Rural Marketing

1. RURAL MARKETS
1.1

Profile of Rural Markets

1.2

Rural Market has Arrived

1.3

Rural Income Disposal Projection

1.4

Rural Markets - Mirage or Reality

1.5

Rural Marketing Challenges and Opportunities

1.6

Assessing Marketing for Rural India

1.7

Rural Marketing Strategies

1.8

My Views

1.1 PROFILE OF RURAL MARKETS

The rise of rural markets has been the most important marketing
phenomenon of the 1990s, providing volume growth to all leading
companies. Many corporates have been trying to get a grip on rural market.
But the challenges are many: how to make the product affordable, how to
penetrate villages with small populations, connectivity, communication,
language barriers, spurious brands, etc.
The reasons why companies are going rural are manifold. Higher rural
incomes driven by agricultural growth, increasing literacy rate, high
penetration of TV and other mass media have increased the propensity to
consume branded and value-added products in rural areas. Marketers and
manufacturers are increasingly aware of the burgeoning purchasing power,
vast size and demand base of the once neglected Indian rural markets.
Efforts are now on to understand the attitude of rural consumers, and to
walk their walk and talk their talk. The marketing mix of many companies is
now being tailored to rural tastes and lifestyles. The Indian hinterland has
been transformed from a back-to-the-roots holiday destination to a business
proposition.

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Two-thirds of the countrys consumers live in rural areas and almost 26

percent of the national income is generated there. And 10 consecutive good
monsoons have led to improved returns from agriculture, except the
unfortunate

rainfall of the present year. Agriculture - The agricultural

sector is the largest employer in India's economy but contributes to a

declining share of its GDP (17% in 2014-15). India ranks second worldwide
in farm output.
To give a boost to the rural economy, the Union Budget for 2015-16 allocated a
total of Rs 79,526 Cr for rural development activities including Mahatma
Gandhi National Rural Employment Guarantee Act (MGNREGA).
Undeniably, the urban market (metropolitan cities, tier II, III cities) offers great
opportunities to organized retailers but they are expected to saturate in the near
future. Moreover, low penetration rate in rural market facilitates most big retail
companies to enter the untapped rural market (bottom of the pyramid). For
example, ITC has taken a initiative through Choupal Sagar, DCM through
Hariyali Kisan Bazaars, Pantaloons in a JV with Godrej through Aadhars,
TATA through Kisan Sansars to name a few. These corporate retailers have
already established the farm linkages resulting in Indian farmers making good
money, after centuries of social and economic exploitation. Also, as rural areas
have been affected to a lesser degree by the current economic slowdown,
several other Indian companies are contemplating over launching rural retail
brands. Thus, rural retailing in India has a very long haul ahead.
In all, there are more than 3.8 million retail outlets in rural India, averaging
5.8 shops per village. Overall, the rural market has been growing at 3-4
percent per annum, adding more than 1 million new consumers every year,
and now accounts for close to 50 percent of the volume consumption of fast
moving consumer goods (FMCG) in India. As a result, it is becoming an
important part of the market development strategies of all FMCG
companies, including multinational ones, as well as consumer durables
businesses and services companies as well.

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However, there are intrinsic problems in the way products and services are
retailed in rural India therefore the organized retailers have been facing a
difficult time to lure customers from traditional kirana stores, especially in the
food and grocery segment. Other impediments include gaps in road and
telecommunications connectivity, lack of reliable electricity and water supply,
higher overhead costs, fluctuating demand that depends on the monsoon etc.
Rural populations share several commonalities like domestic constraints,
financial hardships, difficult living conditions, lack of basic information for
making informed decisions, amongst others.
The Indian rural retail scenario is headed for a quantum leap. Besides newer
names set to dot the landscape, new and emerging retail formats are driving the
diversity of the fast-changing retail backdrop. As organized retail in rural India
awaits the arrival of new players, current majors like ITC are expanding their
retail operations by setting up more stores, offering newer product categories
and entering new states. A shift from selling agricultural-inputs will help these
stores target the non-farming segments. It is a little known fact that 25% of the
rural population is not engaged in agriculture but it earns 50% of the rural
income. The Indian rural retail market is the next growth frontier for corporate
India as it offers an opportunity for a large player to build approximately Rs.
40,000 Cr retail business spanning multiple categories by the end of 2015 (at
current prices).

1.2 RURAL MARKET HAS ARRIVED

The Fast Moving Consumer Goods (FMCG) sector in rural and semi-urban
India is estimated to cross US$ 20 billion by 2018 and US$ 100 billion by 2025
The rural FMCG market expanded at a CAGR of 13.2 per cent to US$ 100
billion during 200915

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In rural markets, durables like refrigerators as well as consumer electronic

goods are likely to witness growing demand in the coming years as the
government plans to invest significantly in rural electrification

Number Of Potential Consumers in Rural Market - 720 million people

Current Share Of Rural Market & Urban Market in Retail Sector:

Type of Goods

Rural( % )

Urban (% )

FMCG

40%

60%

Consumer

35%

65%

Durables

Estimated annual size of the rural markets

Type of product

Contribution in
Rural Market
(Rs.)

FMCG

Rs. 75,000/Crores

Consumer Durables
Agro-Inputs

Rs. 65,000/Crores

Automobiles(including
Tractors)

Rs. 55,000/Crores
Rs.10,000/Crores

Total

Rs. 2,05,000/-

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Crores

Some impressive facts about the rural sector

In 2001-2002 LIC sold 55% of its policies in rural India.

Of two million BSNL mobile connections, 50% are in small towns

and villages

Of the six-lakh villages, 5.22 have a Village Public Telephone

(VPT).

41 million Kissan Credit Cards issued (against 22 million creditplus-debit cards in urban) with cumulative credit of Rs.977 billion
resulting in tremendous liquidity.

Of the 20-million rediff mail signups, 60% are from small towns.
50% transactions from these towns on rediff online shopping site.

1.3 RURAL INCOME DISPERSAL PROJECTION

All figures in %
CONSUMER

ANNUAL INCOME

Rural

CLASS
Very rich

Above Rs.10,00,000

0.49

Rich

Rs.5,00,000 - Rs.10,00,000

1.23

Consuming class

Rs.3,00,000 - Rs.5,00,000

2.70

Climbers

Rs.1,50,000 - Rs.3,00,000

13.64

Aspirants

Rs.1,50 000 and below

29.36

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Destitutes

Rs. 75,000 - Rs. 1,50,000

TOTAL

52.58
100.0

Projections based on 7.2% GDP growth

1.4 RURAL MARKETS MIRAGE OR REALITY
Now a days we see a decline in rural poverty levels and an increase in rural
incomes, but despite everything, rural markets have remained at an
anathema for most marketers.
The reasons are not far to seek:

Most Corporates have treated rural markets as adjuncts to their urban

strongholds and rural consumers as a homogeneous mass without
segmenting them into target markets and positioning brands appropriately.

The companies should not treat rural markets as a dumping ground for
lower end products designed for an urban audience. Instead they should
use their technological expertise to create specific products for the rural
economy. The companies that have done this (e.g. Hindustan Levers) have
benefited tremendously.

Also, while launching products, it is of paramount importance to

understand the dynamics of culture and society of the rural audience. The
classic example that can be cited here is of the CTV segment wherein
Corporates found that their carefully drafted rural marketing went awry.
At the same time, rural consumers purchased the premium models
designed for urban markets and also made cash down payments. The
reason is not the fact that they are richer than their urban counterparts, but
the fact that the joint family system prevalent in rural areas called for
wider screens (as a larger number of people were watching).

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Along with the cultural dynamics, the needs and latent feelings of the
rural people also need to be well understood. Marketers would do well to
first understand this and then design and launch products accordingly.

Another very important factor that needs to be looked at is the

proliferation of spurious products. Rural masses are primarily illiterate
and identify a product by its packaging. Brands such as "Bonds Talcum",
"Funny & Lovely" etc., which are doing the rounds of rural markets eat
into the demand for the genuine products.

Companies would also do well to have a proper distribution network and

make sure that the prices of products are not pushed up because of a
channel of middlemen who are neither required nor add any value to the
product. A very significant step for change could be an effort to directly
tap the haats.

Companies also need to change the profile of their brand managers. Their
brand managers are usually urban-bred management offerings who do not
relate themselves to the rural markets. A step in this direction could
probably go a long way in improving the situation.

To conclude, it can be said that the shape of rural income distribution and
their consumption pattern needs to be carefully looked into. The rural
income distribution is a debatable issue as there are no structural accounting
methods used. Corporates will have to try hard to get a clear picture. Once
the homework is done, the mirage will surely transform into concrete reality.

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1.5 RURAL MARKETING

CHALLENGES AND OPPORTUNITIES

Distribution of villages
POPULATION

NO.OF

% OF

VILLAGES

VILLAGES

Less than 200

92,541

15.6

200-500

127,054

21.4

501-1000

144,817

24.4

1001-2000

129,662

21.9

2001-5000

80,313

13.5

5001-10,000

18,758

3.2

593,154*

100.0

Total no. of villages

* Inhabited villages, total number of villages is 6,40,867

Hardly 2.2 lakh shops in the villages with population of less than
200 and from 200-500.

17% of villages account for 50% of rural population and 60% rural
wealth.

The Indian rural market with its vast size and demand base offers great
opportunities to marketers. Two-thirds of countries consumers live in rural
areas and almost half of the national income is generated here. It is only

Rural Marketing

natural that rural markets form an important part of the total market of India.
Our nation is classified in around 450 districts, and approximately 630000
villages, which can be sorted in different parameters such as literacy levels,
accessibility, income levels, penetration, distances from nearest towns, etc.

The success of a brand in the Indian rural market is as unpredictable as rain.

