1. “Opportunities, Challenges & Innovations for the Marketing of FMCG Product in Rural Market ”<br />A Project Report Submitted in Partial Fulfillment of award of MBA Degree<br />Introduction<br />Gone are the days when a rural consumer went to a nearby city to buy “branded products and services”. Time was when only a selected household consumed buy branded goods, be it tea or jeans. There were days when big companies flocked to rural markets to establish their brands. Today, rural marked are critical for every marketer – be it for a branded shampoo or an automobile. Time was when marketers thought van campaigns, cinema commercials and a few wall paintings would suffice to entice rural folks under their folds. Thanks to television, today a customer in a rural area is quite literate about myriad products that are on offer in the market place. An Indian farmer going through his daily chores wearing jeans may sound idiotic. Not for Arvind Mills, though. When it launched the Ruf & Tuf kits, it had created quite a sensation among the rural folks as well within few monts of their launch. <br />Trends indicate that the rural markets are coming in a big way and growing twice as fast as the urban, witnessing a rise in sales of hitherto typical urban kitchen gadgets such as refrigerators, mixer-grinder and pressure cookers. According to a National Council for Applied Economic Research (NCAER) study, there are as many ‘middle income and above ‘household in the rural areas as there are in the urban areas. There are almost twice as many ‘lower middle income’ households in rural areas as in the urban areas. At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas. According to Mr. D. Shivakumar, Business Head (Hair), Personal Product Division, Hindustan Lever Limited, the money available to spend on FMCG (Fast Moving Consumer Goods) product s by urban India is Rs. 49,500 crores as against to Rs. 63,500 crores in rural India.<br />Thus with the urban market getting saturated and overcrowded the rural market has coming with a big way as their income level is increasing with the increase in the per productivity of land, government assistance etc. the companies are seeing the rural market as the future market for their product. We had selected the project on the “Opportunities, Challenges & Innovations in Marketing of FMCG’s in Rural Market ”. <br /> <br />Objectives<br />To focus on current scenario prevailing on rural marketing.<br />To focus on different strategies used by the different marketers to make their product reach the big chunk of the market that is rural market.<br />To focus on different innovation adopted in rural INDIA.<br />To study the consumer behaviour on the purchase of Sachets (shampoos)<br />Introduction to Hair Care Industry<br />HAIR CARE PRODUCTS: Contents<br />I. Sector overview<br />Products and applications<br />Consumer habits and practices<br />Consumer awareness and penetration<br />Market size and growth<br />Major players and market shares<br />Manufacturing process and economics<br />Products and applications<br />Hair care category in India consists of the following major product groups:<br />Hair oil is a very Indian phenomenon. It is used as a conditioner and for nourishment. Hair oils are broadly of two Types viz. coconut oil and non-greasy perfumed oil.<br />Shampoos and conditioners are used for cleaning, conditioning and maintaining the quality of hair. Most shampoos available today is two-in-one i.e. shampoo cum conditioner, which cleans as well as conditions hair Shampoos are available in bottle and sachets.<br />Styling products such as styling mousse, spray, gel etc are very popular abroad but have a negligible market in India.<br />Herbal remedies like shikakai, shikakai soaps and other ayurvedic<br />Products with ingredients such as amla and tulsi.<br />Hair dyes/ colors market include products like instant dyes, coloring agents etc.<br />Segmentation<br />Hair shampoo/ conditioners are targeted at upper middle class and upper class of the society particularly in urban areas. In recent times, with steep duty cuts, prices have been lowered and the marketers have broadened their target segments to include housewives of middle class urban consumers and upper class rural consumers. Teenagers also constitute a major segment. Shampoo market can also be segmented on benefit platforms Cosmetic (shine, health, strength etc)<br />Anti dandruff<br />Herbal<br />INDIAN HAIR CARE INDUSTRY<br />HAIR CARE PRODUCTS: Contents<br />I. Sector overview<br />Products and applications<br />Consumer habits and practices<br />Consumer awareness and penetration<br />Market size and growth<br />Major players and market shares<br />Manufacturing process and economics<br />Products and applications<br />Hair care category in India consists of the following major product groups:<br />Hair oil is a very Indian phenomenon. It is used as a conditioner and for nourishment. Hair oils are broadly of two Types viz. coconut oil and non-greasy perfumed oil.<br />Shampoos and conditioners are used for cleaning, conditioning and maintaining the quality of hair. Most shampoos available today is two-in-one i.e. shampoo cum conditioner, which cleans as well as conditions hair Shampoos are available in bottle and sachets.<br />Styling products such as styling mousse, spray, gel etc are very popular abroad but have a negligible market in India.<br />Herbal remedies like shikakai, shikakai soaps and other ayurvedic<br />Products with ingredients such as amla and tulsi.<br />Hair dyes/ colors market include products like instant dyes, coloring agents etc.<br />Segmentation<br />Hair shampoo/ conditioners are targeted at upper middle class and upper class of the society particularly in urban areas. In recent times, with steep duty cuts, prices have been lowered and the marketers have broadened their target segments to include housewives of middle class urban consumers and upper class rural consumers. Teenagers also constitute a major segment. Shampoo market can also be segmented on benefit platforms Cosmetic (shine, health, strength etc)<br />Anti dandruff<br />Herbal<br />Consumer habits and practices<br />Shampoos<br />The frequency of shampoo usage is very low. Most consumers use shampoos only once or twice a week. In many cases, these products are used on special occasions such as weddings, parties etc.<br />Some consumers use shampoo only to address a specific problem such as dandruff or when they need to condition their hair.<br />Use of conditioners is not common. It is restricted to the super premium segment or those who are very involved with their hair care.<br />Some consumers use natural conditioning agents such as Henna.<br />About 50% of consumers use ordinary toilet soaps to wash their hair about 15% of consumers use toilet soaps as well as shampoo for cleaning their hair.<br />Brand loyalties in shampoos are not very strong. Consumers frequently look for a change, particularly in fragrances.<br />Consumers attribute lathering to the act of cleaning.<br />Major expectations from the product are improvement n texture and manageability, giving softness and bounce to hair, curing and avoiding damage to the hair.<br />An Indian need more shampoo for proper wash (average 6-mi) compared to 4 nil needed in Western countries as:<br />• Most Indian women have long hair<br />• Most consumers do not use shampoo daily. Regular users would need smaller quantity of shampoo per bath.<br />• Hair tend to collect more dust due to dusty environment and oiling habits.<br />Southern market is predominantly a sachet market. Accounting for 70% of sachet volumes.<br />In sharp contrast shampoo bottles are more popular m the Northern market. About 50% of shampoo bottles are sold in the Northern region alone. In the North. local brands such as Ayur have strong equity and these products being low priced dilute sachet’s USP of low price.<br />Herbal Remedies<br />Many consumers do not use shampoos due to the perception that it contains synthetic chemicals, which may give immediate better appearance, but cause harm to the hair in the long run. This segment of consumers therefore uses herbal and home made natural remedies such as Hena, Shikakai, Amla, Multani Mitti, Curd, Eggs etc. Use of these natural treatments is quite popular in rural as well as urban areas.<br />Herbal soaps such as shikakai are perceived to provide convenience and ease to consumers who wish to use shikakai but do not want to follow the cumbersome process of applying shikakai powder to the hair.<br />Consumers however are aware that these products cannot offer several benefits offered by shampoos such as softness, manageability and bounce to the hair. Therefore, many consumers also use shampoo occasionally along with the herbal remedies.<br />Styling Products (not covered in primary research)<br />Most Indian use hair oil extensively for styling and conditioning. Although styling products are not very expensive, the market is nascent and tiny. It is restricted to upper class urban consumers.<br />One segment of consumer is also represented by people on the move who need to look to good for a particular event such as interview, party and do not have time to shampoo or wash the hair.<br />Consumer awareness and penetration<br />Modern hair care products such as shampoos have yet not penetrated significantly. All India penetration of 12.9% is largely due to 25% penetration in urban areas. also, there is a higher concentration in large metros where penetration is 30.5% compared to 25-26% in small/medium size towns. Shampoos penetration in rural areas is very low at 8.2% largely represented by southern India. Penetration in other parts of the country is still lower. Awareness about shampoos, however, is close to 90% in urban areas and 80% in rural areas. urban market account for 80% of total shampoo market whereas rural market contributes only 20%.