VIEWS: 387 PAGES: 76 POSTED ON: 11/4/2009
ARCHIVES Rural Marketing in India - Rahul Mirchandani The Threat of Success - Rahul Mirchandani attempts to understand the ‘other side’ of the impact of success on human behaviour at the workplace. Salesmanship - Getting to the Roots of Objections in Personal Selling Marketing In India - An Overview Marketing is War - Rahul Mirchandani Rural Marketing in India - Rahul Mirchandani A thorough understanding of the rural markets has become an important aspect of marketing in the Indian marketing environment today. This attraction towards the rural markets is primarily due to the colossal size of the varied demands of the 230 million rural people. In fact, the rural markets are expanding in India at such a rapid pace that they have overtaken the growth in urban markets. This rate of growth of the rural market segment is however not the only factor that has driven marketing managers to go rural. The other compelling factor is the fact that the urban markets are becoming increasingly complex, competitive and saturated. Further, the vast untapped potential of the rural markets is growing at a rapid pace. The policies of the government largely favour rural development programmes. This is clearly highlighted by the fact that the outlay for rural development has risen from Rs 14000 crores in the 7th plan to Rs 30000 crores in the 8th plan period. These figures also prove that the rural market is emerging stronger with a gradual increase in disposable income of the rural folk. In addition, better procurement prices fixed for the various crops and better yields due to many research programmes have also contributed to the strengthening of the rural markets. Thus, with the rural markets bulging in both size and volume, any marketing manager will be missing a great potential opportunity if he does not go rural. Importance of customs This however raises a fundamental problem of fathoming the differences between urban and rural markets in India. This is of paramount importance in the Indian marketing environment as rural and urban markets in our country are so very diverse in nature, that urban marketing programmes just cannot be successfully extended to the rural markets. The buying behaviour demonstrated by the rural Indian differs tremendously when compared to the typical urban Indian. Further, the values, aspirations and needs of the rural people vastly differ from that of the urban population. 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. Another contrasting feature is the precision in the assessment of purchasing power of the consumers. In urban markets, income levels are generally used to measure purchasing power and markets are segmented accordingly. However, this measure is not adequate for defining the purchasing power in rural areas because of the single fact that rural incomes are grossly underestimated. Farmers and rural artisans are paid in cash as well as in kind. However, while reporting their incomes, they report only cash earnings, which then affects the calculation of their purchasing power. This is the reason why marketeers are often surprised to find that their products are sometimes consumed by people who, according to their surveys and estimates do not have the purchasing power to do so. Every marketing manager must therefore make an attempt to understand the rural consumer better so that he can plan his strategies in such a manner that they produce the desired results. Changing the marketing mix Unfortunately, most marketers of today try to extend marketing plans that they use in urban areas to the rural markets and face, on many occasions failure. They should adopt a strategy that appeals individually to the rural audience and formulate separate annual plans and sales targets for the rural segment. Changes must be made in the marketing mix elements such as price, place, product and promotion. Corporate marketers should refrain from designing goods for the urban markets and subsequently pushing them in the rural areas. 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. For most companies wanting to enter the rural markets, distribution poses a serious problem. Distribution costs and non availability of retail outlets are major problems faced by the marketers. But if one takes a closer look at the characteristic features of the rural market, it will be clear that distribution in fact, is no problem at all. In rural India, annual melas organised with a religious or festive significance are quite popular and provide a very good platform for distribution. Rural markets come alive at these melas and people visit them to make several purchases. According to the Indian Market Research Bureau, around 8000 such melas are held in rural India every year. Besides these melas, rural markets have the practice of fixing specific days in a week as Market Days when exchange of goods and services are carried out. This is another potential low cost distribution channel available to the marketers. Also, every region consisting of several villages is generally served by one satellite town where people prefer to go to buy their durable commodities. If marketing managers use these feeder towns they will easily be able to cover a large section of the rural population. While planning promotional strategies in rural markets, marketers must be very careful in choosing the vehicle to be used for communication. They must remember that only 16% of the rural population have access to a vernacular newspaper. Although television is undoubtedly a powerful medium, the audio visuals must be planned to convey a right message to the rural folk. The marketers must try and rely on the rich, traditional media forms like folk dances, puppet shows, etc with which the rural consumers are familiar and comfortable, for high impact product campaigns. Thus, a radical change in attitudes of marketers towards the vibrant and burgeoning rural markets is called for, so they can successfully impress on the 230 million rural consumers spread over approximately six hundred thousand villages in rural India. The Threat of Success - Rahul Mirchandani attempts to understand the ‘other side’ of the impact of success on human behaviour at the workplace. Personal career success can be a grave threat to those who have climbed to the management ranks. Unfortunately, research has shown that such success often leads to inflexibility as one tends to lose the motivation and courage to change. With time, we tend to lose the ability to distinguish the new from the old, the unique from the regular. It is the very "busy-ness" of managerial life that contributes to the problem. The reality of most executives’ days is not like that implied in management text books, neatly divided into periods of planning, controlling, structuring, staffing and directing. Rather, it is a seeming chaos of time, talking in many short conversations covering a multiple of topics, broken by five or so previously scheduled meetings per day. On an average, studies show that managers talk to 25 different people, which takes over 60 per cent of their time (perhaps 13 hours per week on the telephone!) And the day is jumpy: the average interval of quiet time without interruption is less than 10 minutes; the average incident, such as talking to someone, lasts about two minutes. Under such conditions, an executive’s day is extremely fractionated, devoted mainly to responding to various telephone calls, visitors and meetings. His or her life is dominated by the present and by fighting immediate fires. The future shrinks in apparent importance because there is no real time to deal with it. Now making transitions from short-run emergencies to longer-run challenges is tough; ten minutes alone are helpful only for work on small, immediate issues. They are unsuitable for longer-range, less-structured projects. Many executives simply do not believe they have up to 90 minutes alone each day; they feel that they scarcely have enough time to start a new task, drink a cup of coffee or even take a deep breath, before being interrupted by a ringing telephone, an unexpected fax or an uninvited visitor. Continual dominance by immediate demands means inadequate time for future-oriented reading and thinking. As a result, many executives tend to be narrow in their interests, concentrating on technical and business reading. They take insufficient time to explore the different. They lose track of who they are and what they believe, losing touch with their own values and aspirations. They find it difficult, therefore, to initiate fundamental changes. The future is never confronted. Short-term performance measures also encourage executives to concentrate on the ‘now’. They feel that they are evaluated, rewarded or punished for their current performance, based on annual measures of costs, earnings and growth. In the long run, they seem to follow the words of John Meynard Keynes : "In the long run, we are all dead." Every competitive business system requires short-term performance results. Nonetheless, given nationwide and world-wide competition, performance tends to be measured over a limited lifespan. Concentrating on the present is often rewarded, while sacrificing the future tends to be ignored. Short-term busy-ness contributes to habits and pre-occupations that are the ultimate threats of success. As we master our jobs and get more experienced, we tend to behave without thinking, a sort of sleepwalking through our lives allowing our perceptive skills into atrophy. One study of 2000 executives concluded that the single most important attribute of those who handled success well (and were able to maintain it) was their ability to embrace change. To stay so vital requires maintaining the ability to perceive uniquely, to see differences. Experience can be a great source of learning. It can certainly save a lot of time as we fit current problems into the learned categories of the past. Unfortunately, it can also waste time and cause disaster if we categorise issues prematurely and erroneously. You must have heard of people who have worked for 20 years, but do not have 20 years of experience. They merely repeated the first year 20 times. Such people may treat a new problem as if it were like the past ones, when in fact it is new and unique. Keeping alive this ability to perceive deeply requires frequent brain storming. This means building into our daily lives regular repetition of the process of letting go of the known and confronting the unknown for the sake of change. Every three to six months, executives should define an innovation objective by focusing on a major aspect of their job and putting it on trial. Could it be eliminated? Could it be ignored until someone complains? Or could he experiment with changing it? Numerous senior executives have said that they never really felt comfortable in their careers until they ‘ transcended’ their ambitions. It is not that they give up the race, but they become less concerned with winning and happier with merely running. The key to this turning point lies in accepting and understanding oneself and giving up the tyranny of external evaluations. The paradox for general executives is that they need to relax a little in order to work more effectively. They need to relax the intensity of their work on present problems and begin to spend at least some of their time on addressing themselves to future possibilities. They need to start valuing the future more. Executives tend to avoid thought about the future because it is ambiguous. Clear-cut short-run problems may be difficult but they are satisfying to solve. In contrast, formulating wishes about the future, conceiving what we want the future to be and perceiving the future as history in the making, is difficult and threatening. We tend to fear the kind of time necessary for such thought. It must be open, unstructured and seemingly non-directed attributes counter to time-haunted, efficiency-minded people. Wide open time, like space, can be frightening. In addition, incorporating concern about the future into the present necessitates clarifying what we really want. And this means defining the fundamental values of management, organisation and society. An old American proverb states : "All that is seen is temporary." The present is not unimportant nor is the world an illusion. But future oriented, time- transcending executives should have the detachment of people who accomplish great things while refusing to be devoured by current events. Salesmanship - Getting to the Roots of Objections in Personal Selling. Every salesman faces a multitude of objections during and after their sales calls. Articulation, product knowledge and other ‘marketing behaviour’ would become less significant if sales personnel are not adept at handling customer objections. Being prepared to handle a variety of objections makes a sales executive more confident and enables him to act with alacrity. Consumers are impressed with sales personnel who can convincingly handle objections; they look forward to a mutually beneficial didactic relationship. So now it becomes obvious in these days of brand proliferation (where even leaders may find themselves ‘embarrassed’ by small players) handling consumer objections should be given an important role in training the sales force. It therefore, becomes very important to find out why consumers raise objections. Objections may not be raised in the typical tone and tenor with which they are raised in most facts of life. Infact the slightest (but sensitive) form of objection could just be a nod of disapproval. Thus, a sales executive has to get through the sensitivity raised keeping in mind the different forms of objections : • Image based objections : Consumers may be used to certain brand names for several years. They may be using them for years. Such a situation is faced by salesmen handling new brands with which consumers are unfamiliar. Though it is possible that several reactions could be expected from the sales executive, it is important to note that the reaction should not be overly emotional and irrational. • Loyalty based objections : Consumers in this category are more difficult to handle as they have already used other brands. There is an emotional link established between the buyer and the brand. The seller in such a situation could try to persuade the buyer into making a trial purchase without putting forth the replacement possibility. Another alternative could be of reasoning out the comparison between the ‘old’ and ‘new’ brand with objective criteria. • Performance based objections : If a prospective buyer is fully satisfied with the performance of his existing brand, he may have little incentive to try out new brands. Here, the seller could concentrate on other aspects of the marketing mix elements and attempt a ‘modified buy’ situation in which the buyer expects a better deal on other aspects of the deal and not just on performance. • Need based objections : The buyer may be convinced about the quality of the product, but may still feel that he does not have a need for the product (especially so in case of new product concepts). The ‘need-offering’ match will need to be highlighted. The best way to combat this objection is to use innovative and persuasive advertising – a medium known to make one buy even things that he does not need. • Experience based objections : A customer may raise objections because he may have had a bad experience with the brand or the company in the past. It could be in relation to quality, after sales support or delivery. The seller in this situation needs to carefully note down details of the complaint and provide genuine solutions by highlighting the objections to the top management. This customer-oriented approach reaps long term gains. • Credibility based objections : The buyer may need an assurance about a brand new to the market, or launched by a new company. The seller in such a situation should be in a position to substantiate all the claims he has made during his sales call. • Resistance based objections : The aggressive enthusiasm of the seller may get the better of his discretion. In his anxiety to close the sale, he may psychologically pressurize the buyer without intending to do so. The buyer feels manipulated and gets a feeling that he has been sold something he doesn’t want. A salesman should be sensitive to such situations and avoid pressurising buyers. • Price objections : Many buyers are wary of paying too much for a product or service. Price could be discussed after the features, uses and benefits of a product are reviewed. The buyer should be presented with a cost-benefit analysis and be convinced that good quality tends to carry its own price tag. A seller should however never be apologetic about the price. Handling customer objections is an art, which needs to be cultivated and perfected over time. When a seller expects an objection, he should get mentally prepared to overcome it, however trivial it may be. MARKETING IN INDIA In India, most marketers come down to the scene just when the product is ready for launch. And that's precisely why many have burnt their fingers. The true concept of marketing starts way fore there is a product - telling customers what the product is going to be - and continues long after sales are achieved in order to keep in touch with the customer. In fact, if you do good marketing," according to Philip Kotler, the guru of marketing, "you don't have to work hard on selling." On the Indian marketing scene, Kotler feels that while companies in the country may spend crores on specialist marketing wings, hiring the best brains out of the management institutes, that's not enough. It isn't enough to just have a good unit unless it liases with all the other departments and the entire organisation regards the customer as the ultimate boss. "Make happy employees and they make happy customers," goes his logo. The only way to create marketing awareness is to have a kind of public relations approach. Kotler adds, "Public relations is embryonic as a function in India. It is not used enough. They use salesmen to close an order. He further says, "Select examples of real marketing that constitute the accomplishments of marketing like producing value, finding out what the customer wants and creating the goods that are of value to the customers." As to why India hasn't emerged a major player on the world arena, Kotler feels that licensing is the major hurdle for any international marketer to make a foray here. Further, he says not many manufacturers go after volume. "Segmentation is the key. You don't trust one edge because you are likely to be attacked. So build a portfolio of niches." The model that Kotler recommends for India is a "bend of elements that fit the Indian situation" like gradual opening up of markets, improving on the quality of products and services, making it easier for multinationals to come to India, privatisation, deregulation of banks, getting rid of the licensing system and making the internal marketplace more competitive. Welcoming and encouraging Multinationals with skills and products that are absent in the Indian economy should also help. He warns that we shouldn't be deceived into thinking that India will thus benefit as local industries may not always be as competitive. As India is a large country, to manage it in totality would be tedious. So, energy should be released at the local level. Kotler argues, "Cities are like products. They should develop economic plans centered around what competitive advantages they have in the Indian marketplace, in that it should create wealth to export to other cities and even abroad. It's not a question of managing India, but cities mange themselves better." Marketing is War - Rahul Mirchandani. The true nature of marketing today is not only serving your customers; it is outwitting, outflanking, outfighting your competitors. In short, marketing is war where the enemy is the competition and the customer is the ground to be won. When we formulate marketing plans, we carefully dissect each participant in the marketplace. We then develop a list of competitive strengths and weaknesses as well as a plan of action to either exploit or defend against them. Take a quick look at the business pages of any newspaper. You will invariably find the bloodthirsty language of the CEO’s and top marketing managers of companies. "We’ll kill them", "This is a life-or-death struggle". These are not quotes from a leftist guerilla or a right wing dictator. These are typical quotes from business leaders discussing forthcoming marketing campaigns. Even the language of marketing has been borrowed from the military. We launch a marketing campaign. Hopefully, a breakthrough campaign. We promote people to higher positions. We report gains and losses. From time to time we go into the field to inspect and review the progress of the troops (the sales team). We have even been known to pull rank. It is clear that we are marketing in a new era. Competition is getting brutal.The name of the game has become "taking business away from somebody else." Marketing battles are not fought in the customer’s office or in the retail outlets. Those are only distribution points. Marketing battles are not fought in cities, towns or villages. Marketing battles are fought inside the mind. Inside your own mind and inside the mind of your prospects. The mind is the battleground - a terrain that is tricky and difficult to understand. Marketing wars are totally intellectual wars with a battleground that no one has ever seen. It can only be imagined. Reconnaissance in marketing wars is thus, extraordinarily difficult. One way to reconniter the human mind is the use marketing reserach. Done correctly, it can be used to look inside and contour the mind of the average prospect. Mapping the mental battleground can give you enormous competitive advantage. When a customer uses a brand name (say Chelamin) in place of a generic name (in this case Chelated Zinc), you know that you have won the battle in that customer’s mind. Similar to us saying "Get this Xeroxed" which clearly shows that you associate ‘Xerox’ (the company) as synonymous to ‘photocopying’ (the service). There is no one way to fight a marketing war. And knowing which type of warfare to fight is the first and most important decision you need to make. When a company has a dominant share of the market, the way they can win is by not losing their market share to any of the smaller, existing player or new entrants. The engage in defensive warfare to defend their large chunk of the market. There are cases when the company is a strong No.2 in the market and wants to launch an attack to gain market leadership. Who should it attack ? The temptation is to prey on the weak rather than the strong competitors. Yet the opposite is closer to the truth. The smaller the company, the harder it will fight to protect the small share it does own, with tactics like price cuts, discounts, lengthened warranties, etc. Never pick a fight with a wounded animal. It is more advisable to launch an offensive attack on the weak points in the market leader’s product line. There is an old African procerb : "When elephants fight, its the ants that take a beating." Som companies cannot afford to pik a fight with the No.1 and the No.2 players in the market. They simply do not have the resources to launch a sustained attack. Such companies should avoid the battle between the market leaders and launch flanking attacks. In other words, you don’t attack the mountain head-on but go around it. This is usually the most effective and least expensive type of marketing operation. Still other playrs have tiny market shares of their own. What can such companies do ? All they can do is become a guerilla. These organisations should use the classic guerilla tactic - find a market segment big enough to be profitable, but too small to be tempting to the leader. In other words, select a territory small and secure enough to defend. We’ve never seen a company that didn’t consider itself a leader. But companies dont create leaders customers do. It is who the customer perceives as the leader that defines a true category leader. Then there are pretender to the throne. You can never "will" you’re way to the top. Pretendership has no place in developing marketing strategies. A good marketing manager must have a clear picture of the actual situation so that he can lead from the truth. Fool the enemy, never fool yourself. Because of a leadership position that Aries enjoys, for example, in the micronutrients market, we have a strong point in the mind of the prospect. The best way, according to marketing gurus, to improve your position is by constantly attacking it. In other words, introducing new products or services that obsolete existing ones. The competition then constantly struggles to catch up. A moving target is harder to hit than a stationery one. Taking our example, Aries launched Agromin HiSol, a move that attacked our own Agromin Foliar Spray. But the product was a marked improvement over the current formulation and took the competition by surprise. In the minds of our customers, HiSol made an impression - we won the battle of the mind with product innovation. In today’s competitive market, every competitor makes their own moves. But leaders cannot counter every move. He who attempts to defend everywhere defends nowhere. Effors must be made to counter only strong competitive moves or just the ones that are most likely to succeed. Further, a leader cannot waste time monitoring the situation to see what happens before making its move. Too often what happens in the market happens too fast. All of a sudden it is too late to get into the new ball game. To play any game well, you have to first learn the rules, or principles of the game. And second, you have to learn to forget them. That is, you have to learn to play without thinking about the rules. Similarly, good marketing managers should know the rules so well that they can forget about them and concentrate on the opponents. The problem with marketing today is not just the lack of rules. The biggest problem of all is the failure to realize that one ought to have rules in the first place. As for all of us in the field, there are many more battles to fight and many more victories to win. AIDA AIDA is an acronym used in marketing that describes a common list of events that are very often undergone when a person is selling a product or service: A - Attention (Awareness): attract the attention of the customer. I - Interest: raise customer interest by demonstrating features, advantages, and benefits. D - Desire: convince customers that they want and desire the product or service and that it will satisfy their needs. A - Action: lead customers towards taking action and/or purchasing. Nowadays some have added another letter to form AIDA(S): S - Satisfaction - satisfy the customer so they become a repeat customer and give referrals to a product. NEW DEVELOPMENT Later evolutions of the theory have edited the AIDA steps. New phases such as conviction (AIDAC) and satisfaction (AIDAS) have been added. If you combine these phases with the AIDA-Formula you get AIDACS. One significant modification of the model was its reduction to three steps (CAB): Cognition (Awareness or learning) Affect (Feeling, interest or desire) Behaviour (Action). Along with these developments came a more flexible view of the order in which the steps are taken, suggesting that different arrangements of the model might prove more effective for different consumer-to-product relationships. AIDA sales funnel description: In 1898, the American advertising and sales pioneer, E. St. Elmo Lewis developed a practical sales tool using the latest Scientific Management insights. He created his AIDA funnel model on customer studies in the US life insurance market to explain the mechanisms of personal selling. Lewis held that the most successful salespeople followed a hierarchical, four layer process using the four cognitive phases that buyers follow when accepting a new idea or purchasing a new product. The AIDA model describes the basic process by which people become motivated to act on a purchase and