It has always been difficult to gauge the rural market. Many brands, which
should have been successful, have failed miserably. 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 it follows a consistent pattern.
While the rural market certainly offers a big attraction to marketers, it would
be naive to think that any company can easily enter the market and walk
away with sizable share. Actually the market bristles with variety of
problems.
The main problems in rural marketing are:

Physical Distribution

Channel Management

Promotion and Marketing Communication

The problems of physical distribution and channel management adversely

affect the service as well as the cost aspect. The existent market structure
consists of primary rural market and retail sales outlet. The structure
involves stock points in feeder towns to service these retail outlets at the
village levels. But it becomes difficult maintaining the required service level
in the delivery of the product at retail level. One of the ways could be using
company delivery vans, which can serve two purposes- it can take the

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products to the customers in every nook and corner of the market and it also
enables the firm to establish direct contact with them and thereby facilitate
sales promotion. However, only the bigwigs can adopt this channel.
The companies with relatively fewer resources can go in for syndicated
distribution where a tie-up between non-competitive marketers can be
established to facilitate distribution.
As a general rule, rural marketing involves more intensive personal selling
efforts compared to urban marketing. Marketers need to understand the
psyche of the rural consumers and then act accordingly. To effectively tap
the rural market a brand must associate it with the same things the rural
folks do. Utilizing the various rural folk media to reach them in their own
language and in large numbers so that the brand can be associated with the
myriad rituals, celebrations, festivals, melas and other activities where they
assemble, can do this.
One very fine example can be quoted of Escorts where they focused on
deeper penetration .In September-98 they established rural marketing sales.
They did not rely on T.V or press advertisements rather concentrated on
focused approach depending on geographical and market parameters like
fares, melas etc. Looking at the kuchha roads of village they positioned
their motorbike as tough vehicle. Their advertisements showed Dharmendra
riding Escort with the punch line Jandar Sawari, Shandar Sawari. Thus,
they achieved whopping sales of 95000 vehicles annually.
One more example, which can be quoted in this regard, is of HUL. A year
back HUL started Operation Bharat to tap the rural markets. Under this
operation it passed out lowpriced sample packets of its toothpaste, fairness
cream, Clinic plus shampoo, and Ponds cream to twenty million households.
Thus looking at the challenges and the opportunities, which rural markets
offer to the marketers it can be said that the future is very promising for

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those who can understand the dynamics of rural markets and exploit them to
their best advantage.
Rural marketing is a time-consuming affair and requires considerable
investments in terms of evolving appropriate strategies.

The other major problems with rural markets are as follows:

Deprived people and Deprived Markets
Transport
Many Languages and Dialects
Dispersed Markets
Low per capita Income
Low levels of Literacy
Different way of thinking
Rural Marketing will grow in importance in the coming years. Corporates
that have understood the psyche of rural consumers and markets and how to
work it, have notched up successes.

1.6 ASSESSING MARKETING FOR RURAL INDIA

Introduction

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In 2005, Hindustan Lever Limited had a contribution of Rs. 5,000 crores

from the rural market that was a whopping 50 percent of its total sales
turnover. Another large corporate house LG Electronics that had a total
turnover of Rs. 4500 crores had a share of 55 percent from the rural and
semi-urban market. With such kind of contribution from the rural India,
corporate houses perceived great opportunity in the rural markets and
tapped the countryside to enlarge their market share.
Rural marketing is the much talked about subject for the business
establishments especially the FMCG and the consumer durable industry. A
large number of companies have made a big headway by focusing
themselves on rural markets. It proved to be an opportunity rather than a
problem for the marketers to concentrate on rural markets and the poor.
Many of them who had earlier ignored this segment due to lot of investment
requirements and low returns have again started foraying into it and targeted
the rural masses. They attempted all the feasible approaches to sell the
products to the rural consumers that met their lifestyles and living standards.
Several large companies like HUL, ITC, Coca-Cola, LG, Britannia, Philips,
Colgate-Palmolive etc., penetrated aggressively into the rural markets and
spent heavily in the rural areas. Some of them even invested money to
create separate sales and marketing teams exclusively for rural markets.
They also appointed specialist agencies that could advise them on rural
marketing.
The Rural Market Scenario
The rural markets offered a huge potential to the business houses because of
their enormous spread and rising consumer demands. Around the world,
over 4 billion people survived in rural areas that came to more than 60
percent of the total population.

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In India also, the ratio of rural to urban population was slightly higher than
the world's ratio with 70 percent of them living in rural areas. They
domiciled in nearly 6,27,000 villages spread over 3.2 million sq. km. This
growing affluence along with good monsoon and the increased agriculture
output, increased the total disposable income of rural consumers to 58
percent with two-third of middle-income households being in the rural
market.
About 40 percent of the graduates coming out of Indian Universities were
from rural areas. As they are eager to earn more and live better, their
aspirations are similar to the urban youth. It is predicted by industry analysts
that by 2014 15, the urban households are projected to grow by 4 percent
while rural households are expected to grow by 11 percent.

If the rural income rose by 1%, then the buying power would
correspondingly increase by about Rs. 10,000 crores. The colour televisions,
refrigerators, air-conditioners and microwaves have become a household
sight in villages and small townships that was long thought of as a luxury
and domain of urbanites.
However, rural India had its own set of problems like illiteracy, early
childhood marriages, lack of access to birth control measures, poverty etc.,
that were interdependent on each other. There are also large numbers of
daily wage earners and most of the people depended on vagaries of
monsoon. Inadequate infrastructure like non-availability of gas supply,
frequent power cuts, improper sanitary conditions, inaccessible areas were
the other common sight of rural areas.
The paradigm shift
In most of the rural areas in different parts of the country, there is
considerable awareness on various latest products that are available in the

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market. This has been possible due to the penetration of cable and satellite
channels that have brought down the world at the fingertips of the common
man.
The media influenced the mindset of the rural consumer to such an extent
that people who had money started purchasing the products unmindful of
the costs, just to satisfy their needs as well as their ego. But, the growth of
rural market could be attributed to many other reasons that in one way
increased the sales as well as the profits of the companies.

Some of the important causes for the growth of rural markets are
The rise in disposable income of the rural families
The economic boom
Timely rains
Rural population involved themselves in business other than
agriculture
Increase white-collar jobs in nearby towns
Commercialization of agriculture
Saturation of the urban markets
Media penetration in rural areas (particularly satellite channels)
Globalization

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Economic liberalization
Revolution in the Information Technology
Women empowerment
Improving infrastructure
However, there was a significant role of the corporate enterprises
simultaneously in the development of rural market. Their timely
intervention into the rural areas, their appropriate planning, their perception
and identification about the growth of rural markets and the use of
marketing strategies all have equally contributed for the progress of rural
markets. Even though corporate houses were hedged with so many problems
in the rural areas, they saw a galore of opportunities in the rural market and
converted all the pessimistic characteristics of the rural market into
affirmative attributes.
They satisfied themselves with the availability of limited infrastructure, saw
a sign of prosperity rather than fear during the entry of competitors into the
rural markets, showed excitement at the availability of satellite channels in
the rural households, visualized their cash bells ringing with the increase in
purchasing power of the rural masses that came equivalent to their urban
counterparts.
1.7 RURAL MARKETING STRATEGIES
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 upgrading from indigenous teethcleaning ingredients to tooth powder and toothpastes, from traditional
mosquito repellant to coils and mats. There is also a visible shift from local

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and unbranded products to national brands. From low-priced brands to

premium brands.
FMCG consumption
Organizations like Hindustan Lever Ltd., Nirma Chemical Works, Colgate
Palmolive, Parle foods etc have carved inroads into the heart of rural
markets. Various categories of products have been able to spread their
tentacles deep into the rural market and achieved significant recognition in
the country households. And, in the process, the leading brands displaced
the regional brands, local brands and the other unbranded offerings.
Company

Household penetration

HUL
Nirma Chemical Works
Colgate Palmolive
Parle Foods

88%
56%
33%
31%

Category

% volume of
brands/unbranded

Washing cakes/bars
Tea
Salt

88%
56%
33%

local

Of the expenditure on consumer goods in rural household, approximately,

44% is on food articles such as biscuits, tea, coffee and salt, 20% on
toiletries, 13% on washing material, 10% on cosmetics, 4% on OTC
products and 9% on other consumables. A number of category products
have 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 a larger proportion of the purchases made in rural market can
be attributed to local/ unbranded players. Surprisingly, however, the

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unbranded/local component contributes to a substantial portion of the

volume of only a few of the highly penetrated categories.
Category

Category
Penetration

84%
77%
70%

Brand with
highest
penetration
Lifebuoy
Wheel
Double Iran
mustard
Lipton, Taaza
Nirma

Toilet Soap
Washing
cakes/Bars
Edible oil
Tea
Washing powder
/ liquid
Salt
Biscuits

91%
88%

64%
61%

Tata Salt
Parle G

Focus on urban categories

Though the commodity products have greater penetration, traditionally
urban categories such as skin 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 that after 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.
Category

Household Penetration

Skin creams
18%
Talcum Powders
15%
In 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
Ponds and Fair & Lovely are enjoying a monopoly in the rural markets in
their respective categories.

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Rural India is not averse to trying out the premium brands at high prices. A
study indicated that a majority of the premium brand users are using the
brand for the first time.
Similarly 0.9% of the talcum powder-using families have started using
Denim talc and 0.7% of the shampoo using households started using
Pantene. Surveys also reveal that trials are not restricted to the more affluent
echelon of the villages. The experimenting households are more-or-less
evenly spread across the various socio-economic clusters of the rural
market. This should further encourage the marketers to focus their attention
on rural buyers.
Brand
Surf
Ariel
Pantene
Denim

Penetration
category users
6.2%
4.5%
1.8%
1.8%

of

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
use toothpaste.
Similarly, many of the households using premium brands also use massmarket brands. For example, while 15% of Surf and 12% of Ariel using
families also use Nirma detergent, 3% of Denim users use Ponds Dream
flower talc and 18% of Pantene using households use Clinic shampoo as
well.

1.8 MY VIEWS ON RURAL INDIA

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The rural India that has lot of money with it definitely offers a great
potential for the companies where the chances of outnumbering the urban
areas in all aspects are very high. But only those companies would
survive at these places and win over the rural consumers who can spend
time and money on understanding the needs of them and come up with
innovative ideas.
The companies should also strive to give more focus to the rural market
in order to make it a market leader. This can happen only with the firm
commitment of the top management and extension of full support to the
marketing personnel by each and every department of the organization.