<br />Shampoo penetration in the North is concentrated in upper class status conscious people, in contrast to south where sachet have crack opened the market to lower income class as well.<br />Market size and growth<br />The hair care market is currently estimated at Rs 26Bn. The relative shares of various products are as follows.<br /> SegmentSize (Rs.Bn) Shampoo5.1 Hair Soap1.0 Herbal remedies0.1<br /> <br />The shampoo market is estimated at 25000 ton valued at Rs 5bn.<br />Historically growth was stunted by exorbitant excise duties. During the last 6 years, excise duty rates have slashed from 120% to 30%. This has led to explosive growth in the market. Prior to liberalization there were a few MNC players (the market was dominated by unilever, with Colgate at a distant No.2).<br />There was a significant presence unorganized sector, which is now declining with steep reduction in duty rates.<br />In the early 90’s the shampoo market got a strong impetus for growth with the success of Velvette brand (excise exempt for small scale operation), which was introduced, in Rs.1 in the southern India. Currently, Velvette brand’s market share is negligible. However the introduction of sachets enabled significant expansion of the market, by making shampoos affordable to a large part of the population. The relative share of sachets Vs bottles has increased significantly in last 8 years. HLL the market leader, today sales almost 70% of its shampoos in sachets.<br />In 90’s the aggressive entry of P&G also led to HLL intensifying its marketing effort. Colgate introduced its globally successful products “optima”. Domestic players like Nirma and Dabur also entered the fray. The advent of satellite channels increasing westernization, exposure to various products available and used all over the world and aspirations for better life styles, spurred demand growth for personnel care products. The market expanded by 25-30% per annum between 1995-97., added by new launches and aggressive marketing by MNC players.<br />In 1997, all the major players launched anti dandruff variants which led to the shampoo market recording a volume growth over 40%. While the market growth has tapered down to 15-20% per annum, the category will continue to grow, as penetration level is still very low.<br />Other products<br />Hair care soap market (mainly Shikakai) is estimated to Rs 1bn. It is growing at 5-6% per annum. The growth however is expected to slow down with rising penetration of the shampoo market.<br />Major Players and market share<br />Shampoo<br />A few years ago, the shampoo market was dominated by the three MNC’s, HLL, Colgate and P&G. Several other small players, catered mainly to the regional markets. In early ’96, all the three players launched three new brands – Pantene (P&G), Organics (HLL) and Optima (Colgate). Media spend went up by 3 times. There was a huge jump in the market. While Optima and Organics were unable to build a strong brand franchise, Pantene has been a huge success.<br />HLL, however, has managed to maintain its leadership in the shampoo segment with greater focus on Clinic and Sunsilk brands and launch of various brand. It has also extended the Lux franchise by launching a mid-priced shampoo under the same brand. Nirma, a local player also entered the market in early 1997, with a strategy to offer value to consumers at a low price. Several other players have entered the fray like Garnier Laboratories with the Ultra Doux brand, Dabur with its Vatika Henna Conditioning Shampoo positioned on the herbal platform.<br />In 1997, growth was driven by a spate of launches in the anti-dandruff segment. Almost 40% of population in the country suffers from dandruff problem. There were a few brands like Abott Laboratories Selsun, HLL’s Clinic Active which offered solution for dandruff. However these brands were not aggressively promoted and had a small market. Globally, P&G has a 30% market share in the anti dandruff segment. Head & Shoulders, P&G’s leading global brand with twin positioning of anti-dandruff and great looking hair was launched in July ’97. Head & Shoulders has acquired a 6% market share in the shampoo market. Responding to the Head & Shoulders launch, HLL relaunched Clinic All Clear (HLL), the existing leading brand in this segment. Also, encouraged by the success of Head & Shoulders and with a view to extend the Pantene brand franchise, P&G launched Pantene Pro-V Anti-dandruff with Pro Vitamin B5 in November ‘97. P&G has also launched Head & Shoulder with menthol.. Other brands with anti-dandruff variants are Optima (Colgate Palmolive), Ultra Doux (Laboratories Garnier) and Organics (HLL). In ‘97 the market grew by 40% driven mainly by the launches in the anti dandruff segment.<br />Herbal shampoos:<br />Nyle and Ayur are two leading herbal brands which cater to the economy segment of the herbal shampoo market, while the premium segment is dominated by Biotique, Shahnaz, etc. Dabur, leveraging upon the brand equity of its Vatika brand in the hair care segment, launched Dabur Vatika Henna Conditioning Shampoo targeted at the non-synthetic, herbal shampoo user. Dabur has launched its brand in the mid-priced segment where the only other player is Ultra Doux.<br />Currently, HLL dominates the shampoo market with 63% market share contributed by its four brands Clinic, Sunsilk, Organics and Lux. Market shares of the various HLL brands are estimated at Clinic - 40%, Sunsilk - 17% , Lux - 4%, Organics - 2%. HLL, the dominant player has cost advantage due to local sourcing and scale economies in promotion and distribution. Besides, several brand variants launched under the umbrella brands Clinic and Sunsilk have helped in expanding the market.<br />P&G is the closest competitor with about 12% market share, represented by Pantene Pro V, Pantene Anti-dandruff and Head & Shoulders. Globally, P&G is the market leader in shampoos. However it has higher cost of production as it imports significant part of key raw materials. Besides, its premium pricing restricts growth in the price sensitive Indian market.<br />Colgate has been unable to create a significant market and has around 3% share represented by Optima.<br />The other leading national shampoo brands are Ayur Ltd’s Ayur (8% market share), Beauty Cosmetic’s Nyle (7%) and Chik (3%) brands and Laboratories Garnier’s Ultra Doux (1%) etc. Velvette once a leading sachet brand currently has negligible share. Besides, there are local brands which are available at a significant discount and compete with sachets on price front, as also premium brands like Shahnaz, etc which are available at select outlets. A recent entrant in the herbal segment has been Himalaya Drug Company with its Ayuredic Concepts brand in the anti dandruff segment.<br />Manufacturing process and economics<br />Shampoo<br />Shampoo in terms of product consists of surfactants (cleaning agents) and conditioners. Surfactants, which are mainly detergents like AOS - alfa olefin sulphonate and LES (lauryl ether sulphate salt) are suspended in distilled water with perfume. Conditioning agents are added which could be different silicones or cationic polymers.<br />Perfume is an important ingredient. Shampoo is then filled in bottles or sachets. Packaging is technology intensive. New packagings introduced in the recent times include flip top caps.<br />Shampoo is a high margin product and contribution margin is around 50-60% of realizations. Out of total direct cost, raw materials account for 40-45% and packaging materials account for 25-30%. The balance is accounted for utilities etc.<br />Advertisement costs are substantial at about 15% for established brands. A nation wide launch costs about Rs100-150mn.<br />Shampoos and hair oil manufacturing are still reserved for small scale sector. Imports are not allowed. Excise duty on the product is currently 30% on MRP basis. Sales tax varies from state to state and averages about 20% of realizations.<br />The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 6,30,000 villages, which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc.<br /> The features of Indian rural markets are:<br />Large and Scattered market: <br />The rural market of India is large and scattered in the sense that it consists of over 63 crore consumers from 5,70,000 villages spread throughout the country.<br />Major income from agriculture: <br />Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with agricultural prosperity.<br />Low standard of living: <br />The consumer in the village area do have a low standard of living because of low literacy, low per capita income, social backwardness, low savings, etc.<br />Traditional Outlook: <br />The rural consumer values old customs and tradition. They do not prefer changes.<br />Diverse socio-economic backwardness: <br />Rural consumers have diverse socio-economic backwardness. This is different in different parts of the country.<br />Infrastructure Facilities: <br />The Infrastructure Facilities like roads, warehouses, communication system, financial facilities are inadequate in rural areas. Hence physical distribution becomes costly due to inadequate Infrastructure facilities.<br />Scenario of Rural Market<br />Rural FMCG Market Projections<br />CategoryGrowth (%)2001-20022006Rural TotalRural shareTotalRural shareMarket shareToilet soap13.49645602118,08611,29162.4Body talcum powder23.6514457934237229254.1Toothpaste23.5319814419376414045.1cooking medium (oil)10.9120,94615,73135,29525,80673.4cookinjg medium (vanaspati)7.63454928466648410862.6Tea10.978009495513,495833761.9Beverages28.54605398211039.839.8Electric bulbs9.4354137155531.731.7Electric tubes10.157430812138.738.7Cigarettes13.099784642218,02611,87965.6Biscuits6.79286213234014183746.2Hair oil/Cream30.85300179115968959.7<br />Annual growth rates compounded for 1994-1999 period<br />Source: Business intelligence unit and NCAER, Business World, 11,October, 1989.