RURAL MARKETING: Challenges, Opportunities & Strategies

The future lies with those companies who see the poor as their customers.
-CK Prahalad to Indian CEO's, Jan 2000.
To get rich, sell to the poor.
-Pradeep Kashyap.
Concept:
In recent years, rural markets have acquired significance, as the overall growth of the
economy has resulted into
substantial increase in the purchasing power of the rural communities. On account of green
revolution, the rural
areas are consuming a large quantity of industrial and urban manufactured products. In this
context, a special
marketing strategy, namely, rural marketing has emerged. But often, rural marketing is
confused with
agricultural marketing – the latter denotes marketing of produce of the rural areas to the
urban consumers or
industrial consumers, whereas rural marketing involves delivering manufactured or processed
inputs or services to
rural producers or consumers.
What makes Rural Markets Attractive?
Rural market has following arrived and the following facts substantiate this.
742 million people
Estimated annual size of the rural market
FMCG Rs 65,000 Crore
Durables Rs 5,000 Crore
Agri-inputs (incl. tractors) Rs 45,000 Crore
2 / 4 wheelers Rs 8,000 Crore
In 2001-02, LIC sold 55 % of its policies in rural India.
Of two million BSNL mobile connections, 50% in small towns/villages.
Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT)
41 million Kisan Credit Cards issued (against 22 million credit-plus-debit cards in urban)
with
cumulative credit of Rs 977 billion resulting in tremendous liquidity.
Of 20 million Rediffmail signups, 60 % are from small towns. 50% transactions from
these towns on
Rediff online shopping site
42 million rural HHs availing banking services in comparison to 27 million urban HHs.
Investment in formal savings instruments: 6.6 million HHs in rural and 6.7 million in
urban
Opportunities:
Infrastructure is improving rapidly.
In 50 years only 40% villages connected by road, in next 10 years another 30%.
More than 90 % villages electrified, though only 44% rural homes have electric
connections.
Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is
connected by STD.
Social Indicators have improved a lot between 1981 and 2001
Number of “pucca” houses doubled from 22% to 41% and “kuccha” houses halved (41%
to 23%)
Percentage of BPL families declined from 46% to 27%
Rural Literacy level improved from 36% to 59%
Low penetration rates in rural so there are many marketing opportunities.
Durables Urban Rural Total (% of rural HH)
CTV 30.4 4.8 12.1
Refrigerator 33.5 3.5 12.0
FMCGs Urban Rural Total (% of rural HH)
Shampoo 66.3 35.2 44.2
Toothpaste 82.2 44.9 55.6
Marketers can make effective use of the large available infrastructure
Post offices 1,38,000
Haats (periodic markets) 42,000
Melas (exhibitions) 25,000
Mandis (agri markets) 7,000
Public distribution shops 3,80,000
Bank branches 32,000
Proliferation of large format rural retail stores which have been successful also.
DSCL Haryali stores
M & M Shubh Labh stores
TATA/Rallis Kisan Kendras
Escorts rural stores
Warnabazaar, Maharashtra (annual sale Rs 40 crore)
Rural Consumer Insights:
Rural India buys.
Products more often (mostly weekly).
Buys small packs, low unit price more important than economy.
In rural India, brands rarely fight with each other; they just have to be present at the right
place.
Many brands are building strong rural base without much advertising support.
Chik shampoo, second largest shampoo brand.
Ghadi detergent, third largest brand.
Fewer brand choices in rural: number of FMCG brand in rural is half that of urban.
Buy value for money, not cheap products
Some Myths:
1. Myth-1: Rural Market Is a Homogeneous Mass
Reality: It’s a heterogeneous population. Various Tiers are present depending on the incomes
like Big
Landlords; Traders, small farmers; Marginal farmers: Labors, artisans. State wise variations
in rural
demographics are present viz. Literacy (Kerala 90%, Bihar 44%) and Population below
poverty line
(Orissa 48%, Punjab 6%)
2. Myth-2: Disposable Income Is Low
Reality: Number of middle class HHs (annual income Rs 45,000- 2, 15,000) for rural sector
is 27.4
million as compared to the figure of 29.5 million for urban sector. Rural incomes CAGR was
10.95%
compared to 10.74% in urban between 1970-71 and 1993-94.
3. Myth-3: Individuals Decide About Purchases
Reality: Decision making process is collective. Purchase process- influencer, decider, buyer,
one who
pays can all be different. So marketers must address brand message at several levels.Rural
youth brings
brand knowledge to Households (HH).
Why Different Strategies?
Rural markets, as part of any economy, have untapped potential. There are several difficulties
confronting the
effort to fully explore rural markets. The concept of rural markets in India is still in evolving
shape, and the sector
poses a variety of challenges. Distribution costs and non availability of retail outlets are
major problems faced by
the marketers. The success of a brand in the Indian rural market is as unpredictable as rain.