2. GROWTH OF RURAL MARKETS

2.1

Rural India set to fuel Business Growth Engine

2.2

Winds of Growth from Rural India

* Impact on Rural Economy
* Growth in Industry
* Impact on Industry
* Gains from Rains
* Stock to Watch

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2.1 RURAL INDIA SET TO FUEL BUSINESS GROWTH ENGINE

With 70 per cent of the population, 25 per cent of GDP and 41 per cent of
savings, Rural India is all set to be the engine for corporate growth in the
new millennium.
Identifying rural as rural rich, rural middle and rural poor, Corporates need
to be sensible and have to make products exclusively for the rural markets.
Rural markets should not be treated as an extension of the urban population
as they are different in many ways.
Corporate houses should train the rural population for low-cost manpower,
which would help them in generating employment and wealth for the rural
population. This would eventually end up in Corporates offers, as the
income generated would be used to buy their products.
"What is rural today will be urban tomorrow" going by the speed of the
technological and communication revolution and its adaptation to the rural
economy. The national highways connecting all the four metros through the
hundreds of villages are hastening this phenomenon.
"Do not try to fit their lifestyle into your products; rather make products that
would fit into their lifestyle. This emphasizes that future growth will be
from the rural areas.
2.2 WINDS OF GROWTH FROM RURAL INDIA

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There may finally be a silver lining to the gloomy economic picture

prevailing in the country. Recently, there were economic forecasts from
three important quarters that saw a better future for the country's economy
in the current year. The Centre for Monitoring Indian Economy (CMIE)
forecast a 7.8 - 8.2 per cent growth in real GDP in the current financial year
against 7.3 per cent growth in GDP in the last fiscal. Its forecast was quickly
followed by estimates from the Reserve Bank of India (RBI) which saw the
economy growing at over 6.5 per cent in FY2014-2015 and then the finance
minister stated that he saw the economy turning around by the end of the
calender year. In a nutshell, the picture for Indian economy appears to be
brightening up as we go forward into the year.
However, the most remarkable feature of this improving economic outlook
is that the growth is projected to come almost entirely from the agriculture
sector. CMIE has forecast that growth in the agriculture production during
the current year would be a whopping 9 per cent over the previous year.
This would be almost the highest in the last seven years and comes after two
consecutive years of shrinkage in agriculture sector.

Impact on Rural Economy

After having grown at over seven per cent annually during 1994 and 1997,
India's GDP growth slowed down substantially because of the sharp fall in
agricultural production and income. After an impressive 8.2 per cent rise in
production in 1998-99, the pace of growth in the farm sector turned negative
with output shrinking by 1.5 per cent in FY 2013 and 4.5 per cent in FY
2014. This meant there was less disposable income generated in the rural

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areas and hence the demand-pull from vast majority of population was
absent.
With a pick up in income in the rural areas, the demand for goods and
services is expected to pick up this year and that should contribute to the
over all growth in economy.
Growth in Industry
The growth in industry suffers from poor demand in consumption as well as
investments. Due to a decline in farm income over the past two years,
demand from rural areas was poor and as result of this investment sentiment
remains sluggish too. The situation can only reverse if consumption rises
giving a boost to investment sentiment. However, as the impact of increased
income in farm sector would be felt only from the end of the year, the
growth in industrial production in expected to remain this year. CMIE has
projected that the growth in industrial production this year would be nearly
4.5 per cent, down from 5 per cent in the last financial year and the lowest
level since 1998-99.
The index of industrial production (IIP) is expected to rise by 4.4 per cent in
2015-16, higher than the 2.8 per cent growth recorded in the preceding year.
After tepid growth in production during 2012-14, the industry was expected
to witness a sharp acceleration in output in 2014-15. Although at 2.8 per
cent, IIP growth staged a recovery, it was much below expectations.
All the

factors are expected to benefit overall industrial activity. The

manufacturing sector, that accounts for 75.5 per cent of total IIP, is expected to
grow by 4.1 per cent in 2015-16 as compared to 2.3 per cent in 2014-15.

Finally the CMIE has projected that the industrial activity will pick up in the
second half of this calendar year and the IIP should be between 2 to 4 per
cent for the year.

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Impact on Industry
Increased income in farm sector impacts the entire economy, however it has
an almost immediate impact on some sectors like consumer durables and
non-durables, tractors and motorcycles. There is also an increased demand
for cement and steel from the resurgent housing sector. Heavy commercial
vehicles too attract buying as transportation of goods picks up across the
country and demand for services too is higher. Therefore, the relationship
between agricultural income and economic growth is almost direct. It is
expected that FMCG companies, tractor manufacturers and motorcycle
makers could feel an immediate pick up in demand once the kharif crop is
harvested. This sentiment has already been reflected in the stock markets
with the FMCG leader, Hindustan Lever attracting huge amount of buying
by fund managers in expectation of a large topline growth this year.
There might also see a turnaround in the subdued sentiment in industries
such as televisions, washing machines and refrigerators, which have seen a
fall in sales due to sluggish rural demand over the past two years. Higher
demand for goods and services in rural areas necessitates increased
movement of goods and hence a pick up in demand for commercial
vehicles. This means there is an increased demand in almost all sectors such
as steel, engineering and FMCG. Therefore, if the agriculture sector does
grow at the projected 9 per cent this year, economy would receive a big
boost by the end of the year.

Stocks to Watch
The direct beneficiary of a surge in rural demand would be companies in the
FMCG sector, like Hindustan Lever. HUL has seen a sluggish topline

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growth over the pat two years largely because of a slowdown in demand
from rural areas. The company can be expected to capitalize heavily on a
revival in farm income. Infact, Hindustan Lever was one of the biggest
gainers. Others that could gain too include Nirma, Colgate Palmolive,
Britannia Industries and Tata Tea.
The other gainers could be tractor majors who have faced a sharp slump in
demand over the past two years. The decline in farm income had forced a
big slump in tractor sales. Tractors sales are almost first to be impacted by a
change in farm income.
It is expected that tractor majors such as Punjab Tractors and Mahindra &
Mahindra would be biggest beneficiaries of a look up in the prospects. Both
the stocks, particularly, Mahindra & Mahindra, has taken a big hit in
valuations due to the fall in sales. Both the companies are fundamentally
sound and have very good management. A surge in rural economy would
also mean more transportation needs, increased housing and larger demand
for services. CMIE projects the growth in services at 7 per cent in the
current year.
Overall, it can be said that the worst may soon be over for the economy and
things could begin to look much better from the second half of the year.

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3. TAPPING INDIAS RURAL MARKET

* Introduction * Understand the Rural Market

* Products and uses

* Partnering

* Rural Income

* Buy-out

* Tackle the Distribution Networks * Point of Sale

Introduction
Ten years ago, foreign consumer products were scarce in India and only
available to the affluent. Import restrictions prevented or severely hindered
foreign consumer goods from entrance to India. With the economic
liberalization that ensued, foreign brands are now prevalent across India.
Today, multinational corporations view emerging markets like India as
prime opportunities for growth. Rural markets are growing twice as fast as
the urban markets. Generally speaking, success in Indias rural markets for
multinational corporations has been mediocre at best. It is from these
struggles and failures, however, those multinational corporations seeking to
enter the rural Indian market can learn how to do so more wisely.
Understand the Rural Market

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Rural Marketing

With a population already in excess of one billion people, India has caught
the eye of multinational corporations across the globe as a place of
opportunity for exploring new markets. While India has portions of their
population that would be considered wealthy or middle class by Western
standards, a much greater percentage of Indias population is low income.
As a result, they spend money, live, and use products differently than the
countries where most multinational corporations originate. Rural areas, in
particular, exemplify these differences. Understanding the characteristics
that make the people and the market in rural India unique can help
corporations to enter this market with success.
Rural Income
With an average income equivalent to Rs. 2000 per month, rural Indians
have a very low disposable income. Most rural homes have minimal storage
space and no refrigeration. Very few people own or have access to cars. As
a result, rural Indian purchasing habits tend to be of an earn today, spend
today mentality. Rather than buying in bulk, which would mean paying
more for a large quantity upfront, rural Indians tend to buy what they need
for short segments of time. These factors result in consumers buying
products locally, as well as on a daily basis.
In addition to the fact that income levels are low, rural incomes also vary
greatly depending on the monsoons. When a monsoon hits, this devastates
the livelihood of most rural consumers because they are dependent on
agricultural work for income. Corporations are also directly affected
because this makes it difficult to predict demand.
Products and Uses
Before a company considers entering the rural market, understanding the
types of products and packages that rural Indians typically use is crucial. For
example: A company seeking to enter Indias market with an oral care

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Rural Marketing

product, this would be an important fact to know and consider during both
the product and package development stages. Similarly, Hindustan Lever
Ltd. (HUL) discovered that rural Indians tend to use the same soap for
washing everything from hair to their bodies to clothing. Because HUL
manufactures products including various soaps and detergents, HUL product
and packaging development processes have taken this rural habit into
account by designing all-in-one soaps.
By taking into account the low disposable incomes and the unique product
and package needs of this market, consumer products that are designed and
packaged for this market have great potential.
Partnering
The first and best option for aligning with the Indian industry is for the
multinational to partner with an Indian company that is already successfully
producing and selling a similar type of product. In doing so, the new
company can take advantage of the manufacturing facilities and distribution
networks that are already in place rather than having to start from scratch.
As a result of Indias colonial experience when it was controlled by Britain,
many Indians have a profound mistrust of foreign brands . By creating
a partnership with an Indian company plays down the foreign factor and
helps to dispel some of this mistrust.
Hindustan UniLever is a multinational corporation that has found success
with this method of aligning with industry. By partnering with local
entrepreneurs who own and manage their own plants, Hindustan Lever is
able to manufacture their products with minimal amounts of fixed capital. In
these partnerships, the entrepreneurs agree to devote their plants capacity to
manufacturing only Hindustan Lever products.
Buy-Out
A second alternative for aligning a new industry to enter Indias rural market
is to buy out a local Indian manufacturer. As with partnering, buying out a

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Rural Marketing

local manufacturer gives a company the ability to capitalize on existing

manufacturing facilities and distribution networks.
The disadvantage is that Indian consumers may view this negatively. CocaCola is an example of a multinational corporation that tried buying out a
local distributor. In 1992, Coca-Cola made its second appearance to the
Indian market. In an attempt to eliminate its biggest competitor, Coca-Cola
acquired Thumbs Up, the local market leader in cola. When Coca-Cola tried
to exchange its own brand on the regular Thumbs Up distribution network,
Indian consumers looked unfavorably upon Coca-Cola. The company has
been struggling ever since.
Tackle the Distribution Networks
Distribution networks in emerging markets tend to be very unique and often
times disjointed. India is no exception. Before a multinational corporation
even considers entering Indias rural market, it is important to first get an
understanding of the current distribution system characteristics as well as
the ways that the system is likely to change over time.
In doing so, a company can assess whether or not accurate and timely
product distribution can be achieved without first investing in the
distribution networks. Some of the characteristics unique to rural Indias
distribution networks include the modes of transportation used as well as the
point of sale. Despite the challenges of the rural Indian distribution
environment, there have been distribution successes from multinational
corporations.
Point of Sale
The retail establishment where most rural consumers purchase their day-today goods is at a kirana or street shop. These small open stalls line the

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streets and are approximately the size of a living room. Consumers purchase
everything from bananas to razors at a kirana.
With over 2.5 million kiranas throughout Indias rural towns and villages,
keeping store shelves stocked is one of the main challenges to consumer
goods manufacturers. In order to reach these local shops and establish a
brand presence in them, companies need substantial amounts of working
capital and a large committed sales force.

