ABSTRACT

Indian rural marketing has always been complex to forecast and consist of special uniqueness. However many companies were successful in entering the rural markets. They proved that with proper understanding of the market and innovative marketing ideas, it is possible to bag the rural markets. It is very difficult for the companies to overlook the opportunities they could from rural markets. As two-thirds of the Indian population live in rural areas, the market is vast than expected. For the companies to be successful in rural markets, they have to overcome certain challenges such as pricing and distribution.

This project on rural marketing gives examples of few FMCG companies who were successful in rural areas with their innovative marketing strategies. They found the way-out for the challenges to become successful. They believed that it is patience which is important to gain loyal customers than entering the rural with aggressive marketing. By introducing the products in to rural markets, companies are not changing customers' tastes and preferences but their habits which is most challenging and in which case if the customer is dissatisfied, it will become more difficult to regain the trust or may be never possible.

Products which have a quick turnover, and relatively low cost areknown as Fast Moving Consumer Goods (FMCG). FMCG products are thosethat get replaced within a year. Examples of FMCG generally include a widerange of frequently purchased consumer products such as toiletries, soap,cosmetics, tooth cleaning products, shaving products and detergents, as wellas other non-durables such as glassware, bulbs, batteries, paper products, andplastic goods. FMCG may also include pharmaceuticals, consumer electronics,packaged food products, soft drinks, tissue paper, and chocolate bars.

India’s FMCG sector is the fourth largest sector in the economy andcreates employment for more than three million people in downstreamactivities. Its principal constituents are Household Care, Personal Care andFood & Beverages. The total FMCG market is in excess of Rs. 85,000 Crores. Itis currently growing at double digit growth rate and is expected to maintain ahigh growth rate. FMCG Industry is characterized by a well establisheddistribution network, low penetration levels, low operating cost, lower percapita consumption and intense competition between the organized andunorganized segments.

Introduction to rural marketing

INTRODUCTION:

WHAT IS RURAL?

According to the census of India, villages with clear surveyed boundaries not having a municipality, corporation or board, with density of population not more than 400sq.km and at least 75 per cent of the male working population engaged in agriculture and allied activities would qualify as rural. So, from the above stated conditions, there are 638,000 villages in the country. Of these, only 0.5 cent has a population above 10,000 and 2 per cent have population between 5,000 and 10,000. Around 50 per cent has a population less than 200.

But, FMCG and consumer durable companies are considering a territory as a rural market which has more than 20,000 and below 50,000 population. According to them, class-II and class-III towns are considered as rural. According to the census of India 2001, there are more than 4,000 towns in the country that are categorized as Class II and III Towns based on the population. Size of rural market is estimated to be 42 million households and rural market has been growing at five times the pace of the urban market.

RURAL MARKETING

The concept of Rural Marketing in India Economy has played an influential role in the lives of people. The rural market in India is not a separate entity in itself and it is highly influenced by the sociological and behavioral factors operating in the country. Rural marketing determines the carrying out of business activities bringing in the flow of goods from urban sectors to the rural regions of the country as well as the marketing of various products manufactured by the non-agricultural workers from rural to urban areas. The rural market in India is vast, scattered and offers a plenty of opportunities in comparison to the urban sector. It covers the maximum population and regions and thereby, the maximum number of consumers.

'Go rural' is the slogan of marketing guru's after analyzing the socio-economic changes in villages. The Rural population is nearly three times of the urban, so Rural consumers have become the prime target market for consumer durable and non-durable products, food, construction, electrical, electronics, automobiles, banks, insurance companies and other sectors besides hundred per cent of agri-input products such as seeds, fertilizers, pesticides and farm machinery.

However, the success of the product in the rural market is as predictable as rain. It has always been difficult to understand the rural markets. Marketers need to understand the social dynamics and attitude variations within each village. But by overcoming the challenges and looking into the opportunities which rural markets offers to the marketers it is said that the future is very promising for those who understand the dynamics of rural markets and exploit them to their best advantage. Rural markets face the critical issues of Distribution, Understanding the rural consumer, Communication and Poor infrastructure.

The marketer has to strengthen the distribution and pricing strategies. Improvement in infrastructure and reach, promise a bright future for those intending to go rural. Rural consumers are keen on branded goods nowadays, so the market size for products and services seems to have burgeoned. The rural population has shown a trend of wanting to move into a state of gradual urbanization in terms of exposure, habits, lifestyles and lastly, consumption patterns of goods and services.