<br />The growth rate of the FMCG market and durables is higher in rural areas for many products. The rural market share will be more than 50 per cent for products like toilet soaps, body talcum powder, cooking medium (oil), cooking medium (Vanaspati), tea, cigarettes and hair oil/cream. Table portrays the projected market size of FMCG products in 2001-02 and 2006-07 based on the annual growth rates compounded for 1994-99 period.<br />Rural Market Demographics<br />Sr. No.AspectMalesFemaleTotal1Population (‘000)367,240344,640711,8802Work Force (‘000)271,370121,820393,1903Student population ratio (per 1000) Age Wise 5-9……………………………………..10-14……………………………………15-19……………………………………20-24…………………………………..70777741386631635259294Worker population ratio (per 1000)Age Wise 5-9……………….. 10-14……………… 15-19……………… 20-24………………. 25-59……………… 60+…………………. All Ages……………..6915038449706395317963044095502182995Unemployment rates for educated(Per 1000)SecondaryGraduate +691072043516Occupational Distribution (per 1000)0. Agriculture, forestry and fishing1. Mining and quarrying2-3. Manufacturing & Repairs services4. Electricity, gas and water5. Construction.6. Trade, hotels and restaurants7. Transport, storage & communication.8. Finance, insurance, real-estate and business service9. community, social and personal services531711545713152168774931020.317434479<br />Rural Work & Earnings<br />Sr. No.AspectsMaleFemale1.Average No. of days worked3272462.Average daily earnings (Rs.) (casual labour)28.3418.273.Earning per worker (Rs.)923444954.Earning per capita (Rs.)490313445.Rate of growth of earnings per worker (%)3.413.526.Rate of growth of earnings per capita (%)2.171.95<br />Rural market constitutes 71.4 per cent of households in 2001-02. It decreases to 66.7 per cent by 2006-07. It is a result of growing urbanization.<br />Middle and lower income segment constitutes the major chunk of the total market population wise in 2001-02 and 2006-07.<br />Distribution Households income-wise (projection) in crores<br />Income Group2001-20022006-2007RuralRuralTotalNo.%TotalNo.%High0.260.0726.90.520.1223.1Middle12.047.7364.216.7010.3261.8Low5.745.0988.73.683.5295.7Total18.0412.8971.420.9013.9666.7<br />Source: The Futures of the New Market place, NCAER research project, Business Today April 7-21, 1997<br />Table Rising Rural Prosperity<br />Income Group1994-952000-012006-07Above Rs. 1,00,0001.63.85.6Rs. 77,001-1,00,0002.74.75.8Rs. 50,001-77,0008.313.022.4Rs. 25,001-50,00026.041.144.6Rs. 25,000 & Below61.437.420.2<br />Projections based on 7.2 per cent GDP growth<br />Source: NCAER, Business world, 11, October 1999 p.28.<br />Table shows how India is now seeing a dramatic shift towards prosperity in rural households. The lowest income class (Rs. 25,000 & below) will shrink from more than 60 per cent in 1994-95 to 20 per cent in 2006-07. The higher income classes will more than double. Thanks to the development under five year plans, and other special programmes such as land reforms, rural electrification, rural communication, rural credit facilities, etc.<br />Spending Pattern.<br />The average rural household spends on consumables excluding food grains, milk and vegetable is Rs. 215 with the most affluent households, the rich spending around Rs. 333 and the least affluent ones spending about Rs. 166. The spend is distributed as shown in the table below:<br />ItemPer centRichPoorAverageFood articles 147737395Toiletries20673343Washing Material13432228Cosmetics10331721OTC products41369Others9301519Total333166215<br />Source: ORG- MARG R-panel, June 1999<br />Table depicts the spending pattern of consumables.<br />The average rural household spends on consumables excluding food grains, milk and vegetable is Rs. 215 with the most affluent households, the rich spending around Rs. 333 and the least affluent ones spending about Rs. 166.<br />Problems or challenges faced for distribution of goods to the end user in booming rural market<br />Although the rural market does offer a vast untapped potential, it should also be recognized that it is not that easy to operate in rural market because of several problems. Rural marketing is thus a time consuming affair and requires considerable investments in terms of evolving appropriate strategies with a view to tackle the problems.<br />The major problems faced are like:<br />Underdeveloped People and Underdeveloped Markets: The number of people below poverty line has not decreased in any appreciable manner. Thus underdeveloped people and consequently underdeveloped market by and large characterize the rural markets. Vast majorities of the rural people are tradition bound, fatalistic and believe in old customs, traditions, habits, taboos and practices. <br />Lack of Proper Physical Communication Facilities: Nearly fifty percent of the villages in the country do not have all weather roads. Physical communication of these villages is highly expensive. Even today most villages in the eastern parts of the country are inaccessible during the monsoon. <br />Media for Rural Communication: Among the mass media at some point of time in the late 50's and 60's radio was considered to be a potential medium for communication to the rural people. Another mass media is television and cinemas. Statistics indicate that the rural areas account for hardly 2000 to 3500 mobile theatres, which is far less when compared to the number of villages. <br />Many Languages and Dialects: The number of languages and dialects vary widely from state to state, region to region and probably from district to district. The messages have to be delivered in the local languages and dialects. Even though the number of recognized languages are only 16, the dialects are estimated to be around 850. <br />Dispersed Market: Rural areas are scattered and it is next to impossible to ensure the availability of a brand all over the country. Seven Indian states account for 76% of the country’s rural retail outlets, the total number of which is placed at around 3.7 million. Advertising in such a highly heterogeneous market, which is widely spread, is very expensive. <br />Low Per Capita Income: Even though about 33-35% of gross domestic product is generated in the rural areas it is shared by 74% of the population. Hence the per capita incomes are low compared to the urban areas. <br />Low Levels of Literacy: - The literacy rate is low in rural areas as compared to urban areas. This again leads to problem of communication for promotion purposes. Print medium becomes ineffective and to an extent irrelevant in rural areas since its reach is poor and so is the level of literacy. <br />Prevalence of spurious brands and seasonal demand: - For any branded product there are a multitude of ‘local variants’, which are cheaper, and, therefore, more desirable to villagers. <br />Different way of thinking: - There is a vast difference in the lifestyles of the people. The kind of choices of brands that an urban customer enjoys is different from the choices available to the rural customer. The rural customer usually has 2 or 3 brands to choose from whereas the urban one has multiple choices. The difference is also in the way of thinking. The rural customer has a fairly simple thinking as compared to the urban counterpart. <br />Mass media as – one of the keys to tackle the problem.<br />The past two decades have seen a dramatic expansion of exposure to mass media in rural areas. Since these are, almost, by definition urban media and present an overwhelmingly urban portrayal of life and values, their impact on attitudes and behavior has been profound.<br />Radio is the medium with the widest coverage. Studies have recently shown high levels of exposure to radio broadcasting both within urban and rural areas, whether or not listeners actually own a set. Many people listen to other people's radios or hear them in public places. Surveys indicate that in rural areas more than a third of the married women of reproductive age have listened to a radio within the last week.<br />Television, video and films expose viewers to a common window on styles of life and behaviour, an impact increased by the supranational reach of the media. Television is extremely popular where it is available. Television increasingly exposes viewers to a wide range of national, regional and international viewpoints. Rural exposure to television has been lower by far than radio.<br />The mass media brings change wherever they go; but change does not have to be random. Successful media campaigns have changed attitudes and behaviour in a variety of areas, from basic literacy to health care and family planning.<br />But Advertising to rural consumers continues to be a hit and miss affair. At best, it is an exercise where communicators grapple with issues of language, regional and religious affiliations and local sensitivities. Most often finding the right mix that will have a pan-Indian rural appeal is the greatest challenge for advertisers. But more often than not, marketers throw in the towel going in for simplistic solutions: such as going in for a mere transliteration of advertising copy. The result: advertising that is rooted in urban sensitivities and do not touch the hearts and minds of the rural consumer.<br />But there are number of reasons that makes the mass media ineffective and those are: -<br />The Indian society is a complex social system with different castes, classes, creeds and tribes. The high rate of illiteracy added to the inadequacy of mass media impedes reach almost to 80% of India's population who reside in village. <br />Mass media reaches only 57% of the rural population. Generating awareness, then, means utilizing targeted, unconventional media including ambient media.<br />Mass media is too glamorous, interpersonal and unreliable in contrast with the familiar performance of traditional artist whom the villager could not only see and hear, but even touch. <br />The communication and the design of marketing mix needs to be different, as what attracts one need not attract the other as well. So again, even if the media reaches a rural consumer, there might not be an impact as he may fail to connect to it due to his different lifestyles. <br />Moreover rural marketing is usually related with products having low profit margins and high sales volumes and hence it is more important to emphasize the availability of the product to all potential consumers than an overdose of expensive inefficient mass-media strategies.<br />Other option than mass media<br />The winning combination will be a good product with consistent quality and availability. Once you earn the villagers' loyalty (and they are known for their brand loyalty), it will be difficult for competitors to take away your customers.<br />For the rural customer the choices available are limited. So the retailer plays a very big role in the purchase decision. Data on rural consumer buying behavior indicates that the rural retailer influences 35% of purchase occasions. The rural customer goes to the same shop always to buy his things. And there is a very strong bonding in terms of trust between the two. The buying behavior is also such that the customer doesn't ask for the things by brand but like - quot;