is based on external stimuli from sales representatives. This motivation to make a purchase depends on: 1) 2) 3) AWARENESS of the existence of a product or service; INTEREST in paying attention to the product's benefits; DESIRE for the product. Lewis held that the fourth stage or mental state, ACTION, was a natural result of moving through the first three stages -- that desire leads to action, i.e. 1. Are you talking to me? 2. Why are you talking to me? 3. Good idea, but do I really need it? 4. What will I have to do to get it? In 1911, Sheldon extended the model with a fifth phase, 'permanent Satisfaction' to stress the importance of repeat sales. In the following decades, the AIDA model served to study how advertising affects consumers and was the basis for numerous motivational driven consumer behaviour research models such as ACAIP, ACCA, and CAB. The AIDA funnel model was to be used as the backbone for structuring an organisation's sales. The sales funnel helps sales personnel to better target a client by basing their actions on the client's position in the funnel. Salespeople should seek different sales objectives for their suspects, their prospects and their customers. The aggregated information from the sales funnel allows a firm to construct an overview across sales representatives and departments and to deliver better structured sales forecasts. Pros: The AIDA model allowed salespersons and managers to monitor their personal sales activity progress. Structuring the organisation's sales funnel according to the AIDA model's four hierarchical layers permits the insertion of quantitative conversion rates. The model demonstrated to sales people that timing is important in sales processes since the mental state of prospective buyers changes over time. The buyer requires different information from the sales person at each state to be able to move to the next phase. The model formed the basis for measuring the effect of advertising. It is the foundation for what became known in consumer behaviour research as the 'hierarchy of effect' models. Cons: The model takes the view that the sales person rather than the buyer has the most control in the interaction. Later research showed that buying and selling are the same process whose outcome is determined by the total sales process rather than the actions and traits of the individual actors. The model can be applied too strictly: its goal is to stimulate the buying action from potential buyers, not to lead them through five stages at all costs. AIDA as a blue print for a sales presentation requires the salesperson to talk disproportionably to keep feedback from the potential buyer from disrupting the flow of the sales process. The key for successful AIDA implementation is to understand the state of the prospect. This requires skill and experience on the side of the sales person. Later research showed that buyers change their mental state in a more dynamic, complex way than sequentially. Cascading Advertising Principles into Course Development Learner apathy is there to stay! Millions spent on setting up an LCMS for global delivery of e-courses and a couple of hundreds sign up! 1000 licenses bought for a specific course and a handful go through it in a year! Custom-built courses created at huge costs and there are no takers! Are these just one-off horror stories or ground reality? For every success ful e-Learning case study there are many more that don't make the grade! And, what's more, even after making it mandatory, it is difficult to get 100% sign-up. Or even worse, get more than 50% completion of the course. Rather than play the blame-game, e-Learning customers and vendors globally have come to the conclusion that learner apathy is there to stay. Drastic ideas have been thought up and radical changes brought about - to gain some successes. Continuous innovation based on a deeper understanding of "what will tickle the learner's fancy", is expected to help reduce learner apathy as we go along. Before getting into how advertising can help, let's recount the reasons for learner apathy, from two different angles: first, the learner as a corporate emplo yee and next, as an adult. The Corporate e-Learner: The missing WIIFMe Research indicates that the typical corporate e-Learner doesn't own up to e-Learning, for he or she believes that: This is all additional work to be done, for no pay and no benefit They have been doing well so far without this, and can continue to do so They can't find time to do this on top of their jobs Bosses will get upset with their taking time away from the job on hand to learn something that "may be useful" That these courses are anyways "boring" To tackle these issues of W hat's I n I t F or Me (or WIIFMe), most corporate have adjusted their reward and recognition mechanisms to promote e-Learning. They have run awareness campaigns to educate the learners and their bosses about the power of e-Learning and the benefits that can accrue to the individual, the team and the corporate. The "boring" part has been tackled by jazzing up the delivery and deploying more and more technology to make e -Learning interesting. However, this has at best, worked in fits & starts. The Adult e-Learner: The "Y" Generation The global ICT explosion has changed forever the way we receive, process and act upon information. Reading habits are down and viewing habits are up - a host of TV channels, thousands of video games and the Internet, itself has changed the way adults basically think, assimilate information and learn. The expectation is one of action learning in an online context - not just learning from the course, but from others on the course about their experiences & learning - they are comfortable with e-mail more than mail, voice chats over the web than teleconferences and collaborative document creation online than working on task -forces The expectation is one of highly interactive learning - being used to action-oriented video games that call for hair-trigger responses, anything that is static, such as page-turners or pop-up-quizzes is seen as boring. Even simulation without successive challenges thrown in is not seen as engaging beyond a certain point The expectation is one of learning by experiencing - no more will just presentation of facts and concepts do - these need to be experienced and have to dovetail into past experiences to make fresh learning Finally, the expectation is one of learning by fooling around - highly regimented and structured learning is typically rebelled against and they expect to figure things out for themselves by trying out things and experimenting So, what's missing from current generation of e-Learning? Let's see if our marketing brethren have some answers. Can we learn from our Marketing brethren? We cannot expect most learners to own-up a course right away. A chain of increasing interaction and engagement needs to take place, along the lines of: Attracting them to the course Interesting them to explore the course Creating a desire in them to get on with the course, and finally Getting them to own-up the course sufficiently to complete it This is not very different from what our marketing friends need to do to ge t customers hooked to their products. All marketing activities fall in line with the 4 Ps of marketing, originally propounded by Kotler: Product - designed to satisfy customer needs and also includes another P or packaged aesthetically Price - offering value for money Place - made available at the right place at the right time in the right format Promotion - making customers know about the product, selling the benefits and not features or attributes and attracting customers to buy now - including offering freebies, tasters etc. Quite a few of the key principles that marketers deploy to cover these 4 Ps is deployed in e Learning too. To list a few of these: Course design based on learner needs Aesthetically designed courses Various pricing options to ensure that the deal does not falter on price Being online, distribution is never an issue Free tasters to get learners to sample first Technology driven marketing of courses to the target audience and many more such activities But, there is a lot to learn from our marketing friends, especially about " emotionally connecting to the customer ". This will become the key to engage the apathetic learner and make him or her into a motivated learner. As it is, e-Learning suffers from low information levels, since it is adjusted to what a learner consciously can absorb or accommodate at any given point in time. This is partly offset by giving the learner access to a vast amount of content or courses that normally gets published. But there is little to no emotional connect with the learner, which is the basic minimum must to engage - if you ask any marketing person. A number of lessons are available from advertising for incorporating in course development. Advertising communicates to the target customer, what a particular brand is all about. It either entices and encourages the customer to start-off an engagement or solidifies a pre-existing relationship. e-Learning is about communicating too and some of the principles of advertising can easily be adapted to make effective & engaging content. Learning from the Science of Advertising: AIDA model The key learning from the various models used to explain a buy decision is that the decision is not instantaneous. The process of how an ad works is said to be sequential: Awareness - the ad must first gain the target consumer's attention Interest - the ad must next arouse the consumer's interest for the product or service Desire - the consumer must then desire the product or service Action - finally leading up to a purchase by the consumer AIDA is a very elementary model that has been expanded and modified to explain better how ads work and help draw up guidelines for ads. For instance, John Caple (a great copywriter) recommends following a sequence, when writing advertising c opy: o o o o o o o Get attention Hold attention Create desire Make it believable Prove it's a bargain Make it easy to buy Give a reason to buy now These principles are not true of only product advertising. They are the same for any from of advertising, as clear from a recruitment advertising case that we have worked out in the past. If we look at the recruitment ad above, that is looking to hire a team of software engineers, the copy, visual treatment, and headline - all of them individually may seem out of place. However, the project had to do with launching a new software tool before the competition did. The deadline was just over a month for 40+ engineers to deliver something a "sane" company would probably take half a year. The hires therefore had to be "insane" engineers if you could call them that - those who would probably work 20 hours out of 24 everyday, those who thrive on crazy challenges and those who felt stifled in existing software houses which go about doing things methodically. The ad worked very well indeed - 42 engineers were hired the same day that the ads were released across India; the team came on board soon and delivered the product well ahead of competition to become the first-movers in the space. This ad had all the components of AIDA - The visual and headline got instant attention due to the shock-value The overall treatment got the "right" targets interest ed in the company for it was different The copy highlighted that it was a difficult but exciting job and provoked desire by challenging only the "fittest" to apply; and The deadlines brought about a sense of urgency to act today We have attempted to build in some of these principles learnt from our advertising practice into designing the content for the electronic courses that we creat e for our customers. The following case studies will help highlight our 4E model - Entice - Enamour - Engage - Enable, which is patterned after the AIDA model. Deploying AIDA in e-Learning: 4E Model The 4E model, similar to AIDA, is a sequential model to engage a learner. Entice - First, hook the attention of the learner and entice him or her to start-off the engagement process Enamour - Next, make them experience something different from what they expect to typically learn from an online course; so that they become interest ed in going forward Engage - All the content that follows in the learning hour has to create a desire in the learner to continue further and take them to completion Enable - All content deployed has to have an action-orientation, i.e. be linked to the learner's job; allow the learner to experiment, fool around and learn from it. This again reduces chances of a drop-off midway during the course It is not always possible to achieve all 4 steps in one hour, especially so if the course is very packed or the learning objectives for the hour are too complex. Our experience shows that by sticking close to the model, we get far better responses from learners - in terms of enrolment and completion rates for voluntary programs and feedback such as "the course was useful" instead of "course was interesting". Case: Problem Solving Tools & Techniques course for India's marquee software services firm Step: Entice - software engineers are extremely comfortable with online learning. But they hate to enrol for any course, which does not increase their skills in coding or learning a new software language. In corporate environments where continuous education is voluntary and employees are expected to be self-actualised enough to enrol on their own, this can be a challenge. To hook such difficult learners, we challenged them to start-off on an animated game of helping a fish made up of matchsticks escape from a crocodile under time pressure. All they had to do was move three or four matchsticks to get the fish to face away from the croc. It would then escape. They were given three chances to solve it. Step 2: Enamour If the first task set was one of action-oriented problem solving, the next one was a mental challenge - or an "orientation" challenge, as shown below. At the end of this SCO, the learner was sufficiently challenged and interested in knowing more about the course and was proceeding to hit the next SCO in sequence. Step 3 & 4: Engage and Enable Every problem solving tool or technique was treated a l ittle differently; but the underlying principle was one of allowing the user to learn to use the tool or provoke thinking by challenging and by connecting to their job. Some examples: In a SCO on Covey's Quadrant that helps to prioritise problems, learners were encouraged to enter their own data on screens and allowed to publish a Covey's Quadrant. This way it connected to their daily job, showed them how to use such a tool and the importance of using such a tool instead of intuitively prioritising their problems. To get the learners appreciate and accept "Is / Is-not Matrix" as a useful tool that they could deploy on the job, we put up an interesting but silly problem with seemingly no logical answer. Most learners enjoyed this challenge and could not figure out how to solve it. More importantly they could connect the technique to their daily job of de-bugging software code. Many hundreds of engineers have been through the course and the feedback has been excellent, to get us a preferred e-Learning partner status. Case: Course on Motion Pictures for MBA students of a Middle East based University Step: Entice - since it had to do with movies, we worked on using a sequence of cinema posters to get them to start-off on the course. Step: Engage Activities were embedded within the course that allowed them to pick up key learning in an interesting format that also ensured that they would remember. A case in example is a Crossword that we built in to the course. Some other examples: To engage learners of a 100-hour mandatory, online Insurance Agents Training course, we deployed a mascot in the form of an "oldish" looking agent. He turned out to be a mentor, a coach and a facilitator at various points of time during the course. This was a must from the course design, since the target learners were spread across the breadth and width of India, with most coming from small locations. The typical learner was High school pass, minimal English skills and culturally from the backwaters of India. Over 5000 agents have successfully completed the course with most of them now as certified agents after passing an offline certification exam conducted by a Government body For a course on business basics for managers of a corporate, we created a story -telling format for the course. We created a story with three friends from different companies getting together to form a new company and working their way through building up their business over 4 learning hours. This directly linked to the aspirations of most target learners since all of them dreaming of a unit of their own, sometime in the future. And got us motivated learners! In conclusion: There is a lot to learn from good advertising that pulls customers towards the product or service on offer. Similarly, good e-Learning must draw the learner towards the course. Adapting shamelessly from advertising can help, especially to emotionally connect to target learners. The 4E Model - Entice - Enamour - Engage - Enable is one such model to achieve the Big E - Educate learners! LG Electronics eyes rural areas to boost market share Our Bureau THE consumer goods major LG Electronics India Private Ltd is eyeing a Rs 3,000crore turnover in the current year, a jump of nearly 40 per cent over its performance in the previous year (January to December). The company is also planning to establish a second factory, either in southern or western India, at an investment of about Rs 100 crore to increase its market share and quicken the response time. Speaking at a news conference in Coimbatore today, Mr Kwang-Ro Kim, Managing Director, LG Electronics, said the company clocked a turnover of about Rs 2,200 crore during January-December 2001. During 2002, he expected it to log a sales of Rs 3,000 crore. He said in the first four months of this year (January-April), LG Electronics was able to notch up sales of Rs 1,000 crore compared to Rs 700 crore in the corresponding period last year. Since the major festivals like Diwali come in the last quarter of the year, he was confident of reaching the sales target of Rs 3,000 crore for the full year. He said in 2001, of the total turnover, TV and home appliances segments had a share of about 40 per cent each, while computer peripherals accounted for the balance 20 per cent. He said there was huge untapped potential in the rural market for electronic goods. Compared to other brands like BPL, LG's presence in the rural market was less. Currently, the share of rural and urban markets was almost equal in the performance of LG. He was planning to increase the share of the rural market to 60 per cent. Mr M.S. Shabbir, Branch Manager, LG Electronics India, Coimbatore, said his company has certain products like lower end frost free fridges and TVs for mass marketing in rural areas. Besides, the dealer network in rural areas was also being strengthened to cater to this segment. He said there was good potential in rural areas even for high-end products in the refrigerator segment. The LG Electronics MD pointed out that though the population of China was only about 20 per cent higher than India, the penetration level of TVs was far higher in China. Because of steeper levies, a comparable TV model costs 50 per cent more in India than in China. If the levies were reasonable, the penetration level would substantially increase in the country. Mr Kim said currently, LG Electronics had a factory in Noida near Delhi and its market presence was more in the North and East. To cater to the markets in the South and the West, LG was planning to establish another production unit in either of the two regions. Several locations such as Chennai, Hyderabad, Bangalore and Pune were under consideration and a final decision would be taken before June. He said it would take a year to complete the construction at an investment of $20 million (approximately Rs 100 crore). It would produce colour TVs, ACs , washing machines and microwave ovens. Mr Kim was confident that in the next five years, LG Electronics would record such a growth volume that it would necessitate the establishment of a third production unit in the country to meet the demand for its products. He said LG Electronics recently achieved a cumulative sales turnover of Rs 5,000 crore since its entry into the country in 1997, which was the fastest Rs 5,000crore turnover reached by any company in the Indian consumer electronics and home appliances industry. LG Electronics India's goal was to reach overall market leadership status by 2003 and make the Indian subsidiary an export hub for many South Asian countries. TV firms gear up for rural market When Oscar Television made it to ORG-Gfk's list of 10 top-selling colour television brands earlier this year, there was one person who wasn't satisfied. Arpita Khurana, Oscar's youthful director, insisted that the ORG-Gfk survey didn't tell half the story because it collected figures only in the metropolitan areas. Oscar, she said, was flying off the shop-shelves in semi-urban and rural India. What's more, Khurana predicted that semi-urban and rural demand would zoom by around 80 per cent this year. That, say her rivals, may be an overestimate. But the other colour television and consumer electronics manufacturers aren't disagreeing loudly. In fact, they are also gearing for a buying spree in rural and semi-urban India. The industry association too is bullish about sales this year. Cetma (the Consumer Electronics and TV Manufacturers Association) has projected sales of 10 million sets in 2004 compared to around 8 million to 8.25 million TVs likely to be sold this year. That's compared to 6.7 million sets sold in 2002. Cetma believes that between 8 million and 8.25 million TV sets will be sold this year compared to 6.7 million last year In 2002 63.1 per cent of sales came from cities and smaller regions with a population of less than 1 million Companies like LG and Philips are almost doubling distribution networks in the rural areas To attract rural buyers 14-inch televisions are being sold for as little as Rs 3,500 Most amazingly, about 70 per cent of this will come from the semi-urban and rural market. "This means the rural market will grow by as much as 25 per cent compared to 5 per cent growth in the urban markets," says an association executive. What's fuelling the rural optimism? There's a growth in awareness, say the manufacturers. Also, they have boosted penetration in semi-urban and rural areas. And this year there have been good monsoons followed by good harvests. Diwali sales have been robust and the feel-good factor in the economy is boosting buying. It's important to keep one thing in mind. This isn't the first year when rural demand has climbed sharply. Market research firm Francis Kanoi recently said in a report (on consumer electronic market growth and projections) that the top seven metros contributed 24.1 per cent of total sales in 2002. That was followed by towns with a population of over 1 million where 12.0 per cent of the sets were bought. The remaining 63.1 per cent of sales in 2002 came from cities and smaller regions with a population of less than 1 million. The tilt towards the smaller towns and rural areas is becoming more pronounced with each passing year. This year, for instance, it has been reckoned that buying in the top seven metros will contribute only 22.6 per cent a fall from last year. Smaller towns and regions will be 64.3 per cent of total sales. "Barely five years ago, the contribution from semi-urban and rural markets for us was 20 per cent. Today we get 70 per cent of our volumes from these markets," says Chandramani Singh, product group head (consumer electronics) at LG Electronics India. But another subtle change is taking place this year, according to industry analysts. Until now, the market transformation has happened primarily because owners of radios and B&W televisions were upgrading to colour televisions. As per Francis Kanoi data, the upgrades from B&W to the colour TV segment forms over 60 per cent of total CTV purchases. But now the industry is talking of other factors, which will drive growth like the booming rural economy. Also, they feel consumers will be making up for lost time: the feel-good factor has been distinctly missing for the last two years so rural consumers have held back on big ticket purchases. But there's an additional factor that's likely to fuel growth. Loans for products like televisions have become easier in the rural areas because the public sector banks are moving in with offers of easy credit. Add to that the fact that prices of televisions have fallen steeply and companies are taking extra initiatives to promote sales. "Rural consumption is linked with agricultural output and the availability of cash. Untill very recently, financing was available to the rural people at very high interest rates and that too, not made available by any financing agents or banks but by the village sahukars (money lender). Thus, the trend in the rural areas still is to make cash purchases, which links to good harvests and ready availability of cash," says Ravinder Zutshi, director (sales) of Samsung India Electronics Ltd. Zutshi is convinced that buying will climb even more sharply in coming years because of cheap financing. Banks such as the State Bank of India are pushing their loan schemes in the rural areas and so are financing companies like Bajaj Finance. "The manufacturers too are expanding both their penetration as well as the products for the rural markets, all of which should help boost rural sales," he says. Says LG's Singh, "Electrification of villages and an increase in awareness among the people, a good harvest and a booming economy will help drive growth. The rural market should see a growth that is three to four times that in the urban markets." "The potential is high as the penetration levels are low, and hence our efforts towards creating a bigger market here," adds Devender Saini, senior product manager (television), Philips India Ltd. "If we look at the penetration levels in rural markets, it is less than 10 per cent. This is lower than the all-India average of 21 per cent and the urban markets which are at 35 per cent to 40 per cent." The increase in penetration levels in the rural markets has also shown the way to the Oscars and Belteks of the world, which are carving out a niche by positioning themselves as price warriors. And their cut-price tactics have forced LG, Samsung and Philips, among others, to launch products targeted only at these markets. These products have fewer frills, and are hence, cheaper. As a result, the rural masses are being tempted by the lower prices offered by all manufacturers. The entry of the bigger players in these market segments has forced the smaller ones to squeeze margins and reduce prices further. R K Caprihan, an old industry hand and the chief executive of The Kelon Corporation, claims he is selling 14-inch for as low as Rs 3,600 and a 20-inch for only Rs 5,500. In fact, the success of the smaller brands and the entry of the bigger players have started a war on many fronts. It's not restricted to pricing, but it's also about visibility and value for money. Oscar, for instance, which derives 40 per cent of its sales from the semi-urban and rural sectors, has launched a battery-operated television model in the 14" segment to cater to parts of Eastern UP and Bihar. This has boosted the company's sales by 5 per cent to 7 per cent. It is planning to come out with a similar 21" model this month. Says Arpita Khurana: "Since electricity is a problem in these areas we felt the model would be a success." LG is putting more emphasis on dealership network. The company had only one distributor in Jaipur. But it now has distributors in Jodhpur, Jaisalmer, Udaipur and several other places. Over the past year, the company's direct dealers have risen from 1,000 to 1,500 and the number of sub-dealers has climbed from 2,800 to 5,000. The company, which is the market