Rural marketing What is rural market? Bulk of India population live in villages. With the increase in purchasing power and the demand for wide variety of products by the farmers , the rural market offers new and greater opportun8ities to manufactures of several consumer and industrial products in India. But to tap this vast expanding market, companies need to develop effective marketing and advertising strategies based on their study and understanding of rural consumer behaviour. What is the rural market in the Indian context? There could be several approaches in defining the Indian rural market. It will not be an exaggeration if the whole of India, excluding the metropolitan’s cities, the various district headquarter and large Industrial Township, is considered as the rural market. Alternately all villages with a population of less than say, 40,000 or 50,000 can be considered as forming the rural market. Definition of rural market (old definition) Which is not urban What is urban? Urban means: All locations with: Municipality Corporation Cantonment board or Notified town area All other locations satisfying the criteria: Minimum population of 5,000 At least 75% of the male work force engaged in non agricultural activities A population density over 400 per sq km Rural market (new definition) One having population of less than 5,000 75% of male population engaged in agriculture 2/3 of a country’s consumer live in rural area 50% of national income is generated by the rural population Country is classified in: 593 districts and 638000 villages
Out of the above 32% can be reached by paccka road 68% of rural market list untapped for net accessibility 3.8 million retail outlets in rural India averaging 5.8 shops per village (including hats, stalls, snacks that sells A to Z goods) Characteristics of rural market The rural market of India consists of about 80% of the population of the country. Apparently therefore, in term of the number of people, the Indian rural market is almost twice as larger as the entire market of U.S.A or U.S.S.R. the market is not only large, but very much scattered geographically. It is also as diverged as it is scattered it exhibited linguistic, religion and cultural diversities and economic disparities, and hence it can easily be considered as more complex than the market of a continent as a whole. The market is generally undeveloped as the people who constitute the market are so. Poor standard of living, low per capital income and economic, social and cultural backwardness are the characteristics of the market. The literacy level is generally law even though this varies from one art of the country to the other. Another important feature of the rural market is that, at least in the present contest, it is largely agricultural oriented. Here again the much heard of “green revolution” and the resultant prosperity is confined to a few select areas in the country. As a consequence, the effective demand based for a large variety of consumer items as well as the wealth generating inputs is confined to selected pockets and not spread over the rural markets
Satellite system A concept that has come to be none as satellite distribution system is strongly recommended for adoption in penetrating the rural market. The system works as follows: Stokist get appointed in major towns and the feeder towns. They by and large, discharge the following functions (a) Financing (b) Warehousing (c) Sub-distribution Depending on the size of the stockiest and the product line, the above functions are performing various degrees of perfection. Retailers in and around the feeder town get attached to these stokist. In some cases they function as authories retailers or franchise dealers of the company and are recognized officially as forming as part of the marketing network operating through the stokist. In other cases, they are not franchised dealers, but by custom form the part of the stockiest network. The manufacturer supplies goods to the stockiest either on consignment bases or on cash or credit purchase bases. Te stockiest take care of the sub distribution job on the terms and conditions determined by the manufacturer or agreed upon by the parties. Often the stockiest operate their own delivery van to take care of the secondary transport and local delivery jobs. They are fully responsible for the financial implications. The retailers vary largely among themselves in their volume of business, partly because of their location and partly because of their own capacities for doing business. Over a period of time some retailers grow in stature and impo5rtance. If such retail points also coincide with centers of demand and transportation within the feeder town area the retail points get elevated at the appropriate as stockiest [points. The area of operation of the original stockiest ofcource shrinks on account of this but care is taken to see that his volume of business does not shrink. This is achieved with considerable ease, in practice, on account of the ever-enlarging demand as well as increased market penetration. If 15 or 20 retailers were operating as part of the original stockiest network, 5 or 6 of them get elevated over the period of time as stockiest. Fresh retail points get established simultaneously, out of whom some get attached to the original stockiest and others to new stockiest depending on location, service convenience and other factors. This process continues so long as the market and consumption level keeps expanding and the supply also catches up. Just like the second generation stockiest, a set of third generation stockiest gets established with the passage of time. At any point of time enough number of retail points always hover round a
particular stockiest. Hence the system is known as the satellite distribution system. The satellites can have their own satellite too! The main advantage of this system is that market penetration takes place in the interior so the rural market without the manufacturer having to expand his direct stock point network. If care is taken to see that the motivation of the stockiest is not destroyed due to overzealous and premature expansion of the network, the system will indeed bring ample rewards in terms of increased sales and laser distribution cost.
