Pricing Strategy in Rural Market by lbq89852

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									                             Rural Marketing




       PROJECT REPORT ON
       "RURAL MARKETING"


                BY
        AARON FERNANDES
            T.Y. B.M.S.
           SEMESTER V


SHRI CHINAI COLLEGE OF COMMERCE &
             ECONOMICS
             MUMBAI



         PROJECT GUIDE
     PROF. VAISHALI CHAUDHARY


      UNIVERSITY OF MUMBAI
            2003-2004




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                                                                 Rural Marketing

        I. ACKNOWLEDGEMENTS


      Many hands have toiled to ensure that this project finally sees the light
of the day. It required continuous guidance, inspiration and support from
many people and without their cooperation; this project would not have been
complete.
      I take this opportunity to express my sincerest gratitude to my Project
Guide, Ms. Vaishali Chaudhary, who lived up to her Designation and was a
constant source of guiding light for me at each and every stage of the
execution of this project.

  I would also like to thank the following people who through their experience
  have enlightened me on the practical aspects of this subject without whom
  the study would not have been carried out successfully.

 i. Prof. (Ms) Dr. Malini Johari   – Principal, Shri Chinai College, Andheri

ii. Prof. (Ms) S.G. Kelkar         – BMS Co-ordinator, Shri Chinai College,
    Andheri

iii. Professors at Shri Chinai College:

    Prof. Sunil Fussey

    Prof. Vaishali Chaudhary

    Prof. Padma Iyer

    Prof. Gitanjali Thorvat


      Lastly I would like to thank my well-wishers and my colleagues who
were a constant source of inspiration and in some cases also motivation as it
ultimately has led to the completion of this project. Finally I would also like to
give due credit to people, who knowingly or unknowingly have guided,
supported and helped me in the completion of this project as without their
support this project would have never seen daylight.


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                                                        Rural Marketing


Chapter
                                                                Page
  No.                      CONTENTS                              No.



  1       RURAL MARKET ENVIRONMENT                             1 – 14
   I      Introduction                                        1–5
   II     The Features of Indian Rural Markets                5–6
  III              Profile of the Rural Consumer              6–8
  IV      Understanding Rural Markets                         8 – 11
  V       Changing Profile of Rural Marketing                 12 – 12
  VI      Factors Contributing to the Growth of Rural         12 – 14
          Marketing




  2                      RURAL MARKETING                      15 – 20
   I      What is Marketing?                                   15 – 15
   II     Rural Marketing                                      15 – 15
  III     Rural Market Strategies                              16 – 20




  3       PRODUCT STRATEGY                                    21 – 27
   I      Introduction                                        21 – 21
   II     Rural Product Categories                            21 – 22
  III                    Product Item Decisions               22 – 25
  IV      Branding Strategies                                 25 – 27




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Chapter
                                                               Page
  No.                    CONTENTS                               No.



  4                   PRICING STRATEGY                       28 – 34
   I      Introduction                                       28 – 28
   II     Consumer Categories                                29 – 29
  III     Price in Marketing Mix for Rural Marketing         29 – 30
  IV      Pricing Methods                                    30 – 33
  V       General Pricing in Rural Markets                   33 – 34




  5               PROMOTION STRATEGY                         35 – 41
   I      Introduction                                        35 – 35
   II     Unique Traits on the Part of Salesmen for Rural     35 – 37
          Marketing
  III     Personal Selling & Opinion Leaders                  37 – 37
  IV      Managing Sales Force of Rural Market                37 – 39
  V       Selecting Proper Media Mix                          39 – 41




  6       PHYSICAL DISTRIBUTION STRATEGY 42 – 50
   I      Introduction                                        42 – 42
   II     Channels                                            42 – 45


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                                                      Rural Marketing

  III     Inter-Net Marketing                                45 – 45
  IV      Channel Management in Rural Markets               45 – 47



Chapter
                                                              Page
  No.                    CONTENTS                              No.



  V       Possible Approaches for Effective Channel         47 – 50
                Management in the Rural Context




  7                 CASE STUDY ANALYSIS                     51 – 80
   I      The Making of ‘CHIK’                              51 – 57
   II     E-choupal, the V21 SCM Model                      58 – 62
  III     A Matter of ‘PRESTIGE’                            63 – 67
  IV      How Mahindra Maxx-ed It!!! – The Mahindra         68 – 75
          Case Study
  V       The COLGATE Case Study                            76 – 80




             BIBLIOGRAPHY & WEBLIOGRAPHY




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                                                                Rural Marketing

Chapter – 1


RURAL MARKET ENVIRONMENT

   I. Introduction:


The emergence of an active cash economy is bound to create is bound to
create a strong rural demand and promote rural consumption. The traditional
growth and dominance of urban industrial centres is undergoing rapid
changes. A more equitable distribution in rural areas would also help in
slowing down the rapidly increasing influx of people from rural to urban areas.


There are two sections of rural population:
        A large portion has a low income and low consumption levels;
        The rest are rural rich.


The rural population forms a major portion of the Indian population as seen
below:




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                                                                Rural Marketing

About 75% of the Indian people reside in rural areas. In other words, for every
consumer in the urban area, there are three of them in the rural areas. Though
the proportion of rural population is showing a slight decrease over the years,
but in absolute numbers, the rural population is growing at a higher rate than
the urban population. This large population will require a wide range of
consumable and durable goods and services. At the same time the need of
the rural areas does not automatically guarantee a market, unless it is backed
by income and the resultant purchasing power.


For a vast majority of the rural population, the main occupation is agriculture
and allied activities. The graph below gives the distribution of rural population
as per their occupation pattern.




About half of the rural population own or lease land to cultivate it for their
livelihood. Another 27% are dependent on these cultivators for their jobs as
agricultural labourers. Thus, a total of 77% of rural population depend on land
only for their living and land is their source of living.




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                                                               Rural Marketing

There are others, constituting small proportions, who are engaged in business
like petty shopkeepers or merchants and salary earners like teachers, health
workers and village level officials. The implication of this is that the income
generation in rural areas entirely depends on how the land is used, what crops
are cultivated, how much is marketed, how much is consumed and the
marketing arrangements for the production. If rainfall is adequate, weather
conditions are favourable and appropriate technology is available, the rural
areas prosper as it has happened in the states of Punjab, Haryana and
Western Uttar Pradesh. So the disposable income in the hands of the rural
people is very much conditioned by the status of agriculture and other allied
activities. This also indicates that major part of income generated is a source
of agriculture. 75% of income generation in rural areas is from agriculture and
agriculture-related activities.


One of the deterrents for marketers to exploit the rural market potential has
been the vastness of the rural market in terms of areas covered and the
location of the rural population. It is much easier to cater to the needs of the
urban population because of their concentration, but it is very difficult in the
case of rural population because of their widespread nature.


The villages are also not uniform in size. Nearly 48% of the villages have a
population of less than 500 persons or about 100 households, which is
probably of no consequence to marketers. This may be acceptable since the
proportion of population covered by these 48% of villages account for only
12% of the total population. Yet it should be borne in mind that the people of
these villages also have land and cultivate and generate some income.


Thus the location and size of population of villages throw a challenge to
marketers. This phenomenon is not true for the whole country and there are
wide variations among the different states. In states with high irrigation and




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                                                              Rural Marketing

fertile lands, the concentration of population is more when compared to states
with low irrigation facilities and lack of arable land.




Given the distribution of rural and urban population, it can be seen that the
number of literates in rural areas are more than in urban areas. It is an
interesting got note that has been a considerable increase in the number of
literate persons in rural areas since the last two decades. This has its
implications in communicating with the rural population. It appears to prove
that communication should not prove to be such a big hurdle. Today, television
has proved to be an effective medium for communication with the rural
masses. The telecasting network in the country today covers about 93% of the
population.


Assuming that the entire urban population is covered by the television but the
television, which is only 23%, then nearly 67% of the rural population will be
covered by television. Thus, television reaches a larger segment of the rural
population than any other form of mass media. Though radio is also very
popular, people like to see to believe.


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                                                                   Rural Marketing



The above factors point that the potential for marketing of goods and services
depends heavily on agriculture, since it is the main occupation in rural areas.
The market for agricultural inputs – fertilizers, pesticides, insecticides, tractors,
irrigation equipment and seeds – has been expanding over the years in rural
areas as the Indian farming is fast becoming market-oriented. But the rural
market has remained a dark area for those manufacturing and marketing
consumables and consumer durables. To successfully exploit the potential
offered by the rural market, there is a need to first understand the rural market
in terms of the characteristics mentioned above. Only a few established
companies – HLL, Lipton, Brooke Bond, TOMCO, and P & G – have been
trapping the potential of the rural market for a long time.




                  I. The Features of Indian Rural Markets


   1) Large and Scattered Market: - The rural market of India is large and
       scattered in the sense that it consists of over 63 crore consumers from
       5, 70,000 villages spread throughout the country.


   2) Major Income from Agriculture: - Nearly 60 % of the rural income is
       from agriculture. Hence rural prosperity is tied with agricultural
       prosperity. Roughly speaking, a location is defined as “rural”, if 75 per
       cent of the population is engaged in agriculture related activity. In India,
       close to 70 per cent of the population is agrarian and contributes to
       about one-third of India‟s GNP.


   3) Low Standard of Living: - The consumers in the village area do have
       a low standard of living because of low literacy, low per capita income,
       social backwardness, low savings, etc.



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                                                                      Rural Marketing

   4) Traditional Outlook: - The rural consumer values old customs and
       tradition. They do not prefer changes.


   5) Diverse Socio-Economic Backwardness: - Rural consumers have
       diverse socio-economic backwardness. This is different in different
       parts of the country.


Infrastructure     Facilities:   -   The    Infrastructure    Facilities   like   roads,
warehouses, communication system, and financial facilities are inadequate in
rural areas. Hence physical distribution becomes costly due to inadequate
Infrastructure Facilities.




                  II. Profile of the rural consumer:


1. Size of the Rural Consumer:
       The size of the rural consumer group can be understood from the
   following details provided in the table:
Population of India
Rural v/s Urban: 1971, 1981, 1991 and 2001
  Population          Total      %   Total       %    Total     %     Total       %
                      1971           1981             1991            2001
  Rural Population 43.90 cr 82       50.20 cr 76.3 64.1 cr 76         74.2 cr     72.3
  Urban Population 10.91 cr 20       15.62 cr 23.7 20.3 cr 24         28.5 cr     27.8
  Total Population 54.81 cr 100 65.82 cr 100 84.4 cr 100 102.7 cr 100


    Rural population forms a major portion of the Indian population as seen in
   the table. If we consider the state level picture, in several states like Uttar
   Pradesh, Rajasthan, Madhya Pradesh and Kerala, the rural population



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                                                                Rural Marketing

   constitutes more than 80% of the total population. In states like Bihar and
   Orissa 90% of the population is in rural areas.




2. Location Pattern of Rural Consumer:
       The urban population of India is concentrated in 3200 cities and towns
   and the rural population is scattered over 6, 38,365 villages. Statistics
   shows that out of the 6,38,3645 villages have populations of more than
   5000 persons each. About 55% of the villages have population in the range
   of 500 people or less.


        The influence is clear, rural demand is scattered over a large area,
   unlike the urban demand, which is highly concentrated.


3. Literacy Level:
        It is estimated that there are 23% literate in rural India as compared
   with 365 of whole country. The rural literacy in the rural area is on an
   increase. Among the rural population Kerala tops with 77%.


        The literacy rate has its implication in communication with the rural
   population. It appears that communication should not prove a hurdle,
   provided appropriate means are chosen.


4. Rural Income:
        An analysis of the rural income pattern reveals that nearly 60% of the
   rural income is from agriculture. Rural prosperity and the discretionary
   income with rural consumers are directly tied up with agricultural
   prosperity. The pre-dominance of agriculture in the income pattern has one
   more significance-rural demand is more seasonal.


5. Rural Savings:


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                                                                 Rural Marketing

           The rural consumers have been drawn into the saving habit in a big
   way. The commercial banks and the co-operative have been marketing the
   saving habit in the rural areas for quite some years. Today nearly 70% of
   the rural households are saving a part of their income.


