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UNIVERSITY OF MUMBAI

PROJECT ON
RURAL MARKETING – ITC

SUBMITTED
In Partial Fulfillment of the requirements
For the Award of the Degree of
Bachelor of Management

BY
NEHA MIRAJKAR

PROJECT GUIDE
PROF. V.S. GOPAL

BACHELOR OF MANAGEMENT STUDIES


SEMESTER V
(2009-10)

V.E.S. COLLEGE OF ARTS, SCIENCE & COMMERCE,


SINDHI SOCIETY, CHEMBUR, MUMBAI – 400071.
DECLARATION

I, ____________________________, the student of Bachelor of Management


Studies - Semester V (2009-10) hereby declare that I have completed this project
on _________________________________
________.

The information submitted is true & original to the best of my knowledge.

Student’s Signature
( )
CERTIFICATE

This is to certify that Mr. _______________________________ of


Bachelor of Management Studies - Semester V (2009-10) has successfully
completed the project on ______________________
_______________________under the guidance of ___________
___________.

Course Coordinator Principal


Mrs. A. MARTINA Dr. (Mrs) J. K. PHADNIS

Project Guide/ Internal Examiner


PROF. V.S. GOPAL

External Examiner
ACKNOWLEDGEMENT

Before we get into thick of things, I would like to add a few words of appreciation for the
people who have been a part of this project right from its inception. The writing of this project has
been one of the significant academic challenges I have faced and without the support, patience, and
guidance of the people involved, this task would not have been completed. It is to them I owe my
deepest gratitude.
It gives me Immense pleasure in presenting this project report on "RURAL MARKETING –
ITC” It has been my privilege to have a team of project guide who have assisted me from the
commencement of this project. The success of this project is a result of sheer hard work, and
determination put in by me with the help of my project guide. I hereby take this opportunity to add a
special note of thanks for PROF. V.S. GOPAL, who undertook to act as my mentor despite his
many other academic and professional commitments. His wisdom, knowledge, and commitment to
the highest standards inspired and motivated me. Without his insight, support, and energy, this
project wouldn't have kick-started and neither would have reached fruitfulness.

I also feel heartiest sense of obligation to my library staff members & seniors, who helped me in
collection of data & resource material & also in its processing as well as in drafting
manuscript. The project is dedicated to all those people, who helped me while doing this
project.
OBJECTIVE

1. Understanding e-Choupal concept which, implement in practical market by ITC Ltd.

2. To know e-business concept & in this processing and all activities.

3. Understand all activities as well as challenges, problems and solution & various roll which
act in this business especially for rural market.

4. To know profile of ITC Ltd. and their business, product, award, reward, business strategy,
marketing strategies, etc.

5. Improve our own general knowledge about this company & this business concept.

6. To learn business skill this can help in future.


EXECUTIVE SUMMARY

In country over 70% of the total population live in villages. There are states like U.P,
M.P, Bihar, Rajasthan and Orissa where rural population varies form 80 to 90 per cent. Agriculture
and agriculture related activities contribute to about 75% of the income in rural areas.The general
impression is that the rural markets have potential only for agricultural inputs like seeds, fertilizers
and pesticides, cattle feed and agricultural machinery. More than 50% of the national income is
generated in rural India and there are opportunities to market modern goods and services in rural
areas and also market agricultural products in urban areas.

While rural markets offer big attractions to the marketers, it is not easy to enter the market
and take a sizeable share of the market within a short period. This is due to low literacy, low income,
seasonal demand and problems with regards to transportation, communication and distribution
channel. Further there are different groups based on religion, caste, education, income and age.
There is a need to understand the rural markets in terms of buyer behaviour, attitudes, beliefs and
aspirations of people.

Today in 21 century e-business & e-commerce initiative have become popular but it may
be rather difficult to think of poor illiterate farmer in a centre position dusty villages of India making
e-business a part of their daily lives.In Indian village may not have basic facilities such as electricity,
telephone, & transportation facilities? In India have 75% proportion of farmer & in that huge are
illiterate & not aware of existence of computer, let alone the internet & e-business. However large
number of illiterate farmers group conduct e-commerce transaction easily in the year of 2002 with
the help of innovative & revolutioning concept of e-Choupal which introducing by ITC Ltd.

The purpose of e-Choupal implementing is net working the village via internet & procuring
agriculture product from farmer for export. ITC started with just six e-Choupals in June 2000. ITC
had managed to establish 1200 e-Choupal centers in approximately 6500 village across 14 states
within next five to seven year. e-CHOUPAL An example of the successful application of ITC is the
e-Choupal experiment kicked off by diversified tobacco giant ITC. ITC has designed and set up
internet kiosks called e-Choupals tosupport its agricultural product supply chain.The e-Choupals are
totally owned and set up by ITC with the operators not having any investment or risk of their
own.There are four kinds of e-Choupals tailored for shrimps, coffee,wheat and soyabeans. The focus
is on creating internet access for global market information to guide production and supplydecisions.
It provides price information and thus, price certainty to the farmers. In addition, the farmers get
access to operational information, developed by ITC experts, pertaining to cropping, seeds, fertilisers
etc. These gains are shared roughly equally between ITC and individual farmers. The longer-term
goal is to use e-Choupals as sales points for soyabean oil and a range of other consumer goods. ITC
has also set up its first rural mallnear Bhopal, where it distributes products of other FMCGmajors as
well.
E-choupal offers farm-related services like training soil testing, product quality
certification, medical and clinical services, cafeteria and fuel station. Over 6,200 e-choupals are
there in 10 states covering 40,000 villages reaching over 4 million farmers, ITC plans to scale the
same to over 20,000 e-choupals in 15 states covering over a lakh villages benefiting close to 10
million farmers.

THE CIGARETTES TO BISCUITS maker, ITC has claimed many headlines in


recent times for its foray in FMCG and packaged foods business to spruce up its tobacco-laden brand
imagery and create new growth areas. But what gave it more brownie points than these initiatives,
has been its well itched-out rural foray with e-choupal and choupal Saagar.
INDEX
Contents Pages
no.
1) INTRODUCTION TO RURAL MARKET

2) RURAL MARKETING
3) CHANGING PATTERNS IN RURAL DEMAND
– REASONS
4) RURAL CUSTOMER PROFILE
5) THE PROBLEM AREAS IN RURAL
MARKETING
6) MOTIVATING THE RURAL CONSUMER
7) ITC COMPANY PROFILE
8) AGARBATTIS IN RURAL MARKET
9) ITC- e-CHOUPAL
10) MARKETING STRATEGIES
11) THE SOCIAL IMPACT OF E-CHOUPAL
12) CHAUPAL SAGAR
13) CONCLUSION
CHAPTER I

INTRODUCTION TO RURAL MARKET

GONE ARE the days when a rural consumer went to a nearby city to buy branded
products and services. Time was when only a select household consumed branded goods, be it
toothpaste or soap. There were days when big companies flocked to rural markets to establish their
brands. Today, rural markets are critical for every marketer - be it for a branded shampoo or an
automobile.

To open a business daily or business magazine today, you will read about some
company or other announcing its intention to `go rural'. Is going rural that simple? A number of
today's marketers who believe that consumers in rural India are less demanding and easily satisfied
are in for a rude shock. It is high time these marketers realize that an indiscriminate marketing
strategy, a replication of that used for the urban customer, will not work with his rural counterpart.
The latter have a different set of priorities, which necessitates a different approach, both in terms of
developing appropriate products to suit them and using appropriate communication strategies, which
they will comprehend better.

There is a debate in some quarters that the rural market is mature enough to understand
communication developed for urban markets, especially in the case of FMCGs. This is partly true, if
the communication is such that it makes the product promise in a simple and easy-to-understand
style.

