, to less than 50,000 for fast -moving consumer goods.

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Advantages to the Sector

Governmental Policy Indian Government has enacted policies aimed at attaining international competitiveness through lifting of the quantitative restrictions, reducing excise duties, automatic foreign investment and food laws resulting in an environment that fosters growth. 10 0% export oriented units can be set up by government approval and use of foreign brand names is now freely permitted. Central & State Initiatives Recently Government has announced a cut of 4% in excise duty to fight with the slowdown of the Economy. This announcement has a positive impact on the industry. But the benefit from the 4% reduction in excise duty is not likely to be uniform across FMCG categories or players. The changes in excise duty do not impact cigarettes (ITC, Godfrey Phillips), biscuits (Britannia Industries, ITC) or ready-toeat foods, as these products are either subject to specific duty or are exempt from excise. Even players with manufacturing facilities located mainly in tax -free zones will also not see material excise duty savings. Onl y large FMCG-makers may be the key ones to bet and gain on excise cut. Foreign Direct Investment (FDI) Automatic investment approval (including foreign technology agreements within specified norms), up to 100% foreign equity or 100% for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries (SSI). There is a continuous growth in net FDI Inflow. There is an increase of about 150% in Net Inflow for Vegetable Oils & Vanaspati.

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Market Opportunities
Vast Rural Market Rural India accounts for more than 700 Million consumers or 70% of the Indian population and accounts for 50% of the total FMCG market. The working rural population is approximately 400 Millions. And an average citizen in rural India has less than half of the purchasing power as compare to his urban counterpart. Still there is an untapped market and most of the FMCG Companies are taking different steps to capture rural market share. The market for FMCG products in rural India is estimated about 52%t and is projected to touch about 60% within a year. HUL is the largest player in the industry and has the widest market coverage. Export - "Leveraging the Cost Advantage" Cheap labor and quality product & services have helped India to represent as a cost advantage over other Countries. Even the Government has offered zero import duty on capital goods and raw material for 100% export oriented units. Multi National Companies outsource its product requirements from its Indian company to have a cost advantage. It adds a cost advantage as well as easil y available raw materials.

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Rural Promotion and Advertising

In country like India, where the 70% of the people live in rural area, the rural market holds a lot of marketing potential. There is a wide spread difference in the standard of living between urban and rural India. In order to launch products and develop advertising for rural market there is a need to understand both the rural context and also the consumer very well. Promotion of brands i n rural markets requires the special measures. Due to the social and backward condition the personal selling efforts have a challenging role to play in this regard. The word of mouth is an important message carrier in rural areas. Infact the opinion leaders are the most influencing part of promotion strategy of rural promotion efforts. To communicate effectively with rural audiences, it is important to understand the aspirations, fears and hopes of rural customers, in relation to each product category, befo re developing a communication package to deliver the product message. Hence, there is a strong need to build reassurance and trust about product quality, service support and company credentials in the minds of rural consumers. This is best done through the facetoface 'below the line' touch, feel and talk mode at haats, melas and mandis. Language and regional behaviour variations should be considered while developing rural communications strategy. Although the reach of television in rural India is high, fr equent power-cuts restrict viewing time considerably. With the licensing of FM channels to cover all district headquarters, the power of radio to deliver a localized message in a local language will soon be available to advertisers as a cost effective way to reach rural masses. Rural India has a very high ownership of transistor radios and as these run on batteries, radio can once again be expected to become a popular medium for reaching

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rural masses One of the most popular and widely accepted Marketing Myth is that the rural consumers will only buy really cheap mass market brands. But the stark reality is that though brands like Nirma lead, but penetration of premium products has also been observed even to the lowest SEC (socio-Economic Classification). The percentages may be very small, but given the large universe, the actual figures may be significant. Thus when we are aware of the fact that brands like Nirma, Tiger biscuit, Parchute oil rule the rural market, it would be interesting to study and analyse their basic marketing inputs. Promotional Strategies of different FMCG brands in India.

For Example
A) Tiger Biscuits: Britannia has entered in to the
rural market by participating in rural melas and displaying its down market brand Britannia Tiger Biscuits. These rural melas and weekly haats have become more popular medium of rural advertising by the media planners. Apart from stockists and substockists, Britannia has used traditional haats and melas to promote the Tiger brand. It has made the ongoing Kumbh Mela a major promotion and sales outlet. Whenever they come to know of a major mela or haat, they ensure that their brand is stocked in large quantities. There are hoarding, which are put up by the company in the rural areas. The hoardings are mostly put up with complete information regarding the product. The information is given in the local language in order to let people know about the product. The hoardings also have the mascot tiger which emphasises a strong healthy individual. T.V. The various ad campaigns throughout the country are done by preparing a single advt but the language in which it features is according to the regional language of that state. The ads include famous personalities like Saurav Gangul y. The ads mainl y focus on the child ren and emphasise a strong diet for a healthy mind and body.

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School children in rural areas are often given small packs at a confessional rate and at times they are distributed as free samples.