            The habit is particularly widespread among salary earners and self-
   employed non-farmers.


6. Significant Aspects:
            It can be seen in general sense low purchasing power, low standard
   of living, low per capita income, low literacy level and overall low social and
   economic positions are the traits of the rural consumers.


   By and large, the rural consumers of India are a tradition bound
   community; religion, culture and even superstition strongly influence their
   consumption habits.




Rural Consumer Class
   2001- 02                  2006-07
Very Rich          0.8       1.6       NUMBER          OF
                                       HOUSEHOLDS IN
                                       MILLIONS
Consuming          26.8      41.3
Class
Climbers           54.7      63.3
Aspirants          25        14.7
Destitutes         20.9      12.2




                                       13
                                                                 Rural Marketing



                III. Understanding Rural Markets:

There has been always a vast difference between the two markets for a long
time now. The difference is not only between urban and rural but also within
the rural areas -- between regions, states and districts. There is a difference in
the media reach, the education levels, in the culture and the type of products
that the two markets are exposed to and this leads to a difference in the two
markets.



The difference is in things like -- how do you celebrate New Year, how do you
celebrate birthdays? Small things like these are celebrated in a completely
different manner when the rural and the urban customers are concerned.
There is a vast difference in the lifestyles of the people in the two
regions. The kind of choices of brands that an urban customer enjoys is
different from the choices available to the rural counterparts. The rural
customer usually has 2 or 3 brands to choose from whereas the urban one
has multiple choices. The difference is also in the way of thinking. The rural
customer has a fairly simple thinking as compared to the urban counterpart.
But with technology coming in, mass media reach and the literacy levels going
up         -    this      divide       is       expected        top       reduce.
The biggest thing is that there is lack of any research into the consumer
behavior of the rural areas. There is considerable amount of data on the
urban consumer regarding things like -- who is the influencer, who is the
buyer, how do they go and buy, how much money do they spend on their
purchases, etc. but on the rural front - the effort has started to happen now. So
there is a need to understand the buyer.



There is no collective effort. Some people have spent time in the rural
markets, carried out studies and have understood the rural behavior, but their


                                      14
                                                                   Rural Marketing

works have not been passed or known to the rest of the industry. So, an in
depth understanding of the consumer is one key area that the industry needs
to work on.



There are vast differences in the rural areas as well. There are some 5, 60,000
villages and some 525 districts and each one is different from the other. The
geographical spread is not as homogeneous as it is with the urban areas
owing to vast cultural differences. So an in depth understanding of the areas is
what                                   is                                    required.


The field of rural marketing has been witnessing a lot of action from both the
fast moving consumer goods (FMCG) sector and consumer products
manufacturers but, there has been little success in the manner in which rural
research is carried out.



The limitation lies in the inadequate or unavailability of appropriate tools to
evaluate the rural market behavior. The problem arises because of general
lack of education resulting in low awareness about the products and hence the
inability to respond to the queries of the researcher in these areas.
Conventional research tools do not work in these markets, as these are
difficult to comprehend for the illiterate and semi-literate rural people.



The typical research scales used are for ranking, rating and attitude
measurement, limiting the research questions to simple yes/no kinds that do
not bring the true essence of the research process. In an effort to look in to
this issue two students from Management Development Institute, Gurgaon
along with Pradeep Kashyap, director of Marketing And Research Team
(MART) tried working out on some possible solutions to this problem. The
limitation of conventional research tools during the research project prompted



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                                                                  Rural Marketing

them to look at alternative sources to solve this problem and the results were
favorable.



Colors are very strong indicators, and forms, of expressing the feelings in the
rural areas and there are tools devised with colors that represent and reflect
the right answer to the researchers' queries. The selection of colors is done on
the basis of the association of rural people with these colors. For instance, it
has been observed that dark green represents a good crop or „Haryali‟ (as
they call it) and hence represents prosperity and is considered to be the best.
Light green represents not very good crop and stands next to dark green color.



Yellow represents dry sand or a dry field and hence comes next. Orange is the
color of the setting sun and represents the end of the day and hence is placed
after yellow and just before red, a color that represents danger to them. Such
hypothesis has been working well, according to MART, and it has incorporated
these tools in its research projects.



This is probably the beginning to a new form of research and analysis that
might change the paradigm of rural marketing research and, who knows, one
might just see this field blossom into a specialized research activity. If a simple
ranking and rating is achieved, a lot can be explained about the rural
preferences and behavior providing the marketers and manufacturers of goods
specific to the rural markets get that meaningful insight to be able to help grow
the markets in these areas.




                                        16
                                                                  Rural Marketing

                IV. Changing Profile of Rural Marketing

The position in the rural market was totally different some twenty years ago. At
present there is a demand for certain articles like T. V., fans, radio, engine oil,
readymade garments, detergents, medicines, etc. New product like toiletries,
baby care products and consumer durables are now getting good support in
the rural market.


Parle Agro is marketing 80% of its sale in the rural areas. Batliboi and Co. Ltd.
is a leading marketer in agricultural implements. Hindustan Lever sells its
products like soaps, shampoos, face cream, etc. in all rural markets on a large
scale.


Kirloskar and Crompton are leading rural marketers in diesel engines and
agricultural machinery.


In the service sector the Central Bank and Canara Bank are the largest banks
in rural India. More and more manufacturers are turning towards rural markets
because the urban are getting saturated.


The Indian rural markets have turned out to be gold mine for the marketers in
the nineties.


                 V. Factors contributing to the growth of rural
                     marketing:


1. New Employment Opportunities: The income from new employment and
   rural development efforts launched in the rural areas has increased the
   purchasing power among the rural people. Self employment policy with the
   assistance from the bank has become a great success in the rural areas.



                                      17
                                                                Rural Marketing

2. Green Revolution: A technological break through has taken place in
   Indian agriculture. Rural India derived considerable benefit from green
   revolution. Today, rural India generates 185 million tones of food grains per
   year and substantial output of various other agricultural products.


3. Expectation Revolution among Rural Masses: More than the green
   revolution, the revolution of „rising expectation‟ of the rural people
   influenced the marketing environment of rural India. It brought about a
   powerful change in the environmental dynamics. It enlarged the desires as
   well as the awareness of the rural people.


4. Favorable Government Policies: As a part of the process of planned
   economic development, the government has been making concerted
   efforts towards rural development. The massive investment in the rural
   India has generated new employment, new income and new purchasing
   power. In the recent years as a part of new farm policy, high support prices
   are offered for farm products. Various measures like tax exemption in
   backward areas, subsidy, concessions, incentives, assistances, literacy
   drive in rural areas has brought rapid growth of rural markets.


5. Literacy Growth: The literacy rate is on the increase in the rural areas.
   This brings about a social and cultural change in the buying behaviour of
   the rural consumer. They are exposed to mass media which create new
   demand for goods and services.


6. Growth in Income: The rise in the income resulting from the new farming
   strategy is adding meaning and substance to the growing aspirations of the
   rural people. Remittances from Indians working abroad have also made a
   sizeable contribution to the growing rural income and purchasing power.




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                                                               Rural Marketing

7. Attraction for Higher Standard of Living: The rural consumers have
   been motivated to change their consumptions habits enjoy a higher
   standard of living by the growing awareness about better living and easy
   availability of information about the goods.


8. Marketing Efforts: Firms like Bajaj, HLL, etc., have started penetrating the
   rural market realizing the rising expectations and the demand revolution in
   the rural India.




                                     19
                                                                 Rural Marketing

Chapter – 2


Rural Marketing

        I. What is Marketing?


The American Marketing Association defines marketing as “those activities
which direct the flow of goods and services from production to consumption.”


Marketing is also defined as “the set of human activities directed at facilitating
and consummating exchanges.”


In essence, marketing covers all those activities involved in providing
customer satisfaction, and making a profit for the manufacturer who makes
use of available resources to the maximum. Marketing starts with the
customer -- what he wants to have; and ends with the customer – giving him
what he wants.




        II. Rural Marketing


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 and the
like.


                                      20
                                                               Rural Marketing



       III. Rural Market Strategies
(DEVELOPMENT STRATEGIES FOR RURAL MARKETING IN INDIA)


An appropriate segmentation of highly heterogeneous rural market and
identification of the needs and wants of different segments will form the very
basis for rural marketing strategies. The strategies of the 4 P‟s of the
marketing mix would be an ideal one for the rural market.




   a. PRODUCT STRATEGIES:


The following are the product strategies for the rural market and rural
consumers:


   1. Small Unit Packing: This method stands a good chance of acceptance
      in rural markets. The advantage is that the price is low and is easily
      affordable by the rural consumer. Products like shampoos, pickles,
      biscuits, etc have tested this method.


   2. New Product Designs: The manufacturer and the marketing men can
      think in terms of new product designs, keeping in view the rural life
      style. E.g. P.V.C. shoes and chappals can be considered suited ideally
      for rural consumers due to adverse working conditions. The price of
      P.V.C. items is also low and affordable.


   3. Sturdy Products: Sturdiness of the product either in terms of weight or
      appearance is an important criterion for rural consumers. For the rural
      consumers, heavier weight means that the product is more durable, e.g.
      the experience of torch light dry battery cell manufacturers supports this



                                    21
                                                               Rural Marketing

      because rural consumers preferred dry battery cells which are heavier
      than the lighter ones.


   4. Utility Oriented Products: Rural consumers are more concerned with
      the utility of the product and its appearance. Phillips India Ltd.
      developed and introduced BAHADUR (a low cost medium wave
      receiver) during the early seventies. Initially the sales were good but
      declined subsequently, on investigation it was found that the rural
      consumers chose to purchase radios for entertainment purposes, not
      only for news & information.


   5. Brand Name: The rural consumers do give their own brand name on
      the name of an item. A brand name or logo is very important for a rural
      consumer for identification purposes.




b. PRICING STRATEGIES:


Pricing strategies are linked to product strategies. The product packaging and
presentation also keeps the price low to suit the rural consumer.


   1. Low Cost/Cheap Products: This is a common strategy widely adopted
      by manufacturing and marketing concerns wherein the price can be
      kept low by low unit packing like paisa pack of tea, shampoo sachets,
      etc.


   2. Refill Packs/Reusable Packaging: Health drinks available in the
      urban areas. The containers can be put to multipurpose uses, which
      can have a significant impact in the rural market. E.g. tea, coffee &
      many other consumer goods re available in refill or reusable packages.




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                                                                 Rural Marketing

   3. Application of Value Engineering: In the food industry, Soya protein
       is being used instead of milk protein. The nutrition content of both being
       the same, Milk protein is expensive whereas Soya protein is cheaper.
       The basic aim being to reduce the value of the product so it becomes
       affordable to a larger segment, thus expanding its market.


c. PHYSICAL DISTRIBUTION STRATEGIES:


While it is necessary to formulate specific strategies for distribution in rural
areas, the characteristics of the product - whether it is consumable or durable,
the life of the product and other factors have to be kept in mind.


   1. Coverage of Villages with 2000 & Above Population: Coverage of
       villages with up to 2000 and above population could be the break even
       point for a distribution setup. By doing so the percentage of villages
       covered comes to only 10% of all the villages but the rural population
       covered will be substantial.


   2. Use of Co-operative Societies: Co-operatives have an arrangement
       for centralized procurement and distribution through their respective
       state level federation. Such state level federations can be motivated to
       procure & distribute consumable items and low value items to the
       members of the society for selling to the rural consumers.


   3. Utilization of Public Distributor System: The PDS in the country is
       fairly well organized, whose effective utilization should be explored by
       the manufacturing and marketing men. Its purpose is to make available
       essential commodities like food grains, sugar, kerosene etc. to the
       consumers at a reasonable price. Fair price shops are run by the state
       civil supplies corporation, co-operatives etc. Who have an arrangement
       for centralized for procurement and distribution?