It is also true that the section of rural society, which is exposed to urban lifestyles
because of employment, is beginning to appreciate and understand all types of communication aimed
at it. But they are in small numbers and the vast majority of rural folks, even today, cannot
understand clever communication. What to communicate and how to communicate to the rural
audience is a subject which must be understood clearly before any attempt to develop a
communication package aimed at them is undertaken.
“Real India lies in Rural India”, ‘India is a land of ‘villages’, ‘Rural economy is the
backbone of the Indian economy’, ‘India lies in its villages’, etc, are the perpetual and common
slogans. India is predominantly an Agricultural Economy and the rural markets hold immense
potentials for any company to expand.

Thus the next word after “expanding sales” today is “targeting the rural markets”.
Also, intensified competitions in the urban-markets have resulted in increase in costs but not higher
market share and profits. This has resulted in change of focus by a host of organizations. Thus, rural
bazaars are becoming more important than urban markets and many organisations have realized that
in a host of product classes the winners of tomorrow are going to be those who focus on rural India.
Industrial giants and other savvy small to medium firms are awakening to the potential of India’s
jackpot rural market of nearly 733 million consumers, more than twice the population of the USA. It
has thus become very necessary to study the rural markets because this market, which is mostly
underestimated, is drastically changing.
BACKGROUND OF RURAL MARKETING

It was in the late 1960s and 1970s that rural marketing became a topic of general discussion.
The Green Revolution and the consequent pockets of rural prosperity that appeared on its wake
awakened many manufacturers to the new purchasing power. The NCAER’s Market Information
Survey of Households (MISH) shows that the 1980’s saw a rapid improvement in the distribution of
income in the rural as compared with urban India. In 1989-90, the number of households with
income over Rs. 25,000/- per annum as 9 million (around 50 million people), and above Rs. 12,500
per annum was 35 million households (around 160 million people).

However, aggressive Rural Marketing is not a recent activity. With the Green Revolution,
companies like Siemens with a package of products for water drilling marketers of fertilizers,
pesticides, seeds, bicycles, etc., were followed by manufacturers of motorcycles, and many others
who took their products to the rural consumers.

Earlier, consumers who were illiterate or unable to read English created symbols to
identify their favourite products-Red Soap for Lifebuoy, Palm tree for Dalda, etc. Manufacturers
now began to deliberately build symbols and colours into their products to enable identification of
their brands.

Nineties was a phase when the advocates of rural marketing convinced corporate India that
villages were big, this decade is differentiating between companies that can unlock the potential of
the rural market and those that cannot.

Today rural population is 7,41,660,293, while that of urban India is 285,354,954 (Census of
India 2001). There is a 241 million strong working population, spread across 6.38 lakh villages in
the rural hinterlands. The rural population has been dependent primarily on agriculture as their main
source of income. However, after 50 years of independence, and the advent of industrialization, the
agriculturally skewed income of rural India is steadily normalizing. Horticulture and fishery are also
fast becoming income-generating activities in rural India.

WHAT IS RURAL MARKETING?


‘Rural marketing is a process of developing, pricing, promoting, distributing rural
specific goods and services leading to exchanges between urban and rural markets, which satisfies
consumer demand and also achieves organizational objectives’.
Rural marketing involves a two way marketing process, however, the prevailing flow of goods and
services from rural to rural areas cannot be undervalued.
The process should be able to straddle the attitudinal and socio-economic disparity between the
urban and rural customers.

URBAN RURAL

RURAL URBAN

RURAL RURAL

URBAN TO RURAL (U 2 R)

A major part of rural marketing falls into this category. It includes the transactions of urban
marketers who sell their goods and services in rural areas. The following are some of the important
items, which are sold in rural areas and manufactured in urban areas: pesticides, fertilizers, seeds,
FMCG products, tractors, bicycles, consumer durables, etc.

RURAL TO URBAN (R 2 U)

Transactions in this category basically fall under agricultural marketing where a rural
producer seeks to sell his produce in an urban market. An agent or a middleman plays a crucial role
in the marketing process. The following are some of the important items sold from the rural to urban
areas: seeds, fruits and vegetables, milk and related products, forest produce, spices, etc.

RURAL TO RURAL (R 2 R)
This includes the activities that take place between two villages in close proximity to each
other. The transactions relate to the areas of expertise the particular village has. The items in this
category include: agricultural tools, handicrafts and bullock carts, dress materials, etc.

RURAL MARKET ENVIRONMENT

► Untapped Potential
Rural markets offer a great potential for marketing branded goods and services for two reasons:

→ The large number of consumers. A pointer to this is the larger volume of sales of
certain products in rural areas as compared to the sales of the same products in urban
areas.

→ Largely untapped markets. The penetration levels for many products are low in rural
areas.

► Market Size and Penetration


The estimated size of India’s rural market stated as the percentage of world population
is 12.2 percent. This means 12.2 percent of the world’s consumers live in rural India. In numbers,
this works out to about 120 million households. In India, the rural households form about 72 percent
of the total households. This is a huge market by world standards.

Rural consumers own only 52 percent of available consumer durables, even though
they form 72 percent of the total households in India. On an average, rural household own three
consumer durables as compared to seven consumer durables owned by an average urban household
(NCAER, 1998). The gap clearly indicates the untapped potential among the large number of rural
households.

► Increasing Income and Purchasing Power


The agricultural development programs of the government have helped to increase
income in the agricultural sector. These in turn have created greater purchasing power in rural
markets. Households in the lower income group have reduced while there is a strong growth in the
number of households in upper middle and higher income households.

► Accessibility of Markets
The attraction of a market depends not only on its potential but also on its accessibility. A
market that cannot be exploited is a case of “sour grapes”. Development of infrastructural facilities
and marketing institutions has increased the accessibility of these markets.
The road network has facilitated a systemized product distribution system to villages. In
the past, companies relied on a ‘trickle down’ of stocks to the buyer in interior villages that resulted
from the active participation of channel members. In this system, the village retailer made fortnightly
purchase visits to a bigger retailer in the nearest tehsil (sub-division of a district) level town. The
large retailer in the tehsil town procures goods from district headquarters. The district headquarters
were therefore the terminal point of the company distribution channel.

Today, an increasing number of companies are supplying village markets directly.


Increasing direct contacts to villages helps product promotion and availability of the product in the
village shop. Marketers of durable goods use direct contacts as a means to promote and attract rural
consumers to dealer points in large feeder villages or towns. Feeder villages or towns are locations
from where a large number of interior villages get their products. Delivery-cum-promotion vans
traversing 8 to 10 villages a day and covering haats or mandis, is the widely used method of direct
control in rural areas.

► Competition in Urban Markets


Intensified competition in urban markets increases costs and reduces market share. The
rural markets are therefore increasingly attractive in relation to urban markets. The automobile
market brings this out clearly. Rajdoot motorcycles, Bajaj scooters or Ambassador Cars find ready
acceptance in rural markets as compared to urban markets where there is a proliferation of brands.

► Consumer Behavior Changes


Increased literacy and greater awareness in rural markets create new demands and
discriminating buyers. This is observed more in the younger generation. In villages today, this
segment of buyers consumes a large variety of products, both durables and non-durables. There is a
visible increase in the consumption and use of a variety of products, which is easily observed. The
younger generations appears to seek variety and are more discriminating buyers. The young adult in
a village likes to sport a fashionable watch. The preferred brand of toilet soap for the youth is not
necessarily Lifebuoy, the brand preferred by the elders.