paanch rupey waali chaye denaquot;
. Now it is on the retailer to push whatever brand he wants to push as they can influence the buyer very easily and very strongly on the preferences. Therefore, sheer product availability can determine brand choice, volumes and market share. Thus distribution is the key factor for the success of rural marketing. This includes, maintaining favorable trade relations, providing innovative incentives to retailers and organizing demand generation activities among a host of other things.<br />In rural areas, the place where consumers prefer to shop is very important, because it has been found that they buy their requirements from the same shop. This high shop loyalty is accentuated by the quot;
khataquot;
system, which is widely practiced. Hence, if the product is not available at the place where the consumer shops, he would buy some other available brand. <br />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. <br />In the Indian rural marketing context, perhaps linguistics could provide a new approach to tackling communication issues and arriving at a better understanding of rural consumers. Also, the manner in which symbols and icons are used, which provides insights and clues into the mindsets of rural audiences, can be deployed to grab their attention.<br />Though television and radio fare better then print, the best way to kick start sales are events. Where the company meets and interacts with the audience, talks to them in their own idioms and tells them what this product offers. Marketers should think up games and events, which would attract the attention of the villagers from all professions uniformly. This would require local level goods creation and social negotiation skills.<br />The best choice comes from weekly bazaars. With varying populations, one shop or few shops cannot really cater to all the needs of the consumers. Thus, it makes sense to have weekly outlets that caters to the needs of the consumers in these regions. Economical though the rural consumer is, success from these weekly outlets is that much more relevant. What attracts her is the freshness of the produce, buying in the bulk for a week and the bargaining power. These markets (haats and mela’s) have high potential that corporates are now waking up to. The scope that these markets offer to distribution is something that has to be seriously considered. Distribution is clearly the key to rural marketing.<br />Sales potential of Haats & Melas in India<br />Number of Haats47,000Average per day sales in HaatsRs. 2,23,000Average out lets per Haat314Average visitors to a Haat4,580 (covers five villages)Average sales per outlet in a HaatRs. 874Purchase of manufactured goods in a Haat24.3 per centNumber of commercial Melas5000Sales per day in MelaRs. 25 lakh<br />Source: Pradeep Kashyap, MART, quoted in A & M, 28 February, 1999 <br />Sales Potential of Haats & Melas (Zone wise)<br />AspectWestNorthSouthEastTotalVillage with less than 5000 people2,00,10673,5851,61,9821,35,9364,35,673Villages with pacca roads78,21743,10241,34844,6932,07,360Villages with number of outlets9,75,9119,80,72810,89,6036,51,28532,53,602Villages with number of Haats11,436316718,905838941,897<br />Source: Business World 11 October 1990<br />Traditional media can be used to reach these people in the marketing of new concept. The traditional media with its effective reach, powerful input and personalized communication system will help in realizing the goal. Besides this when the advertisement is couched in entertainment it goes down easily with the villager. The traditional media like folk/street plays, wall signs/shop paintings, van campaign/Haat events (weekly fairs), melas, home-to-home contacts and product demonstrations can be effectively used for this purpose.<br />Some companies, which have successfully penetrated the rural market, used the following strategies:<br />OPPORTUNITIES<br />The Market Opportunity for Consumer Goods Companies<br />Under penetrated rural market<br />India is the second largest consumer market in the world. With over 1 billion potential customers,<br />It comes as no surprise why consumer goods companies see India as fertile ground for expansion <br />and growth. <br />The National Council for Applied Economic Research (NCAER) published a study on consumer behavior and purchasing power in India. <br />The NCAER classified Indian consumers by their propensity to consume. <br />At the lower end of the scale (the Destitute and Aspirants) are consumers who are in the market for manufactured essential consumables and basic durables. At the top end of the scale (the Very Rich and a part of the Consumers) is a relatively small but rapidly growing segment for branded international products ranging from automobiles and electronics to cosmetics and garments, often at international prices. The middle segment (majority of the Consumers and the Climbers) is in itself highly differentiated, depending on the product, and is price sensitive, requiring a targeted approach to product design and pricing. Over the years, the bottom layer is expected to narrow further while the top level is expected to expand.<br />Exhibit B: India’s Consumer Classes Millions of households <br />The NCAER study also highlights that the key to growth lies in the rural areas, where over 70% of Indians live. The chart below indicates that rural “Consumers” and “Climbers” together, make up over 60% of total households in India. The rise of the rural market in India has been the most important marketing phenomenon of the nineties, providing volume growth to all leading consumer goods companies. <br />Higher rural incomes driven by agricultural growth, increasing enrolment in primary education, and high penetration of television and other mass media, have induced the propensity to consume branded and value-added products in rural areas.<br />To succeed in India, consumer goods companies will need to effectively market to the large and currently under penetrated rural population.<br />Challenges and Innovations in Marketing<br />The management of Godrej Consumer Products brings out about the challenges associated with growth into India’s rural areas. These challenges apply especially to multinational consumer goods companies, which have often underestimated the difficulty of gaining a foothold in the rural market. The Godrej Group highlighted that success depends on understanding the unique characteristics of the rural market environment in India. These are broadly as follows:<br />(i) Low per capita income<br />(ii) Lack of formal retail and distribution network<br />(iii) Relative cheapness of labor<br />And the review of the impact of each characteristic on rural consumer behavior and draw lessons on how marketing programs of multinational consumer goods companies can be tailored to successfully capture this large and growing consumer base.<br />(i) Low Per Capita Income<br />Multinational consumer goods companies have a strong understanding of marketing in developed markets. Assumptions about the similarity of consumer behavior and preferences, segments and economies of scale have been used to justify the application of marketing programs from developed markets in India. However, these marketing programs have failed because they do not meet the needs of the rural population.<br />Focus on Volume not Margins.<br />377190099695<br />According to Euro monitor data, the 2002 per capita income of India was a mere $360. Marketing strategies in rural India must rely on large volumes over fat margins to drive profitability in such a price sensitive market. However, how can consumer goods companies drive volume growth when a regular bottle of shampoo costs more than the average daily rural wage? Hindustan Lever, a subsidiary of Unilever coined the term nano-marketing in the early 90s when it introduced its products in small sachets. In tiny pillow-like plastic packets that contain about 20 millilitres of product, Unilever sells shaving gel, dishwashing liquid and toothpaste, to name just a few items. <br />The satchets answer the needs of rural consumers who cannot, or are not used to, buying larger sizes and enables them to buy on a more frequent basis. This strategy provides a viable entry-level price for many rural consumers who want to try new products, and allows companies to drive volume sales.<br />Today, Hindustan Lever estimates its shampoo sachets are sold in around 400,000 of India's 600,000 villages.