leader in the colour television segment, has focused on decentralising its operations to increase its rural penetration this year. It has increased its 'remote area offices', which function at district levels, from 27 earlier to 62 this year. Similarly, Philips is planning to double its retail presence. From an existing network of 6,000, the company plans to have 12,000 retailers. About 75 per cent of this increase will take place in the rural areas. Companies are also spending on huge sums on advertising, especially in local vernacular newspapers. Philips has fallen back on some unconventional advertising media like wall-writing and radio advertising. Says D Shivakumar, vice-president, consumer electronics, Philips India: "We have a strong base of loyal consumers of transistor sets as well as B/W TVs who are now ready to upgrade. We will try and tap these consumers for our rural scheme." Companies are also organising rural melas and haats and use mobile hoardings to reach potential customers in villages and semi-urban markets. And, if the rural customers are switching on in larger numbers the picture can only get brighter for all the companies. Mobile manufacturer in rural India Mobile manufactures like Nokia, Motorola, LG, Samsung etc. have started to reach out to the Indian villagers trough Mandi’s, Haats (unregulated markets) etc as their on-ground activity to attract the villagers towards their handsets. I think it’s about time they did so, considering 70% of the Indian population are from the rural areas. The rural market is a virgin territory that has not been completely explored. The mobile penetration in the rural market is only 3% which is very small amount considering 70% of the total Indian population live in rural areas According to industry estimates, the rural markets contribute about 5% of the national GSM handset sales. But this is expected to rise to 25-30% by 2009. So it doesn’t come to me as a surprise that big phone vendors are looking at the Indian rural market. Motorola has already launched Motofone catering to the rural market. It would also provide local language voice prompts, allowing Hindi, Punjabi, Tamil, Telugu, Kannada, Malayalam and Bengali to be compatible on the phone. the GSM version of the black and white handset would be available coupled with an offer from BSNL, all for Rs.1,650 only. Motorola, has already ensured distribution tie-ups with rural retail chains - ITC’s echoupal, DCM’s Hariyali Kisaan Bazaar and Godrej Agrove making it easily available to the end user. The new user will also get free talk-time worth Rs.150 every month, for the next three years as part of the offer. Says Motorola India, Director-Marketing, Lloyd Mathias, “The handset is made with an intention to target the rural market in the country, specifically the first-time users.” The launch is expected to strengthen the company’s position compared to its Finnish counterpart, Nokia, in India. Companies like Nokia and LG run vans trough villages demonstrating and selling the product. (excellent idea) Nokia India director (marketing) Devinder Kishore said: “We will finalise the model in six months since a one size fits all strategy will not work in the villages. The aim is to deliver an experience to consumers and not just plain vanilla sales. We are also investing on training the front-end sales people.” Nokia is also undertaking extensive below-the-line branding activity in village mandis. About 50% of its marketing budget is for such activities. “Through the mandi initiative, we will reach out to farmers to show them how a mobile phone can help them access best price for their farm produce by using the GPRS services,” LG sells its handsets in 5,000 village haats through make-shift tents. “We are also going to launch a sub-Rs 2,000 colour handset in three months time which will further push sales. We are also running TV campaigns through local cable channels in regional dialect,” said HS Bhatia, head (GSM), LG Electronics India. Samsung is targeting rural markets where there is a significant demand for colour handset. “In line with our global strategy, we are positioning ourselves as a premium brand even in rural India,” said Samsung Telecommunications India head (marketing)Asim Warsi. While the phone vendors expect higher volume sales, they feel value wise the rural market’s contribution will still be low. “While the average sale price of GSM phones in the urban market is Rs 3,500, it is about Rs 2,000 in the rural market. It will take two years for this to rise since consumers will take time to upgrade to feature-rich colour phones,” Mr Bhatia said. As of now infrastructure seems to be the only cause of concern as reaching out to such a large audience is a mammoth task. To sum it all up, the Indian rural market is very Price conscious and is brand loyal (at least initially to the first few brands that are able to connect with the user). The product should be able to help them or in any way increase productivity for the users. They prefer simple devices that are easy to operate and should preferably be in their local language as it is big barrier in our country. MNC in rural India INTRODUCTION To expand the market by tapping the countryside, more and more MNCs are foraying into India's rural markets. Among those that have made some headway are Hindustan Lever, Coca-Cola, LG Electronics, Britannia, HDFC Standard Life, Philips, Colgate Palmolive and the telecom companies. OPPORTUNITY IN RURAL MARKET The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban. As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in 1991, rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income. The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased. The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster than the urban counterpart. APPROACHES TO RURAL MARKETING The rural market may be alluring but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions; poor roads; power problems; and inaccessibility to conventional advertising media. However, the rural consumer is not unlike his urban counterpart in many ways. The more daring MNCs are meeting the consequent challenges of availability, affordability, acceptability and awareness of products. AVAILABILITY OF PRODUCT The first challenge is to ensure availability of the product or service. India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. However, given the poor state of roads, it is an even greater challenge to regularly reach products to the far-flung villages. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Marketers must trade off the distribution cost with incremental market penetration. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system which helps its brands reach the interiors of the rural market. To service remote village, stockists use autorickshaws, bullock-carts and even boats in the backwaters of Kerala. Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices. AFFORDABILITY OF A PRODUCT The second challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to the rural consumer, most of whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh - the so-called `Bimaru' States. Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. Coca-Cola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm priced at Rs 15. ACCEPTABILITY OF A PRODUCT The third challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market. One company which has reaped rich dividends by doing so is LG Electronics. In 1998, it developed a customised TV for the rural market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice boxes — a tin box for new outlets and thermocol box for seasonal outlets. The insurance companies that have tailor-made products for the rural market have performed well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crore in total premia. The company tied up with non-governmental organisations and offered reasonably-priced policies in the nature of group insurance covers. With large parts of rural India inaccessible to conventional advertising media only 41 per cent rural households have access to TV. AWARENESS OF A PRODUCT This is another challenge. Fortunately, however, the rural consumer has the same likes as the urban consumer — movies and music — and for both the urban and rural consumer, the family is the key unit of identity. However, the rural consumer expressions differ from his urban counterpart. Outing for the former is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Consumption of branded products is treated as a special treat or indulgence. Hindustan Lever relies heavily on its own company-organised media. These are promotional events organised by stockists. Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language. Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural households. It doubled its spend on advertising on Doordarshan, which alone reached 41 per cent of rural households. It has also used banners, posters and tapped all the local forms of entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media.LG Electronics uses vans and road shows to reach rural customers. The company uses local language advertising. Philips India uses wall writing and radio advertising to drive its growth in rural areas. CONCLUSION The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether they can do so without hurting the company's profit margins. The company's product portfolio is essentially designed for urban consumers, and the companies are cautioned from plunging headlong into the rural market as capturing rural consumers can be expensive. Any generalization "about rural India could be wrong and one should focus on high GDP growth areas, be it urban, semi-urban or rural." Switching on in rural India It's a twin-pronged strategy that has worked brilliantly for LG Electronics, India. Two years ago the company's top brass was debating how to reach out to rural India. At one level, the company figured it needed new cheaper products to lure the rural buyer. At another level, it figured that more offices in smaller towns and cities were the need of the hour. LG moved quickly on both fronts. At one level, it has introduced cheaper products like it Sampoorna television range. At another it has gone on an office-opening spree in India's smaller towns. Currently, it has 40 branch offices. That will climb to 150 by year end. Says Anil Arora, head, marketing, LG India: "A chunk of our revenue was coming from that segment and there was potential to grow it even further. Greater penetration has meant greater focus." But LG isn't the only white goods manufacturer that is striking deep into rural India. There's also Mirc Electronics which late last year launched its Operation Vistaar (meaning expansion). Mirc is already selling a second-string brand Igo which is slightly cheaper than its Onida range. Mirc says that both Igo and Onida are selling in the rural areas. Recently the company has hired another 100 people for its Igo team. Cracking the rural market has become the holy grail for scores of Indian companies. Now the white goods manufacturers are hoping to catch the eye -- and the wallets -- of the out-of-towners in a bigger way than ever before. As a result a rural bloodbath between white goods giants is clearly on the cards. The reasons for heading into the rural areas are fairly clear. The urban consumer durable market for products like colour TVs, washing machines, refrigerators and airconditioners is growing annually at between 7 per cent and 10 per cent. By comparison, the rural market is zooming ahead at around 25 per cent annually. "The rural market is growing faster than urban India now," says Venugopal Dhoot, chairman of the Rs 989crore (Rs billion) Videocon Appliances. "The urban market is a replacement and upgradation market today," adds Samsung's director, marketing, Ravinder Zutshi. Leading the way is LG. In 2002, 60 per cent of its turnover came from the urban market. Today, that's down to 40 per cent. The majority of LG's revenues are now coming from smaller towns like Hapur, Trichy, Jorhat and Asansol. Videocon, which sells about 40 per cent of its products in the rural areas, has just begun a fresh thrust to boost sales outside the metros. It's hoping that by year end about 55 per cent of total sales will come from the rural areas. But it isn't designing new products for rural customers. So an entry level 14-inch Videocon CTV will sell for Rs 7,000, both in the cities and the villages. "The thrust is on CTVs, tape recorders, refrigerators, DVD/VCD players as demanded by rural India today," says Dhoot. Some companies are playing the game slightly differently. Samsung, for instance, insists that it's a high end technology driven player. That's why the urban areas are still a focus area for it and only 30 per cent of revenue comes from rural and semi-urban India. "We have always been a hiend technology driven player and want to keep that equity," says Zutshi. Nevertheless, in the last two years, Samsung has looked at increasing awareness and penetration of its products in second rung cities like Bhuj, Porbandar and Jalandhar. The Samsung Dream Home road shows across the length and breadth of the country have been a step in this direction. "We don't have a rural model or different pricing strategy. But the products are focused on semiurban or urban markets," says Zutshi. Similarly, Mirc says it had to be careful about diluting the Onida brand. Igo, at Rs 5,000 for a 14inch TV is priced Rs 500 to Rs 700 lower than the national brands. "We didn't want to dilute Onida's mid to premium brand equity by making it mass market," says V Chandramouli, vice president- marketing, sales and service, Mirc Electronics Limited. At another level, there's Godrej Appliances that has learnt its rural lessons through trial and error. Today, it is present in 900 towns of which 450 have a population above 100,000. Another 250 are towns with less than 100,000 residents. Says Soumitra Ghatak, executive vice president, Godrej Appliances, "There is money today in the rural household. So clearly we're looking at dropping anchor. The fear is not being on their radar." To match its new aims, for the first time, Godrej will be advertising on Doordarshan. Till now the company has always advertised on cable television. The company has also redefined its target group from SEC A, B and C to SEC D as well. Godrej's direct cool refrigerator range starts at Rs 6,500. Godrej admits that it fumbled on the way when it tried to sell cheaper products. Two years ago it tried to sell a stripped- down fridge called Champion with only half a freezer. However, sales did not pick up so it had to be rejigged and relaunched with a full freezer. "Product features are important, rural customers are just as aware as the urban," says Ghatak. But LG's example shows that revenues can rise quickly if you get the mix right. The company says that earlier a single branch office catered to Chandigarh, Jammu & Kashmir, Punjab and generated Rs 18 crore (Rs 180 million) per month. Now with more branches, revenue in the same area has gone up to Rs 50 crore (Rs 500 million) per month. Similarly other states like Rajasthan now have two branches -- Jodhpur and Jaipur -instead of one. The company has also taken other initiatives like 65 Remote Area Offices under the branch offices that are empowered to directly link to the central billing system for orders, 230 service centres and 2,600 mobile authorised service personnel for villages having below 10,000 residents. All these moves are part of LG's efforts to push turnover to a whopping Rs 7,000 crore (Rs 70 billion) by year-end. All this is great music for rural dealers. A city dealer will today sell a CTV by cutting into his margin, closer to the dealer price rather than the marked retail price. So while he makes 5 per cent to 7 per cent, rural dealers make 7 per cent to 10 per cent on a sale. "Volume makes up in the city whereas value makes up in the rural area," says an industry observer. Also, the increased rural focus doesn't mean the urban market will suffer. Samsung, Onida and even LG are aggressively looking at the urban replacement market for their hi-end premium product range. Who will emerge winner in this battle? Industry players warn of dangers in the aggressive rural ramp up. For one, stripping product features in order to lower prices, as some brands are known to do, players say is a dangerous game to play. Then there are other external problems to surmount like the irregularity of electricity supply and lack of finance options. "Cracking the rural market is easier said than done," says Godrej's Ghatak. Adds an industry observer, "The rural market will not be about pricing but about how the customer is serviced and treated. If one consumer is not happy, the entire village will know and the company can then kiss that market goodbye." LG’s Strategy For Rural Market Pays Dividends NEW DELHI: LG India’s strategy of targeting the rural and semi-urban markets has resulted in specific gains for the company. In a bid to consciously go deeper and farther into the hinterland, LG has set up 50 Central Area Offices (CAOs) in B class cities and 59 Remote Area Offices (RAOs), in C class towns, besides its 18 branch offices. This has helped in feeling the pulse of the consumer and being able to respond rapidly to their needs. The company believes that this strategy has had tangible benefits: RAOs & CAOs have resulted in 25 per cent additional benefits, value-wise in H1 2003 over last year. According to LG head of marketing Anil Arora,‘‘Our special focus on the rural and semi-urban segment has helped us come up with innovations in keeping with the needs of the consumers in these areas, giving us an edge over competition. Thus in one year we have been able to enter lower price points targeted at the low end customer.’’ Thus the entry level CTV is now priced at Rs 5,650, against the earlier Rs 9,000. Similarly, frost-free refrigerators now begin from Rs 11,500, ACs from Rs 16,000 and microwave ovens from Rs 6,000. ‘‘Product planning has also become easier and faster due to the ready feedback from these offices. At times there is barely a 15-day gap between feedback and production,’’ he says. On the basis of customer feedback, LG came out with a frost-free refrigerator for low-end customers without the FIR lamp and deodoriser (after consumer feedback showed that the rural consumer did not look for storage beyond two days) and twister ice tray, at a price saving of Rs 1,500. Similarly, a 1.2 tonne AC model in place of the traditional 1.5 tonne AC has resulted in a price differential of Rs 2,000. In terms of marketing also the focus has shifted from item-based sales and marketing to different models, different channels (DMDC) strategy. It has also started media campaigns focused on regional papers. The rural market is going to be the main focus of LG for 2004. Since we intend to be very active in the rural market, we have set a target of 70% value growth. So the target is Rs. 7,000 crores. We think the rural market contribution will be around 65% and the growth over this year on the rural market will be something around 40%. Anil Arora, Head (Marketing), LG Electronics After working in Eureka Forbes for three years, Anil Arora joined BPL Sanyo as Asst. Sales Manager, looking after direct marketing for vacuum cleaners. After the company merged with BPL in ‘93, he took charge of microwave ovens and gas tables in Delhi; the next stop was Head of Sales, Punjab, HP, Chandigarh and J&K, before he left BPL to join the 5,000-cr Korean consumer durable major – LG. A strong believer in ‘feet marketing,’ within two years Anil moved on to Asst. GM and later shifted to the corporate headquarters at Noida where he took over as Product Group Head-refrigerators, finally moving on to Head (Marketing), LGEIL. In a chat with Jasmeen Dugal at LG’s Greater Noida plant, Anil Arora shares some details on the new brand positioning, the company’s aggressive strategy to strengthen reach in rural India and more. Q. How do you view the consumer durables market today? A. The consumer durables market is not that good as of now. The growth has not been good at all, although LG has grown by 35-36%. We thought that the market would grow by 10-15% but that has not happened. The washing machine segment has been totally dead; direct cool and frost-free has not been good. CTV, on the other hand, has been good. Q. To what would you attribute this stagnancy? A. Well, last year witnessed heavy purchase because of two-three events. Early this year, the World Cup took place, so the money might have been drained out there. That is why even in peak season, the compressor products too did not sell in a very big way. Coming to Diwali, the trends have changed – over the last two-three years, Diwali has shifted from a month-long shopping event to a weeks’ event; people have been indulging in shopping only in the last week of the festive season. Additionally, Diwali was a festival where even high-end products used to sell in a big way; today, it has degenerated to a very middle or low-end trend where only products for gifting purposes or on exchange schemes are being purchased. Stagnancy could also be because there are so many players in this segment, it even has the consumer confused about the best buy for him – and in this confusion, he postpones the purchase. Q. How does LG intend to strengthen its reach in rural India? A. The rural market is going to be the main focus of LG for 2004, which includes marketing activities and other initiatives in the form of surveys and the like. So for that, we are opening many more branches across the country. In September ’02 we had only eighteen branches; now we have forty branches. Additionally, we have 112 area offices, which were not there at all last year; these area offices have been opened in the district-level areas. Below these area offices, we have remote area offices, which we call ‘RAOs.’ Currently we have eighty RAOs, which we are planning to expand to two hundred RAOs by next year so that we can reach out to the rural market in a better way and feel the pulse of all the consumers and the dealers there. Q. What are your expectations from the rural market? A. We thing there is a lot of potential in the rural market. Till now we have seen a 35% growth. But now, since we intend to be very active in the rural market, we have set a target of 70% value growth. So the target is touching around 7,000 on DP value i.e. Rs. 7,000 crores. We think the rural market contribution will be around 65% and the growth over this year on the rural market will be something around 40%. Q. Please share some details on your new communication plank: ‘Goodness Inside.’ Does it completely rebuff the health positioning? A. Over the last four-five years, LG was positioned on technology and health grounds, and we sold many units on health and technology. But after extensive research, we noticed that even though LG was number one, the connect between the consumer and LG Electronics as a family brand was missing. To bring that connect, we have taken the family route on all the aspects i.e. outdoor hoardings, glow signs, press ads, television commercials etc. We want to draw emphasis on family grounds. LG should be perceived by the customer as an in-house brand. This does not imply that we will abandon our technology ground; basically, it is just one step ahead, put together with a lot of family interfaces into it. For instance, in the case of LG Golden Eye TV’s promise of ‘Ankho ko kuch nahi ho sakta’ has been broadened to mean more to the overall life of the consumer, and not just his eyes. ‘Goodness Inside’ is a part of that. If you own LG products, you will feel ‘good’ inside. That is the punch line we would like to adopt. We will be implementing it from 1 January 2004 in a big way. And we are ready with all the ads; in fact, there will be nine-ten new ads, which we will air shortly. Q. What was your ad spend this year? A. The total spend including the outdoors, indoors, hoardings, shop translites, small-scale activities, exhibitions and the like, put together comes up to Rs. 180 crores. But clear-cut spend on television commercials and print ads are in the vicinity of Rs. 74 crores. Q. Does this include the new ad campaign? A. Yes, this budget is more than enough and we will manage with it. Apart from the two agencies coming in, at the regional level we have started a new concept – we are not going to control everything from the corporate; we have allocated all things to four different regional vendors. And we have also set ourselves a cost-cutting target of 22-30%. If we do this, we will be saving Rs. 20 crores. So we’ll be able to manage within this budget. Q. In such a vast market, what is LG’s key differentiator? A. Our key differentiator is our product and our technology. If you pick up any of our products, starting with color televisions, we have the ‘Golden Eye,’ which nobody has. In refrigerators, nobody has the ‘ice-beam door cooling’, which we have. In the case of air-conditioners, we have the ‘Plasma;’ in washing machines, we have ‘punch wash.’ Technology remains the biggest differentiator in LG. The second differentiator will be reach. We are going to have a number of new offices in the near future, so our infrastructure and ground-level activities will increase. Besides these key differentiators, we are going to stress on the placement of our ads in vernaculars at the regional as well as district levels. And with our Pune plant coming up, we will be able to address the needs of the western and southern markets immediately. In line with our regional concept, i.e. the feedback from our area and district managers in the northeast and southwest zones, we are making ‘regional required products.’ This means products, which are required more in, say, the southern zone, is sent there in bulk. Basically, the product team and the R&D team are working on this together. I personally feel that these ‘regional required products,’ that is ‘different products for different markets,’ is soon going to be our biggest differentiator. Q. Does LG rely heavily on ground-level activities? A. Brand building activities through advertising is one thing, but below the line and ground-level activities are important for any organization. To achieve a growth of 68-70% against an economy growing at 6-7%, these secondary activities are very, very important. We’ll be focusing on road shows and sponsorship of district-level activities in a very big way. Q. How does LG deal with the competition? A. Every now and then different competitors are coming in and everyone has different technologies. To fight competition, a very strong base is essential. If the roots are strong, automatically, other things will fall in line. Having spent so much in our Pune and Noida factories, LG can adapt to changes; we can adapt to competition reaction in case of pricing, technology, model or anything immediately, and give back the product to the trade at least within a span of ten days. So competition is not a threat to us – only, our infrastructure should be in place and our employees should be highly motivated to work. Q. What are the new launches on the cards? A. There are no new product categories, but within the existing product categories, there will be many new products launches. GSM is the focus area for us – that is a new line we are entering and we need to have a sale of at least 5-6 million handsets next year. Keeping that in mind, there will be many major launches in GSM. And we will also be looking into new product launches in airconditioners, refrigerators, washing machines – everywhere. Q. How are the GSM handsets faring? A. Our handsets – G5300 and G7030 – are both targeting the upper middle class. If you look at the market size, next year as announced, is estimated at Rs. 30 million. This year it is around Rs. 19 million. We are addressing 15% of the total market share, which is above 14-15,000 handsets. We have not been aggressive as far as the sales have been concerned but we have been very aggressive where marketing is concerned. This is because we want to first establish our presence with outdoors, glow signs, dealer meets etc. Where our marketing strategy is concerned, LG always comes in with the high-end brands and then comes into the middle or low-end markets. We hope that by 2005, we will be number one in the field of GSM handsets also. Q. What kind of a growth do you expect to achieve in 2004? A. We are targeting Rs. 7,000 crores next year as opposed to Rs. 4,400 crores this year. That’s approximately a growth of 68%. Going Rural: The New Marketing Mantra What is Rural? According to the census of India village with clear surveyed boundaries not having a municipality, corporation or board, with density of population not more than 400sq.km and with at least 75 per cent of the male working population engaged in agriculture and allied activities would quality as rural. According to this definition, there are 6.38,000 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. Interestingly, for FMCG and consumer durable companies, any territory that has more than 20,000 and 50,000 population, respectively, is rural market. So, for them, it is not rural India which is rural. According to them, it is the class-II and III towns that are rural. According to the census of India 2001, there are more than 4,000 towns in the country. It has classified them into six categories-around 400 class-I towns with one lakh and above population (these are further classified into 35 metros and rest non-metros), 498 class-II towns with 50,000-99,999 population, 1,368 class-III towns with 20,000-50,000 population, 1,560 class-IV towns with 10,000-19,999 population. It is mainly the class-II and III towns that marketer's term as rural and that partly explains their enthusiasm about the so-called "immense potential" of rural India. Demographic details of Indian Rural Markets: About 285 million live in urban India whereas 742 million reside in rural areas, constituting 72% of India's population resides in its 6, 27,000 villages. The number of middle income and high income households in rural Indian is expected to grow from 46 million to 59 million. 