                                      23
                                                                      Rural Marketing



   4. Utilisation of Multipurpose Distribution Centres by Petroleum/Oil
      Companies: Petroleum/oil companies have evolved a concept of
      multipurpose distribution centres in rural areas. These outlets can be
      profitably used for selling consumable & durable items. In addition to
      petrol, diesel etc. fertilizers, seeds, etc. can be stocked at these outlets.


   5. Distribution upto Feeder Markets/Mandi Towns: Keeping in view the
      hierarchy of markets for the rural consumers, the feeder markets and
      the mandi towns offer excellent scope for distribution. From the feeder
      towns and the mandi towns the stockist or the wholesaler can arrange
      for distribution to the village shops in the interior places.


   6. Shandies/Haats/Jathras/Melas: These are the places where the
      consumers congregate as a rule. Shandies/Haats are held on a
      particular day every week, Jathras and Melas are held once or twice a
      year for longer durations, normally timed with religious festivals.


   7. Agricultural Input Dealers: Fertilizers should be made available to the
      farmers within the range of about four to five km. from their residence,
      as per the essential commodities Act. There are about 2 lakh fertilizer
      dealers in the country both in co-operative & private sector. E.g.
      Varana-Nagar in Maharashtra, where sugar & milk co-operatives have
      totally changed the life styles of people. The supermarket in Varana-
      Nagar caters to exclusively to rural consumers.




d. PROMOTION STRATEGIES:


The promotion measure should be cost effective. Word of mouth is an
important message carrier in the rural areas and „opinion leader‟ play a


                                      24
                                                                Rural Marketing

significant role in influencing the prospective rural consumers about accepting
or rejecting a product or a brand. Other attributes are explained as under:


   1. Mass Media: Mass media is a powerful medium of communication. The
      mass media generally used are:
          a. Television
          b. Cinema
          c. Radio
          d. Print Media: handbills, booklets, posters, banners, etc.


   2. Personal Selling and Opinion Leaders: In personal selling it is
      required that the potential users are identified and awareness is created
      among them. A highly motivated sales person can achieve this. Word of
      Mouth holds a lot of validity in the rural areas. This is the reason why
      opinion leaders are thriving among rural consumers.


   3. Special Campaigns: These should be undertaken during harvest &
      marketing seasons in rural areas. E.g. Tractors owners meet (tonee)
      conducted by MRF.




                                     25
                                                               Rural Marketing

Chapter – 3


Product Strategy
       I. Introduction


It has been observed that the rural consumer outlook is very different from the
urban consumer and what works out for the urban consumer may not work for
the rural consumer. Most of the companies treat rural markets as a dumping
ground for lower end products designed for an urban audience. It could
tremendously benefit the companies if they use a little bit of their technical
expertise to create specific products for the rural economy. The product must
be affordable and satisfy rural needs. It also depends on the consumer‟s
attitude towards the product and the cost-benefit analysis done by him before
buying the product. A rural consumer is largely governed by the social values
of rural society. E.g. If a rural consumer has the potential to buy an expensive
premium consumer durables like VCR‟s, washing machines, refrigerators etc.
he thinks first of the social values of rural society.


   II. Rural Product Categories


The NCAER has categorized the consumer goods into three categories.


Category I- Products are of immediate use to the family. E.g.- bicycles, fans
etc.


Category II- Products are a combination of entertainment products and
products that ease household work strain. E.g. - mixer grinder, cassette player
etc.




                                        26
                                                                Rural Marketing

Category III- Here products are a combination of means to supplement
income, easy household working, and source of entertainment. E.g. - washing
machine, motorcycle, etc.


  III. Product Item Decisions:


The product or service offered by the marketer has the ability to satisfy the
needs & wants of the customer. Products are physical and tangible. E.g. –
footwear, motorcycle, etc. Services are intangible and people based. E.g. -
health care, etc. The main consideration in individual product/service offer is
developing of product at three levels,
Namely-


   1. Core Product Development: Core product refers to the advantages
      that are specified by consumer needs. Core product developer has to
      focus on the needs of the consumer. Business is to be viewed as a
      customer satisfying process & not as a goods producing processing
      process. A product that provides the important form utility and ensures
      performance of the basic function is the core product. Products are
      transient, but the basic needs of the consumer group remain the same.
      For an e.g. the need for brushing teeth- old products were neem sticks,
      charcoal, etc. whereas now toothpaste, tooth powder is used, still the
      need for brushing the teeth remains the same.




   2. Tangible Product Development: The product concept becomes
      visible and operational when the psychological needs are specified in
      physical terms. Every product has five characteristics:
          a. Quality
          b. Features
          c. Style/design


                                     27
                                                                 Rural Marketing

          d. Packaging
          e. Branding


Quality: Success in the market depends on offering products to the market
segments that will be profitable. Quality signifies the ability of the product to
meet the following expectations-


                       Reliability,
                       Economy,
                       Durability,
                       Capability,
                       Efficiency


The product designers should interact with the marketers to know how the
consumers evaluate the quality of products, since consumers develop their
own norms, beliefs & notions about the quality of products.




Features: Features are extras to a product, which are of value to the buyers.
They are improvements provided for more comfort and convenience. They are
of two types


  i. Rational, problem solving
 ii. Emotional, fancy


The consumer is willing to pay for the solutions to the problems he has in
using the product. The features, which capture the attention of the buyer, are
less functional and fancier in nature.


Design and style: Design means the arrangements of parts, form, colour, etc.
so as to bring out an artistic unit with functionality, aesthetics, convenience of


                                         28
                                                                  Rural Marketing

operation, ease of service of service, repair & costs, etc. Good design adds to
the product attractiveness and usefulness. The three components of
personalities are structure, shape & style, which are acquired through design.


Packaging: It is providing a container/wrapper for a product for the purpose of
handling & protection. The three levels are-


  i. Primary package- To hold the product, e.g. bottles.
 ii. Secondary package- To hold the primary package, e.g. cardboard boxes.
 iii. Shipping package- To carry the secondary package from one place to
     another e.g. corrugated boxes. All products need shipping package.


   HLL has made „bubble pack‟ shampoos. They are neither sachets nor
   bottles & works on the principle of capillary action. The rural markets were
   kept in mind & this type of package was developed keeping in mind the
   convenience of storage after use.


   Branding: Brand is the term, name, sign, symbol, design or a combination
   of them, which helps to identify the seller products & identify them from
   competitor products. Its primary purpose is creating an identity of the
   product. The brand names should be easily understood & recognized by
   the rural consumer. Unfamiliar & absurd brand names cause hesitation in
   the minds of the consumer. The rural brands are recognized through
   symbols, logos and colours. E.g. -„Billi waali cell‟ - Battery with the cat as a
   symbol- Eveready.


   3. Augmented Product Development: The marketer should have a
      vision to look at the specific needs of the consumers and their related
      requirements. He needs a broader view to have the whole picture of
      consumption of the consumer. Augmentation requires fortifying the




                                      29
                                                               Rural Marketing

      product strategy with extra force drawn from other P‟s due to which the
      product offers make buying a pleasant and exciting experience.




 IV. Branding Strategies
Brand Name makes products familiar and evokes possessiveness. Branded
goods comprise 65% of sales in the villages. The share of non-branded goods
is shrinking dramatically. E.g. LG Electronics India gave the name
„Sampoorna‟ to the customized T.V. developed for the rural market. The word
(Sampoorna) is a part of Bengali, Hindi & Tamil language. The strategy
worked very well and the company sold about as 114 crores worth T.V. Sets in
the villages in a year. Strategy becomes effective when other elements
(emotional) are in consonance with it.


OTHER IMPORTANT STRATEGIES:
  i. CUSTOMER IMPORTANT STRATEGIES:
          a. Mass Product Strategies: The urban consumers are brand
             conscious whereas the rural consumers are price sensitive. They
             are more concerned about the functional benefits of the products
             and the value-for-money they pay. Hence, several companies
             have launched “no frills” economy products to attract rural
             consumers and low-end urban markets. E.g. Agni Tea launched
             by Tata.


          b. Premium Product Strategy: In case of some products rural
             consumers‟ exhibit preferences similar to those of urban
             consumers. Premium brands are gaining wide acceptance in
             rural areas. E.g. some high profile brands that have gained
             popularity in the rural households are Fair & Lovely, Surf & Ariel
             detergents, Pantene Shampoo and LG‟s Golden Eye models.



                                     30
                                                                Rural Marketing

 ii. INNOVATION STRATEGIES:
             a. Rural Urban Common: There are many products that are
               common to rural & urban markets. They include cosmetics,
               toiletries, washing powder, communication services etc. e.g.
               Videocon is pushing walkman into markets with a population
               under 50,000. Electrolux is test marketing urban models of
               refrigerators and washing machines in rural Punjab.


             b. Special for Rural: There are some companies who choose to
               develop products especially to meet rural market needs while
               others experiment with packaging. E.g. Green Cards- Andhra
               Bank & Allahabad Bank has issued credit cards known as „Green
               Cards‟ to farmers.


COMPANY                      PRODUCTS
Bajaj Electricals            Home Appliances
Colgate Palmolive            Dental Cream
Dabur India                  Chawanprash, Digestive Lozenges
Electrolux                   Refrigerators, Washing Machines
Eveready India               Batteries
Godrej Soaps                 Toilet Soaps
Hero Cycles                  Bicycles
Hero Honda Motors            Motorbikes, Mopeds
HLL                          Personal Products and Detergents
J K Dairy                    Dairy Whitener
Koshika Telecom              Cellular Services
LG                           Colour Televisions
Mahaan Foods                 Pickles, Ghee, Vadis and Papads
Maharaja                     Home Appliances
Marico                       Hair Oil
Nippo Batteries              Batteries


                                        31
                                                                    Rural Marketing

Philips India                 Consumer Durables
Titan Industries              Watches
United Phosphorus             Pesticides
Videocon                      Consumer Durables
 iii. QUALITY STRATEGIES:


   Many companies utilize the quality aspect to win the customer. In the
   organized sector competition requires quality improvements.


           a. Quality Improvement Strategy: Sundaram Clayton introduced
                TVS-50 XL in 1980. It was powered by 48 CC engine and a load
                capacity of 120 kg. in 1983 the company researched the uses of
                vehicle. It was being put to various uses by the farmers. The
                company decided to give TVS-50 XL a 53.3 CC engine, which
                was at that tie the highest powered in its class.


           b. Spurious Goods Strategy: Spurious products, generally
                marketed by the unorganized, low-end entrepreneurs somehow,
                make their way into the market and eat away the large chunk of
                corporate marketers‟ profit. The imitation will have resemblances
                that dope the consumer.
                              E.g. - Lifebuoy - Loveboy
                                    Tata     - Teta




                                        32
                                                                Rural Marketing

Chapter – 4


Pricing Strategy

   I. Introduction:


One of the important constituent of rural marketing mix is pricing. In the rural
market value-for-money brands give the fastest sales for the FMCG sector.
FMCG majors are trying to increase sales through low unit perks and VFM
products. In segments like bathing soaps, washing soaps, and detergents,
toothpastes, etc. the consumers are increasingly opting for more VFM
launcher. VFM brands like Nirma‟s Soap, Britannia‟s Tiger are doing better
than the other premier brands from their own companies.


According to ORG many estimates, in the year 2001, Breeze recorded a
growth of 12 % while Lux a premium brand recorded a negative growth of
12.3%. Britannia‟s Tiger grew by 12.6% in 2001.


In a slowdown mass brands register better growth than premium brands. In
the home appliances category, Videocon was one of the first companies to
enter the rural markets in home appliances. Phillips who was the market
leader for radio sets (cost Rs. 250) were attacked by Videocon by launching a
radio set for Rs. 180. They grab a major chunk of the market, at present they
are marketing „walky‟ range of personal cassette players at low prices to rural
customers. Only charging a lower price is not enough, they have to offer
value-for-money.


Pricing strategy requires a holistic approach. Pricing is a part of the marketing
strategy. It should be designed in such a way that it contributes to the
objectives of the marketers and needs and wants of the customer groups.