<br />Other multinational companies, such as Coca-Cola, have learned the hard way. After being thrown out by India’s earlier socialist government, Coca-Cola re-entered the Indian market in 1993 and struggled to grow its business. Coca-Cola overestimated the size of the market, misread consumer preferences and underestimated Pepsi’s market penetration in India which had been established through its long-standing presence in the country. In 2000, the company wrote down its Indian bottling assets by $405 million after incurring years of financial losses<br />-11430090170<br />Left: Painted Pepsi advertisements<br />were frequently found on road side<br />walls in India, including on the side<br />of a water fountain (see picture).<br />This photograph was taken on our<br />bus ride to the Taj Mahal.<br />Since Coca-Cola recruited a local Hindustan Lever veteran, Sanjeev Gupta, its Indian operations have started to turn around. With a pulse on rural consumer needs and preferences, Gupta introduced a new, smaller sized bottle in 2001. The 200ml Coca-Cola bottle sells at 10c and is aimed at rural areas and lower-income urban markets (the “Climbers” and the “Consumers”).Furthermore, this year Gupta dropped the price of a 300ml bottle of Coca-Cola to 17c from 24c. These price cuts have boosted volume sales and the smaller sized bottle has been extremely successful and is expected to represent about half of Coca-Cola’s sales by volume in 2003, turning Coca-Cola’s operations to profitability.<br />Keep Products Simple and Functional<br />Driving consumption of goods in rural areas is not just about lowering prices and increasing volume sales. It is also about product innovation: developing indigenous products that cater to the needs of rural consumers who demand quality products at an affordable cost. This requires substantial R&D to better understand consumer behavior and preferences.<br />A case in point is the rural market for shampoo. Hair products were introduced to rural India in an attempt to capitalize on a culture where hair grooming is taken extremely seriously by women. While rural women may wear faded saris and little jewelry, few step out without ensuring that their hair is in place. <br />Consumer goods companies introduced a transplanted product from developed markets, the 2-in-1 shampoo/conditioner. Companies thought that women would be attracted to this product because it was cost-effective, however, initial sales were dismal. What<br />companies failed to recognize is that most rural consumers had previously never used shampoo and did not value or understand the full benefits of conditioner Several years back, Hindustan Lever focused on product development strategies for rural consumers who still did not use shampoo in India.<br /> Their research indicated that a prevailing consumer habit in rural India was to use soap for hair and body care. Rather than try to change instilled consumer behavior, product developers focused on creating an opportunity. Consumers wanted a product that was convenient and low-cost. The result was a new 2-in-1 soap, a product that cleans the hair and body, and is targeted towards consumers in rural areas. <br />Innovative advertising programs<br />Consumer goods companies cannot rely on conventional advertising techniques, particularly in India’s rural areas where only one in every three households owns a television set and more than half of all villagers are illiterate.<br />Instead, companies need to turn to more innovative methods of advertising to reach their potential customer base. The result has been consumer video vans which carry infomercials to rural villages. A marketer invites people to the van to view the infomercial which incorporates the new product into an aspect of daily life. These potential customers are subsequently given a demonstration of the product, for example, toothpaste and toothbrush, and then provided free samples. The van returns the following month to reinforce the sales pitch and to make sales.<br />Another strategy consumer goods companies have used to reach the rural mass-market is to market at large festivals. Two years ago, many companies congregated at the Ganges River for the Kumbh Mela festival where approximately 30 million people were expected to attend over the span of a month. Companies provided “touch and feel” demonstrations and free samples for consumers, the majority of which were from rural areas. <br />Colgate-Palmolive distributed free tubes of herbal toothpaste at the festival to villagers who traditionally used a neem tree branch to clean their teeth. <br />Hindustan Lever marketed its Lifebuoy soap and handed out glasses of Brooke Bond tea. This marketing strategy proved to be extremely effective in advertising to the mass rural market.<br />d. Income variability<br />India’s wide income distribution implies that there exist multiple segments with very different levels of purchasing power. The challenge for consumer goods companies is to develop products that capture the entire spectrum of potential consumers.<br />Offering a variety of pack sizes at different price points has been one solution. However, unlike developed markets, consumer goods companies have to be particularly careful in developing their pricing strategy in developing countries such as India. <br />While daily satchets of products are affordable to the rural consumer, if quantity discounts (common in developed markets) are large enough, street entrepreneurs will purchase the ‘family pack’ and retail it in loose form. The result is a lack of control over the quality of the product, brand presentation, and pricing.<br />While income variability across the population is one issue, consumer goods consumers also need to be mindful of income flow variability across the rural population. A significant portion of the rural population is paid daily wages. Daily wage earners tend to have little stock of money, and therefore tend to make purchases only to meet their daily needs. The implication is that pack sizes and price points are critical to sales, and importantly, that rural consumers view the purchase-tradeoff dilemma across a much wider range of product categories. As a result, the nature of competition is much greater; a beverage manufacturer is not only competing with other manufacturers in its category, but also other products that consumers may consider one-off luxury purchases such as shampoo.<br />(ii) Lack of formal sales and distribution network<br />Challenges due to low per capita income are compounded by the need to maintain low operating costs in a country where formal sales and distribution networks are largely non-existent and difficult to obtain without substantial capital or local guidance.<br />Nature of retail and distribution network<br />Unlike developed markets where large retail distribution chains are commonplace, India is, by and large, a nation of small shopkeepers (“kirana”). This poses a tremendous challenge to consumer goods companies which have traditionally used large retailers as their primary channel of distribution. <br />Retail chains have not flourished in the rural areas of India because economies of scale do not exist. Rural consumers live in small homes with little storage space, lack refrigeration and do not own cars. As a result, daily purchases at the neighborhood store are frequently preferred by consumers and may be the only avenue to buy goods in smaller rural towns. To compete successfully with incumbents, new consumer goods companies are forced to build an extensive distribution network to reach India’s rural population. <br />This distribution network relies first, on gaining shelf space in the small independently owned stores that drive the majority of retail sales, and then on establishing a relationship with wholesalers and distributors to further expand the distribution network.<br />Notwithstanding the direct sales force and working capital costs, some companies have succeeded in building a distribution network, and in doing so, created a substantial barrier to entry. <br />Hindustan Lever boasts a network that reaches 800,000 stores directly and relies on wholesalers and distributors to reach another 3.5 million.<br /> Other foreign companies have overcome the sales and distribution obstacles by entering into joint ventures with local partners. This was an important motivation behind Procter & Gamble’s decision to collaborate with the Godrej Group in the early 1990s. Procter & Gamble was able to immediately tap into a well-established sales and distribution network rather than spending time and money to go it alone. Joint ventures may have consequences in the longer-term should partners disagree on key aspects of the venture. In the case of Procter & Gamble and the Godrej Group, the joint venture in manufacturing and marketing was dissolved three years later and Mr. Godrej provided the following insight on this partnership: <br />1) The negotiated amicable restructuring was found to be mutually beneficial,<br />2) P & G found it attractive to have 100% control over its distribution, and Godrej Group did not mind since it had an alternative distribution system through Godrej hair care,<br />3) Multinationals change their top personnel very rapidly and new people tend to have different perceptions of past decisions. <br />4) At the time of the alliance Procter & Gamble were not permitted 100% investments in India, however this changed in the late 1990s, and <br />5) The restrictions imposed on each party were oppressive.<br />Retailer Power<br />While independent retailers are a fragmented group, they have a substantial amount of power in driving consumer purchases, particularly in rural areas. Most rural stores are cramped providing little opportunity for consumers to browse. The consumer interacts directly with the retail salesperson (usually the owner) and services often include informal lines of credit and home delivery in addition to personal opinions on goods. In rural areas, retailers tend to carry only a single brand in a product category. In such a retailing environment, being first on the shelf and developing a privileged relationship with the retailer is extremely important and a competitive advantage to consumer goods companies.