B) Parachute Oil:
With the objective of creating awareness for Parachute Coconut Oil pouches in towns with less than 20,000 population in Tamil Nadu, and in order to convert loose oil buyers into Parachute pouch customers, Marico Industries launched a van campaign. The communication Strategy focussed on getting wo men out of their homes to participate in the van campaign, which was aimed exclusively for them and for the first time conducted by women. Result - A study by Promotional Strategies of different FMCG brands in India 10 Marico showed a 25per cent conversion from loose coconut oil usage to Parachute Pouch Pack, post van campaign and a substantial increase in sales from the campaign areas.

C) Pepsodent
HLL has introduced a 15 gm. Pepsodent pack to target the first time user. Close up is introduced at retail outlets in suburban and rural areas with a price tag of Rs. 3.50 Campaign: - the operation, bharat program. HLLs door to door campaign in rural areas concentrates on educating the consumer by holding free dental camps. In India there is scholarship for students in dental colleges for collaborating in research at such centers. Dental check-up camps are conducted in schools. A rural hygiene program a counterpart to urban is to cover 350000 villages and has target of reaching 20 crore people. Door to Door sales: - in this HLL is selling a discounted personal care kit containing mini -packets of shampoo, toothpaste, talcum powder and face cream. The kit is sold at Rs. 15, Sold separately the products would together cost Rs. 27

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Cinema: - after home to home contact and sales in villages during the day, HLL concentrates on cinema time in the evenings. There are still villages which do not have TVs; hence cinema shows are quite popular.

D) Tata Salt
Tata Chemicals salt story began in 1983, when it needed fresh water for the boilers that produced soda ash at its Mithapur plant. Fresh water was scarce, so the company set up a process to generate it by using seawater, a freely available resource. Salt, of high quality and purity, was a by-product. The positioning statement used earlier was Namak ho Tata ka, Tata namak." The communication was built around the fact that Tata Salt, Indias first iodized salt, was manufactured by a Tata company. Tata Group follows the policy to give returns to the nation. Therefore, along with the Desh Ka Namak ad they came out with the Desh Ko Arpan programme last year in 2002. The company The Promotional tools adopted by the company include advertising and sales promotion. Advertising: The amount spent on advertising accounts for 7 to 8% of the sales revenue. They use mass media commun ication like Television Ads, Print Ads, etc. Print Ads: They are printed in regional language newspaper and in the magazines in the regional language. Like, The Desh Ko Arpan Programme is been promoted through print media advertisements in 5 regional languages (Hindi, Marathi, Bengali, Tamil and Telugu).

Media Vehicles
Conventional Media(a) Television: For rural market they dont have a separate advertisement but they play the same advertise in the regional language.

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Doordarshan- Tata Salts around 40% reach is because of its advertisements on Doordarshan. It also advertises on Star Plus, NDTV, etc. Regional Channels like - Alfa, Sun, Surya, etc. depending upon the State Language. (b) Wall paintings: They also communicate to rural market through the wall paintings in Haats. Urban consumers shop daily and have 365 opportunities a year to switch brands while the rural purchasers who buy their goods in weekly haats have only 54. Considering this Tata Salt makes ultimate use of this opportunity to educate the customers about the product. (c) Video on Wheels: Tata Salt uses van marketing to reach the satellite villages.

E) Fair & Lovely

Promotion:
Advertisements on Television In serial branding with product placement in DD serials Relationship building: Direct Contact Programs with villagers sales team to visit from time to time to increase awareness, induce trial and repurchase Find and target opinion leaders of the village to increase advocacy for our product POPs danglers, shop branding, bus shelters, buntings Target beauty parlors to stock and advocate our product Presence of stalls during Bazaar offering makeovers and sampling

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The Rural And Urban Consumer A Detailed Profile

Size of Rural and urban Consumer Group Rural population is about 73% and urban population is 27% of the total population of India A Scattered market the comparison below shows the same * Urban Population is spread over 3,200 cities. * Rural population is spread across 5,70,000 villages .

Reasons For Selecting Market

Size of the market Largely Untapped Income on the rise/disposable income Income from other than agriculture Income flow from urban /abroad Great success stories of some famous companies Asian Paints 60% Dabur 40% Videocon 40% Colgate 50%

Rural Market-

Urban MarketLarge number of customer Awareness about the product Effective distribution channel Rise to competition

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Source of new ideas.

Great success stories of some famous companies Future group 80% DMart 65% Globus 59%

Analysis Of Markets
The annual consumer durable market for products like colour t.vs,washing machines, refrigerators and air conditioners is growing at 7-10 %. While the rural market is zooming at 25 % . HAVE A LOOK.. F.m.c.g Rs.65000 crores (53 % share in total revenues) Rs.5000 cr.for agri inputs. 50 % of Indias national income is generated in rural India. HLL,Colgate Palmolive ,Toyato 50 % revenues coming from rural and 50% from urban area. Hero Honda- 40 % from rural and 60% urban area. Kinetic motors 30 % from rural and remaining from urban area. Godrej- 30% from rural70% from urban sector.