CHAPTER II

CHANGING PATTERNS IN RURAL DEMAND - REASONS

To gain from a market where demand is expected to grow from 11% in 1995-96 to
21% in 2006-07, marketers have to come to terms with the poor transport and communications that
characterizes this market far more quickly and competitively than before.
► New Employment Opportunities
Government schemes like IRDP (Integrated Rural Development Programme), JRY
(Jawahar Rozgar Yojana) and TRYSEM (Training Rural Youth for Self Employment) have created
new employment opportunities in Rural India. Co-operative banks and Public sector banks are
extending loans to rural people, thereby creating job opportunities for them. As a result very few
rural people are now flocking to urban centres. This creates more purchasing power for the people.

► Green Revolution
The vision of Dr. Swami Nathan, the father of the green revolution to achieve self-
sufficiency in food grain production in 1995, gave a major breakthrough in food grain production by
the use of scientific methods in agriculture. At present, Rural India generates 299 million tones
annually.

► Various Government Policies


The government’s stress on self-sufficiency resulted in various schemes like Operation
Flood (White Revolution), Blue Revolution, Yellow Revolution, etc. resulted in the production of 15
million tones of milk per annum.

► Better credit facilities through banks

With co-operative banks taking the lead in the rural areas, every village has access to short,
medium, long-term loans from these banks. The credit facilities extended by public sector banks
through Kisan Credit Cards help the farmers to put seeds, fertilizers and every consumer goods on
installments.
► Green Card / Credit Card for farmers
The government initiated credit cards for farmers through public sector banks. Canara
bank and Andhra bank were the pioneers in the launch of the Kisan Credit Card. The farmer had a
choice to take short or medium term loans through these credit cards to buy seeds, fertilizers, etc.
This enabled him to produce more and thereby increase his income.

► Improved exports due to Export Policy


The new Export Policy 2000 paves the way for open market (OGL- Open General License
System) status for agriculture. The World Trade Organization’s (WTO) Policy for agro-exports has
increased exports of Indian agricultural produce thereby increasing incomes of the rural population.

► Remittances from Indians working abroad


These remittances are a sizeable contribution to growing rural income & purchasing power.

► Political & Social changes through favourable Government policies


The Indian Government launched a number of schemes like IRDP (Integrated Rural
Development Programme) and REP (Rural Electrification Programme) in the 1970’s, which gave a
boost to the agrarian economy. This resulted in changes in people’s habits and social life. REP gave
impetus to the development of consumer durable industry.

► Marketing Efforts
FMCG players like HLL, Marico Industries, Colgate Palmolive, Britannia Industries, etc.
have been gung-ho about rural marketing. MNC’s in consumer durables like Samsung, LG are
designing products targeted at rural customers. These companies are changing the lifestyles of rural
Indians.

► Media
Mass Media has created increased demand for goods and services in rural areas. Smart
marketers are employing the right mix of conventional and non-conventional media to create
increased demand for products. The role cable television has been noteworthy in bringing about the
change in rural people’s mindset and influencing their lifestyles.

RURAL CUSTOMER PROFILE

The rural customer shows distinctive characteristics, which makes him different
from the urban buyers.

► Education Profile
Nearly 45% of the rural Indians are literate (men 59%, women 31%). The rural
customer has much lesser education than his/her urban counterpart. Generally, the maximum
education that one sees among rural areas is still primary school or high school level. Though rural
literacy programmes have made significant headway, we are still confronted with a customer who is
illiterate. This comes in the way of the marketer using print media and handbills to promote the
product. Visual displays and phonetics become important in promoting the product in the rural
areas. Demonstration on product usage and even on how to use it becomes integral to the marketer’s
promotion strategy.

► Low income levels


Though rural incomes have grown manifold in the last one decade, still an average
rural consumer has a much lower income than his or her urban counterpart. Still a large part of his
income goes to provide the basic necessities, leaving smaller income to be spent on other consumer
goods. This makes the rural consumer more price sensitive than the urban consumer. Marketers
have evolved various strategies to lower the final prices. One such strategy is designing special
products as reflected by Hindustan Levers strategy of developing Sunlight Detergent Powder and the
other in even reducing the size of the product. Another aspect of this low income is that an average
rural customer buys a single unit of the product and not in bulk.

► Occupation
Typically, in the rural area one finds that the principal occupation is farming, trading,
crafts, and other odd jobs like plumbing, electric works, etc. One also finds primary health workers
and teachers in the rural areas. Since farming, animal husbandry and poultry farming are the
principal occupations we find that even here we have different types of farmers. The basis for
differentiation is obviously their size and ownership of land. We have their consumption patterns
differ mainly because of their income levels. For example, a large or a big farmer will have almost
everything that an urban consumer will have. He is an affluent farmer and represents the highest end
of the rural income continuum.

► Reference Groups
Typically in rural area, the reference groups are the primary health workers, doctors,
teachers and the Panchayat members. One may even observe that the village trader or the grocery
shop owner, commonly called the “baniya” or the “mahajan”, may also be an important influencer in
the rural customers decision-making. This is because the trader extends credit to the farmers.
Today, another person is also considered as a change agent and that is the rural bank’s officer or
manager. A marketer needs to be aware of these influences that can effect a change in the rural
customers consumption patterns.

► Media Habits
A rural customer is fond of music and folklore. In a state like Maharashtra the rural
theatre called “Tamasha” has held sway with the people. Likewise, “Nautanki” in which the artists
are a part of the audience entertains the rural Uttar Pradesh. Today, television and radio are
important forms of media, which hold the attention of rural folks, so is the video. Radio Programmes
reach almost 95% of the Indian population, while television programmes is now as high as 85%.
As we mentioned earlier because of a low education level print media does not have that
much of an impact as the audio and the audiovisual media does.

► Importance of customs

Basic cultural values have not yet faded in rural India. Buying decisions are still made by
the eldest male member in the rural family whereas even children influence buying decisions in
urban areas. Further, buying decisions are highly influenced by social customs, traditions and beliefs
in the rural markets. Many rural purchases require collective social sanction, unheard off in urban
areas.

The rural attitude towards consumption has been traditionally based on the values of
restrain and self-denial. But the high exposure to T.V advertising in recent years where brands are
working relentlessly to loosen this restraint by communicating escape/release and self-confidence
messages is having its effect, particularly on the youth. But Caste and family are still paramount in
rural life.
But we should bear in mind that with more and more marketers eyeing for a piece of the
rural cake, the awareness of the rural consumer is on the rise. He is moving towards branded
purchases and is becoming more and more demanding in his purchase decisions.

THE PROBLEM AREAS IN RURAL MARKETING

Where 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 attendant 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.

► 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.

► Vastness and uneven spread

The number of villages in India is more than 6 lacs. Again, the villages are not uniform
in size. Nearly 50% of the villages have a population of less than 500 persons which account for
20% of the rural population. This type of distribution of population warrants appropriate strategies
to decide the extend of coverage of rural market.

► Lack of Proper Physical Communication Facilities

Nearly fifty percent of the villages in the country do not have all weather road.
Physical communication of these villages is highly expensive. Even today most villages in the
eastern parts of the country are inaccessible during the monsoon. Moreover, 3,00,000 villages in the
country have no access to telephones. Local telecom companies are working with the Department of
Telecommunications (DOT) to provide service in rural areas at local costs which could be a costly
affair considering the underdeveloped infrastructure.