Many brands, which
should have been successful, have failed miserably. This is because, most firms try to extend
marketing plans that
they use in urban areas to the rural markets. The unique consumption patterns, tastes, and
needs of the rural
consumers should be analyzed at the product planning stage so that they match the needs of
the rural people.
Therefore, marketers need to understand the social dynamics and attitude variations within
each village though
nationally it follows a consistent pattern. The main problems in rural marketing are:
• Understanding the rural consumer
• Poor infrastructure
• Physical Distribution
• Channel Management
• Promotion and Marketing Communication
Dynamics of rural markets differ from other market types, and similarly rural marketing
strategies are also
significantly different from the marketing strategies aimed at an urban or industrial consumer.
Strategies to be followed:
Marketing Strategy:
Marketers need to understand the psyche of the rural consumers and then act accordingly.
Rural
marketing involves more intensive personal selling efforts compared to urban marketing.
Firms
should refrain from designing goods for the urban markets and subsequently pushing them in
the rural
areas. To effectively tap the rural market a brand must associate it with the same things the
rural folks
do. This can be done by 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.
Distribution Strategy:
One of the ways could be using company delivery vans which can serve two purposes- it can
take the
products to the customers in every nook and corner of the market and it also enables the firm
to
establish direct contact with them and thereby facilitate sales promotion. However, only the
bigwigs
can adopt this channel. The companies with relatively fewer resources can go in for
syndicated
distribution where a tie-up between non-competitive marketers can be established to facilitate
distribution. Annual “melas” organized are quite popular and provide a very good platform
for
distribution because people visit them to make several purchases. According to the India n
Market
Research Bureau, around 8000 such melas are held in rural India every year. Rural markets
have the
practice of fixing specific days in a week as Market Days (often called “Haats’) when
exchange of
goods and services are carried out. This is another potential low cost distribution channel
available to
the marketers. Also, every region consisting of several villages is generally served by one
satellite
town (termed as “Mandis” or Agri-markets) where people prefer to go to buy their durable
commodities. If marketing managers use these feeder towns they will easily be able to cover
a large
section of the rural population.
Promotional Strategy:
Firms must be very careful in choosing the vehicle to be used for communication. Only 16%
of the
rural population has access to a vernacular newspaper. So, the audio visuals must be planned
to
convey a right message to the rural folk. The rich, traditional media forms like folk dances,
puppet
shows, etc with which the rural consumers are familiar and comfortable, can be used for high
impact
product campaigns.
Some Live Examples:
One very fine example can be quoted of Escorts where they focused on deeper
penetration. They did not
rely on T.V or press advertisements rather concentrated on focused approach depending on
geographical
and market parameters like fares, melas etc. Looking at the ‘kuchha’ roads of village they
positioned their
bike as tough vehicle. Their advertisements showed Dharmendra riding Escort with the punch
line ‘Jandar
Sawari, Shandar Sawari’. Thus, they achieved whopping sales of 95000 vehicles annually.
HLL started ‘Operation Bharat’ to tap the rural markets. Under this operation it passed
out low–priced
sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to
twenty million
households.
ITC is setting up e-Choupals which offers the farmers all the information, products and
services they need
to enhance farm productivity, improve farm-gate price realization and cut transaction costs.
Farmers can
access latest local and global information on weather, scientific farming practices as well as
market prices
at the village itself through this web portal - all in Hindi. It also facilitates supply of high
quality farm
inputs as well as purchase of commodities at their doorstep.
BPCL Introduced Rural Marketing Vehicle (RMV) as their strategy for rural marketing.
It moves from
village to village and fills cylinders on the spot for the rural customers. BPCL considered
low-income of
rural population and therefore introduced a smaller size cylinder to reduce both the initial
deposit cost as
well as the recurring refill cost.
Conclusion:
Thus looking at the challenges and the opportunities which rural markets offer to the
marketers it can be said that
the future is very promising for those who can understand the dynamics of rural markets and
exploit them to their
best advantage. 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.
Health & Hygiene Education