<br />(iii) Relative Cheapness of Labor<br />The low cost of labor in India has implications on the consumer goods industry. Unlike developed markets where it has been cost-efficient to replace human labor with machines, labor intensive manufacturing and distribution remains economical in India.<br />Today in India, it is hard pressed to find a soft drink vending machine. A salesperson who carts around a pushcart and sales single serve bottles or, in certain areas, a salesperson would dispense drinks from a fountain and sold in paper cups. <br />Because the cost of supplying and maintaining a vending machine probably outweighs the cost of employing the salesperson. The low cost of labor also explains the difficulty large chain retailers have had in implementing their developed market strategy of replacing human labor with capital in India. <br />Scale economies are difficult to achieve with the higher capital cost and often result in higher priced goods than the local owner-operated shops. For consumer goods companies, independently owned stores in towns and villages will be the primary form of distribution, at least for the near future. Mass marketing through television and other forms of media is often seen as a more cost-efficient means to reach a large number of potential consumers in developed markets. However, in India it is less expensive, and often much more effective to employ a direct sales force.<br />Strategies for the Present and Future<br />The rural markets are expected to witness a different kind of a shift. As companies aggressively compete to get a higher share of the rural pie, competitive advantage will lie with those who have a higher reach.<br />Marketing according to a leading management theorist Peter Druker can be put in this way quot;
There will be always, one can assume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sell itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available.quot;
<br />Through this we feel that the gist of mktg. in rural & urban is the same. It is nothing but teasing the minds of people, their desires, needs, expectations & playing with their psychology. But the market for a product may vary in rural & urban area and the marketing strategies to market the product is also different in urban and rural area.<br />The strategies should revolve around what attracts the rural customer to a product. For example –<br />Packaging: Rural customers are usually daily wage earners and they don’t have monthly incomes like the ones in the urban areas have. So the packaging is in smaller units and lesser-priced packs that they can afford given their kind of income streams. <br />Packaging and package sizes are increasingly playing a vital role in the decision making process of the rural buyers. Certain products like detergents and paste are bought in large quantities, whereas shampoos, toilet soaps, eatables are bought in smaller pack sizes. The reasoning behind this is that the products that are common to family members are bought in large pack sizes, whereas individual-use products are preferred in smaller packs.<br />A successful example is that of HLL’s project ‘Operation Bharat’. HLL supplied hampers for Rs. 5, 10, 15 and 20, each of which had a Clinic shampoo bottle, a tube each of Pepsodent, Fair & Lovely, and Pond’s Dreamflower Talc, in different sizes and combinations. The idea behind this strategy was to have a product for hair care, dental care, skin care and body care.<br />Value for money: Rural consumers are quite brand conscious. A rural consumer wants value for money minus the frills. Zany advertising and marketing would be a no-go for this sector. A high price tag usually deters the rural consumer from purchase. To counter this, companies need to resort to low unit price strategy to expand sales. <br />A good example of this would be the sachet revolution and combi-packs. According to a survey, 95 percent of total shampoo sales in rural India are by sachets. Colgate has followed the very successful sachet route by introducing the toothpowders in 10g sachets of Rs. 1.50 each and the toothpaste with Super Shakti in 15g packs of Rs. 3 each. The entrant can also offer attractive exchange and money back schemes for its middle and lower segments.<br />Convenience: An example is what Colgate did to its tooth powder packaging. Firstly – it made sachets as was required by their income streams. Secondly - since many households don’t have proper bathrooms and only have a window or things like that to keep such things -- it was wise to cap this sachet for convenience of storage while use. So this is what they did. <br />Demonstration:<br />Demonstration: Direct Contact is a face-to-face relationship with people individually and with groups such as the Panchayats and other village groups. Such contact helps in arousing the villager's interest in their own problem and motivating them towards self-development. <br />Demonstration may be<br />Method demonstration <br />Results demonstration <br />The five steps to make any demonstration effective are:<br />1. Information about people<br />2. Objectives to be accomplished<br />3. Demonstration plan & Execution of the plan<br />4. Evaluation of the demonstration<br />5. Reconsideration after evaluation.<br />In result demonstration, with help of audio -visual media can add value. Asian Paints launched Utsav range by painting Mukhiya's house or Post office to demonstrate that paint does not peel off.<br />Promotion and marketing communication: While planning promotional strategies in rural markets, marketers must be very careful in choosing the vehicle to be used for communication. They must remember that only 16% of the rural population have access to a vernacular newspaper. Although television is undoubtedly a powerful medium, the audiovisuals must be planned to convey a right message to the rural folk. The marketers must try and rely on the rich, traditional media forms like folk dances, puppet shows, etc with which the rural consumers are familiar and comfortable, for high impact product campaigns. Thus, a radical change in attitudes of marketers towards the vibrant and burgeoning rural markets is called for, so they can successfully impress on the 230 million rural consumers spread over approximately six hundred thousand villages in rural India. <br />Wall Paintings <br />Wall Paintings are an effective and economical medium for advertising in rural areas. They are silent unlike traditional theatre .A speech or film comes to an end, but wall painting stays as long as the weather allows it to. Rural households shopkeepers and panchayats do not except any payment, for their wall to be painted with product messages.<br />The greatest advantage of the medium is the power of the picture completed with its local touch. The images used have a strong emotional association with the surrounding, a feat impossible for even a moving visual medium like television, which must use general image to cater to greatest number of viewers.Such a promotion has led to an interesting outcome. For both, washing and for taking bath - one requires water. Now for rural markets there are three sources of water - wells, hand pumps and ponds. For the first in the history of advertising - these are being branded. Special stickers were put on the hand pumps, the walls of the wells are lined with advertising tiles and tinplates are put on all the trees surrounding the ponds. The idea is to advertise not only at the point of purchase but also at the time of consumption.<br />So the customer could also see the advertising when he was bathing or washing. Now, the customers who bought these brands got a sense of satisfaction by seeing their choice being advertised in these places while a question was put in the minds of the customers who had bought other brands. So this was an innovative strategy that worked quite well.<br />Example of successful use of wall painting is by Nirma, which makes extensive use of wall paintings, also a soil conditioner called Terracare uses images of Sita, Luv and Kush to attract the rural consumer.<br />Haats & Melas <br />The countries oldest tradition holds the key to rural penetration. The average daily sale at a Haat is about Rs.2.25 Lacs while the annual sales at melas amount to Rs.3, 500 crore.<br />In rural India, annual melas organised with a religious or festive significance are quite popular and provide a very good platform for distribution. Rural markets come alive at these melas and people visit them to make several purchases.<br />According to the Indian Market Research Bureau, around 8000 such melas are held in rural India every year.<br />Rural markets have the practice of fixing specific days in a week as Market Days when exchange of goods and services are carried out. This is another potential low cost distribution channel available to the marketers. Haats serve a good opportunity for promotion after brand building has been done at Mela.<br />Also, one satellite town where people prefer to go to buy their durable commodities generally serves every region consisting of several villages. If marketing managers use these feeder towns they will easily be able to cover a large section of the rural population. Melas are organized after harvest season, so the villager has enough money, which he will be ready to spend. Demonstration at Haat is essential to convert customers at haats since their attitude is far more utilitarian than that of visitors to a fair.