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. More government rural development initiates. Low literacy rate Increasing agricultural productivity leading to growth of rural disposable income. Lowering of difference between taste of urban and rural customers. Rural Initiators "Going rural" the new marketing mantra-all corporate companies agreed that the rural market the key to survival in India. The real India lives in villages-6, 38,365 villages to be precise. This is where the fortunes of many of Indian biggest corporations are likely to be shaped. To expand the market by tapping the countryside, more and more MNC`s are foregoing into rural markets. Among those that have made some headway are HLL, Coca-cola, LG Electronics, Britannia, Standard life, Philips, Colgate Palmolive, ITC and the foreign-invested telecom companies. Gone are the days when a rural consumer went to a nearby city to but branded Products and services`. Time was when only a select household consumed branded goods, be it tea (or) jeans. 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. Time was when marketers thought van campaigns, cinema commercials and a few wall paintings would suffice to entice rural folks under their folds. Thanks to television, today a customer in a rural area is quite literate about myriad products that are on offer in the market place. An Indian farmer going through his daily chores wearing jeans may sound idiotic. Not for Arvind Mills, though. When it launched the Ruf & Tuf kits, it had created quite a sensation among the rural folks as well within few months of their launch. Rural Marketing-Challenges and Opportunities The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000 villages which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc. The success of a brand in the Indian rural market is as unpredictable as rain. It has always been difficult to gauge the rural market. Many brands, which should have been successful, have failed miserably. More often than not, people attribute rural market success to luck. Therefore, marketers need to understand the social dynamics and attitude variations within each village though nationally it follows a consistent pattern.While the rural market certainly offers a big attraction to marketers, it would be naive to think that any company can easily enter the market and walk away with sizable share. Actually the market bristles with variety of problems. The main problems in rural marketing are: Physical Distribution Channel Management Promotion and Marketing Communication The problems of physical distribution and channel management adversely affect the service as well as the cost aspect. The existent market structure consists of primary rural market and retail sales outlet. The structure involves stock points in feeder towns to service these retail outlets at the village levels. But it becomes difficult maintaining the required service level in the delivery of the product at retail level. One of the ways could be using company delivery vans which can serve two purposes- it can take the products to the customers in every nook and corner of the market and it also enables the firm to establish direct contact with them and thereby facilitate sales promotion. However, only the bigwigs can adopt this channel. The companies with relatively fewer resources can go in for syndicated distribution where a tie-up between non-competitive marketers can be established to facilitate distribution. As a general rule, rural marketing involves more intensive personal selling efforts compared to urban marketing. Marketers need to understand the psyche of the rural consumers and then act accordingly. To effectively tap the rural market a brand must associate it with the same things the rural folks do. This can be done by utilizing the various rural folk media to reach them in their own language and in large numbers so that the brand can be associated with the myriad rituals, celebrations, festivals, melas and other activities where they assemble. One very fine example can be quoted of Escorts where they focused on deeper penetration .In September-98 they established rural marketing sales. They did not rely on T.V or press advertisements rather concentrated on focused approach depending on geographical and market parameters like fares, melas etc. Looking at the 'kuchha' roads of village they positioned their mobike as tough vehicle. Their advertisements showed Dharmendra riding Escort with the punchline 'Jandar Sawari, Shandar Sawari'. Thus, they achieved whopping sales of 95000 vehicles annually. One more example, which can be quoted in this regard, is of HLL. A year back HLL started 'Operation Bharat' to tap the rural markets. Under this operation it passed out low–priced sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to twenty million households. Thus looking at the challenges and the opportunities which rural markets offer to the marketers it can be said that the future is very promising for those who can understand the dynamics of rural markets and exploit them to their best advantage. Rural Trends in India Tends indicates that the rural the rural markets are coming up in a way and growing twice as fast as the urban, witnessing a rise in sales of hitherto typical urban kitchen gadgets such as refrigerators, mixer-grinders and pressure cookers. According to a National Council for Applied Economics Research (NCAER), study, there are as many 'middle income and above' households in the rural areas as there are in the urban areas. There are almost twice as many 'low middle income' households in rural areas as in the urban areas. At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas. According to Mr.D.Shiva Kumar, Business Head (Hair), personal products division, Hindustan Lever Limited, the money available to spend on FMCG (Fast Moving Consumer Goods) products by urban India is Rs.49,500 crores as against is Rs.63,500 crores in rural India. As per NCAER projections, the number of middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. In Urban India, the same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural India is expected to be double that of urban India. Rural income levels are largely determined by the vagaries of monsoon and, hence, the demand there is not an easy horse to ride on. Apart from increasing the geographical width of their product distribution, the focus of corporate should be on the introduction of brands and develop strategies specific to rural consumers. Britannia industries launched Tiger Biscuits especially for the rural market. An important tool to reach out to the rural audience is through effective communication. A rural consumer is brand loyal and understands symbols better. This also makes it easy to sell look-alike. The rural audience has matured enough to understand the communication developed for the urban markets, especially with reference to FMCG products. Television has been a major effective communication system for rural mass and, as a result, companies should identify themselves with their advertisements. Advertisements touching the emotions of the rural folks, it is argued, could drive a quantum jump in sales. The trick is to stay ahead in thinking," says Ganesh Mahalingam, general manager marketing, LG Electronics India, the man behind LG's high-decibel promo-led strategy this year. With a big share of the consumer durables market under its belt, LG wants to be seen as the thought leader in every category it is present in. A challenge that Mahalingam - who started his career as a salesman with Godrej and then tried his hand in a wide spectrum of industries ranging from consumer healthcare (Ranbaxy Group) to advertising (iB&W Advertising), from industrial products (Godrej & Boyce) to direct marketing (Wunderman Cato Johnson) - seems ready to take on. In this interview to Sumita Vaid Dixit of agencyfaqs!, Mahalingam talks about how innovative marketing has turned the Korean chaebol into a household name in the country today. Q. LG have used promotions strategically to turn the sluggish durables market in its favour. How did you go about this? A. The promotion strategy we followed this year was totally unprecedented in the durables industry. We used promotions in a big way during what is termed as the "off-season", which is between May and September. And we used events to match these promotions. We had our birthday in May when we launched the LG Birthday Bash. And because we did something on our birthday, the whole industry jumped on to the promo bandwagon around the same time. Then we did the Champions Trophy promotion, and because we did that, everyone else followed suit. We used television for most of our promotions during the lean season. The peak season for promos every year is Diwali, and everyone assumed we would use TV in a big way during that time. But we skipped TV completely. We focused on print because Diwali is one season when people are in a buying mood any way. And when people are in a buying mood they look at newspapers more seriously than TV. This is one insight we have culled out from our experience over the years. We have achieved a turnover of Rs 400 crore this year through promotions alone. Which is an all-time high by any single brand in the industry. At a time when the consumer was being loaded with various exchange offers, LG differentiated its products on the basis of technology. Q. LG seems to have put the initial period of difficulty behind it - finally. What is that one key factor that has changed your fortunes in the country? A. LG Electronics' success in the country is a result of various factors. The key among them are its focus on technology, aggressive sales and marketing, resources focused on a single differential, leadership in ad spend, appropriate pricing and a broad and contemporary product range. The company has been associated with many "firsts" and "fastest" vis-à-vis its competitors in India. Today LG is the market leader in almost all product categories that it is present in - colour televisions, air-conditioners, frost-free refrigerators, semi-automatic washing machines and microwave ovens. Equally important is our communication strategy. LG has been successful in driving home the benefits of its products that are unmatched as far as quality and price go. The health positioning of all LG products in India has been well received by customers and today the benefits of Golden Eye technology, Plasma technology and the Fabricare concept is common knowledge. We appealed to the emotion of the Indian consumer rationally. This helped LG build a strong bond with its consumers. Q. A large part of your brand-building efforts has focused on usurping the health platform. What led you proceed on this line of thought? A. Various studies have shown that the Indian consumer today is well informed, well aware and concerned about good health. He/she is spending more time and resources to move towards a healthier lifestyle. LG was one of the first companies in India to recognise the change in consumer needs and invest in research to develop "healthy" consumer durable products. Its vision is to become 'a health partner' for its consumers worldwide and in India. The concept of "wrinkle-free viewing" was conceived at this stage and this gave birth to the "Golden Eye" technology in television. This has become the most revolutionary technology in CTVs ever brought to the Indian consumer by any consumer electronics and home appliances company. Relentless efforts in this direction led to the patented health technologies in other products, namely, Preserve Nutrition (PN) system in refrigerators, Health Air System for air-conditioners, Health Wave technology in microwaves, Fabricare System in washing machines and HealthGuard in vacuum cleaners. In an environment where the consumer was being loaded with various exchange offers, LG differentiated its products on the basis of technology, which appealed to the emotion of the Indian consumer rationally. This helped LG build a strong bond with its consumers. Because we are successful, people think we must be doing something right and follow us. So we have to keep changing our benchmark every quarter. Q. And the logical extension was sports… A. Yes, LG has been associated with health and fitness, and sports is integral to this. In India, cricket is a religion and LG has aligned itself with the aspirations of the country. Just like every ball or run matters in the game of cricket, every consumer and product matters to LG. Q. But this sort of imagery holds more appeal for the urban consumer. What has your company done to address the needs of the large mass of consumers out there in rural India? A. The rural market in India with its size and demand base offers many opportunities to marketers. Two-thirds of the country's consumers live in rural and semi-urban areas and almost half of the national income is generated there. The biggest draw is the fact that rural markets are growing at five times the rate of growth of urban markets. The accelerated pace of development of infrastructure facilities, higher yields of agricultural produce, recent hikes of support prices, increased literacy and multiplicity of rural-specific media have contributed to this growth. In contrast, intense competition in the urban markets has resulted in an increase in costs but not higher market share and profits. This, in turn, has resulted in a change of focus by a host of organisations. LG realises if it wants volumes it has to direct its efforts in the hinterlands. And that's exactly what we are doing now and sales from semi-urban areas comprise 35 to 40 per cent of LG's total sales turnover today. We have struck a balance between utilitarian and aspirational features. In effect, there is increasing customisation for the rural markets. Q. To what extent have the needs of rural consumers reshaped your thinking at the product development stage? A. One reason for us to enter the rural market is that we have products at prices that can address these markets. Four or five years ago we had televisions priced at Rs 15,000. Today we have TV sets that cost Rs 8,000. When we launched microwaves in the country, they were available at Rs 20,000. Today, we have microwave ovens at Rs 6,000. As we have come down the price ladder we have expanded the market. That is because the rural market operates on a price-value proposition. How did we do this? To begin with, we've knocked off some of the frills in our products; the idea is to give features that are absolutely indispensable. For example, the upcountry consumer does not need the Golden Eye feature; so our base model does not have that feature. Similarly, not all consumers need 200 channels; so we have provided for 100 channels in our base model. We surmised everyone might not need a sound output of 350 watts; so we have given an output of 200 watts in some sets. This is what we call 'cost innovation' - to bring the price down. In fact, the 'Mujhe Kuch Nahin Ho Sakta' punchline for our refrigerators encapsulates LG's attempt to broad base its customer profile. At no point have we stripped down product features though. What we have done is strike a balance between utilitarian and aspirational features. In effect, there is increasing customisation to satisfy the demands of these markets. If you consider our communication, a lot of it has been devised keeping the rural consumer in mind. We are speaking directly to these consumers through regional channels like Lashkara, Alpha Punjabi and Gujarati. We spend 80 per cent on TV and 20 per cent in print because our volumes have grown to Rs 3,000 crore and our reach has increased manifold. Q. To what extent have the needs of rural consumers reshaped your thinking at the product development stage? A. One reason for us to enter the rural market is that we have products at prices that can address these markets. Four or five years ago we had televisions priced at Rs 15,000. Today we have TV sets that cost Rs 8,000. When we launched microwaves in the country, they were available at Rs 20,000. Today, we have microwave ovens at Rs 6,000. As we have come down the price ladder we have expanded the market. That is because the rural market operates on a price-value proposition. How did we do this? To begin with, we've knocked off some of the frills in our products; the idea is to give features that are absolutely indispensable. For example, the upcountry consumer does not need the Golden Eye feature; so our base model does not have that feature. Similarly, not all consumers need 200 channels; so we have provided for 100 channels in our base model. We surmised everyone might not need a sound output of 350 watts; so we have given an output of 200 watts in some sets. This is what we call 'cost innovation' - to bring the price down. In fact, the 'Mujhe Kuch Nahin Ho Sakta' punchline for our refrigerators encapsulates LG's attempt to broad base its customer profile. At no point have we stripped down product features though. What we have done is strike a balance between utilitarian and aspirational features. In effect, there is increasing customisation to satisfy the demands of these markets. If you consider our communication, a lot of it has been devised keeping the rural consumer in mind. We are speaking directly to these consumers through regional channels like Lashkara, Alpha Punjabi and Gujarati. We spend 80 per cent on TV and 20 per cent in print because our volumes have grown to Rs 3,000 crore and our reach has increased manifold. Q. One noticeable thing about LG is that you are completely off STAR Plus. Why? A. Simply because it is not value for money. Consider this. Saas Bhi Kabhi Bahu Thi is the lead programme on STAR Plus and everything is built around that programme. The cost of a 30-second ad during the programme, as far as I know, is close to Rs 5 lakh. For that amount, I can get five programmes on channels other than STAR Plus. So what we did last year was that we excluded STAR Plus from our list of preferred channels. Despite that, according to research done by Gallup recently, we are the highest recalled brand in the country. The other way of looking at it is if we were on STAR Plus, our sales may have been 10 per cent more. But then we get to straddle more channels using the same money. The other reason for not advertising on STAR Plus is that we know we are on cricket. With cricket you straddle the entire country, all age groups, all programmes. Everything comes to a halt in this country when cricket is on. This year we've invested Rs 185 crore on advertising, which also includes the gifts given out in our promotion schemes. Q. All durable advertising (like FMCGs) these days is based on claims and counter claims of various players saying they are No 1. What is the importance of claiming to be No 1? A. When we came into the country, BPL was the leader, so our target was BPL. We have now beaten BPL in colour televisions. The leader in refrigerators was Whirlpool; we have beaten it in frost-free. In direct cool, currently our competition is Whirlpool and Kelvinator. We are looking to beat them this year. There was no clear leader in the microwave oven category; we moved in, created the market and are the leaders now. Videocon was the leader in washing machines. Today we are the leaders in the semi-automatic segment. By the year end we will probably be the category leaders. That leaves us with air-conditioners. Carrier was the leader in this segment. We have been ahead of Carrier for two consecutive years in the room AC category. We hope to overtake them in the spilt AC category next year. Let me make it clear here that while ORG-Marg figures may not substantiate our claims, our numbers indicate otherwise. Given that we are the clear leaders, every company today benchmarks itself against LG because it is everyone's ambition to beat LG in the numbers game. That includes Samsung, Onida, Videocon, Whirlpool and Godrej. And that is the problem of being the leader. Because you are successful, people think you must be doing something right and they follow you. That is why we have to keep changing our benchmark every quarter. We have invested in research to develop "healthy" consumer durable products. Our vision is to become 'a health partner' for our consumers. Q. LG is one of the few companies that went whole hog into selling rather than first building the brand and then building on volumes. Why? A. This is not true. Initially, we used print advertising to build our brand unlike most companies that focus on TV advertising to build their brand. The impact of press advertising during the launch period, especially when you are launching technologically different and innovative products, is much greater. In fact, the impact of a full-page ad is completely different from that of a 30-second commercial. A 30seconder delivers reach and frequency for you, but it cannot deliver impact. A newspaper ad drives the customer to the retail outlet, which makes the dealers happy. So initially we did a 70:30 split (that is, 70 per cent of the advertising effort was concentrated in print and 30 per cent on TV). This paid off in the first three years, but now it is the reverse. We do 80 per cent TV and 20 per cent print because our volumes have grown to Rs 3,000 crore and our reach has increased manifold. This year we spent Rs 185 crore on advertising, which also includes the gifts given out in our promotion schemes. For the next year, we have earmarked an ad budget of Rs 200 crore. Q. What are the focus areas for the next one year? A. We have identified the products that are going to add some 'oomph' to our image. The focus for the next one year will be on hi-end products. We will focus on plasma products, our Dios refrigerator and Art-cool air-conditioners. We are not looking at generating volumes from these hi-end products though. We want to achieve our target for the year 2005 in the year 2003 itself. And this figure is Rs 4,000 crore. ICICI Pru to tap rural market Kochi: Leading private insurance company, ICICI Prudential Life Insurance has identified India's rural areas as the next big opportunity and proposes to further stregthen its presence in the villages, a top ICICI official said today. Poonam Bhardwaj, Senior Vice President, Customer Service and Operations, ICICI Prudential Life Insurance, told a press meet here that about 45 per cent of Indian household incomes come from rural areas and 50 per cent of rural income comes from the non farm sector. To tap the rural market, the company has developed a multi channel distribution network to increase touch points. It has established 260 micro offices in tehsils and districts across key states, appointed over 20,000 advisors dedicated to the rural segment and has tied up with leading Regional Rural Banks, Micro Finance Institutions (MFI)s and NGOs. The company has also created a strong service infrastructure to ensure that the rural customer enjoys the highest level of service experience. Poonam Bhardwaj said there are huge opportunties in the life insurance sector as only a third of the target propulation of 400 million had been covered and added that the company, the largest private life insurer in the rural segment, had crossed the one million policies milestone. The Rural Business Channel (RBC) launched in February last year has garnered over Rs 100 crore business so far, she said. Business in the urban areas from April-november has touched Rs 3,947 crore, she said. A call from the bottom With the telecom operators aligning their subscriber acquisition strategy around low-cost handsets, Chinese vendors are emerging as the leaders The market for CDMA or code division multiple access handsets is bleeding. The one that got the hardest knock is LG—its sales fell 50% in January-June from a year ago. For the whole year, LG has an optimistic projection; a drop of 25%, with dollops of luck, that is. Mind you, LG had 43% of the CDMA market to itself in 2006. Its local rival Samsung had succumbed to the price pressure two years ago and almost exited the sub-Rs 1,200 handset market. LG, too, would focus only on the mid-size to premium ranges since there isn’t money left in low-cost CDMA handsets. The Koreans know they are leaving the turf to the dragonscome-lately. But then, isn’t the low-end market spoilt? The Crowd-Puller Reliance Communications has literally forced a handset in every pocket with its Rs 777 offer. Tata Indicom followed suit, with a bundled offer of Rs 1,099, giving a Huawei handset at Rs 600. Both have driven subscription growth, and both have banked on Chinese makers for backing their low-cost maneuvers. Huawei and ZTE, from China, were the key gainers from this. Telecom service providers’ penchant for the Chinese has a firm logic behind; huge volumes bring big savings even on a small shaving. Says Hitendra Takhtani, Sales and Marketing Manager (CDMA) of LG Electronics: "The cost of production in China is less than anywhere else. If the Chinese vendors are cheaper even by 10%, it turns out to be huge for the end user. The volumes are so huge that even a Rs 10-15 cut means a lot of money." So, the operative word here is ultra-low cost. Qualcomm, patent-holder for CDMA, has made the transition to low-cost easy for makers with a single-chip architecture. "This chip has helped reduce the electronic cost and power consumption, and enabled better form factor, leading to sleek designs," says Nikhil Jain, Chief Technology Advisor at Qualcomm India. Such cost advantages have operators unrolling the welcome mat for handset makers from China, Taiwan and even Japan. Players like ZTE, Huawei, CalComp, PanTech, Kyocera and Kinto are walking in, flaunting their ultra-thin price tags. Of them, Shenzhen-based ZTE is more than a blip on the screens of analysts. ZTE, which till recently was supplying fixed wireless terminals to Bharat Sanchar Nigam and Mahanagar Telephone Nigam, plans to ship over 10 million CDMA handsets to India by the yearend. This would be almost 33% of its global targets. What vendors like ZTE, and operators like Reliance and Tata, are banking on is the huge rural market. iSuppli, a market research firm, says in the rural markets—which covers almost 70% of the Indian population—the key to success will be adding new