Lifebuoy Swasthya Chetana is the single largest rural health and hygiene educational programme ever
undertaken in India. Its objective is to educate people about basic hygienic habits.

It has been developed around the insight that people mistakenly believe "visible clean is safe clean". The
programme establishes the existence of "invisible germs" and the associated risk of infection. In India this
is important, because diarrhoea, caused by invisible germs, is the second largest cause of death among
children below the age of 5. The project will help reduce incidence of such diseases, by raising awareness
of preventive hygienic practices.

The campaign has been divided into various phases. In the initial phase, a Health Development Facilitator
(HDF) and an assistant initiates contact and interacts with students and influencers of the community, like
village community representatives, medical practitioners, school teachers etc. A number of tools like a
pictorial story in a flip chart format, a "Glo-germ demonstration", and a quiz with attractive prizes to
reinforce the message are used. The "Glo-Germ demonstration" is a unique tool to make unseen germs
visible and emphasize the need to adopt hygienic practices. The first interaction with students is then
replicated with the rest of the community. Subsequently, follow-up visits and communication are
undertaken at periodic intervals which reinforce the message and learnings.

Started in 2002, the programme has as of now covered about 15000 villages in 8 states - Uttar Pradesh,
Bihar, Jharkhand, West Bengal, Orissa, Madhya Pradesh, Chattisgarh and Maharashtra; it has already
touched about 70 million people, imparting hygiene education to over 25 million children. The vision of
this on-going project is to make a billion Indians feel safe and secure by focusing on their health and
hygiene needs.

RURAL MARKETING-CHALLENGES AND OPPORTUNITIES

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 630000
villages which can be sorted in different parameters such as literacy levels, accessibility, income
levels, penetration, distances from nearest towns, etc.
The success of a brand in the Indian rural market is as unpredictable as rain. It has always been
difficult to gauge the rural market. Many brands, which should have been successful, have failed
miserably. More often than not, people attribute rural market success to luck. Therefore,
marketers need to understand the social dynamics and attitude variations within each village
though nationally it follows a consistent pattern.
While the rural market certainly offers a big attraction to marketers, it would be naive to think that
any company can easily enter the market and walk away with sizable share. Actually the market
bristles with variety of problems. The main problems in rural marketing are:
 Physical Distribution
 Channel Management
 Promotion and Marketing Communication
The problems of physical distribution and channel management adversely affect the service as
well as the cost aspect. The existent market structure consists of primary rural market and retail
sales outlet. The structure involves stock points in feeder towns to service these retail outlets at
the village levels. But it becomes difficult maintaining the required service level in the delivery of
the product at retail level.
One of the way could be using company delivery vans which can serve two purposes- it can take
the products to the customers in every nook and corner of the market and it also enables the firm
to establish direct contact with them and thereby facilitate sales promotion. However, only the
bigwigs can adopt this channel. The companies with relatively fewer resources can go in for
syndicated distribution where a tie-up between non-competitive marketers can be established to
facilitate distribution.
As a general rule, rural marketing involves more intensive personal selling efforts compared to
urban marketing. Marketers need to understand the psyche of the rural consumers and then act
accordingly. To effectively tap the rural market a brand must associate itself with the same things
the rural folks do. This can be done by 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.
One very fine example can be quoted of Escorts where they focussed on deeper penetration .In
September-98 they established rural marketing sales. They did not rely on T.V or press
advertisements rather concentrated on focussed approach depending on geographical and
market parameters like fares, melas etc. Looking at the ‘kuchha’ roads of village they positioned
their mobike as tough vehicle. Their advertisements showed Dharmendra riding Escort with the
punchline ‘Jandar Sawari, Shandar Sawari’. Thus, they achieved whopping sales of 95000
vehicles annually.
One more example, which can be quoted in this regard, is of HLL. A year back HLL started
‘Operation Bharat’ to tap the rural markets. Under this operation it passed out low–priced sample
packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to twenty million
households.
Thus looking at the challenges and the opportunities which rural markets offer to the marketers it
can be said that the future is very promising for those who can understand the dynamics of rural
markets and exploit them to their best advantage.

Hindustan Lever's distribution network

How do you ensure that Mr. Ramesh in Kanyakumari gets his Lifebuoy soap and Mrs. Kulkarni in Gurgaon
gets her favourite Knorr Annapurna atta whenever they feel the need for it? Well, you need to have a
cutting edge distribution network in place. At Hindustan Lever Limited, our distribution network is one of
our key strengths that help us reach our products across the length and breadth of this vast country.

At the cutting edge of competitiveness

To meet the ever-changing needs of the consumer, we have set up a distribution network that ensures
availability of all our products, in all outlets, at all times. This includes, maintaining favourable trade
relations, providing innovative incentives to retailers and organising demand generation activities among a
host of other things.

Furthermore, although the distribution system is common across most businesses, each of the businesses
have, over the years, fine-tuned the system to meet their objectives. The differences, therefore, lie in the
manner businesses use an existing distribution network, and the channel players involved therein, to
improve their reach and service to their customers and end users. For instance, the distribution model for
detergents, personal products and beverages are quite different from each other due to various factors.