► Low Growth Rate

The slowdown in the economy is of serious concern to everyone in Government,


industry and every other sector of the economy. Our GDP growth target for the Tenth Plan is 7.7%,
rising to 8.1% in the subsequent one. Today we are at a 6% level, which is itself below the current
Plan. Even more worrying is the fact that our growth rate has been trending down for the last 3
years. The sectoral components of this slowdown are very telling. Agricultural growth has dropped
to 0.9% from an average of 3.9% in the 1980's and 3.3% in the 90's. Industrial growth too has
slowed to below 6% from 6.6% in the last decade. We believe there is an urgent need to lift overall
GDP growth sustainable by addressing a central issue - the slowdown in rural incomes.

► 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. High costs in finance is a stumbling block while higher purchase is unheard of, the small town
culture works against financing of products. The sprawling unorganized market offers prices that the
organized industry finds difficult to match. Many existing product lines continue to be too expensive
or irrelevant.

► 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. Messages have to delivered in local languages and
dialects. Even though the number of recognized languages is only 16, the dialects are estimated to be
around 850.

► Low levels of literacy

Literacy rate is low in rural areas as compared to urban areas. This again leads to
problem of communication. Print medium becomes ineffective and to an extend irrelevant in rural
areas since its reach is poor.

► Different way of thinking

There is a vast difference in the lifestyles of the people. The rural customer usually
has 2 or 3 brands to choose from whereas the urban one has many more choices. The rural customer
has fairly simple thinking as compared to his urban counterpart. Life in rural areas is still governed
by customs and traditions and people do not easily adopt new practices.

► Transport

Many rural areas are not connected by rail transport. Around 68% of the rural roads
have been poorly surfaced, and many are totally destroyed or severely damaged by the monsoon and
remain unserviceable leaving interior villages isolated. Though it would be desirable to connect all
villages by all-weather roads, use of bullock carts is inevitable for many years.

► Distribution problem
Rural markets typically signify complex logistical challenges that directly translate
into high distribution cost. Coupled with relatively slower growth of incremental demand and lack of
adequate institutional mechanism for retail operations, margins are squeezed to the utmost.
Infrastructure also poses a major problem when a marketer thinks of targeting the rural markets.
► Market organisation and staff

The size of the market organisation and staff is very important, to have an effective
control. Comparatively, catering to rural market will involve large marketing organisation and staff.
Most of the manufacturers cannot effort huge investments in terms of personnel and also keep an
effective control on it.

► 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 it has been observed that cinema viewing habits in rural areas is very
satisfactory were ever available. Again 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.

Exploring the available media

Promotion media may be classified broadly into 3 categories:

Mass Media Local Media Personalized Media


Radio Haats, Melas, Fairs Direct Communication

Cinema Wall Paintings Dealers


Press Hoardings Sales Persons

TV Leaflets Researchers

Video Vans

Folk Media

Animal Parade

Transit Media

► MASS MEDIA

A medium is called mass media when it reaches 50 million people. A rural market is
difficult to reach. Their exposure to mass media is very less. Further a universalized communication,
which comes through mass media, would become ineffective when it comes to rural audience since
they are heterogeneous – varying from region to region.
Let us examine the utility of mass media.

→ Radio

Irrespective of the literacy levels of the people, topography and geographical location of
the area of residence, the radio reaches rural people easily. It continues to be the principal source of
information by habit and choice for many rural people.

→ Cinema

The cinema is the theatres attract good number of people and provide an opportunity to
disseminate product information by way of short one or two reel advertising films. These films are
exhibited just before the start of the movie and during interval time.

→ Press/Print media

Newspapers, magazines and other publications have both reach and access problems in
rural areas. Very few households subscribe to magazines and newspapers. Literacy levels are also
low. Thus press is not a very good media for promotion.

→ Television
Ogilvy Rural dismisses the talk of huge TV audiences in rural India. According to them,
media exposure in rural areas is just about 50%. Half are secondary viewers and many watch TV
just for 5minutes per week. TV exposure would just about touch 100 million people, of which only
30-40 million would really get impacted.

► LOCAL MEDIA
Though mass media is powerful it does not work as effectively as the local media.

→ Haats & Melas


It is the countries oldest tradition and holds the key to solving the problems. It is called the
weekly mobile supermarkets of rural India.

Facts & Figures: -

→ Over 47,000 haats and 25,000 melas are held annually.


→ The average daily sale at a Haat is about Rs.2.25 Lakhs
→ Annual sales at melas amount to Rs.3, 500 Crores.
→ Over half the shoppers at haats have shopping lists.
→ More than 10,000 melas draw visitors from all over India.

Nearly half the outlets at melas are for manufactured goods.

Haats is a better opportunity for promotion after brand building has been done at Mela.

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.

→ Wall Paintings
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.
Retailer normally welcomes paintings of their shops, walls, and name boards. Since it makes the
shop look cleaner and better. To get one's wall painted with the product messages is seemed as a
status symbol.

The message should be simple, direct and clear. It should be peaked up during the festival
and post harvest season. To derive maximum mileage their usage needs to be planned meticulously.

→ Folk Theatre
Folk theatres are mainly short and rhythmic in form. The simple tunes help in informing
and educating the people in informal and interesting manner. It has been used as an effective
medium for social protest against injustice, exploitation and oppression.

Puppetry

Puppetry is the indigenous theatre of India. From time immortal it has been the most
popular form and well-appreciated form of entertainment available to the village people. It is an
inexpensive activity. In rural India puppetry is a source of livelihood, avenue for entertainment
and creative expression, which is ritually sacred and meaningful as a means of social
communication and vehicle of social transformation.

Indian Institute of mass communication, New Delhi made a study of comparative impact
of puppetry and documentary films, in two villages near Delhi. People in both the villages responded
more favorably to the puppet shows then the films.

→ Video Van
The pioneer of the medium in India was Sadhna Bharadwaj, Director, and Video on
Wheels. It started commercial operations in 1989. This is a vehicle that goes to selected villages and
towns on weekly markets days to communicate the benefits of the product. Its repertoire includes
audio, video, film playback equipment, etc.

→ Animal Parade
Companies can resort to parading of animals with the banners highlighting the product
messages. For example, in the Pushkar mela held annually in Rajasthan, the camels participating in
the camel race are painted with colours or have banners displayed on them like blue for Rin, green
for Wheel detergent, etc.

→ Mobile Displays
Dabur used this novel way of communication. It selected a cluster of 300 villages in
Banda district and sent in 3 bowling alleys. The bowling pins represented the various germs that
Chawanprash protects against.

→ Hoardings
They are of 2 types – stationary and mobile. Large sized hoardings placed at strategic
locations have a huge impact.

► PERSONALIZED MEDIA

→ Direct Contact
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.
HLL is going in for direct marketing in an attempt to attract first-time users. HLL has launched a
door-to-door campaign selling hampers of its detergent, toothpaste and talcum powder for Rs 15.
Companies can also establish contact with their customers in several other ways using
conventional channels like dealers, salesperson and researchers and non-conventional channels like
telephone and Internet.

Potential and Changing Pattern of Rural Marketing

Consumer products where rural consumption is more than urban consumption are

Bicycles 80% Rural 20% Urban

Safety razor blades 67% Rural 33% Urban

Silk Clothing 59% Rural 41% Urban

Books & Stationery 55% Rural 45% Urban

Woolen Clothing 53% Rural 47% Urban

Other Consumables 53% Rural 47% Urban

Generators 95% Rural 05% Urban

Products where rural consumption growth rates are higher as compared to urban markets
are as follows:

1. Packed Tea

2. Alcoholic Beverages

3. Tobacco Products

4. Medicines

5. Detergent Powder

6. Soap Cake/Bar

7. Detergent Cake/Bar
Tapping the Rural Market Problems

While the rural market of India certainly offers a big attraction to marketers, it would
be totally naive to think that any firm can easily enter the market and walk away with a sizeable
share of it. A firm seeking a share of this market has to work for it, as the market bristles away with
a variety of problems. The enterprise has to grapple with these problems and find innovative
solutions to them. In fact, only because a few pioneering firms correctly understand these problems
and came up with innovative solutions to them, that we now see a wonderful trend of growth in rural
markets.

