A PROJECT REPORT ON Rural Development

SUBMITTED BY: Chawla Deepak Jagdish (65) Rohit Gupta(21) Kashyap Pandya(78)

Submitted To: Mr Baxis Patel

NAVNIRMAN INSTITUTE OF MANAGEMENT (NIM) Bharthana, Surat.

Academic Year 2010-2011

Meaning of Rural Marketing:

Rural marketing is promotion of a company's products in the rural market buy using strategies which differs from that of urban market, the rural market is more price sensitive but it has preference for quality.

Significance Of Rural Marketing:

1. Growing Population:
India Rural marketing is indeed a large one. It consists of more than 740 million Indians , forming 73% of Indians Population in rural areas , according to census 2001. The rate of increase of rural population is higher than that of urban population. The number of rural household is in excess of 120 million and accounts for over 70% of total household in India. In urban areas the demand is limited to just 3200 cities and town and the rural market demand is highly scatteres in pur country.

2. Market size:
The size of India rural market stated as 12.2% of the percentage of world population. This means 12.2% world consumer leaves in rural India. In India , rural household form 72% of the total population and this constitutes of a large market.

3. Increasing Income:
The growing opportunity in the rural market in no doubt the prime factor. The increased income or Purchasing power of the consumer and the improved income distribution have enhanced rural demand for several product. Better access to many modern product has added to this growth.

4. Current Consumption:
The purchase and consumption of certain durables and non durables by consumer in rural areas is more than in urban areas.

5. Accessibility Of Market:
The attractiveness and sustainability of a market depends upon its accessibility. The road network has considerably increased in last 30/40 years. Some states like Gujarat almost 95% of the villages and towns are connected by roads. Therefore delivery and maintenance of stock of goods in interior rural areas is not a problem.

6. Change In Rural Consumer Behavior :

The rural consumer are marked by a conservative and tradition bound lifestyle. But , what is striking today about this is not the basic characteristic , but the fact that the lifestyle is undergoing a significant change. The life style of a sizeable segment of rural consumer has already changed significantly in recent years, and that of a much larger segment is currently going through the process of change.

7. Competition In Urban Areas:

The competition for market share , sale , profit etc in the urban market is driving many companies to look beyond the urban market which has been their activity areas for least few decades. The costs have been increased and profits are reduced . In Such a situation , rural market is becoming more remunerative and profitable.

Key Decision Area In Rural Marketing:

1. Rural Marketing Segmentation:
A marketer has certain important sources of data available and can consider several variables to segment those markets. There are no hard and fast rules regarding what variable to choose . The following variable seem to be relevant o most of the rural areas in India and can be considered in determining the different market segments:  Geographical Location  Population Density  Gender and age  Occupation  Income levels  Social-cultural consideration  Lifestyle etc Other than the conventional methods of segmentation , we can also use few more variables as:  Land Holding Pattern  Irrigation facilities  Cropping pattern  Education level  Proximity to cities  Occupation categories

2. Product Plannig:
Companies have to consider whether the existing successful products available in the urban areas can br marketed in rural market without any modification . It is advisable for companies first to determine what consumer in rural markets need and want and then select product from available ones. Product Specification like design , price and durability should be in accordance with the needs of the rural masses.

3. Pricing Decision:
The rural consumer in general is price sensitive and value conscious. Apparently this has to do with the income level of most of the consumer. The marketer will have to examine the ways to make the product affordable to a large number of consumers In the rural market. Incase of a large number of non-durable consumer product, it is possible to design a smaller pack size.

4. Distribution strategy:
It is well known that transportation infrastructure in most part of the rural India is in poor shape. Though our country has the third largest system of railway in the world, many parts of rural India remain outside the rail network. Nearly 50% of the five lakh seventy thousand villages in our country have no proper roads. While some inprovements are taking place on account of various road development programmes.

5. Promotion:
The masses in rural areas are highly traditional with high regards and compliance for deep rooted customs. We have seen the rate of literacy among rural consumers is low and this drawback limits the use of printed words, communicating the message to rural consumers has posed enormous problem due to diversity distance and dis-integrated rural market.

6. Communication and personnel selling:

Rural customers have poor literacy level, the scope for using print media, magazine, newspaper etc. is not viable. The situation is further compounded by the linguistic diversity. In the urban areas marketing communication can be managed by and large with English and Hindi, but marketing communication in rural areas has to be necessary to be managed in local language.

Typical problems encountered in rural marketing:

1. Large Market:
The rural market of India consists of India consists of 60,00,00,000 consumers. It is a big market having considerable potential as it is still partially tapped. Even it is offering a market worth Rs. 20,000 crores per year as present .

2. Scattered market:
The rural markets are widely scattered covering about 5.6 lac of villages spread over the entire length and breadth of India.