                                     33
                                                              Rural Marketing

  II. Consumer Categories

Rural customers like urban ones can be divided into three categories:


   1. Quality Conscious Customers: who are very rich and whose annual
      income is over 1.5 lakhs.


   2. Value Conscious Customers: who is the consuming class and whose
      annual income is between Rs. 45,000 – Rs. 1, 50,000.


   3. Price Conscious Customers: who are climbers, aspirants and
      destitute. The annual income of climbers is Rs. 22,000 – Rs. 45,000.
      The annual income of aspirants is Rs. 16,000 – Rs. 22,000 and the
      destitute whose annual income is below Rs. 16,000.


   III. Price in Marketing Mix for Rural Marketing


   1. PRICING FOR QUALITY CONSCIOUS CUSTOMERS:
   These customers are basically concerned with functional benefits and
   value-for-money. If a marketer wants to develop an effective pricing
   strategy for these customers he must know whether the price quality
   relationship holds good for the market.


   Six propositions emerge which are applicable to rural market as well as
   urban market.


          a. Quality Differences: Larger the perceived difference quality of
             brands in a category, the price quality relationship is stronger.
             E.g. home appliances.




                                     34
                                                                  Rural Marketing

          b. Quality Uncertainty: Greater the uncertainty involved in judging
              the quality of product, stronger the price quality relationship.


          c. Price Consciousness: Higher the price consciousness of the
              consumer and more price variations within a particular category
              of product, the price quality relationship is stronger. Therefore
              companies create a hierarchy of products establishing price
              quality relationship.


          d. Need Compulsion: Certain products that fulfill certain needs will
              have a strong price quality relationship. For e.g. a reputed doctor
              or lawyer would charge premium rates for their services because
              their services are viewed essential.


          e. Place Availability: Price quality relationship is stronger for the
              brands sold to the premium market within the same product
              category.


          f. Social Consciousness: Shoes and shirts that are publicly
              consumed products have a strong price quality relationship than
              privately consumed products like tooth powder and underwear.


       IV. Pricing Methods
Marketer can employ the following methods when price-quality relationships
are associated.


      Discriminatory Pricing: This is employed to charge different customer
       groups differently projecting differences of quality of offer. The
       differences discriminatory pricing are




                                      35
                                                                  Rural Marketing

     i. Product Form Pricing: Different versions of the product are priced
        differently. E.g. Chota Pepsi – Rs. 5


     ii. Location Pricing: Same product is priced differently at different
        locations. E.g. Residential places in city are costly.


    iii. Time Pricing: Prices varies by days or seasons. E.g. During summer,
        hill resorts charge higher rates.


    Perceived Value Pricing: In order to enhance the customers perceived
       value companies add features to their products. For each feature which
       enhances attractiveness, reliability, durability convenience, etc., the
       marketer charges an extra price.


    Psychological Pricing: Psychological pricing may be in the form of
       reference pricing or image pricing. In reference pricing the marketers
       position and sell products at higher prices by endorsement of products
       by celebrities or placing products with classy products. Another form of
       psychological pricing is image pricing. This pricing is effective in case of
       ego sensitive products like cameras, sunglasses, cars, etc. Since price
       acts as a signal of quality people prefer to buy expensive ones.


   2. PRICING FOR VALUE CONSCIOUS CUSTOMERS:
Some customers are willing to pay for the product of their choice a long as
they get „Value for Money‟. When consumers are value-conscious, price hiking
need not lower sales. E.g. - Eveready Industries increased the price of the
white 1.5 volt cells it sold in rural India by 6% from Rs. 7.50 to Rs. 8. But still
the sales did not decline.




                                      36
                                                               Rural Marketing

Rural consumers cannot afford to buy large volumes, but they prefer t buy
quality products. With the introduction of small unit packaging, there is
increased penetration of shampoos, soaps etc.


   a) Skimming Pricing:
   In this type of pricing companies as the time of introduction favor setting
   high prices to skim the cream off or low prices to sweep the entire ground.
   Skimming price is preferred when high price is aimed to communicate the
   image of a superior. E.g. - P&G introduced Ariel and Tide detergents at
   high prices. Recently it cut the prices of most of its laundry and hair wash
   brands.


   b) Penetration Pricing:
   Penetration is chosen when market is highly price sensitive, and a low
   price stimulates market growth. Products like Maggi Noodles, Rin
   detergent penetrated the market with lower prices in the initial stages and
   later went up the price ladder.


   c) Value Pricing:
   It involves setting prices reasonably at a lower level compared to
   competitors through careful streamlining of operations to become a low-
   cost firm without sacrificing quality. It involves human development, quality
   management, supply chain management, etc. In India many companies
   are adopting this approach as the markets are saturated and competition
   has intensified.


   d) Psychological Pricing:
   Some smart sellers quote their prices that end in an odd number e.g. Rs.
   99.95 paise. It conveys two notions.
     i. There is a discount or bargain
    ii. It belongs to a lower price range.


                                     37
                                                               Rural Marketing



   Bata Shoe Company has been using this price tactics since long.


   3. PRICING FOR PRICE CONSCIOUS CUSTOMERS:
These consumers belong to the destitute, aspirants & climber groups. They
can afford less. The climbers watch for promotional offers to whet appetite for
quality products.


Since branded products are costlier than unbranded and ungraded local ones,
also not available in small quantities, the rural consumers purchase local
brands or fake brands which are relatively cheap.


Many companies have revolutionized the buying in rural areas by introducing
sachets. Promotional pricing measures include price-offs, discounts or
rebates, credit facilities and no interest or low interest long term finance
schemes. Another way of inducing them to buy can be the low-priced mini-
pack strategy. E.g. - HLL sells a mini pack of shampoo, toothpaste, face
cream and talcum powder for Rs.15, if sold separately it would cost Rs. 27.


V. General Pricing in Rural Markets


   a) Low Cost/Cheap Products: The price can be kept low by low unit
       packing like paisa packs of shampoo sachets etc. This is a very
       common strategy which is being widely adopted by many marketers.


   b) Refills/Reusable Packaging: The refill packs benefits the consumers
       in terms of price. Such measures can have significant impact too, since
       the price can be reduced to the advantage of rural consumers. In
       addition the packaging material used should be reusable in rural areas.
       Most fertilizers companies pack fertilizers in LDPE or HDPE sacks
       which can be washed & reused, which are in demand by the farmers.


                                    38
                                                        Rural Marketing



c) Application of Value Engineering: The application of           value
  engineering evolves cheaper products by substituting costly raw
  material with a cheaper one. We now find costly materials being
  replaced by cheaper reinforced plastic. This technique does not
  sacrifice the technical efficiency of a product but lowers the product
  price.




                              39
                                                              Rural Marketing

Chapter 5


Promotion Strategy

   I. Introduction


The rural market has a huge buying potential due to the increase in the
income and higher prices of the agricultural products. It was neglected or
ignored by the marketers due to varied reasons but with the growing
awareness in the Information technology has reduced the urban rural
divide and now the consumers in the rural areas are aware of the world
class products. The increase in the network of roads, the literacy drive and
many other things has brought about a change in the economy of the
country. Rural India is now bound with opportunities waiting to be exploited
by the potential marketers. Rural marketers should place greater emphasis
on developing sales forces to exploit the rural market. Various novel ideas
of sales promotions have been tried out during the harvest time since that
is the time when the rural household becomes cash rich.




   II. Unique Traits on the Part of the Salesman for Rural
       Marketing:
Personal Selling is an essential element in rural marketing. Rural Marketing
involves more intensive personal selling efforts than Urban Marketing. The
basic traits of Personal Selling are enthusiasm, communication skill and
knowledge of selling techniques which are required in equal measures by
both urban & rural salesmen. In order to match the peculiar rural market
conditions, the rural salesman require certain additional traits & capabilities
listed below-

                                  40
                                                             Rural Marketing



1. Knowledge of Local Language: This is the basic requirement for a
   rural salesman that he should be well versed with the local language.
   The rural salesman needs a strong background of the local language.


2. Willingness to Get Located in Rural Areas: It is common knowledge
   that the rural areas lack modern amenities compared to urban areas.
   Because of this factor salesmen are generally elected to work in rural
   centres. It is only those who are genuinely happy in living and working
   in the villages can become good rural salesman.


3. Cultural Congruence: The salesman must have proper acquaintance
   with the cultural pattern of rural in the given rural territory. Since the
   cultural patterns of the rural community differ from one another, a
   cultural background i.e. in consolance with the culture of given rural
   community is a specific requisite of success for the rural salesman.


4. Attitude Factor: The rural salesman must have a great deal of
   patience and perseverance as their customer is a traditional person. It
   will not be possible for the rural salesman to clinch the sales quickly. He
   may have to spend a lot of time with the customer and also make
   several visits to gain a several response from him.


5. Capacity to Handle a Large Number of Product Lines: The rural
   salesmen are often required to handle a much large number of product
   lines as compared to their urban counterparts. The rural salesman
   usually does not generate economic value of business if they handle
   few products. They are compelled to handle a large variety of items and
   basically become a jack of all trades.




                                  41
                                                            Rural Marketing

6. Greater Creativity: Often the product concerned may be very new in
   the rural context. The rural salesman must endeavor to introduce them
   in the rural market through creative selling, using consumption pioneers
   and opinion leaders.




III. Personal Selling & Opinion Leaders
Rural con sumers do not decide on the basis of information provided by
companies or advertisement. They prefer consulting others who have
purchased the products previously. These actual experiences of the other
actual users significantly influence the buying decision in rural areas. In
Personal Selling, it is required that the potential users are identified and
awareness is created among them about the product, its features &
benefits. This can be achieved through the efforts of a highly motivated
salesperson, supplemented by the influence of opinion leaders in villages.


„Opinion leaders‟ & „Word of Mouth‟ are thriving among rural consumers.
Opinion leaders in rural can be defined as a person who is considered
knowledgeable and is consulted by others, and his advice is normally
followed. He could be a politician, big landlord, teacher; progressive farmer
etc. There could be different opinion leaders for different purposes. „Word
of Mouth‟ information holds a lot of validity in the rural areas, since rural
consumers place more emphasis on the experience of the other who uses
different brands of the product.




IV. Managing Sales Force of Rural Market:
The task of sales force management carries certain added dimensions in
the rural context. In selecting the salesman, in giving the orientation, in
motivating them and in developing them the sales manager has to adapt to
the unique requirement of rural selling. The major concern in sales function

                                   42
                                                              Rural Marketing

is to constantly improve profitability of the territory. The salesperson has to
undertake the following activities in the field.


1. Increase Sales: The sales person has to identify his own and
   customers potential, call on more customers consisting of farmers,
   dealers etc. Training and motivating the distributors, dealers etc. help
   improve trade sales. Organising campaigns with special emphasis on
   farmers‟ contacts and demonstration will be important in order to
   increase demand for the product. The services of NGO‟s can be used
   e. g. Colgate Palmolive used NGO‟s to promote its toothpaste Colgate
   „Supershakti‟.


2. Improve Company’s Image: A sales person is the link between the
   customers and the company. He is the company‟s ambassador in the
   market. Transactions are based on trust in the salesperson. It is
   therefore important that he creates a good impression of the company
   in the eyes of the customers.


3. Develop Future Market: The salesperson will have to keep in touch
   with the latest advancements in the market. He has to identify &
   develop distribution system and undertaking demand generation
   activities are necessary for the developing the market for the future.


4. Effective use of Resources: Salesperson should not resort to
   dumping of stocks in order to achieve sales targets. He should ensure
   that stocking of goods is proportional to expected sales; it will help him
   in collecting dues as per the credit policy of the company.




                                    43
                                                               Rural Marketing

5. Self   Improvement       and      Development:      The   salesman    need
   comprehensive on the job training in selected village markets. They
   need to be educated about the rural marketing environment in addition
   to be trained in salesmanship, and in selling techniques.




MAIN TASKS INVOLVED IN SALES FORCE MANAGEMENT:


   1. Determination of personal selling objectives
   2. Formulation of sales policies
   3. Structuring the sales force.
   4. Decide sales force size.
   5. Fixing targets and quotas.
   6. Selection, recruitment and training.
   7. Managing sales force compensation, motivation and supervision.
   8. Sales communication and reporting.
   9. Sales co-ordination and control.