What are these problems? How are they peculiar to the rural market? And how does a
firm solve them?

The existing problems in rural marketing are:

a. Physical Distance

b. Language/Culture

c. Accessibility

d. Money/Expensive

e. Lack of Human Resource

f. Competition

g. Technology

h. Rules & Regulation

i. Lack of Information

j. Size of the Market


k. Buying Power

l. Image

Major Problems in Tapping the Rural Markets and the possible


solutions are as follows:
1. Managing Physical Distribution In Rural Markets

The main problems in physical distribution in the rural context relate to:

a. Transportation:

→ Inadequate railways
→ Bad or no roads
→ Immediate carriers or cargo operators

Eg. Accidents in India 1per day and 1 in 4 days complete loss to property and some life

b. Warehousing Problems
→ No electricity (only 35% of India have electricity)
→ Unavailability of godowns
→ Marketing purposes

c. Communication Problems

→ Only 3% of India is connected by phones


→ Unreliable post and telegraph facility

1947 – 1 postman for 9000 people

2000 – 1 postman for 47000 people

Transportation problems

Transportation infrastructure is quite poor in rural India. Though India has the 4th largest
railway system in the world, many parts of the rural India remain outside the rail network. As
regards road transport, nearly 50% of the 576000 villages in the country are not connected by roads
at all. Many parts in rural India have only kacha roads and many parts of the rural interiors are
totally unconnected by roads with any mandi level town. As regards carriers, the most common
mode is the animal drawn cart. Because of these problems in accessibility, delivery of products and
services continues to be difficult in rural areas.

Warehousing problems

In warehousing too, there are special problems in the rural context. Business firms find it
quite difficult to get suitable godowns in many parts of rural India. And there is no public
warehousing agency in the interiors of rural India. The central warehousing corporation (CWC) and
the state warehousing corporation (SWC’s) which constitute the top tier in public warehousing in
India, do not extend their network of warehouses to the rural parts. They go only upto the nodal
points or major market centers. The warehouses at the mundi level which constitute the second tier
in the warehousing chain are mostly owned by cooperatives. And the same is the case with rural
godwons, which form the third tier. None of these tiers function as public warehousing agencies ;
they provide the warehousing service only to their members. As such, a business firm has to manage
with the CWC/SWC network which stops with the nodal points, or it has to establish its own depots
or stock points run by its stockists / distributors. Of course, in such cases, the commercial advantages
of operating through a public warehousing agency like CWC/SWC are lost to the firm.

Communication problems

Communication infrastructure, consisting of posts and telegraph and telephones, is quite


inadequate in rural areas. Since communication is the first requirement of efficient marketing, lack
of proper communication infrastructure poses difficulties, especially in physical distribution.

Cost-Service Dilemma Gets More Acute

The effect of these problems on the physical distribution front is certainly felt by any
business firm venturing into the rural market. They adversely affect the service aspect as well as the
cost aspect. Maintaining the required service level in the delivery of the products at the retail level
becomes very difficult. At the same time, physical distribution costs get escalated with 80 per cent
Of the total rural consumers living in the 'less than 1,000 people' category of villages. The scattered
nature of the market and its distance from the urban based production points, compound the
difficulty arising from the constraints in transportation, warehousing and communication.

Larger pipeline stocks and bigger inventories in warehouses are the natural outcomes
of these constraints. It means higher costs of transportation, higher inventory carrying costs and
transit and storage losses. And as we will see in detail in the next section, costs of distribution
channels too are much higher in the rural context. Consequently, the total distribution cost per unit
is higher by as much as 50 per cent on an average in the rural market, as compared to the urban
market. In fact, the experiences of some companies operating in the rural market show that the cost
of distribution in rural areas is two and a half times that of urban areas.
MOTIVATING THE RURAL CONSUMER

What works in the urban market may not in the rural areas that are with respect to
marketing. Pesticide used by the farmers are same or similar to what are used in urban
households but have to be packed or packaged and distributed differently due to the
differentiation in usage. Also pricing becomes a factor here. Similarly water is the universal
commodity i.e. either piped or bottled for the urban consumer and canalled or irrigated for the
rural farmer. Therefore the marketer must bring the right product to suit the needs of the rural
consumer. In this connection the following can be considered motivating.

1. Packaging:

Unlike the Eg., given earlier the rural consumer prefers smaller packages this is because

→ The rural consumer buys in low quantity due to low purchasing power.
→ Secondly the rural consumer may be trying out the product and doesn’t like to be saddled by
the larger quantities.

While designing the packages, the color, design and quality of the pack is of great
importance. The rural consumer may prefer a pack with either dark or bright or both dark and
bright colors in a contrasting combination. He may also prefer packs that have fancied designs.
As far as the quality of the pack is concerned he may not mind medicour packaging and even no
packaging if this results in lower prices.

2. Product Quality:

It is of utmost importance. The dimensions of the quality that are to be considered


are durability, features and serviceability in that order. In no way, the marketer must ever even
think of sacrificing quality or manipulating its winning combination dimensions. This is because
the fragile rural consumer may loose faith in the product and may either resort to alternative
brands or traditional products. The new product should not only excite him but also satisfy him.

3. Pricing:

The product pricing must be reasonable and must depend upon the quality of the
product. Distributing to various rural areas is very expensive. However the cost of this should not
be transferred under any circumstances on to the rural buyer. It should be noted here that the
rural consumer is highly price sensitive and competition is not between competitors but with the
fact of “no-use”.

4. Branding:

The rural consumer prefers to buy nationally advertised brands as compared to


local brands. They consider or perceive powerful national brands to have more value than locally
available brands. Naming a particular brand is an important activity. Brand names should be such
that the rural consumers don’t find it difficult to pronounce and remember. Short, sweet and
simple brand names can work wonders with the rural market. At times marketers will try to
experiment with brand names that have local connections.
CHAPTER III

ITC COMPANY PROFILE:

ITC is one of India's foremost private sector companies with a market capitalization
of over US $ 13 billion and a turnover of US $ 3.5 billion. Rated among the World's Best Big
Companies by Forbes magazine and among India's Most Respected Companies by Business World,
ITC ranks third in pre-tax profit among India's private sector corporations.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded
Apparel, Greeting Cards, Safety Matches and other FMCG products. While ITC is an outstanding
market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-
Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods &
Confectionery, Branded Apparel and Greeting Cards.

As one of India's most valuable and respected corporations, ITC is widely perceived
to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a
commitment beyond the market". In his own words: "ITC believes that its aspiration to create
enduring value for the nation provides the motive force to sustain growing shareholder value. ITC
practices this philosophy by not only driving each of its businesses towards international
competitiveness but by also consciously contributing to enhancing the competitiveness of the Larger
value chain of it is a part.
“ITC wants to create a high-quality low-cost fulfillment channel for rural India. The e-Choupal
was the first step in the last mile towards complete backward integration. But it's also the first
mile on a new information highway around which multiple suppliers and buyers can converge. It
is transformational in its implications and can make a huge contribution towards rural well-
being."

- -Y.C.Deveshwar,Chairman,ITC.

ITC's diversified status originates from its corporate strategy aimed at creating
multiple drivers of growth anchored on its time-tested core competencies: unmatched distribution
reach, superior brand-building capabilities, effective supply chain management and acknowledged
service skills in hoteliering. Over time, the strategic forays into new businesses are expected to
garner a significant share of these emerging high-growth markets in India.

ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC


is one of the country's biggest foreign exchange earners (US $ 2.4 billion in the last decade). The
Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance its
competitiveness by empowering Indian farmers through the power of the Internet. This
transformational strategy, which has already become the subject matter of a case study at Harvard
Business School, is expected to progressively create for ITC a huge rural distribution infrastructure,
significantly enhancing the Company's marketing reach.

ITC employs over 20,000 people at more than 60 locations across India. Ranked
among India's most valuable companies by the 'Business Today' magazine, ITC continuously
endeavors to enhance its wealth generating capabilities in a globalizing environment to consistently
reward more than 4,67,000 shareholders, fulfill the aspirations of its stakeholders and meet societal
expectations. This over-arching vision of the company is expressively captured in its corporate
positioning statement: "Enduring Value. For the nation. For the Shareholder."

Background Note
The 'Imperial Tobacco Company of India Limited' was incorporated on August 24,
1910 in Kolkata, India by British American Tobacco (BAT). The name of the company was changed
to I.T.C (Indian Tobacco Company) Limited in 1974 and later 'ITC Limited' (the dots were removed)
on September 18, 2001.

ITC PRODUCT:

Cigarette:

ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it has
a leadership position in every segment of the market. Its brands include Insignia, India Kings,
Gold Flake, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake.

Foods:

ITC made its entry into the branded & packaged Foods business in August 2001 with the
launch of the Kitchens of India brand with brand launches in the Confectionery, Staples and
Snack Foods segments. ITC's world famous restaurants like the Bukhara and the Dum Pukht
and other products like Aashirvaad, Sunfeast, Mint-O.

Lifestyle Retailing:

ITC's Lifestyle Retailing Business Division has established a nationwide retailing presence
through its Wills Lifestyle chain of exclusive specialty stores. Beginning with its initial offering
of Wills Sport relaxed wear from the first store at South Extension, it has expanded with Wills
Classic work wear, Wills Clublife evening wear.

Greeting, Gifting, and Stationary:


ITC's stationery brands Paper Kraft & Classmate are the most widely distributed brands
across India. Paperkraft is targeted at working executives and college goers. The Classmate
range consists of notebooks, long books, drawing, etc. ITC's Greeting & Gifting products include
Expressions greeting cards and gifting products.

Agarbattis:

ITC has launched Mangaldeep Agarbattis across a wide range of fragrances like Rose,
Jasmine, Bouquet, Sandalwood, Madhur, Durbar, Tarangini, Anushri..

Hotels:

The 484-room ITC Hotel Maurya Sheraton & Towers at New Delhi is not only amongst the
leading business hotel in the country and the 386-room ITC Hotel Grand Maratha Sheraton &
Towers. Fabulous Indian meal at the Bukhara.

Safety matches:

These matches are available in unique designs and with innovative value added features. ITC's
brands like iKno, Mangal Deep, VaxLit and Delite.
AGARBATTIS IN RURAL MARKET:

As part of ITC's business strategy of creating multiple drivers of growth in the FMCG
sector, the Company has commenced marketing agarbattis (incense sticks) sourced from small-scale
and cottage units. This business leverages the core strengths of ITC in nation-wide distribution and
marketing, brand building, supply chain management, manufacture of high quality paperboards and
the creation of innovative packaging solutions to offer Indian consumers high quality agarbattis.

ITC has launched Mangaldeep Agarbattis across a wide range of fragrances like Rose,
Jasmine, Bouquet, Sandalwood, Madhur, Durbar, Tarangini, Anushri and Mogra. To offer
better value proposition to the consumer, Mangaldeep is also available in 3in1 and 5in1 varieties
giving the consumer three and five fragrances in one pack respectively. Attractively packaged, these
brands have been appropriately priced to appeal to a cross-section of consumers at various price
segments. These agarbattis are available in innovative 'Fragrance-Locked' packaging.

ITC has also entered into an MOU with the Khadi & Village Industries Commission
(KVIC) to source agarbattis from KVIC approved units, and to distribute agarbattis through the
Khadi Bhavan / Khadi Bhandar outlets across the country. This collaborative venture is expected to
result in employment generation, particularly in the semi-urban and rural areas.

ITC is also supporting an 'Agarbatti Community Participation Programme' run by the


Vyakti Vikas Kendra, a non-profit organisation founded by the renowned spiritual guru Sri Sri
Ravishankar and located near Bangalore. Over 100 village women are gaining from the training that
this organisation imparts in rolling agarbattis. ITC is also beginning to extend similar support to
other NGOs in other states like Bihar, Tripura and Andhra Pradesh, who are also setting up agarbatti
units, training village women in rolling agarbattis and employing these women in these units.

Marketing Mix:

Product:

1) ITC Limited has launched agarbattis in Indian Rural Market.


2) ITC has sold these Agarbattis in the name of ‘Spriha’ and ‘Mangaldeep’.
3) These agarbattis have got different fragrances like rose, jasmine, bouquet, sandalwood,
madhur, sambrani and nagchampa.
4) These agarbattis are available in ‘fragrance-locked’ packets.

Pricing:
1) ITC is selling these agarbattis at very low cost seeing the economy of the people
staying in rural areas at Rs five for 10 sticks for every pack.
2) ITC has also kept cost for each stick that is 75 paisa.

Place:

1) ITC has promoted this product through the melas and Haats.
2) Some agarbattis had been given to co-operative societies to help in distributing the
agarbattis to different consumers.

Promotion:

1) ITC had chosen to promote their agarbattis in rural markets hrough wall paintings in
different languages so that it should be understood by everyone.
2) ITC had also chosen formal media to promote their product by TV and Radio.
CHAPTER IV

ITC- e-CHOUPAL
THE CONCEPT
WHAT IS A CHOUPAL?

In Hindi choupal means a village place where people gather, gossip, smoke hookah, discuss
or interact with each other. There may be a Sanchalak or leader who heads the proceedings.

WHAT IS AN e–CHOUPAL?

When a choupal is equipped with a computer & internet connectivity it is called an e-


choupal. Since power is a cause for concern in rural areas it involves backing the computer with
solar power.

ITC’S e-CHOUPAL: -

The project e-Choupal is ITC’s unique click & mortar initiative. e-Choupal is an ITC
platform for carrying out trade at a number of locations. The e-Choupal redefines choupal, which as
mentioned earlier, is the Hindi word for village square where elders meet to discuss matters of
importance. The all-important letter in the word is "e". It stands for a computer with an Internet
connection for farmers to gather around and interact not just among themselves but with people
anywhere in the country and even beyond.
It begins with ITC installing a computer with solar-charged batteries for power and a
VSAT (Very Small Aperture Terminal) Internet connection in selected villages in the house of
one of their key links called the Sanchalak. The computer's functioning is freed from the notorious
power and telecom facilities at the village level. e-Choupal delivers real-time information and
customized knowledge to improve the farmer's decision-making ability, thereby better aligning farm
output to market demands; securing better quality, productivity and improved price discovery.ITC
accumulates information regarding:

• Weather,

• Modern farming practices

• And market prices etc.

From sources like the Meteorological Department; Agro-universities, mandis (regional markets)
etc., and upload all information on to the e-Choupal web site.

This helps the farmers to gather Information regarding weather and scientific farming helps
farmers to select the right crop and improve the productivity of their farms. Availability of market
information helps farmers to become market oriented.