To expand the market by tapping the countryside, many MNC's are foraying into India's rural markets. Among those that have made headway are Hindustan Liver, Coca-Cola, LG electronics, Britannia, Colgate Palmolive and the foreign invested telecom companies. These companies' foreseeing the vast size and demand in the rural market cannot afford to ignore. Rural market accounts for half the total market for TV sets, Fans, Pressure cookers, bicycles, washing soap and tooth powder where FMCG products in rural products in rural markets is growing much faster than the urban counterpart.

Presence of fast moving consumer goods (fmcg) sector in rural marketing

For quite some time now, the lure of rural India has been the subject of animateddiscussion in corporate suites. And there is a good reason too. Withurban markets getting saturated for several categories of consumer goods andwith rising rural incomes, marketing executives are fanning out and discoveringthe strengths of the large rural markets as they try to enlarge theirmarkets.

Today, the idea has grown out of its infancy and dominates discussionsin any corporate boardroom strategy session. Adi Godrej, chairman ofthe Godrej group that is in a range of businesses from real estate and personalcare to agri-foods, has no hesitation proclaiming, it is a myth that ruralconsumers are not brand and quality conscious.

A study by the Chennai-based FrancisKanoi Marketing Planning Services says that the rural market for FMCGis worth $14.4 billion, far ahead of the market for tractors and agri-inputswhich is estimated at $10 billion.In total, that represents a market worth a whopping $27 billion. It is nowonder that even MNCs have cottoned on to the idea of a resurgent ruralIndia waiting to happen.

Coke's rural growth of 37 per cent far outstrips its urban growth of 24per cent. Coke is not the only first MNC to have cottoned on to the rural lure.Its global rival Pepsicotook a wider approach to the business when it wasgiven permission to set up shop in India in the late 1980s and investmentin food processing and farming was a pre-condition for entry. The companyimported a state-of-the art tomato processing plant from Italy to Punjab.In five years, productivity improved from 16 tonnes to 52 tonnes per hectare and there was a tomato glut in the state. Farmers weren't complaining becauseeven though prices fell, their incomes increased because of the hugejump in productivity. Pepsi is now heralding a citrus plantation drive in thestate and other parts of the country for its brand of Tropicana fruit juices,to replace imported fruit.

Hindustan Lever Ltd, the $2.3 billion Indian subsidiaryof Unilever, the country's largest FMCG Company, has also got on thebandwagon. It's Project Shakti uses self-help groups across the country topush Lever products deeper into the hinterland. Its four-pronged programmecreates income-generating capabilities for underprivileged rural women; improvesrural quality of life by spreading awareness of best practices in healthand hygiene; empowers the rural community by creating access to relevantinformation through community portals and it also works with NGOs tospread literacy. There are currently over 15,000 Shakti entrepreneurs, mostof them women, in 61,400 villages across 12 states. By the end of 2010,Shakti aims to have 100,000 Shakti entrepreneurs covering 500,000 of India’s 640,000 villages, touching the lives of over 600 million people

As Ashok Gulati of the US-basedInternational Food Policy Research Institute put its, The future of Indianagriculture in general and the farmer in particular depends on the how soonthey can become globally competitive. Indian economic policy realises this.

Between the 8th (1992-97) and the 10th (2002-07) Five Year Plans, successivegovernments have tripled the spending on rural development from $6.82billion to $20.2 billion.All this potential has got India's big business houses rushing to enterand expand rural businesses in the FMCG sector.

In an interesting business diversification, Sunil Bharti Mittalhas tied up with thelegendary Rothschilds of Europe for a $51 million food processing ventureand export of fruits and vegetables. We can replicate our pre-eminence in ITagriculture and transform the country into a global food basket, he pointsout. Mittal's initial investments include an agriculture research centre andmodel farm in Punjab.

It hasalso not escaped the radar of the oldest business house, the $17 billion Tatagroup, which has consolidated its rural operations. The group's two companies, Tata Chemicals and Rallis India, ran separate rural initiatives till 2003.Tata Chemicals ran a chain called Tata Kisan Kendra, which offered farmersa host of products and services ranging from agriinputs to financing toadvisory services. Rallis, on the other hand, was partnering ICICI Bank andHindustan Lever in offering deals to farmers that covered operations from thepre-harvest to post-harvest stage. In 2004, the two operations were merged and Tata Kisan Sansar, a network of onestop shops providing everything frominputs to know-how to loans, was launched. Today, the Tata Kisan Sansar has 421 franchisee-run centres in three states and reaches out to over 3.6 millionfarmers. Like the Tatas.

Rural India accounts for a market worth $27 billion.