<br />Dealing with this sector needs innovative and localized approaches: Watch major Titan Industries plans to aggressively approach the rural and semi-urban markets in India by creating a separate image for its low-priced Sonata brand. The company has opened its first showroom in Bhopal and nine more showrooms are to be opened across the country. The marketing strategy being followed is to keep the prices of the watches at an affordable range of Rs 295-1,195 and create a niche market for the brand. <br />They will not open showrooms in metros such as Mumbai or Delhi for Sonata brand. The target segment would be the Rs 295-700 customers. They plan to open showrooms at locations, which rural customers visit frequently such as bus terminals, railway stations among others. Also, there would be a range of 300 models from smart plastics and all weather steel to all gold and all-occasion gold and leather. Titan will be looking for the marriage season, which will start from April-June where the rural customers become actual buyers.<br />Another innovative idea is that of Sanjay Lalbhai's Ruf and Tuf jeans is targeted at the rural market. And they are leaving nothing to chance. Arvind Mills is teaching tailors in the villages how to stitch the jeans.<br />Mobile Traders: Even though they have been used before for redistribution, Cycle Salesman could possibly emerge as one of the most cost-effective ways of selling directly to rural consumers. The lack of motorable roads and high distribution costs are not a hindrance any more. Mobile traders score over the conventional wholesale channel on both counts of cost and reach. They travel either on foot or on cycles. That means transportation costs are virtually non-existent. Besides these traders can target smaller villages, which conventional distribution channels often do not touch. <br />The mobile traders can play a crucial role in buying decision. Most rural women are loath to visit retail outlets. Mobile traders therefore are a smart way of reaching women in their home environment. The women rely on these mobile traders to sell them goods in the security of their home.<br />Rural India is a marketer’s dream given its tremendous potential and increasing money power. The formula of success for companies entails a complete shift in marketing and advertising strategies.<br />quot;
To be successful in the rural market, remember- there is no unity in diversity, but act local while thinking global.quot;
<br /> INTRODUCTION TO DISTRIBUTION INTO RURAL MARKET<br />Central to the success of rural marketing strategy is distribution. Product distribution and retailing has developed into a highly specialized activity in urban markets. However, the distribution channel, a much-publicized means of merchandising in urban market has remained in the background in the rural areas. Now distribution has to be virtually reworked from scratch with full rural orientation and awareness of existing rural channels of distribution.<br />Many companies view the rapidly rising rural markets as a great opportunity for expanding their sales but find distribution as major problem. Unfortunately, it is almost impossible to transplant strategies which work successfully in urban market onto rural markets, namely extensive retailing and sustained pull generation through mass media advertising. <br />The hindrances for the companies to reach the rural customers are:<br />Lack of adequate transport facilities,<br />Large distances between villages<br />Lack of pucca roads connecting villages to nearest townships,<br />Lack of proper retail outlets, and<br />Lack of mass media infrastructure.<br />Channels<br />Five levels of distribution channels are identified as shown below. Figure depicts the product movement routes through interior.<br />Level Channel measurePlace Level ACompany depotNational / StateLevel BRedistribution stockiest, C & F agents, Semi-wholesalers and retailersDistrict headquartersLevel CSemi-wholesalers and retailersTehsil headquarters,Mofussil towns, Industrial townshipsLevel DItinerant traders, vans, petrol bunks, semi-wholesalers, retailers and co-operative societies.Haats, large villagesLevel ERetailers, vans, sales people, NGOs, Government agencies.Villages<br />Most companies have direct representation in the form of redistribution stockist at level B and C. Level C in a district would comprise at best 7-10 towns. High outlet density and large customer population permit economies in developing these markets through regular working of sales-cum-distribution van. On consolidating market penetration, direct representation could be extended to the towns by way of sub-dealers or stockists.<br />To achieve a winning edge in rural sales the object is to maximize directed flow and control of stocks at levels C to E. Approaching level D requires prior selection of haat market and villages located in contiguous clusters. Sorting of easily accessible census data enable listing of villages above a predetermined population bracket and of occurrence of haat markets. Various schedules with level C stockist at nodal points could be operated towards self sustaining distribution rates for level D markets.<br />The next level is E. The villages are too small to allow economies in van distribution. But these villages form the bulk of the consumption in rural areas.<br />The old setup:<br />The historically available people and places for distribution include: wholesaler, retailer, vans, weekly haats & bazaars <br />Wholesalers:<br />More than 70 per cent of the rural markets are still beyond the pale of direct distribution, the consumer boom not withstanding. Since, wholesale trade in India has remained largely unchanged over the years; there is a need to revitalize it.<br />The Indian wholesaler is principally a galla-kirana (food-grain) merchant who sustains the belief that business is speculative rather than distributive in character. He is a trader/commodity merchant rather than a distributor and therefore, tends to support a brand during boom and withdraws support during slump. The reasons for this speculative character and dormant role of wholesalers are:<br />Indian market was largely sellers market. There was no need for active sales approach.<br />Companies laid more emphasis on retailers in urban areas, who are very large in number. As a result of retail based distribution, wholesale-based distribution was weakened.<br />Many neglected rural markets. The occurrence of retail outlets was low. Therefore, many companies were dependent on wholesalers. Few companies operated mobile vans to distribute products to village shopkeepers.<br />The current need is to activate and develop wholesaler of the adjoining market as a distributor of products to rural retails outlets and build his loyalties to company.<br />Retailers:<br />Village retailers have traditionally been amongst the most mobile of rural residents. Often doubling up as moneylenders, their occupation facilitates multi-person interaction in the closed village society. <br />As a result the retailer plays a significant role:<br />Credibility: He enjoys the confidence of though villagers. His views are accepted and followed by the rural people whose awareness and media exposure levels are low. The urban retailer is not trusted. He is seen as a businessman with profit motto. His viewpoints are evaluated with other sources of information.<br />Influence leader: His role as influence leader is indisputable. From tender twig of neem to washing powder, retailer testimony has been vital part of the product adoption process. The role of urban retailer, on the contrary is weak. The urban consumers have numerous sources of information. While the retailers’ opinion is sought it may not be hundred percent believed and followed.<br />Brand promoter: With the increase number of brands in the place of commodities, concept selling has come to a close. Brand choices are easy as the brand characteristics and benefits are communicated through different promotion media. Despite the direct one-to-one communication, the retailer remains the deciding factor to sell a particular brand. There are no shelf displays or point of purchase influences. It is the retailer who helps in identification and selection of brands. <br />The presence and sales of spurious brands in an ample testimony to this view. “Higher retail margins, with lower end consumer prices, supported by pack formats identical to the original, these spurious brands sell on the premise of maximum retailer push through maiming returns to the retailers”. No promotion, ads, customer pull…the retailer does all.<br />The urban retailer has a limited role as a brand promoter. He cannot directly, recommend the brands. He has to intelligently drive home his recommendations, as urban consumers do not trust him completely. It is through shelf displays and incentives offers that he has to push the brands.<br />Relationship marketer: Village retailer practices relationship marketing. He caters to a set of buyer who have incomes derivative from immovable land resources and would be static over a much longer time span. The relationship could extend beyond three generations, backed by historical credibility of the retailers as a product referral.<br />On the contrary, the urban retailer has to make an effort to adopt relationship marketing. His customer base comprises largely the mobile service class prone to shift residence at least once, if not more, in less than a decade. This limits the time span and perspective of the retailer-customer relationship.<br />Harbinger of change: Village shopkeeper has not been merely a seller of wares. In an environment relatively isolated from external developments, he has been harbinger of change. He is one of the main sources of information and opinion as well as supplier of product and services. As against this, we find urban retailer, wielding limited influence in changing the product choices and quality of life of consumer. The retail outlets are now in for a change with the corporate marketers finding them as right places for promoting their products.<br />Vans <br />Mobile vans long since, have an important place in distribution and promotion of the products in villages.