subscribers at a rapid pace and at a low acquisition cost. "In the low-cost segment, the pricing and competition is very aggressive and the margins are tight," says Lloyd Mathias, Director, Marketing (Mobile Devices) of Motorola India. More Buyers iSuppli says the average revenue per user (ARPU) in the rural markets could come down. "In CDMA, there has been a huge push towards low-cost to get subscribers. With the next wave of growth coming from B and C circles, this pressure would increase. Low-cost strategy seems to be working at least in getting the subscriber numbers now," says Rahul Gupta of BDA Connect, a market research firm. Agrees Ann Liang, Principal Research Analyst (Mobile Devices and Consumer Services) at Gartner: "The price game in CDMA is very crucial. The average selling price of CDMA phones in entry-level segment is $8-10 cheaper than the GSM ones." In the CDMA space, the low-cost handsets market is entirely dependent on imports. Chinese players have managed to customise and reduce pricing.These vendors are well positioned to tweak their production lines in Shenzhen, Taiwan or Shanghai without much extra overheads. This is where branded players like LG, Samsung, Nokia and Motorola are hit hard. Moon B Shin, Managing Director of LG Electronics, India, says, "LG is bleeding because of cheap Chinese CDMA handsets shipped to India." Local manufacturing is an option. But that does not ensure an upper hand over the Chinese players. Sensing the squeeze, Mathias says, "If things are not working out, a relook at the strategies might be necessary." ZTE would prefer to assemble, rather than manufacture, in India ( Interview: He Shiyou). It cites the absence of an industrial ecosystem as a deterrent and says it makes more business sense to import the units or assemble them here. Huawei’s Chief Technology and Marketing Officer Ramdev Sharma hammers the point, "Qualcomm provides chips but what about other components. There has to be an ecosystem and infrastructure support system to make manufacturing in India costeffective." CDMA Vs GSM Any comparison between CDMA and GSM in terms of average revenue per user would tilt the scales in favour of GSM. Figures released by the Cellular Operator’s Association of India and Association of Unified Service Providers of India peg the CDMA ARPU at Rs 202. It is almost Rs 100 less than GSM. Further, the value-added service revenue is less than 2% for CDMA and is 6% in GSM. A research report by GFK Group shows that the average selling price of a CDMA phone was less than Rs 1,500 while GSM was Rs 4,355. It shows consumers in the CDMA market are less affluent and talk less. But BV Raman, Country Head of CDMA Development Group (CDG) India, says dirt-cheap handsets are just the bait to entice users. "Lower price points are to lure the customers to the shop. There he can experiment with the range of models available. He will end up selecting a more feature rich slightly costlier phone," he argues. GSM players have, however, woken up to the possibility of low-cost bundled schemes, especially after Vodafone’s foray. Vodafone now charges $25 for its monochrome sets and $45 for colour ones. Sources say the company is planning to launch the monochrome sets at $20 in India. There could be a difference in the choice of vendors in GSM. Initially, Chinese companies might not be given preference. Already, Airtel has tied up with Nokia as its handset supplier; Idea is sourcing it from Nokia, Motorola and Spice. If the pressure to reduce price increases in GSM, the margin factor might come into play and Chinese players might find themselves in the reckoning. Chinese players have not succeeded in the GSM market because the choice of handsets offered by global players is huge. In urban areas, people might pay a premium for their choice of brand. Also, low-cost is associated with poor quality and Chinese players would be suspect. "The quality of components they use is suspect and the failure rates are high. Brand conscious people will go for branded products," says HC Ryu, Managing Director of Samsung Telecommunications India. But none disagrees that the low-end of market is wide open for the Chinese players to connect with the Indian masses, to possibly upgrade them later. LG Household is making inroads into Indian market' INDIA Household & Healthcare Ltd is the sole licensee of the Korean company LG Household & Healthcare Ltd. It entered the Indian market in October 2003. Mr Vijay R. Singh, Vice-Chairman and Managing Director, India Household & Healthcare Ltd, spoke about its strategy for growth and plans for the Indian market. The company entered the market at a time when the going was tough. What is the strategy for growth in this market? India Household and Healthcare Ltd entered the market in October 2003 as the sole licensee of LG Household & Healthcare. The Korean company was planning to enter India after a big success in China. LG Household & Healthcare is present in 41 countries and wanted to enter the Indian market. In February 2004, the market got fierce in terms of price cuts by the major FMCG giants. We are a multinational company and we have been fighting the same companies in all the countries we are present in. We knew what exactly had to be done to the market and entered the market with six categories instead of one as is done by other companies. We are actually making inroads into the Indian market with six categories at one time. The categories are detergents, toothpaste, diapers, soaps, shampoos and hairstyling products. It took one full year for us to put out the entire distribution network across the country. We started out retail placement only in midSeptember in South India and in the first week of October, nationally. The advertising broke out nationally on October 1. This advertisement will take 40- 45 days to impact the consumer. We have been successful in retail placements with 80,000 outlets nationally and have plans to touch 1.20 lakh outlets by March 31, 2005. How long do you plan to source the products from Korea? Please understand it is not (just) sourcing of products from Korea. It is sourcing of Indian products from Korea. What's the difference? All the products that are being retailed in India are manufactured in Korea but they are made to Indian water conditions, pack claims, maximum retail price (MRP) and address. These are Indian products, which are manufactured in Korean factories, which are completely automated, spanning over 10 to 12 acres. You incur import duties of almost 56 per cent, is this not a disadvantage when competing in the market. If you study any of our competitors' balance sheets they have a profit after tax (PAT) of 25 per cent, if you remove the PAT. And we are not looking at making profits for the first three years. We are on equal terms. (We have an import duty of 56 per cent; they have an excise duty of 26 per cent — a difference of 30 per cent.) So you will be making a loss in the first three years? We may not make a loss but will try to break even. Will you start manufacturing at any point of time? Manufacturing has to be thought of once we have reached a threshold turnover and penetration in the Indian market. Do you think you can achieve this in three years? The mandate that we have given ourselves is first three years of imports from Korea, with Indian market in mind. For instance the Indian market requires more fragrance and foaming, so there is research and development on this. Why have you gone in for umbrella branding for your products? This is the introductory film, which positions LG as a technology company with premium products. This is the single thought that we want to present to the Indian consumer. The future ones will be product oriented and brand oriented. What will be your budget for the first year? We have planned for an advertising budget of both above and below the line, of Rs 30 crore spends, from September 1, 2004 to October 31, 2005. You had spoken about packaging in sachets some time back. What is your status on this? The Indian market is skewed for certain categories for the lower end pack. We are in discussion with our Korean board for introducing lower pack units and that decision will take time but globally, we are not present in that segment. We are only present in premium value packs, which are of value to the consumer. India is the only market where sachets are sold in urban markets. It is actually a rural product. Sachet was introduced because of the rural skew in the Indian market. Unfortunately it had gone into the urban market. Now the sachet had penetrated urban market and 60 per cent of market share is sachet. So you have to be in this segment? I will just tell you where our vision is. We are operating in six categories. The six categories put together are about Rs 16,000-18,000 crore. We are operating in the premium segment, which is around 3 to 4 per cent. The 4 per cent of the market we are targeting is just Rs 800-900 crore, out of this we want to be just 20 per cent of the premium segment. We are looking at Rs 150 crore of turnover in the first year. We are looking at 20 per cent of the premium segment and less than one per cent of the total market. Are the products available in the kirana stores? In all A and B class outlets. Unfortunately in India the classification of the B type outlet is the kirana. When we take the Koreans to a kirana store and tell them this is a B class outlet they are shocked. We are just maturing in retailing and the classification of A and B will be changing in the next five years in India. Have you completed the rollout of all the products that you had announced earlier? Yes. All the six categories are in the market. We are strong in five categories. In the hair styling products one or two variants are in the market. We are thinking of introducing others. For the hair styling product are you going through the salons? What is the distribution network for that? Hair colour and gel will come in the main line channel. We will be introducing some more variants in this category, while we have introduced all the variants in the other categories. We will also be coming out with cosmetics soon from another division called LG Cosmetics, which is a part of LG Household and Healthcare Ltd. We have not yet completed the plans. These products will not be main line, but a niche, premium market like Revlon. RURAL MARKET Salvation In A Sachet Nandurbar, like most of India, lives in its villages. A predominantly tribal district in north Maharashtra, Nandurbar has a population of 13 lakh, more than 11 lakh of which lives in small, far-flung villages. Nearly half of them cannot read or write. Simply put, Nandurbar is as rural as it can get. The district's central town, however, does not reflect this backwardness. Motorola RAZR and Nokia Nseries phones blare Himesh Reshammiya polyphonic ringtones. Pepsi and Coke compete with domestic brands like Taaza and Aam Ras. A hoarding proclaims the lethal power of Good Knight coils, not mats, on mosquitoes. It's a different story in Nandurbar's 500-odd villages. One of them is Horapalli. The apology of a road that connects Nandurbar to Horapalli quickly transforms into a steep muddy road. Locals say the road is being built since 1967. When you finally get to Horappalli village, after walking a couple of kilometers (most vehicles give up), you realise there are just two very small shops which stock limited supplies. Loose sugar, tea and biscuits are big sellers. Most packaged products are local brands like Crown coconut oil. The shops, which cater to 1,700 people, together have a turnover of Rs 5,000 a month. That's almost Rs 2 spent per person per month. A pack of Parle-G costs Rs 5 at Horapalli-a rupee more than what it costs at Akkalkuwathe nearest tehsil, 45 km away. CASE STUDY: TANGADAPALLI/ANDHRA PRADESH HOME IS WHERE THE WAREHOUSE IS HLL ensures the "red soap" villagers want is Lifebuoy. VILLAGE: Tangadapalli POPULATION: 3,000 AVERAGE MONTHLY HOUSEHOLD INCOME: Rs 3,000 About 70 km to the east of Hyderabad, in the Nalgonda district of Andhra Pradesh, lies Tangadapalli village. Some of its small bylanes are coated with cattle dung. Among the 3,000-odd inhabitants of the village is 27year-old Mangamma whose house doubles up as a warehouse. Racks of creams, soaps and detergents decorate the house. The reason-Mangamma is among the 30,000 'Shakti entrepreneurs' in the country who stock and sell Hindustan Lever Limited's (HLL) products door-to-door. The wife of the village postmaster, Mangamma sells HLL products worth Rs 12,000-15,000 and earns around Rs 1,500 per month. Like Mangamma, 30,000 women across tiny villages in rural India sell HLL products as part of HLL's Project Shakti-the FMCG giant's rural distribution initiative, which targets small villages with populations of less than 2,000 people. HLL hopes to have 50,000 such women entrepreneurs by the end of December 2007-a giant leap from just 650 in 2002. At Tangadapalli, most villagers are daily wage labourers. The average income per household is around Rs 3,000 and savings are minimal. Despite that, Mangamma finds that people are 'brand conscious'. Villagers no longer ask for 'that red soap' but for Lifebuoy. And women prefer the Rs 5 sachet of Fair and Lovely and occasionally even splurge on a Rs 20 Pears soap. One such buyer is 23-year-old Konduru Balamani. Her husband is a lorry driver and earns about Rs 3,000 (and not all of this is shared). At times, she chips in with her daily wages. Food adds up to her biggest household expense. "We have meat once a week,'' she says, as if to emphasise the good times. And yes, she does pick up Fair and Lovely packets too. And at times, she even opts for a single strand of 16 Clinicplus shampoo sachets for Rs 16. On an average, she spends around Rs 500 a month on medical expenses, mostly on her two kids. Expenses on health are high in the village (some suffer because of the fluoride present in groundwater). A visit to N. Yadagiri, a local registered medical practitioner (RMP), shows that people end up with average monthly medical expenses in the region of around Rs 500. It is not, therefore, surprising that Mangamma's ambition is to make her son a doctor. It is also not without good reason that she is focussed on saving her entire earnings of close to Rs 1,500 per month. She, incidentally, also has a bank account and seeing her, others may follow suit! -E. Kumar Sharma Horapalli illustrates two things. One, the limited spending power in the smaller villages of rural IndiaHorapalli is full of marginal farmers or landless labourers. Two, people in interior India, for whom a rupee matters the most, are forced to spend that extra rupee on buying quality branded products. "The further away the villages are from city centres, the higher is the cost of quality branded products," says Pradeep Kashyap, Team Leader of rural marketing and research agency mart India. Rural retailers have to incur higher costs to get these products to the market, often by travelling to towns in their own vehicles. Unviable Markets India's rural population, at 742 million-larger than the population of the EU and the US put together-lives in six lakh-plus villages. A lakh of these hold 50 per cent of the rural population and 60 per cent of its total wealth. Clearly, the fortune for marketers may be at the bottom of the pyramid but-with due apologies to C.K. Prahalad-the wealth in rural India, as Kashyap points out, is at the top of the pyramid and not at the bottom. The upshot? Roughly 320 million of the population residing in five lakh villages are not target customers for marketers, simply because it isn't viable to cater to them. Most of these villages, like Horapalli, have a population of less than 2,000, and every marketer's mojo -'critical mass'-is tough to attain. As Ali Harris, Britannia's Brand Manager for Tiger Biscuits, says: "If I go to a shop in Mumbai, I will sell Rs 5,000 worth of stock and my cost to reach that outlet is next to nothing. If I need to reach an interior village, I would have to hire a van from the nearest town, and then probably sell Rs 50 worth of stock in the village." The other reason for brands not being able to penetrate the rural boondocks has got to do with the sheer physical effort involved. According to a nationwide survey conducted by consultants McKinsey & Co, of 593 rural districts, 248 are "deprived" and lack basic infrastructure like all-weather roads. Adil Zainulbhai, Managing Director, McKinsey & Co, says: "Almost half of India's rural population does not have access to good roads and decent infrastructure." CASE STUDY: MAADIKERI/KARNATAKA FROM MOBILE TO MARKET The roads are bad, but not connectivity! VILLAGE: Maadikeri POPULATION: 1,200 AVERAGE MONTHLY HOUSEHOLD INCOME: Rs 3,000 Until six months ago, 65-year- old Y.C. Anjappa, a marginal silk farmer in the small village of Maadikeri in southern Karnataka, used to spend Rs 20 every week to visit the local market to obtain the rates there. This routine got much more comfortable when he signed on for a Reliance Limited Mobility handset in late 2006. Since then, he has had to pay just 90 paise to call and get the latest information from the market in the town of Chintamani, 5 km away. Every morning, local salesmen from Reliance outlets in Chintamani head out into the hinterland to pitch for business from farmers and other rural folk, parking their vehicles in the central village square and hawking their service to anyone who is interested in listening. This approach has clearly paid dividends for the company, which has garnered some 100 new subscribers in Maadikeri alone, including the likes of Anjappa, who waited for three years or more to be allotted a landline from state-owned carrier BSNL. Despite being a rustic village of 1,500, dependent on the local dairy (which set a record recently with a Rs 5 lakh monthly collection) and a fledgling sericulture industry, villagers seem acutely aware of the latest and best brands in the market. For instance, in consumer goods, Johnson & Johnson baby powder, Pepsodent toothpaste and ITC Foods' brands top the list, while villagers trade notes on their latest Nokia CDMA handsets (GSM or wireline connectivity is virtually non-existent here). It's not just technology that's up for sale. Villagers are starting to buy other branded products too. "We used to buy everything from the local weekly market and purchased unbranded goods until very recently. That has changed dramatically following the easy availability of branded biscuits and consumer products locally. We no longer have to visit Chintamani or travel even further to buy them," says T.C Nagaraj, the secretary of the local milk dairy and a long-time resident of the village. Instead, the local stores have moved from stocking an assortment of home-made confectioneries to housing some well-known national and international brands. Despite the difficulty in reaching villages such as Maadikeri (it's barely 100 km from Bangalore, but the roads are rutted and it takes three hours to get there), companies seem undaunted as they reach out to the furthest corners in search of elusive rural consumers. "We start work at 7 a.m. and don't return until late at night from some of these villages because of the demand that exists there. Initially, they were sceptical, but a combination of BSNL's lethargy and our 30-minute activation routine meant that we were signing up 50100 subscribers every day," says Sahad Ali Baig, a partner at Saha Infocomm, the local Reliance franchisee. In Maadikeri, locals have begun to open accounts at the Canara Bank branch in Oojipura, 2 km away, and even travel up to Chintamani to deposit some savings. "We earn around Rs. 3,000-5,000 a month and can use some of our savings for mobile phones and other novelties," says one local. -Rahul Sachitanand Often, the quality of the roads is almost directly proportional to the quality and variety of products available in rural India. In fact, according to market research agency Hansa Research, the average shop in rural India stocks just about 29 brands from 14 FMCG (fast moving consumer goods) categories. That can vary from 13 product categories and 27 brands in eastern India to almost 16 products and 40 brands in Andhra Pradesh. A significant portion of these brands are also locally-made labels, which may not be up to the mark in terms of quality. Interestingly, more than 50 per cent of rural housewives purchase goods from outside their villages (in nearby towns) as village shops often quote higher prices. Smaller Packs, Greater Returns There's doubtless potential that's yet to be unlocked in most of rural India, and marketers can do so by finding more cost-effective ways to penetrate deeper even as they strive to make their products more affordable. McKinsey & Co predicts that given the right investment in rural infrastructure, the rural market may be worth $500-600 billion by 2020. Industry body ASSOCHAM projects that growth in the FMCG segment is likely to be driven by increased consumption in rural and semi-urban areas, and it is contribution from these regions that will propel the industry to a market size of Rs 1,23,363 crore by 2012 from the present figure of Rs 70,000 crore. CASE STUDY: MANCHER & RANJANI/MAHARASHTRA GODREJ TURNS GROCER Sickles or shampoos, they're all available here. As you drive along the picturesque Mumbai-Pune Expressway, Toyota, Skoda and the occasional Mercedes cars zip past you to Pune. It's possible to check the cricket score on your mobile throughout the journey. Once past Pune, the occasional crater jolts sleepy passengers. As you hit the Pune-Nashik highway, you enter desi territory. The high-end cars are replaced by Maruti vans and Tata Indicas. Tractors trundle alongside bullock carts brimming with sugarcane stalks. As soon as you enter Mancher town after a four-hour drive from Mumbai, the first impressive building you see is a Godrej Aadhar outlet. 'What's Godrej doing in a small town like this?' is a question that any city slicker is bound to ask. Inside the two-storey outlet, two farmers, Vasant Ganpat Hole (60), and Jijabai Shirolikar (55), are talking to an agriculture officer, who studies a withered plant stalk that Ganpat Hole has got along with him and diagnoses that his potato crop suffers from "late blight". The solution-a fungicide and a crop nutrient-both incidentally, Godrej products. The bill: Rs 420-not chicken feed, but definitely worth a one-time buy for Ganpat Hole, who earns about Rs 40,000 a year from his crops. The Rs 1,000-crore Godrej Agrovet has 31 such Aadhar outlets in eight states across the country. At outlets like the one in Mancher, farmers can not only shop for agri-inputs, but can get their soil tested for Rs 50. In addition, branded products from LG televisions to gigantic packets of biscuits are also on sale. A 45-minute drive from Mancher takes you to a small but prosperous village called Ranjani. Some 2,000 people live in this fertile, agrarian village with 350 households. Nearly 250 houses have television sets and most houses have telephone connections. But your mobile connection dies out as soon as you enter the village. It is in this village that Godrej set up its first-ever Aadhar centre. It's a much smaller one compared to the one in Mancher. Farmers buy sickles for Rs 69 or biscuits or shampoo sachets from the groceries section. "Earlier, we had to go all the way to Narayangaon, which is 14 km away, to pick up groceries," says M.G. Ranjanikar (67), who buys groceries worth Rs 500 every month. A mile away, an annual event is in progress. Farmers whoop and scream egging their bulls as they charge down a dusty 400-metre track. About 25,000 farmers from villages across the district have gathered to witness the race. Nearly 500 bulls participate-many have been purchased just for this occasion and some cost up to Rs 70,000. That's an indication of the purchasing power that some of these farmers have. What's more, the bulls are insured. Any farmer whose bull is maimed in the race is compensated up to Rs 50,000 on the spot. -T.V. Mahalingam Those figures are also not lost on some of the country's biggest marketers of FMCG products, consumer durables and telecom services, to name three of the categories that are most relevant to rural India. The success of companies like HLL, Parle, CavinKare, Britannia, LG, ITC, Godrej and telecom service providers (not to mention local brands like Ghari detergent) in tapping the rural markets is validation that a market exists in rural India. HLL, for instance, flagged off Project Shakti primarily to reach out to the villages its conventional network can't. Today, Shakti goes into 100,000 villages, and the company is targeting half-amillion villages by 2010. Shampoos and packaged biscuits are two great examples of rural India's hunger for branded products. In 2000, shampoo penetration in rural India was a meagre 13.3 per cent. Today, a third of the rural population uses shampoo. Sachets at affordable price points are being pushed by companies like HLL and CavinKare in the rural market. Says CavinKare Managing Director C.K. Ranganathan: "We have adopted special packaging for the rural market. The price starts at 50 paise for a sachet of shampoo to Rs 5 for a fairness cream (for a week's usage). But most products are designed for one- off use." CavinKare is growing at 25 per cent in rural areas compared to 15 per cent in urban centres. Today, 86 per cent of all shampoo sales in the rural markets happen through sachets, according to data from Hansa research. In urban areas, that figure is 69 per cent. A Tale of Two Rural Indias It's not that rural India is just a market for biscuits and shampoo sachets. Experts like Kashyap believe that the rural durables market has great potential-provided companies find a way of tapping it. "In the next five years, I expect nearly 70 million rural households to have television sets, mobile connections and twowheelers compared to 48 million households in urban India," he says. It's a trend that companies like LG have seen and have profited from. "Rural consumers are increasingly opting for colour TVs over black & white ones, the entry-level models are slowly but steadily changing from 14'' to the 20"-plus range. The rough price range for these sets is about Rs 5,000- plus for rural markets and Rs 7,500-plus for b & c class cities," says Girish Rao, Vice President (Marketing and Sales), LG Electronics India. LG targeted its Sampoorna range of television sets at the rural customer and today 35 per cent of sales come from its 'rural offices'. CASE STUDY: AMBEDKAR NAGAR & HANUMANT DARGA/TAMIL NADU FRIDGE, WHAT'S THAT? But healthy groundnut oil and insurance aren't strangers. VILLAGE: Ambedkar Nagar & Hanumant Darga POPULATION: 800 & 500 AVERAGE MONTHLY HOUSEHOLD INCOME: Rs 3,000-4,000 Singaperumalkoil, a sec c town as media planners might call it, is an hour's drive from Chennai. About 2 km away from this temple town, which gets regular tourist traffic, is a small village called Ambedkar Nagar. Visitors to Ambedkar Nagar, a couple of years ago, would have seen farmers tilling rice fields and cattle grazing languidly. However, over the last four years, most of the villagers have sold their land to Mahindra City (first private SEZ in the country). The villagers now make their living by doing odd jobs-from doing construction work to working as security personnel in the SEZ. The average monthly household income in the village is Rs 3,000-4,000. A small shop run by a 58-year-old widow, M. Kiliamma, sells soaps, ghutkas, shampoos, pickles, curry masalas, toothpastes, a few vegetables and other items of daily use. A slightly larger shop near the panchayat office stores rice, groceries and branded products like mineral water, Coke and Pepsi. But the predominant packaging for branded goods is the daily 'takeaway pricing'-anywhere from 50 paise to Rs 5. Kiliamma's son Veerabhadran works as a security staff in Infosys (located in Mahindra City, virtually in their backyard.) He prefers to do whatever shopping he has to do in the city. "Even the watches that are sold here are of poor quality,'' he points out, though these are available from Rs 100 onwards. Major expenses revolve around groceries-rice, vegetables