Success Stories
In spite of all the distribution challenges, there have been several
multinational corporations that have experienced great successes in tackling
the distribution networks. Hindustan Lever has been able to build a
distribution network in India that directly serves 800,000 stores and uses
wholesalers and distributors to reach another 3.5 million outlets. Not only
does this help Hindustan Lever move products from manufacturing facilities
to retail outlets, it also provides a large deterrent to potential competitors.

Think Small
Due to the fact that rural Indians have small disposable incomes and very
little storage space, one of the most popular concepts to hit the rural market
has been a sachet. Sachets are plastic pouches that contain approximately 20
milliliters of product.

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Rural Marketing

An Indian company selling a 10-milliliter sachet of Velvette shampoo first

introduced sachets to India in the 1990s. Before the sachet, shampoo in
India was only available in larger bottles, therefore limiting its sales success
among people with small incomes. Sachets meet the needs of the rural
consumer in several ways. Sachets are inexpensive, they occupy a small
amount of space, and they allow consumers to experiment with new
products that they may never have tried before.
Coca-Cola is another company that has found success by thinking small. In
a packaging change aimed directly at the rural and lower-income markets,
Coca-Cola launched a new 200 ml bottle for the equivalent of 10 cents in
2001. After introducing the smaller size bottle, sales increased 34 percent by
the end of the first quarter in 2002. Packaging in smaller units clearly helps
to increase the affordability of products for rural Indian consumers.
Visual Communication
The rural area is a market where large portions of the population are
illiterate. So, when packaging consumer products for rural markets,
companies must use prominent logo symbols and logo colors to assure that
illiterate consumers will be able to recognize the products. Therefore,
communicating brand values through the package rather than with words
becomes essential. Emotional Surplus Identity (ESI) is a concept that uses
the shape, color, and content of a package to differentiate a brand in the eye
of a consumer.
By creating a bond with the consumer through the package, companies are
able to establish a relationship that encourages repeat purchases. Loud,
bright colors are typically used on packages to differentiate a product from
the others on the shelf and to create a lasting impression in a consumers
mind.

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Rural Marketing

Another technique used by multinational corporations has been tailoring

products, including changing brand names, to give them a rural image. In
the eyes of the consumer, branded products are associated with quality and
value. Nirma, the largest selling detergent in the world, found success in the
rural Indian market by using unelaborated packaging to position their
product, as one that cleaned well yet was affordable. While this technique is
not the most eye-catching, it allows rural Indian consumers to experience
the benefits of a branded product without requiring elaborate or expensive
packaging on the part of the multinational corporation.

My views on tapping the rural markets

With an approximate population of 700 million people, the rural Indian
market is important for multinational corporations to tap. Although rural
Indians need to purchase consumer goods just as their Western counterparts
do, rural Indian consumers have a different set of needs that must be met by
both package and product. Spending time researching the rural Indian
consumer as well as the market before diving in can help to prevent
unnecessary struggles and failures. If the opportunity exists, partnering with
an existing Indian company upon market entry can provide several key
advantages to a company.
Understanding the available distribution networks in rural India is crucial to
making a successful entry into the rural Indian market. Packages need to be
designed to withstand more distribution abuse due to poor roads and more
primitive mode of transportation. Finally, when creating a package for rural
India, small sizes allow consumers to try new products. It also caters to the

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Rural Marketing

fact that most rural Indians have low disposable incomes and little storage
space at home. By applying these lessons that have been learned from
multinational corporations in the past, the task of entering the rural Indian
market should be promising.

4. HINDUSTAN UNILEVER LIMITED(HUL)

4.1

Profile of HUL

4.2

HULs Project Shakti

* Why Shakti?

* Shakti- Where are we today?

* Other Activities

* Why I- Shakti?

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4.1 PROFILE OF HINDUSTAN LEVER LTD.

Hindustan Unilever Limited (HUL) is India's largest Fast Moving

Consumer Goods Company with a heritage of over 80 years in India and touches
the lives of two out of three Indians.
HUL works to create a better future every day and helps people feel good, look
good and get more out of life with brands and services that are good for them and
good for others.
With over 35 brands spanning 20 distinct categories such as soaps, detergents,
shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged
foods, ice cream, and water purifiers, the Company is a part of the everyday life of
millions of consumers across India. Its portfolio includes leading household
brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Ponds,
Vaseline, Lakm, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke
Bond, Bru, Knorr, Kissan, Kwality Walls and Pureit.
The Company has over 16,000 employees and has an annual turnover of INR
30,170 crores (financial year 2014 15). HUL is a subsidiary of Unilever, one of
the worlds leading suppliers of fast moving consumer goods with strong local

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Rural Marketing

roots in more than 100 countries across the globe with annual sales of 48.4
billion in 2014. Unilever has 67.25% shareholding in HUL.
HUL's Vision:
" Unilever is a unique company, with a proud history and a bright future. We have
ambitious plans for sustainable growth and an intense sense of social purpose."
HUL's Purpose & Principle:
Our Corporate Purpose states that to succeed requires "the highest standards of
corporate behaviour towards everyone we work with, the communities we touch,
and the environment on which we have an impact."
4.2 HULs PROJECT SHAKTI
Project Shakti, a low cost distribution model, was rolled out in 2000 by
Hindustan Lever Limited (HUL) to attack the bottom of the pyramid. True,
the company had experimented with mobile retailing for rural markets in the
late-1980s and Project Bharat in the mid-1990s that focused on increasing
penetration and raising awareness.
But Project Shakti was introduced with an aim to
bring down distribution costs in rural markets. The
traditional distribution systems used in urban markets
were costly to replicate in smaller areas.
We had to create a low-cost vehicle for markets that
had a population of less than 2,000, in Shakti, HUL.
The company appointed women entrepreneurs from villages as distributors
of HULs range of products.
The 15-month pilot project in Andhra Pradesh turned out to be a good
learning ground. For instance, the company initially decided to save
distributor margins by cutting one layer of distribution the local
distributor. These savings helped in giving higher margins to the Shakti

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Rural Marketing

entrepreneurs and retailers. Stocks were directly sent to the Shakti

distributor from the local C-and-F (carry and forward) depots. However,
cutting the local distributor had its own shortcomings because they help
redistribute stocks in smaller quantities. To expect that service from a large
C-and-F depot was difficult.
Then, local distributors also managed issues like giving credit to the small
retailer they had more information about the credit value of local retailers
or the Shakti entrepreneurs. Within six months, HUL had to reinstate the
local distributor in Project Shakti.
Another learning was that most Shakti entrepreneurs had never ventured
into business. Thus, handholding became critical. HUL invested in creating
awareness about the Shakti woman entrepreneur. HUL offered incentives to
villagers who buy from the Shakti representative.
If consumers cannot locate the Shakti woman easily, it naturally takes
more time for her to establish the business
However, Shakti is still trying to effectively bring down distribution costs.
Manpower costs is one area where a lot could be done it forms 80 per
cent of total costs in selling to the BOP. The task is manpower intensive, as
employees are required to identify and develop new BOP markets, train the
entrepreneurs and revisit existing markets to ensure that it has adequate
stocks.
Hence, HUL is experimenting with three-four pilot models. It has rolled out
mobile trainers who move from village to village and perform multifunctions from selecting entrepreneurs, training them and handholding. It is
also experimenting with exclusive trainers.

At present, Shakti accounts for 5-6 per cent of HULs total sales and reached a
break-even point on operational expenses in 2014. Project Shakti also consists of

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Rural Marketing

public awareness programs focusing on health and hygiene, as well as an i-Shakti

initiative that allows villagers to access information through kiosks. By the end of
2007, more than 45,000 Shakti entrepreneurs covered 3 million homes in 100,000
villages in 15 Indian states. Unilever aims to increase the number of Shakti
entrepreneurs that they recruit, train and employ from 45,000 in 2010 to 75,000 in
2015.
Hindustan Lever has built alliances with telecom & banking companies to
increase the income of the Shakti family with the sale of telecom prepaid
currency, sim activations and acting as a banking correspondent.
Shakti is now being adapted in other Unilever markets such as Sri Lanka, Viet
Nam and Bangladesh, and is also being considered for Latin American and
African markets. At the end of 2007, Sri Lanka had over 3,500 entrepreneurs
covering 275,000 households in 4,000 villages, and 4,250 entrepreneurs in
Bangladesh were covering 400,000 households in 8,000 villages.
WHY SHAKTI?

Empowering Women in Rural India

The objective of project Shakti is to create income-generating capabilities

for neglected rural women, by providing a sustainable micro enterprise

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Rural Marketing

opportunity, and to improve rural living standards through health and

hygiene awareness.
Following the pioneering work carried out by grameen bank of Bangladesh,
several institutions, NGOS and government bodies have been working
closely, for nearly five years, to establish self help groups (SHGs) of rural
women in villages across India. Their experiments clearly indicate that
micro-credit, when carefully targeted and well administered can ease
poverty significantly.
A key lesson learnt was that rural upliftment depended not on successful
infusion of credit, but on its guided usage for better investment
opportunities
This is where HUL's project Shakti is playing a role in creating such
profitable micro enterprise opportunities for rural women.

Risk-free micro enterprise that yields high returns

A typical Shakti entrepreneur conducts a steady business, which gives her
an income in excess of Rs.2,000 per month on a sustainable basis. As most
of these women live below the poverty line, and hail from extremely small
villages (with populations of less than 2000), this earning is very significant,
and almost twice the amount of their previous household income.
For most of these families, project Shakti is enabling families to live with
dignity, with real freedom from want.
In addition to money, there is a marked change in the woman's status within
the household, with a much greater say in decision-making. This results in
better health and hygiene, education of the children, especially the girl child,
and an overall betterment in living standards.
The most powerful aspect about this model is that it creates a win-win

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partnership between HUL and the consumers, some of whom will depend on
the organization for their livelihood, and build a self-sustaining cycle of
growth for all.
SHAKTI: WHERE WE ARE TODAY?
The model was piloted in Nalgonda district of Andhra Pradesh in 50 villages
in the year 2000. The government of Andhra Pradesh took the pioneering
step of supporting the initiative by enabling linkages with the network of
Dwarka groups of rural women set up for their development and selfemployment. Most SHG women view project Shakti as a powerful business
proposition and are keen participants in it. It has since been extended to in
Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Uttar Pradesh,
Tamilnadu, Chattisgarh and Orissa.