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Advertising & Promotion (Rural and Urban Areas) (Colgate)

PROMOTION It is often said that markets are made, not found. This is particularly true of the rural market of India. It is a market meant for the truly creative marketer. Promotion has become the biggest challenge, to rural marketers today. Rural marketers have to skillfully communicate with a much larger but scattered audience characterized by variations in language, culture and lifestyles.(companies have to adopt the principle of multi-national companies i.e., think global and act local

. High quality products was always a plus point of Colgate all they had to do was to now tap the still unattended rural markets and change their habits i.e from the usage of manjans and datoon to toothpaste and tooth powder. In 1998, Colgate contacted 6 million people in 20,000 villages of which 15,000 villages had not experienced the availability of toothpaste and toothpowder let alone toothbrushes. Suggesting and
implementing a rural promotional scheme was what Colgate called Sampark for, as they were specialis t in rural advertising category. Going in for mass media would not prove to be costly but the reach would be limited as, still only very few people own and possess a T.V. or a radio. Sampark decided to their advertising by door to door selling.

To design right communication and motivation strategies to induce target audience to buy the product.

Whole seller Retailer Vans Weekly Haats

Bazaars

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1. Wholesalers The Indian wholesaler is principally a Galla

Kirana (food-grain) merchant who sustains the belief that business is speculative rather than distributive in character. 2. Retailers Village retailers have traditionally been among the most mobile of rural residents.
I. CREDIBILITY: - - He enjoys the confidence of the villagers. II. INFLUENCE LEADER: - - His role as influence leader is indisputable. III. BRAND PROMOTER: - - In rural market retailers remains the deciding factor to sell particular brand. - Retailers helps in identification and selection of brands, there is less influence of shelf displays and point of purchase promotion.

3. Vans Mobile vans long since, have an important place in distribution and promotion of the products in villages. It has on-going rural van program, which covers on an average 80 million rural consumers per year. Vans are supplemented with bicycle vendors who go to villages not accessible by the vans.) 1. Weekly Haats, Bazaars, Shandies The haats are the oldest outlets to purchase household goods and for tradeThese markets have different names in different regions. But they are strikingly similar in what they sell. It is reported that there are, in all, about 47,000 haats held through out the country.

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Toothpaste (Colgate) use in rural and urban areas

Colgate is one of the leading providers of scientifically proven oral care products in India, including toothpastes, toothpowder and toothbrushes. The company is spending on advertising according to its market share and leadership position it enjoys and is conscious about what it costs.

For marketing to rural consumers, you need to persuade them to try and adopt products that they may have not used before. A company like Colgate has to convince people to change to toothpaste instead of using neem twigs to clean their teeth, which was the traditional practice. This is difficult to do and requires patience and investment by the company. It's not like getting someone to switch brands. Rural India presents huge opportunity for the company to grow its market. Therefore, Colgate continues to focus on expanding its rural distribution. They keep conducting various programmes with massive rural sampling and seeding exercise for Colgate, targeted at non -users and infrequent users of dentifrices.

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In rural areas, people use neem and other substances for cleaning their teeth. Even after keeping the products low priced, people were not willing to use the toothpaste. Hence, Colgate conducted a research to show that neem sticks dont do much for oral health as they only massage the gums, which even a toothbrush can do. For upgrading these users to use toothpaste, which also generates demand for toothbrushes and to penetrate deeper into rural households, Colgate is constantly conducting oral care awareness programmes. It also actively participates in local festivals.

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CONCLUSION
Growing at an annual rate of 4% the rural market introduces 1.2 million consumers every year. Rural consumer is no more looked upon as the distant cousin of the urban consumer by the Indian corporates and multinationals. The rural customer has found his own place under the su n. More and more villages are incorporated in the scheme of things as FMCG companies and MNCs scramble to woo the rural consumer. As a result of the promotions drive launched by the agencies, most consumers have become extremely brand conscious and loyal. No longer is every washing powder Surf and every bathing soap Lux. Promotions in rural areas need to be carried out very carefully as the people are very brand loyal. It has been seen often enough that in one village only one brand is prevalent. This is not due to lack of supply of other competing brands but simply because the brand entered the market first. But the flip side of this is that if one brand turned out to be faulty in one household, it would be boycotted by the whole village. Carrying out prom otions in rural India is no mean task. As technology has not been used extensively to cover this market, it is the knowledge base that is more critical. Rural people associate a brand image with what they think of themselves. Therefore, using pictures of s emi-nude women would amount to asking them to not use the product at all. The rural communication strategy has to be very well planned and implemented and the rural consumers sentiment has to be taken into consideration while planning and executing the st rategy.

Due to the large size of the market, penetration level in most product categories like jams, skin care, toothpaste, hair wash etc. in India is low. This is more visible when a comparison is done between the rural and the urban areas. Existence of unsaturated markets provides an excellent opportunity for the industry players in the form of a vastly untapped market as the income rises. Another key positive for the sector is the current government's focus making India the hub of agri-processing.

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FMCG products are witnessing a retailing revolution in recent times. While some retail chains have large retail formats enabling huge volumes, some are focused on affordability which has resulted in margins getting squeezed. The Indian market is dominated by more than 12 m small 'mom and pop' retail outlets. However only 4% is in the organized sector, thereby reducing the reach. With FDI expected to be allowed, the share from the retail formats is expected to increase.

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