3. Seasonal and irregular demand:

Not only the rural market is very large and very widely scattered but the demand is also seasonal because the rural demand is very closely associated with farming.

4. Economic and social backwardness:

Average per capita income and purchasing power is very low though gradually growing. Literacy is also low. The village life is still governed by customs and traditions though it is slowly being exposed to modernism. We have also to face diversity related to languages, customs and culture.

5. Special problem in marketing:

We have already noted that the marketing of goods in rural India is a big challenge to marketers. There are special problem in rural marketing: Problem in physical distribution  Problem of distribution channel  Problem of promotion and marketing communication  Problem of sell force management

4 PS In Rural Marketing:
1. Product Strategy:
The rural marketing is conscious for getting value for money. Low price high quality and multiple uses is the basic principles rural product desigh.

Case : LG sampoorna TV
LG electronics launched a customized TV sampoorna. A more important aspect of customization is to make TV set which ca appeal to local needs, it facilitated on screen display in vernacular language like hindi, tamil and Bengali selling 1,00,000 sets in very first year.

Strategy: Thinking Locally, Succeeding Globally

2. Price Strategy:
Rural marketing are low price high volume growth markets. The rural markets being intensily price sensitive in comparison to urban area , reaching at lower cost is a major challenge.

Case: Mc Donalds
The Indians Customer seek high value for evry rupee spent, so Mc Donalds has been highlighting the Happy Price Menu Rs 20 to shackle entry barriers appeal to India Customer.

Strategy: Highlighting The Value Being Delivered For A Small Price

3. Promotion Strategy:
The challenge is to create communication that would help the rural consumer in recognizing brands , logos, visuals and colors. To effectively tap the rural markets , a brand must associate with their culture and personality.

Case: Idea Cellular:

Ideas aggressive promotion campaigns What An Idea Sirjee ad creates a real rural feel came through strong advertisement .

Strategy: Spreading a social message Each One Has Aimed At The Changing
Someones Life For Better

4. Distribution Strategy:
Plannig physical distribution , managing logistics and controlling marketing communication are major inpediments for entering rural market. The distribution structure involves stock points in feeder town to service these retail outlets at the village levels.

Case: Coca Cola:

Coca Cola is a pioneer company in distribution network . Coca-Cola has envolved a hub and spoke distribution model for effectively reaching and serving rural markets. Coca Cola provides low-cost ice boxes to the small distributors in rural areas because of the lack of the electricity. In this marketing strategy a wake up call for cokes rural focus.

Strategy: Coke Is Available Where , Even Water Is Not Available

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Rural Marketing in India Economy:

The concept of Rural Marketing in India Economy has always played an influential role in the lives of people. In India, leaving out a few metropolitan cities, all the districts and industrial townships are connected with rural markets. The rural market in India is not a separate entity in itself and it is highly influenced by the sociological and behavioral factors operating in the country. The rural population in India accounts for around 627 million, which is exactly 74.3 percent of the total population.

The Registrars of Companies in different states chiefly manage: The rural market in India brings in bigger revenues in the country, as the rural regions comprise of the maximum consumers in this country. The rural market in Indian economy generates almost more than half of the country's income. Rural marketing in Indian economy can be classified under two broad categories. These are:
y y

The market for consumer goods that comprise of both durable and non-durable goods The market for agricultural inputs that include fertilizers, pesticides, seeds, and so on

The concept of rural marketing in India is often been found to form ambiguity in the minds of people who think rural marketing is all about agricultural marketing. However, rural marketing determines the carrying out of business activities bringing in the flow of goods from urban sectors to the rural regions of the country as well as the marketing of various products manufactured by the non-agricultural workers from rural to urban areas. To be precise, Rural Marketing in India Economy covers two broad sections, namely:
y y

Selling of agricultural items in the urban areas Selling of manufactured products in the rural regions

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Some of the important features or characteristics of Rural Marketing in India Economy are being listed below:
y

With the initiation of various rural development programmes there have been an upsurge of employment opportunities for the rural poor. One of the biggest cause behind the steady growth of rural market is that it is not exploited and also yet to be explored.

The rural market in India is vast and scattered and offers a plethora of opportunities in comparison to the urban sector. It covers the maximum population and regions and thereby, the maximum number of consumers.

The social status of the rural regions is precarious as the income level and literacy is extremely low along with the range of traditional values and superstitious beliefs that have always been a major impediment in the progression of this sector.

The steps taken by the Government of India to initiate proper irrigation, infrastructural developments, prevention of flood, grants for fertilizers, and various schemes to cut down the poverty line have improved the condition of the rural masses.