OTHER ACTIVITIES
To improve the business skills of the rural women, extensive training
programmes are being held. Such workshops have already covered a large
number of Shakti entrepreneurs in Andhra Pradesh, Karnataka, Gujarat,
Madhya Pradesh, Uttar Pradesh, Tamilnadu, Chattisgarh and Orissa.

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As part of their training programme, all HUL management trainees spend

about 4 weeks on project SHAKTI in rural areas with NGOS OR SHGS.
Assignments include business process consulting for growing enterprises
engaged in the manufacture of products such as spices and hosiery items.
WHY I-SHAKTI?

A key factor that has inhibited the development of rural India has been
lack of access to critical information and services. Given
Indias large geography and weak infrastructure, it is often
difficult to reach out to the rural areas.

In order to impact both livelihood opportunities and living standards of rural

communities I-Shakti - an IT-based rural information service has been
developed to provide information and services to meet rural needs in
agriculture, education, vocational training, health and hygiene.
The premise of the I-Shakti model is to provide need based demand driven

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Rural Marketing

information and services across a large variety of sectors that impact the
daily livelihood opportunities and living standards of the village community.
The I-Shakti kiosk will be operated by the Shakti entrepreneur, which
further strengthens the relationship they have already cultivated and builds
new capacity. HUL expects that the information provided would improve
the productivity of the rural community and unlock economic and social
progress.

I-SHAKTI: THE PILOT PROJECT

I-Shakti kiosks have been set up in 8 villages in Andhra Pradesh, and have
been functional since August 2003.
The kiosks offer information chiefly in the form of audio-visuals in the
following areas:
Health and Hygiene
E-Governance
Education
Agriculture
Employment
Legal services
Veterinary services
The information provided in the above areas is culled from the best
available resources, taking additional care to ensure that information,
especially in areas like agriculture, is locally relevant and includes inputs
from home-grown experts. These experts are also available on request, to

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Rural Marketing

help provide solutions to problems raised by users through a query mailing

system.
The kiosks have received a great response from the local public. During the
launch of these kiosks, important village members like the sarpanch,
schoolteacher and doctor are invited to help reinforce relationships with the
villagers.
The kiosks remain open from 9 a.m. to 7 p.m., six days of the week. To
enable access to the services, users have to register themselves first and
obtain the unique registration number. An id card with the registration
number is provided for use every time they visit the kiosk.

A farmer from the village can obtain a quick solution to a pest problem with
his crops. People can also send queries on health and hygiene to a local

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Rural Marketing

doctor for a speedy response. Villagers can avail of discount coupons from
the kiosk for medical treatment from doctors operating in local areas.

5. INDIAN TOBACCO COMPANY (ITC)

5.1

The ITC Profile

5.2

ITCs Rural Development Philosophy

5.3

ITC Tapping the Rural Battle

5.4

Working of E-Choupal

5.1 THE ITC PROFILE

ITC is one of India's foremost private sector companies with a market

capitalization of over US $ 40 billion and a turnover of US $ 8 billion.
Rated among the World's Best Big Companies by Forbes magazine and
among India's Most Respected Companies by Business World, ITC ranks
third in pre-tax profit among India's private sector corporations. ITC is
rated among the World's Best Big Companies, Asia's 'Fab 50' and the
World's Most Reputable Companies by Forbes magazine and as 'India's
Most Admired Company' in a survey conducted by Fortune India magazine
and Hay Group. ITC also features as one of world's largest sustainable value
creator in the consumer goods industry in a study by the Boston Consulting

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Rural Marketing

Group. ITC has been listed among India's Most Valuable Companies by
Business Today magazine. The Company is among India's '10 Most
Valuable (Company) Brands', according to a study conducted by Brand
Finance and published by the Economic Times. ITC also ranks among Asia's
50 best performing companies compiled by Business Week.
ITC has a diversified presence in Cigarettes, Hotels, Paperboards &
Specialty Papers, Packaging, Agri-Business, and Packaged Foods &
Confectionery, Information Technology, Branded Apparel, Greeting Cards,
Safety Matches and other FMCG products. While ITC is an outstanding
market leader in its traditional businesses of Cigarettes, Hotels,
Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share
even in its nascent businesses of Packaged Foods & Confectionery, Branded
Apparel and Greeting Cards.
As one of India's most valuable and respected corporations, ITC is widely
perceived to be dedicatedly nation-oriented. ITC's diversified status
originates from its corporate strategy aimed at creating multiple drivers of
growth anchored on its time-tested core competencies: unmatched
distribution reach, superior brand-building capabilities, effective supply
chain management and acknowledged service skills in hoteliering.
The Company's 'E-Choupal' initiative is enabling Indian agriculture
significantly enhance its competitiveness by empowering Indian farmers
through the power of the Internet. This transformational strategy is expected
to progressively create for ITC a huge rural distribution infrastructure,
significantly enhancing the Company's marketing reach.
ITC employs over 20,000 people at more than 60 locations across India.
Ranked among India's most valuable companies by the 'Business Today'
magazine, ITC continuously endeavors to enhance its wealth generating
capabilities in a globalising environment by the following corporate
strategies:

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Continue to focus on the core businesses of Cigarettes & Tobacco, Hotels,

and Packaging & Paperboard.

Ensure that each of its businesses meets the three criteria of sustainability,
namely Market Standing, Profitability and Internal Vitality. Exit from
businesses, which do not meet these criteria within an agreed time frame.

Ensure that each business is internationally competitive in the Indian

global market.

Create distributed leadership within the organisation by nurturing talented

and focused top management teams for each of the businesses.

Secure the future growth of the Company by creating new businesses,

which leverage the strength of its core competencies, residing in various
businesses.

5.2 ITCS RURAL DEVELOPMENT PHILOSOPHY

LET'S PUT INDIA FIRST

ITC believes that an effective growth strategy for our nation must address
the needs of rural India, home to 75% of our poor. It is imperative to ensure
that India's economic growth is inclusive, embracing its villages, so as to
free millions of our disadvantaged citizens from the indignity of poverty.

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Rural Marketing

It is ITC's belief that India's rural transformation cannot be brought about by

the government alone. Nor can the efforts of a few enterprises make a
decisive difference. Only an inspired public-private partnership can
transform lives and landscapes in rural India. ITC's humble endeavours have
demonstrated that it is possible to create and sustain a model that can
harmonize the need for shareholder value creation with making a substantial
contribution to society.
ITC has partnered the Indian farmer for close to a century. ITC is now
engaged in elevating this partnership to a new paradigm by leveraging
information technology through its trail-blazing e-Choupal initiative.
Additionally, ITC is significantly widening its farmer partnerships to
embrace a host of value-adding activities: creating livelihoods by helping
poor tribals make their wastelands productive; investing in rainwater
harvesting to bring much-needed irrigation to parched dry lands;
empowering rural women by helping them evolve into entrepreneurs;
enhancing livestock quality to significantly improve dairy productivity;
providing infrastructural support to make schools exciting for village
children. Through these rural partnerships, ITC touches the lives of over 3.5
million villagers across India.
For ITC, these are expressions of a commitment beyond the market. Of
a conviction that country must come before corporation. Of a true pride
in being Citizen First.
5.3 ITC TAPPING THE RURAL BATTLE
The concept of a market waiting to be tapped at the 'bottom of the pyramid
has caught the imagination of business people. To grow the market,
companies should redesign products targeted at richer buyers to bring them
within the reach of poorer people in India and other developing countries.
Another way to do that is to grow the incomes of the poorer people. The two

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approaches, from the supply and the demand sides can go hand-in-hand, as
ITC is showing in its rural marketing.

ITC launched its E-Choupal initiative that can change the face of the
company. In June 2000, it began experimenting with this Internet-based
project for rural India. This E-Choupal operates as Internet-based trading,
marketing and distribution channels of goods and services across the rural
economy. The E-Choupal model confers the power of expert knowledge on
even the smallest of individual farmers. It is gradually enabling a
revolutionary model shift that is enhancing the international competitiveness
of Indian agriculture. While the project currently services over a million
farmers through its 1,045 kiosks in 6,000 villages, it eventually aims to
cover over one-lakh villages in the next five years that would include onesixth of India's villages.
The company believes that a market-led model like the E-Choupal can
induce higher productivity and higher incomes in the rural community. In
turn, ITC hopes that the relationship established with the farmers will help
gain their confidence so that they can trust ITC as a reliable supplier of
goods and services on the one hand, and as a cost-effective buyer of farm
output on the other.

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E Choupal at a Glance
Milestones

Agenda for the next Decade

----------------

Commencement of initiative:
2000
States covered: 6

States to be covered: 15

Villages covered: 31,000

Villages to be covered:

E-Choupal installations: 5200

1,00,000

Empowered e-farmers: 3.5

E-Choupal to be installed:

million

20,000
Farmers to be e-empowered:
10 million

Through the E-Choupal initiative, ITC aims to confer the power of expert
knowledge on even the smallest individual farmer. Thus enhancing his
competitiveness in the global market.

5.4 WORKING OF E-CHOUPAL

The Big Picture:
ITCs International Business Division, one of Indias largest exporters of
agricultural commodities, has conceived E-Choupal as a more efficient
supply chain aimed at delivering value to its customers around the world on
a sustainable basis. The E-Choupal model has been specifically designed to
begin the challenges posed by the unique features of Indian agriculture,

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characterized by fragmented farms, weak infrastructure and the involvement

of numerous intermediaries.

The Value Chain - Farm to Factory Gate:

E-Choupal also unshackles the potential of Indian farmer who has been
trapped in a vicious cycle of low risk taking ability > low investment > low
productivity > weak market orientation > low value addition > low margin >
low risk taking ability. This made him and Indian agribusiness sector
globally uncompetitive, despite rich & abundant natural resources.
Such a market-led business model can enhance the competitiveness of
Indian agriculture and trigger a virtuous cycle of higher productivity, higher

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incomes, enlarged capacity for farmer risk management, larger investments

and higher quality and productivity.
Further, a growth in rural incomes will also unleash the latent demand for
industrial goods so necessary for the continued growth of the Indian
economy. This will create another virtuous cycle propelling the economy
into a higher growth trajectory.
The Model in Action:
Appreciating the imperative of intermediaries in the Indian context,
E-Choupal leverages Information Technology to virtually cluster all the
value chain participants, delivering the same benefits as vertical integration
does in mature agricultural economies like the USA.
E-Choupal makes use of the physical transmission capabilities of current
mediators aggregation, logistics, counter-party risk and bridge financing
while disintermediating them from the chain of information flow and market
signals.
With a careful merge of click & mortar capabilities, village internet kiosks
managed by farmers called sanchalak themselves,
enable

the

agricultural

community

access

ready

information in their local language on the weather &

market prices, disseminate knowledge on scientific farm practices & risk
management, facilitate the sale of farm inputs (now with fixed knowledge)
and purchase farm produce from the farmers doorsteps (decision making is
now information-based).