V. Selecting Proper Media Mix:
The firm has to choose a combination of formal & non-formal media in the
rural context. The possibilities are enlisted below:


A) The Formal Organised Media:


1. T.V.: It has the potential to become the primary medium for rural
   communication, 77% of the villages in India receive T. V. transmission
   & 27% of all rural people actually watch T. V.



                                   44
                                                              Rural Marketing

2. Cinema: 29% of rural people watch cinema as a part of their regular
   lifestyle.    Most   villages   have   cinema    house.    Advertisements,
   documentaries combining knowledge and entertainment can be
   employed for rural communication.


3. Radio: It is a well-established medium in rural areas. Expansions in
   broadcasting facilities have taken place over the years.


4. POP’s: The POP‟s point of purchase promotion tools area is quite
   useful in rural markets. They should be designed to suit rural
   requirements, using symbols & bright colours.


5. Outdoor: Many companies are using Hoardings, Wall Paintings, etc.,
   as part of their outdoor medium.


B) Informal/Rural Specific Media:


1. Music        Records,    Harikatha,    and      Puppet    Shows:    Music
   cassettes/records are a very effective, inexpensive and appealing
   medium, which can be used in cinema houses etc. where people gather
   regularly. The traditional art forms such as puppet shows, harikathas
   render themselves for communication in rural society and can be used
   at melas.


2. Group Meeting, Demonstration, and House-to-House Campaigns:
   The promotion staff of the firm can effectively carry the product
   messages and demonstrations to the target audience at the group
   meetings. Promotion squads make house-to-house visits. They carry
   along product samples and promotion literature along with them.




                                   45
                                                          Rural Marketing

3. Audio Visual Publicity Vans (AV Vans): The AV unit is very useful for
   rural communication. The firm can exhibit films, presentations, slide
   shows etc. The van can be used for sales campaigns in addition to
   promotions campaigns. They are quite popular with rural marketing
   firms.


4. Syndicated AV Vans: In recent years, rural publicity vans have
   become a purchasable service. Firms which afford to operate publicity
   vans of their own can utilize the syndicated AV vans service offered by
   independent agencies.


5. Interpersonal Media: They have a special merit since they facilitate
   two-way interactions. They also bring market feedback to the firm.
   Advantages of interpersonal media are they are segment specific,
   market specific and score high when it comes to participation and
   involvement of the audience.




                                  46
                                                            Rural Marketing

Chapter 6


Physical Distribution Strategy

   I. Introduction


Product Distribution and retailing has developed into highly specialized
activities in the urban market. However the distribution channel has
remained in the background in the rural areas. Now the distribution has to
be reworked from scratch with full rural orientation and awareness of
existing rural channels of distribution. Many companies foresee the rural
markets as a great opportunity for expanding their sales but they find
distribution as a major obstacle. Unfortunately it is almost not possible to
transplant strategies which work successfully in urban markets into rural
markets. There are problem to reach the rural customers.




II. Channels:
1. Company depot which may be located at a particular state.
2. Redistribution stockist, C&F agents, semi-wholesaler and retailers who
   may be located at the district headquarters.
3. Semi wholesalers and retailers who may be located at Tehsil
   headquarters, mofussil towns or industrial townships.
4. Itinerant traders, vans, petrol pumps, semi-wholesalers retailers and co-
   operative societies, which may be at large villages or Haats.
5. Retailers, vans, sales people, NGO‟s and government agencies at the
   village level.




                                 47
                                                                   Rural Marketing



                       PRODUCT MOVEMENT ROUTES THROUGH INTERIOR


       1                                      SPURIOUS BRAND MFG.
                      COMPANY
                       DEPOT                        FACILITY
      -------
            -
       2
                    REDISTRIBUTION STOCKIST, SEMI WHOLESALERS AND
                         RETAILERS AT DISTRICT HEADQUARTERS
      -------
      -
                     SEMI-WHOLESALERS AND RETAILERS AT TEHSIL
       3             HEADQUARTERS OTHER MOFUSSIL TOWNS AND
                              INDUSTRIAL TOWNSHIPS


      -------
      -------      INTINERANT
      ---                                  SEMI-WHOLESALERS AND
                   TRADERS AT
        4                               RETAILERS IN LARGE VILLAGES
                      HAAT
                                        (POPULATION OF AT LEAST 5000
                     MARKET
                                                 PERSONS)

      ---------

                                     RETAILERS IN
       5                             SMALLER VILLAGES




Source: Pawan Bhandari and Rajan Iyer, A & M, January, January 15, p.
25.


Most of the companies have direct representation in the form of redistribution
stockist at level II and III. Level III in a district would comprise 7-10 towns. High
outlet density and large customer population centres enables economies in
developing these markets through working of sales-cum distribution van.


                                       48
                                                                  Rural Marketing



In order to achieve a winning edge in rural sales the object is to maximize
directed flow and control the of stocks at level III or V. Approaching level IV
requires prior selection of haat markets and villages located in contiguous
clusters.


Various schedules with level III stockist at nodal points could be operated
towards self-sustaining distribution rates for level IV markets. The next level is
V. The villages are too small to allow economies in van distribution. But these
villages form the bulk of the consumption in the rural areas.


   Example: HLL is focusing a mobile sub-stockist in hinterland towns having
   a population less than 20,000 to supply its toothpaste brands Close-up and
   Pepsodent to consumer in the surrounding villages. The sub-stockist will
   be linked to a super stockist who will be present in every district.


   The Old Setup:
   The Old Setup for distribution in the rural markets includes
       1. Wholesalers
       2. Retailers
       3. Mobile Vans
       4. Weekly Haats, Bazaars and Shandies and
       5. Melas and fairs




   THE NEW PLAYERS:
   1. Unofficial Channels: Hero Honda has reported the emergence of an
       unofficial channel of distribution. Local real estate agents, village
       mechanics; and shopkeepers who sell non durables. These people take
       motorcycles from official dealers in twos and threes and display them




                                      49
                                                             Rural Marketing

   outside their premises for sale. This paper work is left to the dealer to
   complete.


2. Co-operative Society: Co-operatives occupy an important place in
   India‟s rural economy. The rural scan reports say that there are 4398
   primary marketing societies and 2933 Large Agricultural Multipurpose
   Primary Marketing Services. Generally a co-operative exists for 2-3
   villages. Farmers service co-operatives is a mini super market.


The others are:
1. Public Distribution System.
2. Petrol Bunks.
3. Agricultural Input Dealers.
4. NGO’s
5. Barefoot Salesman.
6. Syndicated Distribution.


III. Inter-Net Marketing:
In the Rural Setting: Efforts are on the way, in rural India, to bring
convergence between what the poor need and what digital technology
makes possible. The Net is becoming the livelihood for hundreds of rural
youth, who are offering a combination of specialized Net services; interface
which administration, organizations and customers.


IV. Channel Management in Rural Markets:
The second major task in rural marketing is organizing an effective
distribution channel. This task too has many problems:


1. Multiple tiers, Higher Cost and Administration Problems: The
   distribution chain in the rural context requires a large number of tiers as
   compared to the urban context. In the rural context, at the minimum

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                                                                Rural Marketing

   level the chain needs the village shopkeeper, the wholesaler, etc.,
   whereas at the top level involves the manufacturer‟s own warehouses,
   office operations at selected centers. Such multiple tiers make channel
   management a major problem area.


2. Scope      for   Manufacturer’s           own   Outlets   Limited;   Greater
   Dependence on Dealers: Scope for manufacturer‟s direct outlets such
   as depots or showrooms is limited in rural markets unlike in the urban
   context since it is expensive and unmanageable.


3. Non-Availability of Dealers: There is also a problem of availability of
   dealers. Suitable dealers are limited even if the firm is willing to start
   from scratch and try out rank newcomers; the choice of candidates is
   limited.


4. Poor Visibility of Retail Outlets: Sales outlets suffer from poor
   viability in the rural market. Scattered nature of market and the
   multiplicity of tiers in the chain use up the additional funds the
   manufacturer is prepared to part with. Moreover the business volume is
   not adequate enough to sustain the profitability of all groups and the
   retail tier is the worst sufferer.


5. Inadequate Bank Facilities: Due to lack of bank and credit facilities
   distribution in rural markets is handicapped. Rural outlets need banking
   support for 3 important purposes;


      a. In facilitating remittances to principals and to get fats
          replenishment of stocks.


      b. In receiving supplies „through bank‟ (retiring documents with the
          bank).


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                                                                 Rural Marketing



       c. To facilitate securing credit from banks. It is estimated that there
           is only one bank branch for every 50 villages.


6. Inadequate Credit Facilities from Banks: Another constraint is the
   inadequacy of institutional credit. Rural outlets are unable to carry
   adequate stocks due to lack of credit facilities. The vicious circle of lack
   of credit facilities leading to inadequate stocking and loss of business,
   finally result in poor viability of outlets, getting perpetuated.


V. Possible Approaches for Effective Channel Management
in the Rural Context:


The Existing Market Structure: Indian rural market is composed of
22,000 primary rural markets and 20 lakh retail sales outlets of which
nearly 1 lakh are fair price shops of Public Distribution Systems (PDS) as
estimated. One retail shop services 60 to 70 families in rural areas. The
structure also involves stock points belonging to the manufacturer or area
distributor to service these retail outlets at village levels in feeder towns.


Available Channel Choices: The channel types that is available in the
rural market are-


   a. The Private Shops
   b. The Co-operative Societies
   c. Fair Price Shops of PDS
   d. The Village Shandy or Weekly Market


From the above, the co-operative societies are mainly concerned with the
distribution of agricultural inputs. Fair price shops are concerned with the
distribution of essential commodities consumed by the common man. The

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                                                            Rural Marketing

„Village Shandy‟ is a widely used channel of rural market. But its role in
marketing branded products is limited.


The Private Village Shops: Private shops are the main channels in the
rural market for a large variety of products. They are also the cheapest and
the most convenient channel to align with.


The village shopkeeper is forced to deal in a large number of products in
order to make his operations viable, which means a large inventory. The
larger lead-time for replenishments from urban based production point
enlarges the inventory holding further. And as his sales are not uniform
throughout the year, he has to carry inventory over a longer period of time,
leading to the blocking up of his capital.


Organizing one‟s channel out of these private shops, however, requires
assiduous efforts on the part of the firm. The choices are usually confined
to-


      a. Existing traditional private shops.
      b. Moneylenders willing to branch off to trade.
      c. Land owners willing to branch off to trade.
      d. Educated unemployed persons.


The firm has to select personnel from the above group depending on the
product line and other relevant factors and then train and develop them into
competent dealers.


Satellite Distribution: A concept known as „Satellite Distribution‟ can be
tried in developing a distribution channel in the rural market. Under this
system, the firm appoints stockist in feeder towns, who take care of
financing, warehousing the goods and sub-distribution of goods. The firm


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                                                                  Rural Marketing

   also appoints a number of retailers in and around the feeder towns and
   attaches them to the stockist. The goods are supplied to the stockist either
   in cash or credit or on consignment basis.


   The sales volume of the retailers will vary depending on the potential of the
   area covered and the capacity on the dealer concerned. Over a period of
   time, some retailers grow in terms of business turnover. If such retail points
   also happen to be transportation centers within the feeder town area, the
   firm elevates them as a stockist. The area of operation of the original
   stockist shrinks in this process, but care has to be taken to see that his
   volume of business does not shrink. This is achieved, in practice, on
   account of growth in demand and deeper market penetration.


   If twenty retailers operate in the network of an original stockist, five or six
   of them get elevated over a period of time as stockist. Out of the retailers
   some remain attached to the original stockist and other relevant factors.
   The process continues as long as the market keeps expanding. And at any
   point of time, enough retail points in variably hover around or particular
   stockist, hence the name „Satellite Distribution‟.


   The main advantage of this system is that it facilitates market penetration
   in the interiors of market. However, the firm must ensure is that it facilitates
   market penetration in the interiors of the market. The firm must ensure that
   in the process, the motivation of the earlier generation stockist is not
   destroyed due to overzealous and premature elevation of the retailers into
   stockist.