About the survey Summary Our group of 7 students went to vasai road (east) to conduct a survey on the baby products used in rural area named as gokhivare. This area is situated nearly about 20 km from the railway station. The people here are not much literate, there are at least 25% of the population literacy, hence there is much scope for penetrating into this area for the companies by proper marketing and pricing strategies. This village is further divided into 7 different parts. These villages are as follows: 1. Khalchi ali 2. Shinde ali 3. Baudhwada 4. Bhatpada 5. Devipada 6. Lagipada 7. VINAY. And many other minute huts The data and other information for the project were collected from this area. In this project we would try to show that how the people of these rural villages spend their life. Other queries covered under this project are: What are the products used for small child under the age group of 1-5 years? Which are the companies (local/branded) that have penetrated into the rural area for sale of their products? What are the marketing strategies adopted for the promotion of such products? What are the prices and quantity of their products? How do people choose to use a particular product?
The people and children 90% of the people are below poverty line. Their poverty is such that they cannot even fulfill their basic necessities like food, clothing and shelter. The situation is very bad and needs much improvement. They live in huts given on rental basis from 500-1000.The people of this village do jobs like running rickshaws, labour work etc to feed their family every day. The monthly income of the people here are around 100-400 Rs. Per month. Hence their purchasing power is also very low. The common man’s main income depends on agriculture as it is seasonal and depends only on monsoons. The crop grown in this area is mainly rice. Some of the families have animals like cow, buffaloes whose milk is sold and income is earned. About 75% of the families are below poverty line and cannot met their day-to-day bread. Around 76% of the children are born at their homes itself, as they don’t have the capacity to pay hospitalities. Special lady (dai) does the delivery of the child. Another reason is that hospitals are far away and the roads are not proper.
PRODUCTS The people here are illiterate and hence they don’t have the proper knowledge of which product to be used and which not, they just go for the product which the neighbors use or a educated person recommends them. Only few people go to the doctor for the product recommendation. Mostly the people go for the price which suits them i.e. they purchase the product which have fewer prices. The products purchased by them lasts for almost 1.5 weeks to 3 weeks. The different products used as per our survey are: Products brand no of people using Soap Johnson & Johnson Wipro Hamam Lux Lifebuoy Jo Naam OIL Parachute Coco care Dabur lal tel Rai tel Purnima Parasun POWDER J&J Ponds Red rose Santoor GRIPE WATER Sishuwin Wood words
J&J Wipro HLL HLL HLL local local
88 28 20 14 18 22 34
local local
72 28 40 16 58 30
88 80 16 12
24 44
KAJAL Jai Home made FOOD Home made Cerelac Farex Milk & Parle G Mother Milk Package Food
136
128 10 6 64 20 12
Competition (product wise) There are many companies who have penetrated this rural market such as HLL, WIPRO, J&J etc. the competition is very sever and many more companies are trying to penetrate this rural market such as PONDS, PARLE-G etc. all the companies are interested to attract the rural consumer and obtain monopoly in the market. There are marketing strategies as well as pricing strategies to sell their product. HLL is the leading baby product seller in the rural area but J&J Company is also concentrating in this area as they see that there is much scope for their product. SOAP: The competition is very high in soap products as many companies have come up with this product and gained success in attracting the customers. There is a high time for HLL and WIPRO as there are many local brands available in the rural market. Johnson and Johnson leads the market as their marketing and pricing strategies are very well planned, which has attracted the customers. The capacity of the people here to spend money is very low and hence they mostly opt for low priced items. Single soap is used for at least 2-3 months. The people prefer NAAM the local brand manufactured in the rural area as they are the workers in the factory and know well about the product. OIL: Non-brand/local manufacturer captures the oil market. The sellers sometimes force the customers to buy the local brand. Many a times the price of the local brand is quite low and the customers get attracted towards local brand. Local brands such as PRABHAT, PARASUN, INDO, PANCHATANTRA has captured 33% of the total market. The PARACHUTE brand of is on the 2nd position and has captured 30% of the market. The people here know that DABUR LAL TEL is very good for the babies but unfortunately they are not able