<br />Weekly Haats, Bazaars, <br />The haats are the oldest outlets to purchase household goods and for trade. These markets are very well organized with shopkeepers having pre-assigned spaces for them to sell their wares. A typical market is in an open field with ample space for displaying all sorts of goods. Its location changes every week. These markets have different names in different regions. But they are strikingly similar in what they sell. It is reported that there are, in all, about 47,000 haats held through out the country.<br />Merits:<br />#Convenience: The entire market can be related to large departmental stores in cities, where the advantage is a one-stop shopping exercise. These outlets crop up every week, providing consumers immense choice and prices.<br />#Attractive: The weekend shopping is not only convenient but also entertaining. The markets start early and will be over by lunch. Afterwards, there will be entertainment. In respect of transactions, it is an attractive place to those who want to buy second hand durable and to those prefer barter transactions. Further the freshness of the produce, buying in bulk for, a week and the bargaining advantage attract the frugal and week long hard working rural folk.<br />#Availability: It is a market for every one and for every thing. Household goods, clothes, durables, jewellery, cattle, machinery, farming equipment, raw materials and a host of products are available.<br />Melas and Fairs:<br />This is another low cost distribution channel available to the marketers. It is comparable with urban events like Wills Trophy, India International Trade Fair (IITF), Sajavat or Consumer in which audience participation varies from a few thousands to a few lakh people. These melas are ancient and part of Indian cultural heritage.<br />Most of the fairs are associated with either a religious event of a festival. Among the most famous melas is the mighty Kumbh Mela at Allahabad, Pushkar Mela in Rajasthan, Kullu Dusshera Mela in Himachala Pradesh, Sonepur Mela in Bihar and Makar Vilakku in Kerala. According to the Indian Market Research Bureau (IMRB) around 8000 melas are held in rural India every year. According to Rural Scan (Quarterly News letter by MICA (Mudra Institute of Communication, Ahmedabad), there are on an average, 1000 melas held in a state annually. The average duration of a mela is anywhere from one to 45 days.<br />Majorities of the melas are held during October-November and January-April. This coincides with the Kharif and Rabi harvests when the farmer’s purchasing power is high. With both money and leisure at hand, he is inclined to indulge his family with a day out at the mela. He also looks forward to updating himself on the latest farming practices and on consumer goods. Visitors to fairs are thus highly receptive to try out new products and also come with enough money to do so.<br />Packaging strategy<br />Packaging strategies:<br />Packaging is defining new paradigms in rural marketing, making it perhaps the most vital component in the marketing mix. According to the survey of National Council for Applied Economics and Research (NCAER) in 1998, it is the low-income group which now comprises an overwhelming majority of consumers for mass consumption products. The study indicated that almost 90 per cent of goods surveyed were purchased by people earning less than Rs.18000 per annum. Marketers have realized, “To enter the rural market, it is necessary to offer products at the lowest unit price”. At the same time, innovative packages are necessary to add value to the premium products. Particularly, innovations, which help lower the price, are desirable. Small packs and combo-packs have become major attractions in rural India.<br /> <br />Small packs: The reasons for high preference to small packs low-unit price are:<br />Affordability: The income of rural consumer is unsteady. The sources of income as well as the size of income earned per day vary. They cannot hence make planned purchases and large purchases. Small pack sizes help the rural consumer pick the product at a price that he can afford.<br />Usage: Certain products like detergent and paste are bought in larger quantities, whereas shampoos toilet soaps, eatables are bought in small pack sizes. The reason for this is: ‘The products that are common to family members are bought in large pack sizes whereas individual-use products are preferred in small packs’.<br />Storability: The storage life of a product also has a bearing on this decision. Edibles, for example, cannot last long unless preserved and kept under ideal conditions. Further, the shelf space of rural consumers is also limited as they live in small huts or semi-pucca houses.<br />Benefits to retailer: The small pack sizes are convenient to the retailer to do his business and promote the national brands. The shelf space of rural retailers is less. He cannot afford big premises. Small pack sizes do not demand shelf space.<br />Display: Small sizes are easy to display. They increase the visual appeal they carry compared to large ones; the colours on the smaller packs are looked at with more interest.<br />Implications to marketers: Manufacturers prefer producing large pack sizes. The economies of scale indicate that small pack sizes are less feasible. However, on the marketing side, benefits are revealing.<br />They induce strongly the rural consumers to buy.<br />Trial sales of national brands are on the rise.<br />Regular sales are growing up for many products. The regional/local players are finding it difficult to face competition from the big players on their home turf.<br />Examples:<br /> P & G introduced Vicks VapoRub in a tiny 5 gm tin and Tide detergent in 30 gm sachets priced at Rs.3.<br />Marico Industries launched low prices sachets of hair oil.<br />Godrej sells its Velvette shampoo in sachets priced at Rs. 1.25.<br />Combi-packs: Another packaging innovation is ‘Combi-packs’.<br />When related products are packed together and sold at economy prices, the consumer finds it a better option to buy. The combi-packs may become an ‘assortment’ when more than two products are packed together. Johnson & Johnson’s baby care assortment package priced around Rs. 175 consists of a powder, soap, shampoo, hair oil and cream.<br />Seethrough packs: Many companies are coming up with new packages that are attractive as well as economical.<br /> For example: The transparent packaging of new Palmolive Naturals is not just a matter of aesthetics. The seethrough wrappers, which are a first of its kind in India, enable Colgate Palmolive to offer a premium product at a competitive price of Rs. 17 for a 100 gm pack.<br />Annexure<br />Address_________________<br /> Male:-_____Female :-_____ <br />A Questionnaire On<br /> The Consumer Behavior On Purchase Of The Shampoos<br />Note: - The data collection through this questionnaire is for the study purpose only, and the information gathered over here will not be disclosed to any college except S. K. Patel Institute of Management & Computer Study. (GANDHINAGAR)<br />QUESTIONNARE<br />1] Which brand of shampoos are you aware so far?<br />Clinic Sunsilk Lux Pantene H & S Rejoice Chick Nyle Vatika Ayur Nirma Others <br />2] How frequently do you purchase it?<br /> Thrice a weekTwice a weekOnce a weekTwice a monthOnce in 2 monthMoreSachets 50 ml 100 ml Others <br />3] Who purchase among the family?<br />MyselfHusband / WifeKidsOthers<br />4] What do you ask for while going to the shop for the purchase of <br /> shampoo?<br />_____________________________________________________________<br />5] How regularly do you change your shampoo? <br />After every timeOnce a monthOnce a 2 month Stick to oneOthers <br />6] From which source do you come to know about this brand of shampoo?<br /> Family membersFriends or relativesAdvertisingRetailerSource of awareness <br />7] Rank the attributes that you look for while purchasing a shampoo?<br /> Different AttributesBrand name Price Packaging Scheme Availability Performance Quality Others <br />8] From where do you purchase these products ?<br /> Own Village Nearby neighbor villageRetailer Wholesaler Kirana Medical store Departments Others <br />Media Habits<br /> Do you watch television regularly?<br /> Yes No<br /> <br /> Which television channel is regularly watch in your family?<br />Star plusSonyZee TVDD channelOthers<br /> <br /> At what time do you mostly watch TV?<br />Morning Noon Afternoon Night <br /> Which newspaper do you read regularly?<br />Sandesh Gujarat samachar Loksatta Divya bhaskar Times of India Indian express Local newspaper <br /> Do you listen to radio?<br />Listen Do not listen <br />Demographic<br />Occupation <br />AgricultureStudentEmployee BusinessUnemployed<br />Monthly income<br />2000-below 2001-40004001-6000 6001-80008001-above<br />THANK YOU<br />RETAILERS QUESTIONAIRE ON SHAMPOOS DISTRIBUTION <br />Name of the retailer: -<br />Area of distribution: -<br />Q.(1) How many different brand of powdered soft drinks do you sell ?<br />SKUMRPMarginPresent stockAny otherSKU7.5ml100mlHead & shoulder Sunsilk Pantene ClinicChickLuxNirmaNyle Vatika Rejoice Ayur Others <br />Q. (2) Approximately how many sachets do you sell in a day?<br /> ______________<br />Q. (3) Approximately how many 200gm.packs do you sell in a day? ______________<br />Q. (4) who frequently come for purchasing the powdered drink?<br />Ladies Males Kids<br />Q. (5) How many sachets do they purchase at one time? _________________________<br />Q. (6) how frequently do you place your order?<br />DailyWeeklyBiweeklyMonthly2 monthly<br />Q. (7) what is the ordering size?<br />SachetsHead & shoulder Sunsilk Pantene ClinicChickLuxNirmaNyle Vatika Rejoice Ayur Others <br />Q. (8) What is the reason you don’t keep the above-mentioned products?<br />Products nameReason1.2.3.4.<br />Q. (8) Which according to you is a better product & why?<br />Parameters Products nameMargin PackagingConsumer pullAd SchemesRegular supplyCredit available Relation with sales personOthers <br />THANK YOU<br />Bibliography<br />