After understanding the entire marketing mix for the rural markets, let us now
see some practical examples of how companies have entered the rural
markets and have been highly successful by modifying one or more P‟s of the




                                      54
                                                           Rural Marketing

marketing mix to target the rural market. A few of the successful companies
are as follows:




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                                                                    Rural Marketing

                                     Case – 1


                           The Making of ‘C H I K’


Late 70‟s: Following the success of Velvette shampoo in the southern markets,
a pioneering attempt to offer shampoos in small pillow packs, the market was
flooded with 70-odd small labels of shampoos, each one eager to nibble a
share of an enlarging pie. Most look similar with little differentiation.


Velvette as a brand had become synonymous with „sachet shampoo‟.
Consumers would ask the retailer for a Velvette and they would walk away
happy with whatever labels the retailer gave them. Many of them never knew
the difference and for the rest it just did not matter.


The success of the sachet changed the structure of the shampoo industry.
New layers of consumers, most of them from rural pockets could now afford
shampoos. The „upper class‟ tag attached to shampoos was fast fading away.
The market was extremely cut-throat and trade had a significant influence on
what the consumer bought.


It was against this background that Chik shampoo was launched by CavinKare
in March 1983. The brand was launched initially in 10ml packs and later in
sachet form.


Though the market was cluttered with low-cost shampoos, there was a clear
opportunity for a “good quality shampoo with appealing perfume at a price
which will delight the consumer”.


The brand endeavoured to provide to the masses a significantly superior
product than those available at similar points. Chik shampoo used French
perfume at the time to differentiate itself on the plank of superior fragrance.

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                                                                Rural Marketing

The target audience was lower middle-class/semi-rural; monthly household
income of Rs. 1,500-3,000; females in the age group of 16-plus.


Innovative radio advertising based on popular cinema dialogues supported the
brand; this was quite different from the plain jingles being used by other
brands that advertised on radio. The advertising strategy was based on the
consumer insight of the powerful appeal of cinema among the common
masses. The brand roped in popular southern cine stars in the south like
Amala, Khushboo, Manorama and Charlie who were popular with rural
audiences to endorse the brand. Radio was used as the sole mass medium of
advertising and the annual advertising spends were in the region of about 2
lakh. Though shampoos were getting encouraging trials from the rural
consumers, the penetration levels were extremely low. Many people had no
clue how to use a shampoo. To encourage trials, CavinKare‟s team travelled
extensively in rural pockets, caught hold of schoolboys to demonstrate how to
lather and wash, comb hair and show the difference. This exercise had a
significant impact in breaking the ice and made people comfortable with the
concept. Another method used to encourage trial was through a consumer
scheme, where anyone could take any four empty shampoo sachets to a
retailer and take home a Chik sachet free. Though more risky, this scheme
paid off and more and more people began asking for Chik at their local retail
outlet.


By the late „80s the brand had become quite popular in the southern markets.
The shampoo market was growing at a healthy clip of 15 per cent at that time.
1990 was a major turning point in the life of the brand when it introduced floral
fragrance shampoos in two floral fragrances – rose and jasmine. They turned
out be an instant hit with the masses and sales jumped from Rs. 10 lakhs a
month to Rs. 30 lakhs a month. The brand continued to use popular cinema
celebrities and extended the endorsements to television media in 1992.




                                     57
                                                                  Rural Marketing

In 1993, CavinKare had decided to take Chik shampoo national.
Chik is a recruitment brand and the objective was to expand the market and
get new customers into the category. The focus was largely rural though
value-conscious sections in urban areas also were attracted to the proposition.
The distribution in rural areas was driven through innovative trade schemes
and consumer offerings. The market began to surge – by the mid „90s, the
shampoo market was growing at about 25 percent. Then, packs contributed
nearly 40 percent of the total shampoo volumes. Rural markets were growing
much faster than the urban markets. The key challenge was in reaching the
rural markets. Most villages in India are of very small size. Close to 70 percent
of villages in India have population of less than 1,000, the accessibility is low
and the local markets are not developed.


The good news is that there are about 47,000 haats and 25,000 melas
organised in such villages. The average daily business transacted in these
haats is close to Rs 2 lakh. The company made use of such opportunities as
well as created availability in smaller villages through the wholesale network.
The right marketing strategy for the rural market is to balance the conflicting
dimensions of „availability‟ on the one hand and „affordability‟ on the other.


During the mid „90s, the Chik pneumonic and the pack were changed to bring
in design and colour elements, which enabled on-shelf differentiation and
aided recall. Packaging becomes even more critical when viewed in the
context for rural marketing.


Consider some facts and insights, which a study on the factors influencing
shampoo buying in rural markets threw.


A significant portion of buying happens by looking at the wrapper. The rural
consumer used this insight to improve packaging while branding was made
more prominent and the graphic improved to enable quick identification.


                                      58
                                                                 Rural Marketing



By the year 1999, Chik was already the second largest brand of shampoo in
India - (also in rural markets) – only next to Hindustan Lever‟s Clinic Plus. This
year was to see a major development in the brand, which would take it to
greater heights. Some years back while on a market visit Mr. C. K.
Ranganathan, Chairman & Managing Director, CavinKare Pvt. Ltd. happened
to interact with a rural consumer who was using soap to wash his hair and had
been doing this for ages. During the course of the discussion the consumer
told the Chairman that he had not seen any visible damage to his hair.


Though the hair felt rough, the consumer was fine with that.
So why would he start paying for and using shampoos? During this discussion
CavinKare got the insight that the number of adults per household in India is
about five. At Rs. 2 per sachet of shampoo and four washes a month it meant
Rs. 40 for hair wash alone. There was no way the consumers were willing to
spend this kind of money on washing hair every month. CavinKare got the
feedback that of the cost of hair wash could be cut to Rs. 2 per person per
month he would no be averse to try a shampoo. That meant that the
consumers wanted something as marginal as a 50-paise shampoo pack.


Initially, the thought of offering a 50-paise shampoo sounded ridiculous. How
do you offer a good quality shampoo at that price? Could something like this
be viable?


CavinKare worked backwards from this brief and made the 50-paise shampoo
happen. It took them a few years to develop the formula and packaging. The
launch happened in September 1999. Chik was the first brand to launch a
shampoo sachet at 50-paise. The results were amazing; shampoo‟s growth
rate in rural India became almost twice that of the urban sector.




                                      59
                                                                  Rural Marketing

The price point was instrumental in driving distribution in deep rural pockets.
The market share of Chik after the launch of Chik 50-paise went up from 5.61
percent in 1999 to over 23 percent now.


Today, Chik, a Rs 100 crore brand based on MRP value, is the No. 1 brand of
shampoos in rural India. It is strong rural brand and roughly 65 percent of the
sales of Chik shampoo come from rural markets. It symbolizes the
requirement of a shampoo for Indian consumers. An accompanying table
illustrates the rural hold of Chik in some states in India having significant rural
population. The value proposition offered has helped us to become number
one in many states in rural India.


To sum up, rural markets are an opportunity as a challenge. In most rural
markets recruitment is the issue. The rural consumer is very rational as well as
value conscious. Therefore, the marketing mix must deliver superior value to
the rural consumer at a price point he is comfortable with in order to be
successful.


Strategy Adopted


As seen in the above case study, the company marketing Chik shampoos
came up with a wide variety of changes to target the rural markets. Some of
the changes that the company adopted are:
   1. Changing the Packaging of the product by introducing sachets instead
       of conventional bottles.
   2. Slashing the price of the product to 50-paise per sachet so that rural
       consumers could afford it.
   3. Adopting innovative ways of promotion by using radio advertising in the
       form of jingles and cinema dialogues that would appeal the rural
       consumers.




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                                                               Rural Marketing

   4. A wide variety of perfumed shampoos were available so as to give
        more option to the rural consumers.
   5. The village Haats and Melas were used as an efficient way of the rural
        distribution channels.
   6. The packaging looks of the products were modified and they were
        made to look more attractive to the rural consumers.


Thus it can be seen that to market Chik Shampoo, the company made
significant changes in the 4 P‟s of the marketing mix so as to ensure that their
product successfully penetrated the rural markets.


The move to enter the rural markets was highly successful for the company as
the company within a small span of 5 years has witnessed a dramatic rise in
the market share. This can be better viewed with the help of the chart below:

               Chik Shampoo Market Share
                  (Urban+Rural-Volume)
   25                             22.4     23.09

   20
                          15.18
   15
                  11.33
   10
        4.84
    5

    0
        1998      1999    2000    2001     2002


As seen from the above graph, the market share of the company has
increased considerably from just 4% in 1998 to around 23% in the year 2002,
which means that the market share of Chik shampoo grew six folds in the last
five years.
Apart from gaining the market share, the shampoo was also successful in
increasing the number of shampoo users so that the overall market of
shampoo users increased. This was because the company made its shampoo
more affordable and available to the rural market through efficient packaging,
pricing, promotion and distribution. Today the company is a 100 crore


                                                   61
                                                          Rural Marketing

company and leads the rural market for shampoos in India. Also 65% of the
total sales of the company come from the rural markets.




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                                                                  Rural Marketing

                                   Case – 2

                     E-choupal, the V21 SCM Model


The e-choupal idea cuts through the basic and historic problems crippling
Indian agriculture: fragmentation of agricultural land holdings, the difficulty of
access to those holdings and high levels of illiteracy, all of which make
agricultural extension work unviable, making it difficult and daunting to adapt
and apply the findings of laboratory research to agricultural cultivation.


E-choupal makes use of the physical transmission strengths of the current
intermediaries – the only efficient option in the context of India‟s weak
infrastructure, making them an integral part of the value chain. Yet, by using
the real-time multicasting ability of the Internet, these intermediaries are
bypassed to deliver information and market signals directly to the farmers to
enhance the long-term competitiveness of Indian agriculture.


Under e-choupal, ITC has set up Internet kiosks in villages. These kiosks are
managed by the farmers, selected from within the community and trained,
known as „Sanchalaks’. At the kiosks, the „Sanchalaks’ help the farmers to
readily access the different agricultural crop-specific Web sites that ITC has
created in the relevant local language. The farmers can learn online the best
farm practices for their crop, the prevailing prices and price trends for the crop
in the Indian and world markets, the intricacies of risk management, and the
local weather forecast. The smallest individual farmers thus get the benefit of
expert knowledge on the cultivation of their crop. E-choupal leverages the
seamless workflow capabilities of IT to virtually integrate several best-in-class
players along chain and offer the services on a single platform to every farmer.




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                                                                Rural Marketing

The farmers can order quality agricultural inputs online. Virtual aggregation of
such demand effectively reduces the cost of these inputs, again bringing the
power of scale to even the smallest of farmers.


E-choupal links the Indian farmer to the consumers in local and global
markets, by leveraging ITC‟s time-tested and proven competencies in
branding, marketing and distribution. Unlike in the alternative mandi channel
(where the farmer discovers the price for his produce after he has incurred
costs of transportation, therefore ending up selling even if he is not satisfied
with the price), e-choupal helps the farmer take an informed and empowered
decision (because the price is known in the village itself). In the process, many
non-value-adding activities like multiple transportation, handling and bagging,
otherwise inevitable in the traditional supply chain, are eliminated, ploughing
back a larger share of the consumer‟s pie to the farmer.


Thus, through the virtual vertical integration (V21) model of supply chain
management (SCM), e-choupal secures the scale benefits for India‟s
agricultural economy without displacing the small farmer.


E-choupal, the Unique 3-D Marketing Channel:
On the ground, e-choupal is proving to be a unique 3-D marketing channel for
many products and services consumed by rural India.
The changes sweeping the marketing discipline in the backdrop of the
increasing consumer-centricity of today‟s world are well known. For example,
while superior products and distinctive functional benefits form the necessary
starting point for success in the marketplace, the experiential dimension is
becoming a critical differentiator. Process benefits – which make transactions
between buyer and seller easier, quicker, less expensive and more pleasant –
support this dimension. A third dimension, personalization, now successfully
employed by a few marketing companies, will be the only sustainable
differentiator in tomorrow‟s world. Relationship benefits – which reward the


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                                                                Rural Marketing

willingness of consumers to identify themselves and to reveal their purchasing
behaviour - lay the foundation for this dimension.