to purchase as the cost is very high. This brand captures 17% of the total market share. A home made product known as RAI TEL is mostly preferred by the people, as it is prepared easily at no higher cost. POWDER: Johnson & Johnson the leading market shareowner has no problem by its competitors, as their marketing and pricing strategies are very good. This company is in this market for several years and very well knows the need of the rural consumers. J&J powder is well known in this area and most people prefer to use this product, as the price is very less. One pack of J&J powder is used at least 4-5 months. GRIPE WATER: there is not much competition as there are only two products under consideration. 80% of the people do not prefer to give gripe water to their child as they are not much aware of this product. Some people use the product by consulting their doctors. KAJAL: JAI kajal is in the rural market from 1973 and leads the market in rural as well as urban area. About 80% of the people make KAJAL in their home as they are very safe and economical. Some people use JAI kajal for their children and some do not use at all. STRATEGIES ADOPTED BY: HINDUSTAN LEVER LIMITED 1. EMPOWERMENT OF WOMEN (creating income generating opportunities for women) PROJECT SHAKTI, their rural initiative, seeks to empower underprivileged rural women by providing them the opportunity to generate income. But as importantly, what it provides them is new found dignity and self-respect. Supported by micro credit, these women form self-help groups and HLL’S rural direct-to-home distributors. This in turn helps them increase their reach, penetration and competition with rural consumers. This initiative has so far benefited women in 4750 villages in Andhra pradesh, Karnataka and Gujarat touching about 7.5 million rural people. It has been widely supported by various developmental bodies and the government. Their vision is to change the lives of women in one-lakh villages by making them shakti dealers. This provides economic opportunities for the underprivileged while creating a distribution and communication channel for our brands to access untapped rural markets with a consumer base of over 100 million Indians.
2. REHABILIATION (helping the underprivileged and specially challenged children lead a normal life) ASHA DAAN in mumbai is a home for poorest of the poor. Managed by the missionaries of charity, it is actively supported by and operates form premises given by us. It has been home to over 20,000 people since 1976. it provides care and compassion as well as food, shelter and medication to the homeless, sick, infants and HIV+ patients. ANKUR in doom dooma plantations- Assam, KAPPAGAM and ANBAGGAM in their Tamil nadu plantations are aimed at physically and mentally challenged children. The projects provide educational, therapeutic, vocational and recreational inputs which help the children to be self-reliant and engage in some fruitful occupation. Their projects have been widely appreciated and ANKUR has also received the lawrie group worldaware award for social progress from HRH princess royal in London. 3. INTEGRATED RURAL DEVELOPMENT (improving the quality of life in backward areas) Providing development opportunities in backward areas is an important part of our philosophy. 28 of their plants are located in the most underdeveloped regions of India spread across 11 political states. Apart from providing local employment they have also made efforts in the development of surrounding villages through their INTEGRATED RURAL DEVELOPMENT program. Communities in over 500 backward villages adjacent to our plants in locations like ETAH and ORAI in Uttar pradesh, have benefited through IRD their initiative span adult literacy, animal husbandry, modern farming, infrastructure development, education and medical care. IRD is also an internal part of our business leadership training program, enabling every trainee to get an in-depth understanding of rural lifestyles, conditions, opportunities and challenges. Their involvement through this has made all their managers more sensitive to the needs and aspirations of rural area.