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Coca Cola India's Thirst for the Rural Market: 'Thanda' Goes Rural

In early 2002, Coca-Cola India (CCI) (Refer Exhibit I for information about CCI) launched a new advertisement campaign featuring leading bollywood actor - Aamir Khan. The advertisement with the tag line - 'Thanda MatlabCoca-Cola' was targeted at rural and semiurban consumers. According to company sources, the idea was to position Coca-Cola as a generic brand for cold drinks. The campaign was launched to support CCI's rural marketing initiatives. CCI began focusing on the rural market in the early 2000s in order to increase volumes. This decision was not surprising, given the huge size of the untapped rural market in India (Refer Exhibit II to learn about the rural market in India).

With flat sales in the urban areas, it was clear that CCI would have to shift its focus to the rural market. Nantoo Banerjee, spokeswoman - CCI, said, "The real market in India is in the rural areas. If you can crack it, there is tremendous potential." However, the poor rural infrastructure and consumption habits that are very different from those of urban people were two major obstacles to cracking the rural market for CCI. Because of the erratic power supply most grocers in rural areas did not stock cold drinks. Also, people in rural areas had a preference for traditional cold beverages such as 'lassi' and lemon juice. Further, the price of the beverage was also a major factor for the rural consumer. CCI's Rural Marketing Strategy:

CCI's rural marketing strategy was based on three A's - Availability, Affordability and Acceptability. The first 'A' - Availability emphasized on the availability of the product to the customer; the second 'A' - Affordability focused on product pricing, and the third 'A'Acceptability focused on convincing the customer to buy the product.

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Availability Once CCI entered the rural market, it focused on strengthening its distribution network there. It realized that the centralized distribution system used by the company in the urban areas would not be suitable for rural areas. In the centralized distribution system, the product was transported directly from the bottling plants to retailers. However, CCI realized that this distribution system would not work in rural markets, as taking stock directly from bottling plants to retail stores would be very costly due to the long distances to be covered. The company instead opted for a hub and spoke distribution system. Under the hub and spoke distribution system, stock was transported from the bottling plants to hubs and then from hubs, the stock was transported to spokes which were situated in small towns. These spokes fed the retailers catering to the demand in rural areas.

CCI not only changed its distribution model, it also changed the type of vehicles used for transportation. The company used large trucks for transporting stock from bottling plants to hubs and medium commercial vehicles transported the stock from the hubs to spokes.

For transporting stock from spokes to village retailers the company utilized auto rickshaws and cycles. Commenting on the transportation of stock in rural markets, a company spokesperson said, "We use all possible means of transport that range from trucks, auto rickshaws, cycle rickshaws and hand carts to even camel carts in Rajasthan and mules in the hilly areas, to cart our products from the nearest hub." In late 2002, CCI made an additional investment of Rs 7 million (Rs 5 million from the company and Rs 2 million from the company's bottlers) to meet rural demand.

By March 2003, the company had added 25 production lines and doubled its glass and PET bottle capacity. Further it also distributed around 2,00,000 refrigerators to its rural retailers. It also purchased 5,000 new trucks and auto rickshaws for boosting its rural distribution. Through its rural distribution initiatives, CCI was able to increase its presence in rural areas from a coverage of 81,383 villages in 2001 to 1,58,342 villages in August 2003. Apart from strengthening its distribution network, CCI also focused on pricing in rural market.
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Affordability A survey conducted by CCI in 2001 revealed that 300 ml bottles were not popular with rural and semi-urban residents where two persons often shared a 300 ml bottle. It was also found that the price of Rs10/- per bottle was considered too high by rural consumers. For these reasons, CCI decided to make some changes in the size of its bottles and pricing to win over consumers in the rural market.

In 2002, CCI launched 200 ml bottles (Chota Coke) priced at Rs 5. CCI announced that it would push the 200 ml bottles more in rural areas, as the rural market was very pricesensitive. It was widely felt that the 200 ml bottles priced at Rs. 5 would increase the rate of consumption in rural India. Reports put the annual per capita consumption of bottled beverages in rural areas at one bottle as compared to 6 bottles in urban areas. The 200 ml bottles priced at Rs. 5 would also make CCI competitive against local brands in the unorganized sector. It was reported that in the states of Rajasthan and Gujarat the local cola brands such as Choice and Tikli cost only half the price offered by CCI, which gave them the advantage in garnering the major market share before CCI came out with Chota Coke. CCI also targeted the rural consumer aggressively in its marketing campaigns, which were aimed at increasing awareness of its brands in rural areas.

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Acceptability The initiatives of CCI in distribution and pricing were supported by extensive marketing in the mass media as well as through outdoor advertising. The company put up hoardings in villages and painted the name Coca Cola on the compounds of the residences in the villages. Further, CCI also participated in the weekly mandies by setting up temporary retail outlets, and also took part in the annual haats and fairs - major sources of business activity and entertainment in rural India.