and oil. The remaining goes into cosmetics. Branded purchases are restricted to ghutkas, soaps, black and white TVs, the occasional motorbike or moped, and cell phones with Reliance CDMA connections. Not all homes have cell phones or motorbikes. Nobody has a fridge. Even the soaps are largely local brands like Urvasi. Thanks to heavy regional television advertising, kitchen products like Rani curry masala and Achi curry masala are much sought after. -Nitya Varadarajan If anything, the explosive growth of telecom is an indication of the market for costlier products in rural India. Even in a village like Horapalli, the sarpanch, who is a marginal farmer, has a basic model cell phone. It is another issue that whenever he wants to use it, he climbs on top of the biggest rock in his village to "catch the signal". In prosperous agrarian belts of states like Punjab, Tamil Nadu, Karnataka, Maharashtra and parts of Uttar Pradesh, farmers can afford to buy Motorola phones. It is to tap markets like these that global cellular phone giants like Motorola have forged alliances with rural retailers like ITC's eChoupal, DCM group's Hariyali Kisaan Bazaar and Godrej's Aadhaar outlets. And the response has surprised Motorola. "We thought that cheaper phones would sell. We were pleasantly surprised to find that it was the mid-tier and top tier phones that were in demand in rural areas... ones with fm capability and high memory," says Sudhir Agarwal, Director (Sales) for mobile devices at Motorola India. He adds that though most of these places do not have fm radio stations, they have community radio, which they use these phones to tune into. Telecom service providers like Airtel and Idea are not only pushing cheap post-paid cards but are also tying up with handset manufacturers like Motorola to make inroads into the rural market. The Big Rural Shops The problem with rural markets, as with internet connectivity, is the last mile. It is this last mile that outlets like Godrej Aadhar and Hariyali Kisaan Bazaar are trying to plug. At a Godrej Aadhar outlet, farmers can get their soil tested for Rs 50 or pick up fertilisers or soil nutrients, in addition to buying groceries. Basically, outlets like Aadhar and Hariyali Kisaan Bazaar are the equivalent of supermarkets in rural India-a one-stop shop for farmers. "Our 31 Aadhar centres in India service 15-25 villages each. We want to take this number up to 1,000 centres in five years to service 20,000 villages," says C.K. Vaidya, MD, Godrej Agrovet, which clocked revenues of about Rs 1,000 crore last year, 75-80 per cent of which were from selling compound animal feed to rural India. Similarly, each Hariyali Kisaan Bazaar outlet caters to 50,000-70,000 acres of agricultural land and reaches out to 15,000 farmers. There are 33 such stores all over India. Such initiatives-in tandem with government investment in rural infrastructure-can go some way in catalysing prosperity in the country's interiors. With increasing media penetration, quality and choices are things that rural India is increasingly becoming aware of. "The same electronic media and channels reach all parts of the country and so, everyone aspires for the same things. They are aware of what is available-they might want to compromise only if they cannot afford it," says Vaidya. Spending power in India's smallest villages is no doubt limited but the sheer number of people living there makes them difficult for marketers to ignore. They may be difficult to penetrate too, but cost-effective intervention-not just in terms of reaching out but also in terms of product offerings-is the need of the day. -additional reporting by Shivani Lath, Rahul Sachitanand, E. Kumar Sharma, Pallavi Srivastava and Nitya Varadarajan India industry, June,09 2006 India industry: From top to bottom *There is a huge consumer market out there somewhere* ARRIVING before the start of the morning shift at LG's factory in Noida, outside Delhi, is like entering another country. In front of the enormous hangars housing the production lines, workers are doing their physical jerks, finishing with some chanting, clapping and a vicious punch into the air. Everywhere the walls are covered in uplifting mottoes. "Great Customers, Great Products!" "Zero Idle Time!" "My Job, My LG, My Family." LG has imported a little bit of its South Korean homeland, along with its disciplined work ethic. As LG tells it, the workers here are so pampered that none has even tried to form a trade union. The firm employs 2,800 people in India, in this factory and another one in Pune, and in a nationwide distribution and marketing network. According to Kwang-Ro Kim, the firm's boss in India, the country is now, with Brazil and Russia, LG's "second-equal" market, behind China, accounting for 5% of global turnover. The company has 25-30% of the Indian market in air-conditioning units for homes; 27% of the colour-television market; 35% in washing machines; 30% in refrigerators; and 40% in microwaves. Yasho Verma, an LG director responsible for human resources, puts these achievements down to a combination of Indian brainpower and South Korean focus. "Analytically," he suggests, "Indians are the best in the world. But execution is poor." But LG's is also, like most successes in the Indian consumer market, a triumph of adaptation. In most parts of the world, LG appliances built for a 220-volt electricity supply would have a tolerance of 200-240 volts, but in India they are built to operate within a range of 170-340 volts. Its televisions are also tweaked for the Indian market, featuring big speakers with a thumping bass. In India, television is not for a quiet night in. Indian business is full of legendary marketing coups. There is the high penetration gained by McDonald's in a country where most people are beef-shunning Hindus, through its Veggie and Chicken Maharaja burgers. There is the individually wrapped one-rupee biscuit and the onewash sachet of shampoo, both luxuries for the rural consumer. Nokia, which has a remarkable share of nearly three-quarters of the GSM mobile-handset market, has a similar tale to tell. Its biggest success in India was a purpose-built model, featuring a torch, a dust-resistant keypad and an anti-slip grip for humid conditions, as well as an ability to support Hindi. It became a bestseller despite being 30-40% dearer than the cheapest models. India is already Nokia's fourth-biggest market, behind China, America and Britain. It is expected to be the second-biggest by 2010. But with a 40% market penetration of mobile phones in the biggest cities, and 20% in urban India overall, that will require an expansion of the market in the countryside, where the penetration rate is only about 2%. Despite much excitement in the West about an "Indian middle class" said to be 300m strong, the "consuming class", with discretionary income to splash about, is much smaller than that. Suhel Seth, a marketing expert and boss of Equus Red Cell, an advertising agency, puts the figure at about 150m. Within that, the relatively well-off are a fast-growing minority. With rising incomes and a consumer borrowing spree, "a nation of hoarders becomes a nation of consumers," in Mr Seth's words. It is still, however, primarily a nation of farmers. Two-thirds of its people live in the countryside and more than half the labour force works in agriculture. Even pockets of affluence in such a multitude make up an important market (see chart 4). And for basic consumer goods, "the bottom of the pyramid" is vast. Indian business, however, is now looking at the villages not just as a potential market, but as a vital and neglected part of its supply chain. Mukesh Ambani, chairman of Reliance Industries, an oil, petrochemicals and textiles giant and India's largest private-sector company, intends "to bring the world to the Indian farmer". This is part of an astonishingly ambitious plan to build, in the next four years, a nationwide retail network of 1,000 hypermarkets and 2,000 supermarkets with a distribution system to supply it: an "integrated farm-to-fork supply chain". So defective is India's cold chain and so arduous its inland transport that, at present, as much as 35-40% of fruit and vegetables grown in the country rot before they can be eaten. Reliance would not enter the farming business itself. Land, says Mr Ambani, is too emotional an issue. Instead, it would be the "off-taker of last resort", relieving the farmer of risk. Much of the Indian countryside, because it is so poorly connected with the modern world, has been very resistant to change. Might companies such as Mr Ambani's achieve what no Indian government has managed and drag India's villages into the 21st century? R. Gopalakrishnan, an executive director of Tata Sons, India's biggest conglomerate, agrees that Mr Ambani is a "visionary kind of guy" but is sceptical of "megaplans". "Six hundred million people just don't change like that." And even a huge venture such as that planned by Reliance would leave most of the 600,000-plus villages untouched. Still, satellite television, mobile telephony and slowly improving roads are nibbling away at the rural-urban divide. Consumer-goods firms, such as Hindustan Lever, a 51% subsidiary of Unilever, an AngloDutch giant, recognise the potential of a market where only 15% of people use shampoos, and are seeking new ways of doing business among the rural poor. Its "Project Shakti" extends its marketing effort by recruiting women to "self-help groups" which are able to offer tiny loans-microcredit--to support a direct-to-home distribution network. It already reaches 80,000 villages, and by 2010 expects to employ 100,000 "Shakti entrepreneurs", covering 500,000 villages. Businesses, as well as some charities, are also trying to put the villages online. ITC, the former Imperial Tobacco Company still one-third owned by BAT, a British tobacco behemoth, has equipped more than 6,000 villages with a computer and a satellite connection to the internet. This is its "e-Choupal" initiative, part of its agribusiness procurement network. ("Choupal" is the word for the traditional village meeting place.) Farmers can use the computers to check prices for their products and, if they wish, sell online, freeing them from the tyranny of middlemen who have long taken a big cut of farm earnings. Once a commercially viable way has been found of providing a village with an internet connection, it has many other potential uses: government, sales, education, entertainment and so on. In Andhra Pradesh, Byrraju, the family foundation of Satyam's Mr Raju, has even set up two rural BPO operations, employing 100 people each, in tasks such as data entry. Attrition rates, he says, are very low. Selling in Rural India The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. TO expand the market by tapping the countryside, more and more MNCs are foraying into India's rural markets. Among those that have made some headway are Hindustan Lever, Coca-Cola, LG Electronics, Britannia, Standard Life, Philips, Colgate Palmolive and the foreign-invested telecom companies. Opportunity The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban. As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in 1991, rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income. The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased. The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster than the urban counterpart. The 4A approach The rural market may be alluring but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions; poor roads; power problems; and inaccessibility to conventional advertising media. However, the rural consumer is not unlike his urban counterpart in many ways. The more daring MNCs are meeting the consequent challenges of availability, affordability, acceptability and awareness (the so-called 4 As) Availability The first challenge is to ensure availability of the product or service. India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. However, given the poor state of roads, it is an even greater challenge to regularly reach products to the far-flung villages. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Marketers must trade off the distribution cost with incremental market penetration. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system which helps its brands reach the interiors of the rural market. To service remote village, stockists use autorickshaws, bullock-carts and even boats in the backwaters of Kerala. Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices. Affordability The second challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to the rural consumer, most of whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh — the so-called `Bimaru' States. Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. Coca-Cola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm priced at Rs 15. Acceptability The third challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market. One company which has reaped rich dividends by doing so is LG Electronics. In 1998, it developed a customised TV for the rural market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice boxes — a tin box for new outlets and thermocol box for seasonal outlets. The insurance companies that have tailor-made products for the rural market have performed well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crore in total premia. The company tied up with nongovernmental organisations and offered reasonably-priced policies in the nature of group insurance covers. With large parts of rural India inaccessible to conventional advertising media — only 41 per cent rural households have access to TV — building awareness is another challenge. Fortunately, however, the rural consumer has the same likes as the urban consumer — movies and music — and for both the urban and rural consumer, the family is the key unit of identity. However, the rural consumer expressions differ from his urban counterpart. Outing for the former is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Consumption of branded products is treated as a special treat or indulgence. Hindustan Lever relies heavily on its own company-organised media. These are promotional events organised by stockists. Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language. Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural households. It doubled its spend on advertising on Doordarshan, which alone reached 41 per cent of rural households. It has also used banners, posters and tapped all the local forms of entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media.LG Electronics uses vans and road shows to reach rural customers. The company uses local language advertising. Philips India uses wall writing and radio advertising to drive its growth in rural areas. The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether they can do so without hurting the company's profit margins. Mr Carlo Donati, Chairman and Managing-Director, Nestle, while admitting that his company's product portfolio is essentially designed for urban consumers, cautions companies from plunging headlong into the rural market as capturing rural consumers can be expensive. "Any generalisation" says Mr Donati, "about rural India could be wrong and one should focus on high GDP growth areas, be it urban, semi-urban or rural." O&M launches rural link drive in UP ADVERTISING major Ogilvy & Mather (O&M) has launched a new rural initiative called Param which will take connectivity and thereby e-governance to interior India where a large portion of the population lives. According to Mr Pankaj Baveja, who is heading this initiative, "We are calling our project connecting the last mile first." It is focused on communications and providing connections among people by using multiple technologies, some developed in-house and others off the shelf, to reach remote rural areas, where no landline phones or media-based communication is available. A pilot project called Beta-I has been undertaken in two remote villages of Basti district in east Uttar Pradesh. Mr Baveja, who was speaking at the International Conference on e.governance 2003, said the project could prove critical for e-governance related communications including education, healthcare and business. BPCL moves to sell products thru e-choupal network CONSUMERS in the rural areas of several States may soon have access to a portfolio of petroleum products from Bharat Petroleum Corporation Ltd (BPCL) through ITC Ltd's e-Choupal network, if a project currently being discussed by the two companies works out. Under the scheme, BPCL products including LPG, diesel and lubricants are likely to be sold through the e-Choupal network. Confirming that the two companies were working out the details of this venture, Mr S. Radhakrishnan, DirectorMarketing, BPCL, told Business Line that the agreement is likely to be finalised "very soon." The first phase is expected to cover the e-Choupal network in Andhra Pradesh, Madhya Pradesh and Uttar Pradesh. Meanwhile, BPCL is preparing to launch a branded diesel product on the lines of its `Speed' petrol, said Mr Radhakrishnan. Several possible variants of branded diesel that offer customers `value-for-money' are being examined and the company hopes to launch its offering in a "few months," he added. The company is also working on leveraging its nationwide LPG customer base, he said. The idea is to offer a portfolio of additional services to the company's 17 million LPG customers through its network of Bharat Gas distributors. The company already retails Nirlep kitchenware, Prestige and Hawkins pressure cookers and emergency lamps under the `Beyond LPG' brand, said Mr Radhakrishnan. On the retail front, the company is looking at expanding its network of petrol stations still further. Over the next six months, it expects to add some 600 new retail outlets to its existing network of approximately 5,000 outlets, he said. Similarly, it is also planning to add some 300 new `In and Out' convenience stores over the next several months, he added. BPCL has also reworked its `One-stop truckers' shop' offering, said Mr Radhakrishnan. These outlets, along the nation's highways, have been rebranded Ghar in keeping with the objective of functioning as a `home away from home' for the truckers. `Speed 93' launched: BPCL has launched `Speed 93', its new branded petrol, in Thiruvananthapuram. Addressing the launch conference in the city, Mr S. Radhakrishnan, said the product would also be launched in some other districts of Kerala over the next fortnight. The product, which is currently available in Bangalore, Chennai, Mumbai, Pune and New Delhi, will cost about Rs 3.27 more than normal petrol, he said. The new petrol is made up of specially refined octane 93 fortified with multifunctional additives and will be available at select `pure for sure' outlets in Kerala. Coke uses art to reach out to rural folks COCA-COLA India has embarked on a plan to cater to the rural population through its rural marketing initiative in Maharashtra. As a part of this initiative, a co-branded musical activity - the `Thums Up Chowfulla' - was recently organised in several districts and villages all over Maharashtra. The Thums Up Chowfulla seeks to provide wholesome family entertainment. The Chowfulla is largely based on the concept of the folk dance - Lavni - and has already taken place in several villages of Maharashtra. The Lavni is a traditional folk dance, and brings forth the enthusiastic spirit of the people of the State.Recently, Laxmikanth Berde, Marathi film star, was the primary attraction of the`Thums Up Chowfulla' in Bhawaninagar (a village in the Baramati district of Maharashtra) and entertained the crowd with many of his quirky anecdotes and enactments. This promotional scheme entails one to buy a 600 ml bottle of any of the Coca-Cola products and get a free ticket to the Thums Up Chowfulla. The programme in Bhawaninagar drew nearly 35,000 people from all the neighbouring villages and was attended by Coca-Cola's Mr Jaideep Kibe, General Manager (Regional Marketing), and Mr M.V. Natarajan, Area General Manager. Speaking about the rural marketing initiative, Mr Natarajan said: "Over the years we have realised the huge potential that rural India has to offer. Keeping this in mind we have initiated some very innovative rural marketing initiatives such as the `Thums Up Chowfulla' and `Thums Up Gumbat Gari (mobile van)' in the last two months." Mr Kibe said: "In-depth knowledge of the rural psyche, strong distribution channels and awareness are the prerequisites for making a dent into the rural market. We have now embarked on an new initiative. From product innovation like the Rs 5 bottle - `Chotta Coke' - to pro-rural advertising campaigns with catch lines such as the - `Thanda Matlab Coca Cola' - we have been exploring rural marketing in depth. With these two initiatives, we have now started to experiment with events that have mass appeal. We are confident that these initiatives will help us reach remote corners of the nation and facilitate volumedriven growth as well." The Thums Up `Gumbat Gari' is another marketing campaign that spans over 154 villages all over Maharashtra. As a part of this initiative, a mobile van with complete Thums Up branding tours villages and invites people to buy any CocaCola product and play a game free. The van comes complete with a magician, speakers/promoters, and invites all consumers to participate in various games. The promotion was kick-started from November 14 and ends on December 9. Where HLL's Shakti comes from FMCG giant Hindustan Lever has embarked on yet another ambitious venture, Project Shakti, to spur growth and penetration of its products in rural India while changing lives and boosting incomes. Catalyst presents a first hand account. A HARSH summer sun beats down mercilessly on the drive to Nalgonda district in Andhra Pradesh. The rocky landscape is parched, scorched by successive years of drought. The destination is Peddakaparthy village, 65 kms from Hyderabad, and the seat of a brave new experiment by fast moving consumer goods major, Hindustan Lever Ltd (HLL), where, undaunted by the vagaries of nature, a group of village women are attempting to bring about a transformation in their lives. Through a combination of micro-credit and training in enterprise management, these women from self-help groups have turned direct-to-home distributors of a range of HLL products and helping the company plumb hitherto unexplored rural hinterlands. From the time HLL's new distribution model, named Project Shakti, was piloted in Nalgonda district in 2001, it has been scaled up and extended to over 5,000 villages in 52 districts in AP, Karnataka, Gujarat and Madhya Pradesh with around 1,000 women entrepreneurs in its fold. The vision is ambitious: to create by 2010 about 11,000 Shakti entrepreneurs covering one lakh villages and touching the lives of 100 million rural consumers. What's Project Shakti all about? How does it work and benefit the company? Catalyst was part of a media team that HLL invited to visit Peddakaparthy village to see Project Shakti at work. The team visits the house of Jella Sujathamma, whose spouse is a weaver who weaves the famous Pochampally sarees of AP. However, her income was not enough for her family, which includes three children. Five years ago, Sujathamma had joined a self-help group (SHG), formed by the district rural development authority. HLL has operated Project Shakti through these self-help groups; AP was chosen for the pilot project as its has the most number and better established SHGs - there are about 4.36 lakh SHGs in AP covering nearly 58.29 lakh rural women. C.S. Ramalakshmi, Commissioner, Women Empowerment & Self employment, Govt of AP, points out that AP alone has about half of the SHGs organised in the country. Says Pradeep Kashyap, Managing Director, Marketing & Research Team (MART): "This network has ensured that AP is the incubator for all our experiments in working out new models of distribution of FMCGs and other products." MART, an organisation which works in the social sector, implements the on-ground activities for many companies wanting to work the rural sector, including HLL. The likes of Sujathamma, among the first Shakti entrepreneurs, have been chosen from these SHGs. She, HLL officials explain, is a shining example of the success of the model - Sujathamma, on an initial loan of Rs 10,000 from her SHG to start the enterprise, has a turnover of Rs 10,000-Rs 25,000 a month earns a profit of Rs 750-Rs 2,000 a month, an average return of 8 per cent. Besides, she now also sells staples, sugar, edible oil and a variety of other household items. The objectives of Project Shakti, explains Dalip Sehgal, Executive Director, New Ventures & Marketing Services, HLL, are to create "income-generating capabilities for underprivileged rural women by providing a sustainable microenterprise opportunity" and to improve rural living standards through "health and hygiene awareness". For HLL, it is "enlightened self-interest". Creating opportunities to increase rural family incomes puts more money in their hands to purchase the range of daily consumption products - from soaps to toothpastes that HLL makes. It also enables HLL access hitherto unexplored rural hinterlands. Says Sehgal, "We looked at several models of rural distribution, even at the Grameen Bank model in Bangladesh, before we decided on the pilot in Nalgonda to figure out this model. Now the model has been refined based on our learning here and we expect to roll out quickly in other states." For HLL greater penetration in rural areas is also an imperative - presently over 50 per cent of its incomes for several of its product categories like soaps and detergents come from rural India. The challenge for HLL now is to take its products to towns with a smaller population - under 2,000 people. As Sehgal points out, HLL's conventional hub-and-spoke distribution model which it uses to great effect in both urban and semi-urban markets, wouldn't be cost-effective in penetrating the smaller villages. Now, with this new distribution model, the smaller markets are now being referred to as `Shakti markets'. How it works Typically, a woman from a SHG selected as a Shakti entrepreneur receives stocks at her doorstep from the HLL rural distributor and sells direct to consumers as well as to retailers in the village. Each Shakti entrepreneur services 6-10 villages in the population strata of 1,000-2,000 people Typically, as Sehgal points out, a Shakti entrepreneur sets off with 4-5 chief brands from the HLL portfolio - Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic Plus. "These are the core brands, they we layer it with whatever else is in demand like talcum powder or Vaseline during winters," elaborates Sehgal. These brands apart, other brands which find favour with a rural audience are: Lux, Ponds, Nihar and 3 Roses tea. Typically, unit packs are small. All the brands are national and HLL is cool to the idea of creating a rural-specific brand as it will only dissipate the advertising media effort for the brands. To get started the Shakti woman borrows from her SHG and the company itself chooses only one person. With training and hand-holding by the company for the first three months, she begins her door-to-door journey selling her wares. The impact is slow and HLL too is not expecting any quick returns on this project. In Andhra, so far, since the experiment began, HLL has seen 15 per cent incremental sales from rural Andhra, which contributes 50 per cent to overall sales from Andhra of HLL products. But analysts see this rural foray as something the company has got to do. As Nikhil Vora, Sr. Vice President of research group ASK Raymond James explains, if there is one company that can take on the onus of developing the rural markets, it's HLL. Says he: "HLL contributes 20 per cent of the total FMCG business in the country. So, clearly, the onus is on HLL to grow the market. Returns may not happen in the next five years, but a lot of consumer understanding and insights comes from an exercise like Project Shakti, which in turn can lead to product innovation." An analyst with a leading brokerage points out that a lot of