The organic blending of relevant knowledge (for example, application) and
customized information (local weather), with farmer‟s purchase transactions, is
creating a unique value for him, especially in farm inputs. The „Sanchalaks‟
connected to the market, leading farm input companies and experienced
agricultural scientists through the e-choupal infrastructure, are able to deliver
this benefit to the farmer by leveraging the power of collaborative networks,
previously unthinkable in rural India.


A couple of other important process benefits that e-choupal is delivering
to the marketer are:
 Superior demand forecasting and real-time communication with the help of
   „Sanchalaks‟ and the IT infrastructure, especially valuable in FMCG as well
   as short-window-demand products,


 The ability to assemble groups of highly involved customers for credible
   and focused research as well as to demonstrate product features. This is
   proving to be a boon in consumer durables.


 By virtue of its wealth-enhancing capability, e-choupal has been able to
   build valuable and sustainable relationships with farmers who constitute
   the majority of rural consumers. As the relationships transcend short-term
   expedient considerations, these people share a wealth of information about
   themselves, which is then converted into valuable knowledge to market
   tailor-made credit and insurance products.


 Emerging      areas    like   telemedicine,   eGovernance,    education    and
   entertainment will soon ride on the Internet, Web-casting and video
   conferencing infrastructure of e-choupal.


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                                                                  Rural Marketing

The Road Map notwithstanding the Speed Breakers:
 The e-choupal project, launched in June 2000, has today become the
   largest Internet-based corporate intervention in rural India. E-choupal‟s
   network today reaches out to more than a million farmers in over 11,000
   villages through 2,100 e-choupal kiosks that ITC has set-up across four
   states – Madhya Pradesh, Karnataka, Andhra Pradesh and Uttar Pradesh.


 The hurdles that ITC encountered while setting up and managing the e-
   choupals relate primarily to the inadequacies in infrastructure in rural India:
   lack of power supply, telecom selectivity and bandwidth. Imparting
   computer usage skills to first time Internet-users in the remote areas of
   rural India is providing to be another daunting proposition.


 ITC has been evolving several alternative and innovative solutions to
   overcome these challenges: for instance, arranging back-up power through
   batteries charged by solar-panels, upgrading telephone exchanges with
   RNS (RAX Network Synchronization) kits, installing VSAT (very small
   aperture terminals) equipment introducing mobile choupals, local caching
   of static content, enhancing efficiency in streaming-in dynamic content, and
   setting up a distributed 24x7 helpdesk infrastructure.


ITC has worked closely with farmers in designing and managing the entire e-
choupal initiative. The active participation of farmers in e-choupal has created
a sense of ownership in the project among the entire farming community.
Farmers view e-choupal as the „new age cooperative‟.


Encouraged by this enthusiastic response from farmers, ITC has planned to
extend the e-choupal initiative to 11 other states across India over the next
seven years. ITC‟s vision is to extend this interactive transaction and fulfillment
channel to cover one-lakh villages, and reach out to 10 million farmers growing
a range of agricultural products.


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                                                               Rural Marketing

Conclusion:
“Growing competitiveness of Indian agriculture induced through such a
market-led business model, can trigger a virtuous cycle of higher productivity,
higher productivity, higher incomes, enlarged capacity for farmer risk
management, higher order of investments, feeding even higher quality and
productivity. On the other hand, growth in rural incomes would unleash the
latent demand potential for industrial goods so necessary for the continued
growth of Indian economy. This creates another virtuous cycle snowballing the
economy into higher growth trajectory.”


ITC is planning to extend its integrated watershed development programme
and holistic community development programmes to all the villages covered
by the e-choupal network. The consequently cascading economic multiplier
effect will be extraordinary. Thus, ITC‟s pioneering e-choupal movement
exemplifies the economic power of the synergy between the corporate sector‟s
creations of shareholder value with the development of India‟s agricultural
economy




                                    67
                                                                Rural Marketing

                                  Case – 3

                         A Matter of ‘PRESTIGE’


      This cast stresses on why companies decide to go rural. What are the
factors that attract them and are rural markets potentially bigger markets than
the urban city centers? Again the basic concept that this case covers is that of
the marketing strategies adopted by the company to market their pressure
cooker brand “Prestige” in rural areas.


The Background:
      Prestige - India‟s leading pressure cooker brand, over the last few years
was facing problems of stagnant/declining sales and reduced realizations. The
pressure cooker category growth rates itself were on the decline and on the
menace of the unorganized sector, volumes have been under pressure for
most manufacturers. Urban markets were getting saturated – in fact; markets
like Mumbai were having negative growth rates. Also, Prestige Popular, in
larger sizes (which sell in the South – our strong hold) was launched in 1999,
and since then the sales of this premium offering of the company has been on
the decline. However, rural markets were growing at almost five times the
growth of the category. This was when the company decided that rural
markets were going to be a thrust area. Traditionally, Prestige was very strong
in the higher population strata markets and market share declined as one
came down the pop strata.


How it all began?
   The exercise began, when the company decided to do a pilot project in the
   rural Mehboobnagar district of Andhra Pradesh with the help of MART, an
   agency with vast expertise in the field of rural marketing. At this point of
   time Hindustan Lever was in the process of rolling out its Project Shakti, its
   rural marketing initiative was also with assistance from MART in AP.


                                     68
                                                                  Rural Marketing



      The Pilot Project:
      The women‟s self help group (SHG) movement had been very strong in
AP. Basically groups of women – around 15 a group – who save a rupee a day
and the corpus so generated loan out to members of the group to help them in
their work and not for meeting personal needs. The groups get a matching
loan from the government on soft terms. The interest earned is ploughed back
into the corpus. There are over four lakh such groups in AP. Taking advantage
of the available situation; the company decided to convince these women Self
– Help Groups to help sell the Prestige brand.


MART and the company organized meetings of the women of the SHGs and
explained the concept of pressure cooking, giving them details on the
company, the brand and what they stand to gain by selling Prestige pressure
cookers. For enlisting dealers the help of „animators‟, who are paid a stipend
by the Government for propagating / implementing development activities of
the State Governmental among the rural population, was enlisted. All those
who became dealers were given a demo pressure cooker. Meetings were
organized by the dealers for potential customers, where the concept of
pressure-cooking was explained. Company personnel attended these meeting
so that dealers got trained on the concept of pressure cookers.


Intense working of these markets for two months by a management trainee of
the company along with the guidance provided by MART saw the company
selling 50 pressure cookers. The company thus with its excellent strategy the
back – up that it got from the state government could enter the rural markets
successfully. It could enter a market (Mehboobnagar), which was one of the
most backward districts of AP.


However after the whole exercise i.e. from the company‟s pilot project, the
company had come down to the following major conclusions on how to go


                                    69
                                                                  Rural Marketing

rural and the various problems that governed rural selling that are discussed
below:
   1) Logistics and high price point.
   2) Limited rural purchasing power.
   3) Difficulty in convincing the customer on the product‟s utility.


From the conclusions thus drawn the company could now frame a proper
policy with the perfect product design, price – point etc. it then came up with
the product with the following changes (the new adopted strategy):
   1) A „rural‟ brand at a much lower price point was launched immediately.
   2) To take care of another crucial aspect of logistics was another problem
         as there were few distributors. For this TTK directly started supplying to
         these dealers from warehouses at Hyderabad and also at Vijaywada.
   3) To take the initiative forward the company got in touch with the
         Department of Women Empowerment. The TTK group was asked to
         make a proposal on how it could work with the Government on
         improving the lot of the rural women. After prolonged discussions with
         the department, TTK gave a proposal, which was three-pronged
         strategy:


 Appointing women as dealers of „Prestige;
 Setting up an assembly plant in AP with land and building provided by the
   Government using women of the rural areas;
 Setting up a ready-to-fry snacks conversion units in each of the 21 Districts
   of AP with equipment provided by TTK and appointing dealers to sell these
   snacks in each of the mandals in these 21 districts (around 1,000). The
   TTK had its own brand of ready-to-eat snack, Fryums, which had been
   withdrawn but the group sells pellets to converters who convert it to ready-
   to-fry snacks and sell it. The whole proposal involved creating one-lakh
   women workdays and generating Rs 3.42 crore of income for the rural
   women in the fifth year of operations.


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The Dealer Network Scheme:
      For setting up the assembly unit the group asked for some fiscal
benefits from the State Government. The proposal was accepted by the
principle by the department and the company and the departments are
working hand in hand for its implementation.


      From then, TTK Prestige has set up a four member sales team to take
the rural initiative forward. Dealers would be women as individuals or SHGs
themselves. A woman or a SHG can become a dealer by paying around Rs
5,000 for a lot of six pressure cookers. The company also provides one free
demo cooker to the dealer. The company coordinates with the department and
organizes a series of meetings involving SHG members in the districts to enlist
dealers.


Once a woman becomes a dealer the rural promoter of the company works
with her in making calls to prospective customers. When the dealer is able to
get a gathering of prospects, the rural promoter does a demo. The AP
government has been releasing gas connections under the „Deepam‟ scheme
to the people in rural areas whereby the government pays the deposit to the oil
company and the beneficiary has to pay for the cylinder, gas stove and
regulator. The beneficiaries are the members of the SHGs based on seniority.
The TTK group is selling its gas stoves to the SHGs, who, in turn, sell to the
beneficiaries making a profit. Around 16 lakh gas connections are to be
released this year and the company intends to make a dent in this segment.


The Result and The Future Plans:
      From then on there‟s been no looking back for the company. Today,
TTK Prestige is working on a separate sub-brand to be sold exclusively
through rural women. This will be at a much lower price point. As sales from
the rural initiative are incremental, margins have been kept to a bare minimum.
The product specs will not be comprised in any way. There will be some


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product differentiators to prevent the product from coming into the normal
channel and affecting company realizations.


      The assembly unit proposed to be set up will be for pressure cookers
and gas stoves which can be sold in AP both in the regular channel and the
„rural‟ channel proposed to be established. The „polishing‟ and „assembly‟ part
will be done in this plant. Both these operations are labour intensive. The
department will provide the land and building and the company the machinery
and expenditure. Employment will be provided to 75 women in the first phase.


      In the ready-to-fry foods project a group of around 30 women will be
formed in each district. Each member of this group will have to invest around
Rs. 4,000. Besides, the groups would be licensed to use the Yummies brand
name owned by TTK.


      Pilot projects are underway in four districts – Chittoor, Anathapur,
Kurnool and Nellore where the groups are being formed to generate the
corpus.


      The strategy had been so successful that the company intends to
replicate this model in three other southern states i.e. TN, Karnataka and
Kerala in the near future. This initiative shows how the corporate sector and
the government can work hand in hand to bring about rural upliftment.




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                                      Case – 4

    How Mahindra Maxx-ed It !!! – The Mahindra Case Study


       The biggest myth that exists in the minds of most marketers is that rural
is all about traditional dhoti clad villagers living in huts.


The reality however is very different. The new rural generation is clad in jeans
and T-shirts and though it may not know Schumacher, it stands divided on
Sehwag‟s ability to counter Glenn McGrath and Brett Lee. Magazines such as
Debonair and Fantasy adorn the roadside of Bikaner just as in the Book
Shoppe at the airport. This clearly depicts that it is now becoming difficult to
differentiate between the rural and urban class. To understand the case it is
important to first understand some rural facts:


Facts on Ownership:
    95.9 percent of rural households (HHs) are self-owned
    31 percent of rural HHs owns a radio and an equivalent number own a
       TV.
    27 percent own wristwatches.
    8.5 percent of the HHs owns a two-wheeler.


Facts on Consumption:
    95 percent of rural India uses toilet soaps.
    76 percent uses detergent (powder/liquid).
    48 percent uses dental products (toothpowder/toothpaste).