CCI also launched television commercials (TVCs) targeted at rural consumers. In order to reach more rural consumers, CCI increased its ad-spend on Doordarshan. The company ensured that all its rural marketing initiatives were well-supported by TVCs. When CCI launched Chota Coke in 2002 priced at Rs. 5, it bought out a commercial featuring Bollywood actor Aamir Khan to communicate the message of the price cut and the launch of 200 ml bottles to the rural consumers. The commercial was shot in a rural setting. In the summer of 2003, CCI came up with a new commercial featuring Aamir Khan, to further strengthen the Coca-Cola brand image among rural consumers. The commercial aimed at making coke a generic name for 'Thanda.' Of the reason for picking up the word 'Thanda', Prasoon Joshi, national creative director - McCann Erickson, the creator of the commercial, said, "Thanda is a very North India-centric phenomenon.

Go to any restaurant in the north, and attendants would promptly ask, 'thanda ya garam?' 'Thanda' usually means lassi or nimbu pani, 'garam' is essentially tea. Because the character, in itself, represented a culture, we wanted to equate Coke with 'Thanda', since 'Thanda' too is part of the popular dialect of the north. Thus making 'Thanda' generic for Coca-Cola. With the long-playing possibilities of the 'Thanda' idea becoming evident, 'Thanda' became the central idea. Once we decided to work on that idea, the creative mind just opened up." Between March and September 2003, CCI launched three commercials with the 'Thanda Matlab Coca-Cola' tag line. All the three commercials aimed to make rural and semi-urban consumers connect

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with Coca-cola. The first ad featured Aamir Khan as a 'tapori' (street smart); in the ad he makes the association between Coca-Cola and the word 'Thanda.'

The second commercial in the series featured Aamir Khan as a 'Hyderabadi shop-keeper'; here again he equates the word 'Thanda' with Coca-Cola. The third commercial featured Aamir Khan as a 'Punjabi farmer' who offers Coca Cola to ladies asking for Thanda. The three commercials showed progression in associating 'Coke' with 'Thanda' in a rural/semiurban context. In the first commercial the connection of Coke with Thanda was made, in the second one there was a subtle difference, with the shopkeeper asking customers to ask for Thanda instead of Coke, and the third commercial showed that when one asked for Thanda, one would get Coke. Analysts said that all the three commercials succeeded in make rural consumers connect to Coke and increased awareness of the brand among them. Along with TVCs, CCI also launched print advertisements in several regional newspapers.

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Future Prospects CCI claimed all its marketing initiatives were very successful, and as a result, its rural penetration increased from 9% in 2001 to 25% in 2003. CCI also said that volumes from rural markets had increased to 35% in 2003. The company said that it would focus on adding more villages to its distribution network.

For the year 2003, CCI had a target of reaching 0.1 million more villages. Analysts pointed out that stiff competition from archrival PepsiCo would make it increasingly difficult for CCI to garner more market share.

PepsiCo too had started focusing on the rural market, due to the flat volumes in urban areas. Like CCI, PepsiCo too launched 200 ml bottles priced at Rs. 5. Going one step ahead, PepsiCo slashed the price of its 300 ml bottles to Rs 6/- to boost volumes in urban areas. In early 2003, CCI announced that it was dropping plans to venture into other beverage businesses. Company sources said that increasing volumes of cola drinks had made the company rethink its plans of launching juice and milk-based beverages. In 2002, CCI had announced plans to launch beverages such as nimbu paani (lemon juice), fruit juice, cold coffee, and iced tea in collaboration with Nestle India.

Though CCI was upbeat on account of its early success in its drive to capture the rural market, the question was whether the company would be able to take this success further. A major media setback occurred in August 2003, when the Delhi-based Center for Science and Environment announced that it had found high pesticide content in soft drinks manufactured and sold by both cola majors. Around same time BBC Radio in its program - 'Face the Facts' alleged that Coke's plant in Kerala was making excessive use of groundwater resources in the region and was also contaminating the groundwater through discharge of toxic elements, thereby harming the land, water resources and also the food chain in the region.

Though CCI refuted these allegations, the company reportedly experienced a considerable
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decline in sales after August 2003. With many social and political groups becoming active against the cola companies in rural areas, it remains to be seen whether CCI will be able to quench its thirst for the rural market.

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Bibliography:
Reference Book:
 Philip Kotler and Kavin Lane Keller, Marketing Management-Dorling Kindersley Pvt. Ltd.

Sites:
1. http://www.icmrindia.org/free%20resources/casestudies/CocaColamarketing.htm 2. http://www.slideshare.net/upload 3. http://www.slideshare.net/9291542839/case-study-on-rural-marketing-ravifrom-pbsiddharthavijayawada-1830467 4. http://www.slideshare.net/9291542839/case-study-on-rural-marketing-ravifrom-pbsiddharthavijayawada-1830467

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