They know what price ITC is quoting and the price prevalent in the local market, thereby
helping better price realization for farmers. If the farmer decides to sell to ITC, the Sanchalak works
as the aggregator of the small farmer’s produce to sell them to ITC. The Sanchalak also aggregates
the farmers’ input purchase orders for various items like seeds, pesticides and places them directly
with the suppliers through the internet and thus facilitates the supply of high quality farm inputs as
well as the purchase of farm produce at the farmers’ doorstep with the help of intermediaries.
All information is customized according to the local farmer’s requirements and provided in
the local language through computer set up by ITC in the Sanchalak’s house.

Thus the e-choupal model helps aggregate demand in the nature of a virtual producers' co-
operative, in the process facilitating access to higher quality farm inputs at lower costs for the
farmer. The e-Choupal initiative also creates a direct marketing channel, eliminating wasteful
intermediation and multiple handling, thus reducing transaction costs and making logistics efficient.
The e-Choupal project is already benefiting over 3.5 million farmers.

e-CHOUPAL AT A GLANCE

Commencement of initiative: 2000

• States covered: 10
• Villages covered: 40,000
• e-Choupal installations: 6500
• Empowered e-farmers: 4 million
ITC OPERATES THE e-CHOUPAL THROUGH: -

‘THE SANYOJAK’

The Sanyojak is the main link between ITC and the Sanchalaks. Each Sanyojak acts as a co-
coordinator for an e-choupal hub which consists of around 50 odd e-choupals. He is either a former
‘Mandi’ dealer or a local ITC product dealer. The Sanyojak earns a certain commission on every e-
choupal deal.

‘THE SANCHALAK’

The Sanchalak is a lead farmer, who acts as the interface between the computer and the acts
as the interface between the computer and the farmer. He operates the computer on behalf of ITC,
but exclusively for farmers. The Sanchalak also known as the ‘Pratinidhi’ is the most important link
between the Sanyojak and the farmers. Sanchalaks are required to take a public oath of serving
their community without discrimination and sign a social contract to spend a part of the income they
earn from e-choupal on community welfare.
As stated earlier, all the information to be uploaded on the e-choupal site is customized according to
the local farmer’s requirements and provided in the local language through the computer set up by
ITC in the Sanchalak’s house. The Sanchalak accesses this information and facilitates its
dissemination to the farmers.

These Sanchalaks are considered to be the most important link in the whole chain as it is
the sanchalak who interacts with the farmers. Within 2-3 years of implementing e-choupal, these
Sanchalaks have earned a certain status. They have become agents of change as the farmers now
consult the Sanchalak for all critical decisions.
ITC provides the
farmer appropriate
ITC's mobile vans take the message
documentation which
of e-Choupal to new villages.
records the quantity
Thereafter, virtual helpdesks enable
and quality of his
the farmer to find solutions to his
output. Payment is
problems through online interactions.
instant.
ITC has set up VSAT links to
overcome connectivity problems.

MARKETING STRATEGIES
As
stated earlier, to a large extent, it is the Sanchalak’s influence on the farmers that can turn the sales
in ITC’s favor or the opposite way. Hence one of the most important things ITC needed to consider
before entering the market was the strategy they needed to use to promote their project.

ITC realized the importance of the role the Sanchalak can play in helping their project
become successful.
This is clear from their whole idea of appointing one of the farmers/ villagers as the
Sanchalak. They knew very well that if they appointed some outsider as the Sanchalak, the farmers
may have not taken to the project in the same way due to the presence of an outsider. But, appointing
someone from the village would only re-emphasize the fact that e-choupal was here only by the
farmers and also only, for the farmers. Also, even the smallest of farmers would be comfortable in
speaking to the Sanchalak rather than some outsider.

Once, ITC developed this strategy to assure the farmers, they had to develop a strategy to
ensure that the Sanchalaks would convince the farmers to sell their produce to ITC and also buy ITC
products. Hence, for every quintal of produce sold to ITC through an e-choupal, the Sanchalak, get
Rs. 5. Also, in 2003-2004; ITC had distributed Rs. 3 crore as commission.

Besides this, every Sanchalak also gets a commission for every product bought by the
farmers from ITC. Also, the farmers who sell their produce to ITC are required to follow a certain,
minimum quality standard. When the quality of their produce exceeds this required minimum
specification, then, they are given a certain discount on any product they would like to buy from the
ITC Company.

Hence the ITC Company has implemented various steps which are mutually beneficial to
both, the company and the farmers.

But ultimately, it is upto the Sanchalak who can maximize his profits as well as the farmer’s.
But while doing this he has to retain the trust of his villagers as he becomes responsible for all the
transactions which take place with ITC.
Thus ITC has developed a very good system, where they provide the farmers with every
possible facility and service, but at the same time; the farmer is free to sell his produce to whomever
he wants.

THE SOCIAL IMPACT OF E-CHOUPAL

A major impact of the e-Choupal system comes from bridging the information and service gap of
rural India. Agricultural research centers (such as the Indian Council for Agricultural Research),
universities, and other agencies in India have developed several practices and technologies to
improve productivity and crop quality. The impediment to implementation has been affordable,
large-scale dissemination of this knowledge. The e-Choupal system leverages technology that can
reach a wide audience literally at the click of a mouse. The constant presence of sanchalaks, who
themselves are farmers who apply these techniques, ensures that the practices actually make their
way from the Web site to the field. Some areas about which information and services are provided
by the e-Choupal Web site and e-commerce system
include:

• Weather:
This is a very popular section on the Web site because it provides localized weather information at
the district level. Other public sources generally provide only aggregated statelevel weather
information. E-Choupal’s weather information is intelligently coupled with advice on the activities
in the agricultural lifecycle. One farmer observed that prior to e-Choupal, unreliable weather
information would result in prematurely planted seeds that would be washed out by early rains. The
availability of accurate rain information has cut losses due to weather bymore than half.

Agricultural Best Practices:


Scientific practices organized by crop type are available on the Website. Additional questions are
answered through FAQs and access to experts who respond to emails from the villages.

• Customized Quality Solutions:


After sale of a crop is completed, ITC performs laboratory testing of the sample collected. Based on
these results, farmers are given customized feedback on how they can improve crop quality and
yield.

• Intelligent Product Deployment:


Inputs such as fertilizers and pesticides are not generic in their application. The optimal application
is relative to the soil and crop. Determining these parameters requires services such as soil testing.
Past providers brought inputs but not the information and services required to make them effective.
ITC’s “full-service” approach corrects this by coupling the input sale to the information on the Web
site and services such as soil testing.

A second major area of impact stems from the ability of the e-Choupal system to open a window on
the world and thus impact the future of the villages in which they operate. Computers are bringing
the same resources to villages as they brought to urban India, and their impact is no less dramatic.
This, coupled with higher incomes and changes in farmers’ attitudes, is causing several shifts in the
social fabric of village life.

Some accounts from villages include:


• Children are using computers for schoolwork and games. A particularly poignant story is that of
Khasrod, where 2,000 local students used the local e-Choupal to print their grade sheets, saving them
days of waiting and travel time.

• Sanchalaks use the Internet to chat extensively among themselves about the status of operations
and agriculture in their villages.

• Villagers access global resources to learn about agriculture in other parts of the world and are
taking action to compete in the world outside, not merely in the local mandi.

• Youngsters in the village use computers to research the latest movies, cell-phone models, and
cricket news.

WINNERS AND LOSERS

Not everyone has benefited from the introduction of e-Choupals. Indeed, lost income and
jobs is directly connected to the overall increase in efficiency in the e-Choupal system. Some of the
players in the mandi system have suffered loss of revenue. They include:

• Commission agents:
Despite ITC’s best efforts to maintain mandi volumes and compensate commission
agents for lost income, there is little doubt that on the whole they have lower incomes as a result of
the introduction of e-Choupals.