Similarly, the success stories of urban markets cannot necessarily be replicated in rural markets.
IThe evolution of HLL's distribution network The first phase of the HLL distribution network had
wholesalers placing bulk orders directly with the company. Large retailers also placed direct orders, which
comprised almost 30 per cent of the total orders collected.

The challenge of the rural markets

70% of India's population resides in villages. Penetrating the rural markets is, therefore, one of the key
challenges for any marketer. While rural markets present a great opportunity to companies, they also
impose major challenges.
At HLL, we have been at the forefront of experimenting with innovative methods to reach the rural
consumer.

Indirect coverage

Under the Indirect Coverage (IDC) method, company vans were replaced by vans belonging to
Redistribution Stockists, which serviced a select group of neighbouring markets.

Operation Harvest

The reach of conventional media and, therefore, awareness of different products in rural markets is weak. It
was also not always feasible for the Redistribution Stockist to cover all these markets due to high costs
involved. Yet, these markets are important since growth opportunities are high.

Operation Harvest endeavoured to supplement the role of conventional media in rural India and, in the
process, forge relationships and loyalty with rural consumers. Operation Harvest also involved conducting
of product awareness programmes on vans.

Cinema van operations

These are typically funded by the Redistribution Stockists. Cinema Van Operations have films and audio
cassettes with song and dance sequences from popular films, also comprising advertisements of HLL
products.

Single Distribution Channel

For rural India, HLL has established a single distribution channel by consolidating categories. In a
significant move, with long-term benefits, HLL has mounted an initiative, Project Streamline, to further
increase its rural reach with the help of rural sub-stockists. It has already appointed 6000 such sub-
stockists. As a result, the distribution network directly covers about 50,000 villages, reaching about 250
million consumers.

toptop

Distribution will acquire a further edge with Project Shakti, HLL's partnership with Self Help Groups of
rural women. The project, started in 2001, already covers over 5000 villages in 52 districts of Andhra
Pradesh, Karnataka Madhya Pradesh and Gujarat, and is being progressively extended. The vision is to
reach over 100,000 villages, thereby touching about 100 million consumers. The SHGs have chosen to
adopt distribution of HLL's products as a business venture, armed with training from HLL and support from
government agencies concerned and NGOs. A typical Shakti entrepreneur conducts business of around
Rs.15000 per month, which gives her an income in excess of Rs.1000 per month on a sustainable basis. As
most of these women are from below the poverty line, and live in extremely small villages (less than 2000
population), this earning is very significant, and is almost double of their past household income. For HLL,
the project is bringing new villages under direct distribution coverage. Plans are being drawn up to cover
more states, and provide products/services in agriculture, health, insurance and education. This will both
catalyse holistic rural development and also help the SHGs generate even more income. This model creates
a symbiotic partnership between HLL and its consumers, some of whom will also draw on the company for
their livelihood, and helps build a self-sustaining virtuous cycle of growth.

Lifebuoy – “Family health protection for my family and me”

World’s largest selling soap offers a stronger health benefit to the entire family

Launched in the year 1895, Lifebuoy, for over a 100 years, has been synonymous
with health and value. The brick red soap, with its perfume and popular Lifebuoy
jingle have carried the Lifebuoy message of health across the length and breadth
of the country, making it the largest selling soap brand in the world.

In 2002 Lifebuoy was relaunced, marking a new turning point in its history. The
new mix includes a new formulation and a repositioning of the brand to make it
more relevant to both new and existing consumers.

Lifebuoy is no longer a carbolic soap with cresylic perfume. It is now a milled

toilet soap with a new health fragrance. The new formulation has an ingredient,
Active-B, which offers protection against germs, which can cause stomach
infection, eye infection and infections in cuts and bruises. The new health perfume
has been selected after one of the most extensive perfume hunts in the industry.
The new milled formulation offers a significantly superior bathing experience and
skin feel. The new formulation, new health perfume and superior skin feel, along
with the popular red colour, have registered conclusive and clear preference
among existing and new users.

The new Lifebuoy is targeted at today’s discerning housewife with a more

inclusive “family health protection for my family and me” positioning. Lifebuoy
has made a deliberate shift from the male, victorious concept of health to a
warmer, more versatile, more responsible benefit of health for the entire family.

The new Lifebuoy range now includes Lifebuoy Active Red (125gm, 100 gm and
60 gm) and Lifebuoy Active Orange (100gm). Lifebuoy Active Orange offers the
consumer a differentiated health perfume while offering the health benefit of
Lifebuoy.

At the upper end of the market, Lifebuoy offers specific health benefits through
Lifebuoy International (Plus and Gold). Lifebuoy International Plus offers
protection against germs which cause body odour, while Lifebuoy International
Gold helps protect against germs which cause skin blemishes.