Real-time information and customized knowledge provided by E-Choupal

improve the ability of farmers to take decisions and align their farm output

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Rural Marketing

with market demand and secure quality & productivity. The aggregation of
the demand for farm inputs from individual farmers gives them access to
high quality inputs from established and reputed manufacturers at fair
prices. As a direct marketing channel, virtually linked to the mandi system
for price discovery, E-Choupal eliminates wasteful intermediation and
multiple handling. Thereby it significantly reduces transaction costs.
E-Choupal ensures world-class quality in delivering all these goods &
services through several product / service specific partnerships with the
leaders in the respective fields, in addition to ITCs own expertise. While the
farmers benefit through enhanced farm productivity and higher farm gate
prices, ITC benefits from the lower net cost of procurement (despite offering
better prices to the farmer) having eliminated costs in the supply chain that
do not add value.
The Status of Execution:
Launched in June 2000, 'E-Choupal', has already become the largest
initiative among all Internet-based interventions in rural India.
'E-Choupal' services today reach out to more than 3.5 million farmers
growing a range of crops - soyabean, coffee, wheat, rice, pulses, shrimp - in
over 31,000 villages through 5200 kiosks across seven states. The problems
encountered while setting up and managing these E-Choupal are primarily
of

infrastructural

inadequacies,

including

power

supply,

telecom

connectivity and bandwidth, apart from the challenge of imparting skills to

the first time internet users in remote and inaccessible areas of rural India.

50

Rural Marketing

As Indias Kissan Company, ITC has taken care to involve farmers in the
designing and management of the entire E-Choupal initiative. The active
participation of farmers in this rural initiative has created a sense of
ownership in the project among the farmers. They see the E-Choupal as the
new age cooperative for all practical purposes.
This enthusiastic response from farmers has encouraged ITC to plan for the
extension of the E-Choupal initiative to altogether 15 states across India
over the next few years. On the anvil are plans to channelize services related
to micro-credit, insurance, health and education through the same EChoupal infrastructure.
ITCs trail-blazing answer to these problems is the E-Choupal initiative; the
single-largest information technology-based intervention by a corporate
entity in rural India. Transforming the Indian farmer into a progressive
knowledge-seeking citizen. Enriching the farmer with knowledge; moving
him to a new order of empowerment.
E-Choupal delivers real-time information and modified knowledge to
improve the farmer's decision-making ability, thereby better aligning farm
output to market demands; securing better quality, productivity and
improved price discovery. The model helps total demand in the nature of an
effective producers' co-operative, in the process facilitating access to higher
quality farm inputs at lower costs for the farmer.
The E-Choupal initiative also creates a direct marketing channel,
eliminating wasteful intermediation and multiple handling, thus reducing
transaction costs and making logistics efficient. The E-Choupal project is
already benefiting over 3.5 million farmers. Over the next decade, the

E-

Choupal network will cover over 100,000 villages, representing 1/6th of

rural India, and create more than 10 million e-farmers.

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Rural Marketing

A Digital Transformation:
ITC began the silent e-evolution of rural India with Soya growers in the
villages of Madhya Pradesh. For the first time, the stereotype image of the
farmer on his bullock cart made way for the e-farmer, browsing the EChoupal website. Farmers now log on to the site through Internet kiosks in
their villages to order high quality agri-inputs, get information on best
farming practices, existing market prices for their crops at home and abroad
and the weather forecast all in the local language.
In the very first full season of E-Choupal operations in Madhya Pradesh,
Soya farmers sold nearly 50,000 tons of their produce through the
Soyachoupal Internet platform, which has more than doubled since then.
The result marks the beginning of a transparent and cost-effective marketing
channel. Bringing prosperity to the farmers' doorstep.
Linking Farmers to Remunerative Markets:
Farmers grow wheat across several agro-climatic zones, producing grains of
varying grades. Though these grades had the potential to meet diverse
consumer preferences, the benefit never trickled down to the farmers,
because all varieties were aggregated as one average quality in the mandis.
Enter ITC's E-Choupal intervention.
The E-Choupal site is now helping the farmers discover the best price for
their quality at the village itself. The site also provides farmers with
specialized knowledge for customizing their produce to the right consumer
segments. The new storage and handling system preserves the identity of
different varieties right through the 'farm-gate to dinner-plate' supply chain.
Encouraging the farmers to raise their quality standards and attract higher
prices.

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Rural Marketing

Livestock development services at the farmers doorstep:

Social & Farm Forestry

Agenda for the next

at a glance
Milestones

Decade

Commencement of

_________________

initiative: 1998
Area developed: 29,000

Area to be developed:

hectares

100,000 hectares

Saplings planted: 108

Saplings to be planted: 600

million

million

Number of beneficiaries

Potential beneficiaries

through additional

through

employment: 290,000

additional employment: 1.2

people

million people

ITC's Afforestation mission goes beyond regenerating wastelands and

forests. It

enhances

farm

incomes

and

generates

sustainable

employment.
ITCs afforestation project is driven by the realization that Indias poor
forest cover a meager 11% of the geographical area of the country against

53

Rural Marketing

a desirable 33% has serious implications for the rural poor. Forests and
common property resources constitute as much as 20% or more of the total
income source of such households. The main plan of ITCs forestry projects
is the building of grassroots capacities to initiate a virtuous cycle of
sustainable development.

ITC provides a comprehensive package of

support and extension services to farmers loans, land development,

planting of saplings, plantation maintenance, and marketing and funds
management.

6. PROJECT SHAKTI V/S E-CHOUPAL

6.1

Project Shakti

6.2

E-Choupal

6.3

Shakti v/s E-Choupal

6.1 PROJECT SHAKTI

I) Rural distribution:
Project Shakti is for the rural distribution of products of HUL it is an
activity which ease the marketing / distribution channel of

the HUL

products through the Rural market. It also generate / create awareness

among the Rural masses about the product varieties of HUL.
II) Process Based (FMCG):
The products here are processed in the factories and than passed to the
consumers i.e. Fast Moving Consumers Goods (FMCG). Shakti is a process
based i.e. consumers are getting the finished goods directly to consume that
to at the affordable price.

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Rural Marketing

III) Directly moves to final consumer:

In Shakti project rural women are targeted to market HULs products .So,
HUL through Shakti Project directly moves to the final consumers and there
is no middleman to interrupt the distribution chain and it also got the
success.
IV) Beneficial to rural population:
The project Shakti is very beneficial to the rural population as it creates
awareness among the rural women in their areas who knows all the In and
Outs of her home. So,
Indirectly whole

rural

population is benefited.
6.2 E-CHOUPAL
I) Procurement Orientation:
E-Choupal is projected towards the farmers, as they are helped through the
information, which they get from the sanchalak of the E-Choupal. In this
system grains and food items are purchased by ITC co. directly from the
farmers, as farmers are informed about all farming items like seeds,
pesticides etc. and they are suggested some productive crops etc.
II) Agro-based:
E-Choupal is totally agro based as ITC whole production system is based on
agricultural goods i.e. Tobacco, Cotton, Wheat, and Wood pulp etc. Hence
E-Choupal helps to get proper quantity and quality agro raw materials to its
Company.
III) Moving in both ways:
E-Choupal is the one way to create awareness among farmers

by giving

them all the latest farming techniques and all the recent agro research which

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Rural Marketing

are very useful to them .In this way it helps the consumers i.e. farmers and
In another way through E-Choupal the company is purchasing the food
grains for processing their finished goods.
IV) Beneficial to Farmers:
E-Choupal has the dual reachness as it helps the farmers by giving them
information about the hybrid seeds and fertilizers and farming techniques
and also how to increase the productivity on the other hand. It also helps
farmers by giving them information about the standard rates of food grains
among the mandis in India. Hence, E-Choupal is very beneficial to the
farmers.
6.3 SHAKTI V/S E-CHOUPAL

V/S

ITC and HUL are the top shots of the Indian FMCG industry both of them
have variety of products and are at a saturation point with their products in
urban areas now they have shifted towards the huge untapped rural area
both of them have come up with a project to capture the rural mass land.
The project Shakti started by HUL and E- choupal by ITC. E-Choupal and
Project Shakti are locked in a fascinating race to pry open India's rural
heartland. The real India, they say, lives in the villages - 638,365 villages, to
be precise. This is where the fortunes of many of India's biggest
corporations are likely to be shaped. ITC's E-Choupal and HUL's Project
Shakti is significant. For the uninitiated, Project Shakti is HUL's smart way
to use self-help groups to directly cater to 1 million homes every month in
villages where traditional distribution systems cannot hope to enter. E-

56

Rural Marketing

Choupal is ITC's much-feted business model to build a trading platform

with rural India that already touches 3 million farmers.
Over the years, HUL has defined what competitive marketing is all about.
Its distribution system has been the envy of every other marketing
organization in the country. Lever House in downtown Mumbai has been
Corporate India's unofficial University of CEOs, making it one of the most
powerful corporate alumni networks in the country. Project Shakti today
covers 60,000 villages across 12 states. It provides livelihood to 13,500
Shakti dealers, almost all of them poor women. By this year-end, it will
have another 11,500 women entrepreneurs hawking Lever products to
village folk.
The project now contributes a little more than Rs 100 crores to the Lever
topline, and is yet to break even. By the next year-end, HUL believes
Shakti's contribution could double and the project could achieve cash breakeven.
Then there's ITC's E-Choupal. It's the second largest agri products exporter
from India. Thanks to its 5,050 Choupal across six states, the company
sources agri products worth almost Rs 850 crore from 31 lakh farmers. By
2010, it plans to extend coverage to 1.1 crore farmers across 1 lakh villages
in 15 states. But ITC is now looking beyond mere procurement - it has
begun using its network of Choupal and warehouses for a two-way trading
process that takes products and services to the farmers. By next March, it
hopes to build 30 Choupal Sagars, its large rural shopping complexes replete
with supermarket, petrol pump, bank, healthcare and training facilities, and
more.
In 1999, as a part of Project Millennium, HUL invited suggestions from
employees on how it could keep growing. Ideas that came in were put into
several buckets. One of them was loosely termed as 'rural'. Someone