• Mandi laborers:
The workers in the mandi who weighed and bagged produce have been severely
impacted by the drop in volume. In the Sonkach mandi, for example, some 28 tulavatis and 300
laborers have been affected. ITC’s long-term vision is to employ many of these people in the hubs in
much the same functions as they perform in the mandi.

• Bazaars near the mandi:


When farmers sold produce in the mandi, they would also make a variety of
purchases at local bazaars. This revenue has now been diverted to shops near the ITC hubs. This,
however, can be considered a diversion of revenue rather than elimination.

• Some mandi operations:


ITC still pays mandi tax for all the crops procured through e-Choupals but it now
pays the tax to the mandi nearest to the procurement center. As a result, taxes are being diverted
from several mandis to the few mandis near procurement hubs. The result of this is that regional
mandis have lost taxes that contribute to maintaining their infrastructure.

• Competing processors:
Even before the advent of the e-Choupal, the soya crushing industry suffered from
severeovercapacity (half of all capacity was excess). The efficiency pressures imposed by e Choupal
has spurred industry consolidation.
CHAPTER V

CHAUPAL SAGAR

Chaupal Sagar is one of the first organized retail forays into the hinterland. One of the first
Chaupal Sagars was soft-launched in a small village in Madhya Pradesh, 40 km. from Bhopal. The
company had promised to open 1,000 rural malls in India and this is one of the first. It is located just
next to the ITC warehouse where the farmers bring in their produce to sell to ITC. The whole idea
behind this is that the farmer will be tempted to go visit the Sagar Chaupal once he has money in his
hands and also, his money will be spent in a wise manner.

The Chaupal Sagar has opted for self service, stocking its merchandise on shelves lining the
neat aisles, it stocks a breadth of products no supermarket can. It offers almost everything - from
toothpastes to televisions, hair oils to motorcycles, mixer-grinders to water pumps, shirts to
fertilizers; mostly all of them being national products like Marico, LG, Philips, torches from
Eveready, shirts from ITC's apparel business, bikes from TVS, and tractors from Eicher etc and
many other companies ITC has tied up with. It is a very sharply thought-out rural store.

Next to Chaupal Sagar, ITC is setting up a bank, a cafeteria and a learning


room to offer more services to farmers

One of the main reasons why ITC started on this foray is with the hope of capturing the rural
folks' out-of-village shopping. The warehouse is one part of its strategy, obviously. But the farmers
will come here only after every harvest. To ensure that they keep coming to Chaupal Sagar even at
other times, the company is offering a slew of other goodies. Another building is coming up next to
the main warehouse. When completed, it will house a bank, a cafeteria, apart from an insurance
office and a learning centre. ITC has tied up with agro-institutes to offer farmer training
programmes. Then, plots of land have been earmarked to display large agricultural machinery like
threshers. Other parcels of land have been earmarked for pesticide and fertilizer companies for
demonstrating their products. A petrol pump is coming up as well.

ITC is tentatively planning to open another 4-6 malls this year and not more than that, as it is
waiting to see how well the malls do.

If these malls are picked up well by the rural Indians, not only will ITC prosper, but even the
rural areas will prosper. Already, with the advent of e-Choupal, many of the rural areas are
prospering; thus increasing the buying capacity, which will thus encourage new entrepreneurs to
focus on rural India as well.

AGENDA FOR THE NEXT DECADE

• States to be covered: 15

• Villages to be covered: 1, 00,000

• E-Choupals to be installed: 20,000

• Farmers to be e-empowered: 10 million


“Be serious; commit resources like human, money and time for rural success”

S. Shivakumar is the chief executive of ITC’s Agri business and also looks aster the highly
successful rural initiative e-choupal which has made to many case studies both in India and abroad.
Edited excerpts from an e-mail interview with him:

1) How do you look at rural market?

It’s a high potential market, yet under-leveraged and relatively unexplored. I think rural
region has opportunity beyond just ‘Agri Inputs’ and ‘Cheap products’. But, there are unique
challenges posed by inadequate infrastructure. Also, growth in rural markets during Phase-I was
driven by mere “reach”. In Phase-II, deeper consumer engagement is being driven by innovation in
products, packaging and communication.

2) Please share your rural success story and the secrets of it.
Besides the traditionally successful rural marketing approach of ITC driven by innovations in
distribution of company’s cigarette brands, the new success story is the ITC e-choupal initiative. ITC
e-choupal design is based on a synergistic business model that raises rural incomes, while sourcing
agri raw material cost effectively. It serves as a platform for rural marketing, relying on new
consumers insights: unique needs, social norms, habits it also helps us in understanding the gaps in
the current product & channel alternatives.

3) How does e-choupal help drive synergy for the ITC businesses?

ITC e-choupal synergises the backend supply chain needs and the frontend consumer
engagement needs in rural India as a cost-effective and differentiated backend supply chain through
direct farm level sourcing of agri raw material for ITC’s branded foods business. E-choupal
works as a low-cost supply chain by eliminating non-value adding intermediation. As a consumer
engagement point for ITC products, e-choupal captures consumer insights through direct consumer
interaction (sampling, trials, feedback on buying & consumption behaviour).

4) Please share your various rural initiatives to create entrenchment.

We do physical engagement through presence @ Rural Haat to build awareness and


excitement around e-choupal products and services. Besides, we also hold product/categories
specific camps that focus on consumer engagement for promoting categories and brand through
trials, demonstration, advocating right usage and sampling. There is online engagement as e-choupal
portal and spreads awareness across product categories through static and interactive multimedia
content.

5) In terms of marketing, what are the challenges you faced in reaching out to rural
consumers?

It’s a heterogeneous market requiring a lot of customization but the limited consumer insights
add to the complexities of customization.

6) What do you think prevents majority of marketers from going rural?

Organisation mindset and long-term commitment is needed for success. The desire to reach
rural is often a fad that emerges when urban market slows down. The trade-off to revert to urban
looks attractive when the markets get better. Secondly, absence of a strong anchor business which
has a scale to sustain initial infrastructure cost also acts as an impediment.

7) What will be your advice to marketers going rural?

Be serious and commit resources: human, money and time. Be ready to partner: to leverage
complementary strengths and to shrink the learning curve. And lastly engage with consumers rather
than focusing on just physical reach of the products.

CONCLUSION:

Ultimately, the ball lies in the court of rural marketers. It's all about how one
approaches the market, takes up the challenge of selling products and concepts through innovative
media design and more importantly interactivity. So the fact remains that the rural market in India
has great potential, which is just waiting to be tapped. Progress has been made in this area by some,
but there seems to be a long way for marketers to go in order to derive and reap maximum benefits.
Moreover, rural India is not so poor as it used to be a decade or so back. Things are sure a changing
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 growing 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.

The e-Choupal model shows that a large corporation can combine a social mission and
an ambitious commercial venture; that it can play a major role in rationalizing markets and
increasing the efficiency of an agricultural system, and do so in ways that benefit farmers and rural
communities as well as company shareholders. ITC’s example also shows the key role of
information technology—in this case provided and maintained by a corporation, but used by local
farmers—in helping to bring about transparency, to increase access to information, and to catalyze
rural transformation, while enabling efficiencies and lowcost distribution that make the system
profitable and sustainable. Critical factors in the apparent success of the venture are ITC’s extensive
knowledge of agriculture, the effort ITC has made to retain many aspects of the existing production
system, including retaining the integral importance of local partners, the company’s commitment to
transparency, and the respect and fairness with which both farmers and local partners are treated.

BIBLIOGRAPHY

• www.itcportal.com

• www.itcinfotech.com

• www.bbc.com

• www.itcibd.com

• www.echoupal.com