HLL's rural initiatives in the recent past have not paid off because of poor rural incomes. But, a monsoon revival and greater rural incomes can mean payback time for projects like Shakti. "Large companies like HLL have to push greater into rural areas. Brand loyalty is declining among urban consumers; they're looking mostly for consumer promos; regional brands too are snapping at their heels. So, to attain growth, going rural has become an imperative," she says. Concurs K.N. Siva Subramanian, Sr. Vice President, Franklin Templeton India Ltd: "The (HLL) management had recognised the impending saturation of the urban markets some time back and launched aggressive plans to capture the rural markets. However, a slowdown in the agricultural sector resulted in rural incomes remaining flat and affecting sales. We believe that by targeting lower price points and further expanding the distribution network, companies can tap the potential of rural markets. Initiatives like Project Shakti will help them in establishing and consolidating their base in rural markets." Regional brands, or even larger FMCG companies, do not have the kind of distribution reach that HLL has established and in the long run, that could prove a winner for HLL, according to analysts. The future of Shakti Having perfected the model in Nalgonda, in 2003 HLL plans to extend Shakti to a 100 districts in Madhya Pradesh, Gujarat and UP. There are other plans brewing. One is to allow other companies which do not compete with HLL to get onto the Shakti network to sell their products. Talks are on with battery companies like Nippo, TVS Motor for mopeds, insurance companies for LIC policies. "We wanted to first stabilise the project before we can look at other companies. It requires somebody with scale and size to build a platform and then invite other companies onto this platform," elaborates Sehgal. The most powerful aspect about this model, emphasises Sehgal, is that it creates a win-win partnership between HLL and its consumers, some of whom will also draw on the organisation for their livelihood, and it builds a self-sutaining virtuous cycle of growth for all. The next stage of Project Shakti is even more ambitious. HLL is now in the process of piloting `I-Shakti', an IT-based rural information service that will provide solutions to key rural needs in the areas of agriculture, education, vocational training, health and hygiene. The project will be piloted in Nalgonda district again. Based on a palm pilot, HLL is looking at sourcing appropriate lowcost hardware from Hewlett-Packard while Unilever Research out of London is developing the consumer interactivity software. As Sehgal puts it, women in the rural areas are the catalyst of change and that is why its whole programme keeps women in focus. "It's like popcorn in a machine; one bursts at first and then everything begins popping; here too, one woman as an agent of change bursts into a movement," he says. Clearly, it's the rural women who give Shakti its strength. AP's self-help groups THERE are about 4.36 lakh women self-help groups in Andhra Pradesh covering nearly 58.29 lakh poor women. AP alone has about half of the SHGs organised in the country. The SHGs are also popularly called DWCRA groups and this name became popular after the DWCRA programme (Development of Women and Children in rural areas) through which women's groups were assisted initially. The SHGs not only save but also take small loans out of the corpus available with the group. The group corpus consists of savings , government assistance as well as bank loans. Members use the loan out of the group corpus for their personal needs initially. However, in the long run such loans are utilised for income generation activities. Since the inception of the SHGs, an amount of Rs 1,362.98 crore has been mobilised as corpus by these groups and it is estimated to reach Rs 1,500 crore by the middle of this year. The women's savings movement, explains C.S. Ramalakshmi, Commissioner, Women Empowerment, Govt of AP, started in 1993 as an offshoot of the total literacy campaigns conducted by the government. Rural women organised themselves into `thrift and credit' groups with one rupee saving a day and this mass movement, in which 58 lakh members saved more than Rs 800 crore is rotated internally and lent amongst members twice in a year as per the interest rates fixed by the groups. Such amounts are used for their daily consumption needs as well as for making goods to sell. It is into this strong network that HLL tapped to launch Project Shakti. While the savings was there among the SHGs, there was no channel of investment. Now, HLL has provided a window of opportunity to invest and earn. HLL's `Shakti' to help partners in rural India FMCG major Hindustan Lever plans to partner insurance companies to distribute their products in remote rural areas through its Project Shakti. The Project is a distribution model that HLL established in late 2000 to sell its products through women self-help groups who operate like a direct-to-home team of sales women in inaccessible areas where HLL's conventional sales system does not reach. Mr Dalip Sehgal, Executive Director, New Ventures & Marketing Services, HLL, told Business Line that the company is in dialogue with non-competing companies for a partnership to distribute their products through the network that HLL has established. The company is in talks with insurance companies such as ICICI Prudential and Max New York Life to sell policies through its `Shakti dealers'. Sources said that a battery maker is also in talks with the company as it is not a product in the HLL portfolio. HLL evolved Project Shakti to reach areas of low access and low market potential. The Project currently covers all districts of Andhra Pradesh and Karnataka, reaching almost 5,000 villages through 800 self-help groups (SHGs). The company intends to extend the model across Madhya Pradesh, Gujarat and UP in 2003. It is looking at the TN market too. The Shakti vision, as outlined by Mr Sehgal, is to have by 2007 at least 10,000 Shakti dealers, covering a lakh villages and touching at least 100 million consumers. "Thirty per cent of FMCG business comes from villages with a population less than 2,000, but business viability is an issue in this population strata," said Mr Sehgal. The Shakti model trains women from SHGs to distribute HLL products of daily consumption such as detergents, toilet soaps and shampoos - the latter's penetration being only 30 per cent in rural areas. The women avail of microcredit through banks. Mr Sehgal explained that some of the established Shakti dealers are now selling Rs 10,000-Rs15,000 worth of products a month and making a gross profit of Rs 700-Rs1,000 a month. Each Shakti dealer covers 610 villages which have a population of less 2,000. The company is creating demand for its products by having its Shakti dealers educating consumers on aspects like health and hygiene. Sources said that HLL might have seen incremental sales of Rs 1 crore a month each in AP and Karnataka where it has covered the whole State. An analyst, commenting on HLL's plans to partner other companies in using its Shakti distribution system said that it is "enlightened self-interest" as more income in the hands of villagers could translate into greater sales of the products of daily consumption that it sells. The Rural Network to bring market issues centrestage THE Rural Network, an alliance of leading rural marketing organisations in the country, is spearheading a series of initiatives designed to put rural marketing issues squarely in the reckoning of corporates looking for new markets. The Network partners, Mr R.V. Rajan of Anugrah Madison, Chennai, Mr Pradeep Kashyap of MART, New Delhi, Mr Pradeep Lokhande of Rural Relations, Pune and Mr R.A. Patankar of Sampark, Mumbai, met in the city last week to finalise the initiatives. Mr Kashyap, speaking to Business Line, said one of the key initiatives was a seminar that the Rural Network is organising in association with FICCI in New Delhi on April 24 for senior management. The seminar will have participation from both the government as well as the private sector and will focus on what organisations need to do in their structures to service the rural market. "One of the reasons for this lack of focus on rural markets is the lack of commitment from the top. We need to get a buy-in from top management," said Mr Kashyap. The Network expects 300 delegates from some of the top FMCG and consumer durables companies to attend the seminar to debate some key issues confronting rural marketers. Another area that the Rural Network will collaborate on is research and data on the rural markets, "Currently, it's a black hole, there's not enough data; we will try to create a knowledge base," said Mr Kashyap. This year, two studies are planned - financing of durables in small towns. The other, related study will look at how to promote and distribute products of companies. It will study platforms like melas and mandis and buying patterns of rural folk and how corporates can use this network to good effect. "It will show the way for corporates on how to reach out," he added. For now the Network will fund these qualitative studies, and will use students from management institutes to undertake them. Another area that the Network will look at is getting management schools interested in starting rural marketing courses. As Mr R.V. Rajan of Anugrah pointed out, "More than 50 per cent of durables and FMCG sales come from rural areas, but except for a few, not many institutions offer a course in rural marketing." The Network will also look at publishing some case studies on rural markets based on its collective experience. Marketing the Kumbh Mela This year, The Rural Network is looking to leverage the Kumbh Mela to make it a marketer's delight. This year's Mela is at Nasik in Maharashtra and it starts on June 27. Over 45 lakh pilgrims are expected. The Network has identified around 10 important bathing ghats where pilgrims will congregate in great numbers. "We've identified 40 important days to carry out branding activities for corporates," said Mr R.A. Patankar of Sampark, who, along with Mr Lokhande, is coordinating the activities there. The Network is organising both the manpower and field vans which will be used to distribute leaflets as well as carry out product samplings and trials. It will also put up stalls and will also look at using the postal infrastructure like vans and post boxes for advertising. It is also looking at companies wanting to launch products. It is already in dialogue with interested corporates across several industries, including the mobile companies. "We've done an assessment study of the Mela; we've experience of fairs and the Kumbh is one on a much larger scale. We will plan a post-impact study for brands as well," said Mr Patankar. The Mela will be promoted as a must-be-there opportunity for corporates. Mega conference planned NEXT year, The Rural Network plans a mega conference, perhaps in New Delhi, which will bring together under one roof all types of players dealing with rural marketing and will provide a platform for sharing experiences. It will also explore the possibility of starting a Rural Marketing Association on the lines of AAAI and other similar professional bodies. Publishing a directory of all people in the industry is also on the agenda. The directory will be a database of people ranging from rural wall painters to folk artistes who can be used to promote products in rural areas. The planned two-day mega show will consist of talks, panel discussions, case study presentations as well as an expo. The conference will target all clients and ad agencies dealing with agri-inputs, consumer durables, FMCGs and other services, rural event managers, video-on-wheel operators and other vendors who are involved in rural marketing in some form or the other. Technology to the grassroots A few companies have spearheaded the e-mandi for procurements from their rural suppliers and use them to sell products and services. There is a lesson in this for other manufacturers who sell in the country's vast rural market. RURAL markets are not going to be the same for very long. Gone are the days when individual companies attempted to create a brand pull by advertising their products and arranging for live demonstrations. The fertiliser manufacturers sold fertilisers, the pesticide makers sold pesticides, and the farm equipment makers sold their wares and so on. Of course, the makers of consumer products such as TV, bicycle, fan and other FMCG items tried their best to create a market preference for their brands. Now the attempt is on to create virtual bazaars or agri-portals akin to weekly mandis where the sellers of various commodities and buyers gathered together. Mandi in Hindi means commodity market, a market where buyers and sellers meet and transact business. The most notable virtual mandis are the e-Choupal by ITC, Inagriline by EID Parry, and the Dairy Portal by Amul. This article briefly explains the functioning of these three portals and draws lessons for rural marketing in India. ITC's E-Choupal What was started by ITC as a cost-effective alternative supply chain system to deal directly with the farmer to buy products for exports is getting transformed into a meta market for rural India. The tobacco giant has already set up over 700 choupals covering 3,800 villages in four States — which include Madhya Pradesh, Uttar Pradesh, Karnataka and Andhra Pradesh — dealing with products ranging from soya bean, coffee, aquaculture and wheat. Consider why a farmer would opt for the e-choupal over the regular mandi. Farmers who strike orders on the Internet kiosk with ITC have a choice. They can either bring their produce to the ITC warehouse or factory and get reimbursed for the transportation cost or they could give their supplies to one of the collection centres that have been set up by the company for a cluster of villages or even deliver it to the sanchalak who runs the Choupal. Both ITC and the farmers make a neat saving by bypassing the middleman in the mandi. For instance, the farmer saves as much as Rs 250 per tonne on soya bean because he does not incur costs such as bagging, transportation, loading and unloading, to haul his goods to the mandi. The company, on the other hand, saves over Rs 200 a tonne by avoiding transporting the produce from the mandi to the company outlet even after reimbursing the farmer for transport. And the sanchalak, the local-level entrepreneur, also makes money by getting a 0.5 per cent commission on the total transaction made through his kiosk. But the kiosk can be used for reverse trading also — for companies to sell products and services needed by farmers directly. And ITC is already putting together a strategy to leverage the infrastructure to market and distribute goods and services that farmers require. The facility will be available for selling both ITC's products as well as those of other companies — of course, at a price. The company has taken some initial steps to get agricultural input companies to sell their products directly to farmers. It has already roped in US seeds giant Monsanto, fertiliser companies such as BASF and Nagarjuna Fertilisers and the State-owned MP State Seeds Corporation to take orders and market their products through the site. These companies can display their products on the Net, train farmers on how to use them, offer special prices, book orders from farmers and — through the sanchalak — deliver it at the village. Of course, ITC does not provide the service free. Companies have to pay a 10 per cent fee on the face value of the transaction and the tobacco company pays the sanchalak five per cent of the sales as commission for any product sold on his kiosk. ITC is also experimenting with using the kiosk to sell fast moving consumer goods (FMCGs). As the first step, it is selling gas lanterns and packaged vegetable oil. At the moment, these are being manufactured by third parties on behalf of ITC. Orders by farmers are being booked by the sanchalak who also arranges to have them delivered to the farmer's doorstep. If the idea clicks, the platform would be available for other companies too, which could help ITC generate healthy revenues. The third initiative is to leverage the e-choupal to sell services. Talks are already on with various insurance companies for using the e-choupal as a medium for both educating and selling insurance products to the farmer — in which the sanchalak becomes the insurance agent. The ITC virtual mandi is emerging as a one-stop shop for selling and buying of all kinds of products and services in the rural market. As ITC owns the infrastructure and interacts with the rural consumers, it will be able to crosssubside its products and services through the revenue obtained by selling the products and services of other companies. Inagriline by EID Parry The agri-portal of EID Parry, www.indiagriline.com, has been designed to address the specific needs of the rural farming community and is an attempt to catalyse e-commerce in agricultural and non-farm products by offering a network of partnerships. This content has been developed by using in-house expertise (EID Parry's Sugar and Farm Inputs Division and Corporate R&D Lab) and working with the TN Agriculture University and its Research Stations, TN University for Veterinary and Animal Sciences, National Horticulture Board, AMM Foundation, Murugappa Chettiar Research Centre, other players in agriculture-related media and publishing houses. The content is in the local language (Tamil) for ease of use. There is also a Web-based application for the registered sugarcane growers of EID Parry to access and maintain their transaction records with the company. An application for the dealer channel and the sales force of the company is also under development. The first 16 Internet Kiosks (`Parry's Corners') have been set up using the franchisee scheme. These owners/operators have been trained to use PCs and surf the Portal and the Net and assist users coming to the kiosks. About 150 farmers have been trained on the use of the Net and the portal and especially the special application built for them to view their transaction record with the company. Amul's Dairy Portal Dairy Information System Kiosk (DISK) project by AMUL was conceived with two components: 1) an application running at the society level that could be provided Internet connectivity and 2) a dairy portal at the district level serving transactional and information needs of all members and staff in the district cooperative structure. The software used at the society level was developed to provide: - Data analysis and decision support to help a rural milk collection society in improving its performance, i.e. increasing milk collection. - Data analysis to improve productivity and yield of milch cattle. - Farmers with facilities to place orders for goods and services offered by different agencies in the co-operative sector and seek information on subjects of interest. The services to be offered at these centres would include: 1) Delivery of information related to dairying, including best practices in breeding and rearing milch cattle, scheduling of Government and other private sector agency services, and collecting feedback on the quality of service provided to the catchment area 2) Access to a multimedia database on innovations captured by Srishti (an NGO working with IIM-A) from hundreds of villages, covering agricultural practices, medicinal plants, home remedies, tools and implements and so on, and a multimedia format that has captured the description of the innovations provided by innovators and a visual presentation of the innovations 3) Use as a communication centre offering services such as e-mail, fax and Internet telephony (if Internet telephony is permitted) 4) Internet Banking Services and Automated Teller Machines (ATMs), which will enable the milk societies to credit payments directly to sellers' bank accounts. (The sellers already have plastic card identifiers. The card identifier may have to be upgraded to smart cards carrying biometric identification. The cards can be used to withdraw cash from ATMs) 5) A way for farmers to download government forms, receive documents (from a government Web site) and order supplies and agricultural inputs from manufacturers; and 6) A means of communicating with farmers via the automatic printing process of daily payment slips. Implementation of the project requires computerisation of its more than 70,000 village societies and automation of milk collection process. In nearly 600 centres, the automation has been completed and 2,500 societies are computerised. Each farmer is given a plastic card as ID. At the counter he drops the card into a box that reads it electronically and transmits the identification number to the PC. The milk is emptied into a steel trough kept over a weighbridge. Instantly the weight of the milk is displayed to the farmers and communicated to a PC. The trough is connected by a pipe to a can, which transports milk to the dairy. One operator is required to fill the cans. Another operator sitting next to the trough takes a 5-ml sample of milk and holds it up to a tube of an Electronic milko-tester (a fattesting machine, which is a local adaptation of an expensive and sophisticated tester made by A/SN Foss Electric, Denmark). The fat content is displayed to the farmer and communicated to the PC, which calculates the amount due the farmer based on the fat content of the milk. The total value of the milk is printed on a payment slip and given to the farmer who collects the price from the adjoining window. Lessons for rural marketers We see the re-emergence of mandis in the form of portals or virtual bazaars. After all, the concept of mandis cannot be written off that easily. They have evolved over a period of time and have lasted for several centuries. They lost their prominence temporarily due to the brand marketing strategies adopted by companies. The basic problem with brand marketing is its high cost. Mandis offer a costeffective method of marketing. With the virtual mandis the cost saving is still better. Consider for example the case of marketing farm inputs like fertilisers, seeds and pesticides. In the brand marketing approach, the same information is provided by several marketers through different media and methods. In the virtual mandis, several people can join hands and provide best possible information in a most cost effective manner to the farmers. The virtual mandis operate on the principles of collaboration, co-operation and co-evolution as opposed to the conflict, confrontation and competition approach followed by brand marketers. At the very basic level several agencies, such as agricultural universities and governmental agencies join hands with each other to provide the necessary information to the villagers. As more and more people join the network, the member benefits grow exponentially. Hence it makes sense to enrol as many member as possible, be it the consumers or suppliers. Technology is the key to achieving success in the new marketing approach. With the cost of technology coming down day by day, it should not be a big problem to invest in technology. Also, several firms and agencies can share the cost of building the necessary infrastructure to build the virtual mandis. Interestingly, it is the buyers of rural produce who have taken the initiative to exploit the virtual mandi concept. What started as automation of procurement system by Amul or streamlining of supply chain by ITC and EID Parry has led to the formation of virtual mandis. The rural market grab has already begun. Once the rural consumers get attached to these new forms of virtual mandis they are going to procure most of their requirements from the same source and sell their produce in the same mandis. This offers an interesting challenge for those companies that are selling in the rural market including the agri-input companies, farm equipment companies, FMCG and consumer durable manufacturers. Are these companies going to continue the traditional brand marketing approach or turn to the emerging virtual mandis? Once customers get locked in with the new breed of virtual mandis, existing rural marketers are going to find it hard to win them back. REGP exhibition showcases rural products By Our Staff Reporter KOZHIKODE JAN. 7. With a view to popularising the products manufactured by units and individual enterprises of the Rural Employment Generation Programme (REGP) under the aegis of the Khadi and Village Industries Commission (KVIC), an exhibition and sale `Grameena Vyavasaya mela 2003', is on at the Indoor stadium hall here (January 6 to 11). The convener, K. G. Baburaj, said that this is the first such exhibition being held in the State in an effort to create awareness among the public on the products manufactured, besides channelising marketing outlets. ``Priority is placed on quality. For example the shirts manufactured by our units can be compared in quality to those produced under brand names, though the price level is much less. Many of our products have ISO certification.'' he claims. This is true of automobile oil, paints, footwear, traditional ovens, oil varieties, grinding machines, etc. Children's wear and hosiery products are items which have been attracting good sales. A unit which has showcased exceptional productivity is a Beypore-based pickle unit Shakti Foods which employs a sizable number of women. The unit sells traditional pickles in sachets of one kg, 500gm, etc. The stall owners said that the public response was reasonable during the last two days. A bigger exhibition is proposed to be held in Kochi in March. Under the KVIC margin money scheme, loans are available to individuals, cooperative societies, charitable institutions, self-help groups, for setting up units with a capital not exceeding Rs. 25 lakhs. Besides, for those setting up industrial units with a capital of Rs. 10 lakhs, 25 per cent is available as margin money (grant). The KVIC does not provide assistance to industry/business connected with meat (slaughtered), its processing, canning, or serving besides those processing pashmina wool and such other products. The Kerala Gramavyavasaya Ekopana Samithi, has been conducting awareness programmes on loan schemes, subsidies, and other assistance, for those interested in setting up smallscale units. For details contact C.P.Abdul Aziz, State Organising Secretary, Wafa Bhavan, U.K.Sankunni Road, Kozhikode- 673 001. Telephone : 0495-2760733, 222385, 98470 23851. ITC to expand rural marketing network By Our Staff Reporter KOLKATA, SEPT. 14. The e-choupals, primarily set as a part of the company's agribusiness initiative, are going to be an important vehicle of ITC's business. The company will be launching financial and FMCG products through the choupals on revenue sharing basis. A plan has also been drawn up to expand the choupal network in four more States apart from the existing four. Overall the agri business volume is expected to increase from Rs. 1,000 crores last year to Rs. 1,600 crores. Talking to media persons on the sidelines of the AIMA National Management Convention, here on Friday, S Shivakumar, chief executive, agri-business, said the company would launch life insurance products through the e-choupals in 50 villages, before the forthcoming kharif season. The products will be launched on a revenue sharing basis with the local `sanchalaks' of choupals each of which will have four of them. "The products will later be launched in other under-privileged villages," he said and added that the company had plans to launch other financial products including general insurance products soon. While FMCG products are generally available, the company is now conducting market research on launching these products through the choupals. "To begin with we will launch vegetable oils followed by salt and sugar". Keeping in tune with its ambitious rural marketing plans, the company has decided to increase the spread of choupals in Uttar Pradesh, Andhra Pradesh, Madhya Pradesh and Karnataka in the first phase. The choupal network