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Rural Marketing

suggested looking at alternative channels such as the one used by Grameen

Bank in Bangladesh. There, the micro-credit body had boosted savings
among poor women through self-help groups (SHGs), and then helped them
convert those savings into micro-enterprises.
It was an idea whose time had come. The SHG movement had been
gathering momentum in India. At the same time, despite being the largest
consumer product marketer, HUL's much-admired distribution machinery
was directly servicing less than a fifth of India's villages. This was the
fallout of uneconomical last-mile logistics. The business generated by
retailers in these half a million villages was less than that incurred by the
company to service them. That meant Lever could not reach out to nearly 87
per cent of India's villages, which have a population of 2,000 or less.
Retailers in these villages relied on the wholesale channel - easily one of the
most cost-effective mass distribution systems. So products did get through,
but only fast-moving brands like Life buoy. Without a direct distribution
system in place, Lever knew that only a handful of its brands would reach
rural shop shelves. Could a new delivery channel be developed around
SHGs? It was an idea no one had tried before.
In contrast, E-Choupal was the child of desperate brainstorming. In 1999,
ITC was on the verge of closing its international business division (IBD).
While sourcing Soya in Madhya Pradesh, the IBD team used to see farmers
lug their produce in trailers to the local mandi. Then, ITC would buy the
produce from the mandi and bring it to its processing hub. Not only did ITC
end up paying each intermediary at the mandi, but the farmers also got
cheated at the mandi. The insight for the E-Choupal idea came from a need
to re-engineer this supply chain so that both the farmer and ITC gained.
HUL outsourced almost all the groundwork to partners like Mart, a rural
marketing consultancy. They negotiated with state governments, local
micro-credit organisations, and SHGs. ITC, on the other hand, did the

58

Rural Marketing

spadework itself and decided to test its model at the large Soya-producing
belt in Madhya Pradesh.
The results, too, were remarkably different: HUL ended up with a model
that followed a linear, hierarchical approach, while ITC chose a more
unconventional and complex format. The roles of the key participants in the
two models were sharply different. HUL entered Nalgonda with a simple
plan - to sell through SHGs. It would train their members in selling. Sell
them its merchandise. And then, the members would recoup their
investments by selling to their fellow villagers, and possibly to 3-4 nearby
villages. In the first phase, it started with 100.
ITC also went for a local representative. It would appoint a farmer as the
sanchalak for a clutch of villages. By making a local the face of the
company, ITC could easily build credibility. An Internet kiosk - with a PC, a
VSAT connection and a printer - would be set up at the sanchalak home.
Everyday, ITC would transmit the prevailing mandi prices and the price at
which it would buy Soya at its nearby processing hub to the sanchalak via
the Internet. Instead of being forced to travel all the way to the mandi for
finding out the price, the farmers now had a choice: sell their produce to the
mandi or ITC, or hold till prices improved.

Farmers at ITC's hub in Hardoi being briefed about insurance. Notice the
Philips ad - the company is riding the E-Choupal network to sell its own
wares. So, at ITC, the sanchalak was the critical person who would have to
figure out what the community needed. But how was he an active

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Rural Marketing

participant? Well, he would not make any money disseminating all the
information. He would make money only when there were transactions. This
ensured that the sanchalak would keep ITC on its toes. He would say:
"Unless you deliver value in my village, I won't make any money."
To ensure that these ideas spread from sanchalak to sanchalak, ITC
organized regular community gatherings. In contrast, HUL had no formal
mechanism for spotting ideas from ground up. ITC was also testing the
robustness of its sourcing business by running small pilots in three different
parts of the country, in commodities as diverse as coffee, aqua and Soya. To
make it work, the company's employees sometimes had to even beef up the
local telecom infrastructure on their own.

60

Rural Marketing

The two firms had different comfort levels with uncertainty. HUL wanted to
see the proof of a concept that would be sustainable and scalable across
India. So, for two years, the new business team at Nalgonda fine-tuned the
model to reach those goals. In contrast, the team at ITC was willing to roll
out a model once they felt they had got 60 per cent of it right. So, while ITC
was going though the paces of failure and success, HUL stayed in Nalgonda.
The Nalgonda project's beginning was unnerving. Half of the 100 women
who signed up quit in the first six months. Most were not used to running
businesses. A former HUL employee who worked on the Nalgonda pilot
remembers, the women were unwilling to sell to their fellow villagers at a
profit.

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Rural Marketing

Six months down the line, the company sharpened its hiring strategy. At
first, Shakti had attracted lots of women, who were keen but couldn't
commit enough time. So HUL began to screen them out.
Also, when the project was test-launched, it was not clear if Project Shakti
would work as a retail distribution model or a home-to-home one.
According to the former idea, each village would have 2-3 retail outlets, so
between five villages there would be about 10-15 outlets. Over time, HUL
realized that a combination of the two approaches would work better. So the
women, guided by the company representative (called rural sales promoters,
or RSPs), would sell both door-to-door (at MRP) as well as to retailers (at a
discount typically given out by distributors). They would pocket different
margins for each different sale. The shopkeepers didn't feel threatened
because these women weren't undercutting the MRP; also, the stocks would
come to their doorstep.
The company gained too. Earlier, retailers used to stock only the faster
moving items like Lifebuoy and Rexona; now, by going home to home,

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Rural Marketing

HUL could ensure that a larger range was stocked. By the end of 2002, the
company had a model that would work in villages with a population over
1,000. With that knowledge, it began scaling up. By the end of this year, the
company will have 25,000 Shakti dealers.
Three years ago, the company was present in 100,000 villages. By the end
of 2005, it will be in another 100,000 villages. In another five years, it will
be in another 100,000. This is perhaps the biggest increase in HUL's
coverage in the last many decades."
Now, ITC began hiring for E-Choupal, it picked up graduates from the
agricultural colleges, knowing that they would be less likely to shun rural
India. After Madhya Pradesh, ITC took E-Choupal to Uttar Pradesh. Now,
it's opening 6-7 new Choupal a day. But the process was anything but
smooth when it began.
It is in this regard, ITC's E-Choupal scores over HUL's Project Shakti. ITC
employs both pull and push strategy. The push strategy that ITC adopts is
the plan to introduce healthcare products to the rural market.
The pull strategy is that the farmers can get the required information about
the global market at any time (This has been facilitated by the introduction
of E-Choupal).
ITC procures crops from the rural farmers besides providing market
information to the rural people so that, both the parties have a win-win
situation. Whereas HUL's Project Shakti adopted the push strategy alone by
reinventing their distribution in rural areas. It does not seem to have any
proposal to improve the purchasing power of the rural people.
One of the specialties of ITC's E-Choupal is that the middlemen's role has
been redefined as the consumer friendly middlemen. It is this person, who
explains the information provided by the kiosks to the rural illiterate tech

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Rural Marketing

averse farmers. Thus, ITC has taken the advantage of trust, which the
middleman has in their traditional trading.
ITC's E-Choupal has raised the rural people's purchasing power to an extent
possible with re-intermediation of jobs. This can be understood from the
following table: Cost Incurred by the Farmer
Cost
Trolley Freight
Labour
Middlemen
Handling Loss
Total

Traditional (Mandi)
120
50
150
50
370

E-Choupal
120
Nil
Nil
Nil
120

Cost Incurred by the Processor

Cost
Commission
Gunny Bags
Freight to factory
Storage
Disbursement Cost
Total

Traditional (Mandi)
100
75
120
40
Nil
335

E-Choupal
50
75
Nil
40
50
215

In the final reckoning, both companies have managed to create a chain that
goes all the way down to village communities. The challenge now is to
leverage this better.

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Rural Marketing

7. HUL AND ITC FOR RURAL INDIA

AND

As prosperity visits rural India, incomes keep rising compelling

companies to refocus their marketing strategies.

For quite some time now, the lure of rural India been the subject of animated
discussion in corporate suites. And with good reason too. With urban
markets getting saturated for several categories of consumer goods and with
rising rural incomes, marketing executives are fanning out and discovering
the strengths of the large rural markets as they try to enlarge their markets.
Today, the idea has grown out of its infancy and dominates discussions in
any corporate boardroom strategy session.

65

Rural Marketing

A survey by the National Council for Applied Economic Research, India's

premier economic research entity, recently confirmed that rise in rural
incomes is keeping pace with urban incomes. From 55 to 58 per cent of the
average urban income in 1994-95, the average rural income has gone up to
63 to 64 per cent by 2001-02 and touched almost 66 per cent in 2004-05.
The rural middle class is growing at 12 per cent against the 13 per cent
growth of its urban counterpart.
Higher rural incomes have meant larger markets. Already, the rural tilt is
beginning to show. A study by the Chennai-based Francis Kanoi Marketing
Planning Services says that the rural market for FMCG is worth $14.4
billion, far ahead of the market for tractors and agri-inputs, which is
estimated at $10 billion.
Rural India also accounts for sales of $1.7 billion for cars, scooters and
bikes and over one billion dollars of durables. In total, that represents a
market worth a whopping $27 billion.
Hindustan Lever Ltd, the $2.3 billion Indian subsidiary of Unilever, the
country's largest FMCG Company, has also got on the bandwagon. It's
Project Shakti uses self-help groups across the country to push Lever
products deeper into the hinterland. Its four-pronged programme creates
income-generating capabilities for underprivileged rural women; improves
rural quality of life by spreading awareness of best practices in health and
hygiene; empowers the rural community by creating access to relevant
information through community portals and it also works with NGOs to
spread literacy.
There are currently over 15,000 Shakti entrepreneurs, most of them women,
in 61,400 villages across 12 states. By the end of 2010, Shakti aims to have
100,000 Shakti entrepreneurs covering 500,000 of Indias 640,000 villages,
touching the lives of over 600 million people. With such an emphasis on