Rural India accounts for a market worth $27 billion. No wondereven MNCs have cottoned on to the idea of a resurgent rural India.

Marketing Strategies

Marketers need to understand the psychology of the rural consumers and then act consequently. Rural marketing involves more exhaustive personal selling efforts compared to urban marketing. Firms should abstain 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.

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 in Indian Rural Market-

PRODUCT STRATEGY:-

  • Developing rural specific products.
  • Communicating and changing quality perception.
  • Understanding cultural and social values.
  • Providing what customers want.

PRICING STRATEGY:-

  • Low Price Points
  • Avoid sophisticated packaging.
  • Highlight Value, not price.
  • No frills products.
  • Credit facilities.
  • Discounts.

PROMOTIONAL STRATEGY:-

Marketers must be very careful while choosing the mediums 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. Radio is also very popular source of information and Entertainment, Adds on radio can also be a helpful tool for marketers.

  • By effective media communication
  • By promoting products with Indian models and actors
  • By associating themselves with India
  • By talking about a normal Indian
  • By giving Indian words for brands
  • Paintings
  • Word of mouth advertising

DISTRIBUTION STRATEGY:-

One of the ways could be using company delivery van 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.

  • By adopting localized way of distribution
  • Melas, Haat, Mandis.
  • By proper communication in Indian language

EXPECTED ENTRANTS IN RURAL MARKETING

Uninor eyes on rural and semi-urban market to penetrate its presence and mark its brand over there. Uninor is in full swing to capture a niche in rural telecom market and targets to cover remote areas of UP East as well. Uninor is oriented to tap the potential in rural UP, as low-cost cellular services are affordable it plans to capture market through more innovations.

ITC e-Choupal, in association with Delhi based rural marketing agency Impact Communications, will launch Choupal Mahotsav, a rural marketing initiative, in Uttar Pradesh. For the record, launched in June 2000, ITC's e-Choupal offers a wide spectrum of services including access to real time information on prices of farm commodities, weather forecast and best practices in farming.

Cement majors — UltraTech, HeidelbergCement, ACC, Ambuja — and mid-level players, such as Shree Cement, Binani, have aggressive plans as they focus on the relatively untapped rural market to be the next growth driver. Shree Cement, the largest cement maker of North India, has chalked out an expansive plan for marketing in the villages of Rajasthan, Haryana, Punjab, Chattisgarh, Madhya Pradesh and Gujarat.

Ranbaxy Laboratories will hire nearly 1,500 marketing executives, expanding its sales team by at least 50%, to spur sales and regain its rank as India’s top drug maker. “Ranbaxy is looking at new rural markets and deeper penetration in interior markets,” said one person who is involved in the hiring. The company plans to hire mostly medical representatives, regional managers and area managers by July to boost sales in the rural markets.

With an eye on the rural market, domestic handset maker Zen Mobile will launch about 15 handsets in the below Rs 2,000 range to increase its market share. “A huge number of telecom subscribers are coming from the rural market and that is the market that we are aiming at capturing. We believe that the sub-Rs 2,000 price tag along with good features would be a growth driver for us in these areas,” Zen Mobile Managing Director Mr Deepesh Gupta said.

KEY OPPORTUNITIES FOR INDIAN FMCG SECTOR

Major opportunities for Indian FMCG Sector are mentionedbelow:

Dairy Based Products

India is the largest milk producer in the world, yet only around 15 per cent of the milk is processed. The organized liquid milk business is in its infancy and also has large long-term growth potential. Even investment opportunities exist in value-added products like desserts, puddings etc.

Packaged Food

Only about 10-12 per cent of output is processed and consumed in packaged form, thus highlighting the huge potential for expansion of this industry.

Oral Care

The oral care industry, especially toothpastes, remains under penetrated in India with penetration rates around 50 per cent. With rise in per capita incomes and awareness of oral hygiene, the growth potential is huge. Lower price and smaller packs are also likely to drive potential up trading.

Beverages

Indian tea market is dominated by unorganized players. More than 50% of themarket share is capture by unorganized players highlighting high potential fororganized players.

Insurance

Insurance sector has one of the biggest potential in the upcoming scenario and the fact lies in the statement that only eight to 10 per cent of the rural households are covered by life insurance.

Telecommunication

Telecom sector is one of the booming sectors of the economy.

Challenges in Indian Rural market

Rural markets, as part of any economy, have untouched 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, marketersneed 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: -
a) Understanding the Rural Consumer
b) Poor Infrastructure
c) Physical Distribution
d) Channel Management
e) Promotion and Marketing Communication