Facts on Living Standards:
    45 percent of rural India has pucca houses.
    3.6 crore HHs have a telephone connections.
    6.5 crore individuals in rural India are covered by life insurance policies.


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Facts on Travel:
    Five lakh people from rural India have gone abroad.
    27 percent of rural India has taken a holiday within the country.
Again there are as many four-wheelers in rural India as in the top eight metros.
So, indeed, what is rural? It is in fact the biggest market having the highest
potential for various products. It consists of around 13.5 crore households as
per the latest census figures and with 48 crore adult individuals. A segment of
92 lakh HHs- that is prosperous and has urban-like consumption. So there is
tremendous opportunity to grow by tapping the rural consumer.


The Background:
      Rural customers have always have had a fascination for automobiles,
particularly utility vehicles (UVs). The UVs have been sought either for
personal use or for commercial purpose (making the vehicle available on hire
to others) and in some cases both.




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Some of the key insights or other relevant facts that are to be noted here
are:


    The rural consumer usually travels in a group. He is used to wide
       open spaces. Therefore, he seeks the same in his vehicle. Also
       seeks space for luggage.


    Rural consumer needs a vehicle that is rough and rugged, yet
       comfortable.


    Personal vehicles are also hired out when “not being used” or “in
       demand”. Incidence of hiring out of vehicles is greater than
       ownership.


    City and urban is aspirational. The villager shouldn‟t look like he
       has come from one. Optimisation is a way of life but image and
       show is very critical to the villager.


The idea behind the concept:
       Analysing these insights, the rural needs were found and the
Mahindra MAXX was launched as a product with more space; a vehicle
that is more rugged and tough; least cost of ownership, more value and a
more aspirational image. Quite clearly, the leveragable difference, which
stands out, is “more” or as relevant to the rural customer is Zyaada. And
Zyaada = MaXX.


       This was the core concept in the development of MaXX, and
Mahindra & Mahindra launched the product in the commercial segment in
February 2001. MaXX leveraged the benefit of Zyaada space, comfort and
economy and the brand created a relatable aspirational value.
What did it convey?



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                                                             Rural Marketing



         The MaXX brand promise was defined on two planks – rational and
emotional terms.
    The rational plank was that the vehicle was big on size, which
         meant more space. The MaXX length and width was more than that
         of competing vehicles. The engine is high on fuel economy and low
         on maintenance, fulfilling the need for more value. The MaXX fuel
         consumption is 14-15 kmpl compared with the competitors‟ 10-12
         kmpl.
    On the emotional plank, MaXX positioned it as a travel companion.


The different strategies adopted with respect to the 4 P‟s


The Product Strategy:
         The product strategy was to offer different MaXX value propositions
to the different commercial target segments. To the value-conscious
operator there was the MaXX Standard 10-seater; to the taxi opetator
there was the MaXX TX; to the image seeker there was the MaXX Festiva.
The MaXX Festiva was offered as a premium feature-loaded vehicle at an
attractive price. Features included the metallic paint, fabric seats, fabric
trims, styled interiors, aluminium footstep and an elegant spare wheel
cover.


The Target Group – The Communication Strategy:
         The communication strategy was a great challenge as there were
two distinct target groups. The commercial operator who was the vehicle
buyer and the other was the vehicle hirer who was the operator‟s
customer. The hirer largely influences the operator‟s purchase and in this
case it was essential that the hirers were made aware of the MaXX space
and comfort proposition.




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       The operator, by and large, was aware of the Mahindra vehicles
offered the least cost of ownership.


       At one end, hirers looked for space, comfort and image while the
operator was looking for returns and least cost of ownership. The crucial
insight was that the operator depended on hirer pull or customer demand
for his vehicle.


       Thus the mass media strategy decision was to target the hirer while
the route to target the operator was through below-the-line activities. The
MaXX TVC, which was hence targeted at the hirers, projected MaXX to be
the ideal travel companion.


The Creative Strategy – Promotion:
       The selected group, the hirers that needed to be targeted, had a
majority that existed in the rural markets. This group had aspirations that
mirrored and mood of the rural customer clearly followed urban attitudes.
Thus the challenge was to produce the MaXX TVC in a manner that would
easily appeal to the urban and yet create an empathy with the rural. The
visual imagery had to be urban, the lyrics appealing to all and the music
easily hummable by both.


       The elements of the TVC (Television commercial) were: proposition
– space and comfort (long travel) and the format were called „slice of life‟.


       The press strategy was a combination of thematic advertisements
targeted at hirers for brand saliency and tactical advertisements. Targeted
at operators projecting the rational benefits and/or promotional schemes.


       Scores of below-the-line activities were carried out. There are over
100 tour operators meets all over India. The operators were given test



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drives. The local press was invited to these occasions. This ensured that
MaXX received wide publicity, especially in the small regional press of
vernacular languages creating some excitement in rural areas the
operator meets and the press conference events were also covered by
local cable TV in most places that aroused considerable interest amongst
the hirers. Meanwhile, mileage melas highlighted the MaXX fuel economy
advantage. Joy rides were given to customers to give them a taste of the
MaXX space and comfort.


      MaXX road shows and nukkad nataks were held at contract/taxi
stands along with product demonstrations and test-drives. MaXX
hoardings were put up near bus stands; religious places and MaXX
posters were put up in rural bank offices and local premises.


      There was a direct marketing mailer campaign targeted to over
30,000 existing Mahindra customers in rural areas to announce the launch
of the new MaXX variants. Incentives were offered to them to come for a
free test-drive at dealer showrooms.


      The communication and promotional strategy was able to establish
a line of communication that encompassed both the hirer and the buyer. It
also helped MaXX overcome the “looks” of the product and to create a
brand that is aspirational to the hirer. The prime objective, to establish
MaXX as a major player in the commercial segment, was achieved. The
MaXX sales shot up after the television commercial was telecast and the
overall communication and promotional strategy have caused the sales to
climb nearly 2.5 times in Q4 as compared to Q1 in the year April ‟02 –
March ‟03. the tagline, MaXX Maane Zyaada, succeeded.
      Thus to sum up the above case is a classic example that portrays
that though there exist wide differences in the rural and the urban market
in terms of size and the consumer mindset, tapping the rural markets



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when you use the right strategies is very much possible. The only thing is
that the strike needs to be perfect.


       The rural-urban divide is melting. Rural seeks urban imagery and
yet peculiarities need to be understood.




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                       The MaXX Brand Prism




Economy (DI engine)                                Family man, trusted,
Spacious, Tough                                    dependable, fun loving,
Mahindra                                           Value conscious




                        Physique           Persona


  Companion
  Fellow traveler                                       Caring, promoting
                        Relationship       Culture f    family values



                        User Image         Self Image



 Large family, Semi-                                   Prudent
 urban business                                        Smart choice maker




 The above prism thus explains in general the whole strategy that Mahindra
 had adopted to tap the rural markets.




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                                   Case – 5


                       The COLGATE Case Study


Charcoal, neem sticks, husk, salt and powder mixtures have been some of the
traditional form of oral hygiene products used in rural India. But these products
are losing favour, especially due to the efforts of many organizations and
companies, foremost among them, Colgate. The company claims to have
persuaded about 300 million people into using oral hygiene products in the
country for the last 25 years.




Known as one of the leading brands for oral care in and around the world,
Colgate soon got popular in rural India as well.


Infact the brand has become so generic with the product itself that it is not
surprising to find rural consumers asking for Colgate when they buy toothpaste
or tooth powder or tooth brush. The company, on its part, says that the rural
markets account for about one third of its total sales, the rest coming on urban
sales.



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                                                               Rural Marketing



Maintaining a steady market share in the oral care product segment wasn‟t
tough job for Colgate, but that‟s exactly what it didn‟t want. Colgate was
heading for a total monopoly in the rural markets, and it was leaving no stone
unturned for doing the same.




„Aggressive‟ is the only word that could perfectly describe the advertising and
sales promotion strategy of Colgate. Colgate stepped up its rural promotion
drives with IDA (Indian Dental Association) to add value. This has been the
stepping stone to the high penetration in rural minds. Since 1976, Colgate has
been doing this through its rural promotion vans and “Young India, Bright
Smiles, Bright Futures”, schools dental education program.


After conducting a small research in the rural areas Colgate concluded with
five things that were common in all their rural consumers across India, they
were:-


        Rural consumers are brand loyal.




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      They have disposal income (i.e. because their needs are limited, so
       lesser scope to spend.)


      Literacy level is on an increase.


      Elderly person in the family have the decision authority.


      If a brand is turned down in a household in a village, the whole village
       sooner or later boycotts the brand.


High quality products was always a plus point of Colgate all they had to do
was to now tap the still unattended rural markets and change their habits i.e.
from the usage of manjans and datoon to toothpaste and tooth powder. In
1998, Colgate contacted 6 million people in 20,000 villages of which 15,000
villages had not experienced the availability of toothpaste and toothpowder let
alone toothbrushes.


Colgate decided to do this by controlling various advertising and promotional
activities. Suggesting and implementing a rural promotional scheme was what
Colgate called „Sampark‟ for, as they were specialist in rural advertising
category.


Sampark had limited budget to their disposal. Going in for mass media would
not prove to be costly but the reach would be limited as, still only very few
people own and possess a T.V. or a radio.




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                                                               Rural Marketing




Sampark wanted something that had far and wide reach that is why Sampark
decided to their advertising by door to door selling. Sampark hired people from
a certain locality who knew the local language, jargons and idioms. This not
only helped Colgate communicate easily with the consumer but was also
effective in sending the right message across to the rural consumer, the other
plus point of this message was that the communication gap was reduced to a
large extend. These people would move about in the villages telling the people
about the pros of using advanced oral care products and the cons involved in
tradition oral care system, this was quite difficult as rural people always felt
that natural was the best. Colgate trained these salesmen to convince the rural
population and make them try the free sample that Colgate was distributing
free.


The next best option that „Sampark‟ choose after door to door selling was
„publicity vans‟ also called as A/V vans. Seventy promotion vans do the rounds
of the country and educate rural folks on oral hygiene products such as
toothpaste, toothpowder and toothbrushes. These vans used to travel from
village to village and depending upon the market day in that specific village.
These vans also did a number of other activities at a time such as spot selling,
sampling, retailing etc. The vans used to be parked in strategic locations, they



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were highly decorated so as to get more curious eyes and in the process
educate the rural folk. The roving Colgate vans, after screening a 22 minute
film on oral hygiene that explains how to use the product, offer sampling at
stalls setup near the van. 60 percent of the towns were covered by Colgate
with their own distribution strategy and the remaining 40 percent was covered
by other distributors. There are puppet shows done in the villages educating
the villagers about the plus points of using modern hygiene products.
Educational films were also shown in between movies in theatres, these are
usually 10-40 seconders which were educational and used to feature either
actors, local lenders, for a farmer just like the ones viewing the documentary,
later on after the movie would end free samples were distributed to the
audience, these tactics are also used in Haats and Melas thought the length
and breadth of India. The thrust towards promotion through schools has done
wonders in changing the awareness levels as well as a shift towards the new
decision-makers in the rural families.


OTHER PROMOTIONAL MEASURES:
The packaging strategy too over the years has made the penetration of its
product that much easy for Colgate. The company has followed the very
successful sachet route by introducing the toothpowder in 10 gram sachets of
Rs. 1.50 each and toothpaste with „Super-Shakti‟ in 15 grams pack of Rs. 3
each. The affordable pricing is something that has increased the sales in rural
India and there have been many who have updated from toothpowder to
toothpaste in the process. Colgate has also gone ahead with the combination
packs, offering a toothbrush with 30 gram toothpaste for Rs. 8.50. This has
helped them increase their base in rural regions to great effect. Sachets and
combi-packs are the ones that find encouraging responses in rural segments.
They are fastest moving pack sizes in these markets. This shift towards
smaller pack sizes is an adaptation towards the rural market, a decision that
has, feel analysts, expanded the Colgate market in oral-dentifrice market in
India. The thrust towards rural marketing is surely benefiting the company.



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