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Rural Marketing

rural marketing, consumption patterns are changing and it signals a change

in the regulatory environment. Vertical integration of the food market from
farm to firm to fork becomes the best way to achieve efficiency and serve
the interest of every stakeholder in the chain the farmer, the processor,
the retailer and the consumer.
The idea of E-choupal, a rural initiative by ITC, has been termed path
breaking. In 1999, S Sivakumar, head of the ITC's agri-business division,
approached ITC chairman, Yogesh Deveshwar, for a $115,000 grant to test
an idea. Sivakumar and his team, while sourcing Soya in Madhya Pradesh,
had watched farmers lug their produce in trailers to local daily markets,
often to sell the produce even if the price wasn't attractive.
ITC used to buy the Soya from intermediaries and bring it to their hubs. Not
only did ITC end up paying more but also the farmers got less. Sivakumar
felt that there was a need to re-engineer this supply chain so that both the
farmers and ITC gained. The solution, he felt, lay in information and
communication technology.
Today, ITC's e-choupal network has reached over 3.5 million farmers and is
expanding into 30 villages a day, making it one of rural India's most
ambitious horizon-widening initiatives. Choupal is the Hindi word for the
village square (normally under a tree), where elders meet to discuss matters
of importance.
'E' stands for a computer with an Internet connection and is the farmer's
window to the world outside his village.
ITC installs a computer with a VSAT Internet connection in selected
villages. A local educated farmer called sanchalak, or conductor, operates
the computer on behalf of ITC. He is not paid for his services but gets a
commission on all transactions. At the e-choupal, farmers are offered
services like daily weather forecasts and price of various crops in the local

67

Rural Marketing

market free of cost. They can download information about farming methods
specific to each crop and region through an arrangement with agriculture
universities. They can buy seeds, fertilizers, pesticides and even bicycles,
tractor and insurance policies. Over 35 companies currently sell their
products through the network.
Malls are also on the agenda of ITC, which has its chain of retail outlets for
its apparel line Wills Lifestyle. It plans to set up almost 200 of them by 2010
in various formats and with merchandise assortments designed for local
preferences. These malls will act as a hub for both branded and locally
produced goods, entertainment options, education, and healthcare and farm
advisories.
The malls will also generate rural employment. ITC's rural malls will be
called Choupal Sagars an extension of its famed e-choupal project. By
March 2006, the company hopes to get 30 Choupal Sagars going, replete
with shopping complexes, petrol pump, healthcare, training facilities and
more.
ITC's zeal reflects the dominant trend in corporate India to enter every area
from contract farming to rural malls, seed research to medicinal plants and
food processing to fruit exports. There is a growing perception that such is
the scope of rural markets that what has been done so far amounts to
scratching the surface. After all, as they say, India lives in its villages
638,356 villages, to be precise. It appears that the fortunes of India's largest
corporations, and several MNCs, are about to be shaped there.

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8. SWOT ANALYSIS

STRENGHTS: Cheap Labour Cost

Human Resources are plenty
Not tapped by the Corporates
Agriculture- Main Occupation
Large number of consumers

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Large number of producers

Diverse agro climate conditions
WEAKNESSES: Information asymmetry
Low literacy rate
Low purchasing power
Inadequate infrastructure
Lack of Internet Connectivity
High cost and non availability of Credit
Fragmented land holdings
OPPORTUNITIES: Untapped Resources
Technology Advancement
Enabling rural people to participate in global market
Can generate more employment opportunities
Near absence of rural industries
Low cost of production
Existence of Reference groups
THREATS: Rural peoples perception towards technology
Integration of scattered population
Closer to mother nature
Conservative society
Migration to urban areas
Different languages
Politization of rural society

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Rural Marketing

The future lies with those companies who see the poor as
their customers.

9. SURVEY REPORT ON RURAL MARKETS

In todays marketing situation marketing of the products is very difficult in
the rural areas. It is a very challenging task for the companies to market
their products in rural areas.
For knowing better about the rural markets, I went through a survey at Neral
that is 35-40 kms from Ulhasnagar and is developing slowly and gradually.
My main aim for having a survey in a rural area was to know about the
reasons that contribute to the improvement of economic growth and
enhancement of agricultural income so as to reduce poverty in the rural
areas.
As I had to make a project on the two companies i.e. HUL and ITC, I
inquired much about their marketing strategies and their development
policies followed in that area. For this purpose I interviewed many Retailers
and their Customers to know clearly in what ways HUL and ITC are helping
them to live a better and comfortable life.

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Rural Marketing

HUL and ITC have made a successful approach in designing the networking
for the distribution or marketing of their products in this rural area i.e.
Neral.
Neral has quite a large population and hence the demand of rural market is
higher than urban markets. As a result of this both the companies adopt
different strategies to increase their market share in the rural area. So there
is a huge potential which will be very profitable to both these companies. As
from the analysis point of view I observed that at each and every stage both
HUL and ITC try to empower rural population.

HUL AND ITC IN NERAL

After the collection of information from about 50 people in Neral, I have
classified all the information as per the 4 Ps of Marketing i.e. Product, Price,
Promotion and People.
PRODUCT: Neral being a rural area does not have a large variety of products as in the
urban markets. The people in Neral buy any product looking after its quality
and price. Most of the people here do not stick to a particular brand of
product but keep on changing with the entrance of new brands and with a
price, which is suitable for them. Very less number of people in Neral are
brand loyal and use every product of a particular brand. A large number of
people here use the products of HUL and ITC and consider them the best of
the products as compared to the other local brands.
Following is the list of some of the products of HUL and ITC that are
consumed by the people in Neral:
PRODUCTS OF HUL
Surf

PRODUCTS OF ITC
Staples like Aashirvaad Atta

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Rural Marketing

Sun Silk Shampoo

Soaps like Lifebuoy, Lux,

Biscuits like Sunfeast

Cigarettes

Hamam, Pears
Taj Tea and Bru Coffee
Kwality Walls Ice-cream
Toothpastes like Close-up,

Notebooks
Candies like Mint-O
Mangaldeep Agarbattis

Pepsodent
Jams Like Kissan
Branded Staples Like

Mangaldeep Safety Matches

Annapurna Atta
Tomato-based products like
Kissan Sauce
PRICE: The people in Neral are price-conscious. Most of the people buy the
products that have a low price without considering its brand. Here there are
also people who buy products considering its quality along with a low price.
The products of HUL and ITC have a good volume of sale but only small
packs or sachets, as they are priced low as compared to large packs.
As most of the products of HUL and ITC are products of routine use, the
people in Neral are ready to pay prices for such products because those
products fulfill the basic needs of people. Keeping this in mind, HUL has
launched its products at a very reasonable price, which is affordable for
every consumer in the rural area.

PROMOTION: In Neral, the young and the educated are large in number and hence they are
the decision makers as they get an exposure, attitudes and aspirations from
their counterparts in the urban areas. This helps the two companies- HUL
and ITC to increase its sales through promotion of their products.

HUL had sent a van to show the demonstrations of its products like
detergents, which attracted a large mass of people and got a jump in the sale
of those products.

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There are many posters and wall paintings of the products of HUL and ITC
in Neral. Looking at them, many people buy their products at least once and
they become the regular users of that product.

The people also find many schemes offered by these two companies like
one on one free, buy two get one free, soap free with a pack of surf and
many more.

The media also influences people and they buy many products after looking
at the advertisements in television.
PEOPLE: -

SOURCE OF
INCOME

PERCENTAGE OF
PEOPLE

AGRICULTURE
SERVICE
BUSINESS

40 %
50 %
10 %

About 40% of the people in Neral get their income from agriculture. These
people have their income not more than Rs. 2,000 per month. Among these,
many people have their farms in different parts of Maharashtra while many
have their farms nearby Neral. 50% of the people are working people and
their income if from Rs. 10,000 to 20,000. The other 10% of the people are
having their own businesses in or outside Neral.
PLACE: Neral being a rural area is totally different from the urban areas. It has
comparatively a very smaller area as compared to any urban place. Neral
has some urban places nearby so it is a place accessible for availability of
transport, communication, electricity and other necessary facilities. Due to
all the above factors, HUL and ITC are able to reach their products to this
place and are helping the people to improve their standard of living.
PROCESS: -

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The process here involves buying and selling of the goods or products to the
people of Neral. The retailers get their goods from the wholesalers or
manufacturers. They stock these goods in their shops, etc. and ultimately
sell them to the final consumer or buyer. These consumers or buyers
exchange money with those retailers in accordance of their products they
buy. Some of the retailers or shopkeepers also allow credit to their
customers but only upto a certain limit. Finally the retailers earn profits
from the rural customers.
PHYSICAL EVIDENCE: The physical evidences that work out in Neral are Logos, Symbols,
Attractive Brand Names, Posters, Wall paintings, Packaging of the products,
etc. These are the things that largely attract the people in Neral to buy any
product. Though not many people are educated here, but the uneducated
people are also influenced with the logos of the companies, paintings of any
product on the walls, etc.
In order to improve the profitability of the company, HUL has attractive
packaging of its products to attract many consumers for buying those
products.

My views on the survey

With all this, the people in Neral are happy with the companies- HUL
and ITC as these companies satisfy them with the price and the quality
of its products.
Overall the markets in Neral are growing at a good rate thus
improving the standard of living of the people.
Very soon Neral will be called as an urban market as many new
companies are coming up and many people from urban markets are
also encouraging their businesses in this market viewing for a large
potential of growth.

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The two giants HUL and ITC will soon be in the hearts of the people
as they are working hard in spreading their branches to each and every
rural market in India.

10. CONCLUSION
Here the rain gods still play havoc with ones dreams. The dusty village path
winds past a cluster of slumbering cottages and leads one to a weekly rural
bazaar or haats, brimming over with din, bustle and transaction. This is
where the real India resides.
But things are changing fast now. Thanks to the increasing literacy level and
media explosion, people are becoming conscious about their lifestyles and
about their rights to live a better life. Brand consciousness is on the rise.
This, clubbed with increasing disposable income of rural households, has
made the rural consumer more demanding and choosier in his purchase
behaviour than ever before. And the dusky village damsel has now learned
to pine for a satin rose.
The rural India offers a tremendous market potential. A mere one percent
increase in Indias rural income translates to a mind-boggling Rs 10,000
crores of buying power. Nearly two-thirds of all middle-income households
in the country are in rural India. And close to half of Indias buying potential
lies in its villages. Thus for the countrys marketers, small and big, rural
reach is on the rise and is fast becoming their most important route to
growth. Realizing this Corporate India is now investing a sizeable chunk of
its marketing budget to target the rural consumers.

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Rural marketing is a different ballgame altogether. Companies that are keen

to enter rural markets should think twice about their rural marketing
strategies. Dumping failed urban products in rural markets can hamper a
companys long-term growth prospects. Patience, a thorough understanding
of rural markets and a systematic approach are necessary to penetrate rural
markets. Last, but not the least, companies should,
EXPLORE THE RURAL MARKETS, DO NOT EXPLOIT THEM.

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