will be extended to Kerala, Maharashtra, Tamil Nadu and West Bengal in the second phase. KVIC marketing subsidiary to be set up By Our Special Correspondent NEW DELHI FEB. 15. A marketing company is soon likely to be created as a subsidiary of the Khadi and Village Industries (KVIC). But it will be run as a professional company in the marketing sector. This was disclosed here today by the KVIC chairman, Mahesh Sharma, after a meeting with the Union Finance Minister, Yashwant Sinha, on the need to pay special emphasis to the khadi and village industries sector. The setting up of the marketing subsidiary was discussed during the meeting and an announcement is expected in the next few weeks. Mr. Sinha assured the KVIC chairman that rural industrialisation would get high priority in the coming budget. The Government was committed to increasing selfemployment opportunities and boosting khadi and village industries would be a key element in future strategy. Dr. Sharma urged Mr. Sinha to implement the khadi package recommended by the K.C. Pant Committee in 2000. He also sought convergence among the numerous Central agencies working in the rural industries sector as well as an allocation of Rs.100 crores for upgrading the National Institute of Rural Industrialisation at Wardha. The institute, started by Mahatma Gandhi in 1935 as the All-India Village Industries Association, was gradually reduced to a limited role and activity. Now, KVIC has engaged IIT Delhi on a turnkey basis to develop it as a premier institution. Briefing presspersons, Dr. Sharma said the move to develop KVIC products for the higher end of the market was being continued as they had evoked a "very good response''. The KVIC is working closely with the National Institute of Design (NID) at Ahmedabad and has been able to upgrade the quality of fabrics. The KVIC chief, however, expressed unhappiness over the continued linkage of this sector with the office of the Development Commissioner, Small Scale Industries, which had been made the nodal agency in 1999. This, he said, had not achieved the desired effect in giving a push to rural industrialisation. It's a different ball game for rural markets ALL roads in the consumer durables and electronics market may largely lead to the rural market. But are the players in the industry aware of the nuances of the rural market and that consumer behaviour in the rural market is `demanding and different' from trends perceived in the urban market? "The buying behaviour in the two markets is very different. In fact, our survey has revealed that the rural market is pre-dominantly first hand purchases," says Ms Rucheera Gumber, Senior Consultants, KSA Technopak. Almost 94 per cent of consumers opt for first hand purchase, with meagre six per cent opting for second hand purchases, she observed. "This clearly indicates the fact that if the marketers think that the products bought by them in various `exchange programmes' can be sold in the rural market, they are mistaken," industry analysts point out. Though first time buyers are there in large percentage, replacement purchase dominates the urban market especially for higher-end products. According to Ms Gumber, "the rural market has also got high percentage of first time buyers, but purchase is not driven by any seasonality aspect. For example, in the urban market purchase is more during the festive or marriage season." Concurring with the views of KSA, Mr Gautam Nath, Director-Corporate Services, NFO India, "our studies have revealed that festival-linked durable purchases is largely a big-city phenomenon." As per a survey conducted by KSA Technopak on rural outlook, in Uttar Pradesh, Punjab, Maharasthra, Tamil Nadu and Andhra Pradesh on outlook on the reasons for purchase reveals that 42 per cent of the consumers are in the category of first time purchase, with only six per cent leaving their purchase for festival season. On durable finance, i.e., saving versus loans — the survey states that rural dependence on loans for durables purchase is very low. States Ms Gumber, "the factors for this could be either ignorance of loan availability or an inherent discomfort with loans for `luxuries'. Our survey reveals that while 88 per cent spend their savings, only 12 per cent go for loans. Interestingly, these loans are hand loans from their local lenders." Mr R. Zutshi, Director Samsung India Electronics Ltd, said "across our product ranges, maintaining the same quality as in the urban market, Samsung offers the product that the rural consumer wants. In fact, we are tying up with smaller players for making consumer finance easily available in the semi-urban market." Says Mr Anil Arora, Head of Marketing, LG Electronics India Pvt Ltd, "the rural consumer, what ever he buys, wants to invest in a good product. Rather than lowering our prices, we have introduced economy range of our products for this segment." The rural conundrum Tempting market, big opportunity, large masses to be tapped. Yet success in rural India has eluded several corporates. Can India Inc really make it big in rural markets? CII's recent Summit had experts introspect on the subject. IT is not a one-time act, not a marketing gimmick or a sound byte. It has been the Waterloo of many companies. It involves addressing some 700 million potential consumers, over 40 per cent of the Indian middle-class, and about half the country's disposable income. Rural marketing, a much-talked about and hotly debated subject, was once again the focus of attention of FMCG majors such as Nestle India and CocaCola. Last week's Marketing Summit in New Delhi hosted by the Confederation of Indian Industry saw heads of these companies express diverse points of view on the issue. Carlo Donati, Chairman and Managing Director, Nestle India, observed that `generalising the rural market can be dangerous'. "It is true that in today's congested and difficult markets, both local and global, all FMCG as well as other companies or corporations look and search for new opportunities, consumers and markets. Going rural is a question any marketing person must have reflected on many times," he said. Drawing attention to the 700 million potential consumers in rural India, Donati pointed out that the rural market presented both an opportunity and a problem, given that this market has been characterised by unbalanced growth and infrastructural problems. So is Nestle going rural? "Our product portfolio is essentially designed for urban consumers; but all the same we are closely monitoring the rural consumer," Donati said. Nestle's rural initiatives have largely been based on price-led initiatives. Brands such as Maggi noodles and KitKat chocolates have been priced at Rs 5, and few other candy and chocolate brands are priced at Rs 2 per unit. These price points not only help Nestle reach more retail formats in urban markets, but also help in making inroads into rural markets. Currently, rural markets account for below 10 per cent of the food major's revenues. Coca-Cola, on the other hand, which has been investing heavily in tapping the rural market, has pegged its rural strategy on three factors - availability, affordability and acceptability. "The rural market is tempting, but tapping it has been fraught with challenges," pointed out Sanjiv Gupta, President, Coca-Cola India. "Take availability. It involves a trade-off between the cost of distribution and incremental penetration. Issues such as poor infrastructure and bad roads drive up servicing costs. Then there's the affordability factor - disposable incomes are low, and largely dependent on the vagaries of the monsoon. In the case of acceptability, the trade-off is always between customisation and standardisation of the consumer proposition. Most branded products are considered a luxury, media consumption is limited, and general product consumption is highly seasonal and skewed towards the harvest and festival time. Here, the question of customisation versus standardisation of the consumer proposition also arises. In the case of our thanda commercial, for example, we could connect both with the rural and urban consumer so that the campaign did not need customisation," Gupta said. Drawing comparisons between the urban and rural consumers, Gupta pointed out that while movies, music, social interactions and identifying the family as a key unit were the common attributes exhibited by both, expressions of these activities varied between the two sets of consumers. The rural consumer, for example, sought outings through local fairs, melas and haats, social gatherings such as card sessions, television viewing which was by and large confined to Doordarshan and DD Metro with limited influence of cable and satellite television, besides inter-village competitions. While emphasising the flexibility of the supply chain the rural market offers, Gupta added that "the buying pattern of the rural consumer is different from the urban consumer; purchase behaviour is occasion-driven by events such as weddings and harvests". Donati elaborated on the differentiated purchasing patterns of the urban and rural consumer. "The urban consumer has adapted much faster than his rural counterpart. The reasons probably range from higher exposure to media, to changing lifestyles, to increased pressure on time. On the other hand, the key feature of the Indian consumer - his restraint towards consumption - is more visible in the rural, more traditional environment. Hence, the cost of conversion of rural consumers (to the product) is higher," he said. Cautioning marketers against plunging headlong into the rural market, Donati added, "This does not mean that the rural consumer is not or should not be a target. There are a number of success stories that contradict my statement. I'm just raising a word of caution looking at the large numbers out there. Going rural without first assessing the profitability of such a move can be dangerous. Too much attention on the rural consumer might cause a company to lose focus on its core business. Therefore, attempts to generalise the concept of rural marketing tend to be wrong. I believe one should focus on high GDP areas whether the population is urban, semi-urban or rural." Cracking the market, Gupta reiterated, was not only about grappling with issues such as availability, affordability and acceptability. It was about reinforcing them over and over again. One of the examples Gupta touched upon was to do with issues involving the rural retailer. To counter negligible or erratic supply of electricity, for example, ice-boxes were offered for chilling. For rural retailers preferring high-margin local brands, pricing competitive to that offered by local players and creation of consumer pull have been attempted. The Summit concluded with a reality check - that rural marketing isn't the fad of the decade. Ingredients for success here include long-term commitment, cost reengineering and sustained innovation. To put it as a cliché - it is the survival of the fittest. CII meet on `battling for market share' — `Rural marketing has its own boons and banes' Our Bureau CII's Fourth Marketing Summit on the subject `Battling for market share' saw heads of FMCG majors such as Coca-Cola India and Nestle India voice diverse opinions on the subject of rural marketing. The issues ranged from focusing on rural marketing at the cost of servicing urban markets, to the dichotomy of managing an integrated strategy for both rural and urban consumers, to perceptions of Indian consumers and corporate India's commitment to social marketing. In his address, the Chairman and Managing Director of Nestle India, Mr Carlo Donati, spoke of addressing a potential market of 700 million people in rural India. "This is both an opportunity and a problem, given the unbalanced growth and infrastructural problems." Talking of Nestle's product portfolio specifically, Mr Donati said, "Our products are essentially designed for urban consumers, who have adapted much faster than rural consumers. The key feature of the Indian consumer— his restraint towards consumption — is more visible in the rural, traditional environment. Hence, the cost of conversion of rural consumers (to the product) is higher." Mr Donati cautioned marketers against plunging headlong into the rural market without first assessing the profitability of such a move. "Too much focus on the rural consumer might cause a company to lose focus on its core business," he said. Mr Donati reiterated that attempts to generalise the concept of rural marketing tend to be wrong. "Going rural is a generalisation. I believe one should focus on high GDP areas — whether the population is urban, semi-urban or rural," he said. Mr Sanjiv Gupta, President, Coca Cola India, said going rural is not about taking a one-time gamble but creating a long, sustainable business model that can replicate itself. "The issues of availability, affordability and acceptability have to be reinforced over and over again. In the case of availability, the issue is that of a trade-off between the cost of distribution and incremental penetration. As far as affordability in rural markets is concerned, marketers have to deal with low disposable incomes, which are largely dependent on the vagaries of the monsoon. In the case of acceptability, the trade-off is always between customisation and standardisation of the consumer proposition. In the case of our thanda commercial, for example, we could connect both with the rural and urban consumer so that the campaign did not need customisation," Mr Gupta said. While emphasising on the flexibility of the supply chain the rural market offers, Mr Gupta added that "the buying pattern of the rural consumer is different from the urban consumer; purchase behaviour is occasion-driven by events such as weddings and harvests.'' According to Mr Sudershan Banerjee, Managing Director of Dalmia Consumer Care, "There is no hard and fast classification of a rural market and an urban market. There is a belief that small pack sizes will work in rural India; but the rural buyer is not obsessed only with price; he is interested in the product's functionality and value as well." Mr Ramesh Vangal, Chairman of CII's marketing committee, and Chairman of the Scandent Group, said that rural India does not fall into the stereo cast of modern India. "Rural consumers are moving straight from cash to credit cards and have bypassed cheques completely, this is both a challenge and an opportunity," he said. Not run of the mill Neha Kaushik Marketers need to find unconventional ways to sell in the rural areas. Mills, village personalities and local events offer much opportunity, says a recent survey. EVER wonder what it takes to win the hearts and pockets of the discerning customer from the hinterland? Try thinking unconventional, if you want your durable product to strike the right note in rural India. According to a study conducted by the Marketing and Research Team (MART), consumer durable companies require non-conventional marketing methods and techniques to make a dent in these areas. The study, conducted in 24 villages across three districts each in Uttar Pradesh and Punjab, identifies `innovative' methods of marketing such as local brand ambassadors, mills, and tournaments. It surveyed villages that had population of 2,000-5,000 people and villages of over 5,000 people. Those surveyed included consumers, dealers and consumer durable companies. "Companies are mainly using conventional channels for promotions, even for the rural consumer. Mass media, which might work wonders in urban areas, cannot be that effective in the rural masses. This is primarily because of shortage of electricity, language diversity and low literacy levels. Furthermore, the purchase of high-ticket items such as consumer durables is indirectly related to agriculture and therefore targeting the consumers with an appropriate message at the right place and time is of utmost importance," says the study. Which makes sense, as the National Readership Survey finds that the reach of mass media in rural areas is very poor. While the press reaches only about 23 per cent of rural consumers, TV reaches about 36 per cent and cinema about 26 per cent. Meanwhile, the MART study finds that when it comes to going in for a consumer durable, the rural consumer is very quality-conscious and does not get swayed by just a lower price. Further, about 81 per cent of the surveyed consumers stated that they consulted their friends or relatives before they bought any durable products. "Their decision is mainly influenced by what their friends and relatives tell them," the study says. Apart from the use of melas, mandis, haats and vans to disseminate product information and increase awareness, the MART study identifies mills, rural games/tournaments, service camps and the creation of local brand ambassadors as vehicles of effective communication. Mills The study finds that mills are an effective way of targeting the prospective farmer during the peak season. More than 200 tractors visit a mill everyday during the peak season and best of all, apart from being in a cash-rich state, the farmer can spare time listen to product details and watch live demonstrations. "Farmers have to stand in long queues before their crop gets unloaded from the tractor and accounts are settled," the study points out. The study cites the example of Twin City Motors, a Hero Honda dealership which has been promoting its products at mills regularly. The dealer puts up stalls outside the factories and Electricity Boards to target workers who come from nearby villages. The stalls are used for demonstrations, offer exchange and finance schemes and for sales. Interestingly, the dealer points out that such a stall does not cost him more than Rs 1,000 with which he is able to target about several hundred high potential customers. Some of the non-consumer durable companies have also tried implementing this strategy. "We had put up stalls outside mills in Punjab for Castrol and got extremely good results," says Rakesh Jhanji, head of Creative Marketing, a rural promotion agency based in Punjab. He adds that the farmers have plenty of time to listen and see the products provided one is able to identify the right way to pull them to the stall. Game/tournament sponsorships A major crowd-puller in the entertainment-starved rural scenario are the games/tournaments played between the different villages periodically. For instance, in Punjab, kabbadi tournaments, sometimes even organised by NRIs on a large scale, attract thousands of people and can be used effectively for brand awareness. The study recommends that companies not only put up stalls at such venues and sponsor the events, but also use their products as prizes to be given away. It points out that some of the sports tournaments of Punjab are on such a big scale that they are often referred to as Olympics of Punjab (such as the one held in Kila Raipur district). Further, out of the total number of people surveyed in Punjab, 65 per cent said that they went to see the tournaments held in and around the village. Loan/exchange melas and service camps Dealers have been organising loan/exchange melas in rural India with varying degrees of success. This route has been taken more frequently by two-wheeler companies than the electronic appliance dealers. The survey adds that almost every two-wheeler dealer in Punjab uses loan melas to boost sales in the villages, but at the same time, this does not hold true for the dealers of Eastern UP where recovery is a problem. A dealer of Yamaha motorcycles in UP points out that he does not sell any motorcycle on loan as recovery is a big headache in these areas. However, an increasing number of dealers of both two-wheelers and electronic items is now resorting to service camps to build brand awareness and loyalty. "As most of the people in the villages consult their friends and relatives before buying any product, keeping the existing customers happy and satisfied would lead to more referrals for the product and hence more sales," the study finds. However, it emphasises that there must be good publicity through loudspeakers 2-3 days prior to setting up the service camp so that people turn up in substantial numbers. According to estimates, about 60 per cent of two-wheeler dealers set up service camps in the main villages and 55 per cent put up exchange/loan melas. The conversion from the enquiries generated through these is about 15 per cent. Local brand ambassadors The MART study also recommends the use of local brand ambassadors who can spread the good word about the product technicalities. Invariably, every village with population of over 2,000, has a mechanic and an electrician who services/repairs the electronic products in the area, and can create a positive image for the brand. The study recommends that companies maintain a good relationship with this person by painting/branding his shop and providing him with free tools/gifts from time to time. "His word carries a lot of weight with the village people," the study says. Apart from the above-mentioned unconventional channels for targeting the rural areas, marketers have been actively using channels of marketing such as haats and mandis. However, the survey cautions that the seasonality factor must be kept in mind. People in rural areas usually have surplus money after harvesting the crops, that is, in March-June and October-December. Also, they buy consumer goods mainly in the marriage season. This starts immediately after the harvesting in March and lasts till about June. Says Viraag Agnihotri, General Manager, NFO MBL India, a research firm, "Price, distribution and demonstration of a tangible benefit, in value terms, hold the key to success in the rural markets." An increasing number of durables companies are using non-conventional methods to find the right marketing mix for the burgeoning rural market for consumer durables. According to a report by Francis Kanoi Marketing Research, the rural market for consumer durables is estimated to be about Rs 5,000 crore and growing rapidly. Meanwhile, with penetration levels for many high-ticket items at less than 15-20 per cent in these areas combined with increasing competition in the various categories, the marketing action is only likely to heat up. Penetrating the rural market for consumer durables — Time for cos to think `out-of-the-box': Study You could be doing your rural business all wrong, for the hinterland needs specialised strategies to win the hearts and wallets of village consumers. The latest study by Marketing and Research Team (MART), New Delhi and Management Development Institute (MDI), Gurgaon, provides an insight into the non-conventional techniques that could go a long way in increasing penetration of consumer durables in interior India. Apart from the use of melas, mandis, haats and vans to decimate product information and increase awareness, the study identifies agri-mills, rural tournaments, service camps and the creation of local brand ambassadors as vehicles of effective communication. The study, conducted in six districts of Uttar Pradesh and Punjab, finds that agrimills (such as sugar mills) are a good means of targeting the prospective farmers during the peak season. More than 200 tractors visit a mill every day during this time, and farmers have to stand in long queues before their crops get unloaded from the tractor and accounts are settled. Apart from the farmer being in a cash-rich mindset, he has ample time to spare and listen to product details and watch live demonstrations. The study cites the example of a Hero Honda dealer who regularly puts up stalls at agri-mills to target farmers. He also puts up stalls outside factories and electricity boards, keeping in mind the product and the profile of the farmer/worker. According to the dealer, setting up such a stall costs him around Rs 1,000 and he is able to target 1,000 high-potential consumers. The study also recommends the use of local brand ambassadors, who can spread the good word about the product's technicalities. Invariably, every village, with an over 2,000 population, has a mechanic and an electrician, who services/repairs the electronic products in the area, and can create a positive image for the brand. The study recommends that companies maintain a good relationship with this local ambassador by painting/branding his shop, and providing him with free tools/gifts from time to time. "Their word carries a lot of weight for the village people", the study says. Another crowd-puller in the entertainment-starved rural scenario is the games/tournaments played between villages periodically. For instance, in Punjab, kabbadi tournaments, sometimes even organised by NRIs on a large scale, attract thousands of people and can be used effectively for brand awareness. The study recommends that companies not only put up stalls at such venues and sponsor the event, but also use their products as prizes to be given away. Encouraging dealers to set up free service camps for their products would also build a good reputation of the company. "Since most of the people in the villages consult their friends and relatives before buying any product, keeping the existing customers happy and satisfied would lead to more referrals for the product and hence more sales", the study finds. However, it emphasises that there must be good warm-up publicity through loudspeakers 2-3 days prior to setting up the service camp so that people turn up in substantial numbers. The study finds that such non-conventional methods could be vital for penetrating the Rs 5,000-crore rural market for consumer durables, as studies have shown that the reach of the mass media in these areas is poor. A National Readership Survey (NRS) study revealed that the press reaches only 23 per cent of the rural consumers, cinema only 26 per cent and TV only 36 per cent, hence the need to reach out in new ways. Shattering some rural myths Our Bureau NEW DELHI, April 24 HERE are some myths on the rural market to mull over: The rural market is a homogeneous mass, urban ads are equally suitable for rural audiences, Western market research methodologies are suitable for rural markets too. Mr Pradeep Kashyap, Managing Director, MART and member, The Rural Network, demolished these rural myths and several others while outlining his theme presentation at a conference on rural marketing and communications organised by FICCI here today. Mr Kashyap said that it was a myth that the rural market could be treated as a single entity. Instead it has a vast cultural diversity and vastly varying rural demographics. The second myth is that purchasing power is low. He said that at 15.6 million `middle class' households, the rural areas compared well with 16.4 million urban households. For the same income level, disposable surplus in the rural area is much higher than urban, he said. Another myth he said is that ad agencies and marketers bank on TV to reach rural areas. However, he said that television reach is only 36 per cent of households. Urban ads, Mr Kashyap explained, was not always suitable for rural audiences - another myth. The mother of all myths, Mr Kashyap said, was that the rural boom was over. However, he said that rural market size has grown rapidly and while it was true that growth has tapered off, it already presented a huge market. Mr Kashyap dwelt on the key challenges in the future for rural marketers. One of them was market penetration. Marketers also had to look at increasing occasions for use of FMCGs in rural households. Rural incomes needed to be increased through rural market growth. One other challenge lay in making effective use of the large available infrastructure of post offices and public distribution shops and haats and melas. Companies would have to meet the challenge by creating an independent rural marketing team with its sales targets and budgets, said Mr Kashyap. They would also have to design appropriate products keeping rural usage and environment in mind and be innovative with their distribution channels. The future, he said, would see technology play a key role in transforming markets. There will also be a proliferation of large format rural retail stores, he said.