RURAL CONNECTIVITY Using the network of rural women’s self help groups, the rural connectivity model reaches our products and communication to villages hitherto not reached. The model piloted channel intervention called project shakti in nalgonda, Andhra pradesh in 2001 where self help groups were appointed as shakti dealers distributing HLL goods directly to consumers. Partnerships with several NGO’s and the state government were forged to facilitate the process. The result of the pilot were very encouraging as shakti led to gains in our market share, higher consumption of their categories and increased levels of brand awareness in this markets. During 2002, the model was extended across the states of Andhra pradesh, Karnataka and in parts of Gujarat. Project shakti now works over 6000 SHG’s covering 4750 villages touching over 1.5 million households. In 2003, it will be rolled out to over 100 districts in Uttar pradesh and Madhya pradesh. Work is currently in progress on the I-shakti pilot, an information dissemination service for rural needs delivered through an IT platform. Project Shakti is an excellent case of win-win relationship between the SHG’s and the company. While the company benefits by reaching out to these hitherto untouched markets, the SHG’s get a low risk and sustainable income opportunity. The Shakti dealer generates an income of over Rs 10 per month; more than double their existing household income. It also gives the SHG’s a social identity and the confidence to undertake larger business. This channel has become a source of genuine and correctly priced products for the villagers. Over the next 3 years shakti will be operational in 30,000 villages across 8 states and touching the lives of 10 million households. THE DISTRIBUTION CHANNEL: In as much as the manufacturer cannot on his own look after the distribution right upto the village point middlemen become absolutely essential in the rural context. Also in view of the distance involved and the different sizes of purchases involved, the number of links in the distribution chain or the tiers of the distribution cannels also increases in the rural market. The retailer in the village, the semi wholesaler or authorized dealer at the block level, and the wholesaler or stockiest in the feeder town level all form the forward elements of the physical distribution chain while the manufacturer’s own stock points, both regional and branch operation from the backward elements of the chain. When the manufacturer is not directly operating the forward elements of the channel he can excise the direct control only on a small portion of the total distribution system. On the remaining parts of the system, he can only exercise indirect control. It is in this context that the choice of the cannel and its links as
well, as the choice of individual dealers stockiest and their training development, motivation, etc, becomes a vital important part of the distribution and marketing job in the rural environment. The illogical concept that “middlemen are parasites” should not prejudice the marketer’s decision on distribution channel the test question should be : What are the functions to be performed? Who can perform this function effectively and a lowest possible cost? Who can give the required service? To get a bunch of competent dealers in the rural market is more difficult than in the urban market. Selection is to be made largely from among the following categories a) Members of the traditional trading community; b) Traditional money lenders with willingness to branch off to trade; c) Former land owners who want to branch off to business; d) Educated and technically trained unemployed youth with some financial capacity. Suitable men have to be selected appointed and trained from the above categories depending on the product line and other related factors It is prudent to depend on the traditional channel; of distribution with minor adaptations to suit the specific requirements. By and large, the stockiest play a vital role in warehousing and sub distribution. The rural markets may have to be expanded largely around the stockiest. Semi wholesalers and retailers will take care of the selling and block level and at the village level.
AWARENESS MEDIA: This form of awareness is very difficult as 80% of the families do not have television. The companies find it very difficult to advertise their product for awareness of the people. There is a big screen in the village where movies are shown once a week or month that is time when the companies go for advertising their product as many villagers come to watch the movie. In this type of advertising there is very sever competition as the local brands also contribute to the advertisement. The big brand companies find it difficult to cope with the local brand as the names of local brands are very easy to remember. As media awareness is not possible the companies go in for other marketing strategies. Some of them are listed below: MELAS: Melas play a significant role in rural market in awaking the customers about the new product. Villagers are mostly attracted towards these melas and buy their product at the same time. The melas are held for at least 1015 days. In these melas there are many products for display the customers are
the king in the market they choose the product the like the most. Most of the company’s products are sold in the melas.